<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 1999
REGISTRATION NO. 333-74507
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
@PLAN.INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
TENNESSEE 8732 62-1643381
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
THREE LANDMARK SQUARE, SUITE 400
STAMFORD, CONNECTICUT 06901
(203) 961-0340
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
MARK K. WRIGHT
CHIEF EXECUTIVE OFFICER
@PLAN.INC
THREE LANDMARK SQUARE, SUITE 400
STAMFORD, CONNECTICUT 06901
(203) 961-0340
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
J. PAGE DAVIDSON, ESQ. JAMES N. STRAWBRIDGE, ESQ.
BASS, BERRY & SIMS PLC WILSON SONSINI GOODRICH & ROSATI
2700 FIRST AMERICAN CENTER 650 PAGE MILL ROAD
NASHVILLE, TENNESSEE 37238 PALO ALTO, CALIFORNIA 94304-1050
(615) 742-6200 (415) 493-9300
</TABLE>
APPROXIMATE DATE 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,
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,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE(1)(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (no par value)....... 2,875,000 $14.00 $40,250,000 $11,190
- ------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Determined pursuant to Rule 457(a) promulgated under the Securities Act of
1933.
(2) $9,591 of this fee was paid with our previous filing on March 16, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
@PLAN PROSPECTUS COVER LANGUAGE
Inside Front Cover
(On the upper half of the page, a page screen shot of a sample webplan.net
@plan Gutenberg(TM) screen shot. This page includes a button menu of the
various consumer profiling areas offered by the @plan system, as well as
detailed sub-categories within a selected consumer profiling area. Placed
around the screen shot are the following textual descriptions of various
features of the @plan system.)
1)(Above the screen shot, as a title): "The @plan Gutenberg(TM) Advertising
System enables Internet advertisers, advertising agencies and Web publishers to
..."
Around the screen shot, starting top left and going counter-clockwise:
1) "Conduct comprehensive Internet advertising analysis and planning over the
Internet."
2) "Define a target audience and then optimize a Web media plan for that
audience."
3) "Use various categories to select the consumer profiling area they seek to
understand in detail."
4) "In this example, the user has defined the target audience as anyone who has
shopped online for sport utility vehicles in the past six months."
5) "Further define a target audience with highly detailed categories within a
given consumer profiling area."
6) "Harness the advertising power of the Internet using several interactive
software planning tools."
(On the lower half of the page, a page screen shot of a sample webplan.net
@plan Kepler(TM) screen shot. This page includes a button menu of the various
consumer profiling areas offered by the @plan system, as well as a sample list,
in alphabetical order, of some of the hundreds of sites that clients can
select. Placed around the screen shot are the following textual descriptions of
various features of the @plan system.)
1)(Above the screen shot, as a title): "The @plan Kepler(TM) E-Business System
enables online retailers and consumer brand marketers to ..."
Around the screen shot, starting top-left and going counter-clockwise:
1) "Conduct comprehensive e-commerce analysis and planning over the Internet."
2) "Understand the Internet retailing environment and how it differs from
traditional retailing."
3) "Use various categories to select the consumer profiling area they seek to
understand in detail."
4) "Select the e-commerce sites they want to profile and compare."
5) "Assess the consumer dynamics of a selected e-commerce category."
6) "Understand customers and e-commerce prospects, and compare each with those
of the user's competitors."
<PAGE> 3
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 IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 3, 1999
PROSPECTUS
2,500,000 SHARES
(@PLAN LOGO)
COMMON STOCK
This is an initial public offering of common stock by @plan.inc. We are
selling 2,500,000 shares of common stock. The estimated initial public offering
price is between $12.00 and $14.00 per share.
------------------------
There is currently no public market for the common stock. The shares of
common stock have been approved for listing on the Nasdaq National Market under
the symbol APLN.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Initial public offering price......................... $ $
Underwriting discounts and commissions................ $ $
Proceeds to @plan.inc, before expenses................ $ $
</TABLE>
@plan.inc has granted the underwriters an option for a period of 30 days to
purchase up to 375,000 additional shares of common stock.
-------------------------
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
-------------------------
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.
HAMBRECHT & QUIST
BEAR, STEARNS & CO. INC.
FIRST UNION CAPITAL MARKETS CORP.
, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 8
Forward Looking Statements.................................. 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Capitalization.............................................. 21
Dilution.................................................... 22
Selected Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 35
Management.................................................. 48
Related Transactions with Executive Officers, Directors and
5% Shareholders........................................... 56
Principal Shareholders...................................... 59
Description of Capital Stock................................ 61
Shares Eligible for Future Sale............................. 66
Underwriting................................................ 69
Legal Matters............................................... 71
Experts..................................................... 71
Change in Independent Certified Public Accountants.......... 71
Where You Can Find More Information......................... 72
Index to Financial Statements............................... F-1
</TABLE>
---------------------
Information contained on our Web site does not constitute part of this
prospectus. All brand names and trademarks appearing in this prospectus are the
property of their respective holders.
All information in this prospectus relating to the number of shares of our
common stock, options or warrants is based upon information as of March 31,
1999, assuming a 1.8 for 1 stock split which was effected on March 10, 1999. For
a more complete discussion regarding our capital stock and other related
matters, please see "Capitalization" and "Description of Capital Stock."
This prospectus contains statistical data about the Internet industry. This
data was obtained from industry publications and reports which we believe to be
reliable sources. However, we cannot guarantee the accuracy or completeness of
this data. We have not independently verified this data nor sought the consent
of the organizations to refer to their reports in this prospectus.
3
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" and our financial statements and
the notes to those statements, before making an investment decision.
OUR BUSINESS
We provide Internet market research systems specifically designed for
Internet advertisers, advertising agencies and Web publishers, and we recently
introduced a system for online retailers and consumer brand marketers. These
systems help enable our clients to effectively harness the power of the Internet
as an advertising, marketing and retailing medium. Our internally developed
systems, which our clients access through our Web site, combine our databases of
consumer lifestyle, product preference and demographic data with powerful
technology that enables our clients to perform queries and searches to plan
campaigns and strategies. Our syndicated Internet consumer research data is
collected, on an exclusive basis, by The Gallup Organization, Inc., from a
statistically representative group of approximately 40,000 active adult Web
users. We believe that our systems facilitate the purchase and sale of
advertising on the Internet and are becoming an important information tool in
enabling the increase in consumer electronic commerce.
We introduced the @plan Gutenberg Advertising System in June 1997. As of
March 31, 1999 we had contracts representing a total of over 275 Internet
advertisers, advertising agency offices, Web sites, online retailers and
consumer brand marketers. We currently have subscription contracts for our
systems with all of the top 20 Web publishers as measured by advertising
revenue, 65% of the top 20 U.S. advertising agencies primarily focused on the
Web as measured by billings and 70% of the top 20 "traditional" U.S. advertising
agencies as measured by billings. We introduced the @plan Kepler E-Business
System in December 1998 and as of March 31, 1999 we had contracts with eight
online retailers and consumer brand marketers.
A representative list of our clients includes Buy.com, CBS MarketWatch,
Grey Interactive, Modem Media.Poppe Tyson, Starcom IP (Leo Burnett),
TicketMaster Online, Time Inc. New Media and USWeb/CKS. We believe that our
systems have been accepted as a necessary tool by our clients as evidenced by
our 93% subscription contract renewal rate from our inception in May 1996
through March 31, 1999. The market for Internet market research tools for
Internet advertisers, advertising agencies, Web publishers, online retailers and
consumer brand marketers is new and rapidly evolving, however, and we expect
competition in this market to intensify in the future which could result in a
decline in our renewal rate.
THE MARKET OPPORTUNITY
Market research systems enable advertisers, marketers and retailers in many
industries to optimize their competitive strategies by providing them with
highly detailed consumer behavior information. The characteristics of the
Internet as both a unique medium for advertising and a distinct marketing and
sales channel plus the substantial potential size of the Internet market have
heightened the need among Internet advertisers, advertising agencies, Web
publishers, online retailers and consumer brand marketers for these tools. The
rapid growth of the number of users and the number of content and electronic
commerce sites on the Internet requires these online market participants to
recognize and adapt to changing conditions more quickly than in many traditional
media, marketing and retailing worlds. The diversity of these users and sites
requires online market participants to process vast amounts of
4
<PAGE> 6
information to achieve an understanding of their target market and the online
market as a whole. In addition, the competitive environment on the Internet for
a particular retailing category may be wholly different than that in the
traditional marketplace, requiring online market participants to develop new
understandings of different and evolving competitive factors. As a result,
online market participants are seeking trusted, third-party neutral market
research systems that will enable them to navigate the dynamic online
marketplace.
To meet the needs of online market participants and help enable the rise of
advertising and consumer electronic commerce on the Web, a provider of Internet
market research systems must be able to overcome certain challenges, including:
- amassing and maintaining a large, statistically representative consumer
research database;
- developing a sophisticated yet user-friendly, Web-based software
interface;
- establishing rigorous, third-party neutral methods and procedures for the
collection of data; and
- identifying, researching and reporting emerging consumer electronic
commerce trends.
OUR STRATEGY
Our objective is to be the leading provider of market research systems for
online market participants including Internet advertisers, advertising agencies,
Web publishers, online retailers and consumer brand marketers. The following are
the key elements of our strategy:
- Increase market penetration of the @plan Kepler E-Business System
- Enhance and expand the @plan Gutenberg Advertising System
- Develop additional revenue sources
- Expand sales efforts and maximize sales effectiveness
- Continue to provide the highest level of client service
- Leverage our market research to identify key trends
Our headquarters are located at Three Landmark Square, Suite 400, Stamford,
Connecticut 06901, and our telephone number is (203) 961-0340.
5
<PAGE> 7
THE OFFERING
Common Stock offered by @plan............... 2,500,000 shares
Common Stock to be outstanding after the
offering.................................... 10,948,600 shares
Use of proceeds............................. For general corporate purposes,
including working capital,
expansion of sales, marketing
and customer service
capabilities, product
development and possible
acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol...... APLN
6
<PAGE> 8
The information in this prospectus summary excludes 2,780,000 shares of
common stock reserved for issuance under our stock option plans, 1,852,740 of
which were outstanding at March 31, 1999 at a weighted average exercise price of
$1.48. It also excludes warrants to purchase 200,000 shares, 230,000 shares if
the underwriters' over-allotment option is exercised in full, of common stock at
the initial public offering price issuable upon consummation of this offering.
Upon consummation of the initial public offering, all of the outstanding
mandatory redeemable preferred stock will be converted into 7,541,400 shares of
common stock. The "as adjusted" column in the table below gives effect to our
sale of common stock in this offering at an assumed initial public offering
price of $13.00 per share. For a more complete discussion regarding the
historical financial information in this table, please see the notes to our
financial statements.
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION THREE MONTHS ENDED
(MAY 29, 1996) YEAR ENDED DECEMBER 31, MARCH 31,
THROUGH ------------------------- ----------------------
DECEMBER 31, 1996 1997 1998 1998 1999
----------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenues................ $ -- $ 422,401 $ 3,108,356 $ 469,168 $1,337,122
Loss from operations.... (678,005) (2,894,307) (2,049,464) (415,207) (375,328)
Net loss................ (660,638) (2,813,939) (1,870,879) (367,418) (341,898)
Basic and diluted loss
per share............. $ (0.73) $ (3.13) $ (2.07) $ (0.41) $ (0.38)
Weighted average shares
used in the
calculation of basic
and diluted loss per
share................. 900,000 900,000 901,993 900,000 907,200
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1998 MARCH 31, 1999
------------ -------------------------
ACTUAL ACTUAL AS ADJUSTED
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 3,682,576 $3,156,857 $32,581,857
Working capital.................................... 3,716,071 3,409,363 32,834,363
Total assets....................................... 6,026,481 6,043,368 35,468,368
Mandatory redeemable convertible preferred stock... 9,582,802 9,582,802 --
Shareholders' equity (deficit)..................... (5,310,037) (5,621,875) 33,385,927
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
OTHER DATA:
Contract value.................................... $1,555,000 $4,595,000 $5,868,000
</TABLE>
- ---------------
Contract value represents the annualized value of all of our subscription
contracts outstanding at the end of each period. This value includes amounts
that we have previously recognized as revenue as well as amounts which we expect
to recognize as revenue over the remainder of a contract. As of March 31, 1999,
we have recognized $2.5 million of revenues of the $5.9 million in contract
value. Contract value is provided because we believe that it is useful
information for evaluating our future ability to generate revenues. Contract
value should not be construed as an alternative to revenue or deferred revenue,
or any other indicator of our future operating performance or liquidity.
Contract value is not a financial measure determined in accordance with
generally accepted accounting principles and may not be comparable to similarly
titled measures of other companies.
7
<PAGE> 9
RISK FACTORS
You should consider carefully the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could harm our business, results of operations and financial
condition and could result in a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT IS DIFFICULT TO EVALUATE OUR
BUSINESS AND PROSPECTS
We were incorporated in May 1996 and have a limited operating history. An
investor in our common stock must consider the risks and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets,
including the Internet advertising and electronic commerce markets. These risks
include our ability to:
- sustain revenue growth rates;
- manage our expanding operations;
- compete with companies that have longer operating histories, greater name
recognition and greater financial resources; and
- expand our current client base.
We also depend on the growing use of the Internet for advertising, commerce
and communication, and on general economic conditions. We cannot assure you that
our business strategy will be successful or that we will successfully address
these risks. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for detailed information on our limited
operating history.
WE HAVE A HISTORY OF LOSSES, AND WE ANTICIPATE CONTINUED LOSSES
To date, we have not made a profit. We incurred net losses of approximately
$661,000 during our inception period from May 29, 1996 through December 31,
1996, $2.8 million in 1997, $1.9 million in 1998, and approximately $342,000 for
the three months ended March 31, 1999. As of March 31, 1999, our accumulated
deficit was $5.7 million. We expect to continue incurring significant operating
and net losses through at least 2000 and, as a result, we will need to generate
significant revenues to achieve and maintain profitability. Although our
revenues have grown in recent quarters, we cannot assure you that we will
achieve sufficient revenues for 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. Our results of
operations and financial condition will be harmed if revenues grow more slowly
than we anticipate, or if operating expenses exceed our expectations and cannot
be adjusted accordingly. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for detailed information on our
history of losses and anticipation of continued losses.
WE DEPEND ON SUBSCRIPTION RENEWALS BY OUR CLIENTS AND A DECREASE IN OUR
CURRENT RATE OF RENEWAL COULD CAUSE A DECLINE IN OUR REVENUE
We derive all of our revenues from subscriptions to our systems. Because we
have a limited operating history, our subscription renewal rate is based on a
limited
8
<PAGE> 10
number of contracts and we are not sure that we will continue to experience our
current rate of subscription renewal. If our renewal rate percentage declines,
our results of operations and financial condition could be harmed. Our
subscription renewal rates may decline as a result of a consolidation in our
client base, the emergence of direct competition or if a significant number of
our clients cease operations.
OUR BUSINESS WILL BE HARMED IF OUR RELATIONSHIP WITH GALLUP IS TERMINATED
CAUSING UPDATES TO OUR DATABASE OR THE INTRODUCTION OF NEW PRODUCTS TO BE
DELAYED.
The methodology for the collection of data, the generation of a sample
population to be surveyed and the collection of data from that sample population
for both our Web user database and our U.S. population database is controlled
and conducted by Gallup. Our agreement with Gallup extends through 2006. Gallup
does not have the right to terminate the agreement prior to 2006, however, other
circumstances beyond our control, such as Gallup going out of business or Gallup
breaching the agreement, could cause the agreement to terminate early. We cannot
be sure that Gallup will continue to provide us services in a manner that allows
us to execute our business strategy. If our agreement with Gallup terminates for
any reason, we will need to find another firm to perform our research data
collection services and this could harm our business by delaying our ability to
update our database and introduce new products.
IF GALLUP EXPERIENCES PROBLEMS WITH THE TIMELY COLLECTION, PROCESSING, STORING
OR DELIVERY OF ACCURATE DATA, WE MAY LOSE CREDIBILITY WITH OUR CLIENTS
The data that comprises our exclusively owned databases is collected and
statistically processed by Gallup and delivered to us on a quarterly basis.
Gallup could experience problems with, or make errors in, collecting,
processing, storing or delivering the data. In addition, Gallup could experience
problems with the computer systems that process and store the data. These
problems could result in inaccuracies in, or in delays in delivery or loss of,
the data from Gallup. These inaccuracies, delays or losses could cause us to
lose credibility with our clients or breach some client contracts which could
cause us to lose clients and could harm our business.
WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS AND ANY
INABILITY TO MANAGE THIS GROWTH AND ANY FUTURE GROWTH COULD HARM OUR
BUSINESS
We have grown and expect to continue to grow both by adding new products
and hiring new employees. This growth has placed, and our anticipated future
growth in our operations will continue to place a strain on our management
systems and resources. We cannot assure you that our management team will be
able to efficiently or successfully manage our growth. In addition, we will need
to hire additional financial and operations personnel. We expect that we will
need to continue to improve our financial and managerial controls and reporting
systems and procedures, and we will need to continue to expand, train and manage
our workforce.
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<PAGE> 11
IF WE ARE UNABLE TO ATTRACT AND RETAIN SALES AND CLIENT SERVICE PERSONNEL OR WE
ARE UNABLE TO ADEQUATELY TRAIN OUR SALES PERSONNEL IN A TIMELY MANNER, OUR
BUSINESS AND FUTURE REVENUE GROWTH WOULD BE HARMED
Our business would be harmed if we were unable to continue to attract,
retain and motivate highly qualified, experienced sales and client service
personnel. We need to hire additional sales and client service personnel to
achieve our growth objectives. Competition for these individuals is intense.
Even if we are able to hire additional sales personnel it will take months of
training before they are fully productive. We may be unable to attract, train
and retain an adequate number of individuals to meet our sales and client
service objectives.
OUR BUSINESS AND FUTURE REVENUE GROWTH MAY SUFFER IF WE ARE NOT SUCCESSFUL AT
DEVELOPING AND INTRODUCING NEW PRODUCTS
Our future growth depends in part on our ability to offer new products and
services on a timely and cost-effective basis. Our business may suffer if we
fail to develop and introduce new products or if our new products are not
accepted by the market or are accepted at a slower rate than we anticipate. In
December 1998, we introduced the @plan Kepler E-Business System for online
retailers and consumer brand marketers. We are currently developing more
detailed market research systems for specific client groups. There are many
costs and risks associated with developing and introducing these and other new
products, including:
- significant market research data collection and software development
costs;
- a need for additional sales, client service and other personnel;
- diversion of management attention and resources; and
- the lack of acceptance of new products in the marketplace.
We cannot assure you that we will be successful in developing and
introducing new products.
OUR FUTURE REVENUES MAY BE UNPREDICTABLE AND OUR QUARTERLY RESULTS ARE EXPECTED
TO FLUCTUATE AND IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET
ANALYSTS AND INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE
Our operating results have varied on a quarterly basis and may fluctuate
significantly in the future as a result of a variety of factors, many of which
are outside our control. Due to these fluctuations, it is likely that in some
future quarters our operating results will fall below the expectations of
securities analysts and investors, which could cause the price of our common
stock to drop. Factors that may affect our quarterly operating results include:
- market acceptance of the Web as an advertising medium;
- the development of the electronic commerce market;
- market acceptance of our products;
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, including those related to our
planned development of more detailed market research and planning
systems;
- variations in product or client mix, as pricing may vary based on the
volume and type of subscriptions being sold to a client;
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<PAGE> 12
- our ability to expand our client base and retain current clients;
- new competitors entering our market;
- general economic conditions as well as economic conditions specific to
the Internet;
- our ability to attract, train and retain qualified sales and other
personnel;
- technical difficulties or service interruptions; and
- the magnitude and timing of strategic pricing changes, marketing
decisions or acquisitions.
Our limited operating history and the emerging nature of our markets make
prediction of future revenues difficult. Our expense levels are based, in part,
on our expectations with regard to future revenues, and to a large extent our
expenses are fixed, particularly in the short term. We cannot assure you that we
will be able to predict our future revenues accurately and we may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in our expectations could
cause significant declines in our quarterly operating results.
Due to all the foregoing factors, our quarterly revenues and operating
results are difficult to forecast. We believe that our quarterly revenues,
expenses and operating results could vary significantly in the future, and that
period-to-period comparisons should not be relied upon as indicators of future
performance.
WE MAY EXPERIENCE CLIENT DISSATISFACTION OR BE EXPOSED TO LIABILITY FOR
SUPPLYING INACCURATE INFORMATION TO OUR CLIENTS
Our data may contain inaccuracies as a result of data collection or
software errors, among other reasons. Our clients may become dissatisfied with
our systems, or we may face liability if we supply inaccurate information. Any
client dissatisfaction with our data would hinder our ability to attract new
clients and retain existing clients. If we face liability for supplying
inaccurate data, our business may suffer.
OUR REPUTATION AND THE ATTRACTIVENESS OF OUR SYSTEMS COULD BE IMPAIRED BY A
FAILURE OF OUR COMPUTING SYSTEMS AND OUR INTERNET SERVICE PROVIDER'S
COMPUTING SYSTEMS
The performance of our server and networking hardware and software
infrastructure is critical to our business, reputation and ability to attract
and retain clients. Any system failure that causes an interruption in service or
a decrease in responsiveness of our processing or data storage capabilities
could impair our reputation and the attractiveness of our products. We entered
into an agreement with UUNet for our Internet connectivity. Any interruption in
the service that UUNet provides, or any failure of UUNet to handle higher
volumes of Internet users, would harm our business.
The availability of our systems is dependent upon our ability and the
ability of our Internet service provider to protect our server and network
infrastructure against damage from:
- human error;
- fire;
- flood;
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- power loss;
- telecommunications failure;
- sabotage; and
- intentional acts of vandalism.
Despite precautions taken by us and our Internet service provider, the
occurrence of natural disasters or other unanticipated problems at our or their
facilities could result in interruption in the availability of our systems or
significant damage to our equipment. Even though we have implemented network
security measures, our servers are vulnerable to computer viruses, break-ins and
similar disruptions from unauthorized tampering. The occurrence of any of these
events could result in interruptions, delays, the loss or corruption of our data
or cessations in the availability of our systems, which could harm our business
and our reputation.
WE HAVE EXPERIENCED AND MAY AGAIN EXPERIENCE SYSTEM CAPACITY CONSTRAINTS THAT
COULD RESULT IN CLIENT DISSATISFACTION OR A LOSS OF CLIENTS
An increase in the number of our clients, the addition of new products or
spikes in client demand, either unexpected or in connection with new data
releases, could strain the capacity of our computer systems, which could lead to
slower response time or system failures. For example, some of our clients
recently experienced delays in accessing our systems due to increased client use
following the Spring 1999 update of our databases. Our business could be harmed
by system failures or slowdowns that reduce the speed and responsiveness of our
data processing and diminish the experience for our clients. We face risks
related to our ability to scale up to our expected client levels while
maintaining superior performance. We may need to purchase additional servers to
maintain adequate data processing speeds.
THE LOSS OF SERVICES OF OUR KEY EXECUTIVES WOULD LIKELY HURT OUR BUSINESS
Our future success depends to a significant extent on the continued service
of Mark K. Wright, our Chief Executive Officer and Chairman of our Board of
Directors, and Karl A. Spangenberg, our President and Chief Operating Officer.
We have no employment agreements with either of these executives. The loss of
the services of either of Messrs. Wright or Spangenberg would likely hurt our
business. Please see "Management" for detailed information on these key
executives.
WE FACE COMPETITION FROM MORE ESTABLISHED PROVIDERS OF INTERNET MARKET
RESEARCH TOOLS THAT COULD CAUSE A LOSS OF CLIENTS OR CAUSE US TO REDUCE THE
PRICES WE CAN CHARGE TO OUR CLIENTS
Our market, namely providing market research tools for Internet
advertisers, advertising agencies, Web publishers, online retailers and consumer
brand marketers, is new and rapidly evolving. Competition for clients is intense
and is expected to increase in the future as existing competitors develop new
solutions, potential competitors become active in the market and our industry
consolidates. We cannot assure you that we will be able to compete successfully
or that competitive pressures will not harm our business. We believe that our
ability to compete depends upon many factors both within and beyond our control,
including the following:
- the timing and market acceptance of new products and enhancements to
existing products developed either by us or our competitors;
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<PAGE> 14
- our client service and support efforts;
- our sales and marketing efforts; and
- the ease of use, performance, price and reliability of products developed
either by us or our competitors.
Most of our competitors have longer operating histories, greater name
recognition, larger client bases and significantly greater financial, technical
and marketing resources than we do. This may allow them to respond more quickly
than we can to new or emerging technologies and changes in client requirements.
It may also allow them to devote greater resources than we can to the
development, promotion and sale of their products and services. These
competitors may also engage in more extensive research and development,
undertake more far-reaching marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to existing and potential employees,
strategic partners, advertisers and Web publishers. We cannot assure you that
our current and potential competitors will not develop products or services that
are of equal or superior quality to ours or that achieve greater market
acceptance or that may be offered at lower prices. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of our prospective customers. It
is possible that new competitors may emerge and rapidly acquire significant
market share. Increased competition is likely to result in price reductions,
reduced gross margins and loss of market share, all of which will harm our
business. Please see "Business -- Competition for Our Internet Clients" for
detailed information about our competition.
YEAR 2000 PROBLEMS MAY DISRUPT OUR OPERATIONS AND LIMIT THE AVAILABILITY OF OUR
SYSTEMS WHICH COULD RESULT IN LOST REVENUES, INCREASED OPERATING COSTS OR
THE LOSS OF CLIENTS
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities. All of the systems on which we rely including our
systems, Gallup's systems and third-party systems such as those of UUNet, may
not be Year 2000 compliant, and we cannot assure you that all these systems will
be made Year 2000 compliant in a timely manner or that the third parties upon
which our business depends will achieve Year 2000 compliance. Any failure to fix
or replace our internally developed systems, Gallup's systems, or other
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of clients, or other business
interruptions, any of which could harm our business, results of operations and
financial condition. Moreover, the failure to adequately address Year 2000
compliance issues in our internally developed systems could result in claims of
negligence, mismanagement, misrepresentation or breach of contract and related
litigation, which could be costly and time-consuming to defend. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Compliance" for more detailed information.
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<PAGE> 15
ANY FAILURE BY US TO PROTECT OUR INTELLECTUAL PROPERTY COULD HARM OUR BUSINESS
AND COMPETITIVE POSITION
Our success and our competitive position are dependent on our internally
developed methods, technologies and trademarks which we generally protect
through a combination of copyright, trademark and trade secrecy laws,
confidentiality agreements with third parties, and license agreements with
consultants, vendors and customers. Despite these protections, a third party
could, without authorization, copy or otherwise take information from our
database. Our agreements with employees, consultants and others who participate
in development activities could be breached. We may not have adequate remedies
for any breach, and our trade secrets may otherwise become known or
independently developed by competitors. We cannot assure you that any of our
trademark applications will be approved. Even if these applications are
approved, the trademarks may be successfully challenged by others or
invalidated. Please see "Business -- Protection of Our Proprietary Rights" for
more detailed information.
WE MAY INFRINGE THE PROPRIETARY RIGHTS OF OTHERS AND BE LIABLE FOR SIGNIFICANT
DAMAGES
There have been substantial amounts of litigation in the computer and
online industries regarding intellectual property assets. Third parties may
claim infringement by us with respect to current and future products, trademarks
or other proprietary rights, or we may counterclaim against these parties. Any
claims or counterclaims could be time-consuming, result in costly litigation,
divert management's attention, cause product release delays, require us to
redesign our products or require us to enter into royalty or licensing
agreements, any of which could harm our business and operating results. Royalty
and licensing agreements, if required, may not be available on terms acceptable
to us, or at all.
WE RELY ON THIRD PARTIES FOR THE DEVELOPMENT OF SOME OF OUR SOFTWARE TECHNOLOGY
We hire third parties to develop some of our software technology. We cannot
assure you that we will continue to receive this technology from third parties
or that this technology will continue to be available at a reasonable cost. If
we are unable to develop additional software or upgrade our existing software,
we may experience delays in making our current and future systems accessible to
our clients.
ANY FUTURE ACQUISITIONS OF BUSINESSES OR TECHNOLOGIES COULD STRAIN OUR
MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES
We may acquire or make investments in complementary businesses, products,
services or technologies. We cannot assure you that we will be able to make such
acquisitions or investments on commercially acceptable terms. If we acquire a
company, we could have difficulty in assimilating that company's personnel and
operations. In addition, the key personnel of the acquired company may decide
not to work for us. If we make other types of acquisitions, we could have
difficulty in assimilating the acquired products, services or technologies into
our operations. These difficulties could disrupt our ongoing business, distract
our management and employees, increase our expenses and harm our results of
operations due to accounting requirements such as the amortization of goodwill.
Furthermore, we may incur debt or issue equity securities to pay for any future
acquisitions. The issuance of equity securities could be dilutive to our
existing shareholders.
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<PAGE> 16
RISKS RELATED TO OUR INDUSTRY
IF INTERNET USAGE DOES NOT CONTINUE TO GROW, WE WILL NOT BE SUCCESSFUL
Our business would be adversely affected if Internet usage does not
continue to grow rapidly. Internet usage may be inhibited for a number of
reasons, including:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service; or
- lack of availability of cost-effective, high-speed service.
Even if Internet usage grows, the Internet infrastructure may not be able
to support the demands placed on it by this growth. As a result, its performance
and reliability may decline. Even if the necessary infrastructure or
technologies are developed, we may have to adapt our systems accordingly. In
addition, Web sites and proprietary online services have experienced
interruptions in their service as a result of outages and other delays occurring
throughout their infrastructure. If these outages or delays frequently occur in
the future, Internet usage could grow more slowly or decline.
OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF THE ELECTRONIC COMMERCE
MARKET
If electronic commerce does not grow or grows more slowly than expected,
our business will suffer. Our long-term success depends on widespread market
acceptance of electronic commerce. A number of factors could prevent this
acceptance, including the following:
- electronic commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
- the necessary network infrastructure for substantial growth in usage of
the Internet may not be adequately developed;
- increased government regulation or taxation may adversely affect the
viability of electronic commerce;
- increases in the cost of telecommunications services could make access to
the Internet prohibitively expensive for consumers;
- insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and
- adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
WE WILL LOSE CLIENTS OR FAIL TO ATTRACT NEW CLIENTS IF THE INTERNET DOES NOT
CONTINUE TO DEVELOP AS AN ADVERTISING MEDIUM
Our future success depends on an increase in the use of the Internet as an
advertising medium. We would lose clients or fail to attract new clients if the
market for Internet advertising fails to develop or develops more slowly than we
expect. The Internet advertising market is new and rapidly evolving, and it
cannot yet be compared with traditional advertising media to gauge its
effectiveness and value to advertisers. As a result, demand and market
acceptance for our systems is uncertain. Many of our current or potential
clients have little or no experience using the
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<PAGE> 17
Internet for advertising purposes, and they have allocated only a limited
portion of their advertising budgets to Internet advertising. The adoption of
Internet advertising, particularly by those entities that have historically
relied upon traditional media for advertising, requires accepting a new way of
conducting business, exchanging information and advertising products and
services. Clients may find that Internet advertising is less effective for
promoting their products and services relative to traditional advertising media.
In addition, most of our current and potential Web publisher clients have little
or no experience in generating revenues from the sale of advertising space on
their Web sites.
THE INTERNET MARKET RESEARCH INDUSTRY IS NEW AND CHANGING QUICKLY AND OUR
SYSTEMS MAY NOT BE ACCEPTED BY OUR EXISTING AND FUTURE CLIENTS
To date, no industry consensus has emerged as to what information tools
will be essential to buying and selling Internet advertising as well as to the
development of electronic commerce. Our existing and future clients may
challenge or refuse to accept the market research information that our systems
provide. Our clients may not be satisfied with our methodology for data
collection or may feel that our databases do not represent Internet users. Our
clients might turn to other current or future providers of market research
decision support and planning systems.
THE FAILURE OF INDUSTRY INITIATIVES TO SUPPORT OUR METHODOLOGIES OR THEIR
ENDORSEMENT OF OTHER METHODOLOGIES MAY RESULT IN A DECLINE IN SALES OF
SUBSCRIPTIONS FOR OUR SYSTEMS
Certain key industry organizations, including the Internet Advertising
Bureau, the Media Ratings Council, the Advertising Research Foundation and FAST
Forward, have begun initiatives focusing on standards for Internet market
research and audience measurement. To the extent that some or all of these trade
groups do not support our methodologies or endorse other methodologies, our
business and financial condition could be harmed.
TECHNOLOGICAL CHANGE MAY RENDER OUR SYSTEMS OBSOLETE
The Internet, the Internet advertising and electronic commerce markets are
characterized by rapidly changing technologies, evolving industry standards,
frequent new product and service introductions, and changing client demands. Our
systems may be rendered obsolete by those developments. Our future success
depends on our ability to adapt to rapidly changing technologies, to enhance our
existing products and to develop and introduce a variety of new products to
address our clients' changing needs. We may experience difficulties that could
delay or prevent the successful design, development, introduction or marketing
of our products. In addition, our new products or enhancements must meet the
requirements of our current and prospective clients and must achieve significant
market acceptance. Delays in introducing new products and enhancements may cause
clients to forego purchases of our products and purchase those of our
competitors.
WE MAY BECOME SUBJECT TO GOVERNMENT REGULATION THAT COULD INCREASE THE COST OF
PROVIDING OUR SYSTEMS
Any new laws or regulations relating to the Web could increase the cost of
providing our systems and harm our financial condition. In particular, laws and
regulations may be adopted in the future that address the pricing of Internet
access.
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<PAGE> 18
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 providing our systems
over the Internet.
RISKS RELATED TO THIS OFFERING
CURRENT SHAREHOLDERS, OFFICERS AND DIRECTORS OWN A LARGE AMOUNT OF OUR STOCK AND
WILL BE ABLE TO CONTROL MATTERS REQUIRING SHAREHOLDER APPROVAL
After this offering, the directors and executive officers and their
affiliates will beneficially own 79.0% of the outstanding common stock. They
will be able to exercise control over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership could deter, delay or
prevent transactions that could result in a change in control which could cause
the price at which our common stock trades to drop.
SUBSTANTIAL SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
After this offering, we will have 10,948,600 outstanding shares of common
stock. Sales of a substantial number of shares of common stock in the public
market following this offering could depress the market price of our common
stock. All the shares sold in this offering will be freely tradable. Assuming
the effectiveness of lock-up arrangements restricting the sale of common stock
for a period of 180 days between our shareholders or us and the underwriters,
8,441,400 of the 10,948,600 shares of common stock outstanding after this
offering will be available for sale in the public market 180 days following the
date of this prospectus. Of these shares, 8,324,400 shares will be subject to
volume limitations under federal securities laws. In addition, at such time,
2,076,940 shares subject to options and warrants currently outstanding will be
exercisable and may be resold.
If our shareholders sell substantial amounts of common stock in the public
market, including shares issued upon the exercise of outstanding options and
warrants, the market price of our common stock could fall. Please see "Shares
Eligible for Future Sale" and "Underwriting" for an explanation of what could
happen if our shareholders sell substantial amounts of common stock.
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE THAT COULD AFFECT THE
VALUE OF YOUR INVESTMENT
There has never been a public market for our common stock. Accordingly, we
cannot predict the extent to which investor interest in our common stock will
lead to the development of a trading market or how liquid that market might
become. The initial public offering price will be determined through
negotiations between representatives of the underwriters and us and may not be
indicative of prices that will prevail in the trading market. The price at which
our common stock will trade after this offering is likely to be highly volatile
as the stock market in general, and
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<PAGE> 19
the market for Internet-related and technology companies in particular, has been
highly volatile. Factors that could cause volatility may include, among other
things:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet industry;
- changes in the market valuations of other Internet companies;
- announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures;
- capital commitments;
- additions or departures of key personnel; and
- sales of common stock.
Many of these factors are beyond our control. These factors may depress the
market price of our common stock, regardless of our operating performance. As a
result, investors may not be able to resell their shares of our common stock at
or above the initial offering price. The trading prices of many technology and
Internet-related companies' stocks have reflected valuations substantially above
historical levels. We cannot assure you that our stock will trade at the same
levels of other Internet stocks or that Internet stocks in general will sustain
their current market prices.
THE BROAD DISCRETION WE HAVE IN THE USE OF PROCEEDS OF THIS OFFERING MAY
INCREASE THE RISK THAT WE WILL NOT USE THEM EFFECTIVELY OR THAT WE WILL USE
THEM IN WAYS WITH WHICH YOU MAY NOT AGREE
The net proceeds of this offering will be added to our working capital and
will be available for general corporate purposes, including expansion of sales,
marketing and customer service capabilities and product development. In
addition, we may use a portion of the net proceeds to acquire or invest in
complementary businesses, technologies, services or products. We cannot state
with certainty particular uses for the net proceeds from this offering. Our
management will have broad discretion in the use of the net proceeds. Please see
"Use of Proceeds."
A THIRD PARTY COULD BE PREVENTED FROM ACQUIRING YOUR SHARES OF STOCK AT A
PREMIUM TO THE MARKET PRICE BECAUSE OF THE ANTI-TAKEOVER EFFECTS OF
PROVISIONS IN OUR CHARTER, BYLAWS AND UNDER STATE LAW
Our charter and bylaws provide for the establishment of a classified board
of directors, limitations on the ability of shareholders to call special
meetings, the lack of cumulative voting for directors and procedures for advance
notification of shareholder nominations and proposals. These charter and bylaw
provisions and provisions of Tennessee law could delay, deter or prevent a
change in control. After this offering our board of directors may issue up to
10,000,000 shares of preferred stock without any further vote or action by the
shareholders. The board can determine the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares. The preferred stock
may be issued with voting, liquidation, dividend and other rights superior to
those of the common stock. The issuance of preferred stock could make it hard
for a third party to acquire a majority of our
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<PAGE> 20
outstanding voting stock. Please see "Description of Capital Stock" for more
information about material provisions of our charter, bylaws and Tennessee law.
INVESTORS IN THE OFFERING WILL INCUR DILUTION OF THEIR SHARES
Investors purchasing shares of common stock in this offering will incur
immediate and substantial dilution in pro forma net tangible book value per
share. All of our outstanding options will be immediately exercisable and vested
upon the consummation of this offering. If these options are subsequently
exercised, there will be further dilution. Please see "Dilution" for an
explanation of the dilution investors will incur.
FORWARD LOOKING STATEMENTS
There are statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," and elsewhere in this
prospectus that are "forward-looking statements." These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, expectations and intentions and other statements contained in this
prospectus that are not historical facts. When used in this prospectus, the
words "expect," "anticipate," "intend," "plan," "believe," "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 actual results to
differ materially from those expressed or implied by these forward-looking
statements, including our plans, objectives, expectations and intentions and
other factors discussed under "Risk Factors."
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<PAGE> 21
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 2,500,000 shares of
common stock we are offering will be approximately $29.4 million, assuming an
initial public offering price of $13.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $34.0 million, at an assumed initial public
offering price of $13.00 per share.
We intend to use the net proceeds of this offering for general corporate
purposes including working capital, for the expansion of our sales, marketing
and client service capabilities, and for product development. In addition, we
may use a portion of the net proceeds to acquire or invest in complementary
businesses, technologies, services or products; however, we currently have no
commitments or agreements and are not involved in any negotiations with respect
to any acquisition or investment. We cannot specify with certainty the
particular uses for the net proceeds to be received upon the completion of this
offering. Accordingly, our management team will have broad discretion in
applying the net proceeds.
Pending such uses, we intend to invest the net proceeds of this offering in
short-term, interest-bearing, investment grade securities, certificates of
deposit or direct guaranteed obligations of the United States.
DIVIDEND POLICY
We have never declared or paid any cash dividends. We do not expect to pay
any cash dividends on our capital stock in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the growth
of our business. 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. Any future determination to pay cash dividends will be at the
discretion of our board of directors.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999:
- on an actual basis; and
- on a pro forma, as adjusted basis to give effect to:
- the automatic conversion of all outstanding shares of preferred stock
into common stock upon consummation of this offering;
- the receipt of the estimated net proceeds from the sale of the
2,500,000 shares of common stock offered in this offering at an
assumed initial public offering price of $13.00 per share and after
deducting underwriting discounts and commissions and estimated
offering expenses; and
- warrants to purchase 200,000 shares of common stock at an assumed
exercise price equal to the initial public offering price of $13.00
per share issuable upon consummation of this offering.
The outstanding share information excludes (a) 1,852,740 shares of common
stock issuable upon the exercise of options then outstanding with a weighted
average exercise price of $1.48 per share, (b) 44,400 shares of common stock
issuable upon exercise of options granted after March 31, 1999, with an exercise
price equal to our initial public offering price, (c) 125,000 shares of common
stock issuable upon exercise of options to be granted to our directors at the
date of our initial public offering at an exercise price equal to our initial
public offering price, (d) an aggregate of 867,860 additional shares reserved
for issuance under our stock option plans and (e) 200,000 shares of common stock
issuable upon the exercise of warrants to be issued upon consummation of this
offering with an exercise price equal to our initial public offering price.
This information is qualified by, and should be read in conjunction with,
our financial statements and the notes to those statements appearing at the end
of this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------
ACTUAL AS ADJUSTED
----------- -----------
(UNAUDITED)
<S> <C> <C>
Long-term debt.............................................. $ -- $ --
Mandatory redeemable convertible preferred stock:
Series A, no par value; 500,000 authorized (actual) and
no shares authorized, as adjusted; 448,000 issued and
outstanding (actual) and no shares issued and
outstanding, as adjusted.............................. 431,876 --
Series B, no par value; 2,250,000 authorized (actual)
and no shares authorized, as adjusted; 2,016,000
issued and outstanding (actual) and no shares issued
and outstanding, as adjusted.......................... 4,011,935 --
Series C, no par value; 1,725,667 authorized (actual)
and no shares authorized, as adjusted; 1,725,667
issued and outstanding (actual) and no shares issued
and outstanding, as adjusted.......................... 5,138,991 --
----------- ------------
9,582,802 --
Shareholders' equity:
Preferred stock, no par value; 5,524,333 shares
authorized (actual) and 10,000,000 shares authorized,
as adjusted; no shares issued and outstanding......... -- --
Common stock, no par value; 50,000,000 shares
authorized; 907,200 issued and outstanding (actual)
and 10,948,600 shares issued and outstanding, as
adjusted.............................................. 8,001 39,015,803
Additional paid in capital.............................. 57,478 57,478
Warrants................................................ -- 1,228,391
Accumulated deficit..................................... (5,687,354) (6,915,745)
----------- ------------
Total shareholders' equity (deficit)............. (5,621,875) 33,385,927
----------- ------------
Total capitalization............................. $3,960,927 $ 33,385,927
=========== ============
</TABLE>
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DILUTION
As of March 31, 1999, our pro forma net tangible book value after giving
effect to the conversion of our preferred stock was $3.6 million, or $0.43 per
share of common stock. Pro forma net tangible book value per share represents
the amount of our total tangible assets less total liabilities, divided by the
pro forma shares of common stock outstanding as of March 31, 1999. After giving
effect to the issuance and sale of the 2,500,000 shares of common stock offered
in this offering, and the application of the estimated net proceeds, our pro
forma net tangible book value as of March 31, 1999 would have been $33.0
million, or $3.02 per share. This represents an immediate increase in pro forma
net tangible book value of $2.59 per share to existing shareholders and an
immediate dilution of $9.98 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Pro forma net tangible book value per share at March 31,
1999................................................... $0.43
Increase per share attributable to new investors.......... 2.59
-----
Pro forma net tangible book value per share after
offering.................................................. 3.02
------
Dilution per share to new investors......................... $ 9.98
======
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1999,
the differences between the number of shares of common stock purchased, the
total consideration paid and the average price per share paid by the existing
shareholders and the 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
shareholders...... 8,448,600 77.2% $ 9,665,001 22.9% $ 1.14
New investors........ 2,500,000 22.8 32,500,000 77.1 13.00
---------- ----- ----------- -----
Total.. 10,948,600 100.0% $42,165,001 100.0%
========== ===== =========== =====
</TABLE>
The discussion and tables above assume no exercise of any stock options
outstanding as of March 31, 1999. As of March 31, 1999, there were options
outstanding to purchase a total of 1,852,740 shares of common stock with a
weighted average exercise price of $1.48 per share. If any of these options are
exercised, there will be further dilution to new investors. Please see
"Capitalization" and note 5 of the notes to our financial statements.
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<PAGE> 24
SELECTED FINANCIAL DATA
The selected statement of operations data presented below for the period
from our inception on May 29, 1996 to December 31, 1996 and for each of the
years in the two-year period ended December 31, 1998, and the selected balance
sheet data as of December 31, 1996, 1997 and 1998, are derived from our
financial statements that have been audited by Arthur Andersen, LLP, our
independent public accountants, and are included elsewhere in this prospectus.
The selected statement of operations data for the three months ended March 31,
1998 and 1999, and the selected balance sheet data as of March 31, 1999 are
derived from our unaudited financial statements included elsewhere in this
prospectus. These unaudited financial statements have been prepared on the same
basis as our audited financial statements and, in our opinion, include all
material adjustments, consisting only of normal recurring adjustments, necessary
to present fairly this unaudited financial information. You should read the
following selected financial information in conjunction with our financial
statements and the notes to those statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" located elsewhere in
this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 29, 1996 YEAR ENDED THREE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ -- $ 422,401 $ 3,108,356 $ 469,168 $ 1,337,122
Costs and expenses:
Product costs.................... 487,239 1,744,366 2,360,042 407,649 740,480
Selling and marketing............ -- 819,043 1,713,080 294,811 539,160
General and administrative....... 190,766 753,299 1,084,698 181,915 432,810
---------- ----------- ----------- ----------- -----------
Total costs and expenses..... 678,005 3,316,708 5,157,820 884,375 1,712,450
---------- ----------- ----------- ----------- -----------
Loss from operations................. (678,005) (2,894,307) (2,049,464) (415,207) (375,328)
Interest income...................... 17,367 80,368 191,804 52,710 36,730
---------- ----------- ----------- ----------- -----------
Net loss before income taxes......... (660,638) (2,813,939) (1,857,660) (362,497) (338,598)
Income tax provision................. -- -- 13,219 4,921 3,300
---------- ----------- ----------- ----------- -----------
Net loss............................. $ (660,638) $(2,813,939) $(1,870,879) $ (367,418) $ (341,898)
========== =========== =========== =========== ===========
Basic and diluted loss per share
(1)................................ $ (0.73) $ (3.13) $ (2.07) $ (0.41) $ (0.38)
========== =========== =========== =========== ===========
Weighted average shares
outstanding........................ 900,000 900,000 901,993 900,000 907,200
========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------ MARCH 31,
1996 1997 1998 1999
-------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $1,608,370 $ 832,338 $ 3,682,576 $ 3,156,857
Working capital...................... 1,511,997 726,217 3,716,071 3,409,363
Total assets......................... 1,625,616 1,559,175 6,026,481 6,043,368
Mandatory redeemable convertible
preferred stock.................... 2,189,097 4,443,811 9,582,802 9,582,802
Shareholders' equity (deficit)....... (660,637) (3,474,576) (5,310,037) (5,621,875)
</TABLE>
- -------------------------
(1) Please see note 2 of the notes to our financial statements for an
explanation of the number of shares used in per share computations. At the
time of our initial public offering, each share of our preferred stock will
convert into 1.8 shares of our common stock. On a pro forma basis, basic and
diluted loss per share, had each share of preferred stock been immediately
converted into common stock at the time of issuance, would have been as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
MAY 29, 1996 YEAR ENDED THREE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------- -------------------------
1996 1997 1998 1998 1999
-------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Pro forma basic and diluted loss per
share.................................. $ (0.31) $ (0.58) $ (0.24) $ (0.05) $ (0.04)
</TABLE>
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our financial
statements and the notes to those statements appearing elsewhere in this
prospectus.
OVERVIEW
We were founded in May 1996. During the period from May 1996 to December
31, 1996, our inception period, we had no revenues and were primarily engaged in
the development and planning of our software and survey research
infrastructures. In June 1997, we introduced our first product system, the @plan
Gutenberg Advertising System. Since 1997, subscribers to this system have
included Internet advertisers, advertising agencies and Web publishers and, to a
lesser extent, online retailers and consumer brand marketers. During 1997, we
generated revenues of approximately $422,000, and continued to build our sales
and operations staff. During 1998, our first full year of sales, we continued to
grow our client subscriber base and generated revenues of $3.1 million. Despite
our growth in revenues, we incurred operating losses for the year, as our focus
continued to be on expanding our client and user bases, product development and
the hiring of additional sales, client service and operations personnel. During
1998, we opened a satellite office in San Francisco, California to service our
existing West Coast clients and to expand our client base in this market. In
December 1998, we introduced the @plan Kepler E-Business System specifically
designed for online retailers and consumer brand marketers.
We derive all of our revenues from the sale of subscriptions to our
systems. The subscription contracts are generally non-cancelable for a period of
one year and most automatically renew unless we receive notice of termination
from the client prior to the anniversary date. Clients typically pay contract
fees on an annual, quarterly or monthly basis which are recorded as deferred
revenue until the revenue is recognized. Revenue is recognized on a straight
line basis beginning over the non-cancelable contract period, generally 12
months. Upon renewal, many of the subscription rates increase automatically in
accordance with contract provisions. These automatic increases are generally
higher in the first two renewal years than in subsequent renewal years where the
rate adjustment is based on increases in the Consumer Price Index, or CPI. We
have experienced a contract renewal rate of 93% from inception through March 31,
1999. The renewal rate is not necessarily indicative of the rate of future
retention of our revenue base. See "Risk Factors -- We depend on subscription
renewals by our clients and a decrease in our current rate of renewal could
cause a decline in our revenue."
One measure of the volume of our business is "contract value" which
represents the annualized value of all contracts in effect at a given point in
time, without regard to the duration of contracts then outstanding and without
deducting revenue already recognized under these contracts. Our contract value
was $1.6 million at December 31, 1997, $4.6 million at December 31, 1998 and
$5.9 million at March 31, 1999. As of March 31, 1999, we have recognized $2.5
million of revenues of the $5.9 million in contract value.
Our revenues and operating margins will fluctuate due, in part, to product
and customer mix. Annual subscriptions to the @plan Kepler E-Business System are
typically priced higher than annual subscriptions to the @plan Gutenberg Adver-
24
<PAGE> 26
tising System. Moreover, annual subscription pricing and renewal pricing are
often negotiated and may vary based on the volume of subscriptions being sold to
the client. Variations in product or client mix could cause our revenue and
operating results to fluctuate on a quarterly or annual basis.
Product costs consist primarily of amounts paid to Gallup for quarterly
collection of data used in our market research systems. From time to time we
will engage Gallup on a case-by-case basis to collect additional data. In the
past, these additional engagements have caused our data collection costs to
fluctuate from quarter to quarter, and we expect quarterly data collection costs
to continue to fluctuate as we plan to continue to use Gallup for additional
data collection. Product costs will also increase as we collect data and incur
additional software development costs in conjunction with the development of new
products.
Also included in product costs are software development costs which consist
primarily of the amortization of capitalized software development costs and, to
a lesser extent, other non-capitalized technology expenses such as Web site
maintenance. Software development costs represent direct expenses incurred to
improve or enhance our systems, including increasing access speeds, designing
new user interfaces and developing new system modules. As of March 31, 1999, we
had approximately $366,000 in capitalized software development costs which will
be amortized and expensed as product costs over the next one to three years. See
note 2 of the notes to our financial statements for an explanation of the
accounting for our software development costs.
We have incurred significant losses since inception and as of March 31,
1999, we had an accumulated deficit of $5.7 million. Our net losses and
accumulated deficit resulted from our lack of substantial revenues and the
significant costs incurred in the development of our systems and in the
establishment of our operations infrastructure. We believe that our success will
depend largely on our ability to extend our leadership position as a source for
market research decision support and planning systems for the Internet.
Accordingly, we intend to invest in the development of new products, the
enhancement of our current systems and in the expansion of our sales force. As a
result, we expect to incur additional losses at least through December 31, 2000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1999
Revenues. Total revenues increased from approximately $469,000 for the
three months ended March 31, 1998 to $1.3 million for the three months ended
March 31, 1999. The increase in revenues resulted principally from an increase
of approximately $501,000 in recurring revenues from the retention of existing
clients. Additionally, we experienced increased growth of approximately $367,000
in our subscription sales to new clients, including revenues from our Kepler
E-Business System launched in December 1998.
Product Costs. Product costs consist primarily of amounts paid to Gallup
for quarterly collection of data used in our market research systems and
software development costs. Product costs increased from approximately $408,000
for the three months ended March 31, 1998 to approximately $740,000 for the
three months ended March 31, 1999. This increase was due primarily to an
increase of approximately $217,000 in additional data collection costs and an
increase of
25
<PAGE> 27
approximately $116,000 in software development costs associated with the
introduction of the @plan Kepler E-Business system. Our strategy includes the
development and introduction of new products. We are currently developing more
detailed market research systems for specific client groups. As a result, we
anticipate incurring increased data collection and software costs during the
remainder of 1999 and in future periods as we continue to develop additional
products.
Selling and Marketing. Selling and marketing costs consist primarily of
the personnel expenses associated with the sale and service of our systems,
including commissions, public relations costs and, to a lesser extent, marketing
expenses. Selling and marketing costs increased from approximately $295,000 for
the three months ended March 31, 1998 to approximately $539,000 for the three
months ended March 31, 1999. This increase was due largely to the expansion of
our sales force and client service team and commissions associated with
increased sales. Selling and marketing costs will increase as we continue to
expand our sales force and introduce new products.
General and Administrative. General and administrative expenses consist
primarily of salaries and related costs for our administrative, financial and
information technology personnel, professional fees, occupancy costs and general
office expenses. General and administrative expenses were approximately $182,000
for the three months ended March 31, 1998 as compared to approximately $433,000
for the three months ended March 31, 1999. This increase was primarily due to
the increase in personnel needed to support our expanding operations and related
costs. We anticipate hiring additional personnel and we will incur additional
costs related to being a public company, including directors' and officers'
liability insurance, investor relations programs and professional services fees.
Accordingly, general and administrative expenses will increase in future
periods.
Interest income. Interest income consists of interest on our cash and cash
equivalents. Interest income was approximately $53,000 for the three months
ended March 31, 1998 as compared to $37,000 for the three months ended March 31,
1999. The decrease in interest income was primarily attributable to the higher
cash balances during the three months ended March 31, 1998 as a result of net
proceeds from our sale of preferred stock in January 1998.
INCEPTION PERIOD AND YEARS ENDED DECEMBER 1997 AND 1998
Revenues. Total revenues increased from approximately $422,000 in 1997 to
$3.1 million in 1998. We had no revenues during our inception period from May
29, 1996 through December 31, 1996. The growth in revenues during 1998 resulted
principally from a $2.2 million increase in subscription sales for the @plan
Gutenberg Advertising System during our first full year of sales efforts, as
well as an approximate $455,000 increase in recurring revenues from the
retention of existing clients. We had nominal revenues from subscription sales
of the @plan Kepler E-Business System in 1998 as it was not introduced until
December 1998.
Product Costs. Product costs increased from approximately $487,000 in our
inception period to $1.7 million in 1997 due primarily to data collection costs
associated with the introduction of the @plan Gutenberg Advertising System in
June 1997. This increase was due primarily to an increase of approximately
$531,000 in additional data collection costs and an increase of approximately
$85,000 in
26
<PAGE> 28
software development costs associated with the @plan Gutenberg Advertising
System and the launch of the @plan Kepler E-Business System.
Selling and Marketing. We had no selling and marketing costs during 1996
as the @plan Gutenberg Advertising System was not introduced until 1997. Selling
and marketing costs increased from approximately $819,000 in 1997 to $1.7
million in 1998. The increase was due largely to the expansion of our sales
force and client service team and commissions associated with increased sales.
General and Administrative Expenses. General and administrative expenses
were approximately $191,000 in our inception period, approximately $753,000 in
1997 and $1.1 million in 1998. The increase in each period was primarily
attributable to the increase in staffing levels to manage and support our
expanding operations.
Interest Income. Interest income was approximately $17,000 in our
inception period, approximately $80,000 in 1997 and approximately $192,000 in
1998. The increase in 1998 was primarily due to a higher investment balance as a
result of net proceeds of $5.1 million from our sale of preferred stock in 1998.
27
<PAGE> 29
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth selected statement of operations data for
the five quarters ended March 31, 1999 both in absolute dollars and as a
percentage of total revenues. The information for each quarter has been prepared
on substantially the same basis as the audited statements included in other
parts of this prospectus and, in our opinion, includes all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results of operations for these periods. You should read
this information in conjunction with our financial statements and the notes to
those statements included elsewhere in this prospectus. The operating results
for any quarter are not necessarily indicative of the results to be expected in
the future.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1998 1998 1998 1998 1999
---------- ---------- ------------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.................... $ 469,168 $ 633,281 $ 899,026 $1,106,881 $1,337,122
Costs and expenses:
Product costs........... 407,649 671,153 572,010 709,230 740,480
Selling and marketing... 294,811 420,265 483,496 514,508 539,160
General and
administrative........ 181,915 189,675 345,345 367,763 432,810
---------- ---------- ---------- ---------- ----------
Total costs and
expenses......... 884,375 1,281,093 1,400,851 1,591,501 1,712,450
---------- ---------- ---------- ---------- ----------
Loss from operations........ (415,207) (647,812) (501,825) (484,620) (375,328)
Interest Income............. 52,710 45,709 47,198 46,187 36,730
---------- ---------- ---------- ---------- ----------
Net loss before taxes....... (362,497) (602,103) (454,627) (438,433) (338,598)
Income tax provision........ 4,921 -- -- 8,298 3,300
---------- ---------- ---------- ---------- ----------
Net loss.................... $ (367,418) $ (602,103) $ (454,627) $ (446,731) $ (341,898)
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUES
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100%
Costs and expenses:
Product costs........... 86.9 105.9 63.6 64.1 55.4
Selling and marketing... 62.8 66.4 53.8 46.5 40.3
General and
administrative........ 38.8 30.0 38.4 33.2 32.4
---------- ---------- ---------- ---------- ----------
Total costs and
expenses......... 188.5 202.3 155.8 143.8 128.1
---------- ---------- ---------- ---------- ----------
Loss from operations........ (88.5) (102.3) (55.8) (43.8) (28.1)
Interest income............. 11.2 7.2 5.2 4.2 2.7
---------- ---------- ---------- ---------- ----------
Net loss before taxes....... (77.3) (95.1) (50.6) (39.6) (25.3)
Income tax provision........ 1.0 -- -- 0.8 0.3
---------- ---------- ---------- ---------- ----------
Net loss.................... (78.3)% (95.1)% (50.6)% (40.4)% (25.6)%
========== ========== ========== ========== ==========
</TABLE>
28
<PAGE> 30
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
Our revenues increased during each quarter of 1998 and the first quarter of
1999. Quarterly revenue increased 35% from the first to the second quarter, 42%
from the second to the third quarter, 23% from the third to the fourth quarter
and 21% from the fourth quarter to the first quarter of 1999. These increases
were due to the growth in sales of subscriptions to the @plan Gutenberg
Advertising System, the effects of subscription renewals, which began in the
third quarter of 1998, and sales of the @plan Kepler E-Business System, which
was introduced in December 1998. These renewals reflect higher subscription
rates than those in place during the initial term of these contracts, in
accordance with contract provisions.
Operating costs and expenses increased 45% from the first to the second
quarter, 9.3% from the second to the third quarter, 14% from the third to the
fourth quarter and increased 7.6% from the fourth quarter to the first quarter
of 1999. These increases were due primarily to additions of sales and
administrative personnel to sustain our growth and new product development
costs. Operating costs and expenses in the second quarter were impacted by
product development costs associated with our U.S. population data collection,
which was included with the @plan Kepler E-Business System beginning in the
fourth quarter. Loss from operations, in absolute dollars and as a percent of
revenues, decreased during the year due to increasing revenues from new
contracts and renewals and the maintenance of fixed expenses such as data
collection costs.
Interest income remained relatively constant during the year but declined
as a percentage of revenues due to the growth in our revenues.
Our operating results have varied on a quarterly basis and are expected to
fluctuate significantly in the future as a result of a variety of factors, many
of which are outside our control. Factors that may affect our quarterly
operating results include:
- market acceptance of the Web as an advertising medium;
- the development of the electronic commerce market;
- market acceptance of our products and services;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, including our planned development
of more detailed market research and planning systems;
- variations in product or client mix, as pricing may vary based on the
volume and type of subscription being sold to a client;
- our ability to expand our customer base and retain current clients;
- new competitors entering our market;
- general economic conditions as well as economic conditions specific to
the Internet;
- our ability to attract and retain qualified sales and other personnel;
- technical difficulties or service interruptions; and
- strategic pricing changes, marketing decisions or acquisitions.
Our limited operating history and the emerging nature of our markets make
prediction of future revenues difficult. Our expense levels are based, in part,
on our expectations with regard to future revenues, and to a large extent such
expenses are fixed, particularly in the short term. We cannot assure you that we
will be able to
29
<PAGE> 31
predict our future revenue accurately and we may be unable to adjust spending in
a timely manner to compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall in our expectations could cause significant declines
in our quarterly operating results.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through the
private placement of preferred stock. Net proceeds from the sale of convertible
preferred stock from inception to March 31, 1999 have totaled $9.6 million. As
of March 31, 1999, we had $3.2 million in cash and cash equivalents.
Net cash used in operating activities was approximately $570,000 in our
inception period, $2.8 million in 1997, $1.8 million in 1998 and approximately
$398,000 for the three months ended March 31, 1999. Cash used in operating
activities in each period was primarily attributable to net operating losses and
increases in accounts receivable which were partially offset by increases in
deferred revenue and accrued expenses.
Deferred revenue increased from approximately $367,000 at December 31, 1997
to $1.1 million at December 31, 1998 and to $1.6 million at March 31, 1999.
Deferred revenue represents amounts invoiced under contract prior to our
rendering of services to the client. Unbilled accounts receivable increased from
approximately $91,000 at December 31, 1997 to approximately $245,000 at December
31, 1998, and decreased to approximately $241,000 at March 31, 1999. Unbilled
accounts receivable represents the value of services provided prior to
invoicing.
Net cash used in investing activities was approximately $11,000 in our
inception period, $214,000 in 1997, $533,000 in 1998 and $127,000 for the three
months ended March 31, 1999. Cash used in investing activities in each period
was primarily attributable to software development costs and purchases of
property and equipment.
Net cash provided by financing activities was $2.2 million in our inception
period, $2.3 million in 1997, $5.1 million in 1998 and $0 for the three months
ended March 31, 1999. Cash provided by financing activities in each period was
primarily attributable to the proceeds from the sale of preferred stock, net of
issuance costs.
We believe that the net proceeds from this offering, together with our
existing cash and cash equivalents, will be sufficient to meet our working
capital and capital expenditure requirements for at least the 18 months
following this offering. Thereafter, we may be required to raise additional
funds. If additional funds are raised through the issuance of equity securities,
our shareholders may experience significant dilution. There can be no assurance
that additional funding, if needed, will be available on attractive terms, or at
all. If financing is not available when required or is not available on
acceptable terms, we may be unable to develop or enhance our products or
services. The failure to raise capital when needed could harm our business,
operating results and financial condition.
COMMITMENTS AND CONTINGENCIES
During the first quarter of 1999, we issued 47,340 options to our
employees. These options had an exercise price that was approximately $8.67 less
per share than the fair market value of our common stock on the date of grant.
Accordingly, we
30
<PAGE> 32
plan to recognize compensation expense of approximately $481,000 over the 48
month vesting period for these options. During the three months ended March 31,
1999, we recognized approximately $30,000 of this expense. However, as these
options will vest at the time of our initial public offering, we expect that we
will recognize the remaining $451,000 of expense during the second quarter of
1999.
Simultaneous with the closing of this offering, Mark K. Wright, a director
and our Chief Executive Officer, Gary R. Haynes, a director, and each of the
preferred shareholders will receive warrants to purchase an aggregate number of
shares of common stock equal to 8% of the number of shares sold in this offering
at an exercise price equal to the initial public offering price. Of these
warrants, 12.5% will be granted to each of Messrs. Wright and Haynes. The
preferred shareholders, including Messrs. Wright and Haynes, will receive a pro
rata portion of the remaining 75% of the warrants. These warrants are
exercisable for seven years.
We will account for these warrants at the time of issuance as follows:
- For warrants issued to Messrs. Wright and Haynes, we will apply the
provisions of Accounting Principles Boards Opinion No. 25, "Accounting
for Stock Issued to Employees," and record compensation expense for the
difference between the fair value of our common stock at the time of
grant, based on our initial public offering price, and the exercise price
of the warrant. As these amounts will be equivalent on the date of grant,
we do not expect to record any compensation expense for these warrants.
- For warrants issued to the holders of our preferred stock, we will record
the value of these warrants, as determined by using the Black-Scholes
model, as a dividend to these shareholders on the date of grant. This
dividend will increase our accumulated deficit but will have no effect on
reported net income (loss). While the actual value of the warrants issued
to these shareholders cannot be determined until the date of grant, we
estimate that the value of this dividend will approximate $1.2 million.
We have no material commitments other than our lease for our corporate
headquarters and obligations under our agreement with Gallup. Our agreement with
Gallup provides us with initial baseline data and quarterly tracking data
collection. The agreement has a one-year term with nine successive one-year
renewals and is cancelable by us upon 90-days' written notice prior to an
anniversary date. The annual renewal provides for CPI increases to the
associated fees. Our strategy includes the development and introduction of new
products. We are currently developing more detailed market research systems for
specific client groups. As a result, we anticipate incurring increased data
collection and software costs during the remainder of 1999 and in future periods
as we continue to develop additional products.
YEAR 2000 COMPLIANCE
Overview. Many currently installed computer systems and software products
are coded to accept or recognize only two digit entries in the date code field.
These systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
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<PAGE> 33
State of Readiness. We have made a preliminary assessment of the Year 2000
readiness of all of our information technology systems, including the computer
hardware and software that support our systems and our financial and
administrative systems as well as our non-information technology systems such as
our office facilities. Our plan for addressing Year 2000 has three phases:
- identification and evaluation of Year 2000 issues;
- development of plans for addressing the issues and prioritization of
those issues; and
- implementation of plans and verification of the effectiveness of those
plans.
In relation to our information technology systems, we have reviewed the
software obtained from third parties that is incorporated into our products, and
are seeking assurances from our vendors that licensed software is Year 2000
compliant. In particular, we have received assurances from our relational
database provider, our operating system vendor and accounting systems vendor
that the programs are Year 2000 compliant. Further, we are in the process of
reviewing our internally developed software and are working with our third party
software developer to seek their assurance that their development and backup
systems are compliant. Additionally, we are in the process of reviewing our
Internet connectivity with UUNet as it relates to the delivery of our products
to our clients. We plan to have completed a full review of our information
technology systems by the end of the second quarter of 1999 and plan to complete
all testing by the end of the third quarter of 1999.
Our non-information technology systems are currently being evaluated.
Preliminary responses from our lessor have indicated that our Stamford,
Connecticut facilities are compliant with respect to electrical and climate
control systems. Beginning in the second quarter of 1999 we plan to further
focus on our telecommunications equipment and voicemail systems. We have
identified other vendors whose Year 2000 compliance may have an impact on our
business, such as our payroll processing company. We are sending letters to our
other vendors requesting Year 2000 certification to ensure their Year 2000
compliance. We plan to conduct a Year 2000 simulation test in order to complete
our verification and testing of all non-information technology systems by the
end of the third quarter of 1999. If any of these vendors cannot become Year
2000 compliant, we could have systems failures, telecommunications problems or
electrical failures.
We rely on Gallup for our data collection efforts. Gallup has advised us
that they are finalizing their Year 2000 compliance review of their systems and
are implementing any necessary hardware and software upgrades. Beginning in the
second quarter of 1999, we plan to request another letter from Gallup regarding
its Year 2000 efforts to enable us to reassess Gallup's compliance progress and
develop any necessary testing plans. We plan to establish a contingency plan in
the fourth quarter of 1999 after our simulation tests are complete.
Costs. To date, we have not incurred any incremental costs in connection
with identifying, evaluating or addressing 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 either
revisions to our systems, should revisions be required, or replacement of
third-party software, hardware or services that are determined not to be Year
2000 compliant. Although
32
<PAGE> 34
we do not anticipate that such expenses will be material, these expenses, if
higher than anticipated, could harm our financial performance.
Worst-Case Scenario. We believe that our most reasonably possible worst
case scenario would exist if Gallup's systems were subject to unexpected Year
2000 complications. This could potentially affect our ability to release timely
data in the first quarter or second quarter of 2000 depending on the nature of
the affected systems. If we determine that Gallup is unable to meet data
delivery requirements on a timely basis, we would ask Gallup to accelerate data
collection and data processing which may cause us to incur additional costs.
However, there can be no assurance that Gallup could collect and process data
under an accelerated schedule. We will continue to monitor this and any other
potential areas of exposure and develop contingency plans accordingly.
Risks. We are not currently aware of any Year 2000 compliance problems
relating to our systems that would harm our business, results of operations and
financial condition, other than those previously discussed. We cannot assure you
that we will not discover Year 2000 compliance issues in our systems that will
require substantial revision. In addition, we can not assure you that
third-party software, hardware or services incorporated into our systems will
not need to be revised or replaced, all of which could be time consuming and
expensive.
Our failure to fix or replace our internally developed systems or
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of clients, or other business
interruptions, any of which could harm our business, results of operations and
financial condition. Moreover, the failure to adequately address Year 2000
compliance issues in our internally developed 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 of 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 prolonged Internet, telecommunications or electrical failure. This could
prevent our users from accessing our system, which could harm our business,
results of operations and financial condition. Our contingency plan in this
event would be to provide data to our clients on a manual basis until our Year
2000 issues could be corrected.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use." Statement of Position 98-1 is effective
for financial statements for years beginning after December 15, 1998. Statement
of Position 98-1 provides guidance over accounting for computer software
developed or obtained for internal use including the requirement to capitalize
specific costs and amortization of such costs. We do not expect this standard to
have a material effect on our capitalization policy.
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<PAGE> 35
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." Statement of Position 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the reporting of
start-up costs and organization costs. It requires costs of start up activities
and organization costs to be expensed as incurred. The adoption of this standard
is not expected to have a significant impact on our results of operations,
financial position or cash flows.
We do not believe that any other recent pronouncements will have a
significant impact on our results of operations, financial position or cash
flows.
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BUSINESS
OVERVIEW
We provide Internet market research systems specifically designed for
Internet advertisers, advertising agencies and Web publishers, and we recently
introduced a system for online retailers and consumer brand marketers. These
systems help enable our clients to effectively harness the power of the Internet
as an advertising, marketing and retailing medium. Our internally developed
systems, which our clients access through our Web site, combine our databases of
consumer lifestyle, product preference and demographic data with powerful
technology that enables our clients to perform queries and searches to plan
campaigns and strategies. Our syndicated Internet consumer research data is
collected, on an exclusive basis, by Gallup from a statistically representative
group of approximately 40,000 active adult Web users. We believe that our
systems facilitate the purchase and sale of advertising on the Internet and are
becoming an important information tool in enabling the increase in consumer
electronic commerce.
We introduced the @plan Gutenberg Advertising System in June 1997 and as of
March 31, 1999 we had contracts representing a total of over 275 Internet
advertisers, advertising agency offices, Web sites, online retailers and
consumer brand marketers. We currently have subscription contracts for our
systems with all of the top 20 Web publishers as measured by advertising
revenues, 65% of the top 20 U.S. advertising agencies primarily focused on the
Web as measured by billings and 70% of the top 20 "traditional" U.S. advertising
agencies as measured by billings. We introduced the @plan Kepler E-Business
System in December 1998 and as of March 31, 1999 we had contracts with eight
online retailers and consumer brand marketers.
BACKGROUND OF THE INTERNET INDUSTRY
Growth of the Internet, Web Advertising and Online Commerce
The Internet is rapidly emerging as a mass communications and commerce
medium enabling millions of people worldwide to share information, be
entertained, communicate and research or make consumer purchases electronically.
International Data Corporation, or IDC, projects that worldwide Internet usage
will grow from approximately 97 million users at the end of 1998 to 320 million
in 2002. This growth is driven by a number of factors, including an expanding
base of personal computers and other devices, more convenient, faster and
inexpensive access to the Internet and the increasing importance of the Internet
as a sales, marketing and distribution channel, communications medium and
information resource.
The Internet is evolving into an important medium for advertisers due to
its interactive nature, its potential for highly targeted advertising and its
ability to reach a workplace audience. These unique characteristics, combined
with the growth in the number of Internet users and the compelling demographics
of these users, have led to a significant increase in Internet advertising.
Forrester Research, Inc. estimates that expenditures on Internet advertising in
the United States will grow from $1.3 billion in 1998 to $10.4 billion in 2003.
The Internet is increasingly affecting the methods by which businesses are
selling goods and services and developing relationships with their current and
potential customers. The Internet provides businesses with the ability to reach
a global audience, achieve greater economies of scale, and operate with minimal
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infrastructure while providing consumers with a broad selection of goods and
services, increased pricing power and unparalleled convenience. In addition,
businesses that are not actively selling goods and services online are
integrating the Internet into their marketing strategy to acquire and retain
customers and enhance their marketing capabilities. IDC estimates that the value
of goods and services purchased on the Internet will increase from approximately
$32 billion in 1998 to over $400 billion in 2002.
Need for Internet Market Research Tools
As the Internet advertising, marketing and retailing environment continues
to rapidly evolve, online market participants are continually challenged to
define and reach their target audiences, develop cost-efficient customer
acquisition and retention strategies and develop their business strategies and
tactics. Market research tools enable advertisers, marketers, and retailers in
many industries to optimize their competitive strategies by providing them with
highly detailed consumer behavior information.
The characteristics of the Internet as both a unique medium for advertising
and a distinct marketing and sales channel plus the substantial potential size
of the Internet market have heightened the need among online market participants
for these tools. The rapid growth in the number of users as well as in the
number of content and electronic commerce sites on the Internet requires online
market participants to recognize and adapt to changing conditions more quickly
than in many traditional media, marketing and retailing environments. The
diversity of these users and sites requires online market participants to
process vast amounts of information to achieve an understanding of both their
target market and the online market as a whole. In addition, the competitive
environment on the Internet for a particular retailing category may be wholly
different than that in the traditional marketplace requiring online market
participants to develop new understandings of different and evolving competitive
factors.
As a result, online market participants are seeking trusted, third-party
neutral Internet market research and planning tools that will enable them to
navigate the volatile and dynamic online marketplace. Each of these online
market participants has particular needs to successfully implement their online
strategy, including the following:
Internet Advertisers and Advertising Agencies. The Internet's unique
capability to provide advertisers with the ability to target users with specific
interests and characteristics, and in particular, hard to reach workplace users,
creates a need for Internet market research tools to inform and support those
targeting decisions. In addition, Internet advertisers and advertising agencies
are continually trying to define the role of the Internet in the total mix of
media to efficiently reach their target audience. In order to most effectively
incorporate Internet advertising into their overall marketing plans, advertisers
must have access to tools that enable them to understand the particular
strengths and weaknesses of the Internet in reaching their target audience.
Web Publishers. The market among sellers of Internet advertising is
becoming increasingly competitive as new advertiser-supported Web sites are
launched every day and existing advertiser supported Web sites seek to continue
their growth. New and existing Web publishers need Internet market research
tools to allow them to better understand their audiences in order to
differentiate themselves from
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competing Web sites. To maximize their advertising revenues, Web publishers must
be able to optimize their sales efforts by identifying those potential
advertisers who would be interested in the audience their Web site can deliver.
Once these potential advertisers have been identified, Web publishers need to be
able to provide convincing, third-party neutral information to show that they
can deliver a specific advertiser's target audience and show how their site
differs from competitor sites as it relates to the specific needs of the
advertiser.
Online Retailers and Consumer Brand Marketers. As the number of retailers
and consumer brand marketers conducting business and marketing products and
services to consumers online continues to increase, the Internet has become a
highly competitive retail and marketing environment. Established businesses in
industries such as retailing and financial services must compete with online
companies in a dramatically different environment. In order to compete in this
environment, online retailers need Internet market research tools that will
enable them to develop cost-effective, highly targeted customer acquisition and
retention strategies. Both online retailers and consumer brand marketers need
Internet market research tools that will enable them to leverage the Internet to
target marketing relationships and promotional opportunities with their current
and potential customers.
Challenges of Providing Internet Market Research Systems
To meet the needs of online market participants and help enable the
increase in advertising and consumer electronic commerce on the Web, a provider
of Internet market research systems must be able to overcome many challenges,
including:
- amassing and maintaining a large, statistically representative consumer
research database in order to capture the complexity of the online space,
the diversity of the online audience and the fragmentation of
advertising, marketing and retailing competitors;
- developing a sophisticated yet user-friendly, Web-based software
interface that enables the user to efficiently process and analyze large
amounts of discrete information to meet its own unique decision support
and planning needs;
- establishing rigorous, third-party neutral methodological and data
collection procedures to ensure the accuracy and integrity of the
information; and
- identifying, researching and reporting emerging consumer electronic
commerce trends.
We believe that a significant opportunity exists for a company to provide
Internet market research tools that provide the type of detailed, third-party
neutral marketing research information that online market participants require.
By integrating a comprehensive and reliable database with sophisticated
workstation and decision support software, a Web-based system can enable online
market participants to make informed Internet advertising, marketing and
retailing decisions.
THE @PLAN SOLUTION
Our Internet market research systems help enable our clients to effectively
harness the power of the Internet as an advertising, marketing and retailing
medium. Our internally developed systems, which our clients access through our
Web site, combine databases of consumer lifestyle, product preference and
demographic data
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with powerful technology that enables our clients to perform queries and
searches to plan campaigns and strategies. Our syndicated Internet consumer
research data is collected, on an exclusive basis, by Gallup from a
statistically representative group of approximately 40,000 active adult Web
users. We believe that our systems facilitate the purchase and sale of
advertising on the Internet and are becoming an important information tool in
enabling the rise of consumer electronic commerce. We currently have
subscription contracts for the delivery of our services to all of the top 20 Web
publishers as measured by advertising revenues, 65% of the top 20 U.S.
advertising agencies primarily focused on the Web as measured by billings and
70% of the top 20 "traditional" U.S. advertising agencies as measured by
billings.
We currently provide two Internet market research systems: the @plan
Gutenberg Advertising System for Internet advertisers, advertising agencies and
Web publishers and the @plan Kepler E-Business System for online retailers and
consumer brand marketers. Each of our systems provides reliable, third-party
neutral information.
To Internet advertisers and advertising agencies, the @plan Gutenberg
Advertising System delivers Internet market research tools that help enable an
advertiser or advertising agency to:
- assess the role the Web should play in achieving a client's specific
advertising objectives;
- determine the most efficient way to reach client defined audiences on the
Web; and
- make meaningful comparisons of the relative cost of reaching target
audiences across a large number of advertiser supported Web sites.
To Web publishers, the @plan Gutenberg Advertising System delivers Internet
market research tools that help enable a Web publisher to:
- target its sales efforts by identifying its best brand and category
prospects for advertising and sponsorship revenue;
- access and compare the demographic lifestyle and product preference
profiling information for other major advertiser-supported Web sites; and
- obtain a comprehensive understanding of its users' interests and
lifestyles to develop better positioning and content development
strategies.
To online retailers and consumer brand marketers, the @plan Kepler
E-Business System delivers Internet market research tools that help enable a
retailer or marketer to:
- create sophisticated online retailing strategies by better understanding
how shopping and purchase behaviors differ between the online and
traditional retail environments for a variety of consumer product and
service categories;
- identify and assess the consumer lifestyle, product preference and
demographic profiles of consumers shopping on competitors' Web sites;
- develop cost-effective, highly-targeted customer acquisition and
retention strategies; and
- target marketing relationships and promotional opportunities with current
and potential customers.
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STRATEGY TO ACHIEVE THE @PLAN SOLUTION
Our objective is to be the leading provider of Internet market research
systems for online market participants including Internet advertisers,
advertising agencies, Web publishers, online retailers and consumer brand
marketers. The following are the key elements of our strategy:
Increase Market Penetration of the @plan Kepler E-Business System. We
intend to increase the market penetration of the @plan Kepler E-Business System
by continuing to target our sales and marketing efforts toward online retailers
and consumer brand marketers. We introduced the @plan Kepler E-Business System
in December 1998 and as of March 31, 1999 we had entered into contracts with
eight online retailers and consumer brand marketers. We intend to establish the
@plan Kepler E-Business System as the recognized leader in its market to
capitalize on the projected growth of electronic commerce.
Enhance and Expand the @plan Gutenberg Advertising System. We intend to
expand our sales and marketing efforts of the @plan Gutenberg Advertising
System. Further, we intend to leverage our proprietary information and
technology to further enhance the @plan Gutenberg Advertising System and
facilitate the development of additional features. We believe that our
proprietary information and software interface and the experience and knowledge
gained through the delivery of our systems provide us with a significant
competitive advantage.
Develop Additional Revenue Sources. We intend to leverage our database of
information, our technology, our expertise and our existing client base to
develop new sources of revenue. As the Internet continues to grow and evolve, we
believe the demand for more detailed Internet market research tools will
increase. We intend to meet this demand by continually developing new
information products that are of interest to our clients. In addition, we intend
to leverage our relationships with existing clients by expanding existing
contracts to include additional client offices and Web properties.
Expand Sales Efforts and Maximize Sales Effectiveness. We believe that a
strong sales organization is essential to effectively sell our systems. Our
current sales team consists of highly qualified, experienced individuals who are
able to effectively sell our sophisticated systems. To increase our market
penetration, particularly in the growing electronic commerce segment, we intend
to continue to expand our sales efforts by rapidly expanding our sales team.
Continue to Provide the Highest Level of Client Service. We emphasize high
quality service for our clients and take a proactive approach to ensure that our
clients are satisfied. We believe client satisfaction is the key to ensuring
high rates of contract renewal, and, accordingly, we maintain a dedicated client
service team that provides service, training and client support. We compensate
our client service managers in part based on targeted levels of renewal rates.
In addition, as our client base increases we intend to continue to build our
client service team to offer a high level of service, training and support.
Leverage Our Market Research to Identify Key Trends. We believe that a
significant source of value to our clients is our ability to track trends in the
online marketplace. We continually update our data collection process to capture
relevant information to define these trends. We intend to continue to use and
refine these
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tracking techniques to provide the information that our clients need and to
identify appropriate areas of expansion for our products.
OUR SYSTEMS
We provide two Internet market research systems: the @plan Gutenberg
Advertising System for advertisers, advertising agencies and Web publishers and
the @plan Kepler E-Business System for online retailers and consumer brand
marketers. These systems are accessed through our Web site by entering a
password combination that allows our clients access to our sophisticated
software interfaces through which they can query various datasets in our
exclusively owned and controlled databases. The datasets and databases that new
clients can access generally depends on the system to which they subscribe as
set forth below:
@PLAN GUTENBERG ADVERTISING SYSTEM
- ------------------------------------------------
- - Advertiser-supported Web site specific profiling data
- - Web site advertising rate card, site description and contact information data,
which we call our B.R.E.W. database
- - Web adult consumer lifestyle and product preference data
@PLAN KEPLER E-BUSINESS SYSTEM
- ------------------------------------------------
- - Electronic commerce/retailing Web site specific profiling data
- - Adult U.S. population lifestyle and product preference database
- - Web adult consumer lifestyle and product preference data
- - Advertiser-supported Web site-specific profiling data
@plan Gutenberg Advertising System
The @plan Gutenberg Advertising System is a comprehensive advertising
decision support and planning system providing lifestyle, product preference and
demographic profile information across a large number of advertiser-supported
Web sites.
Internet advertisers and advertising agencies can query the system on an
interactive basis to better understand the role the Internet should play in
attaining specific advertising objectives. Clients can conduct queries on
various client defined targets, such as Web audiences, advertiser-supported Web
sites, or particular products or services. By combining the results of those
queries with current rate card information from our B.R.E.W. database, clients
can develop comprehensive and sophisticated media plans and marketing campaigns
for reaching a specific target audience in the most efficient and cost-effective
manner.
Web publishers utilize the system to develop specific strategies for
optimizing their sales efforts toward those advertisers who would be most
interested in reaching the audience that the publisher's Web site can deliver.
The system provides the support for these optimization strategies and sales
efforts in the form of highly detailed, third-party neutral and comparable
lifestyle, product preference, shopping behavior and demographic profiling data
across a large number of advertiser supported Web sites. Web publishers can also
use the system to assess the strengths and weaknesses of their competitors as
well as to help differentiate the competitive position of their sites.
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@plan Kepler E-Business System
The @plan Kepler E-Business System is a comprehensive consumer Internet
market research and planning system providing lifestyle, product preference,
shopping behavior and demographic profiling data across a large number of
advertiser-supported Web sites and consumer electronic commerce retail sites and
categories. Online retailers and consumer brand marketers utilize the system to
understand and track their competitive strengths and weaknesses in order to
assess their strategy in both traditional and online markets. The system
provides support for these assessments in the form of highly detailed and
comparable information across a large number of consumer electronic commerce
retail Web sites. Online retailers can also use this information to develop more
effective and cost-efficient customer acquisition and retention strategies. The
system also provides access to a database reflecting select lifestyle, product
preference and demographic profiling data for the total U.S. adult population.
Online retailers and consumer brand marketers utilize the system to access this
data to track differences in retailing trends between traditional and online
markets to better understand how the online market differs from the traditional
market in their particular retail category. Online retailers and consumer brand
marketers can also utilize the system to combine this profile information with
content site information to arrive at statistical estimates of the market
penetration for various products and services sold on the Internet.
OUR CLIENTS
Following is a representative list within each category of the over 275
clients that we currently have under contract:
[CAPTION]
<TABLE>
<CAPTION>
ONLINE RETAILERS AND
ADVERTISING AGENCIES WEB PUBLISHERS CONSUMER BRAND MARKETERS
- ---------------------------------- ------------------- ------------------------
<S> <C> <C>
INTERACTIVE
- ----------------------------------
<S> <C> <C>
i-traffic broadcast.com eBay.com
Modem Media.Poppe Tyson CBS MarketWatch Buy.com
Quantum Leap Discovery Channel IBM Enterprise Web
Strategic Interactive Online Management Group
Group/Bronner Excite Preview Travel
Slosberg Humphrey The Mining Company T. Rowe Price
THINK New Ideas Time Inc. New Media TicketMaster Online
US Interactive Women.Com Virtual Vineyards
USWeb/CKS
TRADITIONAL
- ----------------------------------
Euro RSCG Dahlin Smith White
Fallon McElligott
Grey Interactive
Publicis & Hal Riney
Saatchi & Saatchi
Starcom IP (Leo Burnett)
Western International
</TABLE>
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Following are examples of the manner in which our systems are used by
particular clients in each category. These case studies are not necessarily
representative of how our other clients may use our systems.
Advertising Agency.
Starcom IP
Starcom IP, a division of Leo Burnett Company, Inc., is dedicated to
developing media strategies that build their clients' brands. To develop these
strategies effectively, they invest in a variety of media planning, buying and
research resources. Starcom IP subscribes to the @plan Gutenberg Advertising
System.
Recently, a U.S. packaged goods company asked Starcom IP to help create a
targeted Web media plan for them. The client's target audience was men age 21
and older who are active sports enthusiasts. Starcom IP used the @plan Gutenberg
Advertising System to calculate which advertiser-supported Web sites would
efficiently deliver this target audience. Starcom IP then used the @plan system
to sort through the possible Web sites to be considered, arriving at a list of
Web sites for their recommended media plan. Once they completed the site
selection, Starcom IP used the @plan Gutenberg Advertising System to profile the
selected Web sites to ensure that the strengths of those sites fit the client's
specific needs.
Web Publisher.
The Mining Company
The Mining Company is a network of more than 600 branded Web sites, each of
which is managed by a company-trained subject expert who offers visitors to
their Web site experienced guidance, altogether comprising more than 12,000
topics. The Mining Company subscribed to the @plan Gutenberg Advertising System
to understand what distinguishes their audience from the audiences of other
portals and community sites.
When The Mining Company began conducting business on the Internet, they
faced a number of competitors for the advertising revenue they needed to support
their business. They needed to quickly identify the key areas of strength for
their product and develop a credible sales story that allowed them to position
their audience to the advertising buying community. The @plan Gutenberg
Advertising System provided The Mining Company's sales team with the consumer
lifestyle, product preference and demographic information that advertisers
demand. Based on the information generated by the @plan Gutenberg Advertising
System, The Mining Company positioned their audience as people who actively shop
and purchase online. This positioning provided the key point of differentiation
for their resulting sales and marketing effort.
The Mining Company also used the @plan profiling tools to further identify
the relative strengths and weaknesses of their audience. From this analysis, The
Mining Company was able to develop a strategy to focus their sales efforts on
the areas with the strongest advertising sales potential. Information on the
strengths of their audience was combined with data on Web advertising
expenditures to establish priorities for the sales team to pursue.
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Online Retailer.
TicketMaster Online
TicketMaster Online-CitySearch, Inc. is a provider of local city guides,
local advertising and live event ticketing on the Internet, offering online
ticketing, merchandise, electronic coupons and other electronic commerce
transactions to a range of customers. TicketMaster subscribed to the @plan
Gutenberg Advertising System to obtain the consumer lifestyle, product
preference and demographic information they needed to manage, grow and expand
the scope of their new electronic commerce and advertising businesses.
TicketMaster's traditional business is driven by four key consumer
ticketing segments: concerts, sports, family and theatre. TicketMaster's online
commerce activity was highly concentrated in the concert ticketing segment.
Using data generated by the @plan Gutenberg Advertising System, TicketMaster
determined that the primary reason for this was that the audience attracted to
their Web site fell within a narrow niche of 18-34 year olds who were single and
had lower incomes than the average Web user. To expand their audience and
commerce activity beyond this segment, TicketMaster used the @plan Gutenberg
Advertising System to identify the online behaviors for those Web users in each
of their other key segments. TicketMaster then used this information to help
develop specific marketing plans targeted to these consumers.
DATA COLLECTION AND RESULTING DATABASES
We maintain statistically representative market research information
databases collected from approximately 40,000 active adult Web users. In
addition, information is collected from approximately 8,100 adult non-Web users
for use in our U.S. population database. The methodology for collecting our
data, the generation of a sample population to be surveyed and the collection of
data from that sample population for all of our databases is controlled and
conducted by Gallup, which uses a random scientific sample telephone dialing
process to generate an initial pool of potential survey participants. Data is
collected from the participants first on the phone and, for the Web user
database, by means of an extensive interactive online survey software program.
The survey software employs a "decision tree" methodology that automatically
poses specific questions based on a respondent's prior pattern of replies. The
online survey software can collect a wide variety of data while maintaining the
interest of the respondent because it automatically adjusts to the specific
behavior and interests of the respondent. For a subset of non-Web users,
consumer lifestyle, product preference and demographic data is collected by
means of an extensive phone interview. This data is used to create our U.S.
population database. The data collected is then incorporated into a number of
distinct datasets. These datasets include a U.S. consumer lifestyle and product
preference dataset, an electronic commerce/retailing Web site profile dataset,
an advertiser-supported Web site profiling dataset and a Web consumer lifestyle
and product preference dataset.
We employ stringent controls to ensure the integrity of our consumer market
research data. Before any data point can be considered for reporting, it must
first pass rigorous statistical tests. In addition, we update the database every
three months by adding information collected from approximately 10,000 new
representative, active adult Web users while retiring the information collected
from the approximately 10,000 Web users that has been in our database the
longest. Our sample size
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of approximately 40,000 active adult Web users exceeds that which is necessary
to provide a statistically reliable representation of Web behavior.
SALES AND MARKETING OF OUR SYSTEMS
We sell our systems through a sales team located in Stamford, Connecticut
and San Francisco, California. Our current sales team consists of highly
qualified, experienced individuals who are able to effectively sell our
sophisticated systems. We intend to expand our sales team by adding additional
experienced individuals. Our sales team has a number of selling protocols and
systems in place to maximize prospecting and closing of subscription contracts.
Our systems are generally sold on an annual subscription basis. As of March 31,
1999, approximately 97% of our contracts provide for automatic one year renewals
unless the client provides written notice of termination prior to the
anniversary date of the contract.
We take a highly selective approach to our marketing. To help build brand
awareness with our prospective customers, we largely rely on one-to-one live
product demonstrations of our systems. In addition, we seek speaking engagements
at very select events where current and prospective clients are concentrated. We
also produce marketing materials, including media kits and presentations, in
support of sales to prospective customers.
OUR CLIENT SERVICE TEAM
We believe that our ability to establish and maintain long-term client
relationships and high contract renewal rates in part depends upon the strength
of our client service operations and team. Our client service team consists of
client service managers located in Stamford, Connecticut and San Francisco,
California. We motivate our client service managers to provide the highest
quality service by basing a portion of their compensation on both the renewal
rates of the clients they support and the overall client renewal rate. In
addition to providing training and client support, this group works proactively
with our clients to help them maximize the value they derive from our systems.
Each client service manager supports and is responsible for approximately 25-30
contracts. The assignments vary in relation to specific client needs but are
generally defined geographically to enhance opportunities for personal contact.
The client service managers are responsible for training their clients in how to
use the system and the research information that our systems provide, resolving
any problems their clients have with our systems, and providing strategic
insight and technical support. The client service managers also obtain feedback
from their clients to assist us in anticipating client needs and developing new
systems. We monitor our clients' use of the systems on a continual basis to
gauge client satisfaction. We intend to continue to build our client service
team as our client base increases to offer a high level of client service,
training and support.
TECHNOLOGY AND INFRASTRUCTURE
One of our principal strengths is our internally developed technology,
which has been designed specifically for our Internet-based systems. Our
technology architecture features specially adapted capabilities to enhance
performance and reliability.
Our systems run on a network of high-speed computers. The data is stored on
a redundant disk array which provides continuous service in the event of disk
failures. Current backup copies of the complete system are stored off site to
provide for data
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recovery in the event of disaster. Real-time monitors alert our system
administrators to software and hardware failures and performance degradation 24
hours a day.
Clients access our systems over the Web via a secure gateway to our Web
servers in Stamford, Connecticut. Our servers are linked to the Internet via a
digital circuit, which provides a scalable high bandwidth connection. We have in
place a temporary backup circuit which can be used in the event of failure of
our primary connection.
Our databases are implemented atop a multi-tiered software architecture.
This architecture consists of relational database software, a Web server and our
exclusively owned and controlled applications. These applications employ special
purpose data access methods and algorithms to implement the analytic research
methodologies we developed in partnership with Gallup. Our software design is
the result of extensive research in relational database modeling, statistical
analysis and graphical user interfaces. All aspects of the software architecture
are designed to accommodate substantial growth of our client base.
We believe that our future success will depend in part on our ability to
continue to maintain and enhance our systems and applications. To this end, we
intend to leverage the modular nature of our systems' architecture to enable us
to develop new applications rapidly. We expect that most enhancements to
existing and new systems and applications will be developed internally and
implemented using our outside suppliers of coding services. We believe that
timely development of new and enhanced applications and technology is necessary
to remain competitive in the marketplace. Accordingly, we intend to continue to
make investments in development and engineering.
DEVELOPMENT OF NEW PRODUCTS
We believe that our future success depends on our ability to enhance our
current systems and continually develop new systems and products. Our executive
management takes an active role in the development of these enhancements and new
products. In December 1998, we introduced the @plan Kepler E-Business System.
Gallup assisted us in the development of methodology for the collection of
additional data for this system. We are internally developing more detailed
market research systems for specific client groups. We intend to capitalize on
our relationship with Gallup to gather the data necessary for these new systems.
For this additional data collection we will incur substantial expenses.
We also intend to leverage our database of information, our technology, our
expertise and our existing client base to develop new information products of
interest to our clients. We continually track trends in the online marketplace
during our data collection efforts. We rely on our tracking techniques to assist
us in identifying appropriate areas of expansion for our products.
COMPETITION FOR OUR INTERNET CLIENTS
The market for market research tools for Internet advertisers, advertising
agencies, Web publishers, online retailers and consumer brand marketers is new
and rapidly evolving. While we do not believe any of our competitors currently
offer Internet market research systems that provide the same search, query and
planning capabilities as our systems, we face competition from a number of
companies who provide services to a similar base of clients and who could
develop systems that
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more directly compete with our systems. In some cases our services are
complementary to services provided by other companies and in some cases,
particularly with respect to Web "ratings" companies, our services are
considered to be a substitute.
Our competitors include:
- Web "ratings" companies, including Media Metrix and Nielsen Media
Research/NetRatings, that rely on a sampling approach where software is
installed on a respondent's computer and passively monitors Web behavior;
- "auditing" companies, including I/PRO, that audit viewers in terms of
page views, site impressions and navigation on a subject Web site;
- advertisement targeting providers, including DoubleClick, 24/7 Media and
NetGravity, that place advertisements on networks of Web sites and
collect data on viewer response;
- advertisement performance measurement companies, including MatchLogic;
- Web advertising management services, including AdKnowledge;
- online research and consulting providers, including Jupiter
Communications; and
- syndicated market research providers in traditional publishing, including
MRI and Simmons.
Most of these companies have greater financial, technical, product
development, marketing and other resources than we have. These companies may be
better known and have longer operating histories than we have. We believe that
our ability to compete depends on many factors both within and beyond our
control, including the following:
- the timing and market acceptance of new solutions and enhancements to
existing solutions developed by us or our competitors;
- customer service and support efforts;
- sales and marketing efforts; and
- the ease of use, performance, price and reliability of solutions
developed by us or our competitors.
PROTECTION OF OUR PROPRIETARY RIGHTS
Proprietary rights are important to our success and our competitive
position. To protect our proprietary rights, we rely on copyright, trademark,
and trade secret laws, confidentiality agreements with third parties, and
license agreements with consultants, vendors and customers. Despite such
protection, a third party could, without authorization, copy or otherwise
appropriate information from our database. Our agreements with employees,
consultants and others who participate in development activities could be
breached. We may not have adequate remedies for any breach, and our trade
secrets may otherwise become known or independently developed by competitors. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent as do the laws of the United States, and effective
copyright, trademark and trade secret protection may not be available in those
jurisdictions.
We have applied for registration of several trademarks in the United
States. None of these applications have been approved to date, and there can be
no
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<PAGE> 48
assurance that the applications will be approved in the future. Even if these
applications are approved, the trademarks may be successfully challenged by
others or invalidated. If the applications are not approved because third
parties own the trademarks, the use of the trademarks will be restricted unless
we enter into arrangements with the third parties which may be unavailable on
commercially reasonable terms.
There have been substantial amounts of litigation in the computer and
online industries regarding intellectual property assets. Third parties may
claim infringement by us with respect to current and future products,
trademarks, or other proprietary rights, or we may counterclaim against these
parties. Any such claims or counterclaims could be time-consuming, result in
costly litigation, divert management's attention, cause product release delays,
require us to redesign our products or require us to enter into royalty or
licensing agreements, any of which could harm our business, financial condition
and operating results. Such royalty and licensing agreements, if required, may
not be available in terms acceptable to us, if at all.
OUR EMPLOYEES
As of March 31, 1999, we employed 19 persons. We also contract with
independent contractors to develop our internally developed software systems and
to support our information services personnel. We are not subject to any
collective bargaining agreements, and we believe that our relationship with our
employees is good.
OUR EXECUTIVE AND SALES FACILITIES
Our principal executive offices are located in Stamford, Connecticut. Our
lease for approximately 6,400 square feet at this location expires in February
2001. We also lease space for our sales and client service efforts in San
Francisco, California.
NO LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
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<PAGE> 49
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table presents information about our executive officers and
directors as of April 15, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Mark K. Wright...................... 43 Chairman and Chief Executive Officer
Karl A. Spangenberg................. 52 President and Chief Operating
Officer
Susan C. Russo...................... 46 Executive Vice President
Nancy A. Lazaros.................... 34 Senior Vice President, Chief
Financial Officer and Secretary
Gary R. Haynes(1)................... 53 Director
Donald M. Johnston(2)............... 50 Director
W. Patrick Ortale, III(1)........... 45 Director
Roger J. Thomson(2)................. 43 Director
John H. Wyant(1)(2)................. 52 Director
</TABLE>
- -------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
Mark K. Wright has served as our Chief Executive Officer and Chairman of
our Board of Directors since May 1996. Prior to becoming our Chief Executive
Officer, Mr. Wright served as the Executive Vice President of Ericson Marketing
Communications, Inc., an advertising and marketing communications agency. Prior
to that, he served as Senior Vice President of Ericson in charge of marketing
and media services. Mr. Wright has a BA from Northwestern University and a MBA
from Vanderbilt University.
Karl A. Spangenberg has served as our President and Chief Operating Officer
since April 1997. Before joining us, Mr. Spangenberg served as Vice President
Worldwide Advertising Sales for Infoseek, an Internet navigation company, from
December 1995 to February 1997. From March 1994 to November 1995, he served as
Publisher, Datamation Magazine for Cahner's Publishing, a publishing company.
From February 1993 to February 1994, he served as Senior Vice President of the
Construction Information Group of McGraw Hill. From March 1991 to February 1993,
Mr. Spangenberg served as Senior Vice President, Advertising for Business Week,
a publishing company.
Susan C. Russo has served as our Executive Vice President since January
1997. From June 1996 to January 1997, Ms. Russo served as General Manager,
Rodale Interactive for Rodale Press, a publishing company. From May 1994 to June
1996, Ms. Russo served as Vice President, Ad Sales and Strategy, for Hearst New
Media, a Web publishing company. From January 1992 to May 1994, Ms. Russo served
as Executive Director, Sales Operations, for the New York Times, a publishing
company.
Nancy A. Lazaros has served as our Senior Vice President and Chief
Financial Officer since May 1997, and has served as our Secretary since July
1998. Prior to joining us, Ms. Lazaros served as Senior Vice President, Finance
of Popcorn
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<PAGE> 50
Channel, LP, a cable channel, from January 1995 to February 1997; as a
consultant to various publishing companies from January 1994 to January 1995;
and as Controller of RHI Entertainment, a television movie production company,
from January 1991 to November 1993.
Gary R. Haynes has served as one of our directors since 1996. Since 1985,
Mr. Haynes has been President, and since 1991 he has been Chief Executive
Officer, of Ericson Marketing Communications, Inc. an advertising and marketing
communications agency. Mr. Haynes has been associated with Ericson since 1975
and served as Ericson's Chief Operating Officer from 1982 until he became
President in 1985.
Donald M. Johnston has served as one of our directors since 1996. Since
1994, Mr. Johnston has served as President of Massey Burch Capital Corporation
and General Partner of SV Partners II, L.P. Massey Burch Capital Corporation and
SV Partners II are manager and General Partner, respectively, of the Southern
Venture Fund II, L.P., one of our principal shareholders. Mr. Johnston also
serves on the Board of Directors of ODS Networks, Inc. Mr. Johnston was elected
as one of our directors under our Amended and Restated Shareholders' Agreement.
W. Patrick Ortale, III has served as one of our directors since 1996. Since
1994 and 1996, respectively, Mr. Ortale has been a General Partner of Richland
Partners, L.P. and Richland Partners II, L.P., the general partners,
respectively, of Richland Ventures, L.P. and Richland Ventures II, L.P., which
are principal shareholders of ours. Since 1985 and 1990, respectively, Mr.
Ortale has been a general partner of the general partnerships which control
Lawrence, Tyrrell, Ortale & Smith and Lawrence, Tyrrell, Ortale and Smith II,
L.P. Mr. Ortale was elected as one of our directors under our Amended and
Restated Shareholders' Agreement.
Roger J. Thomson has served as one of our directors since 1999. Mr. Thomson
is a Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation,
an investment banking firm, where he has worked since 1994. From 1986 to 1994,
Mr. Thomson was Senior Vice President of Lehman Brothers, Inc., an investment
banking firm.
John H. Wyant has served as one of our directors since 1998. Mr. Wyant is a
Managing Partner and President of Blue Chip Venture Company. Mr. Wyant is
currently a director of Delicious Brands, Inc., a food product company, Regent
Communications, Inc., a radio station operator, Zaring Homes, Inc. a
manufactured housing company, and several private companies. Mr. Wyant was
elected as one of our directors under our Amended and Restated Shareholders'
Agreement.
CLASSES OF DIRECTORS
Under the terms of our Third Amended and Restated Charter, which will
become effective immediately prior to this offering, the board of directors has
been divided into three classes: Class I, Class II and Class III. Members of
each class hold office for staggered three-year terms. At each annual meeting of
shareholders, the shareholders will elect the successors to the directors whose
terms expire at the meeting. These newly elected directors will serve from the
time of their election and qualification until the third annual meeting of
shareholders following their election or until a successor has been duly elected
and qualified. Gary R. Haynes and Roger J. Thomson are Class I directors whose
terms expire at the 2000 annual meeting of shareholders. Donald M. Johnston and
John H. Wyant are Class II directors whose
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<PAGE> 51
terms expire at the 2001 annual meeting of shareholders.W. Patrick Ortale, III
and Mark K. Wright are Class III directors whose terms expire at the 2002 annual
meeting of shareholders.
BOARD COMMITTEES
The board of directors recently created an audit committee and a
compensation committee. The audit committee will review the accounting practices
and procedures, the scope of the audit and will recommend the appointment of the
independent auditors. The members of the audit committee are Donald M. Johnston,
who will serve as chairman, Roger J. Thomson and John H. Wyant. The compensation
committee will evaluate and approve the compensation policies for the executive
officers and will administer our employee benefit plans. The members of the
compensation committee are Patrick W. Ortale, III, who will serve as chairman,
Gary R. Haynes and John H. Wyant.
DIRECTOR COMPENSATION
Directors who are not our employees will receive an annual directors' fee
of $6,000 and directors' fees of $1,000 for each board meeting attended and $500
for each committee meeting attended. We will also reimburse directors for their
expenses incurred in connection with their activities as our directors.
Directors who are also our employees will receive no compensation for serving on
the board of directors.
On March 11, 1999, we adopted our 1999 Stock Incentive Plan to attract and
retain the services of our key employees, consultants and non-employee members
of our board of directors. Each member of the board of directors who is not an
employee of ours, is not a former employee still receiving compensation for
prior services, other than benefits under a tax-qualified plan, and is not
currently receiving remuneration from us in any capacity other than as a
director will be eligible for the grant of stock options under the 1999 Plan.
Currently, all directors other than Mr. Wright are eligible to participate in
the 1999 Plan.
Contingent upon the effectiveness of the registration statement relating to
this offering five directors will be granted options to purchase 25,000 shares
of our common stock at the initial offering price. These options vest
immediately upon grant. Additionally, upon the election of any new member of the
board of directors, that member will be granted an option to purchase 25,000
shares of common stock at the fair market value at the date of grant, vesting in
five equal annual installments beginning on the first anniversary of the date of
grant. Each year immediately following the date of our annual meeting, beginning
with the next annual meeting of our shareholders and provided that a sufficient
number of shares remain available under the 1999 Plan, there automatically will
be granted to each non-employee director who is then serving on the board an
option to purchase 3,000 shares of our common stock, which options will be
immediately vested. The options to be granted under the 1999 Plan will be
nonqualified stock options. Nonqualified stock options are stock options which
do not constitute "incentive stock options" within the meaning of Section 422A
of the Internal Revenue Code.
Mark K. Wright, Gary R. Haynes and Roger J. Thomson, three of our
directors, are also holders of shares of our preferred stock. All holders of our
preferred stock,
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<PAGE> 52
including these three directors, will be issued warrants to purchase shares of
our common stock upon consummation of this offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Before this offering, we did not have a compensation committee, and
compensation decisions were made by the full board of directors. Upon completion
of this offering, the compensation committee will make compensation
recommendations to the board of directors. No interlocking relationship exists
between the board of directors or compensation committee and the board of
directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation we paid for services rendered to us during 1996, 1997 and 1998, by
our Chief Executive Officer and our other three most highly compensated
executive officers who were serving as executive officers at the end of 1998 and
whose salaries were more than $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION
- --------------------------- ----------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mark K. Wright................. 1998 $197,917 $ 60,000 -- $ --
Chief Executive Officer 1997 167,708 50,000 90,000 --
1996(1) -- -- 270,000 --
Karl A. Spangenberg............ 1998 225,000 50,000 -- --
President and Chief 1997 168,750 125,000 405,000 12,522(2)
Operating Officer 1996 -- -- -- --
Joined April 1997
Susan C. Russo................. 1998 175,000 40,000 -- --
Executive Vice President 1997 169,728 5,000 396,000 --
Joined January 1997 1996 -- -- -- --
Nancy A. Lazaros............... 1998 105,292 40,000 27,000 --
Senior Vice President, 1997 53,779 5,000 63,000 --
Chief Financial Officer 1996 -- -- -- --
and Secretary
Joined May 1997
</TABLE>
- -------------------------
(1) Represents the period from our inception on May 29, 1996 through December
31, 1996.
(2) This amount represents reimbursement of relocation expenses.
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<PAGE> 53
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information regarding stock options granted
during 1998 to the executive officers named in the Summary Compensation Table
above, including the potential realizable value over the 10 year term of the
options based on assumed rates of stock appreciation of 5% and 10%, compounded
annually. These assumed rates of appreciation comply with the rules of the SEC
and do not represent our estimate of future stock prices. Actual gains, if any,
on stock option exercises will be dependent on the future performance of our
common stock. In 1998, we granted options to acquire up to an aggregate of
349,200 shares to employees, consultants, directors and other persons having a
business relationship with us, all under the 1996 Plan and all at an exercise
price equal to not less than the fair market value of our common stock on the
date of grant as determined in good faith by the board of directors. Optionees
may pay the exercise price by check, note, delivery of already-owned shares of
our common stock or any other instrument the board will accept. Options under
the 1996 Plan will fully vest upon the completion of this offering.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT
OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES PRICE FOR OPTION TERM
OPTIONS IN FISCAL PER EXPIRATION ---------------------
NAME GRANTED(#) YEAR(%) SHARE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mark K. Wright......... -- -- -- -- -- --
Karl A. Spangenberg.... -- -- -- -- -- --
Susan C. Russo......... -- -- -- -- -- --
Nancy A. Lazaros....... 27,000 7.7% $1.67 7/28/08 $ 28,357 $ 71,862
</TABLE>
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<PAGE> 54
OPTIONS EXERCISED DURING THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
No options were exercised during 1998 by our Chief Executive Officer or any
other of our executive officers. The following table sets forth information
about the number and year-end value of exercisable and unexercisable options
held by the executive officers named in the Summary Compensation Table for the
year ended December 31, 1998. The "Value of Unexercised In-the-Money Options at
December 31, 1998" is based on an assumed initial public offering price of
$13.00 per share, minus the exercise price, multiplied by the number of shares
underlying the option. Under the terms of the 1996 Stock Option Plan, all of
these options become exercisable immediately upon the consummation of this
offering
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark K. Wright........... 292,500 67,500 $3,524,625 $ 764,775
Karl A. Spangenberg...... 161,250 243,750 1,910,963 2,879,288
Susan C. Russo........... 181,500 214,500 2,152,995 2,535,285
Nancy A. Lazaros......... 25,126 64,874 294,653 750,247
</TABLE>
- -------------------------
STOCK PLANS
1996 Stock Option Plan. We adopted the 1996 Stock Option Plan in July
1996, and it was amended and restated in August 1997 and January 1998. The
purpose of the plan is to attract, retain and reward directors, officers, key
employees and consultants by offering equity interests in our company. The plan
provides for grants of incentive stock options, within the meaning of Section
422A of the Internal Revenue Code of 1986, and non-qualified stock options. Our
board of directors and shareholders authorized a total of 1,980,000 shares of
common stock for issuance under this plan. Upon consummation of this offering,
no further awards of stock options will be granted under the 1996 plan.
All options granted under this plan shall become immediately exercisable
and vested upon the closing of this offering. As of March 31, 1999, we have
granted options for the purchase of 1,852,740 shares of common stock to
employees, consultants, directors and other persons having a business
relationship with us.
1999 Stock Incentive Plan. Our board of directors adopted the 1999 Stock
Incentive Plan in March 1999 and it was approved by our shareholders in March
1999. The purpose of the plan is to attract, retain and reward key employees,
consultants and non-employee directors. This plan allows flexibility in the
award of stock based incentive compensation to these people. The plan provides
for grants of incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock, and other stock-based awards.
The plan authorizes up to 800,000 shares of common stock for issuance under
the plan plus an annual increase to be added on each anniversary date of the
adoption of this plan equal to the lesser of 400,000 shares, two percent of the
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<PAGE> 55
outstanding shares of our common stock on that anniversary date or a number
determined by our Board of Directors. However, no individual may receive options
to purchase more than 100,000 shares of common stock in any fiscal year.
Whenever a share of common stock underlying a stock option is no longer subject
to that option, that share of common stock shall again be available for
distribution under the plan.
This plan will be administered by the compensation committee of the board
of directors. The compensation committee will have the authority to:
- select the individuals who may receive the grant for the options;
- determine the number of shares to be covered by each option or other
awards to be granted; and
- determine the terms and conditions of the option, including the share
price, vesting schedule and any restrictions or limitations on the
options.
Grants under the plan may consist of options intended to qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, non-qualified stock options that are not
intended to qualify, stock appreciation rights, restricted stock or other
stock-based awards. Grants can be made to any key employee, consultant and
non-employee director. Incentive stock options may only be granted to our
employees.
The option price for each share of common stock underlying an incentive
stock option shall be at least 100% of the fair market value of the stock at the
date of grant. The option price for non-qualified stock options shall be at
least 85% of the fair market value of the underlying stock at the date of grant.
No incentive stock option shall be exercisable after 10 years from the date of
grant. Incentive stock options are not transferrable except to members of the
optionees' immediate family or by will or the laws of descent and distribution.
If an optionee's employment terminates because of death, any option held by
the optionee may be exercised to the extent the option was exercisable at the
time of death. This exercise must occur within one year from the date of death
or until the term of the option expires, whichever is shorter.
If an optionee's employment is terminated because of disability, any option
held by the optionee may be exercised to the extent the option was exercisable
at the time of the disability, unless accelerated by the committee. This
exercise must occur within three years from the date of the disability or until
the term of the option expires for non-qualified options and one year from the
date of disability or until the term of the option expires for incentive stock
options, whichever is shorter.
If an optionee's employment terminates because of retirement, any option
held by the optionee may be exercised to the extent the option was exercisable
at the time of the retirement, unless accelerated by the committee. This
exercise must occur within three years from the date of the retirement or until
the term of the option expires for non-qualified options and three months from
the date of the retirement or until the term of the option expires for
investment stock options, whichever is shorter.
If an optionee's employment is involuntarily terminated without cause, as
that term is defined in the plan, any option held by the optionee may be
exercised to the extent the option was exercisable at the time of termination.
This exercise must
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<PAGE> 56
occur before the earlier of three months from the date of termination or the
expiration of the option. The compensation committee may extend the exercise
period for six months or until the term of the option expires whichever is
shorter. However, any option that is not exercised within three months will be
treated as a non-qualified stock option.
If an optionee voluntarily terminates employment, any option held by the
optionee may be exercised to the extent the option was exercisable at the time
of termination. This exercise must occur within three months from the date of
termination or until the term of the option expires, whichever is shorter. The
compensation committee may extend the exercise period for six months or until
the term of the option expires, whichever is shorter. However, any option that
is not exercised within three months will be treated as a non-qualified stock
option.
Stock appreciation rights can be granted in connection with all or part of
any stock option granted. They will terminate and no longer be exercisable when
the related stock option terminates. They are only exercisable at the time and
to the extent that the stock options to which they relate are exercisable.
Shares of restricted stock can be issued alone, in addition to or with other
awards granted under the plan. The committee can place limitations on the sale
or transfer of the restricted stock. Other stock-based awards can be granted by
the committee in its discretion. For a description of awards to non-employee
directors, please see "Management -- Compensation of Directors."
The compensation committee can adjust the number of shares reserved for
issuance under the plan if there is a merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure. If there is a change in control, any
awarded option shall become fully exercisable and vested. This change of control
can occur if any person or entity acquires more than 50% of the voting power of
our capital stock or if our existing shareholders hold less than 50% of our
outstanding securities after a cash tender or exchange offer, merger or other
business combination, sale of assets or contested election.
SEVERANCE AGREEMENTS
Upon consummation of this offering, we will enter into severance agreements
with our executive officers. These agreements provide for a severance payment to
the executive officer if, within six months of a change in control of our
business, the executive's:
- job function is changed;
- base salary is reduced;
- office is relocated; or
- employment is terminated, other than by death, disability, retirement or
for cause.
This payment will be an amount equal to six months of the executive's current
base salary.
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<PAGE> 57
RELATED TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND 5% SHAREHOLDERS
Mark K. Wright, our Chief Executive Officer and Chairman of our Board of
Directors, and Gary R. Haynes, one of our directors, were involved in the
founding of our company. On May 31, 1996 and July 23, 1996 we issued an
aggregate of 450,000 shares of our common stock to Mr. Wright and an aggregate
of 450,000 shares to Mr. Haynes. As consideration for these shares, Mr. Wright
and Mr. Haynes contributed all of their right, title and interest in all data,
business plans, processes, ideas, trade secrets, software and other intellectual
property concerning the @plan concept and all associated goodwill.
On July 24, 1996 and March 20, 1997, we sold shares of our Series A
convertible preferred stock in private placement transactions at $1.00 per share
to the following shareholders:
- 200,000 shares to the Southern Venture Fund II, L.P., a five percent
shareholder. Donald M. Johnston, one of our directors, is a general
partner of SV Partners II, L.P., its general partner;
- 200,000 shares to Richland Ventures, L.P., a five percent shareholder. W.
Patrick Ortale III, one of our directors, is a general partner of
Richland Partners, its general partner;
- 5,000 shares to Mark K. Wright, our Chief Executive Officer, Chairman of
our Board of Directors and a five percent shareholder;
- 20,000 shares to Gary R. Haynes, a five percent shareholder and one of
our directors;
- 10,000 shares to Roger J. Thomson, one of our directors;
- 2,500 shares to Susan C. Russo, one of our executive officers; and
- 500 shares to Karl A. Spangenberg, one of our executive officers.
On October 4, 1996 and March 20, 1997, we sold shares of our Series B
convertible preferred stock in private placement transactions at $2.00 per share
to the following shareholders:
- 900,000 shares to the Southern Venture Fund II, L.P., a five percent
shareholder. Donald M. Johnston, one of our directors, is a general
partner of SV Partners II, L.P., its general partner;
- 900,000 shares to Richland Ventures, L.P., a five percent shareholder. W.
Patrick Ortale III, one of our directors, is a general partner of
Richland Partners, its general partner;
- 22,500 shares to Mark K. Wright, our Chief Executive Officer, Chairman of
our Board of Directors and a five percent shareholder;
- 40,000 shares to Gary R. Haynes, a five percent shareholder and one of
our directors;
- 50,000 shares to the Gary R. Haynes 1994 Charitable Remainder Unitrust,
of which Gary R. Haynes, a five percent shareholder and one of our
directors, is trustee;
- 45,000 shares to Roger J. Thomson, one of our directors;
- 11,250 shares to Susan C. Russo, one of our executive officers; and
- 2,250 shares to Karl A. Spangenberg, one of our executive officers.
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<PAGE> 58
On January 6, 1998 and August 7, 1998, we sold shares of our Series C
convertible preferred stock in private placement transactions at $3.00 per share
to the following shareholders:
- 166,667 shares to the Southern Venture Fund II, L.P., a five percent
shareholder. Donald M. Johnston, one of our directors, is a general
partner of SV Partners II, L.P., its general partner;
- 1,000,000 shares to Richland Ventures II, L.P., a five percent
shareholder. W. Patrick Ortale, III, one of our directors, is a general
partner of Richland Partners, its general partner;
- 425,000 shares to Blue Chip Capital Fund II Limited Partnership, a five
percent shareholder. John H. Wyant, one of our directors, is a manager of
Blue Chip Venture, Ltd., its general partner;
- 75,000 shares to Miami Valley Venture Fund, L.P. John H. Wyant, one of
our directors, is a manager of Blue Chip Venture Company of Dayton, Ltd.,
its special limited partner;
- 3,000 shares to Mark K. Wright, our Chief Executive Officer, Chairman of
our Board of Directors and a five percent shareholder;
- 30,000 shares to Gary R. Haynes, a five percent shareholder and one of
our directors;
- 14,000 shares to Roger J. Thomson, one of our directors; and
- 2,000 shares to Karl A. Spangenberg, one of our executive officers.
Each share of preferred stock will convert into 1.8 shares of common stock
upon consummation of this offering. In addition, upon consummation of this
offering, Mark K. Wright, Gary R. Haynes and the holders of our preferred stock
will receive warrants to purchase shares of common stock equal to 8% of the
number of shares sold in this offering, including any shares sold in the
over-allotment. The price to exercise these warrants will be equal to the
initial offering price per share set forth on the cover page of this prospectus.
Mark K. Wright and Gary R. Haynes will each receive 12.5% of the warrants for
their involvement in founding our company. The preferred shareholders, including
Mark K. Wright and Gary R. Haynes, shall receive their pro rata portion of the
remaining 75% of the warrants. These warrants are exercisable for seven years.
The warrants and the shares of each series of preferred stock are entitled to
registration rights following this offering. For a complete description of these
registration rights, please see "Description of Capital Stock -- Registration
Rights."
In June 1997, we made an unsecured loan in the amount of $160,000 to Karl
A. Spangenberg, our President and Chief Operating Officer. The loan accrued
interest of approximately $1,250 and was repaid in full in August 1997.
On various occasions during 1998 and the two preceding fiscal years, we
granted the following options to purchase our common stock to the following
officers, directors and stockholders who beneficially own five percent or more
of our securities:
- On July 22, 1996 and December 31, 1997, Mr. Wright was granted options to
purchase 270,000 and 90,000 shares of common stock, respectively, with an
exercise price of $0.89 and $1.67, respectively;
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<PAGE> 59
- On August 21, 1997 and December 31, 1997, Mr. Spangenberg was granted
options to purchase 360,000 and 45,000 shares of common stock,
respectively, with an exercise price of $1.11 and $1.67, respectively;
- On August 21, 1997 and December 31, 1997, Ms. Russo was granted options
to purchase 360,000 and 36,000 shares of common stock, respectively, with
an exercise price of $1.11 and $1.67, respectively;
- On August 21, 1997, December 31, 1997 and July 28, 1998, Ms. Lazaros was
granted options to purchase 45,000, 18,000 and 27,000 shares of common
stock, respectively, with an exercise price of $1.11, $1.67 and $1.67,
respectively; and
- Contingent upon the effectiveness of the registration statement relating
to this offering, Messrs. Haynes, Johnston, Ortale, Thomson and Wyant
will each be granted options to purchase 25,000 shares of common stock,
at an exercise price equal to the initial offering price. Mr. Johnston
will immediately assign his options to Southern Venture Fund II, L.P.
Upon consummation of this offering, we will enter into severance agreements
with our executive officers. These agreements are more fully described in
"Management -- Severance Agreements."
We believe that all of these transactions were made on terms as favorable
to us as we would have received from unaffiliated third parties. Any future
transactions between us and our officers, directors and principal shareholders
and their affiliates will be approved by a majority of the board of directors,
including a majority of the independent and non-interested directors.
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PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of April 15, 1999, and as adjusted to reflect
the sale of the shares of common stock offered in this offering, by: (1) each
person who owns beneficially more than 5% of our common stock; (2) each of our
executive officers and directors; and (3) all of our executive officers and
directors as a group. The address of all the beneficial owners, unless otherwise
noted, is Three Landmark Square, Suite 400, Stamford, Connecticut 06901.
The percentage ownership in the table below is based on 8,448,600 shares
outstanding as of April 15, 1999. Shares of common stock subject to options
currently exercisable or exercisable within 60 days of April 15, 1999 are deemed
outstanding for the purpose of computing the percentage ownership of the person
holding the options but are not deemed outstanding for computing the percentage
ownership of any other person. All of the options and warrants held by the
beneficial owners in the table below will be immediately exercisable and vested
upon consummation of this offering. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned.
The number of shares includes 7,541,400 shares of common stock issuable
upon conversion of our convertible preferred stock upon consummation of this
offering. The convertible preferred stock converts at a ratio of 1.8 for 1. The
percentage of shares outstanding after the offering assumes the underwriters'
over-allotment is not exercised.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED
AS A RESULT OF
OPTIONS AND PERCENTAGE OF
NUMBER OF WARRANTS EXERCISABLE SHARES OUTSTANDING
SHARES WITHIN 60 DAYS OF ----------------------
BENEFICIALLY THE DATE OF BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER OWNED THIS PROSPECTUS OFFERING OFFERING
- ------------------------ ------------ -------------------- ---------- ---------
<S> <C> <C> <C> <C>
Entities associated with
Richland Ventures............. 3,855,185(1) 75,185 44.7% 35.0%
W. Patrick Ortale, III........ 3,880,185(2) 100,185(3) 44.9 35.1
Southern Venture Fund II,
L.P........................... 2,350,350 70,350 27.2 21.3
Donald M. Johnston............ 2,350,350(4) 70,350(5) 27.2 21.3
Entities associated with Blue
Chip Venture Company.......... 917,901(6) 17,901 10.7 8.4
John H. Wyant................. 942,901(7) 42,901(8) 10.9 8.6
Mark K. Wright.................. 890,992 386,092 9.8 7.9
Karl A. Spangenberg............. 413,720 405,170 4.7 3.6
Susan C. Russo.................. 421,242 396,492 4.8 3.7
Nancy A. Lazaros................ 90,000 90,000 1.1 *
Gary R. Haynes.................. 757,012(9) 55,012 8.6 6.9
Roger J. Thomson................ 151,670 27,470 1.8 1.4
All executive officers and
directors as a group (9
persons)...................... 9,898,073 1,573,673 98.7 79.0
</TABLE>
- -------------------------
* Less than one percent
(1) Represents 1,980,000 shares that are held by Richland Ventures, L.P. and
1,800,000 shares that are held by Richland Ventures II, L.P. The address of
the
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<PAGE> 61
shareholder is 200 31st Avenue North, Suite 200, Nashville, Tennessee 37203-
1205.
(2) Represents 1,980,000 shares that are held by Richland Ventures, L.P. and
1,800,000 shares that are held by Richland Ventures II, L.P. Mr. Ortale is a
general partner of Richland Partners and Richland Partners II, their general
partners. Mr. Ortale disclaims beneficial ownership of the shares held by
these entities except to the extent of his pecuniary interest therein.
(3) Includes warrants for the purchase of 75,185 shares of common stock held by
Richland Ventures, L.P. and Richland Ventures II L.P. Mr. Ortale disclaims
beneficial ownership of the warrants held by these entities except to the
extent of his pecuniary interest therein.
(4) All of these shares are held by Southern Venture Fund II, L.P. Mr. Johnston
is a general partner of SV Partners II, L.P., its general partner. Mr.
Johnston disclaims beneficial ownership of the shares held by Southern
Venture Fund II, L.P. except to the extent of his pecuniary interest
therein. The address of the shareholder is 310 25th Avenue North, Suite 105,
Nashville, Tennessee 37203.
(5) Includes warrants for the purchase of 45,350 shares of common stock held by
Southern Venture Fund II, L.P. Also includes options to purchase 25,000
shares of common stock that will be granted to Mr. Johnston following this
offering and immediately transferred to Southern Venture Fund II, L.P. Mr.
Johnston disclaims beneficial ownership of the warrants and options held by
Southern Venture Fund II, L.P. except to the extent of his pecuniary
interest therein.
(6) Represents 765,000 shares that are held by Blue Chip Capital Fund II Limited
Partnership and 135,000 shares that are held by Miami Valley Venture Fund,
L.P. The address of the shareholder is 2000 PNC Center, 201 E. 5th Street,
Cincinnati, Ohio 45202.
(7) Represents 765,000 shares that are held by Blue Chip Capital Fund II Limited
Partnership and 135,000 shares that are held by Miami Valley Venture Fund,
L.P. Mr. Wyant is a manager of their general partner and special limited
partner, respectively. Mr. Wyant disclaims beneficial ownership of the
shares held by these entities except to the extent of his pecuniary interest
therein.
(8) Includes warrants for the purchase of 17,901 shares of common stock held by
Blue Chip Capital Fund II Limited Partnership and Miami Valley Venture Fund,
L.P. Mr. Wyant disclaims beneficial ownership of the warrants held by these
entities except to the extent of his pecuniary interest therein.
(9) Includes 90,000 shares held by the Gary R. Haynes 1994 Charitable Remainder
Unitrust, of which Mr. Haynes is trustee.
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<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and the provisions of our
charter and bylaws are only summaries and are qualified by reference to our
charter and bylaws filed as exhibits to the registration statement of which this
prospectus is a part. Our authorized capital stock consists of 50,000,000 shares
of common stock, no par value per share, and 10,000,000 shares of preferred
stock, no par value per share. As of March 31, 1999, there were 907,200 shares
of common stock outstanding held of record by three shareholders, 448,000 shares
of Series A convertible preferred stock outstanding held of record by eight
shareholders, 2,016,000 shares of Series B convertible preferred stock
outstanding held of record by nine shareholders and 1,725,667 shares of Series C
convertible preferred stock outstanding held of record by nine shareholders.
Each of the shares of preferred stock outstanding prior to this offering will
automatically convert into 1.8 shares of common stock upon consummation of this
offering.
COMMON STOCK
Holders of the common stock are entitled to receive, when and if declared
by the board of directors, dividends and other distributions in cash, stock or
property from our assets or funds legally available for those purposes subject
to any dividend preferences that may be attributable to preferred stock. Holders
of common stock are entitled to one vote for each share held of record on all
matters on which shareholders may vote. Holders of common stock are not entitled
to cumulative voting for the election of directors.
There are no preemptive, conversion, redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and non-assessable. In the event of our liquidation, dissolution or winding
up, holders of common stock are entitled to share ratably in the assets
available for distribution.
After this offering there will be 10,948,600 shares of common stock
outstanding. This number consists of 907,200 shares of common stock currently
outstanding, 2,500,000 shares to be issued in this offering and 7,541,400 shares
issuable upon conversion of our preferred stock.
PREFERRED STOCK
Before this offering, there were 4,189,667 shares of preferred stock
outstanding. Each of these shares will be converted into 1.8 shares of common
stock upon consummation of the offering. After this conversion, our board of
directors, without further action by the shareholders, is authorized to issue an
aggregate of 10,000,000 shares of preferred stock. Currently, we have no plans
to issue a new series of preferred stock. Our board of directors may, without
shareholder approval, issue preferred stock with dividend rates, redemption
prices, preferences on liquidation or dissolution, conversion rights, voting
rights and any other preferences, which rights and preferences could adversely
affect the voting power of the holders of common stock. Issuance of preferred
stock could make it harder for a third party to acquire, or could discourage or
delay a third party from acquiring, a majority of our outstanding stock.
The 4,189,667 shares of preferred stock currently outstanding have
preemptive rights.
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REGISTRATION RIGHTS
After the consummation of the offering, the holders of warrants to purchase
200,000 shares, 230,000 shares if the underwriters' over-allotment option is
exercised in full, of common stock or their transferees, and holders of
7,541,400 shares of common stock issuable upon conversion of the preferred stock
will have registration rights with respect to those securities. These rights are
described in a shareholders agreement between us and the holders of those
securities. The agreement provides for registration rights upon the demand of
the holders of at least 51% of the outstanding shares of our preferred stock. In
addition, pursuant to that agreement, the holders are entitled, subject to some
limitations, to require us to include their securities in future registration
statements we file under the Securities Act of 1933, referred to as piggyback
registration rights. The holders of those securities also are entitled, subject
to some limitations, to require us to register their securities on a
registration statement on Form S-3 once we are eligible to use a Form S-3 in
connection with registrations. However, holders of these shares will be
restricted from exercising these rights until 180 days after the date of this
prospectus. Registration of shares of common stock by the exercise of these
demand registration rights, piggyback registration rights or S-3 registration
rights under the Securities Act of 1933 would result in these shares becoming
freely tradable without restriction under the Securities Act of 1933 immediately
upon the effectiveness of such registration. Please see "Risk
Factors -- Substantial sales of our common stock may depress our stock price"
and "Shares Eligible for Future Sale."
CLASSIFIED BOARD OF DIRECTORS
Immediately prior to the effectiveness of this offering, our board of
directors will be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the board of directors
will be elected each year. This provision, along with the provision authorizing
the board of directors to fill vacant directorships or increase the size of the
board of directors, may deter a shareholder from removing incumbent directors
and gaining control of the board of directors by filling vacancies created by
the removal with its own nominees.
SHAREHOLDER ACTION; SPECIAL MEETING OF SHAREHOLDERS
The charter that will become effective immediately prior to the
effectiveness of this offering states that shareholders may not take action by
written consent, but only at duly called annual or special meetings of
shareholders. The charter also provides that special meetings of shareholders
may be called only by the chairman of the board of directors or by a majority of
the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
The bylaws provide that shareholders must provide timely notice in writing
to bring business before an annual meeting of shareholders or to nominate
candidates for election as directors at an annual meeting of shareholders. To be
timely notice for an annual meeting, a shareholders's notice must be delivered
to or mailed and received at our principal executive officers at least 120 days
before the first anniversary of the date our notice of annual meeting was
provided for the previous year's annual meeting of shareholders. If no annual
meeting of shareholders was held in the previous year or the date of the annual
meeting of shareholders has been changed to be more than 30 calendar days
earlier than or 60 calendar days after that
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<PAGE> 64
anniversary, notice by the shareholder, to be timely, must be received at least
60 days but no more than 90 days before the annual meeting of shareholders or
the close of business on the 10th day following the date on which notice of the
date of the meeting is given to shareholders or made public, whichever first
occurs. To be timely notice for a special meeting, a shareholder's notice must
be delivered to us by the close of business 10 days after notice of the meeting
is given to shareholders. The bylaws also specify requirements as to the form
and content of a shareholders' notice. These provisions may keep shareholders
from bringing matters before an annual meeting of shareholders or from making
nominations for directors at an annual meeting of shareholders.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without shareholder approval. These additional
shares may be used for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued shares of common stock
and preferred stock could make it harder or discourage an attempt to obtain
control of us by a proxy contest, tender offer, merger or otherwise.
TENNESSEE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS THAT MAY HAVE AN
ANTI-TAKEOVER EFFECT
Provisions in our charter, bylaws and Tennessee law could make it harder
for someone to acquire us through a tender offer, proxy contest or otherwise.
The Tennessee Business Combination Act provides that a party owning 10% or
more of the stock in a "resident domestic corporation" is an "interested
shareholder." An interested shareholder cannot engage in a business combination
with the resident domestic corporation unless the combination:
- takes place at least five years after the interested shareholder first
acquired 10% or more of the resident domestic corporation; and
- either is approved by at least two-thirds of the non-interested voting
shares of the resident domestic corporation or satisfies certain fairness
conditions specified in the Combination Act.
These provisions apply unless one of two events occurs:
- a business combination with an entity can proceed without delay when
approved by the target corporation's board of directors before that
entity becomes an interested shareholder, or
- the resident corporation may enact a charter amendment or bylaw to remove
itself entirely from the Combination Act. This charter or bylaw amendment
must be approved by a majority of the shareholders who have held shares
for more than one year before the vote. In addition, the charter
amendment or bylaw cannot become operative until two years after the
vote. An interested shareholder, for purposes of the Combination Act, is
any person who is an affiliate or associate of the corporation, or the
beneficial owner, directly or indirectly, of 10% or more of the
outstanding voting shares of the corporation.
The Tennessee Greenmail Act prohibits us from purchasing or agreeing to
purchase any of our securities, at a price higher than fair market value, from a
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holder of 3% or more of any class of our securities who has beneficially owned
the securities for less than two years. We can make this purchase if the
majority of the outstanding shares of each class of voting stock issued by us
approves the purchase or we make an offer of at least equal value per share to
all holders of shares of that class.
The effect of the above may make a change of control of our business harder
by delaying, deferring or preventing a tender offer or takeover attempt that you
might consider to be in your best interest. This includes those attempts that
might result in the payment of a premium over the market price for your shares.
They may also promote the continuity of our management by making it harder for
you to remove or change the incumbent members of the board of directors.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our charter provides that, to the fullest extent permitted by the Tennessee
Business Corporation Act, a director will not be liable to us or our
shareholders for monetary damages for breach of his or her fiduciary duty as a
director. Under the TBCA, directors have a fiduciary duty which is not
eliminated by this provision in our charter. In some circumstances, equitable
remedies such as injunctive or other forms of nonmonetary relief will remain
available. In addition, each director will continue to be subject to liability
under the TBCA for:
- breach of the director's duty of loyalty;
- acts or omissions which are found by a court of competent jurisdiction to
be not in good faith or knowing violations of law;
- actions leading to improper personal benefit to the director; and
- payment of dividends that are prohibited by the TBCA.
This charter provision does not affect the directors' responsibilities under any
other laws, such as the Federal securities laws or state or Federal
environmental laws.
The TBCA provides that a corporation may indemnify any director or officer
against liability incurred in connection with a proceeding if the director or
officer acted in good faith or reasonably believed, in the case of conduct in
his or her official capacity with the corporation, that the conduct was in the
corporation's best interest. In all other civil cases, a corporation may
indemnify a director or officer who reasonably believed that his or her conduct
was not opposed to the best interest of the corporation. In connection with any
criminal proceeding, a corporation may indemnify any director or officer who had
no reasonable cause to believe that his or her conduct was unlawful.
In actions brought by or in the right of the corporation, however, the TBCA
does not allow indemnification if the director or officer is adjudged to be
liable to the corporation. Similarly, the TBCA prohibits indemnification of a
director or officer if the director or officer is adjudged liable in a
proceeding because a personal benefit was improperly received.
In cases when the director or officer is wholly successful, on the merits
or otherwise, in the defense of any proceeding brought because of his or her
status as a director or officer of a corporation, the corporation must indemnify
the director or officer against reasonable expenses incurred in the proceeding.
Also, the TBCA provides that a court may order a corporation to indemnify a
director or officer for
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reasonable expense if, in consideration of all relevant circumstances, the court
determines that the individual is fairly and reasonably entitled to
indemnification, whether or not the individual acted in good faith or reasonably
believed his or her conduct was in the corporation's best interest.
Our bylaws provide that we shall indemnify and advance expenses to our
directors and officers to the fullest extent permitted by the TBCA. We also
intend to maintain insurance to protect any director or officer against any
liability and to enter into indemnification agreements to create a contractual
obligation to indemnify our directors and officers. These agreements, among
other things, indemnify our directors and officers for some expenses, including
attorneys' fees and associated legal expenses, judgments and fines and amounts
paid in settlement, actually and reasonably incurred by any of these persons in
any action, suit or proceeding arising out the person's services as our director
or officer. We believe that these provisions and agreements are necessary to
attract and retain qualified directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is First Union
National Bank. Its address is 1525 West WT Harris Blvd., 3C3, Charlotte, North
Carolina 28288-1153, and its telephone number at this location is (800)
829-8432.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market after
the offering could adversely affect the market price of our common stock and our
ability to raise equity capital in the future on terms favorable to us.
After the offering, 10,948,600 shares of our common stock will be
outstanding, assuming that the underwriters do not exercise the over-allotment
option. Of these shares, all of the 2,500,000 shares sold in this offering will
be freely tradable without restriction or further registration under the
Securities Act, unless these shares are purchased by "affiliates" as that term
is defined in Rule 144 under the Securities Act. The remaining shares of common
stock held by existing shareholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. 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.
The following table shows approximately when the 8,448,600 shares of our
common stock that are not being sold in this offering but which will be
outstanding when this offering is complete will be eligible for sale in the
public market:
<TABLE>
<CAPTION>
ELIGIBILITY OF RESTRICTED SHARES
FOR SALE IN THE PUBLIC MARKET
- ---------------------------------------------------------------
<S> <C>
At effective date 7,200
- ---------------------------------------------------------------
180 days after the effective date 8,441,400
</TABLE>
Resale of most of the restricted shares that will become available for sale
in the public market starting 180 days after the effective date will be limited
by volume and other resale restrictions under Rule 144 because the holders are
our affiliates.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year is entitled to sell, within any three-month
period, a number of shares that is not more than the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 109,486 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 before a notice of the
sale on Form 144 is filed.
Sales under Rule 144 must also comply with 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 has not been one of our affiliates at any
time during the 90 days before a sale, and who has beneficially owned the
restricted shares for at least two years, is entitled to sell the shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
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RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchase shares from us under
a stock option plan or other written agreement can resell those shares 90 days
after the effective date of this offering in reliance on Rule 144, but without
complying with some of the restrictions, including the holding period, contained
in Rule 144. All of the options issued under our 1996 Stock Option Plan will
become immediately vested and exercisable upon consummation of this offering and
will be able to be resold after the 90 day period, subject to any lock-up
agreements.
LOCK-UP AGREEMENTS
Executive officers, directors, shareholders and optionees who will hold an
aggregate of 10,518,340 shares of our common stock after this offering will sign
lock-up agreements under which they will agree 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
180 days after the date of this prospectus. Transfers or dispositions can be
made sooner with the prior written consent of Hambrecht & Quist.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 7,541,400 shares of our
common stock and of warrants to purchase 200,000 shares, 230,000 if the
underwriters' over-allotment option is exercised in full, of our common stock
will be entitled to rights with respect to the registration of their shares
under the Securities Act. Please see "Description of Capital
Stock -- Registration Rights" for a more detailed description of these
registration rights. After registration, these shares will become freely
tradeable without restriction under the Securities Act. Any sales of securities
by these shareholders could have a material adverse effect on the trading price
of our common stock.
STOCK OPTIONS
Immediately after this offering we intend to file a registration statement
under the Securities Act covering 2,780,000 shares of common stock reserved for
issuance under our stock option plans. Each year as the number of shares
reserved for issuance under our 1999 Stock Incentive Plan increases, we will
file an amendment to the registration statement covering the additional shares.
As of March 31, 1999, options to purchase 1,852,740 shares of common stock were
issued and outstanding. All 1,852,740 options to purchase shares of common stock
will become vested at the date of this offering. When the lock-up agreements
described above expire, all of these options will be freely tradable. This
registration statement is expected to be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under that registration statement will, subject to vesting provisions
and Rule 144 volume limitations applicable to our affiliates, be available for
sale in the open market immediately after the 180 day lock-up agreements expire.
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WARRANTS
Upon consummation of the initial public offering, Mark K. Wright, Gary R.
Haynes and all of the holders of our preferred stock will receive warrants to
purchase a number of shares of common stock equal to 8% of the number of shares
sold in this offering, including any shares sold in the over-allotment. The
price to exercise these warrants will be equal to the initial offering price per
share shown on the cover page of this prospectus. Mark K. Wright and Gary R.
Haynes will each receive 12.5% of the warrants. Preferred shareholders,
including Mark K. Wright and Gary R. Haynes, will receive their pro rata portion
of the remaining 75% of the warrants. These warrants are exercisable for seven
years and are entitled to registration rights.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below, through their representatives, Hambrecht & Quist, LLC,
Bear, Stearns & Co. Inc. and First Union Capital Markets Corp., have severally
agreed to purchase from us the following respective numbers of shares of common
stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ----------
<S> <C>
Hambrecht & Quist LLC....................................
Bear, Stearns & Co. Inc..................................
First Union Capital Markets Corp.........................
----------
Total............................................... 2,500,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
underwriters are subject to conditions precedent, including the absence of any
material adverse change in our business and the receipt of certificates,
opinions and letters from us, our counsel and the independent auditors. The
nature of the underwriters' obligation is such that they are committed to
purchase all shares of common stock offered hereby if any shares are purchased.
The following tables show the per share and total underwriting discounts
and commissions we will pay to the underwriters. These amounts are shown
assuming both no exercise and full exercise of the underwriters' over-allotment
option to purchase additional shares.
UNDERWRITING DISCOUNTS AND COMMISSIONS PAYABLE BY US
<TABLE>
<CAPTION>
WITH WITHOUT
OVER-ALLOTMENT EXERCISE OVER-ALLOTMENT EXERCISE
----------------------- -----------------------
<S> <C> <C>
Per Share......................... $ $
Total............................. $ $
</TABLE>
We estimate that the total expenses of this offering, excluding
underwriting discounts and commissions, will be approximately $800,000.
The underwriters propose to offer the shares of common stock directly to
the public at the initial public offering price shown on the cover page of this
prospectus and to some dealers at such price less a concession not in excess of
$ per share. The underwriters may allow and the dealers may reallow a
concession not in excess of $ per share to some other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the underwriters. The representatives have informed us
that the underwriters do not intend to confirm discretionary sales of more than
5% of the shares of common stock offered in this offering.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 375,000 additional
shares
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of common stock at the initial public offering price, less the underwriting
discount stated on the cover page of this prospectus. To the extent that the
underwriters exercise this option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage thereof which the
number of shares of common stock to be purchased by it shown in the above table
bears to the total number of shares of common stock offered hereby. We will be
obligated, pursuant to the option, to sell shares to the underwriters to the
extent the option is exercised. The underwriters may exercise this option only
to cover over-allotments made in connection with the sale of shares of common
stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
We have agreed to indemnify the underwriters against liabilities they may
incur, including liabilities under the Securities Act, and to contribute to
payments the underwriters may be required to make in respect thereof.
Our shareholders, including executive officers and directors, and optionees
who will own in the aggregate 10,518,340 shares of common stock after the
offering, have agreed not to, without the prior written consent of Hambrecht &
Quist LLC, offer, sell or otherwise dispose of any shares of common stock,
options or warrants to acquire shares of common stock or securities exchangeable
for or convertible into shares of common stock owned by them during the 180-day
period following the date of this prospectus. We have agreed that we will not,
without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of common stock, options or warrants to acquire
shares of common stock or securities exchangeable for or convertible into shares
of common stock during the 180-day period following the date of this prospectus,
except that we may issue shares upon the exercise of options granted prior to
the date hereof, and may grant additional options under our stock option plans,
provided that, without the prior written consent of Hambrecht & Quist LLC, the
additional options shall not be exercisable during that period.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the common stock will be determined
by negotiation among us and the representatives of the underwriters. Among the
factors to be considered in determining the initial public offering price are
prevailing market and economic conditions, our revenues and earnings, market
valuations of other companies engaged in activities similar to ours, estimates
of our business potential and our prospects, the present state of our business
operations, our management and other factors deemed relevant.
Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the common stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that
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permits the underwriters to reclaim a selling concession from a syndicate member
in connection with the offering when shares of common stock sold by the
syndicate member are purchased in syndicate covering transactions. These
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market, or otherwise. This stabilizing, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Bass, Berry & Sims PLC, Nashville, Tennessee. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
EXPERTS
The audited financial statements and schedules included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
CHANGE IN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Our board of directors has selected Arthur Andersen LLP to serve as
independent auditors for the current fiscal year. Arthur Andersen LLP has served
as our independent auditors since November 11, 1998. On November 11, 1998, we
dismissed Kraft Bros, Esstman Patton & Harrell, PLLC as our independent
accountants. Kraft Bros' reports on the financial statements for the years ended
December 31, 1996 and 1997 did not contain any adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle. The decision to change independent accountants was
approved by the board of directors. During the years ended December 31, 1996 and
1997 and through November 11, 1998 there were no reportable events, as defined
in regulations of the Securities and Exchange Commission, or disagreements with
Kraft Bros on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. Prior to retaining Arthur
Andersen LLP, we had not consulted with Arthur Andersen LLP regarding accounting
principles.
71
<PAGE> 73
WHERE YOU CAN FIND MORE INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933, that registers the
shares of common stock offered hereby. This prospectus does not contain all of
the information stated in the registration statement and the exhibits and
schedule filed with the registration statement. For more information about us
and the common stock offered hereby, you should review the registration
statement and the exhibits and schedule filed with the registration statement.
Statements contained in this prospectus regarding the contents of any contract
or any other document to which reference is made are not necessarily complete,
and, in each instance, you should review the copy of such contract or other
document filed as an exhibit to the registration statement. A copy of the
registration statement and the exhibits and schedule filed with the registration
statement may be inspected and copied at the following location of the
Securities and Exchange Commission:
PUBLIC REFERENCE ROOM
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
You may also obtain copies of all or any part of the registration statement from
that office at prescribed rates. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference room. The Securities and Exchange Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. The address of the site is http://www.sec.gov.
72
<PAGE> 74
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
@PLAN.INC
Report of Independent Public Accountants.................. F-2
Balance Sheets as of December 31, 1997 and 1998 and March
31, 1999 (unaudited)................................... F-3
Statements of Operations for the period from inception
(May 29, 1996) to December 31, 1996, for the years
ended December 31, 1997 and 1998 and for the three
months ended March 31, 1998 and 1999 (unaudited)....... F-4
Statements of Shareholders' Equity (Deficit) for the
period from inception (May 29, 1996) to December 31,
1996, for the years ended December 31, 1997 and 1998
and for the three months ended March 31, 1998 and 1999
(unaudited)............................................ F-5
Statements of Cash Flows for the period from inception
(May 29, 1996) to December 31, 1996, for the years
ended December 31, 1997 and 1998 and for the three
months ended March 31, 1998 and 1999 (unaudited)....... F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 75
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of @plan.inc:
We have audited the accompanying balance sheets of @plan.inc (a Tennessee
corporation) as of December 31, 1998 and 1997, and the related statements of
operations, shareholders' equity (deficit) and cash flows for the years then
ended and for the period from inception (May 29, 1996) to December 31, 1996.
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 @plan.inc as of December 31,
1998 and 1997, and the results of its operations and its cash flows for the
years then ended and for the period from inception to December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
New York, New York
March 11, 1999
F-2
<PAGE> 76
@PLAN.INC
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 832,338 $3,682,576 $3,156,857
Accounts receivable, net of allowance of $0, $80,000,
and $155,000, respectively:
Billed............................................ 354,626 1,440,693 1,841,330
Unbilled.......................................... 91,355 245,310 241,276
Prepaid expenses....................................... 37,838 101,208 252,341
---------- ---------- ----------
Total current assets........................... 1,316,157 5,469,787 5,491,804
Property and equipment, net.............................. 109,618 117,641 114,887
Software development costs, net.......................... 66,634 375,278 366,242
Other assets............................................. 66,766 63,775 70,435
---------- ---------- ----------
Total assets........................................ $1,559,175 $6,026,481 $6,043,368
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable....................................... $ 82,974 $ 254,223 $ 283,987
Accrued liabilities.................................... 140,013 375,411 206,500
Deferred revenue....................................... 366,953 1,124,082 1,591,954
---------- ---------- ----------
Total current liabilities........................... 589,940 1,753,716 2,082,441
Mandatory redeemable convertible preferred stock:
Series A, no par value, 500,000 shares authorized:
448,000 shares issued and outstanding............... 431,876 431,876 431,876
Series B, no par value, 2,250,000 shares authorized:
2,016,000 shares issued and outstanding............. 4,011,935 4,011,935 4,011,935
Series C, no par value, 1,725,667 shares authorized:
no, 1,725,667 and 1,725,667 shares issued and
outstanding, respectively........................... -- 5,138,991 5,138,991
---------- ---------- ----------
Total mandatory redeemable convertible preferred
stock............................................. 4,443,811 9,582,802 9,582,802
Shareholders' equity (deficit):
Preferred Stock, no par value, 5,524,333 shares
authorized; no shares issued and outstanding........ -- -- --
Common stock, no par value, 50,000,000 shares
authorized; 900,000, 907,200 and 907,200 shares
issued and outstanding, respectively................ 1 8,001 8,001
Additional paid-in capital............................. -- 27,418 57,478
Accumulated deficit.................................... (3,474,577) (5,345,456) (5,687,354)
---------- ---------- ----------
Total shareholders' equity (deficit)................ (3,474,576) (5,310,037) (5,621,875)
========== ========== ==========
Total liabilities and shareholders' equity
(deficit)......................................... $1,559,175 $6,026,481 $6,043,368
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 77
@PLAN.INC
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED THREE MONTHS ENDED
(MAY 29, 1996) TO DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------- ----------------------
1996 1997 1998 1998 1999
----------------- ----------- ----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................... $ -- $ 422,401 $ 3,108,356 $ 469,168 $1,337,122
Costs and expenses:
Product costs............... 487,239 1,744,366 2,360,042 407,649 740,480
Selling and marketing....... -- 819,043 1,713,080 294,811 539,160
General and
administrative........... 190,766 753,299 1,084,698 181,915 432,810
--------- ----------- ----------- --------- ----------
Total costs and expenses.... 678,005 3,316,708 5,157,820 884,375 1,712,450
--------- ----------- ----------- --------- ----------
Loss from operations.......... (678,005) (2,894,307) (2,049,464) (415,207) (375,328)
Interest income............... 17,367 80,368 191,804 52,710 36,730
--------- ----------- ----------- --------- ----------
Net loss before income
taxes.................... (660,638) (2,813,939) (1,857,660) (362,497) (338,598)
Income tax provision.......... -- -- 13,219 4,921 3,300
--------- ----------- ----------- --------- ----------
Net loss.................... $(660,638) $(2,813,939) $(1,870,879) $(367,418) $ (341,898)
========= =========== =========== ========= ==========
Basic and diluted loss per
share....................... $ (0.73) $ (3.13) $ (2.07) $ (0.41) $ (0.38)
========= =========== =========== ========= ==========
Weighted average shares
outstanding................. 900,000 900,000 901,993 900,000 907,200
========= =========== =========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 78
@PLAN.INC
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN ACCUMULATED TOTAL SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------- ------ ---------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Balances, May 29, 1996
(Inception)................... -- $ -- $ -- $ -- $ --
Issuance of common stock to
founders...................... 900,000 1 -- -- 1
Net loss........................ -- -- -- (660,638) (660,638)
------- ------ ------- ----------- -----------
Balances, December 31, 1996..... 900,000 1 -- (660,638) (660,637)
Net loss........................ -- -- -- (2,813,939) (2,813,939)
------- ------ ------- ----------- -----------
Balances, December 31, 1997..... 900,000 1 -- (3,474,577) (3,474,576)
Exercise of stock options....... 7,200 8,000 -- -- 8,000
Options granted to
non-employees................. -- -- 27,418 -- 27,418
Net loss........................ -- -- -- (1,870,879) (1,870,879)
------- ------ ------- ----------- -----------
Balances, December 31, 1998..... 907,200 8,001 27,418 (5,345,456) (5,310,037)
Compensation related to stock
options granted to
employees..................... -- -- 30,060 -- 30,060
Net loss........................ -- -- -- (341,898) (341,898)
------- ------ ------- ----------- -----------
Balances, March 31, 1999
(unaudited)................... 907,200 $8,001 $57,478 $(5,687,354) $(5,621,875)
======= ====== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 79
@PLAN.INC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD THREE MONTHS ENDED
FROM INCEPTION YEAR ENDED DECEMBER 31, MARCH 31,
(MAY 29, 1996) TO --------------------------- -----------------------
DECEMBER 31, 1996 1997 1998 1998 1999
----------------- ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................... $ (660,638) $(2,813,939) $(1,870,879) $ (367,418) $ (341,898)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 1,171 48,648 218,878 20,915 139,153
Provision for doubtful
accounts....................... -- -- 80,000 -- 75,000
Non cash charges................. -- -- 27,418 -- 30,060
Changes in operating assets and
liabilities:
Increase in accounts
receivable.................. -- (445,981) (1,320,023) (158,001) (471,603)
(Increase) decrease in prepaid
expenses.................... (783) (37,055) (63,370) 5,560 (151,133)
(Increase) decrease in other
assets...................... (6,696) (61,289) 360 -- (6,660)
Increase (decrease) in accounts
payable..................... 97,156 (14,182) 171,248 16,319 29,764
Increase (decrease) in accrued
liabilities................. -- 140,013 235,398 (9,824) (168,911)
Increase in deferred revenue... -- 366,953 757,130 52,583 467,872
---------- ----------- ----------- ---------- ----------
Net cash used in operating
activities................ (569,790) (2,816,832) (1,763,840) (439,866) (398,356)
Cash flows from investing activities:
Purchases of equipment............. (10,938) (143,419) (74,327) (41,080) (16,455)
Software development costs......... -- (70,495) (458,586) (63,013) (110,908)
---------- ----------- ----------- ---------- ----------
Net cash used in investing
activities................ (10,938) (213,914) (532,913) (104,093) (127,363)
Cash flows from financing activities:
Proceeds from issuance of common
stock............................ 1 -- 8,000 -- --
Proceeds from issuance of preferred
stock, net....................... 2,189,097 2,254,714 5,138,991 3,668,190 --
---------- ----------- ----------- ---------- ----------
Net cash provided by
financing activities...... 2,189,098 2,254,714 5,146,991 3,668,190 --
---------- ----------- ----------- ---------- ----------
Net change in cash and cash
equivalents........................ 1,608,370 (776,032) 2,850,238 3,124,231 (525,719)
Cash and cash equivalents at
beginning of period................ -- 1,608,370 832,338 832,338 3,682,576
---------- ----------- ----------- ---------- ----------
Cash and cash equivalents at end of
period............................. $1,608,370 $ 832,338 $ 3,682,576 $3,956,569 $3,156,857
========== =========== =========== ========== ==========
Supplemental information:
Cash paid for income taxes......... $ -- $ -- $ 4,921 $ 4,921 $ 3,300
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 80
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS
1. GENERAL:
@plan.inc was incorporated in the State of Tennessee in May 1996. We are
based in Stamford, Connecticut, and are a provider of Internet market research
systems for Internet advertisers, advertising agencies, Web publisher, online
retailers and consumer brand marketers.
2. SIGNIFICANT ACCOUNTING POLICIES:
UNAUDITED INTERIM FINANCIAL INFORMATION
The financial information as of March 31, 1999 and for the three months
ended March 31, 1998 and 1999 is unaudited, but includes all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position at March 31, 1999, and our
operations and cash flows for the three months ended March 31, 1998 and 1999.
Operating results for the three months ended March 31, 1999 are not necessarily
indicative of results that may be expected for the entire year.
REVENUE RECOGNITION
We provide Internet market research systems to our clients on a renewable
subscription basis. We recognize revenue ratably over the contract period, which
is generally twelve months. We bill our clients for our services based on terms
of the contracts, which may not coincide with criteria required for revenue
recognition.
On the accompanying balance sheets, deferred revenue represents amounts
invoiced prior to rendering our services while unbilled receivables represents
the value of services rendered prior to being invoiced. Substantially all of the
deferred and unbilled revenue will be earned and billed, respectively, within
twelve months of the respective period ends.
Upon signing a contract, our sales representatives become eligible for a
commission. These commissions are paid at the time of the contract signing. For
financial reporting purposes, we capitalize these commissions as a component of
prepaid expenses and amortize these amounts over the lives of the related
contracts.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and all investments in
highly liquid instruments purchased with original maturities of three months or
less. Funds in excess of operating cash needs are maintained in a money market
fund, which may exceed the amount insured by the Federal Deposit Insurance
Corporation.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the assets, ranging from
three to five years.
SOFTWARE DEVELOPMENT COSTS
We capitalize direct costs relating to our computer software development
upon the establishment of technological feasibility. Until our products reach
technological feasibility, all
F-7
<PAGE> 81
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
costs related to development efforts are expensed as a component of product
costs. Software development costs, subsequent to technological feasibility and
prior to general release, have been capitalized and are reported at the lower of
unamortized cost or net realizable value. We amortize capitalized software
development costs on a straight-line basis for periods ranging from one to three
years. As of December 31, 1997 and 1998 and March 31, 1999, software development
costs are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1997 1998 1999
------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Software development costs.................... $70,495 $ 529,081 $ 639,989
Less: Accumulated depreciation................ (3,861) (153,803) (273,747)
------- --------- ---------
$66,634 $ 375,278 $ 366,242
======= ========= =========
</TABLE>
We periodically review our software development costs and property and
equipment for any potential impairments. We consider undiscounted cash flows,
future operating results, trends or other relevant information in assessing
whether the carrying value of our assets is recoverable. At March 31, 1999, we
do not believe that any of our assets are impaired.
INCOME TAXES
We recognize deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. 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. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
LOSS PER SHARE
Basic loss per share amounts are computed by dividing the net loss by the
weighted average number of shares of common stock outstanding during the period.
Diluted loss per share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding during the period plus the
effects of any potentially dilutive securities. In the accompanying statements
of operations, diluted loss per share does not include the effects of
potentially dilutive securities for all periods presented as they would have
been anti-dilutive in years in which a loss is reported.
F-8
<PAGE> 82
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes the securities outstanding which are excluded from
the loss per share calculation as amounts would have an antidilutive effect.
Preferred Stock is reflected on an "if-converted" basis. See note 4.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Series A preferred
stock.................. 798,300 806,400 806,400 806,400 806,400
Series B preferred
stock.................. 1,596,600 3,628,800 3,628,800 3,628,800 3,628,800
Series C preferred
stock.................. -- -- 3,106,200 2,223,720 3,106,200
Stock options............ 343,800 1,506,600 1,805,400 1,506,600 1,852,740
--------- --------- --------- --------- ---------
Total.................... 2,738,700 5,941,800 9,346,800 8,165,520 9,394,140
========= ========= ========= ========= =========
</TABLE>
STOCK-BASED COMPENSATION
We account for our stock-based compensation to our employees by recognizing
compensation expense for the difference between the estimated fair value of our
stock at the date of grant and the exercise price of the granted stock.
Stock-based grants issued to non-employees are recorded at either the fair value
of the services provided at the fair value of the stock issued, as determined
using the Black-Scholes model.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. These assumptions also affect the reported amounts of
revenue and expenses during the reporting periods. Actual results could differ
from those estimates and assumptions.
CONCENTRATION OF CREDIT RISK
We invest the majority of our cash balances in short-term, high quality
marketable securities. Our accounts receivable balances are domestic. No single
client represents a significant credit risk to us.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of all of our cash and cash equivalents, accounts
receivable and accounts payable approximate fair value due to the short-term
nature of these accounts.
STOCK-SPLIT
The accompanying financial statements give retroactive effect to a 2,500
for 1 stock-split of our common stock which occurred on July 23, 1996 and a 1.8
for 1 stock-split that was approved by our Board of Directors on March 10, 1999.
F-9
<PAGE> 83
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1997 1998 1999
-------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software.............. $138,781 $ 211,999 $ 228,454
Furniture and fixtures....................... 7,503 8,613 8,613
Leasehold improvements....................... 8,073 8,073 8,073
-------- --------- ---------
154,357 228,685 245,140
Less: Accumulated depreciation............... (44,739) (111,044) (130,253)
-------- --------- ---------
$109,618 $ 117,641 $ 114,887
======== ========= =========
</TABLE>
4. PREFERRED STOCK:
Since our inception, we have issued three series of mandatory redeemable
convertible preferred stock. The following is a discussion of each of these
issuances.
In 1996 and 1997, we issued a total of 448,000 shares of Series A preferred
stock and 2,016,000 shares of Series B preferred stock at a purchase price of
$1.00 and $2.00 per share, respectively. In 1998, we issued 1,725,667 shares of
Series C preferred stock at a purchase price of $3.00 per share. Each share of
preferred stock is convertible into 1.8 shares of common stock at any time, at
the option of the holder, or automatically upon successful completion of an
initial public offering yielding gross proceeds of at least $12.0 million and at
an initial public offering price of not less than $6.00 per share.
We have reserved 7,541,400 shares of common stock for issuance upon
conversion of these convertible preferred shares.
The preferred shareholders are not entitled to receive any preferential
dividends until the respective sixth anniversaries of the initial issuance dates
of the shares (Series A -- July 2002; Series B -- October 2002; Series
C -- January 2004). Thereafter, the preferred shareholders will be entitled to
receive dividends at the annual rate of $0.10, $0.20 and $0.30 per share,
respectively, on a cumulative basis from and after the sixth anniversary. Under
our Preferred Stock agreements, dividends on our common stock are restricted to
stock dividends through July 2002.
We will redeem the preferred stock, if not previously converted, of each
preferred shareholder in 48 equal monthly installments beginning on the sixth
anniversary of the respective original issue dates. In the event of any
consolidation, merger, statutory share exchange, liquidation, dissolution or
winding up of our business, the holders of preferred stock will be paid first
out of any distribution of holders of our common and preferred stock at an
amount per share equal to $1.00, $2.00 and $3.00, respectively, plus any
cumulative and unpaid dividends thereon.
Simultaneous with the closing of an initial public offering, a director and
an officer and all of the preferred shareholders will receive warrants to
purchase shares of common stock equal
F-10
<PAGE> 84
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
to 8% of the number of shares sold in the offering at a price equal to the
initial price to the public. Of these warrants, 12.5% will be granted to the
director and officer. The preferred shareholders, including the director and
officer, will receive a pro rata portion of the remaining 75% of the warrants.
These warrants are exercisable for seven years.
We will account for these warrants at the time of issuance as follows:
- For warrants issued to the employee and director, we will apply the
provisions of Accounting Principles Boards Opinion No. 25, "Accounting
for Stock Issued to Employees," and record compensation expense for the
difference between the fair value of our common stock at the time of
grant, based on our initial public offering price, and the exercise price
of the warrant. As these amounts are expected to be equivalent on the
date of grant, we do not expect to record any compensation expense for
these warrants.
- For warrants issued to the holders of our preferred stock, we will record
the value of these warrants, as determined by using the Black-Scholes
model, as a dividend to these shareholders on the date of grant. This
dividend will increase our accumulated deficit but will have no effect on
reported net income (loss). While the actual value of the warrants issued
to these shareholders cannot be determined until the date of grant, we
estimate that the value of this dividend will approximate $1.2 million.
5. STOCK OPTION PLAN:
In 1996, we created the 1996 Stock Option Plan. This plan, as amended,
provides for stock option grants to employees, members of our board of
directors, our consultants and other persons having a business relationship with
us. Under this plan, the option price as determined by the board of directors
cannot be less than 100% of the fair market value of our common stock, at grant,
in the case of incentive stock options, and not less than 50% of the fair market
value of our common stock, at grant, in the case of non-qualified stock options.
Exceptions exist under certain conditions. No options will be exercisable more
than ten years after the date the option is granted. Options that we have
granted under our plan generally vest ratably over a four year period, beginning
at the date of grant. All unvested options will immediately vest upon an initial
public offering of our common stock.
F-11
<PAGE> 85
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
We currently have 1,980,000 shares reserved under our option plan. At
December 31, 1996, 1997 and 1998 and March 31, 1999, the following options had
been granted under our plan and were outstanding:
<TABLE>
<CAPTION>
1996 1997 1998 MARCH 31, 1999
------------------ -------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- --------- -------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
period............. -- $ -- 343,800 $0.94 1,506,600 $1.14 1,805,400 $1.43
Granted.............. 343,800 0.94 1,162,800 1.20 349,200 2.91 47,340 3.33
Exercised............ -- -- -- -- (7,200) 1.11 -- --
Forfeited............ -- -- -- -- (43,200) 1.39 -- --
------- ----- --------- ----- --------- ----- --------- -----
Outstanding at end of
period............. 343,800 $0.94 1,506,600 $1.14 1,805,400 $1.43 1,852,740 $1.48
======= ========= ========= =========
Options exercisable
at end of period... 279,065 $0.89 505,399 $0.99 874,420 $1.20 970,752 $1.23
======= ========= ========= =========
Weighted average fair
value of options
granted during
period............. $0.31 $0.38 $0.66 $8.67
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 1999 (unaudited):
<TABLE>
<CAPTION>
WEIGHTED-
OPTIONS AVERAGE OPTIONS
OUTSTANDING AT REMAINING WEIGHTED- EXERCISABLE AT WEIGHTED-
RANGE OF MARCH 31, CONTRACTUAL AVERAGE MARCH 31, AVERAGE
EXERCISE PRICES 1999 LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- --------------- -------------- ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$.89 - $1.11........... 1,288,800 7.79 years $1.07 822,087 $1.04
$1.67.................. 343,800 8.94 years 1.67 91,659 1.67
$3.33.................. 220,140 9.51 years 3.33 57,006 3.33
--------- -------
1,852,740 970,752
========= =======
</TABLE>
During 1999, we issued 47,340 options to our employees. These options had
an exercise price that was approximately $8.67 less per share than the fair
market value of our common stock on the date of grant. Accordingly, we plan to
recognize compensation expense of approximately $481,000 over the 48 month
vesting period for these options. During the three months ended March 31, 1999,
we recognized approximately $30,000 of this expense. However, as these options
will vest at the time of our initial public offering (see Note 8), we expect
that we will recognize the remaining $451,000 of expense during the second
quarter of 1999.
F-12
<PAGE> 86
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In 1998, we granted 36,000 stock options at an exercise price of $3.33 to
non-employees. We recognized expense in the amount of $27,418 in connection with
these grants, which was estimated using the Black-Scholes model and the
following assumptions:
- risk free interest rate of 5.3%,
- expected dividend yield of 0%,
- expected life of 5.0 years and
- expected volatility of 0%
The fair value of all of our other option grants is estimated on the date
of grant using the Black-Scholes model with the following weighted-average
assumptions used for grants in 1996, 1997 and 1998:
- weighted-average risk free interest rates of 6.7%, 6.5% and 5.3%,
respectively,
- expected dividend yields of 0%,
- expected lives of 6.0 years and
- expected volatility of 0%.
Except for the two series of option grants discussed above, no compensation
cost has been recognized for any option grants in the accompanying statements of
operations. Had compensation costs been recorded, our net loss and basic and
diluted loss per share would have been reduced from the following as reported
amounts to the following pro forma amounts:
<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION THREE
(MAY 29, MONTHS
1996) TO YEARS ENDED DECEMBER 31, ENDED
DECEMBER ------------------------- MARCH 31,
31, 1996 1997 1998 1999
--------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss:
As reported............................ $(660,638) $(2,813,939) $(1,870,879) $(341,898)
Pro forma.............................. $(746,262) $(2,938,567) $(2,037,361) $(341,898)
Basic and diluted loss per share:
As reported............................ $(0.73) $(3.13) $(2.07) $(0.38)
Pro forma.............................. $(0.83) $(3.27) $(2.26) $(0.38)
</TABLE>
6. INCOME TAXES:
The accompanying statements of operations for the year ended December 31,
1998 and for the three months ended March 31, 1998 and 1999 include a provision
for current state capital taxes of approximately $13,200, $4,900 (unaudited) and
$3,300 (unaudited), respectively. No taxes were provided for the periods ended
December 31, 1996 and 1997, as taxes were not due during these years.
F-13
<PAGE> 87
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the tax provision at the United States statutory rate
to the actual income tax expense reported is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED THREE MONTHS ENDED
(MAY 29, 1996) TO DECEMBER 31, MARCH 31,
DECEMBER 31, 1996 1997 1998 1998 1999
----------------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax benefit at the
United States
statutory rate..... $(224,617) $(956,739) $(631,635) $(123,249) $(115,123)
State taxes, net of
federal tax
benefit............ -- -- 8,725 3,248 2,178
Losses not
benefited.......... 222,917 954,695 632,034 123,898 115,990
Other................ 1,700 2,044 4,095 1,024 255
--------- --------- --------- --------- ---------
Total income tax
provision..... $ -- $ -- $ 13,219 $ 4,921 $ 3,300
========= ========= ========= ========= =========
</TABLE>
Since inception, we have generated losses for both book and tax purposes.
We have not recorded potential income tax benefits that we may receive from our
ability to apply current losses to future years in which we have taxable income.
Under accounting rules, these benefits can only be recorded when it is more
likely than not that these benefits will be realized. Due to our limited
operating history, we currently cannot make this assessment.
At March 31, 1999, we have net operating loss carryforwards for federal and
state income tax purposes totaling approximately $5.1 million (unaudited), which
will expire from 2011 through 2014.
Our net deferred tax asset consists of the following amounts of deferred
tax assets and liabilities as of December 31, 1997 and 1998 and March 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31,
1997 1998 1999
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax asset:
Net operating loss carryforwards............. $1,094,546 $1,949,007 $2,046,009
Start-up costs............................... 226,859 184,731 171,214
Reserves and other........................... 1,520 50,668 103,838
---------- ---------- ----------
Deferred tax asset............................. 1,322,925 2,184,406 2,321,061
Less valuation allowance for deferred tax
assets....................................... (1,319,415) (2,129,943) (2,266,403)
---------- ---------- ----------
3,510 54,463 54,658
Deferred tax liability:
Prepaid commissions.......................... -- (37,263) (54,658)
Excess of depreciation for tax purposes over
book...................................... (3,510) (17,200) --
---------- ---------- ----------
Deferred tax liability......................... (3,510) (54,463) (54,658)
---------- ---------- ----------
Net deferred tax asset......................... $ -- $ -- $ --
========== ========== ==========
</TABLE>
F-14
<PAGE> 88
@PLAN.INC
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
We lease office facilities under operating leases. Future minimum lease
payments related to these agreements are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1999...................................................... $148,290
2000...................................................... 142,249
2001...................................................... 23,708
</TABLE>
Rent expense was approximately $0, $110,000 and $156,000, for the years
ended December 31, 1996, 1997 and 1998, respectively. Rent expense totaled
approximately $37,000 (unaudited) and $39,000 (unaudited) for the three months
ended March 31, 1998 and March 31, 1999, respectively.
CONTRACTUAL COMMITMENTS
We have a Letter of Agreement with The Gallup Organization, Inc. which was
entered into on September 6, 1996. This agreement was amended on January 5,
1998, August 20, 1998 and February 19, 1999. Under this agreement Gallup
provides us with initial baseline data and quarterly tracking survey research.
The agreement has a one-year term with nine successive one-year renewals, and is
cancelable only by us upon 90-days' written notice prior to an anniversary date.
8. SUBSEQUENT EVENT (UNAUDITED):
We are currently pursuing an initial public offering of our common stock.
We expect to offer approximately 2,500,000 shares of our common stock at an
initial offering price of approximately $13.00 per share.
In March 1999, we adopted a new stock incentive plan (the 1999 Stock Plan).
The 1999 Stock Plan provides for the issuance of 800,000 options to purchase
common stock to key employees, consultants and non-employee directors. Options
to purchase 24,000 shares of common stock have been granted at the initial
public offering price in April 1999.
F-15
<PAGE> 89
Inside Back Cover
Centered at the top "Representative Clients"
Logos for the following representative clients:
Excite Inc.
Avenue A Inc.
CBS MarketWatch Quantum Leap Communications, Inc.
eBay.com Virtual Vineyards
broadcast.com, Inc. TicketMaster Online
Foote, Cone & Belding-FCB Direct Women.Com
InterActive8, Inc. Yahoo!
141 Integrated Communications
i-traffic
Left Field, LLC
MSNBC-Microsoft Corporation
The Mining Company
MSN Microsoft-Microsoft Corporation
Onsale, Inc.
Preview Travel, Inc.
<PAGE> 90
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,500,000 SHARES
(@PLAN LOGO)
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
HAMBRECHT & QUIST
BEAR, STEARNS & CO. INC.
FIRST UNION CAPITAL MARKETS CORP.
-------------------------
, 1999
-------------------------
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.
Until , 1999 (25 days after the date of this prospectus), all
dealers that buy, sell or trade in the securities in this offering, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount payable by us in connection with the sale of the common
stock being registered. All amounts are estimates except the SEC registration
fee and the NASD filing fees.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 9,591
NASD filing fee............................................. 3,950
Nasdaq National Market listing fee.......................... 78,875
Printing and engraving...................................... 150,000
Legal fees and expenses..................................... 225,000
Accounting fees and expenses................................ 150,000
Blue sky fees and expenses (including legal fees)........... 5,000
Transfer agent fees......................................... 15,000
Miscellaneous............................................... 162,584
--------
Total.................................................. $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Tennessee Business Corporation Act, there is no specific
provision either expressly permitting or prohibiting a corporation from limiting
the liability of its directors for monetary damages. Our charter provides that,
to the fullest extent permitted by the TBCA, a director will not be liable to
the corporation or its shareholders for monetary damages for breach of his or
her fiduciary duty as a director.
The TBCA provides that a corporation may indemnify any director or officer
against liability incurred in connection with a proceeding if the director or
officer acted in good faith or reasonably believed, in the case of conduct in
his or her official capacity with the corporation, that the conduct was in the
corporation's best interest. In all other civil cases, a corporation may
indemnify a director or officer who reasonably believed that his or her conduct
was not opposed to the best interest of the corporation. In connection with any
criminal proceeding, a corporation may indemnify any director or officer who had
no reasonable cause to believe that his or her conduct was unlawful.
In actions brought by or in the right of the corporation, however, the TBCA
does not allow indemnification if the director or officer is adjudged to be
liable to the corporation. Similarly, the TBCA prohibits indemnification in
connection with any proceeding charging improper personal benefit to a director
or officer if the director or officer is adjudged liable because a personal
benefit was improperly received.
II-1
<PAGE> 92
In cases when the director or officer is wholly successful, on the merits
or otherwise, in the defense of any proceeding instigated because of his or her
status as a director or officer of a corporation, the TBCA mandates that the
corporation indemnify the director or officer against reasonable expenses
incurred in the proceeding. Notwithstanding the foregoing, the TBCA provides
that a court may order a corporation to indemnify a director or officer for
reasonable expense if, in consideration of all relevant circumstances, the court
determines that the individual is fairly and reasonably entitled to
indemnification, whether or not the standard of conduct stated above was met.
Our bylaws provide that we shall indemnify and advance expenses to our
directors and officers to the fullest extent permitted by the TBCA. We also
maintain insurance to protect any director or officer against any liability and
have entered into indemnification agreements with each of our directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under our charter. We are not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has sold and issued the following unregistered securities
since May 29, 1996 (inception):
- On May 31, 1996 and July 23, 1996, an aggregate of 450,000 shares of our
common stock were issued to each of Mark K. Wright and Gary R. Haynes in
a private placement pursuant to Section 4(2) of the Securities Act in
connection with founding our organization in consideration for their
right, title and interest in certain data, business plans, processes,
ideas, trade secrets, software and other intellectual property concerning
the @plan concept and all associated goodwill;
- On July 24, 1996 and March 20, 1997, an aggregate of 448,000 shares of
our Series A convertible preferred stock in a private placement
transaction under Rule 506 of the Securities Act only to accredited
investors at $1.00 per share for an aggregate purchase price of $448,000
to the following shareholders:
- 200,000 shares to the Southern Venture Fund II, L.P., a five
percent shareholder. Donald M. Johnston, one of our directors, is
a general partner of SV Partners II, L.P., its general partner;
- 200,000 shares to Richland Ventures, L.P., a five percent
shareholder. W. Patrick Ortale III, one of our directors, is a
general partner of Richland Partners, its general partner;
- 5,000 shares to Mark K. Wright, our Chief Executive Officer,
Chairman of our Board of Directors and a five percent shareholder;
- 20,000 shares to Gary R. Haynes, a five percent shareholder and
one of our directors;
- 10,000 shares to Roger J. Thomson, one of our directors;
- 2,500 shares to Susan C. Russo, one of our executive officers; and
- 500 shares to Karl A. Spangenberg, one of our executive officers.
II-2
<PAGE> 93
- On October 4, 1996 and March 20, 1997, 2,016,000 shares of our Series B
convertible preferred stock in a private placement transaction under Rule
506 of the Securities Act only to accredited investors at $2.00 per share
for an aggregate purchase price of $4,032,000 to the following
shareholders:
- 900,000 shares to the Southern Venture Fund II, L.P., a five
percent shareholder. Donald M. Johnston, one of our directors, is
a general partner of SV Partners II, L.P., its general partner;
- 900,000 shares to Richland Ventures, L.P., a five percent
shareholder. W. Patrick Ortale III, one of our directors, is a
general partner of Richland Partners, its general partner;
- 22,500 shares to Mark K. Wright, our Chief Executive Officer,
Chairman of our Board of Directors and a five percent shareholder;
- 40,000 shares to Gary R. Haynes, a five percent shareholder and
one of our directors;
- 50,000 shares to the Gary R. Haynes 1994 Charitable Remainder
Unitrust, of which Gary R. Haynes, a five percent shareholder and
one of our directors, is trustee;
- 45,000 shares to Roger J. Thomson, one of our directors;
- 11,250 shares to Susan C. Russo, one of our executive officers;
and
- 2,250 shares to Karl A. Spangenberg, one of our executive
officers.
- On January 6, 1998 and August 7, 1998, 1,725,667 shares of Series C
convertible preferred stock in a private placement transaction under Rule
506 of the Securities Act only to accredited investors at $3.00 per share
for an aggregate purchase price of $5,177,001 to the following
shareholders:
- 166,667 shares to the Southern Venture Fund II, L.P., a five
percent shareholder. Donald M. Johnston, one of our directors, is
a general partner of SV Partners II, L.P., its general partner;
- 1,000,000 shares to Richland Ventures II, L.P., a five percent
shareholder. W. Patrick Ortale, III, one of our directors, is a
general partner of Richland Partners, its general partner;
- 425,000 shares to Blue Chip Capital Fund II Limited Partnership, a
five percent shareholder. John H. Wyant, one of our directors, is
a manager of Blue Chip Venture, Ltd., its general partner;
- 75,000 shares to Miami Valley Venture Fund, L.P. John H. Wyant,
one of our directors, is a manager of Blue Chip Venture Company of
Dayton, Ltd., its special limited partner;
- 3,000 shares to Mark K. Wright, our Chief Executive Officer,
Chairman of our Board of Directors and a five percent shareholder;
- 30,000 shares to Gary R. Haynes, a five percent shareholder and
one of our directors;
- 14,000 shares to Roger J. Thomson, one of our directors; and
- 2,000 shares to Karl A. Spangenberg, one of our executive
officers.
- In September 1998, Bethany Joseph, a former employee, exercised options
received under our written 1996 stock option plan for 7,200 shares of our
common stock under Rule 701 of the Securities Act at $1.11 per share for
an aggregate purchase price of $8,000.
II-3
<PAGE> 94
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1 Form of the Underwriting Agreement among @plan.inc and the
underwriters
3.1* Form of Third Amended and Restated Charter of @plan.inc
3.2* Form of Second Amended and Restated Bylaws of @plan.inc
4.1 Form of certificate representing the common stock, no par
value per share of @plan.inc
4.2* @plan.inc Amended and Restated Shareholders' Agreement dated
January 6, 1998, as amended
4.3* Form of Stock Purchase Warrant
4.4* Article 7 of the Third Amended and Restated Charter
(included in Charter filed as Exhibit 3.1)
4.5* Article II of the Second Amended and Restated Bylaws
(included in Bylaws filed as Exhibit 3.2)
5 Opinion of Bass, Berry & Sims PLC as to the legality of the
common stock being offered
10.1 Gallup Agreement dated September 6, 1996, as amended.
10.2 Lease between @plan.inc, as tenant, and Reckson Operating
Partnership, L.P.
10.3* Series A and Series B Convertible Preferred Stock Securities
Purchase Agreement dated July 24, 1996
10.4* Series C Convertible Preferred Stock Securities Purchase
Agreement dated December 31, 1997
10.5* Second Amended and Restated 1996 Stock Option Plan,
effective as of July 22, 1996
10.6 1999 Stock Incentive Plan
10.7* Form of Indemnification Agreement
10.8 Form of Severance Agreement
10.9 Promissory note dated June 10, 1997 between us and Karl
Spangenberg
11 Computation of Loss per Share
16 Letter re: Change in Certifying Accountant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bass, Berry & Sims PLC (included in opinion filed
as Exhibit 5)
24* Power of Attorney (included on page II-5)
27 Financial Data Schedule
</TABLE>
- ---------------
* Previously filed.
(b) Schedules.
Schedule II -- Valuation and Qualifying Accounts
II-4
<PAGE> 95
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(b) 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 in Item 14, 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 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.
(c) The undersigned registrant hereby undertakes that: (i) for purposes of
determining any liability under the Securities Act of 1933, 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; (ii) for the purpose of determining any liability under the
Securities Act of 1933, 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> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Stamford, State of Connecticut, on May 3, 1999.
@PLAN.INC
By: /s/ MARK K. WRIGHT
-----------------------------------
Mark K. Wright
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ MARK K. WRIGHT Chairman and Chief May 3, 1999
- ------------------------------------------ Executive Officer (principal
Mark K. Wright executive officer)
/s/ NANCY A. LAZAROS Senior Vice President and May 3, 1999
- ------------------------------------------ Chief Financial Officer
Nancy A. Lazaros (principal financial and
accounting officer)
* Director May 3, 1999
- ------------------------------------------
Gary R. Haynes
* Director May 3, 1999
- ------------------------------------------
Donald M. Johnston
* Director May 3, 1999
- ------------------------------------------
W. Patrick Ortale, III
* Director May 3, 1999
- ------------------------------------------
Roger J. Thomson
* Director May 3, 1999
- ------------------------------------------
John H. Wyant
*By: /s/ MARK K. WRIGHT May 3, 1999
- ------------------------------------------
Mark K. Wright
as Attorney-in-Fact
</TABLE>
II-6
<PAGE> 97
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To @plan.inc:
We have audited in accordance with generally accepted auditing standards,
the financial statements of @plan.inc included in this registration statement
and have issued our report thereon dated March 11, 1999. Our audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The schedule of Valuation and Qualifying Accounts is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
March 11, 1999
S-1
<PAGE> 98
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Period from Inception (May 29, 1996) to
December 31, 1996.................... $ -- $ -- $ -- $ --
Year Ended December 31, 1997........... -- -- -- --
Year Ended December 31, 1998........... -- 80,000 -- 80,000
Three Months Ended March 31, 1999
(unaudited).......................... 80,000 75,000 -- 155,000
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS
Period from Inception (May 29, 1996) to
December 31, 1996.................... $ -- $ 251,098 $ -- $ 251,098
Year Ended December 31, 1997........... 251,098 1,068,317 -- 1,319,415
Year Ended December 31, 1998........... 1,319,415 810,528 -- 2,129,943
Three Months Ended March 31, 1999
(unaudited).......................... 2,129,943 136,460 -- 2,266,403
</TABLE>
S-2
<PAGE> 99
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
1 Form of the Underwriting Agreement among @plan.inc and the
underwriters
3.1* Form of Third Amended and Restated Charter of @plan.inc
3.2* Form of Second Amended and Restated Bylaws of @plan.inc
4.1 Form of certificate representing the common stock, no par
value per share of @plan.inc
4.2* @plan.inc Amended and Restated Shareholders' Agreement dated
January 6, 1998, as amended
4.3* Form of Stock Purchase Warrant
4.4* Article 7 of the Third Amended and Restated Charter
(included in Charter filed as Exhibit 3.1)
4.5* Article II of the Second Amended and Restated Bylaws
(included in Bylaws filed as Exhibit 3.2)
5 Opinion of Bass, Berry & Sims PLC as to the legality of the
common stock being offered
10.1 Gallup Agreement dated September 6, 1996, as amended.
10.2 Lease between @plan.inc, as tenant, and Reckson Operating
Partnership, L.P.
10.3* Series A and Series B Convertible Preferred Stock Securities
Purchase Agreement dated July 24, 1996
10.4* Series C Convertible Preferred Stock Securities Purchase
Agreement dated December 31, 1997
10.5* Second Amended and Restated 1996 Stock Option Plan,
effective as of July 22, 1996
10.6 1999 Stock Incentive Plan
10.7* Form of Indemnification Agreement
10.8 Form of Severance Agreement
10.9 Promissory note dated June 10, 1997 between us and Karl
Spangenberg
11 Computation of Loss per Share
16 Letter re: Change in Certifying Accountant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Bass, Berry & Sims PLC (included in opinion filed
as Exhibit 5)
24* Power of Attorney (included on page II-5)
27 Financial Data Schedule
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
@PLAN.INC
________ SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
__________, 1999
HAMBRECHT & QUIST LLC
BEAR, STEARNS & CO. INC.
FIRST UNION CAPITAL MARKETS CORP.
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
@plan.inc, a Tennesee corporation (herein called the "Company"),
proposes to issue and sell __________ shares of its authorized but unissued
Common Stock, no par value (herein called the "Common Stock") (said __________
shares of Common Stock being herein called the "Underwritten Stock"). The
Company proposes to grant to the Underwriters (as hereinafter defined) an option
to purchase up to __________ additional shares of Common Stock (herein called
the "Option Stock" and with the Underwritten Stock herein collectively called
the "Stock"). The Common Stock is more fully described in the Registration
Statement and the Prospectus hereinafter mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (herein collectively called the "Underwriters", which
term shall also include any underwriter purchasing Stock pursuant to Section
3(b) hereof). You represent and warrant that you have been authorized by each of
the other Underwriters to enter into this Agreement on its behalf and to act for
it in the manner herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities
and Exchange Commission (herein called the "Commission") a registration
statement on Form S-1 (No. 333-74507), including the related preliminary
prospectus, for the registration under the Securities Act of 1933, as amended
(herein called the "Securities Act") of the Stock. Copies of such registration
statement and of each amendment thereto, if any, including the related
preliminary prospectus (meeting the requirements of Rule 430A of the rules and
regulations of the Commission) heretofore filed by the Company with the
Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a "Rule
462(b) registration statement"), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called the
"Effective Date"), shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended (including any Rule 462(b)
registration statement). The term Prospectus as used in this Agreement shall
mean the prospectus relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from
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and after the filing with the Commission of such supplement or the effectiveness
of such amendment) such prospectus as so supplemented or amended. The term
Preliminary Prospectus as used in this Agreement shall mean each preliminary
prospectus included in such registration statement prior to the time it becomes
effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants as follows:
(a) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement
and the Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the character of
the property owned or leased or the nature of the business transacted by it
makes qualification necessary (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole).
(b) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any materially
adverse change in the business, properties, financial condition or results of
operations of the Company, whether or not arising from transactions in the
ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, the Company has not entered into any material transaction
not referred to in the Registration Statement and the Prospectus.
(c) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Option Stock
is to be purchased, the Prospectus will comply, in all material respects, with
the provisions of the Securities Act and the rules and regulations of the
Commission thereunder; on the Effective Date, the Registration Statement did not
contain any untrue statement of a material fact and did not 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 did
not and, on the Closing Date and any later date on which Option Stock is to be
purchased, will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(d) The Stock, when issued and sold to the Underwriters as provided
herein, will be duly and validly issued, fully paid and nonassessable and
conforms to the description thereof in the Prospectus. No further approval or
authority of the shareholders or the Board of Directors of the Company will be
required for the issuance and sale of the Stock as contemplated herein.
(e) Effective on the closing of the offering, the authorized capital
stock of the Company consists of 10,000,000 shares of Preferred Stock, none of
which are outstanding, and 50,000,000 shares of Common Stock, no par value, of
which there are outstanding _________ shares (including the Underwritten Stock
plus the number of shares of Option Stock issued on the date hereof); proper
corporate proceedings have been taken validly to authorize such authorized
capital stock; all of the outstanding shares of such capital stock (including
the Underwritten Stock and the shares of Option Stock issued, if any) have been
duly and validly issued and are fully paid and nonassessable; any Option Stock
purchased after the Closing Date, when issued and delivered to and paid for by
the Underwriters as provided in the Underwriting Agreement, will have been duly
and validly issued and be fully paid and nonassessable; and no preemptive rights
of, or rights of refusal in favor of, shareholders exist with respect to the
Stock, or the issue and sale thereof, pursuant to the Charter or Bylaws of the
Company and there are no contractual
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preemptive rights that have not been waived, rights of first refusal or rights
of co-sale which exist with respect to the issue and sale of the Stock.
(f) Prior to the Closing Date the Stock to be issued and sold by the
Company will be authorized for listing by the Nasdaq National Market upon
official notice of issuance.
(g) The Company owns or possesses valid licenses or other rights to use
all patents, patent rights, inventions, trade secrets, copyrights, trademarks,
service marks, trade names, technology and know-how (herein called Intellectual
Property) currently employed or proposed to be employed by it in connection with
its business as described in the Prospectus. Except as disclosed in the
Prospectus, the Company has not received any notice of infringement or conflict
with (and the Company does not know of any infringement or conflict with)
asserted rights of others with respect to any Intellectual Property that is
reasonably likely to have a material adverse effect on the Company. The
discoveries, inventions, products or processes of the Company referred to in the
Prospectus do not, to the Company's knowledge, infringe or conflict with any
right or patent of any third party, or any discovery, invention, product or
process that is the subject of a patent application filed by any third party,
that could have a material adverse effect on the Company.
(h) The Company has no subsidiaries and owns no capital stock or other
equity or ownership or proprietary interest in any corporation, partnership,
association, trust or other entity.
(i) Except as described in the Prospectus, all outstanding shares of
Common Stock, and all securities convertible into or exercisable or exchangeable
for Common Stock, are subject to valid, binding and enforceable agreements
(herein called the Lock-up Agreements) that restrict the holders thereof from
selling, making any short sale of, granting any option for the purchase of, or
otherwise transferring or disposing of, any of such shares of Common Stock, or
any such securities convertible into or exercisable or exchangeable for Common
Stock, for a period of 180 days after the date of the Prospectus without the
prior written consent of the Company or Hambrecht & Quist LLC.
(j) Except as to defaults which individually or in the aggregate would
not have a material adverse effect on the business, financial condition or
results of operations of the Company, the Company is not in violation of any
provision of its Restated Charter or Bylaws or other organizational documents,
and is not in breach of or default with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any state
of facts which constitutes an event of default on the part of the Company as
defined in such documents or which, with notice or lapse of time or both, would
constitute such an event of default.
(k) Except as described in the Prospectus, the Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(l) All of the Company's products (including products currently under
development) will record, store, process, calculate and present calendar dates
falling on and after (and if applicable, spans of time including) January 1,
2000, and will calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively, "Year 2000 Compliant").
All of the Company's products (i) will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000 and
(ii) will be interoperable with other products used and distributed by the
Company that may deliver records to the Company's products or receive records
from
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the Company's products, or interact with the Company's products, including
but not limited to back-up and archived data. All of the Company's internal
computer and technology products and systems are Year 2000 Compliant.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
__________ shares of the Underwritten Stock to the several Underwriters and each
of the Underwriters agrees to purchase from the Company the respective aggregate
number of shares of Underwritten Stock set forth opposite its name in Schedule
I. The price at which such shares of Underwritten Stock shall be sold by the
Company and purchased by the several Underwriters shall be $___ per share. In
making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company shall immediately give notice thereof
to you, and the non-defaulting Underwriters shall have the right within 24 hours
after the receipt by you of such notice to purchase, or procure one or more
other Underwriters to purchase, in such proportions as may be agreed upon
between you and such purchasing Underwriter or Underwriters and upon the terms
herein set forth, all or any part of the shares of the Stock which such
defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail so to make such arrangements with respect to all such shares
and portion, the number of shares of the Stock which each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining shares and
portion which the defaulting Underwriter or Underwriters agreed to purchase;
provided, however, that the non-defaulting Underwriters shall not be obligated
to purchase the shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase if the aggregate number of such shares of the
Stock exceeds 10% of the total number of shares of the Stock which all
Underwriters agreed to purchase hereunder. If the total number of shares of the
Stock which the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the 24-hour period
above referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such shares and portion on the terms herein
set forth. In any such case, either you or the Company shall have the right to
postpone the Closing Date determined as provided in Section 5 hereof for not
more than seven business days after the date originally fixed as the Closing
Date pursuant to said Section 5 in order that any necessary changes in the
Registration Statement, the Prospectus or any other documents or arrangements
may be made. If neither the non-defaulting Underwriters nor the Company shall
make arrangements within the 24-hour periods stated above for the purchase of
all the shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase hereunder, this Agreement shall be terminated without further
act or deed and without any liability on the part of the Company to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to __________ shares in the aggregate of the Option Stock from
the Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of the
Option Stock as to which the several Underwriters are exercising the option.
Delivery of certificates for the shares of Option Stock, and
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payment therefor, shall be made as provided in Section 5 hereof. The number of
shares of the Option Stock to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Stock to be purchased by
the several Underwriters as such Underwriter is purchasing of the Underwritten
Stock, as adjusted by you in such manner as you deem advisable to avoid
fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of the
Stock to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front cover
page and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
that the statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock
and the Option Stock (if the option granted by Section 3(c) hereof shall have
been exercised not later than 7:00 A.M., San Francisco time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the office of Bass, Berry & Sims PLC, 2700 First American Center, Nashville,
Tennessee 37238, at 7:00 a.m., San Francisco time, on the fourth business day
after the date of this Agreement, or at such time on such other day, not later
than seven full business days after such fourth business day, as shall be agreed
upon in writing by the Company and you. The date and hour of such delivery and
payment (which may be postponed as provided in Section 3(b) hereof) are herein
called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of Bass, Berry & Sims PLC, 2700
First American Center, Nashville, Tennessee 37238, at 7:00 a.m., San Francisco
time, on the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order by one or more certified or official bank check or
checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the Stock
to be delivered to you shall be registered in such name or names and shall be in
such denominations as you may request at least one business day before the
Closing Date, in the case of Underwritten Stock, and at least one business day
prior to the purchase thereof, in the case of the Option Stock. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at the offices of Lewco Securities Corporation, 2 Broadway, New
York, New York 10004 on the business day prior to the Closing Date or, in the
case of the Option Stock, by 3:00 p.m., New York time, on the business day
preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
for shares to be purchased by any Underwriter whose check shall not have been
received by you on the Closing Date or any later date on which Option Stock is
purchased for the account of such Underwriter. Any such payment by you shall not
relieve such Underwriter from any of its obligations hereunder.
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6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees
as follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) a Prospectus containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A and
(ii) not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of
(i) the request by the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you
a signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required
by law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the Stock,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the Stock by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company will
forthwith prepare and file with the Commission a supplement to the Prospectus or
an amended prospectus setting forth such variation. The Company authorizes the
Underwriters and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance with the
applicable provisions of the Securities Act and the applicable rules and
regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
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(f) The Company will cooperate, when and as requested by you, in the
qualification of the Stock for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such qualifications in effect for so long a period
as you may reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to shareholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. of the
Registration Statement, any Preliminary Prospectus and the Prospectus, (ii) the
furnishing to the Underwriters of copies of any Preliminary Prospectus and of
the several documents required by paragraph (c) of this Section 6 to be so
furnished, (iii) the printing of this Agreement and related documents delivered
to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees.
(j) The Company agrees to reimburse you, for the account of the several
Underwriters, for (i) blue sky fees and related disbursements (including counsel
fees and disbursements and cost of printing memoranda for the Underwriters) paid
by or for the account of the Underwriters or their counsel in qualifying the
Stock under state securities or blue sky laws and (ii) the filing fees and
reasonable fees and disbursements of counsel to the Underwriters incurred in the
review of the offering by the NASD.
(k) The Company hereby agrees that, without the prior written consent
of Hambrecht & Quist LLC on behalf of the Underwriters, the Company will not,
for a period of 180 days following the commencement of the public offering of
the Stock by the Underwriters, directly or indirectly, (i) sell, offer, contract
to sell, make any short sale, pledge, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences or
ownership of Common Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Stock to be sold to the Underwriters pursuant to this Agreement, (B) shares
of Common Stock issued by the Company upon the exercise of options granted under
the stock option plans of the Company (the "Option Plans") or upon the exercise
of warrants outstanding as of the date hereof, all as described in paragraph
next preceding the table under the caption "Capitalization" in the Preliminary
Prospectus, and (C) options to purchase Common Stock granted under the Option
Plans.
(l) The Company agrees to use its best efforts to cause all
shareholders to agree that, without the prior written consent of Hambrecht &
Quist LLC on behalf of the Underwriters, such person or entity will not, for a
period of 180 days following the commencement of the public offering of the
Stock by the Underwriters, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any
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<PAGE> 8
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or exchangeable or
exercisable for or any rights to purchase or acquire Common Stock or (ii) enter
into any swap or other agreement that transfers, in whole or in part, any of the
economic consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.
(m) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(n) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person (including each partner or officer thereof) who controls any
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (herein called
the "Exchange Act"), or the common law or otherwise, and the Company agrees to
reimburse each such Underwriter and controlling person for any legal or other
expenses (including, except as otherwise hereinafter provided, reasonable fees
and disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that (1) the indemnity agreements of the Company
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished as herein stated or
otherwise furnished in writing to the Company by or on behalf of any Underwriter
for use in any Preliminary Prospectus or the Registration Statement or the
Prospectus or any such amendment thereof or supplement thereto and (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Stock which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
(excluding the documents incorporated therein by reference) and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented) unless the failure is the result of noncompliance by the Company
with paragraph (c) of
8
<PAGE> 9
Section 6 hereof. The indemnity agreements of the Company contained in this
paragraph (a) and the representations and warranties of the Company contained in
Section 2 hereof shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, from and against any and all losses, claims, damages
or liabilities, joint or several, to which such indemnified parties or any of
them may become subject under the Securities Act, the Exchange Act, or the
common law or otherwise and to reimburse each of them for any legal or other
expenses (including, except as otherwise hereinafter provided, reasonable fees
and disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus (as amended or as supplemented if
the Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, if such statement
or omission was made in reliance upon and in conformity with information
furnished as herein stated or otherwise furnished in writing to the Company by
or on behalf of such indemnifying Underwriter for use in the Registration
Statement or the Prospectus or any such amendment thereof or supplement thereto.
The indemnity agreement of each Underwriter contained in this paragraph (b)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of such indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding against,
or investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (herein called the Notice of Defense) to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be
9
<PAGE> 10
necessary to protect the interests of the indemnified party or parties and (ii)
in any event, the indemnified party or parties shall be entitled to have counsel
chosen by such indemnified party or parties participate in, but not conduct, the
defense. If, within a reasonable time after receipt of the Notice, an
indemnifying party gives a Notice of Defense and the counsel chosen by the
indemnifying party or parties is reasonably satisfactory to the indemnified
party or parties, the indemnifying party or parties will not be liable under
paragraphs (a) through (c) of this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding, except that
(A) the indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in clause
(i) of the proviso to the preceding sentence and (B) the indemnifying party or
parties shall bear such other expenses as it or they have authorized to be
incurred by the indemnified party or parties. If, within a reasonable time after
receipt of the Notice, no Notice of Defense has been given, the indemnifying
party or parties shall be responsible for any legal or other expenses incurred
by the indemnified party or parties in connection with the defense of the
action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Underwriters shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Stock received by
the Company and the total underwriting discount received by the Underwriters, as
set forth in the table on the cover page of the Prospectus, bear to the
aggregate public offering price of the Stock. Relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by each indemnifying party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Stock purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
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<PAGE> 11
(e) The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or proceeding.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company if after the
date of this Agreement trading in the Common Stock shall have been suspended, or
if there shall have occurred (i) the engagement in hostilities or an escalation
of major hostilities by the United States or the declaration of war or a
national emergency by the United States on or after the date hereof, (ii) any
outbreak of hostilities or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
calamity, crisis or change in economic or political conditions in the financial
markets of the United States would, in the Underwriters' reasonable judgment,
make the offering or delivery of the Stock impracticable, (iii) suspension of
trading in securities generally or a material adverse decline in value of
securities generally on the New York Stock Exchange, the American Stock
Exchange, The Nasdaq Stock Market, or limitations on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such exchange or system, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of, or
commencement of any proceeding or investigation by, any court, legislative body,
agency or other governmental authority which in the Underwriters' reasonable
opinion materially and adversely affects or will materially or adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in the Underwriters' reasonable opinion has a
material adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company to the Underwriters and no liability of the
Underwriters to the Company; provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of the
Company under this Agreement, including all costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Stock is to be
purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder and
the validity and form of the certificates representing the Stock, all corporate
proceedings and other legal matters incident to the foregoing, and the form of
the Registration Statement and of the Prospectus (except as to the financial
statements contained therein), shall have been approved at or prior to the
Closing Date by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Underwriters.
(c) You shall have received from Bass, Berry & Sims PLC, counsel for
the Company an opinion, addressed to the Underwriters and dated the Closing
Date, covering the matters set forth in Annex A hereto, and if Option Stock is
purchased at any date after the Closing Date, additional opinions from such
counsel, addressed to the Underwriters and dated such later date, confirming
that the statements expressed as of the Closing Date in such opinions remain
valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor
11
<PAGE> 12
the Prospectus omitted to state any material fact required to be stated therein
or necessary in order to make the statements therein, respectively, not
misleading, (ii) since the Effective Date, no event has occurred which should
have been set forth in a supplement or amendment to the Prospectus which has not
been set forth in such a supplement or amendment, (iii) since the respective
dates as of which information is given in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
there has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the business, properties,
financial condition or results of operations of the Company, whether or not
arising from transactions in the ordinary course of business, and, since such
dates, except in the ordinary course of business, the Company has not entered
into any material transaction not referred to in the Registration Statement in
the form in which it originally became effective and the Prospectus contained
therein, (iv) the Company does not have any material contingent obligations
which are not disclosed in the Registration Statement and the Prospectus, (v)
there are not any pending or known threatened legal proceedings to which the
Company is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not disclosed in
the Registration Statement and the Prospectus, (vi) there are not any
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required,
(vii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Option Stock is to be purchased, as the case may be, and (viii) there has
not been any material change in the market for securities in general or in
political, financial or economic conditions from those reasonably foreseeable as
to render it impracticable in your reasonable judgment to make a public offering
of the Stock, or a material adverse change in market levels for securities in
general (or those of companies in particular) or financial or economic
conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any later date
on which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (vii) of paragraph (d) of this Section 9 are true and
correct.
(f) You shall have received from Arthur Andersen LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option Stock is purchased, confirming that they are independent
public accountants with respect to the Company within the meaning of the
Securities Act and the applicable published rules and regulations thereunder and
based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (herein called the Original
Letter), but carried out to a date not more than three business days prior to
the Closing Date or such later date on which Option Stock is purchased (i)
confirming, to the extent true, that the statements and conclusions set forth in
the Original Letter are accurate as of the Closing Date or such later date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of the Original Letter or to reflect the availability of more recent
financial statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company which, in your sole judgment, makes it
impractical or inadvisable to proceed with the public offering of the Stock or
the purchase of the Option Stock as contemplated by the Prospectus.
(g) You shall have received from Arthur Andersen LLP a letter stating
that their review of the Company's system of internal accounting controls, to
the extent they deemed necessary in establishing the scope of their examination
of the Company's financial statements as at March 31, 1999, did not disclose any
weakness in internal controls that they considered to be material weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several jurisdictions,
or other evidence satisfactory to you, of the qualification referred to in
paragraph (f) of Section 6 hereof.
12
<PAGE> 13
(i) Prior to the Closing Date, the Stock to be issued and sold by the
Company shall have been duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received from all
shareholders agreements, in form reasonably satisfactory to Hambrecht & Quist
LLC, stating that without the prior written consent of Hambrecht & Quist LLC on
behalf of the Underwriters, such person or entity will not, for a period of 180
days following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer, contract to sell, make
any short sale, pledge, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any rights to purchase or
acquire Common Stock or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences or ownership of
Common Stock, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Wilson Sonsini Goodrich & Rosati, Professional
Corporation, counsel for the Underwriters, shall be satisfied that they comply
in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the transactions
contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the
Company to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company by giving notice
to you. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
13
<PAGE> 14
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 7 hereof, the several parties (in addition
to the Company and the several Underwriters) indemnified under the provisions of
said Section 7, and their respective personal representatives, successors and
assigns. Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable remedy or claim
under or in respect of this Agreement or any provision herein contained. The
term "successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, faxed or delivered to Hambrecht & Quist LLC, One Bush Street, San
Francisco, California 94104; and if to the Company, shall be mailed, faxed or
delivered to it at its office, Three Landmark Square, Suite 400, Stamford,
Connecticut 06901, Attention: Mark K. Wright. All notices given by facsimile
transmission shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraphs
(k) and (l) of Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
14
<PAGE> 15
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement between the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
@PLAN.INC
By __________________________
Mark K. Wright
Chief Executive Officer
The foregoing Agreement is hereby confirmed and
accepted as of the date first above written.
HAMBRECHT & QUIST LLC
BEAR, STEARNS & CO. INC.
FIRST UNION CAPITAL MARKETS CORP.
By Hambrecht & Quist LLC
By __________________________
Name:
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
15
<PAGE> 16
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
<S> <C>
Hambrecht & Quist LLC . . . . . . . . . . . . . . . . . . . . . . . .
Bear, Stearns & Co. Inc. . . . . . . . . . . . . . . . . . . . . . . .
First Union Capital Markets Corp. . . . . . . . . . . . . . . . . . .
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
-------------
</TABLE>
<PAGE> 17
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF BASS, BERRY & SIMS, PLC
COUNSEL FOR THE COMPANY
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified as a foreign corporation and in good standing
in each state of the United States of America in which its ownership or leasing
of property requires such qualification (except where the failure to be so
qualified would not have a material adverse effect on the business, properties,
financial condition or results of operations of the Company), and has full
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement;
(ii) effective on the closing of the offering, the authorized capital
stock of the Company consists of 10,000,000 shares of Preferred Stock, none of
which are outstanding, and 50,000,000 shares of Common Stock, no par value, of
which there are outstanding _________ shares (including the Underwritten Stock
plus the number of shares of Option Stock issued on the date hereof); proper
corporate proceedings have been taken validly to authorize such authorized
capital stock; all of the outstanding shares of such capital stock (including
the Underwritten Stock and the shares of Option Stock issued, if any) have been
duly and validly issued and are fully paid and nonassessable; any Option Stock
purchased after the Closing Date, when issued and delivered to and paid for by
the Underwriters as provided in the Underwriting Agreement, will have been duly
and validly issued and be fully paid and nonassessable; and no preemptive rights
of, or rights of refusal in favor of, shareholders exist with respect to the
Stock, or the issue and sale thereof, pursuant to the Charter or Bylaws of the
Company and there are no contractual preemptive rights that have not been
waived, rights of first refusal or rights of co-sale which exist with respect to
the issue and sale of the Stock;
(iii) the Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending or
preventing the use of the Prospectus is in effect and no proceedings for that
purpose have been instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and with the rules
and regulations of the Commission thereunder;
(v) such counsel has no reason to believe that the Registration
Statement (except as to the financial statements and schedules and other
financial and statistical data contained or incorporated by reference therein,
as to which such counsel need not express any opinion or belief) at the
Effective Date contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus (except as to the
financial statements and schedules and other financial and statistical data
contained or incorporated by reference therein, as to which such counsel need
not express any opinion or belief) as of its date or at the Closing Date (or any
later date on which Option Stock is purchased), contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(vi) the information required to be set forth in the Registration
Statement in answer to Items 9, 10 (insofar as it relates to such counsel) and
11(c) of Form S-1 is to the best of such counsel's knowledge accurately and
adequately set forth therein in all material respects or no response is required
with respect to such Items, and, the description of the Company's stock option
plans and other stock plans and arrangements and the options and other rights
granted and which may be granted thereunder set forth in the Prospectus
accurately and fairly presents the information required to be shown with respect
to said plans,
17
<PAGE> 18
arrangements and options to the extent required by the Securities Act and the
rules and regulations of the Commission thereunder;
(vii) such counsel does not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement, which are not described and filed as required; the franchises,
contracts, leases and documents so described in the Prospectus (assuming due
authorization, execution and delivery by the parties thereto other than the
Company) are in full force and effect on the date hereof; and to the knowledge
of such counsel neither the Company nor any other party is in breach of or
default under any of such franchises, contracts, leases and documents;
(viii) the Underwriting Agreement has been duly authorized, executed
and delivered by the Company;
(ix) the execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Underwriting Agreement, and the
issue and sale by the Company of the shares of Stock sold by the Company as
contemplated by the Underwriting Agreement will not conflict with, or result in
a breach of, the Charter or Bylaws of the Company or any agreement or instrument
known to such counsel to which the Company is a party or any applicable law or
regulation, or so far as is known to such counsel, any order, writ, injunction
or decree, of any jurisdiction, court or governmental instrumentality;
(x) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xi) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Stock by
the Underwriters;
(xii) the statements (1) in the prospectus under the captions "Risk
Factors - Substantial Sales of our Common Stock may depress our stock price,"
"Risk Factors - Anti-takeover effects of certain charter, bylaw and state
provisions including possible issuance of preferred stock," "Business - Data
Collection and Resulting Databases," "Management - Stock Plans," "Transactions
with Executive Officers and Directors," "Description of Capital Stock" and
"Shares Eligible for Future Sale" and (2) in the Registration Statement in Items
14 and 15, in each case insofar as such statements constitute summaries of the
legal matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein;
(xiii) the Stock issued and sold by the Company has been duly
authorized for listing by the Nasdaq National Market upon official notice of
issuance.
18
<PAGE> 1
EXHIBIT 4.1
[@plan.inc logo]
<TABLE>
<S> <C> <C>
COMMON STOCK COMMON STOCK
NUMBER SHARES
Incorporated under the laws of Tennessee
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 04962Q 10 0
NO PAR VALUE @plan.inc
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF NO PAR VALUE OF
@plan.inc
transferable only on the books of @plan.inc (the "Corporation") by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed.
This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
In Witness whereof, the Corporation has caused this certificate to be executed by the facsimile signatures of its duly
authorized officers to be hereunto affixed.
Dated:
/s/ Nancy A. Lazaros /s/ Mark K. Wright
CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER
</TABLE>
Countersigned and Registered:
FIRST UNION NATIONAL BANK
(Charlotte, North Carolina) Transfer Agent
and Registrar
By
Authorized Signature
<PAGE> 2
@plan.inc
The Corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof of the
Corporation, and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or the
Transfer Agent.
- --------------------------------------------------------------------------------
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- _____________ Custodian ___________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act __________________
in common (State)
</TABLE>
For value received, __________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[____________________________________]_________________________________________
_______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated: ____________________________ X________________________________________
X________________________________________
NOTICE: THE SIGNATURE(S) TO THE ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED: _______________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION, (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE> 1
Exhibit 5
B A S S, B E R R Y & S I M S P L C
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
2700 FIRST AMERICAN CENTER 1700 RIVERVIEW TOWER
NASHVILLE, TENNESSEE 37238-2700 POST OFFICE BOX 1509
TELEPHONE (615) 742-6200 KNOXVILLE, TENNESSEE 37901-1509
TELECOPIER (615) 742-6293 TELEPHONE (423) 521-6200
TELECOPIER (423) 521-6234
April 30, 1999
@plan.inc
Three Landmark Square, Suite 400
Stamford, Connecticut 06901
Re: Registration Statement on Form S-1 (File No. 333-74507)
Dear Ladies and Gentlemen:
We have acted as your counsel in connection with the preparation of a
Registration Statement on Form S-1 (the "Registration Statement") filed by you
with the Securities and Exchange Commission, covering 2,875,000 shares of Common
Stock, no par value (the "Common Stock"), of @plan.inc, a Tennessee corporation
(the "Company"), to be offered by the Company.
In connection with this opinion, we have examined and relied upon such
records, documents and other instruments as in our judgment are necessary or
appropriate in order to express the opinions hereinafter set forth and have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as certified or photostatic copies.
Based on the foregoing and such other matters as we have deemed relevant,
we are of the opinion that the shares of Common Stock to be offered by the
Company, when and as described in the Registration Statement (after the
Registration Statement is declared effective), will be validly issued, fully
paid and nonassessable.
We hereby consent to the reference to our law firm in the Registration
Statement under the caption "Legal Matters" and to the use of this opinion as an
exhibit to the Registration Statement.
Sincerely,
/s/ Bass, Berry & Sims PLC
Bass, Berry & Sims PLC
<PAGE> 1
EXHIBIT 10.1
@PLAN. INC.
and
THE GALLUP ORGANIZATION, INC.
Letter of Agreement
The Gallup Organization, Inc. ("Gallup") agrees to provide @PLAN, INC., a
Tennessee corporation ("@PLAN.") with survey research data as specified herein,
The basic services to be provided by Gallup are:
1. In cooperation with @PLAN. executives, Gallup will prepare a system of
survey research designed to provide @PLAN. with statistically reliable
data for profiling the United States population of adults who use
World Wide Web applications other than e-mail. Such survey research
will be conducted substantially as outlined in the Working Proposal
dated August 1996 delivered by Gallup to @PLAN. (the "Working
Proposal") as modified from time to time with the approval of @PLAN.
and Gallup (taking into account timeline changes and executional
changes necessitated by the results of our pilot test). The provisions
of the Working Proposal, as so amended, are hereby incorporated herein
by reference.
2. Gallup shall provide the services contemplated by the Working Proposal
for a term of one year from the date hereof, which term shall
automatically be renewed for nine successive one-year periods unless
@PLAN. shall have given written notice to Gallup 90 days prior to the
commencement of any such renewal period to the contrary.
3. All information provided to Gallup pursuant to this agreement shall be
subject to the provisions of the Confidentiality Agreement dated July
9, 1996 by Gallup in favor of @PLAN. and all of the terms and
conditions thereof are incorporated herein by reference.
4. @PLAN. shall pay to Gallup for its services rendered hereunder $75,000
(the parties agree that Gallup shall have no obligation to initiate
the pretest phase under this agreement until the $75,000 for this
pretest has been received) for the pretesting of research system
components, and an amount for the baseline study and successive
tracking surveys and any other services provided as shall be mutually
agreed to by Gallup and @PLAN. consistent with the estimates for such
study and surveys set forth in the Working Proposal. Gallup's cost to
@PLAN. for providing tracking surveys during the term of this
Agreement shall not increase by more than annual percentage increase
during the immediately preceding year in the Consumer Price Index--All
Consumers (All Items)--United States City Average, as compiled by the
United States Department of Labor. One-half of the cost for the base
wave survey phase, in this case $410,000 shall be paid by @PLAN. prior
to the commencement of this phase. Upon completion of the first half
of the base wave survey phase (n=20,00 completed interviews), the
<PAGE> 2
balance of the amount due ($410,000) shall be due and payable by
@PLAN. within 30 days of the initiation of the second half of the base
wave survey phase. For each successive quarterly tracking survey
phase, one-half of the cost shall be due and payable by @PLAN. prior
to the commencement of that quarter's survey phase. Upon completion of
the first half of that quarterly tracking survey phase (n=50% of the
total number of interviews to be completed for that quarter), the
balance of the amount due shall be due and payable by @PLAN. before
the letters to the recruited respondents are sent.
5. The parties agree that the Gallup name may not be used in any
advertising or promotional materials in support of a particular
product, service, or point of view other than for the sole purpose of
informing the recipient that Gallup conducted the survey research
portion of the @PLAN. database. Public reference to Gallup research
findings that support a particular product, service or point of view
are similar prohibited. Both parties agree that @PLAN. INC. may put
the following statement in advertising and promotional materials. "The
survey research component of this database was generated by The Gallup
Organization."
6. Any notice sent hereunder shall be sent to the following addresses:
Gallup: The Gallup Organization
300 South 68th Street Place
Lincoln, NE 68510
Attention: Cal Martin
@PLAN: @PLAN. INC.
1130 8th Avenue South
Nashville, TN 37203
Attention: Mark K. Wright
The foregoing sets forth the terms and conditions of the Agreement between
Gallup and @PLAN. This Agreement shall be in effect immediately upon signing by
both parties.
@PLAN. INC. THE GALLUP ORGANIZATION, INC.
By: /s/ Mark K. Wright By: /s/ Cal Martin
--------------------- ---------------------
Title: Chairman Title: Sr. VP
Date: 9/6/96 Date: 9/6/96
<PAGE> 3
THE GALLUP ORGANIZATION
PRINCETON, NEW JERSEY
Cal Martin 300 South 68th Street Place
Senior Vice President Lincoln Nebraska 68510
(402) 489-8700
December 19, 1997
Mr. Mark Wright
@plan.inc
Three Landmark Square
Suite 400
Stamford, Connecticut 06901
Dear Mark:
Below find the cost figures for continuing the current quarterly survey and for
starting the U.S. population survey on April 1, 1998. The latter will continue
for the three remaining quarters of 1998. We will continue to provide 10,000
Internet completes per quarter and the U.S. population survey will provide 2,000
completes each quarter.
The Internet survey will use the same design as 1.2. I am recommending that you
add two enhancements to this survey. Both will be more cost-effective (than
adding more RDD numbers to call) in producing RDD Internet completes.
Based on the data from 1.2 and earlier surveys, I recommend that we offer the
$5.00 incentive to all RDD qualified respondents. I estimate this will add an
additional 50 Internet completes in Stratum 2 and 60 Internet completes in
Stratum 3 each quarter.
Second, I recommend we institute a call back reminder procedure to all qualified
telephone respondents that agree to complete the Internet survey, take our
incentive, and yet never log onto our site to complete the survey. Based on a
study we embedded in 1.2, I estimate that we will increase RDD completes by 128,
81 and 74 in Stratum 1, 2, 3, respectively each quarter.
The U.S. population survey will use the same stratified RDD design as used for
2.0. The interview is expected to take 18 minutes on average. Gallup will
provide to @PLAN.INC 2,000 completes per quarter for three quarters. We will use
the same procedures currently in place to pass the data to @PLAN.INC.
<PAGE> 4
Below find the annual cost to @PLAN.INC for 1998 by expenditure category:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
ITEM COST
----------------------------------------------------------------------
<S> <C>
----------------------------------------------------------------------
1. Internet survey - 40,000 completes $1,148,000.00
----------------------------------------------------------------------
2. Incentives - Billed at cost. Not to exceed: $ 228,240.00
----------------------------------------------------------------------
3. Call back reminder to RDD respondents: $ 91,800.00
----------------------------------------------------------------------
4. Sample costs
- For all RDD samples $ 6,340.00
- For list samples $ 54,600.00
----------------------------------------------------------------------
5. U.S. population surveys $ 321,360.00
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL 1998 COST $1,850,340.00
----------------------------------------------------------------------
</TABLE>
I would like us to use this letter as an amendment to our Letter of Agreement
dated September 6, 1996, The Gallup Organization agrees that, except as
specifically amended hereby, all of the terms and conditions of the Letter of
Agreement shall remain in full force and effect. If you have any questions,
please call me as soon as possible. Otherwise, you can simply sign and date this
letter and return it to me in the enclosed envelope.
/s/ Cal Martin /s/ Mark K. Wright
- ------------------------ --------------------------
Cal Martin Mark Wright
Senior Vice President CEO
The Gallup Organization @PLAN.INC
1-5-98 1-5-98
- ------------- -------------
Date Date
<PAGE> 5
@PLAN.INC
and
THE GALLUP ORGANIZATION, INC.
Addendum to Letter of Agreement
WHEREAS, @PLAN.INC., a Tennessee corporation ("@Plan.") and The Gallup
Organization, Inc. ("Gallup") have entered into a Letter of Agreement dated
September 6, 1996, as first amended on January 5, 1998 (the "Original
Agreement");
WHEREAS, Gallup desires to provide @Plan. with survey research data as
specified herein; and
WHEREAS, @Plan. and Gallup intend for this Addendum to add to, modify
or otherwise amend the Original Agreement, as amended.
NOW, THEREFORE, in consideration of the mutual agreements and
undertakings contained herein, the parties hereto agree as follows:
1. Additional Services. Gallup agrees to add the following information
to the services set forth on "Exhibit A" to the Original Agreement: The study
will move to an all RDD sample with the implementation of Wave 7, beginning
September 1, 1998.
2. Pricing. The additional services shall cost $200,000 per year,
payable in $50,000 quarterly installments. This amount is in addition to amounts
due under the Original Agreement.
3. Ownership. Gallup shall prepare the system of survey research solely
on @Plan.'s behalf and for @Plan.'s use and benefit. The parties agree that all
research and any other work Gallup performs in connection with the services
contemplated herein shall be the exclusive property of @Plan.
4. Entire Agreement. Except as expressly stated in this Addendum, all
other terms and provisions of the Original Agreement shall remain unchanged and
are in full force and effect.
5. Amendments, Etc.. No amendment, modification, termination or waiver
of any provision of this Addendum shall be effective unless that same shall be
in writing and signed on behalf of the nonrequesting party , and then such
consent shall be effective only in the specific instance and for the specific
purpose for which it is given.
6. Severability. The parties agree that in the event any provision in
this Addendum should be held to be prohibited or unenforceable, such prohibition
or unenforceability shall be ineffective only to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Addendum.
<PAGE> 6
The foregoing sets forth the terms and conditions of the Addendum
between Gallup and @Plan. This Addendum shall be in effect immediately upon
signing by both parties.
@PLAN.INC THE GALLUP ORGANIZATION, INC.
By: /s/ Mark K. Wright By: /s/ Cal Martin
----------------------- ----------------------
Title: CEO Title: Sr V.P.
Date: 8/18/98 Date: 8/20/98
<PAGE> 7
@PLAN.INC
and
THE GALLUP ORGANIZATION, INC.
Addendum to Letter of Agreement
WHEREAS, @PLAN.INC., a Tennessee corporation ("@PLAN"), and The Gallup
Organization, Inc. ("Gallup") have entered into a Letter of Agreement dated
September 6, 1996, as amended on January 5, 1998 and August 18, 1998 (the
"Original Agreement");
WHEREAS, @PLAN and Gallup intend for this Addendum to add to, modify or
otherwise amend the Original Agreement (as so amended hereby, the "Agreement").
NOW, THEREFORE, in consideration of the mutual agreements and
undertakings contained herein, the parties hereto agree as follows:
1. Exclusivity. During the term of this Agreement, Gallup shall conduct
Research Services (as hereinafter defined) for the Internet and online
population for use in syndicated marketing research products exclusively on
behalf of and for the benefit of @PLAN.
For purposes of this section, Research Services shall be defined as any
and all services including and related to the telephone recruitment of a survey
population of internet users and the collection of data from such population in
any form, including by means of an online survey, for use in syndicated
marketing research or database products. Research Services shall not include
online or internet research for clients who do not incorporate the research in a
syndicated database product which is marketed to subscribers for a fee.
The Research Services provided by Gallup pursuant to this Agreement are
provided for use in @PLAN's "omnibus" syndicated marketing research products
("Omnibus Products"). It is contemplated that @PLAN may contract with Gallup to
provide Research Services for use in @PLAN's specialized "vertical" syndicated
marketing research products ("Vertical Products"). In the event payments
received by Gallup from @PLAN for Research Services pursuant to this Agreement
for Omnibus Products in any calendar year are less than 90% of the payments
received in the prior calender year pursuant to this Agreement for Omnibus
Products, the exclusivity provisions of this paragraph 1 shall terminate with
respect to such Omnibus Products. In the event @PLAN contracts with Gallup to
provide Research Services for a Vertical Product and the payments received by
Gallup from @PLAN for Research Services pursuant to the agreement for such
Vertical Product in any calendar year is less than 90% of the payments received
in the prior calendar year pursuant to the agreement for such Vertical Product,
the exclusivity provisions of this paragraph 1 shall terminate with respect to
such Vertical Product.
2. Amendments, Etc.. No amendment, modification, termination or waiver
of any provision of the Agreement shall be effective unless that same shall be
in writing and signed on behalf of the nonrequesting party , and then such
consent shall be effective only in the specific instance and for the specific
purpose for which it is given.
<PAGE> 8
3. Ownership. Gallup agrees that all research and any other work Gallup
has performed or may perform, and any and all resulting work product and data,
in connection with the Research Services provided pursuant to the Agreement
shall be the exclusive property of @PLAN.
4. Severability. The parties agree that in the event any provision in
the Agreement should be held to be prohibited or unenforceable, such prohibition
or unenforceability shall be ineffective only to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of the
Agreement.
5. Governing Law. The Agreement shall be governed by, and construed in
accordance with, the laws of the State of Connecticut.
6. Entire Agreement. Except as expressly stated in this Addendum, all
other terms and provisions of the Original Agreement shall remain unchanged and
are in full force and effect.
The foregoing sets forth the terms and conditions of the Addendum
between Gallup and @PLAN. This Addendum shall be in effect immediately upon
signing by both parties.
@PLAN.INC THE GALLUP ORGANIZATION, INC.
By: /s/ Mark K. Wright By: /s/ Cal Martin
-------------------------- -------------------------
Title: CEO Title: Sr V.P.
Date: 2/22/99 Date: 2-19-99
<PAGE> 1
EXHIBIT 10.2
RECKSON OPERATING PARTNERSHIP, L.P.
LANDLORD
and
@PLAN, INC.
TENANT
THREE LANDMARK SQUARE, ANNEX
STAMFORD, CONNECTICUT
----------
LEASE
----------
<PAGE> 2
TABLE OF CONTENTS
Article Page
------- ----
1. Demise, Premises, Term, Rents
2. Use
3. Preparation of the Demised Premises
4. When Demised Premises Ready for Occupancy
5. Security Deposit
6. Adjustments of Rent for Changes in Real Estate Taxes
7. Adjustments of Rent for Changes in Operating Costs
8. Subordination, Attornment, Notice to Lessors and Mortgages
9. Quiet Enjoyment
10. Assignment, Mortgaging, Subletting
11. Compliance with Laws and Requirements of Public Authorities
12. Insurance
13. Rules and Regulations
14. Alterations and Tenant's Property
15. Repairs and Maintenance
16. Electrical Energy
17. Heat, Ventilation and Air Conditioning
18. Landlord's Other Services
19. Access, Changes in Building Facilities, Name
20. Shoring, Notice of Accidents, Etc.
21. Non-Liability and Indemnification
22. Destruction or Damage
23. Eminent Domain
24. Surrender
25. Conditions of Limitation
26. Re-Entry by Landlord-Default Provisions
27. Damages
28. Waivers
29. No Other Waivers or Modification
30. Curing Tenant's Defaults
31. Consents-Broker
32. Notices
33. Estoppel Certificate, Memorandum
34. No Other Representations, Construction, Governing Law
35. Parties Bound
36. Certain Definitions and Constructions
37. Subordination and Miscellaneous
38. Relocation
39. Parking
40. Rider
Exhibit
A. Floor Plan(s)
B. Cleaning Schedule
C. Rules and Regulations
D. Work Letter
E. Electricity Schedule
F. Common Areas
<PAGE> 3
LEASE
Lease dated _______________ between RECKSON OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership, having an address at 660 White Plains
Road, Tarrytown, New York, 10591 (hereafter referred to as "Landlord"), and the
lessee, @PLAN, INC. a Tennessee corporation having its principal place of
business at Three Landmark Square, Annex, Suite 400, Stamford, Connecticut
06901 (hereinafter referred to as the "Tenant").
ARTICLE 1
Demise, Premises, Term, Rents
1.01 Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, that certain space in the premises hereinafter described, in the
building (referred to herein as the "Building") known as Three Landmark Square,
Annex in the City of Stamford, Connecticut (the "City", together with the
nonexclusive right to use the Common Areas (hereinafter defined) of the Building
for ingress/egress purposes only, for the term hereinafter stated, for the rents
hereinafter reserved and upon and subject to the conditions (including
limitations, restrictions and reservations) and covenants hereinafter provided.
Each party hereto expressly covenants and agrees to observe and perform all of
the conditions and covenants herein contained on its part to be observed and
performed.
1.02 Landlord and Tenant hereby agree and stipulate that for purposes
of this Lease, the space consists of a total of 6,460 rentable square feet on
the 4th floor in the Building which is outlined on the floor plan(s) annexed as
Exhibit "A" and hereby made a part hereof. The premises constitute and are
hereinafter called the "Demised Premises."
1.03 The term of this Lease, for which the Demised Premises are hereby
leased, shall commence on a date (the "Commencement Date"), which shall be the
earlier of (i) March 1, 1997, or (ii) the day Tenant or anyone claiming under or
through Tenant shall take possession of any part of the Demised Premises,
whichever occurs earlier, and shall end at noon of the last day of the calendar
month in which occurs the end of a four (4) year period from the Commencement
Date (the "Expiration Date") or shall end on such earlier date upon which the
term may expire or be cancelled or terminated pursuant to any of the conditions
or covenants of this Lease or pursuant to law. Promptly following the
Commencement Date, Landlord shall send to Tenant a notice fixing the
Commencement Date.
1.04 Tenant shall pay to Landlord without notice or demand and without
abatement, deduction or setoff, in lawful money of the United States of America,
at the office of the Landlord or at such other place as Landlord may designate
in writing, the fixed rent and additional rent reserved under this Lease for
each year of the term thereof, which payments shall consist of:
(a) Fixed rent (the "fixed rent") as follows:
<TABLE>
<CAPTION>
Fixed
Lease Base Rent Monthly Fixed Annual Fixed
Years Per RSF Rent Amount Rent Amount
<S> <C> <C> <C>
1-2 $18.50 $ 9,959.17 $119,510.04
3-4 $20.50 $11,035.83 $132,429.96
</TABLE>
payable in equal monthly installments in advance on the first day of each month
and every calendar month during the term of this Lease, and
(b) Additional rent (the "additional rent") consisting of all
other sums of money as shall become due from and payable by Tenant to Landlord
hereunder (for default in payment of which Landlord shall have the same remedies
as for a default in payment of fixed rent).
A "Lease Year" shall be comprised of a period of twelve (12) consecutive months.
The first Lease Year shall commence on the Commencement Date but,
notwithstanding the first sentence of this paragraph, if the Commencement Date
is not the first day of a month, then the first Lease Year shall include the
additional period from the Commencement Date to the end of the then current
month. Each succeeding Lease Year shall end on the anniversary date of the last
day of the preceding Lease Year. For example, if the Commencement Date is May 1,
1997, the first Lease Year would begin on May 1, 1997 and end on April 30, 1998
and each succeeding Lease Year would end on April 30th. If, however, the
Commencement Date is May 2, 1997, the first Lease Year would end on May 31,
1998, the second Lease Year would commence on June 1, 1998, and each succeeding
Lease Year would end on May 31st.
1.05 If Tenant substantially renovates or alters the Demised Premises
or any part thereof after the initial fit-up, Tenant shall pay Landlord the real
estate taxes attributable to the increased assessment
1
<PAGE> 4
resulting from such renovation or alteration, in excess of the then assessment
for building standard. The real estate taxes resulting from such excess
assessment shall be computed separately and billed to Tenant and shall be
payable by Tenant as additional rent within ten (10) days of the rendition of a
bill at each time that real estate taxes are payable by Landlord with respect to
the Demised Premises during the term of the Lease.
1.06 Tenant shall pay the fixed rent and additional rent herein
reserved promptly as and when the same shall become due and payable. If the
Commencement Date shall occur on a day other than the first day of a calendar
month, the fixed rent for such calendar month shall be prorated for the period
from the Commencement Date to the last day of the calendar month and shall be
due and payable on the Commencement Date. Notwithstanding the provisions of the
next preceding sentence or of Section 4.01(a), Tenant shall pay the first full
calendar monthly installment of fixed rent on the execution of this Lease. If
Tenant shall fail to pay within five (5) days after the same becomes due any
fixed rent or additional rent, such unpaid amounts shall bear interest at the
annual rate equal to two percentage points (2%) above the Prime Rate of
Citibank, N.A., New York, New York.
ARTICLE 2
USE
2.01 Tenant shall use and occupy the Demised Premises for executive
offices, sales offices and/or general offices for the conduct of any lawful and
reputable business not prohibited by Section 2.02, or any rule or regulation of
governmental authority, and for no other purposes.
2.02 The use of the Demised Premises for the purposes specified in this
Article shall not in any event be deemed to include, and Tenant shall not use,
or permit the use of, the Demised Premises or any part thereof for:
(a) sale of, or traffic in, any spirituous liquors, wines, ale
or beer kept in the Demised Premises;
(b) sale at retail of any other products or materials kept in
the Demised Premises, by vending machines or otherwise, or demonstrations to the
public, except as may be specifically agreed to by Landlord in writing;
(c) manufacturing, printing or electronic data processing,
except for the operation of normal business office reproducing or printing
equipment, electronic data processing equipment and other business machines for
Tenant's own requirements at the Demised Premises; provided only that such use
shall not exceed that portion of the mechanical or electrical capabilities of
the Building equipment allocable to the Demised Premises;
(d) the rendition of medical, dental or other diagnostic or
therapeutic services;
(e) the conduct of a public auction of any kind;
(f) a restaurant, bar, or the sale of confectionery, tobacco,
newspapers, magazines, soda, beverages, sandwiches, ice cream, baked goods or
similar items, or the preparation, dispensing or consumption of food and
beverages in any manner whatsoever.
2.03 Tenant shall not suffer or permit the Demised Premises or any
part thereof to be used in any manner, or anything to be done therein, or suffer
or permit anything to be brought into or kept therein, which would in any way
(i) violate any of the provisions of any grant, lease or mortgage to which this
Lease is subordinate, (ii) violate any laws or requirements of public
authorities, (iii) make void or voidable any fire or liability insurance policy
then in force with respect to the Building, (iv) make unobtainable from
reputable insurance companies authorized to do business in the State of
Connecticut at standard rates any fire insurance with extended coverage, or
liability, elevator or boiler or other insurance required to be furnished by
Landlord under the terms of any lease or mortgage to which this Lease is
subordinate, (v) cause, or in Landlord's reasonable opinion be likely to cause,
physical damage to the Building or any part thereof, (vi) constitute a public or
private nuisance, (vii) impair, in the reasonable opinion of the Landlord, the
appearance, character or reputation of the Building, (vii) discharge
objectionable fumes, vapors or odors into the Building air conditioning system
or into Building flues or vents not designed to receive them or otherwise in
such manner as may unreasonably offend other occupants, (ix) impair or interfere
with any of the Building services or the proper and economic heating, cleaning,
air conditioning or other servicing of the Building or the Demised Premises or
impair or interfere with or tend to impair or interfere with the use of any of
the other areas of the Building by, or occasion discomfort, annoyance or
inconvenience to, Landlord or any of the other tenants or occupants of the
Building, or (x) cause Tenant to default in any of its other obligations under
this Lease. The provisions of this Section, and application thereof, shall not
be deemed to be limited in any way to or by the provisions of the following
Sections of this Article or any of the Rules and Regulations referred to in
Article 13 or Exhibit "C" attached hereto, except as may therein be expressly
otherwise provided.
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2.04 If any government license or permit, other than a Certificate of
Occupancy, shall be required for the proper and lawful conduct of Tenant's
business in the Demised Premises, or any part thereof and if failure to secure
such license or permit would in any way affect Landlord, then Tenant, at its
expense, shall duly procure and thereafter maintain such license or permit and
submit the same to inspection by Landlord. Tenant shall at all times comply with
the terms and conditions of each such license or permit, but in no event shall
failure to procure and maintain same by Tenant affect Tenant's obligations
hereunder.
2.05 Tenant shall not at any time use or occupy or suffer or permit
anyone to use or occupy the Demised Premises, or do or permit anything to be
done in the Demised Premises, in violation of the Certificate of Occupancy for
the Demised Premises or for the Building.
2.06 Tenant shall not place a load upon any floor of the Demised
Premises exceeding the floor load per square foot which such floor was designed
to carry and which is allowed by certificate, rule, regulation, permit or law.
Landlord reserves the right to prescribe the weight and position of all safes
and vaults, which must be placed by Tenant, at Tenant's expense. Business
machines and mechanical equipment shall be placed and maintained by Tenant, at
Tenant's expense, in such manner as shall be sufficient in Landlord's judgment
to absorb and prevent vibration, noise and annoyance.
ARTICLE 3
Preparation of the Demised Premises
3.01 Tenant has examined the Demised Premises and agrees to accept
possession of the Demised Premises in its present "as is" condition, reasonable
wear and tear excepted, and, except as otherwise required in this Lease,
Landlord shall not be required to perform any work in the Demised Premises in
order to make same ready for occupancy by Tenant. Notwithstanding the
foregoing, Landlord shall repaint and recarpet the Demised Premises (except that
that portion of the Demised Premises to be used as a computer room by Tenant (as
shown on the floor plans annexed hereto as Exhibit A) shall be equipped with a
tile floor rather than carpeting) with Landlord's building standard colors and
materials (to be selected by the Tenant); re-adhere the laminate in the kitchen
area of the Demised Premises; paint the spline in the "bridge" area of the
Demised Premises (with a building standard color to be selected by Tenant);
remove existing telephone boxes (and thereafter patch walls where made necessary
thereby); and install a supplemental HVAC unit sufficient to heat, cool and
ventilate Tenant's computer room, provided that such unit is a standard
mechanical unit, and further provided that the cost of installing said unit
shall not exceed $4,000.00 (such work being hereinafter referred to collectively
as "Landlord's Work").
3.02 Landlord's agreement to do the Landlord's Work in the Demised
Premises shall not require it to incur overtime costs and expenses and shall be
subject to unavoidable delays due to acts of God, governmental restrictions,
strikes, labor disturbances, shortage of materials and supplies and for any
other causes or events beyond Landlord's reasonable control.
3.03 Landlord may afford Tenant and its employees, agents and
contractors access to the Demised Premises, at reasonable times prior to the
Commencement Date and at Tenant's sole risk and expense, for the purposes of
making preparations for Tenant's occupancy. Access for such purposes shall not
be deemed to constitute possession or occupancy accelerating the Commencement
Date or Tenant's obligation to pay fixed rent under this Lease.
3.04 If Tenant employs or uses any contractor or subcontractor other
than Landlord in the performance of any work in connection with Tenant's initial
occupancy, all of Tenant's duties and obligations set forth in Sections 14.05
and 14.06 (relating to Tenant's duties and obligations in making alterations)
shall be applicable to and binding upon Tenant with respect to any such work.
3.05 To the extent not currently in the Demised Premises, Tenant, at
its expense, shall, within thirty (30) days after the Commencement Date, install
drapes or vertical blinds, as approved by Landlord, on all windows. Such
Landlord's approval shall not be unreasonably withheld, provided such drapes or
blinds shall be a solid, light color or have a solid light color lining facing
the exterior of the Building. Tenant agrees that no other type of window
covering will be used.
ARTICLE 4
When Demised Premises Ready for Occupancy
4.01 The Demised Premises shall be deemed ready for occupancy on the
earliest date on which all of the following conditions have been met:
(a) A Certificate of Occupancy (temporary or final or a
permission to occupy) has been issued not inconsistent with Tenant's use of the
Demised Premises as permitted under Section 2.01 hereof.
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(b) The Landlord's Work or any work on behalf of Tenant to be
performed by Landlord has been substantially completed.
(c) Adequate means of access have been provided, and the use,
without material interference, of the facilities necessary to Tenant's occupancy
of the Demised Premises, including corridors, elevators and stairways and
heating, ventilating, air conditioning, sanitary, water, and electrical lighting
and power facilities, are available to Tenant in accordance with Landlord's
obligations under this Lease.
(d) The facilities and systems serving the Building and passing
through the Demised Premises have been completed to the extent required to
provide adequate services to the Demised Premises.
(e) Five (5) days after Landlord shall give Tenant written
notice estimating when the conditions listed in subsections (a) through (d)
above will be met, and provided that the conditions shall have been met by the
expiration of such five (5) day period, the Demised Premises shall be deemed
ready for occupancy on the date of expiration of the period, or in the event
Landlord's estimate was inaccurate, on the date when the conditions in fact
shall have been met.
4.02 If the occurrence of any of the conditions listed in Section 4.01,
and thereby the making of the Demised Premises ready for occupancy, shall be
delayed due to any act or omission of Tenant or any of its employees, agents or
contractors, Including but not limited to failure by Tenant to act promptly when
any consent or approval may be requested by Landlord, or to plan or execute work
to be performed by Tenant diligently and expeditiously, the Demised Premises
shall be deemed ready for occupancy on the date when it would have been ready
but for any such delay,
4.03 The Commencement Date of this Lease is scheduled to be on or
before March 1, 1997 and Landlord shall use its best efforts to have the Demised
Premises ready for Tenant's occupancy on or before such date. If Landlord
diligently performs Landlord's Work and the Demised Premises are not ready for
Tenant's occupancy on or before said date, this Lease shall remain in full force
and effect and the Commencement Date shall occur when the Demised Premises
shall be deemed ready for occupancy under Section 4.01; provided, however, that
if the Demised Premises are not deemed ready for occupancy on or before June 1,
1997, Tenant may terminate this Lease.
4.04 If the whole of the Demised Premises shall not be ready for
occupancy at approximately the same time, Tenant may, with the written consent
of Landlord, take possession of any part or parts of the Demised Premises for
its use and occupancy before the Commencement Date, provided that a temporary or
permanent Certificate of Occupancy shall have been obtained for the part or
parts of the Demised Premises in respect of which Tenant desires to take
possession. Tenant shall be deemed to have taken possession of a part of the
Demised Premises for use and occupancy (herein called "actual possession") when
any personnel of Tenant or anyone claiming under or through Tenant shall first
occupy such part for the conduct of business. Tenant's actual possession of any
part of the Demised Premises prior to the Commencement Date shall be subject to
all of the obligations of this Lease including the payment of fixed and
additional rent, which payment shall be reasonably apportioned.
4.05 On the Commencement Date or at such time as Tenant shall take
actual possession of the whole or part of the Demised Premises, whichever shall
be earlier, it shall be conclusively presumed that the same were in satisfactory
condition as of the Commencement Date or the date or dates of such taking of
possession, unless within thirty (30) days after such date Tenant shall have
given Landlord notice specifying in which respects the Demised Premises were not
in satisfactory condition. However, nothing contained in this Section shall be
deemed to relieve Landlord from, and Landlord shall perform, its obligation to
complete, with reasonable speed and diligence, such details of construction,
mechanical adjustment and decoration as shall have been unperformed at the time
Tenant took actual possession, but Tenant shall not be entitled to any rent
abatement on account of any such incomplete work.
ARTICLE 5
Security Deposit
5.01 Tenant, upon or prior to the execution of this Lease, has
deposited with Landlord the sum of Fifty-Nine Thousand Seven Hundred Fifty-Five
and 02/100 ($59.755.02) Dollars (the "Security Deposit"), receipt of which is
hereby acknowledged by Landlord. The Security Deposit shall be held by Landlord
in a segregated account with a bank or other financial institution, without
liability for interest, as security for the faithful performance by Tenant of
all of the terms, covenants, and conditions of this Lease by Tenant to be kept
and performed during the term hereof. If at any time during the term of this
Lease any of the rent herein reserved shall be overdue and unpaid, or any other
sum payable by Tenant to Landlord hereunder shall be overdue and unpaid then
Landlord may, at the option of Landlord (but Landlord shall
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not be required to), appropriate and apply any portion of the Security Deposit
toward any such overdue rent or other sum.
5.02 In the event of the failure of Tenant to keep and perform any of
the terms, covenants and conditions of this Lease to be kept and performed by
Tenant, then Landlord, at its option, may appropriate and apply the entire
Security Deposit, or so much thereof as may be necessary to compensate the
Landlord for loss or damage sustained or suffered by Landlord due to such breach
on part of Tenant. Should the entire Security Deposit, or any portion thereof,
be appropriated and applied by Landlord for the payment of overdue rent or other
sums due and payable to Landlord by Tenant hereunder, then Tenant shall, upon
the written demand of Landlord, forthwith remit to Landlord a sufficient amount
of cash to restore the Security Deposit to the original sum deposited, and
Tenant's failure to do so within five (5) days after receipt of such demand
shall constitute a breach of this Lease. Should Tenant comply with all of the
terms, covenants and conditions of this Lease and promptly pay all of the rent
herein provided for as it falls due, and all other sums payable by Tenant to
Landlord hereunder, the Security Deposit shall be returned in full to Tenant at
the end of the term of this Lease, or upon the earlier termination of this
Lease.
5.03 Notwithstanding the foregoing, in the event that Tenant has not
exercised its option to terminate this Lease as provided in Article 40
hereunder, and Tenant has not been, and is not then, in default under this Lease
beyond any applicable notice and cure period, then at any time after the
Cancellation Date (as such term is defined in Article 40 hereof) Tenant may,
upon 20 days' notice to Landlord, reduce the amount of the Security Deposit to
$29,877.51, which amount is to be held pursuant to this Article throughout the
remaining term of this Lease. Upon any such reduction, Landlord shall promptly
refund to Tenant any excess Security Deposit then being held by Landlord.
5.04 Landlord may deliver the Security Deposit to the purchaser of
Landlord's interest in the Building, and, provided notice of such delivery is
given to Tenant, Landlord shall thereupon be discharged from any further
liability with respect to the Security Deposit.
ARTICLE 6
ADJUSTMENTS OF RENT FOR CHANGES IN REAL ESTATE TAXES
6.01 (a) The term "Tax Base Year" shall mean the tax fiscal year of
July 1, 1997 to June 30, 1998.
(b) The term "Common Areas" shall mean the land and pedestrian
deck, as shown on Exhibit "F", together with the parking garage and loading dock
facility.
(c) The term "Real Estate Taxes" shall mean 100% of the taxes
and assessments levied, assessed or imposed at any time by any governmental
authority upon or against the Building and 20.33% of such taxes and assessments
levied against the Common Areas, and also any tax or assessment levied, assessed
or imposed at any time by any governmental authority in connection with the
receipt of income or rents from the Building and Common Areas, to the extent
that same shall be in lieu of or in addition to all or a portion of any of the
aforesaid taxes or assessments upon or against the Building and Common Areas.
The term "Real Estate Taxes" shall not mean any interest or penalties which may
become due by reason of the failure to pay any such taxes when due and payable;
or any municipal, state or federal income, estate, inheritance, transfer,
corporate or franchise taxes assessed against Landlord unless and to the extent
that same is assessed in lieu of part or all of real estate taxes as presently
constituted and are computed as if Landlord owned no other property.
(d) The term "Tenant's Proportionate Share" shall be 5.13%.
(e) The phrase "Real Estate Taxes payable by Landlord" shall
not include Real Estate Taxes for which Landlord is reimbursed by Tenant under
Section 1.05 or by other tenants of the Building under similar provisions of
their leases.
(f) In the event that, after a statement has been sent to
Tenant, an assessment or valuation which had been utilized in computing the Real
Estate Taxes for a tax fiscal year is reduced (as a result of settlement, final
determination or legal proceedings or otherwise), and as a result thereof a
refund of Taxes is actually received by or on behalf of Landlord, promptly after
receipt of such refund, Landlord shall send Tenant a statement adjusting the
Real Estate Taxes for such tax fiscal year (taking into account the expenses
mentioned in the last sentence of this subparagraph (f) and setting forth
Tenant's Proportionate Share of such refund) and Tenant shall be entitled to
receive such share by way of a credit against the Additional Rent next becoming
due after the sending of such statement; provided, however, that Tenant's
Proportionate Share of such refund shall be limited to the amount, if any, which
Tenant had theretofore paid to Landlord as increased Additional Rent for such
tax fiscal year on the basis of the assessed valuation before it had been
reduced. All expenses, including attorneys' and appraisers' fees and
disbursements, expenses and other witnesses' fees, incurred in contesting the
validity or amount of any
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Real Estate Taxes or in obtaining a refund shall be considered as part of the
Real Estate Taxes for such year.
(g) In the event that any time during a tax fiscal year after
the Tax Base Year the assessment or valuation which had been utilized in
computing the Real Estate Taxes for the additional rent for any Tax Year is
reduced (as a result of settlement, final determination or legal proceedings or
otherwise), so that the Taxes payable for such tax fiscal year is less than the
Taxes payable by Tenant for the Tax Base Year then and in such event: (i) the
Taxes for the Tax Base Year shall become the lower assessment or valuation
effective as of the tax fiscal year in which said settlement or final
determination was reached (hereinafter the "Updated Tax Base Year"); and (ii)
Tenant shall pay as additional rent its Proportionate Share of the amount by
which the Taxes for each succeeding tax fiscal year after the Updated Tax Base
Year, exceeds the taxes for the Updated Tax Base Year. Landlord promptly shall
send to Tenant a statement setting forth the basis for the Updated Tax Base
Year and all adjustments and additional rent payments.
6.02 (a) In addition to the fixed rent, Tenant agrees to pay as
additional rent an amount equal to Tenant's Proportionate Share of the excess of
Real Estate Taxes payable by Landlord for each tax fiscal year of the City which
is subsequent to the Tax Base Year, over the Real Estate Taxes payable by
Landlord for the Tax Base Year. Such additional rent shall be appropriately
prorated, however, in the last Lease Year of the term hereof.
(b) Tenant's obligation to pay such additional rent under (a)
above, shall commence on the July 1st or January 1st (whichever comes first)
after the Tax Base Year; and Tenant shall pay such additional rent, with respect
of each fiscal year subsequent to the Tax Base Year, in two equal installments,
on such July 1st or January 1st (as the case may be) and each subsequent July
1st and January 1st during the balance of the term of this Lease.
(c) Within thirty (30) days after the Expiration Date, Tenant
shall pay to Landlord an amount equal to the portion, if any, of such additional
rent which is attributable to the period prior to the Expiration Date.
(d) The dates for the payment of taxes, July 1st and January
1st, are based on the present dates for the payment of real estate taxes in the
City. If the City or other governmental authority changes the dates for the
payment of Real Estate Taxes, then the changed dates shall be sequentially
substituted for the July 1 and January 1 dates contained herein.
6.03 Upon Tenant's request, Landlord shall furnish to Tenant a copy of
the Assessor's report or reports showing the assessment for the Building and the
Common Areas and the report or reports showing the increased assessment therefor
and all applicable tax bills, or such other evidence coming from the Assessor's
and/or Tax Collector's office which will show the assessments and tax involved
or some other reasonable documentation of the matter.
ARTICLE 7
ADJUSTMENT OF RENT FOR CHANGES IN OPERATING COSTS
7.01 (a) In the event that the Operating Costs for an Operating Year
shall exceed the Operating Costs for the Base Year, Landlord shall, by written
notice to Tenant, adopt a date (the "Adjustment Date"), in the succeeding
Operating Year, and within ten (10) days of the Adjustment Date, Tenant shall
pay to Landlord an amount equal to the Tenant's Proportionate Share of such
excess (without setoff or deduction of any kind and as additional rent), less
the amount of additional rent, if any, which Tenant paid to Landlord, as
additional rent under subparagraph (b) below, during the Operating Year in
question.
(b) Tenant also shall pay to Landlord, as additional rent (in
equal monthly installments) in each Operating Year after the Base Year,
retroactive to the first month of such year, a sum equal to Tenant's
Proportionate Share of the amount by which the projected Operating Costs for the
current Operating Year exceed the Operating Costs for the Base Year. Tenant's
responsibility for Operating Costs hereunder shall be appropriately prorated in
the last Lease Year.
(c) If the Operating Costs for any Operating Year shall be
less than the Operating Costs for the Base Year plus all amounts paid by Tenant
under subparagraph (b) above during the applicable Operating Year, Landlord
shall credit such amount of Tenant's Proportionate Share to Tenant.
7.02 For the purposes of this Article, the following terms shall have
the following meanings:
(a) The term "Base Year" shall mean January 1, 1997, through
December 31, 1997.
(b) The term "Operating Year" shall mean each twelve month
period adopted (by written notice to Tenant) by the Landlord subsequent to the
Commencement Date.
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(c) The term "Common Areas" shall mean the land and pedestrian
deck, as shown on Exhibit "F", together with the parking garage and loading dock
facility.
(d) The term "Adjustment Date" shall be a date adopted by the
Landlord subsequent to each Operating Year.
(e) The term "Tenant's Proportionate Share" shall be 5.13%.
(f) The term "Operating Costs" shall mean the aggregate of all
expenses paid or incurred by Landlord for the operation of the Building, and
20.33% of such expenses paid or incurred by Landlord for the operation of the
Common Areas, and shall include without limitation the following:
(i) Wages and salaries paid by Landlord, including
all fringe benefits and taxes related thereto paid by Landlord, of employees
directly engaged in cleaning, maintenance and repair of the Building, Building
equipment and Common Areas, and performing the functions of garbage and snow
removal, landscaping and security, including a customary managing agent's fee,
or cost to Landlord of an Independent contractor performing any such services;
(ii) Any and all supplies and materials utilized by
Landlord or independent contractors of Landlord in the performance of the items
set forth in subparagraph (i) immediately preceding;
(iii) The cost of supplying utilities to the
Building and Common Areas;
(iv) Insurance premiums paid by Landlord with
respect to the Building and Common Areas;
(v) Expenditures incurred by Landlord after
substantial completion of the Building for any equipment, device or capital
improvement which is required by any law, statute or regulation or a requirement
of the insurance carrier or which is designed as a labor-saving measure or
designed to effect other economies or efficiencies in the operation or
maintenance of the Demised Premises, Common Areas or the Building Equipment
except to the extent such expenses exceed $200,000, in which case the annual
amortization (on a straight-line basis over a depreciable life in accordance
with generally accepted accounting principles consistently applied, with
interest calculated at an annual rate of one (1) percentage point above the
prime rate at the time of Landlord's having made such expenditure) of such
expenses shall be included In Operating Costs; and
(vi) Legal and accounting fees and disbursements,
and any other expense or charge of any nature whatsoever which, in accordance
with generally accepted accounting principles with respect to the operation of a
first-class office building, would be construed as an operating expense,
excluding, however, real property taxes, depreciation, interest on and
amortization of debt, and any items otherwise properly constituting such an
operating expense to the extent payment therefor is received from or payable by
tenants for services rendered or performed directly for the account of such
tenants or for which a tenant pays directly under an electricity schedule.
(g) In the event that the Building is less than 90% occupied
at any time during the Base Year or any Operating Year, the Operating Costs for
such year shall be those which, with equitable adjustment, would have been paid
or incurred by Landlord for the operation of the Building and Common Areas if
the Building had been 90% occupied throughout the whole of such year.
7.03 Landlord shall advise Tenant by written statement, certified to be
correct by Landlord or its agent, of increased Operating Costs for any Operating
Year. The statement shall delineate the amount of Tenant's Proportionate Share
caused by such increase, shall establish the Adjustment Date, and shall set
forth the manner in which the adjustment is computed. Upon written request
therefor by Tenant, Landlord shall provide Tenant with an itemized list
indicating the allocation and calculation of such Operating Costs. Landlord's
failure to render a statement with respect to increases in Operating Costs for
any Operating Year shall not prejudice Landlord's right to thereafter render a
statement with respect thereto or with respect to any subsequent Operating Year.
Furthermore, nothing herein contained shall restrict Landlord from issuing a
statement or from revising an estimate at any time that there is an increase in
Operating Costs during any Operating Year or at any time thereafter. The rights
and obligations of Landlord and Tenant under the provisions of this Article with
respect to any additional rent shall survive the termination of this Lease.
7.04 Tenant and Landlord agree that for all purposes in any way
connected with or arising out of this Article, the statement delivered by
Landlord pursuant to Section 7.03 shall be binding and conclusive on both
parties hereto unless objected to by Tenant in writing within twenty (20) days
after receipt thereof. Tenant's objection shall be in writing and specify the
respects in which the statement is claimed to be incorrect. Tenant shall have
the right to require the production of Landlord's books which
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relate to these items of cost and the right, within ten (10) days subsequent to
the production of Landlord's books, to deliver notice of disagreement with
respect to any item of Operating Costs.
7.05 Anything to the contrary herein notwithstanding, Landlord shall
have the right at any time to calculate Operating Costs for the Building and the
other Buildings separately rather than together and to collect from Tenant as
additional rent Tenant's Proportionate Share of the excess of the Building's
Operating Costs for the Operating Year in question over the Building's Operating
Costs for the Base Year; in such event Landlord shall give Tenant at least
thirty (30) days advance notice of the said manner of calculation ("Landlord's
Change Notice"). At the time said adjustments are made in calculating Operating
Costs for the Operating Years (or portions thereof) falling after the effective
date of Landlord's Change Notice, appropriate adjustment shall be made in
Operating Costs for the Base Year.
7.06 Notwithstanding that in certain provisions of this Lease, it is
specified that Landlord shall perform certain obligations and services as an
Operating Cost, whereas the Lease is silent in regards to other obligations and
services, all obligations and services to be performed by Landlord shall be
included as an Operating Cost to the extent that they fall within the definition
of Operating Costs in Section 7.02(g) hereof. The costs of any services included
in Operating Costs, which services are performed by subsidiaries or affiliates
of Landlord or Landlord's agents, shall be competitive in price for comparable
contracts and transactions with unaffiliated entities for the performance of
such services in comparable buildings.
ARTICLE 8
SUBORDINATION, ATTORNMENT, NOTICE TO LESSOR AND MORTGAGEES
8.01 Landlord hereby represents and warrants to Tenant that there is
currently no ground lease affecting the land or Building of which the Demised
Premises form a part. This Lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate in all respects to all future ground leases,
over-riding leases and underlying leases and/or grants of term of the land
and/or the Building or the portion thereof in which the Demised Premises are
located in whole or in part now or hereafter existing and to all mortgages and
building loan agreements, including leasehold mortgages and building loan
agreements, which may now or hereafter affect the land and/or the Building
and/or any of such leases, whether or not such mortgages shall also cover other
lands and/or buildings, to each and every advance made or hereafter to be made
under such mortgages, and to all renewals, modifications, replacements and
extensions of such leases and such mortgages and spreaders, consolidations and
correlations of such mortgages. This Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver an instrument, in
recordable form, it required, that Landlord, the lessor of any such lease or the
holder of any such mortgage or any of their respective successors in interest
may request to evidence such subordination, and Tenant hereby constitutes and
appoints Landlord attorney-in-fact for Tenant to execute any such instrument for
and on behalf of Tenant. The leases to which this Lease is, at the time referred
to, subject and subordinate pursuant to this Article are hereinafter sometimes
called "superior leases" and the mortgages to which this Lease is at the time
referred to, subject and subordinate are hereinafter sometimes called "superior
mortgages" and the lessor of a superior lease or its successor in interest at
the time referred to is hereinafter sometimes called a "lessor".
8.02 Landlord hereby notifies Tenant that in accordance with the terms
of a superior mortgage, this Lease may not be modified or amended so to reduce
the rent, shorten the term, or adversely affect in any other respect to any
material extent the rights of the Landlord hereunder, or be cancelled or
surrendered without the prior written consent of the holder of the superior
mortgage in each instance, except that said holder's consent shall not be
required to the institution or prosecution of any action or proceedings against
Tenant by reason of a default on the part of Tenant under the terms of this
Lease.
8.03 This Lease shall not terminate or be terminable by Tenant by
reason of any termination of the ground lease, by summary proceedings,
foreclosure of a superior mortgage, or otherwise. Tenant agrees without further
instruments of attornment in each case, to attorn to the lessor under the ground
lease, or the mortgagee under the superior mortgage, as the case may be, to
waive the provisions of any statute or rule of law now or hereafter in effect
which may give or purport to give Tenant any right of election to terminate this
Lease or to surrender possession of the Demised Premises in the event the ground
lease is terminated or a superior mortgage is foreclosed, and that unless and
until the lessor, or mortgagee, as the case may be, shall elect to terminate
this Lease, this Lease shall not be affected in any way whatsoever by any such
proceeding or termination, and Tenant shall take no steps to terminate this
Lease without giving written notice to the lessor under the ground lease, or
mortgagee under a superior mortgage, and a reasonable opportunity to cure
(without such lessor or mortgagee being obligated to cure), any default on the
part of the Landlord under this Lease.
8.04 If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, Tenant will not exercise any such right until
(a) it has given written notice of such act or omission to each holder of a
superior mortgage and to each holder of a superior lease, whose name and address
shall have previously been furnished to
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Tenant, by delivering notice of such act or omission addressed to each such
party at its last address so furnished and (b) a period of thirty (30) days for
remedying such act or omission shall have elapsed following such giving of
notice and following the time when such senior interest holder shall have become
entitled under such senior interest, as the case may be, to remedy the same
(which period shall immediately follow, the full period to which Landlord would
be entitled under this Lease to effect such remedy) provided such senior
interest holder shall, within thirty (30) days of receipt of such written
notice, give Tenant notice of its intention to remedy such act or omission and
shall commence and continue to act upon such intention. Notwithstanding the
foregoing, nothing shall impose any obligation on such holder actually to remedy
such act or omission.
ARTICLE 9
QUIET ENJOYMENT
9.01 Landlord covenants that if, and so long as, Tenant pays all of the
fixed and additional rent due hereunder, and keeps and performs each and every
covenant, agreement, term, provision and condition herein contained on the part
and on behalf of Tenant to be kept and performed, Tenant shall quietly enjoy the
Demised Premises without hindrance or molestation by Landlord or by any other
person lawfully claiming the same, subject to the covenants, agreements, terms,
provisions and conditions of this Lease.
ARTICLE 10
ASSIGNMENT, MORTGAGING, SUBLETTING
10.01 Neither this Lease, nor the term and estate hereby granted, nor
any part hereof or thereof, nor the interest of Tenant in any sublease or the
rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, by operation of law or otherwise, and neither
the Demised Premises, nor any part thereof, shall be encumbered in any manner by
reason of any act or omission on the part of Tenant or anyone claiming under or
through Tenant, nor shall be sublet to be used or occupied or permitted to be
used or occupied, or utilized for desk space or for mailing privileges, by
anyone other than Tenant or its employees or for any purpose other than as
permitted by this Lease, without the prior written consent of Landlord in every
case, except as expressly otherwise provided in this Article.
Furthermore, no assignment shall be binding on Landlord unless
the assignee shall execute, acknowledge and deliver to Landlord (a) a duplicate
original instrument of assignment in form and substance reasonably satisfactory
to Landlord, duly executed by Tenant, and (b) an agreement, in form and
substance satisfactory to Landlord, duly executed by the assignee, whereby the
assignee shall unconditionally assume in accordance with the terms and
conditions of this Lease observance and performance of, and agree to be bound by
all of the terms, covenants and conditions of this Lease on Tenant's part to be
observed or performed, including, without limitation, the provisions of this
Article with respect to all future assignments; but the failure or refusal of
the assignee to execute or deliver such an agreement shall not release the
assignee from its liability for the obligations of Tenant hereunder assumed by
acceptance of the assignment of this Lease.
10.02 If this Lease is assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Demised Premises or any part thereof is sublet or is used or occupied by anybody
other than Tenant, whether or not in violation of this Lease, Landlord may,
after default by Tenant, and expiration of Tenant's time to cure such default,
collect rent from the subtenant or occupant. In either event, Landlord may apply
the net amount collected to the rents herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any of the
provisions of Section 10.01, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to
assignment, mortgaging, subletting or use or occupancy by others shall not in
any way be considered to relieve Tenant from obtaining the express written
consent of Landlord to any other or further assignment, mortgaging or subletting
or use or occupancy by others not expressly permitted by this Article.
References in this Lease to use or occupancy by others, that is anyone other
than Tenant, shall not be construed as limited to subtenants and those claiming
under or through sub-tenants but as including also licensees and others claiming
under or through Tenant, immediately or remotely.
10.03 Tenant, upon written notice to Landlord, but without Landlord's
written consent, may permit any corporations or other business entities which
control, are controlled by, or are under common control with Tenant (herein
called "related corporations") to use the whole or part of the Demised Premises
for any of the purposes permitted to Tenant, subject however to compliance with
Tenant's obligations under this Lease. Such use shall not be deemed to vest in
any such related corporation any right or interest in this Lease or in the
Demised Premises, nor shall such use release, relieve, discharge or modify any
of Tenant's obligations hereunder.
10.04 Tenant, upon Landlord's prior written consent, which shall not
unreasonably be withheld, may assign or transfer its entire interest in the
Lease and the leasehold estate hereby created or sublet
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the whole of the Demised Promises on one or more occasions to a "wholly owned
subsidiary" or "affiliate" of Tenant or to a "successor corporation" of Tenant,
as such terms are hereinafter defined, provided that Tenant shall not be in
default in any of the terms, covenants, conditions and agreements of this Lease,
including but not limited to the payment of the fixed rent or additional rent
payable by Tenant hereunder. A "wholly owned subsidiary" of Tenant shall mean
any corporation all of whose outstanding voting stock shall at the time be
owned, directly or indirectly, by Tenant or by one or more of its wholly owned
subsidiaries. An "affiliate" of Tenant shall mean any corporation which directly
or indirectly controls or is controlled by or is under common control with
Tenant. For purposes of this definition, "control" (including "controlling,"
"controlled by" and "under common control with") is used with respect to any
corporation, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, or by contract
or otherwise. A "successor corporation" as used in this Article, shall mean (i)
a corporation into which or with which Tenant, its corporate successors or
assigns, is merged or consolidated, in accordance with applicable statutory
provisions for the merger or consolidation of corporations, provided that by
operation of law or by effective provisions contained in the instruments of
merger or consolidation the liabilities of the corporations participating in
such merger or consolidation are assumed by the corporation surviving such
merger or consolidation, or (ii) a corporation acquiring this Lease and the term
hereby demised, the good will and all or substantially all of the other property
and assets of Tenant, its corporate successors or assigns, and assuming all or
substantially all of the liabilities of Tenant, its corporate successors and
assigns, or (iii) any corporate successor to a successor corporation becoming
such by either of the methods described in Clauses (i) and (ii); provided that,
immediately after giving effect to any such merger or consolidation, or such
acquisition and assumption as the case may be, the corporation surviving such
merger or created by such consolidation or acquiring such assets and assuming
such liabilities, as the case may be, shall have assets, capitalization, and a
net worth as determined in accordance with generally accepted principles of
accounting at least equal to the assets, capitalization and net worth, similarly
determined, of Tenant, at the beginning of the term of this Lease or Tenant, its
corporate successors or assigns, immediately prior to such merger or
consolidation or such acquisition and assumption, as the case may be, whichever
is the greater. The acquisition by Tenant, its corporate successors or assigns,
of all or substantially all of the assets, together with the assumption of all
or substantially all of the obligations and liabilities of any corporation,
shall be deemed to be a merger of such corporation into Tenant for the purpose
of this Article.
10.05 If Tenant is a corporation or partnership, and if at any time
during the term of this Lease the person or persons who, as of the date this
Lease is executed by Tenant, own or owns a majority of such corporation's voting
stock (as hereinafter defined) or the general partner's interest in such
partnership, as the case may be, cease or ceases to own a majority of such a
voting stock or general partner's interest, as the case may be, then the
occurrence of any such event shall be deemed to be an assignment of this Lease
with respect to which the Landlord's prior written consent shall be required,
except, however, that this provision shelf not be applicable to any corporation,
all the outstanding voting stock of which is listed on a National Securities
Exchange. For the purpose of this Section, stock ownership shall be determined
in accordance with the principles set forth in Section 544 of the Internal
Revenue Code of 1986, as amended, and the term "voting stock" shall refer to
share of stock regularly entitled to vote for the election of directors of the
corporation.
10.06 Notwithstanding anything contained in Sections 10.01 and 10.02
hereof, but subject to the right of Tenant under Sections 10.03 and 10.04
hereof, in the event that at any time or from time to time prior to or during
the term of this Lease Tenant desires to sublet all or any part of the Demised
Premises, Tenant (a) shall notify Landlord in writing of the term of the
proposed subletting and the area so proposed to be sublet, (b) shall be deemed
to have granted Landlord the option to sublet from Tenant such space so proposed
to be sublet upon the covenants, agreements, terms, provisions and conditions
hereinafter set forth, (c) shall not offer such space for subletting to anyone
other than Landlord until thirty (30) days have elapsed after the receipt of
such notice by Landlord. Such option on the part of Landlord to sublet from
Tenant such space so proposed to be sublet shall be exercisable by Landlord in
writing during such 30 day period referred to in clause (c) of the next
preceding sentence. If Landlord fails to exercise such option within said thirty
(30) days and Tenant fails to complete a sublease with a third party (as
hereinafter provided within ninety (90) days thereafter), Tenant shall again
comply with all the conditions of this Section, as if the notice and option
hereinabove referred to had not been given and received.
In the event Landlord exercises Landlord's option to sublet such space,
such sublease by Tenant to Landlord shall be at an annual fixed rent equal to
the fixed rent and additional rent as provided in this Lease for the entire
Demised Premises or equal to an equitable apportionment of such fixed and
additional rent if such sublease shall be in respect of less than the whole of
the Demised Premises, and shall be for the same term as that of the proposed
subletting, and it is hereby expressly agreed that:
(a) the sublease shall be expressly subject to all of the covenants,
agreements, terms, provisions and conditions of this Lease except such as are
not relevant or applicable, and except as otherwise expressly set forth to the
contrary in this Section.
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(b) such sublease to Landlord shall give Landlord the
unqualified and unrestricted right, without Tenant's permission, to assign such
sublease or any interest therein and/or sublet the space covered by such
sublease or any part or parts of such space and to make any and all changes,
alterations, and improvements in the space covered by such sublease;
(c) such sublease to Landlord shall provide that any assignee
or subtenant of the Landlord may, at the election of the Landlord, be permitted
to make alterations, decorations and installments in such space or any part
thereof and shall also provide in substance that any such alterations,
decorations and installations therein made by any assignee or subtenant for the
Landlord may be removed, in whole or in part, by such assignee or subtenant, at
its option, prior to or upon the expiration or other termination of such
sublease provided that such assignee or subtenant, at its expense, shall repair
any damage and injury to such space or sublet caused by such removal.
Notwithstanding the foregoing, in the event Tenant is scheduled to re-occupy
such space, such sublease shall provide that such alterations, decorations and
installations must be removed prior to or upon expiration or termination of such
sublease; and
(d) such sublease to Landlord shall also provide that the
parties to such sublease expressly negate any intention that any estate created
under such sublease be merged with any other estate held by either of said
parties. Tenant covenants and agrees (i) that any such assignment or subletting
by the subtenant may be for any purpose or purposes that Landlord, in Landlord's
uncontrolled discretion, shall deem suitable or appropriate, (ii) that Tenant,
at Tenant's expense, shall and will at all times provide and permit reasonably
appropriate means of ingress to and egress from such space so sublet by Tenant
to Landlord, and (iii) that at the expiration of the term of such sublease,
Tenant will accept the space covered by such sublease in its then existing
condition, subject to the obligations of Landlord to make such repairs thereto
as may be necessary to preserve the premises demised by such sublease in good
order and condition.
10.07 In the event Landlord does not exercise its option to so sublet
such space, Landlord covenants not to unreasonably withhold its consent which
must be in writing, to a subletting, provided, however, that Landlord shall not,
in any event, be obligated to consent to any such proposed subletting unless:
(a) Tenant shall furnish Landlord with the name and business
address of the proposed subtenant, a counterpart of the proposed subleasing
agreement, and satisfactory information with respect to the nature and character
of the business of the proposed subtenant together with current financial
information and references reasonably satisfactory to Landlord;
(b) in the reasonable judgment of Landlord the proposed
subtenant is of a character and engaged in a business such as are in keeping
with the standards of Landlord in those respects for the Building; and
(c) the purposes for which the proposed subtenant intends to
use the portion of the Demised Premises sublet to it are uses expressly
permitted by and not expressly prohibited by this Lease; and
(d) Tenant shall not have (i) advertised or publicized in any
way the availability of all or part of the Demised Premises without prior notice
to and approval by Landlord, (ii) listed or publicly advertised the rental rate
less than the fixed rent and additional rent (pursuant to Articles 6 and 7) then
payable hereunder for such space; but the provisions of this subsection,
however, shall not be deemed to prohibit Tenant from negotiating a sublease at a
lesser rate of rent and consummating the same insofar as it may be permitted
under the provisions of this Article; and
(e) the proposed subtenant is not an existing tenant of
Landlord who leases space in the Building or in the Complex.
(f) Tenant shall pay to Landlord immediately upon receipt
thereof, a sum equal to the amount of (i) all fixed rent and additional rent and
any other consideration paid to Tenant by any subtenant which is in excess of
the fixed rent and additional rent then being paid by Tenant to Landlord
pursuant to the terms hereof, and (ii) any other profit or gain realized by
Tenant from any such subletting (after first deducting, in either such instance.
the reasonable costs and expense incurred by Tenant in connection with such
subletting); if only a part of the Demised Premises is sublet, then the fixed
rent and additional rent paid therefor by Tenant to Landlord shall be deemed to
be the traction thereof that the area of the sublet space bears to the entire
Demised Premises.
(g) Tenant shall together with requesting Landlord's consent
hereunder, have paid Landlord any costs incurred by Landlord to review the
proposed subletting including reasonable attorneys' fees incurred by Landlord.
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(h) In the case of a subletting of a portion of the Demised
Premises, the portion so sublet shall be regular in shape and suitable for
normal renting purposes; and
(i) Tenant shall have reimbursed Landlord for Landlord's costs
incurred in the plan review or plan approval should Tenant propose the
alterations to the Demised Premises to make same suitable for the occupancy by
Tenant's subtenant.
Except for any subletting by Tenant to Landlord pursuant to
the provisions of this Article, each subletting pursuant to this Article shall
be subject to all the covenants, agreements, terms, provisions and conditions
contained in this Lease. Tenant covenants and agrees that notwithstanding any
such subletting to Landlord or any such subletting to any other subtenant and/or
acceptance of rent or additional rent by Landlord from any subtenant, Tenant
shall and will remain fully liable for the payment of the fixed rent and
additional rent due and to become due hereunder and for the performance of all
the covenants, agreements, terms, provisions and conditions contained in this
Lease on the part of Tenant to be performed and all acts and omissions of any
licensee or subtenant or anyone claiming under or through any subtenant which
shall be in violation of any of the obligations of this Lease and any such
violation shall be deemed to be a violation by Tenant. Tenant further covenants
and agrees that notwithstanding any such subletting, no other and further
subletting of the Demised Premises or any part thereof shall or will be made
except upon compliance with and subject to the provisions of this Article.
10.08 With respect to each and every sublease or subletting authorized
by the provisions of this Article:
(a) No subletting shall be for a term ending later than one
day prior to the Expiration Date of this Lease, and that part, if any, of the
proposed term of any sublease or any renewal or extension thereof which shall
extend beyond a date one day prior to the Expiration Date or the earlier
termination of the term of this Lease, is hereby deemed to be a nullity.
(b) Upon the execution of any such sublease as may be
authorized by this Article, Tenant shall promptly deliver to Landlord a copy of
each such sublease.
10.09 Landlord's approval is required for the use of any name other
than Tenant's name for identification on any signs or directory listings in the
Building.
The listing of any name other than that of Tenant, even though
approved by Landlord, shall not:
(i) Constitute a waiver of Landlord's right to withhold
consent to any sublet or assignment pursuant to this Article;
(ii) Be deemed an implied consent by Landlord to any sublet of
the Premises or any portion thereof, to any assignment or transfer of the lease,
or to any unauthorized occupancy of the Premises, except in accordance with the
express terms of the Lease; or
(iii) Operate to vest any right or interest in the Lease or in
the Premises.
The use of any such other name or listing as provided above
shall constitute a privilege extended by Landlord to Tenant, and shall be
revocable at Landlord's will by notice to Tenant.
ARTICLE 11
Compliance with Laws and Requirements of Public Authorities
11.01 Tenant shall promptly notify Landlord of any written notice it
receives of the violation of any law or requirements of any Federal, State,
Municipal or other public authority, and at its expense Tenant shall comply with
all laws and requirements of such public authorities which shall, with respect
to the Building or the Demised Premises or the use and occupation thereof or the
abatement of any nuisance, impose any violation, order or duty on Landlord or
Tenant, arising from (i) the manner of conduct of Tenant's business or operation
of its installations, equipment or other property within the Demised Premises,
to the extent such manner of conduct is inconsistent with the manner of conduct
of a majority of other tenants of the Building, (ii) any cause or condition
created by or at the instance of Tenant (other than Landlord's Work), or (iii)
breach of any of Tenant's obligations hereunder. Landlord hereby represents and
warrants to Tenant that Landlord has not received any written notice of
violation of any such law or requirements which affects the Building and remains
uncured.
ARTICLE 12
Insurance
12.01 Tenant shall not do, or permit anything to be done, or keep or
permit anything to be kept in the Demised Premises which would increase the fire
or other casualty insurance rate on the Building
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or the property therein over the rate which would otherwise then be in effect
(unless Tenant pays the resulting increased amount of premium as provided in
Section 12.02) or which would result in insurance companies of good standing
refusing to insure the Building or any of such property in amounts and at normal
rates reasonably satisfactory to Landlord.
12.02 If, by reason of any act or omission on the part of Tenant, the
rate of fire insurance with extended coverage on the Building or equipment or
other property of Landlord shall be higher than it otherwise would be, Tenant
shall reimburse Landlord, on demand, for that part of the premiums for fire
insurance and extended coverage paid by Landlord because of such act or omission
on the part of Tenant, which sum shelf be deemed to be additional rent and
collectible as such.
12.03 In the event that any dispute should arise between Tenant and
Landlord concerning rates, a schedule or make up of rates for the Building or
the Demised Premises, as the case may be, issued by a Fire Insurance Rating
Organization or other similar body making rates for fire insurance and extended
coverage for the premises concerned, shall be presumptive evidence of the facts
therein stated and of the several items and charges in the fire insurance rates
with extended coverage then applicable to such premises.
12.04 Tenant shall obtain and keep in full force and effect during the
term of this Lease at its own cost and expense comprehensive General Public
Liability Insurance on an occurrence basis with combined single minimum limits
of liability in an amount of not less than $3,000,000.00 for bodily injury or
death including personal injury, and with respect to damage to property, water
damage and sprinkler leakage including legal liability arising out of any one
occurrence, which insurance shall contain contractual liability insurance
covering the matters set forth in Article 21. Landlord shall maintain
throughout the term of this Lease fire and other casualty insurance with
replacement cost coverage for the Building.
12.05 All policies of insurance to be obtained and furnished by Tenant
hereunder shall be issued and carried in the name of Landlord and Tenant, as
their respective interests may appear, together with such other party or parties
as may be designated by Landlord, as their interests may appear. All such
policies of insurance shall be issued by a financially responsible company or
companies, authorized to issue such policy or policies, and licensed to do
business in the State of Connecticut, which shall be reasonably satisfactory to
Landlord, and shall contain endorsements providing as follows: (a) that any such
insurance shall not be subject to cancellation, termination, reduction or
change, except with 30 days' prior written notice sent by registered mall to
Landlord by the insurance company; and (b) that Landlord shall not be liable
for any damage by fire or other casualty covered by such insurance, regardless
of the cause, it being understood that Tenant shall look solely to its insurer
or insurers for reimbursement. Landlord and Tenant waive their right to recover
damages against each other for any reason whatsoever to the extent the damaged
party recovers from its insurance carrier. Any insurance policy procured by
Landlord or Tenant which does not name the other as an additional insured shall
contain an express waiver of any right of subrogation by the insurance company
against such other party. All public liability and property damage policies
shall contain an endorsement that Landlord, although named as an insured, shall
nevertheless be entitled to recover under said policies for any loss or damage
occasioned to it, its servants, agents and employees. The original policy or
policies together with satisfactory evidence of payment of the premium thereof,
shall be delivered to Landlord on or before the commencement of any Work under
this Lease, and upon renewals of such policies, not less than 30 days prior to
the expiration of the term of any such coverage. The minimum limits of any
insurance coverage required herein to be carried by Tenant shall not limit
Tenant's liability under Article 21 hereof.
12.06 In the event that Tenant at any time or times shall fail to
obtain or maintain in full force and effect any or all of the insurance policies
and coverage required of it hereunder, or should Tenant violate any of the
provisions of Section 12.05 herein, Landlord, at its election after ten (10)
days written notice to Tenant, and as agent for Tenant, may obtain such
insurance or coverage, or additional insurance or coverage as the case may be,
pay the premiums thereon or take such other steps as may be necessary to meet
the requirements of this Article and thereafter, upon demand, obtain
reimbursement of the costs so expended from Tenant. The failure of Landlord to
obtain evidence of the required insurance coverage shall not relieve Tenant of
its obligations under this Article.
ARTICLE 13
Rules and Regulations
13.01 Tenant and its employees and agents shall faithfully observe and
comply with the rules and regulations set forth in the attached Exhibit "C" (the
"Rules and Regulations"), and such reasonable changes therein (whether by
modification, elimination or addition) as Landlord at any time or times
hereafter may make and communicate in writing to Tenant, which do not
unreasonably affect the conduct of Tenant's business in the Demised Premises;
provided, however, that in case of any conflict or inconsistency between the
provisions of this Lease and any Rules and Regulations enacted subsequent to the
date of this Lease the provisions of this Lease shall control.
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13.02 Notwithstanding anything to the contrary in any of the Rules and
Regulations set forth in Exhibit "C":
(a) Tenant may bring into and keep in the Demised Premises
such small quantities of inflammable or combustible objects or materials as are
permitted by local law and as are incidental to the use of the Demised Premises
for the purposes permitted by Article 2, but this shall not be deemed to relieve
Tenant of responsibility to comply with all other obligations of this Lease that
may be applicable to or result from the introduction or maintenance of such
objects or materials in the Demised Premises, including but not limited to
compliance with the provisions of Sections 12.01 and 12.02.
(b) Subject to the provisions of Paragraph 2.02(c), Landlord
shall not unreasonably withhold its consent to the installation, maintenance and
operations by Tenant in the Demised Premises of data processing machines, office
duplicating machines, teletypewriter machines and other business machines and
machinery customarily used in offices in the ordinary course of business,
provided, however, that Tenant shall comply with all other obligations of this
Lease that may be applicable to or result from such installation, maintenance or
operation.
(c) Landlord shall not unreasonably withhold from Tenant any
approval provided for in the Rules and Regulations.
(d) Whenever Landlord shall claim, by written notice to
Tenant, that Tenant is violating any of the provisions of the Rules and
Regulations, and Tenant shall in good faith dispute such claim by written notice
given to Landlord within ten (10) days after service of Landlord's notice of the
violation, the dispute shall be determined by arbitration pursuant to Article
33.
(e) Tenant shall utilize only security and cleaning services
approved in writing by Landlord.
ARTICLE 14
Alterations and Tenant's Property
14.01 Tenant shad not make any alterations, decorations, installations,
additions, or improvements in or to the Demised Premises without Landlord's
prior written consent, which consent Landlord agrees shall not be unreasonably
withheld or delayed.
14.02 All work done by or on behalf of Tenant ("Tenant work") shall be
done at Tenant's sole expense and shall be done only by Landlord's contractors,
or Tenant's contractors approved by the Landlord.
14.03 All alterations, decorations, installations, additions or
improvements upon the Demised Premises made by any party shall at the expiration
of the term hereof become the property of the Landlord and be surrendered with
the Demised Premises as part thereof at the end of the term. Tenant's special
chandeliers, business and trade fixtures, machinery and equipment, whether or
not attached to the Demised Premises, which are installed by or for the account
of Tenant, and can be removed without permanent structural damage to the Demised
Premises or the Building, and all furniture, furnishings and other articles of
movable personal property shall be and shall remain Tenant's property and may be
removed by it prior to the expiration date of this Lease; provided, however,
that if any of Tenant's property is removed, Tenant shall repair or pay the cost
of repairing any damage to the Demised Premises resulting from such removal. Any
equipment or other property for which Landlord shall have granted any allowance
or credit to Tenant shall not be deemed to have been installed by or for the
account of Tenant and shall not be considered Tenant's property.
14.04 At or before the Expiration Date, or the date of any earlier
termination of this Lease, Tenant at its expense, shall remove from the Demised
Premises all of Tenant's property (including telecommunications and data wiring)
except such items thereof as Tenant shall have expressly agreed in writing with
Landlord were to remain and to become the property of Landlord, and shall repair
any damage to the Demised Premises or the Building resulting from such removal.
Any other items of Tenant's property (except money or securities) which shall
remain in the Demised Premises after the Expiration Date or after a period of
fifteen (15) days following an earlier termination date, may, at the option of
the Landlord, be deemed to have been abandoned, and in such case either may be
retained by Landlord as its property or may be disposed of, without
accountability, in such manner as Landlord may see fit at Tenant's expense. If
carpet (other than carpet existing in the Demised Premises on the Commencement
Date or installed as part of Landlord's Work) is glued down with an adhesive
substance not previously approved by Landlord, then at Landlord's option, Tenant
may be required to remove the carpet at Tenant's expense.
14.05 All Tenant's work, at all times, shall comply with laws, orders
and regulations of governmental authorities having jurisdiction thereof and all
rules and regulations of Landlord. Tenant, at its expense, shall obtain all
necessary governmental permits and certificates for the commencement and
prosecution of Tenant's work and for final approval thereof upon completion, and
shall cause Tenant's
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work to be performed in compliance therewith and with all applicable
requirements of insurance bodies, and in a good and first class workmanlike
manner, using materials and equipment at least equal in quality to the original
installation of the Building. Tenant's work shall be performed in such a manner
so as not to interfere with the occupancy of any other tenant in the Building,
nor delay or impose any additional expense upon Landlord in the construction,
maintenance or operation of the Building. Throughout the performance of Tenant's
work, Tenant, at its expense, shall carry, or cause to be carried, workmen's
compensation insurance in statutory limits, and general liability insurance for
any occurrence in or about the Building, on which Landlord and its managing
agent shall be named as parties insured, in such limits as Landlord may
reasonably prescribe, with insurers reasonably satisfactory to Landlord. Tenant
shall furnish Landlord with reasonably satisfactory evidence that such insurance
is in effect at or before the commencement of Tenant's work and, on request, at
reasonable intervals thereafter during the continuance of Tenant's work. No
Tenant's work shall involve the removal of any fixtures, equipment or other
property in the Demised Premises which are not Tenant's property, unless
Landlord's prior written consent is first obtained and unless such fixtures,
equipment or other property shall be promptly replaced at Tenant's expense and
free of superior title, liens and claims, with fixtures, equipment or other
property (as the case may be) of like utility and at least equal value (which
replaced fixture, equipment or other property shall thereupon become the
property of Landlord), unless Landlord shall otherwise expressly consent in
writing.
14.06. Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation, arising from
or otherwise connected with Tenant's work which shall be issued by any public
authority having or asserting jurisdiction. Tenant shall defend, indemnify and
save harmless Landlord against any and all mechanics and other liens in
connection with Tenant's work, repairs or installation, including but not
limited to the liens of any conditional sale of, or chattel mortgages upon, any
materials, fixtures, or articles installed in and constituting part of Demised
Premises and against all costs, attorney's fees, fines, expenses and liabilities
reasonably incurred In connection with any such lien, conditional sale or
chattel mortgage or any action or proceeding brought thereon.
Tenant, at its expense, shall procure the satisfaction or
discharge of all such liens within ten (10) days of the filing of such lien
against the Demised Premises or the Building. If Tenant shall fail to cause such
lien to be discharged within the period aforesaid, then, in addition to any
other right of remedy, Landlord may, but shall not be obligated to, discharge
the same either by paying the amount claimed to be due or by procuring the
discharge of such lien by deposit or by bonding proceedings, and in any such
event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of the judgment in favor of the lienor with interest, costs and
allowances. Any amount so paid by Landlord and all costs and expenses incurred
by Landlord, in connection therewith, together with interest thereon at the rate
of one percent per month or portion thereof from the respective dates of
Landlord's making of the payment or incurring of the cost and expense shall
constitute additional rent payable by Tenant under this Lease and shall be paid
by Tenant on demand. It Tenant makes any such payment it shall not be entitled
to any set-off against rent due hereunder. Tenant agrees that it will not at any
time prior to or during the term of this Lease, either directly or indirectly,
use any contractors, labor or materials in the Demised Premises, if the use of
such contractors, labor or materials would, in the Landlord's opinion, create
any difficulty with other contractors or labor engaged by Tenant or Landlord or
others or would in any way disturb harmonious labor relations in the
construction, maintenance or operation of the Building or any part thereof.
ARTICLE 15
Repairs and Maintenance
15.01 Subject to Landlord's obligations under Section 15.02, Tenant
shall take good care of the interior of the Demised Premises and the fixtures
and appurtenances therein, and at its sole cost and expense shall make all
repairs thereto, as and when needed to preserve them in good working order and
condition. In addition, Tenant, at its expense, shall promptly make all repairs,
ordinary or extraordinary, interior or exterior, structural or otherwise, in and
about the Demised Premises and the Building as shall be required by reason of
(i) the performance or existence of work by Tenant necessary to suit the Demised
Premises to Tenant's initial occupancy or Tenant's work, (ii) the installation,
use of operation of Tenant's property in the Demised Premises, (iii) the moving
of Tenant's property in or out of the Building, or (iv) the misuse or neglect of
Tenant or any of its employees, agents or contractors. Tenant shall not be
responsible, and Landlord shall be responsible, for any repairs to the Demised
Premises as are required by reason of Landlord's neglect or other fault in the
manner of performing any work as part of Landlord's Work or Tenant's work which
may be undertaken by Landlord for Tenant's account or as are otherwise required
by reason of neglect or other fault of Landlord or its employees, agents or
contractors.
15.02 Landlord shall keep and maintain the Building and its fixtures,
appurtenances, systems (including, HVAC, plumbing and electrical systems
providing service to the Demised Premises) and facilities serving the Demised
Premises and the Common Areas, in good working order, condition and repair and
shall make all structural repairs, interior and exterior, except as indicated in
Section 15.01, as and when needed in the Building, except for those repairs for
which Tenant is responsible pursuant to any
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other provisions of this Lease, and subject to all other provisions of this
Lease, including but not limited to the provisions of Article 21.
15.03 Except as expressly otherwise provided In this Lease, Landlord
shall have no liability to Tenant by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord or any tenant making
any repairs or changes or performing maintenance services, whether or not
Landlord is required or permitted by this Lease or by law to make such repairs
or changes or to perform such services in or to any portion of the Building or
the Demised Premises, or in or to the fixtures, equipment or appurtenances of
the Building or the Demised Premises, provided that Landlord shall be reasonably
diligent with respect thereto and shall perform such work, except in case of
emergency, at times reasonably convenient to Tenant and otherwise in such manner
and to the extent practical as will not unreasonably interfere with Tenant's use
and occupancy of the Demised Premises.
ARTICLE 16
Electrical Energy
16.01 Landlord shall furnish electrical energy for use by the Tenant in
the Demised Premises for lighting and operation of its business machines.
16.02 Tenant shall pay to Landlord such amounts and at such times as is
set forth in Exhibit "E", attached hereto and made a part hereof.
16.03 Landlord shall in no way be liable for any failure of or defect
in the character or supply of electrical energy supplied to the Demised
Premises.
16.04 Tenant shall at its expense, install all lamps (including, but
not limited to, incandescent and fluorescent), starters and ballasts used in the
Demised Premises.
ARTICLE 17
Heat, Ventilation and Air Conditioning
17.01 Landlord shall maintain and operate the heating, ventilation and
air conditioning systems in the Building and shall furnish heat, ventilation and
air conditioning in the Demised Premises through such systems during regular
business hours, but not before 8:00 A.M., or after 6:00 P.M. on business days
(which term is used herein to mean all days except Saturdays, Sundays and the
days observed by the Federal or the Connecticut government as legal holidays).
If Tenant shall require ventilating and air conditioning service or heating
service at any other time (hereinafter called "after hours", Landlord shall
furnish after hours ventilating and air conditioning service or heating service
upon reasonable advance notice from Tenant, and Tenant shall pay Landlord's then
established charges therefor on Landlord's demand, which charge is currently
$11.00 per hour. Such charge may be increased by landlord as the costs to
Landlord of providing such after hours service increases from time to time but
such charges shall not exceed 121% of Landlord's actual cost of labor, utilities
and equipment depreciation used in providing such after hours air conditioning
or heating service. If any of the other tenants of the Building shall request
and receive after hours heating or air conditioning service pursuant to
Landlord's obligation to provide the same to them, at the same time as Tenant,
only that equitably pro-rated portion of such labor and utilities costs as shall
be incurred for such common service shall be charged to Tenant.
17.02 Landlord will not be responsible for the failure of the air
conditioning system to meet performance specifications as stated in the "HVAC
Specifications" annexed hereto as Exhibit D, if such failure results from the
occupancy of the Demised Premises with more than an average of one person for
each 100 square feet or if the Tenant installs and operates machines and
appliances, the installed electrical load of which when combined with the load
of all lighting fixtures exceeds seven watts per square foot of floor area in
any one room or other area. If due to use of the Demised Premises in a manner
exceeding the aforementioned occupancy and electrical load criteria, or due to
rearrangement of partitioning after the initial preparation of the Demised
Premises, interference with normal operation of the air conditioning in the
Demised Premises results, necessitating changes in the air conditioning system
servicing the Demised Premises, such changes shall be made by Landlord upon
written notice to Tenant at Tenant's sole cost and expense. Tenant agrees to
lower and close window coverings when necessary because of the sun's position
whenever the air conditioning system is in operation, and Tenant agrees at all
times to cooperate fully with Landlord and to abide by all the regulations and
requirements which Landlord may prescribe for the proper functioning and
protection of the air conditioning system. Landlord, throughout the term of this
Lease, shall have free and unrestricted access to any and all air conditioning
facilities in the Demised Premises. Landlord shall not be required to furnish,
and Tenant shall not be entitled to receive, any air conditioning during any
period wherein Tenant shall be in default, beyond applicable notice and grace
periods contained herein for the cure thereof, in any material provision of this
Lease.
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ARTICLE 18
Landlord's Other Services
18.01 Landlord, at its expense, shall provide public elevator
service, by elevators serving the floors on which the Demised Premises are
situated as specified and shown in the Building plans and specifications,
during regular hours of business days, and shall have at least one passenger
elevator subject to call at all other times. The elevators, or any of them, may
be operated by automatic control and/or by manual control, as Landlord shall
determine at any time or from time to time. Landlord shall not be obligated to
furnish an operator for any automatic elevator and shall have no liability to
Tenant for discontinuing the service of any operator theretofore furnished. If
Tenant shall require Saturday or after hours service of elevators or of the
loading area in the Building under such circumstances as in Landlord's
reasonable judgment, will require service or attention by Landlord's personnel,
Tenant shall pay Landlord, on demand, a reasonable charge attributable to such
service or attention.
18.02 Provided that Tenant shall keep the interior of the Demised
Premises in good order, Landlord, at its expense, shall cause the Demised
Premises, including the exterior and the interior of the windows thereof
(subject to Tenant maintaining unrestricted access to such windows), to be
cleaned in accordance with the standards set forth in the attached Exhibit "B"
(the "Cleaning Schedule"). Tenant acknowledges that Landlord shall have no
responsibility to clean the kitchen area of the Demised Premises. Tenant shall
pay to Landlord on demand the costs incurred by Landlord for (a) cleaning work
in the Demised Premises or the Building required because of (i) misuse or
neglect on the part of the Tenant or its employees or visitors, (ii) use of
portions of the Demised Premises for preparation, serving, or consumption of
food or beverages, reproducing operations, private lavatories or toilets or
other special purposes requiring greater or more difficult cleaning work than
office areas, (iii) unusual quantity of interior glass surfaces, (iv)
non-standard building materials or finishes installed by Tenant or at its
request, (v) increases in frequency or scope in any of the items set forth in
Exhibit "B" as shall have been requested by Tenant, and (b) removal from the
Demised Premises and the Building of (i) so much of any refuse and rubbish of
Tenant as shall exceed that normally accumulated daily in the routine of
ordinary business office occupancy, and (ii) all of the refuse and rubbish of
Tenant's business machines and the refuse and rubbish of any other eating
facilities requiring special handling (known as "wet garbage"). Landlord and
its cleaning contractor and their employees shall have after hours access to
the Demised Premises and the use of Tenant's light, power and water in the
Demised Premises as may be reasonably required for the purpose of cleaning the
Demised Premises.
18.03 Landlord, at its expense, shall furnish adequate hot and cold
water for sink, drinking, lavatory, toilet, and ordinary cleaning purposes to
the plumbing fixtures of central Facilities of the Building serving the Demised
Premises.
18.04 Landlord shall keep and maintain the public areas and the
public facilities of the Building clean and in good order and the sidewalks,
driveways and parking areas adjoining the Building shall be kept in good repair
and free of accumulation of snow and ice or unlawful obstructions.
18.05 Landlord, subject to its prior written approval, at its
expense, and on Tenant's request, shall maintain listings on the Building
directory of the names of Tenant, its organizational divisions and any other
person or business entities lawfully occupying the Demised Premises or any part
thereof, and the names of any of their officers and employees, provided that
the names so listed shall not take up more than Tenant's Proportionate Share of
the space on the Building directory, the size of which shall be determined by
Landlord. Landlord and Tenant agree that, initially, such Tenant's
Proportionate Share shall entitle Tenant to the use of a total of twelve (12)
directory lines, allocated as follows: four (4) lines to display Tenant's
corporate name on the directory board in the Building; one (1) line to display
Tenant's corporate name on the main directory board in the building in the
Complex known as One Landmark Square; and the remaining seven (7) lines may be
used for individual names of Tenant's executives or employees, as selected by
Tenant. The listing of any name other than that of Tenant on the Building
directory or on any of the doors of the Demised Premises shall not be deemed to
vest in the person or entity so listed any right or interest in this Lease or
in the Demised Premises or to constitute the consent of Landlord required under
Article 10, or a waiver thereof. Notwithstanding anything to the contrary
herein, initial listings on the Building directory shall be at Landlord's
expense, and any subsequent changes and/or additions shall be at Tenant's
expense.
18.06 Landlord reserves the right, without any liability to Tenant,
except as otherwise expressly provided in this Lease, and without being in
breach of any covenant of this Lease, to stop, interrupt or suspend service of
any of the heating, ventilating, air conditioning, electric, sanitary, elevator
or other Building systems serving the Demised Premises, or the rendition of any
of the other services required of Landlord under this Lease, whenever and for
so long as may be necessary, by reason of accidents, emergencies, strikes or
the making of repairs or changes which Landlord is required by law to make or
in good faith deems advisable, or by reason of difficulty in securing proper
supplies of fuel, steam, water, electricity, labor or supplies, or by reason of
any other cause beyond Landlord's reasonable control, including Governmental
restrictions on the use of materials or the use of any of the Building systems.
In each instance Landlord shall exercise reasonable diligence to eliminate the
cause of stoppage and to effect
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restoration of service and shall give Tenant reasonable notice, when
practicable, of the commencement and anticipated duration of such stoppage, and
if any work is required to be performed in or about the Demised Premises for
such purpose, the provisions of Section 15.03 shall apply. Tenant shall not be
entitled to any diminution or abatement of rent or other compensation nor shall
this Lease or any of the obligations of Tenant be affected or reduced by reason
of the interruption, stoppage or suspense of any of the Building systems or
services arising out of the causes set forth in this Section.
ARTICLE 19
Access, Changes In Building Facilities, Name
19.01 All walls, windows and doors bounding the Demised Premises
(including exterior Building walls, corridor walls and doors and any corridor
entrance), except the inside surfaces thereof, any terraces or roofs adjacent
to the Demised Premises, and any space in or adjacent to the Demised Premises
used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other
utilities, sinks or other Building facilities, and the use thereof, as well as
access thereto through the Demised Premises for the purposes of operation,
maintenance, decoration and repair are reserved to Landlord; provided that
Landlord shall use reasonable efforts to avoid material interference with
Tenant's business in exercising such right of access.
19.02 Tenant shall permit Landlord to install, use and maintain
pipes, ducts and conduits within or through the Demised Premises, or through
the walls, columns and ceilings therein, provided that the installation work is
performed at such times and by such methods as will not unreasonably interfere
with Tenant's use and occupancy of the Demised Premises, or damage the
appearance thereof, reduce the floor area thereof by more than two percent (2%)
(without an appropriate adjustment in rent) or materially affect Tenant's
layout. Where access doors are required for mechanical fixtures in or adjacent
to the Demised Premises, Landlord shall furnish and install such access doors
and confine their location, wherever practical to closets, coat rooms, toilet
rooms, corridors and kitchen or pantry rooms. Landlord and Tenant shall
cooperate with each other in the location of Landlord's and Tenant's facilities
requiring such access doors.
19.03 Landlord or Landlord's agents or employees shall have the
right upon request made on reasonable advance notice to Tenant, or to an
authorized employee of Tenant at the Demised Premises, to enter and/or pass
through the Demised Premises or any part thereof, at reasonable times during
reasonable hours, (i) to examine the Demised Premises or to show them to the
fee owners, lessors of superior leases, holders of mortgages, insurance
carriers, or prospective purchasers, mortgagees or lessees of the land or the
Building, and (ii) for the purpose of making such repairs or changes or doing
such repainting in or to the Demised Premises or in or to the Building or its
facilities as may be provided for by this Lease or as Landlord may deem
necessary or as Landlord may be required to make by law or in order to repair
and maintain the Building or its fixtures or facilities. Landlord shall be
allowed to take all materials into and store such materials upon the Demised
Premises which may be required for such repairs, changes, repainting or
maintenance. Landlord's rights under this Section shall be exercised in such a
manner as will not unreasonably interfere with Tenant's use and occupancy of the
Demised Premises. Landlord, its agents or employees, shall also have the right
to enter on and/or pass through the Demised Premises, or any part thereof
without notice at such times as such entry shall be required by circumstances of
emergency affecting the Demised Premises or the Building.
19.04 During the period of 9 months prior to the Expiration Date
Landlord may exhibit the Demised Premises to prospective tenants upon the same
notice and subject to the same conditions as are provided in Section 19.03. If,
during the last month of the term hereof, Tenant shall have removed all of
Tenant's property therefrom, Landlord may, upon at least 48 hours notice to
Tenant, enter and alter, renovate and redecorate the Demised Premises without
incurring any liability to Tenant therefor.
19.05 Landlord reserves the right, at any time after completion of
the Building, without incurring any liability to Tenant therefor, to make such
changes in or to the Building and the fixtures and equipment thereof, as well
as in or to the street entrances, halls, passages, elevators, and stairways
thereof, as it may deem necessary or desirable; provided that there be no
unreasonably lengthy interference with the use of the Demised Premises or in
the services furnished to the Demised Premises, and no reduction in the area of
the Demised Premises in excess of two percent without an appropriate adjustment
in rent, nor material reduction in the number of parking spaces available for
Tenant's use (unless Landlord provides substitute parking within reasonable
walking distance from the Building).
19.06 The Landlord reserves the right to select a name for the
Building and to make such change or changes of name as it may deem appropriate
during Tenant's occupancy (but only upon thirty (30) days' written notice), and
Tenant agrees not to refer to the Building by any other name than (i) the name
selected by Landlord, or (ii) the postal address approved by the U.S. Post
Office.
19.07 Landlord may limit and restrict, as provided in the Rules and
Regulations attached hereto, the means of access to the Demised Premises
outside of normal business hours, so long as Tenant's employees and authorized
agents have reasonable access to all parts of the Demised Premises. Tenant
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and its agents, employees and visitors shall be entitled to access from the
Demised Premises to, and the right to use, the toilets, lavatories and powder
rooms only on the floor (or floors) on which the Demised Premises are located.
ARTICLE 20
Shoring, Notice of Accidents, etc.
20.01 If an excavation or other substructure work shall be
undertaken or authorized upon land adjacent to the Building or in the vaults
beneath the Building or in subsurface space adjacent to the said vaults, Tenant,
without liability on the part of the Landlord therefor, shall afford to the
person causing or authorized to cause such excavation or other substructure work
license to enter upon the Demised Premises for the purpose of doing such work as
such person shall deem necessary to protect or preserve any of the walls or
structures of the Building or surrounding lands from injury or damage and to
support the same by proper foundations, pinning and/or underpinning, and, except
in case of emergency, if so requested by Tenant such entry shall be accomplished
in the presence of a representative of Tenant, who shall be designated by Tenant
promptly upon Landlord's request. The said license to enter shall be afforded by
Tenant without any claim for damages or indemnity against the Landlord and
Tenant shall not be entitled to any diminution or abatement of rent on account
hereof.
20.02 Tenant shall give notice to Landlord promptly after Tenant
learns of (i) any accident in or about the Demised Premises or the Building,
(ii) any fire in the Demised Premises, (iii) all damages to or defects in the
Demised Premises, including the fixtures, equipment and appurtenances thereof,
for the repair of which Landlord might be responsible or which constitutes
Landlord's property, and (iv) all damage to or defects in any parts of the
Building's sanitary, electrical, heating, ventilating, air conditioning,
elevator and other systems located in or passing through the Demised Premises.
ARTICLE 21
Non-Liability and Indemnification
21.01 Neither Landlord nor any agent or employee of Landlord shall
be liable to Tenant, its employees, agents, contractors and licensees, and
Tenant shall hold Landlord harmless for any injury or damage occurring on or
about the Demised Premises during the term of this Lease to Tenant or to any
other person or for any damage to, or loss (by theft or otherwise) of, any
property of Tenant and/or of any other person, irrespective of the cause of such
injury, damage or loss, unless (with respect to personal injury only) such
injury was caused by or due to the negligence of Landlord, its agents or
employees without contributory negligence on the part of Tenant; it being
understood that no property, other than such as might normally be brought upon
or kept in the Demised Premises as incident to the reasonable use of the Demised
Premises for the purposes herein permitted, will be brought upon or be kept in
the Demised Premises. Landlord shall not be liable in any event for loss of, or
damage to, any property entrusted to any of Landlord's employees or agents by
Tenant without Landlord's specific written consent.
21.02 Landlord and Tenant shall defend, indemnify and save each
other harmless and their respective agents and employees against and from all
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable architects' and attorneys' fees, which may be
imposed upon or incurred by or asserted against such other party and/or its
agents or employees by reason of any of the following occurring during the term
of this Lease, or during any period of time prior to the Commencement Date that
Tenant may have been given access to or possession of all or any part of the
Demised Premises pursuant to Section 3.03:
(a) Any work or thing done in or about the Demised Premises or
any part thereof by or at the instance of the indemnifying party, its agents,
contractors, subcontractors, servants, employees, licensees or invitees;
(b) any negligence or otherwise wrongful act or omission on
the part of the indemnifying party or any of its agents, contractors,
subcontractors, servants, employees, subtenants, licensees or invitees;
(c) any accident, injury or damage to any person or property
occurring in, on or about (1) the Demised Premises or any part thereof (with
regard to Tenant) or (2) the Common Areas (with regard to Landlord);
(d) any failure on the part of the indemnifying party to
perform or comply with any of the covenants, agreements, terms, provisions,
conditions or limitations contained in this Lease on its part to be performed or
complied with.
In case any action or proceeding is brought against
the party to be indemnified by reason of any such claim, the indemnifying party
upon written notice from the other, shall at the indemnifying party's expense
resist or defend such action or proceeding by counsel approved by the other
party in writing, which approval such other party shall not unreasonably
withhold.
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21.03 Whenever either party shall be obligated under the terms of
this Lease to indemnify the other party, the indemnifying party may select
legal counsel (subject to the consent of the indemnified party, which consent
shall not be unreasonably withheld) and shall keep the indemnified party fully
apprised at all times of the status of such defense. Legal counsel of the
insurer for either party is hereby deemed satisfactory to both parties.
21.04 Except as otherwise expressly provided herein, this Lease and
the obligations of Tenant to pay rent hereunder and perform all of the other
covenants, agreements, terms, provisions and conditions hereunder on the part
of Tenant to be performed shall in no way be affected, impaired or excused
because Landlord is unable to fulfill any of its obligations under this Lease
or is unable to supply or is delayed in supplying any service, express or
implied, to be supplied or is unable to make or is delayed in supplying any
equipment or fixtures if Landlord is prevented or delayed from so doing by
reason of any cause whatsoever beyond Landlord's reasonable control, including,
but not limited to, Acts of God, strikes, labor troubles, governmental
preemption in connection with a national emergency or by reason of any rule,
order or regulation of any department or subdivision thereof of any
governmental agency or by reason of the conditions of supply and demand which
have been or are affected by war, hostilities or other similar emergency;
provided that Landlord shall in each instance exercise reasonable diligence to
effect performance when and as soon as possible.
21.05 Notwithstanding any contrary provisions of this Lease
whatsoever, including, without limitation, those pertaining to use and
Permitted Use, Tenant shall not use, or permit the use of the Demised Premises,
the Building or the complex so as to create or result in, directly or
indirectly, (a) any sudden or gradual spill, leak, discharge, escape, seepage,
infiltration, abandonment, dumping, disposal or storage (except in compliance
with applicable laws) of any hazardous or industrial waste, substance or
contamination, effluent, sewage, pollution or other detrimental or deleterious
material or substance (including without limitation asbestos), or the disposal,
storage or abandonment on the Complex of any material, tank or container
holding or contaminated by any of the foregoing residues thereof, or the
installation of any material or product containing or composed of any of the
foregoing, in, on, from, under or above the Complex (the foregoing occurrences
being hereinafter collectively called "Environmental Hazard"), or (b) any
violation, or state of facts or condition which would result in a violation, of
any Federal, State or local statute, law, code, rule, regulation or order
applicable to any Environmental Hazard (the foregoing being hereinafter
collectively call "Legal Violation"). In the event of the violation of the
foregoing by Tenant, in addition to all other rights and remedies of Landlord
under this Lease, regardless of when the existence of the Environmental Hazard
or Legal Violation is determined, and whether during the Term or after the
Expiration Date, (1) Tenant shall, immediately upon notice from Landlord, at
Tenant's sole cost and expense, at Landlord's option, either (x) take all
action necessary to test, identify and monitor the Environmental Hazard and to
remove the Environmental Hazard from the Complex and dispose of the same and
restore the Complex to the condition existing prior to such removal, and/or to
remedy any Legal Violation, all in accordance with applicable Federal, State
and local statutes, laws, codes, rules, regulations or orders or (y) reimburse
Landlord for all costs and expenses incurred by Landlord for engineering or
environmental consultant or laboratory services, in testing, investigating,
identifying and monitoring the Environmental Hazard and in removing and
disposing of the Environmental Hazard and in restoring the Complex, and/or in
remedying any Legal Violation, and (ii) Tenant shall, and hereby does agree to
defend with legal counsel acceptable to Landlord, indemnify and save harmless
Landlord and Others in Interest against and from all liabilities, obligations,
damages, penalties, claims, costs, charges and expenses, including architects'
and attorneys' fees and disbursements which may be imposed upon or incurred by
or asserted against Landlord and Others in Interest, whether by any
governmental authority, Tenant or other third party, by reason of any violation
or alleged violation of any of the foregoing provisions of this Section.
Notwithstanding the foregoing, Tenant shall have no responsibility nor
liability to Landlord on account of any Environmental Hazard or Legal Violation
relating to those portions of the Complex or the Building outside of the
Demised Premises unless same (i) was caused, directly or indirectly, by Tenant
or its employees, agents, licensees or invitees or (ii) resulted, directly or
indirectly from conditions within the Demised Premises.
Landlord hereby warrants and represents to Tenant that Landlord has
not received any written notice of (i) any Legal Violation with respect to the
Building or the Demised Premises, or (i) the existence of any Environmental
Hazard at the Building or the Demised Premises.
ARTICLE 22
Destruction or Damage
22.01 If the Demised Premises and/or access thereto shall be
partially or totally damaged or destroyed by fire or other casualty, then,
Landlord shall, subject to its rights under Section 22.03 hereof, repair such
damage and restore and rebuild the Demised Premises and/or access thereto as
nearly as may be reasonably practical to its condition and character
immediately prior to such damage or destruction, with reasonable diligence
after notice to it of the damage or destruction.
22.02 If the Demised Premises and/or access thereto shall be
partially or totally damaged or destroyed by fire or other casualty not
attributable to the fault, negligence or misuse of the Demised
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Premises by the Tenant, its agents or employees under the provisions of this
Lease, the rents payable hereunder shall be abated to the extent that the
Demised Premises shall be rendered untenantable from the date of such damage or
destruction to the date the damage shall be substantially repaired, restored or
rebuilt. Should Tenant reoccupy a portion of the Demised Premises during the
period that the repair, restoration, or rebuilding is in progress and prior to
the date that the same are made completely tenantable, rents allocable to such
portion shall be payable by Tenant from the date of such occupancy to the date
the Demised Premises are made tenantable.
22.03 In case the Building shall be so damaged by such fire or
other casualty that substantial renovation, reconstruction or demolition of the
Building shall, in Landlord's sole opinion, be required (whether or not the
Demised Premises shall have been damaged by such fire or other casualty), then
Landlord may, at its option, terminate this Lease and the term and estate
hereby granted, by notifying Tenant in writing of such termination, within 60
days after the date of such damage. If at any time prior to Landlord giving
Tenant the aforesaid notice of termination or commencing the repair and
restoration pursuant to Section 22.01, the holder of a superior mortgage or any
person claiming under or through the holder of such superior mortgage takes
possession of the Building through foreclosure or otherwise, such holder or
person shall have a further period of 60 days from the date of so taking
possession to terminate this Lease by appropriate written notice to Tenant. In
the event that such a notice of termination shall be given pursuant to either
of the two immediately preceding sentences, this Lease and the term and estate
hereby granted shall expire as of the date of such termination with the same
effect as if that were the date hereinbefore set for the expiration of the term
of this Lease, and the fixed and additional rent due and to become due
hereunder shall be apportioned as of such date if not earlier abated pursuant
to Section 22.02. Nothing contained in this Section shall relieve Tenant from
any liability to Landlord or to its insurers in connection with any damage to
the Demised Premises or the Building by fire or other casualty if Tenant shall
be legally liable in such respect.
22.04 No damages, compensation or claim shall be payable by Landlord
for inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises or of the Building pursuant
to this Article. Landlord shall use its best efforts to effect such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's use and occupancy.
22.05 Landlord will not carry insurance of any kind on Tenant's
property, and, except as provided by law or its breach of any of its
obligations hereunder, shall not be obligated to repair any damage thereto or
replace the same.
22.06 The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises
by fire or other casualty, and any law to the contrary, now or hereafter in
force, shall have no application in such case.
22.07 Notwithstanding any of the foregoing provisions of this
Article, if Landlord or the holder of any superior mortgage shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Demised Premises or the Building by
fire or other cause, by reason of some action or inaction on the part of the
Tenant or any of its employees, agents or contractors, then, without prejudice
to any other remedies which may be available against Tenant, the abatement of
Tenant's rents provided for in this Article shall not be effective to the
extent of the uncollected insurance proceeds.
ARTICLE 23
Eminent Domain
23.01 In the event that the land, Building or any part thereof or
the Demised Premises or any part thereof shall be taken in condemnation
proceedings or by the exercise of any right of eminent domain or by agreement
between the Landlord on the one hand and any governmental authority authorized
to exercise such right on the other hand, Landlord shall be entitled to collect
from any condemnor the entire award or awards that may be made in any such
proceeding without deduction therefrom for any estate hereby vested in or owned
by Tenant, to be paid out as in this Article provided. Tenant hereby expressly
assigns to Landlord all of its right, title and interest in or to every such
award and also agrees to execute any and all further documents that may be
required in order to facilitate the collection thereof by Landlord.
23.02 At any time during the term of this Lease if title to the
whole or substantially all of the land, Building and/or Demised Premises shall
be taken in condemnation proceedings or by the exercise of any right of eminent
domain or by agreement between the Landlord on the one hand and any
governmental authority authorized to exercise such right on the other hand,
this Lease shall terminate and expire on the date of such taking and the fixed
rent and additional rent provided to be paid by Tenant shall be apportioned and
paid to the date of such taking. For the purposes of this Article
"substantially all of the land, Building and/or Demised Premises" shall be
deemed to have been taken if the remaining portion of such land, Building or
Demised Premises not so taken cannot reasonably or practicably be repaired or
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reconverted so as to permit the use thereof for substantially the same purposes
for which such land, Building or Demised Premises were used immediately prior
to such taking.
23.03 However, if substantially all of the land or Building is not
so taken and if only a part of the entire Demised Premises shall be so taken,
this Lease nevertheless shall continue in full force and effect, except that
Tenant may elect to terminate this Lease if that portion of the Demised
Premises then occupied by Tenant shall be reduced by more than 25%. Tenant
shall give notice of such election to Landlord not later than thirty (30) days
after (i) notice of such taking is given by Landlord to Tenant, or (ii) the
date of such taking, whichever occurs first. Upon the giving of such notice by
Tenant this Lease shall terminate on the date of service of Tenant's notice and
the fixed rent and additional rent due and to become due, shall be prorated and
adjusted as of the date of the taking. If Tenant fails to give such notice upon
such partial taking, and this Lease continues in force as to any part of the
Demised Premises not taken, the rents apportioned to the part taken shall be
prorated and adjusted as of the date of taking and from such date the fixed
rent and additional rent shall be reduced to the amount apportioned to the
remainder of the Demised Premises.
23.04 In the event of any such taking of less than the whole of the
Building which does not result in a termination of this Lease, or in the event
of such a taking of all or any part of the Demised Premises which does not
result in a termination of this Lease, Landlord, at its expense, shall proceed
with reasonable diligence to repair, alter and restore the remaining parts of
the Building and the Demised Premises to substantially the same condition as it
was in immediately prior to such taking to the extent that the same may be
feasible, so as to constitute a tenantable Building and Demised Premises,
provided that Landlord's liability under this Section shall be limited to the
proportionate amount received by Landlord as an award arising out of such
taking.
ARTICLE 24
Surrender
24.01 On the last day of the term of this Lease, or upon any earlier
termination of this Lease, or upon any reentry by Landlord upon the Demised
Premises, Tenant shall quit and surrender the Demised Premises to Landlord
broom clean, in the same condition it was delivered to Tenant on the
Commencement Date, except for ordinary wear and tear and damage by
condemnation, fire or other insured casualty; Tenant shall remove Tenant's
property subject to the provisions of Article 14 hereof; and Tenant shall
surrender to Landlord all keys to offices, lavatories and mail boxes and all
Building identification and parking cards possessed by Tenant's employees.
24.02 In the event Tenant remains in possession of the Demised
Premises after the termination of this Lease without the execution by Landlord
and Tenant of a new lease, Tenant, at the option of Landlord, shall at
Landlord's option, be deemed to be occupying the Demised Premises as a tenant
from month to month, at a monthly rental equal to one hundred fifty (150%)
percent of the fixed rent and additional rent payable during the last month of
the term, subject to all of the other terms of this Lease insofar as the same
are applicable to a month to month tenancy.
24.03 In the event Tenant remains in possession of the Demised
Premises following the termination of this Lease, Tenant hereby indemnifies and
agrees to hold Landlord harmless from and against any loss, cost, liability,
claim, damage, fine, penalty, and expense, including attorneys' fees and
disbursements, resulting from such delay by Tenant in surrendering the Demised
Premises upon the termination of this Lease as provided in this Article 24,
including without limitation, any claims made by any succeeding tenant or
prospective tenant based upon such delay. In the event Tenant remains in
possession of the Demised Premises for any period of time following the
Expiration Date, Tenant shall be in default, and in addition to the rent
provided in Section 24.02 hereof, Landlord shall be entitled to all of its
rights and remedies provided in this Lease.
ARTICLE 25
Conditions of Limitation
25.01 (a) This Lease and the term and estate hereby granted are
subject, inter alia, to the limitation that whenever Tenant shall make an
assignment for the benefit of creditors, or shall file a voluntary petition
under any bankruptcy or insolvency law, or an involuntary petition alleging an
act of bankruptcy or insolvency is filed against Tenant, or whenever a petition
shall be filed by or against Tenant seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or any future federal bankruptcy act or any other present or future
applicable federal, state or other statute or law, or shall seek or consent to
or acquiesce in the appointment of any trustee, receiver or liquidator of
Tenant or of all or any substantial part of its properties, or whenever a
permanent or temporary receiver of Tenant or of or for the property of Tenant
shall be appointed, or if Tenant shall plead bankruptcy or insolvency as a
defense in any action or proceeding, then, Landlord (a) at any time after
receipt of notice of the occurrence of any such event, or (b) if such event
occurs without the acquiescence of Tenant, at any time after event continues
for 60 days, may give Tenant a notice of intention to end the term of this
Lease at the expiration of five (5) days from the service of such notice of
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intention, and upon the expiration of said five (5) day period this Lease and
the term and estate hereby granted, whether or not the term shall theretofore
have commenced, shall terminate with the same effect as if that day were the
Expiration Date, but Tenant shall remain liable for damages as provided in
Article 27.
(b) If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et
seq. (the Bankruptcy Code(M)), any and all consideration payable or otherwise
to be delivered in connection with such assignment shall be paid or delivered
to Landlord, shall be and remain the exclusive property of Landlord and shall
not constitute property of Tenant or of the estate of Tenant within the meaning
of the Bankruptcy Code. Any and all monies and other consideration constituting
Landlord's property under the preceding sentence not paid or delivered to
Landlord shall be held in trust for the benefit of Landlord and be promptly
paid to or turned over to Landlord.
(c) If, pursuant to the provisions of the Bankruptcy
Code, Tenant assumes this Lease and proposes to assign the same to any person
or entity who shall have made a bona fide offer to accept an assignment of this
Lease on terms acceptable to Tenant then notice of such proposed assignment,
setting forth (i) the name and address of such person, (ii) all of the terms
and conditions of such offer, and (iii) the adequate assurance to be provided
Landlord to assure such person's future performance under this Lease,
including, without limitation, the assurance referred to in Section 365(b)(3)
of the Bankruptcy Code, shall be given to Landlord by Tenant no later than
twenty (20) days after receipt by Tenant but in any event no later than ten
(10) days prior to the date that approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right and option,
subject to all legal restrictions under the Bankruptcy Code and to be exercised
by notice to Tenant given at any time prior to the effective date of such
proposed assignment, to accept an assignment of this Lease upon the same terms
and conditions and for the same consideration, if any, as the bona fide offer
made by such person, less any brokerage commissions which may be payable out of
the consideration to be paid by such person for the assignment of this Lease.
25.02 This Lease and the term and estate hereby granted are subject
to the further limitation that:
(a) whenever Tenant shall default in the payment of any
installment of fixed rent, or in the payment of any additional rent, on any day
upon which the same shall be due and payable and such default shall continue
for ten (10) days after the date on which the same was due and payable,
provided that Landlord shall give written notice to Tenant of such nonpayment
not more than twice in any lease year, and thereupon and in such event Tenant
shall not be in default until ten days after Landlord shall have given such
notice; or
(b) whenever Tenant shall do or permit anything to be done,
whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Tenant within fifteen (15) days after Landlord shall have given to the Tenant a
notice specifying the same, or, in the case of a happening or default which
cannot with due diligence be cured within a period of fifteen (15) days and the
continuance of which for the period required for cure will not subject Landlord
to the risk of criminal liability or termination of any superior lease or
foreclosure of any superior mortgage, if Tenant shall not duly institute within
such fifteen (15) day period and promptly and diligently prosecute to
completion all steps necessary to remedy the same; or
(c) whenever any event shall occur or any contingency shall
arise whereby this Lease or any interest therein or the estate hereby granted
or any portion thereof or the unexpired balance of the term hereof would by
operation of law or otherwise, devolve upon or pass to any person, firm or
corporation other than Tenant, except as expressly permitted in Article 10.
Then in any such event at any time thereafter,
Landlord may give to Tenant a notice ending the term of this Lease on the date
of the service of such notice and thereupon this Lease and the term and estate
hereby granted, whether or not the term has theretofore commenced, shall
terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 27.
ARTICLE 26
Re-entry by Landlord - Default Provisions
26.01 If this Lease shall terminate for any reason whatsoever,
Landlord or Landlord's agents and employees may without further notice
immediately or at any time thereafter enter upon and reenter the Demised
Premises or any part thereof, and possess or repossess itself thereof either by
summary dispossess proceedings, ejectment or by any suitable action or
proceeding at law, or by agreement, or by force and otherwise and may
dispossess and remove Tenant and all other persons and property from the
Demised Premises without being liable to indictment, prosecution or damage
therefor, and may repossess the Demised Premises and the right to receive all
rental income again as and of its first estate
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and interest therein. The words "enter" or "reenter", "possess" or "repossess"
as herein used, are not restricted to their technical legal meaning. In the
event of any termination of this Lease, or of reentry by summary dispossess
proceedings, ejectment or by any suitable action or proceeding at law, or by
agreement, or by force or otherwise by reason of default hereunder on the part
of Tenant, Tenant shall thereupon pay to Landlord a fixed rent and additional
rent due up to the time of such termination of this Lease, or such recovery of
possession of the Demised Premises by Landlord, as the case may be, and shall
also pay to Landlord damages as provided in Article 27.
26.02 In the event of any breach or threatened breach by Tenant of
any of the agreements, terms, covenants or conditions contained in this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or in equity or by
statute or otherwise as though reentry, summary proceedings, and other remedies
were not provided for in this Lease.
26.03 Each right and remedy of Landlord provided for in this Lease
shall be cumulative and shall be in addition to every other right or remedy
provided for in this Lease or now or hereafter existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the exercise by
Landlord of any one or more of the rights or remedies provided for in this Lease
or now or hereafter existing at law or in equity or by statute or otherwise
shall not preclude the simultaneous or later exercise by Landlord of any or all
other rights or remedies provided for in this Lease or now or hereafter existing
at law or in equity or by statute or otherwise.
26.04 If this lease shall terminate under the provisions of Article
25, or if Landlord shall reenter the Demised Premises under the provisions of
this Article, or in the event of the termination of this Lease or of reentry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
advance rent, security or otherwise, but such monies shall be credited by
Landlord against any fixed rent or additional rent due from Tenant at the time
of such termination or reentry or, at Landlord's option, against any damages
payable by Tenant under Article 27 or pursuant to law.
ARTICLE 27
Damages
27.01 If this Lease is terminated under the provisions of Article
25, or if Landlord shall reenter the Demised Premises under the provisions of
Article 26 or in the event of the termination of this Lease, or of reentry by
summary dispossess proceedings, ejectment or by any suitable action or
proceeding at law, or by agreement, or by force or otherwise, by reason of
default hereunder on the part of Tenant, Tenant shall pay Landlord as damages,
at the election of Landlord, either:
(a) on demand, a sum which at the time of such termination of
this Lease or at the time of any such reentry by Landlord, as the case may be,
represents the excess of (i) the aggregate of the fixed rent and the additional
rent payable hereunder which would have been payable by Tenant (conclusively
presuming the additional rent to be the same as was payable for the year
immediately preceding such termination) for the period commencing with such
earlier termination of this Lease or the date of such reentry, as the case may
be, and ending with the Expiration Date, had this Lease not so terminated or
had Landlord not so reentered the Demised Premises, over (ii) the aggregate
rental value (calculated as of the date of such termination or reentry) of the
Demised Premises for the same period; or
(b) sums equal to the fixed rent and the additional rent (as
above presumed) payable hereunder which would have been payable by Tenant had
this Lease not so terminated, or had Landlord not so reentered the Demised
Premises, payable quarterly, in advance, but otherwise upon the terms therefor
specified herein following such termination or such reentry and until the
Expiration Date, provided, however, that if Landlord shall relet the Demised
Premises or any portion or portions thereof during said period, Landlord shall
credit Tenant with the net rents received by Landlord from such reletting, such
net rents to be determined by first deducting from the gross rents as and when
received by Landlord from such reletting the expenses incurred or paid by
Landlord in terminating the Lease or in reentering the Demised Premises and in
securing possession thereof, as well as the expenses of reletting, including
altering and preparing the Demised Premises or any portion or portions thereof
for new tenants, brokers' commissions, advertising expenses, and all other
expenses properly chargeable against the Demised Premises and the rental
therefrom; it being understood that any such reletting may be for a period
shorter or longer than the remaining term of this Lease, but in no event shall
Tenant be entitled to receive any excess of such net rents over the sums
payable by Tenant to Landlord hereunder, nor shall Tenant be entitled in any
suit for the collection of damages pursuant to this subsection to a credit in
respect of any net rents from a reletting, except to the extent that such net
rents are actually received by Landlord. If the Demised Premises or any part
thereof should be relet in combination with other space, then proper
apportionment shall be made of the rent received from such reletting and of the
expenses of reletting, and Landlord shall have the right to grant reasonable
rent concessions to attract one or more now tenants and
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to permit the term of any new lease covering part or all of the Demised
Premises to be for a shorter or longer period than provided for herein.
It the Demised Premises or any part thereof be relet
by Landlord for the unexpired portion of the term of this Lease, or any part
thereof, before presentation of proof of such damages to any court, commission
or tribunal, the amount of rent reserved upon such reletting shall, prima
facie, be the fair and reasonable rental value for the Demised Premises, or
part thereof, so relet during the term of the reletting. Landlord, however,
shall in no event and in no way be responsible or liable for any failure to
relet the Demised Premises or any part thereof or for failure to collect any
rent due upon any such reletting.
27.02 In the event Landlord elects to collect damages from Tenant
under Section 27.01 (b) at any time subsequent to such election and upon ten
days prior written notice to Tenant, Landlord may elect to collect a lump sum
under Section 27.01 (a), crediting Tenant with amounts theretofore received by
Landlord as damages. Landlord shall have no obligation to relet part or all of
the Demised Premises subsequent to termination of the Lease and upon Tenant's
default.
27.03 Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the term of this Lease would have expired if
it had not been so terminated under the provision of Article 25, or under any
provision of law, or had Landlord not reentered the Demised Premises. Nothing
herein contained shall be construed to limit or preclude recovery by Landlord
against Tenant of any sums or damages to which, in addition to the damages
particularly provided above, Landlord may lawfully be entitled by reason of any
default hereunder or otherwise on the part of Tenant. Nothing herein contained
shall be construed to limit or prejudice the right of the Landlord to provide
for and obtain as liquidated damages by reason of the termination of this Lease
or reentry on the Demised Premises for the default of Tenant under this Lease,
an amount equal to the maximum allowed by any statute or rule of law in effect
at the time, and governing the proceedings in which such damages are to be
proved whether or not such amount be greater, equal to, or less than any of the
sums referred to in Section 27.01.
27.04 The foregoing Sections of this Article shall apply even if the
default by Tenant has occurred prior to the Commencement Date and/or prior to
Tenant taking possession of the Demised Premises. The parties acknowledge that
this Instrument is a lease and not a contract to make a lease.
ARTICLE 28
Waivers
28.01 Tenant, for itself, and on behalf of any and all persons
claiming through or under Tenant, including creditors of all kinds, does hereby
waive and surrender all right and privilege so far as is permitted by law,
which they or any of them might have under or by reason of any present or
future law, of the service of any notice of intention to reenter and also
waives any and all right to redemption or reentry or repossession in case
Tenant shall be dispossessed or ejected by process of law or in case of reentry
or repossession by Landlord upon any expiration or termination of this Lease as
herein provided.
28.02 Tenant waives Tenant's rights, if any, to designate the items
against which any payments made by Tenant are to be credited, and Tenant agrees
that Landlord may apply any payments made by Tenant to any items it sees fit,
irrespective of and notwithstanding any designation or request by Tenant as to
the items against which any such payments shall be credited.
28.03 Tenant waives Tenant's rights, if any, to assert a
counterclaim in any summary proceeding brought by Landlord against Tenant, and
Tenant agrees to assert any such claim against Landlord only by way of a
separate action or proceeding.
28.04 TO THE EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD AND TENANT
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
EITHER AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, OR TENANT'S
USE OR OCCUPANCY OF THE DEMISED PREMISES, OR ANY EMERGENCY OR OTHER STATUTORY
REMEDY WITH RESPECT THERETO.
ARTICLE 29
No Other Waivers or Modifications
29.01 The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the agreements,
terms, covenants, conditions or obligations of this Lease, or to exercise any
right, remedy or election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations of this Lease or of the right to exercise such election, but the
same shall continue and remain in full force and effect with respect
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to any subsequent breach, act or omission. The manner of enforcement or the
failure of Landlord to enforce any of the Rules and Regulations set forth
herein, or hereafter adopted against the Tenant and/or any other tenant in the
Building shall not be deemed a waiver of any such Rules and Regulations. No
executory agreement hereafter made between Landlord and Tenant shall be
effective to change, modify, waive, release, discharge, terminate or effect an
abandonment of this Lease, in whole or part, unless such executory agreement is
in writing, refers expressly to this Lease and is signed by the party against
whom enforcement of the change, modification, waiver, release, discharge or
termination or effectuation of the abandonment is sought.
29.02 The following specific provisions of this Section shall not be
deemed to limit the generality of the foregoing provisions of this Article:
(a) No agreement to accept a surrender of all or any part of
the Demised Premises shall be valid unless in writing and signed by Landlord.
The delivery of keys to an employee of Landlord or of its agent shall not
operate as a termination of this Lease or a surrender of the Demised Premises.
If Tenant shall at any time request Landlord to sublet the Demised Premises for
Tenant's account, Landlord or its agent is authorized to receive said keys for
such purposes without releasing Tenant from any of its obligations under this
Lease, and Tenant hereby releases Landlord of any liability for loss or damage
to any of Tenant's property in connection with such subletting.
(b) The receipt or acceptance by Landlord of rents with
knowledge of breach by Tenant of any term, agreement, covenant, condition or
obligation of this Lease shall not be deemed a waiver of such breach.
(c) No payment by Tenant or receipt by Landlord of a lesser
amount than the correct fixed rent or additional rent due hereunder shall be
deemed to be other than a payment on account, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment be deemed
to effect or evidence an accord and satisfaction, and Landlord may accept such
check on payment without prejudice to Landlord's right to recover the balance or
pursue any other remedy in this Lease or at law provided.
(d) If, in connection with obtaining, continuing or renewing
financing, for which the Building, land or the leasehold or any interest therein
represents collateral in whole or in part, a banking, insurance or other lender
shall request reasonable modifications of this Lease as a condition of such
financing, Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not increase the obligations of
Tenant hereunder or adversely affect to a material degree the Tenant's leasehold
interest hereby created.
ARTICLE 30
Curing Tenant's Defaults
30.01 If Tenant shall default in the performance of any covenant,
term, provision or condition herein contained, Landlord, without thereby waiving
such default, may perform the same for the account and at the expense of Tenant
without notice in a case of emergency and in any other case if such default
continues after three days from the date of the giving by Landlord to Tenant of
written notice of intention so to do. Bills for any reasonable and necessary
expense incurred by Landlord in connection with any such performance by Landlord
for the account of Tenant, and reasonable and necessary bills for all costs,
expenses and disbursements, including (without being limited to) reasonable
counsel fees, incurred in collecting or endeavoring to collect the fixed rent or
additional rent or other charge or any part thereof or enforcing or endeavoring
to enforce any rights against Tenant under or in connection with this Lease, or
pursuant to law, including (without being limited to) any such cost, expense and
disbursement involved in instituting and prosecuting summary proceedings, as
well as bills for any property, material, labor or services provided, furnished
or rendered, or caused to be provided, furnished or rendered, by Landlord to
Tenant including (without being limited to) electric lamps and other equipment,
construction work done for the account of Tenant, water, ice, drinking water,
drinking cups, towel and other services, as well as for any charges for any
additional elevator, heating, air conditioning or cleaning services and any
charges for other services incurred by Tenant under this Lease, may be sent by
Landlord to Tenant monthly, or immediately, at Landlord's option, and shall be
due and payable by Tenant in accordance with the terms of said bills and if not
paid when due, the amounts thereof shall immediately become due and payable as
additional rent under the Lease together with interest thereon at the rate of
12% per annum from the date of the said bills which should have been paid in
accordance with their terms. Landlord reserves the right, without liability to
Tenant and without constituting any claim of constructive eviction, to suspend
furnishing or rendering to Tenant any property, material, labor, utility or
other service, whenever Landlord is obligated to furnish or render the same at
the expense of Tenant, in the event that (but only for so long as) Tenant is in
arrears in paying Landlord therefor.
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ARTICLE 31
Consents - Broker
31.01 It is hereby agreed that whenever it is provided in this Lease
that consent or approval is not to be unreasonably withheld, such consent or
approval (hereinafter referred to collectively as "consent") shall also not be
unreasonably delayed or conditioned.
31.02 Any provision of this Lease which requires Landlord not to
unreasonably withhold or delay its consent shall never be the basis for an
award of damages or give rise to a right of setoff to Tenant, but shall only be
the basis for a declaratory judgment or specific injunction with respect to the
matter in question.
31.03 Tenant represents and warrants that the sole broker with whom
it has dealt with in this transaction is Sound Commercial Real Estate Group,
LLC, and that no other broker interested Tenant in the Demised Premises.
Landlord shall be responsible for the payment of any real estate commission
to said broker but Tenant shall hold Landlord harmless from the claim of any
other real estate broker or salesman claiming to have interested or have been
responsible for Tenant's execution of this Lease.
ARTICLE 32
Notices
32.01 Any notice, statement, demand, request or other communication
required or permitted to be given, rendered or made by either party to the
other, pursuant to this Lease or pursuant to any applicable law or requirement
of public authority, shall be in writing (whether or not so stated elsewhere in
this Lease) and shall be deemed to have been properly given, rendered or made,
if sent by registered or certified mail, return receipt requested, postage
prepaid, addressed to the other party at the address hereinabove set forth
(except that after the Commencement Date, Tenant's address, unless Tenant shall
give written notice to the contrary, shall be the Building), and shall be deemed
to have been given, rendered or made on the day so mailed, unless mailed outside
of the State of Connecticut, in which case it shall be deemed to have been
given, rendered or made on the expiration of three business days after
mailing. Either party may, by notice as aforesaid, designate a different
address or addresses for notices, statements, demands or other communications
intended for it. Any notice given by Tenant to Landlord under this Lease shall
be sent as required under this Section to the attention of Landlord's Chief
Financial Officer.
32.02 However, notices requesting after hours service pursuant to
Sections 17.01 and 18.01 may be delivered, provided they are in writing, to the
Building Superintendent or any other person in the Building designated by
Landlord to receive such notices, and notice of fire, accident or other
emergency shall be given by telegraph or by personal delivery of written notice
to that address designated for this purpose from time to time by the respective
parties hereto.
32.03 Whenever either party shall consist of more than one person or
entity, any notice, statement, demand, or other communication required or
permitted to be given, rendered or made to or by, and any payment to be made to
such party, shall be deemed duly given, rendered, made or paid if addressed to
or by (or in the case of payment by check, to the order of) any one of such
persons or entities who shall be designated from time to time as the authorized
representative of such party. Such party shall promptly notify the other of the
identity of such person or entity who is so to act on behalf of all persons and
entities then comprising such party and of all changes in such identity.
ARTICLE 33
Estoppel Certificate, Memorandum
33.01 Tenant agrees, at any time, and from time to time, as
requested by Landlord, upon not less than five (5) days prior notice, to execute
and deliver, without cost or expense to the Landlord, a statement certifying
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), certifying the dates to which the fixed rent and
additional rent have been paid, and stating whether, to the best knowledge of
the Tenant, the Landlord is in default in performance of any of its obligations
under this Lease, and, if so, specifying each such default of which the Tenant
may have knowledge, it being intended that any such statement delivered pursuant
thereto may be relied upon by any other person with whom the Landlord may be
dealing.
33.02 Should the Tenant fail to execute and deliver to the Landlord
the certificate and statement set forth in Section 34.01, above, then the
Landlord may execute the statement as attorney-in-fact for the Tenant specifying
to the best of Landlord's knowledge, the items called for in said Section 34.01.
33.03 At the request of either party, Landlord and Tenant shall
promptly execute, acknowledge and deliver a memorandum with respect to this
Lease sufficient for recording. Such memorandum shall
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not be deemed, under any circumstances, to change or otherwise affect any of
the obligations or provisions of this Lease.
ARTICLE 34
No Other Representations, Construction, Governing Law
34.01 Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant in executing and delivering this Lease is not
relying upon, any warranties, representations, promises or statements, except to
the extent that the same are expressly set forth in the Lease, or in any other
written agreement which may be made and executed between the parties
concurrently with the execution and delivery of this Lease, which agreement
shall expressly refer to this Lease.
34.02 If any of the provisions of this Lease, or the application
thereof to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
34.03 This Lease shall be governed in all respects by the laws of
the State of Connecticut.
ARTICLE 35
Parties Bound
35.01 The obligations of this Lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 10 shall operate to vest any rights in any successor
or assignee of Tenant and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 25.
However, the obligations of Landlord under this Lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in the event of such
transfer the obligations thereafter shall be binding upon each transferee of the
interest of Landlord herein named as such owner or lessee of the Building, but
only with respect to the period ending with a subsequent transfer within the
meaning of this Article, and such transferee, by accepting such interest, shall
be deemed to have assumed such obligations except only as may be expressly
otherwise provided in this Lease. A lease of Landlord's entire interest in the
Building as owner or lessee thereof shall be deemed a transfer within the
meaning of this Article.
35.02 Tenant shall look solely to the estate and interest of
Landlord, its successors and assigns, in the land and Building (or the proceeds
thereof) for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord in the event of any default by Landlord
hereunder, and no other property or assets of Landlord shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to either this Lease, the relationship of
Landlord and Tenant hereunder or Tenant's use and occupancy of the Demised
Premises.
ARTICLE 36
Certain Definitions and Constructions
36.01 For the purposes of this Lease and all agreements supplemental
to this Lease, unless the context otherwise requires:
(a) The term "Mortgage" shall include any indenture of
mortgage and deed of trust to a trustee to secure an issue of bonds and
debentures, and the term "Mortgagee" shall include such a trustee.
(b) The terms "include" and "such as" shall each be construed
as if followed by the phrase "without being limited to."
(c) The term "obligations of this Lease" and words of like
import, shall mean covenants to pay rent and additional rent under this Lease
and all of the other covenants and conditions contained in this Lease. Any
provision in this lease that one party or the other or both shall do or not do,
or shall cause or permit or not cause to permit a particular act, condition or
circumstance shall be deemed to mean that such party so covenants or both
parties so covenant, as the case may be.
(d) The term "Tenant's obligations hereunder" and words of
like import, and the term "Landlord's obligations hereunder" and words of like
import, shall mean the obligations to this Lease which are to be performed or
observed by Tenant, or by Landlord, as the case may be. Reference to
"performance" of either party's obligations under this Lease shall be construed
as "performance and
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observance." Tenant's obligations hereunder shall be construed in every instance
as conditions as well as covenants.
(e) Reference to Tenant being or not being "in default
hereunder" or words of like import, shall mean that Tenant is in default in the
performance of one or more of Tenant's obligations hereunder, or that Tenant is
not in default in the performance of any of Tenant's obligations hereunder, or
that a condition of the character described in Section 25.01 has occurred and
continues or has not occurred or does not continue, as the case may be.
(f) References to Landlord as having "no liability to Tenant"
or being "without liability to Tenant" shall mean that Tenant is not entitled to
terminate this Lease, or to claim actual or constructive eviction, partial or
total, or to receive any abatement or diminution of rent, or to be relieved in
any manner of any of its other obligations hereunder, or to be compensated for
loss or injury suffered or to enforce any other kind of liability whatsoever
against the Landlord under or with respect to this Lease or with respect to
Tenant's use or occupancy of the Demised Premises.
(g) The term "laws and/or requirements of public authorities"
and words of like import shall mean laws and ordinances of any or all of the
federal, state, city and county governments and rules, regulations, orders and
or directives of any or all departments, subdivisions, boards, agencies or
offices thereof, or any other governmental, public or quasipublic authorities,
having jurisdiction in the premises, and/or the direction of any public officer
pursuant to law.
(h) The term "requirements of insurance bodies" and words of
like import shall mean rules, regulations, orders and other requirements of the
Board of Fire Underwriters and/or the Fire Insurance Rating Organization in
Connecticut and/or any other similar body performing the same or similar
functions and having jurisdiction or cognizance of the Building and/or the
Demised Premises.
(i) The term "repair" shall be deemed to include restoration
and replacement as may be necessary to achieve and/or maintain good working
order and condition, and the term "untenantable" shall be deemed to include
being inaccessible.
(j) Reference to "termination of this Lease" includes
expiration or earlier termination of the term of this Lease or cancellation of
this Lease pursuant to any of the provisions of this Lease or pursuant to law.
Upon a termination of this Lease, the term and estate granted by this Lease
shall end at noon on the date of termination as if such date were the date of
expiration of the term of this Lease and neither party shall have further
obligation or liability to the other after such termination (i) except as shall
be expressly provided for in this Lease, or (ii) except for such obligations as
by their nature or under the circumstances can only be, or by the provisions
of this Lease, may be, performed after such termination, and, in any event,
unless expressly otherwise provided in this Lease, any liability for a payment
which shall have accrued to or with respect to any period ending at the time of
termination shall survive the termination of this Lease.
(k) The term "in full force and effect" when herein used in
reference to this Lease as a condition to the existence or exercise of a right
on the part of Tenant shall be construed in each instance as including the
further condition that at the time in question no default on the part of Tenant
exists, and no event has occurred which has continued to exist for such period
of time (after the notice, if any, required by this Lease), as would entitle
Landlord in either such instance to terminate this Lease or to dispossess
Tenant.
(l) The term "Landlord" as used in this Lease means only the
owner, or other mortgagee in possession, for the time being of the land and
Building (or the owner of a lease of the Building or of the land and Building)
of which the Demised Premises form a part, so that in the event of any sale or
sales of said land and Building or of said Lease, or in the event of a lease of
said Building, or of the land and Building, the said Landlord shall be and
hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and it shall be deemed and construed without further
agreement between the parties or their successors in interest, or between the
parties and the purchaser, at any such sale, or the said lessee of the Building,
or of the land and Building, that the purchaser or the lessee of the Building
has assumed and agreed to carry out any and all covenants and obligations of
Landlord, hereunder.
(m) The term "Tenant" shall mean Tenant herein named or any
assignee or other successor in interest (immediate or remote) of Tenant herein
named, when Tenant herein named or such assignee or other successor in interest,
as the case may be, is in possession of the Demised Premises as owner of the
Tenant's estate and interest granted by this Lease, and also if Tenant is not an
individual or corporation, all of the individuals, firms and/or corporations and
other entities comprising Tenant.
(n) Words and phrases used in the singular shall be deemed to
include the plural and vice versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender.
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(o) The rule of "ejusdem generis" shall not be applicable to
limit a general statement following or referable to an enumeration of specific
matter or matters similar to the matters specifically mentioned.
(p) All references in this Lease to numbered Articles,
numbered Sections and Subsections and lettered Exhibits are references to
Articles and Sections and Subsections of this Lease, and Exhibits annexed to
(and thereby made a part of) this Lease, as the case may be, unless expressly
otherwise designated in the context.
(q) The term "rent" or "rents" shall, except where the context
expressly implies to the contrary, be deemed to mean fixed rent and additional
rent as such terms are defined in Section 1.04.
36.02 The various terms which are defined in other Articles of this
Lease or are defined in exhibits annexed hereto, shall have the meaning
specified in such other Articles and such exhibits for all purposes of this
Lease and all agreements supplemental thereto, unless the context shall
otherwise require.
36.03 The Article headings in this Lease and Index prefixed to this
Lease are inserted only as a matter of convenience or reference, and are not to
be given any effect whatsoever in construing this Lease.
ARTICLE 37
Subordination and Miscellaneous
37.01 (a) This Lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate in all respects to all covenants, agreements
and restrictions of record as of the date hereof, with respect to the land
and/or the Building, including but not limited to those restrictions and
conditions contained in the deed from the City of Stamford, Connecticut to
Landlord or Landlord's predecessor in title. Landlord hereby represents and
warrants to Tenant that none of such covenants and restrictions would prohibit
or restrict the transactions contemplated hereby. In said deed, Landlord agrees
in part, that in the sale, lease or occupancy of the property, it would not
effect or execute any agreement, lease, conveyance or other instrument whereby
the property or any part thereof is restricted upon the basis of race, sex,
religion, color or national origin, and it would comply with all state and local
laws in effect from time to time prohibiting discrimination or segregation by
reason of race, sex, religion, color or national origin.
(b) Tenant shall not take or permit any action with respect to
the Demised Premises which would violate any covenants, agreements and
restrictions of record with respect to the land and/or the Building.
ARTICLE 38
[INTENTIONALLY OMITTED.]
38.01
ARTICLE 39
Parking
39.01 (a) Tenant shall receive twelve (12) parking cards for
undesignated spaces in the Landmark Square parking garage at no cost to Tenant.
Tenant must provide name and registration of vehicle of each person in its
employment who will have the right to use said parking cards and all such
persons shall be subject to all rules and regulations regarding the use of said
parking cards in the parking garage.
(b) All parking by Tenant's employees shall be on a "first
come, first serve" basis.
(c) All parking garage spaces, ramps and driveways, walkways,
lobbies and elevators used by Tenant, its employees and patrons will be
specifically and exclusively at their own risk, and Landlord shall not be liable
for any damage to any vehicle or its contents, resulting from theft, collision,
vandalism or any other cause whatsoever or for harm or injury to any person from
any cause whatsoever, the failure of any garage attendant or other personnel or
device to patrol, monitor, guard or service such parking garage, and Landlord
shall in no way be liable for any acts or omissions of such personnel, or device
in failing to prevent any such theft, vandalism or loss or damage by other
cause. Tenant's indemnity in Section 21 hereof shall include the parking garage
and all related parts thereof and thereto as though specifically set forth
therein.
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ARTICLE 40
Cancellation of Lease
40.01 Provided Tenant has complied with all the terms, covenants and
conditions of this Lease, Tenant shall have the right to cancel this lease term
at the expiration of the twenty-fourth (24th) month following the last day of
the calendar month in which the Commencement Date shall have occurred (the
"Cancellation Date") by notifying Landlord, in writing, at least six (6) months
prior to the Cancellation Date, of Tenant's intent to exercise this cancellation
option and by paying to Landlord, no later than two (2) months prior to the
Cancellation Date, by bank or certified check, the amount of (a) those portions
of all costs incurred by Landlord in connection with this Lease which have not
been amortized as of the Cancellation Date (the "Unamortized Costs"), which
Unamortized Costs shall include, without limitation, the unamortized portion of
each of the following: (i) the cost of Landlord's Work; (ii) legal fees; (iii)
real estate brokerage commission fees; and (iv) architectural and engineering
fees; which Unamortized Costs shall be amortized as if the original amount of
such costs were a 4 year self-amortizing loan bearing an interest rate of 10%
per annum; and (b) the product of (i) the difference between the average fixed
rent per rentable square foot for the first two (2) years of the Term and the
average fixed rent per rentable square foot for the full four (4) year Term,
multiplied by (ii) the total number of rentable square feet contained within the
Demised Premises.
Upon satisfaction by Tenant of each of the above conditions and upon the
Demised Premises having been surrendered to Landlord and vacated by Tenant on
or before the Cancellation Date (in the manner required under this Lease as if
the Cancellation Date were the Expiration Date), this Lease shall be deemed
canceled and terminated as of the Cancellation Date. Time is of the essence
with respect to all time periods referenced in this Article. In the event that
Tenant shall fail to fully and timely comply with each of the conditions herein
contained, Tenant will be deemed to have waived all of its rights contained in
this Article.
This cancellation option is personal to @ Plan, Inc. and may not be assigned,
pledged or otherwise transferred. Should Tenant fail to terminate the Lease as
permitted hereunder, the Lease shall remain in full force and effect.
ARTICLE 41
Right of First Offer
41.01 In the event space on the third floor in the Building
consisting of 6,500 rentable square feet (the "Offer Premises") becomes
available during the Term, Tenant shall have the right to lease all of the Offer
Premises, provided the following terms and conditions are fully and completely
satisfied:
(i) Tenant shall be occupying the Demised
Premises at such time and no event of default shall have occurred and is
continuing under this lease;
(ii) Tenant shall give written notice to Landlord
of its intent to exercise its right to lease the Offer Premises hereunder within
twelve (12) business days after Landlord gives Tenant notice of the availability
of the Offer Premises; TIME BEING OF THE ESSENCE WITH RESPECT TO ALL OF TENANT'S
OBLIGATIONS HEREUNDER;
(iii) Tenant shall (i) be occupying the Demised
Premises for a period which exceeds twenty-four (24) months after the last day
of the month of the Commencement Date and Tenant shall not have exercised the
Cancellation Option set forth in Article 40 above, or (ii) agree in writing to
waive all rights granted Tenant under such Article 40.
In the event that Tenant elects to lease the Offer Premises, the term "Combined
Premises" shall, from and after the Effective Date (as hereinafter defined),
include both the Demised Premises and the Offer Premises. In the event that
Tenant elects not to lease the Offer Premises, or fails to deliver to Landlord
written notice of Tenant's intent to exercise its rights to lease the Offer
Premises in strict accordance with the terms hereof, Tenant's option to lease
the Offer Premises shall automatically expire and be of no further force or
effect.
41.02 For purposes hereof, the term "Effective Date" shall mean
thirty (30) days from the receipt by Landlord of timely notice by Tenant of its
intention to lease the Offer Premises.
41.03 Upon the exercise by Tenant of its option hereunder, Landlord
and Tenant shall enter into a lease modification agreement, to be effective as
of the Effective Date, which shall reflect the lease by Tenant of the Combined
Premises, as then constituted, in accordance with all of the terms and
conditions of this lease, except that (i) the rental rate per square foot for
the Offer Premises shall be equal to the rate per square foot of Rent for the
Demised Premises as of the Effective Date, and (ii) Tenant's "Proportionate
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Share" shall be equal to a fraction, the numerator of which shall be the total
number of rentable square feet contained in the Combined Premises, as then
constituted, and the denominator of which shall be the total rentable square
footage in the Building.
41.04 In the event Tenant shall exercise its option to lease the
Offer Premises in accordance with this Article, Tenant shall take the Offer
Premises in its "as is" condition as of the Effective Date and Landlord shall
have no obligation to perform any work in, on or to the Offer Premises in order
to prepare same for occupancy by Tenant.
41.05 This option to lease the Offer Premises is personal to @ Plan,
Inc. and shall not be transferable by operation by law or otherwise, except to a
permitted assignee or sublessee under Article 10.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers and their corporate
seal to be hereunder affixed the date and year first above written.
WITNESSES RECKSON OPERATING PARTNERSHIP, L.P.
By: RECKSON ASSOCIATES REALTY CORP.,
its General Partner
By: /s/ F. D. Rich III
- -------------------- -----------------------------------------------
Name: F. D. Rich III, SVP
Title: Managing Director
Reckson Associates Realty Corp.
TENANT:
@ PLAN, INC.
/s/ Donna J. Hooper By: /s/ Mark K. Wright
- -------------------- -----------------------------------------------
Name:
Title: CEO
STATE OF TN )
)ss:
COUNTY OF Davidson )
Before me the undersigned, this 28th day of January, 1997,
personally appeared Mark Wright, known to me to be the CEO of @ Plan, Inc., a
___________ corporation, and that as such officer, signer and sealer of the
foregoing instrument, acknowledged the execution of the same to be a free act
and deed individually and as such officer, and the free act and deed of said
professional corporation.
In Witness Whereof, I hereunto set my hand.
/s/ Margaret C. Lutimore
--------------------------------------------------
Notary Public/Commissioner of the
Superior Court
32
<PAGE> 1
EXHIBIT 10.6
@PLAN.INC
1999 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the @plan.inc 1999 Stock Incentive Plan (the "Plan") is
to enable @plan.inc (the "Corporation") to attract, retain and reward key
employees of and consultants to the Corporation and its Subsidiaries and
Affiliates, and directors who are not also employees of the Corporation, and to
strengthen the mutuality of interests between such key employees, consultants,
and directors by awarding such key employees, consultants, and directors
performance-based stock incentives and/or other equity interests or equity-based
incentives in the Corporation, as well as performance-based incentives payable
in cash. The creation of the Plan shall not diminish or prejudice other
compensation programs approved from time to time by the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Corporation and its
Subsidiaries that is designated by the Board as a participating employer under
the Plan, provided that the Corporation directly or indirectly owns at least 20%
of the combined voting power of all classes of stock of such entity or at least
20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 10(b) of the
Plan.
E. "Change in Control Price" has the meaning provided in Section 10(d)
of the Plan.
F. "Common Stock" means the Corporation's Common Stock, no par value
per share.
G. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of the
Plan.
I. "Corporation" means @plan.inc, a corporation organized under the
laws of the State of Tennessee or any successor corporation.
J. "Disability" means disability as determined under the Corporation's
insurance plans.
<PAGE> 2
K. "Early Retirement" means retirement, for purposes of this Plan with
the express consent of the Corporation at or before the time of such retirement,
from active employment with the Corporation and any Subsidiary or Affiliate
prior to age 65, in accordance with any applicable early retirement policy of
the Corporation then in effect or as may be approved by the Committee.
L. "Effective Date" has the meaning provided in Section 14 of the Plan.
M. "Equity Issuance" means an issuance of Common Stock by the
Corporation following the Effective Date of this Plan in connection with a
public or private offering, including in connection with an acquisition, merger
or similar transaction, but excluding issuances of Common Stock under this Plan
or in any other compensatory transaction with an officer, employee, or director
of, or consultant to, the Corporation or its Subsidiaries or Affiliates.
N. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
O. "Fair Market Value" means with respect to the Common Stock, as of
any given date or dates, unless otherwise determined by the Committee in good
faith, the reported closing price of a share of Common Stock on Nasdaq or such
other market or exchange as is the principal trading market for the Common
Stock, or, if no such sale of a share of Common Stock is reported on Nasdaq or
other exchange or principal trading market on such date, the fair market value
of a share of Common Stock as determined by the Committee in good faith.
P. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
Q. "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
R. "Nasdaq" means The Nasdaq National Stock Market.
S. "Non-Employee Director" means a member of the Board who is a
Non-Employee Director within the meaning of Rule 16b-3(b)(3) promulgated under
the Exchange Act and an outside director within the meaning of Treasury
Regulation Sec. 162-27(e)(3) promulgated under the Code.
T. "Non-Qualified Stock Option" means any stock option that is not an
incentive Stock Option.
U. "Normal Retirement" means retirement from active employment with the
Corporation and any Subsidiary or Affiliate on or after age 65.
2
<PAGE> 3
V. "Other Stock-Based Award" means an award under Section 8 below that
is valued in whole or in part by reference to, or is otherwise based on, the
Common Stock.
W. "Outside Director" means a member of the Board who is not an officer
or employee of the Corporation or any Subsidiary or Affiliate of the
Corporation.
X. "Outside Director Option" means an award to an Outside Director
under Section 9 below.
Y. "Plan" means this @plan.inc 1999 Stock Incentive Plan, as amended
from time to time.
Z. "Restricted Stock" means an award of shares of Common Stock that is
subject to restrictions under Section 7 of the Plan.
AA. "Restriction Period" has the meaning provided in Section 7 of the
Plan.
BB. "Retirement" means Normal or Early Retirement.
CC. "Section 162(m) Maximum" has the meaning provided in Section 3(a)
hereof.
DD. "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to surrender to the Corporation all (or a portion)
of a Stock Option in exchange for an amount equal to the difference between (i)
the Fair Market Value, as of the date such Stock Option (or such portion
thereof) is surrendered, of the shares of Common Stock covered by such Stock
Option (or such portion thereof), subject, where applicable, to the pricing
provisions in Section 6(b)(ii), and (ii) the aggregate exercise price of such
Stock Option (or such portion thereof).
EE. "Stock Option" or "Option" means any option to purchase shares of
Common Stock (including Restricted Stock, if the Committee so determines)
granted pursuant to Section 5 below.
FF. "Subsidiary" means any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. The functions of the Committee specified in the
Plan may be exercised by an existing Committee
3
<PAGE> 4
of the Board composed exclusively of Non-Employee Directors. The initial
Committee shall be the Compensation Committee of the Board. In the event there
are not at least two Non-Employee Directors on the Board, the Plan shall be
administered by the Board and all references herein to the Committee shall refer
to the Board.
The Committee shall have authority to grant, pursuant to the terms of
the Plan, to officers, other key employees and consultants eligible under
Section 4: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, and/or (iv) Other Stock-Based Awards.
In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:
(a) to select the officers, key employees of and consultants
to the Corporation and its Subsidiaries and Affiliates to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, and/or Other
Stock-Based Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, and/or Other Stock-Based Awards, or any combination
thereof, are to be granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, the share price and any restriction or limitation,
or any vesting acceleration or waiver of forfeiture restrictions
regarding any Stock Option or other award and/or the shares of Common
Stock relating thereto, based in each case on such factors as the
Committee shall determine, in its sole discretion); and to amend or
waive any such terms and conditions to the extent permitted by Section
11 hereof;
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or Restricted Stock under Section 5(m),
as applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what
circumstances Option grants and/or other awards under the Plan are to
be made, and operate, on a tandem basis vis-a-vis other awards under
the Plan and/or cash awards made outside of the Plan;
(g) to determine whether, to what extent, and under what
circumstances shares of Common Stock and other amounts payable with
respect to an award under this Plan shall
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be deferred either automatically or at the election of the participant
(including providing for and determining the amount (if any) of any
deemed earnings on any deferred amount during any deferral period);
(h) to determine whether to require payment of tax withholding
requirements in shares of Common Stock subject to the award; and
(i) to impose any holding period required to satisfy Section
16 under the Exchange Act.
The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan; provided, however, that, to
the extent that this Plan otherwise requires the approval of the Board or the
shareholders of the Corporation, all decisions of the Committee shall be subject
to such Board or shareholder approval. Subject to the foregoing, all decisions
made by the Committee pursuant to the provisions of the Plan shall be made in
the Committee's sole discretion and shall be final and binding on all persons,
including the Corporation and Plan participants. Notwithstanding the foregoing,
the Committee shall have no authority to determine terms or conditions of awards
to Outside Directors, which shall be governed solely by Section 9 hereof.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) As of the Effective Date, the aggregate number of shares of Common
Stock that may be issued under the Plan shall be 800,000 shares plus an annual
increase to be added on each anniversary date of the adoption of the Plan equal
to the lesser of (i) 400,000 shares, (ii) two percent of the outstanding shares
on such date or (iii) a number determined by the Board. The shares of Common
Stock issuable under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. No officer of the Corporation or other
person whose compensation may be subject to the limitations on deductibility
under Section 162(m) of the Code shall be eligible to receive awards pursuant to
this Plan relating to in excess of 100,000 shares of Common Stock in any fiscal
year (the "Section 162(m) Maximum").
(b) If any shares of Common Stock that have been optioned cease to be
subject to a Stock Option, or if any shares of Common Stock that are subject to
any Restricted Stock or Other Stock-Based Award granted hereunder are forfeited
prior to the payment of any dividends, if applicable, with respect to such
shares of Common Stock, or any such award otherwise terminates without a payment
being made to the participant in the form of Common Stock, such shares shall
again be available for distribution in connection with future awards under the
Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the
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maximum number of shares that may be awarded under the Plan, in the number and
option price of shares subject to outstanding Options granted under the Plan, in
the number of shares underlying Outside Director Options to be granted under
Section 9 hereof, the Section 162(m) Maximum and in the number of shares subject
to other outstanding awards granted under the Plan as may be determined to be
appropriate by the Committee, in its sole discretion, provided that the number
of shares subject to any award shall always be a whole number. An adjusted
option price shall also be used to determine the amount payable by the
Corporation upon the exercise of any Stock Appreciation Right associated with
any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, other key employees and Outside Directors of and consultants
to the Corporation and its Subsidiaries and Affiliates who are responsible for
or contribute to the management, growth and/or profitability of the business of
the Corporation and/or its Subsidiaries and Affiliates are eligible to be
granted awards under the Plan. Outside Directors are eligible to receive awards
pursuant to Section 9 and not pursuant to any other provisions of the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the Plan.
Any Stock Option granted under the Plan shall be in such form as the Committee
may from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options. Incentive Stock Options may
be granted only to individuals who are employees of the Corporation or any
Subsidiary of the Corporation.
The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
Options granted to officers, key employees, Outside Directors and
consultants under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee
at the time of grant but shall be not less than 100% (or, in the case
of any employee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or of
any of its Subsidiaries, not less than 110%) of the Fair Market Value
of the Common
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Stock at grant, in the case of Incentive Stock Options, and not less
than 85% of the Fair Market Value of the Common Stock at grant, in the
case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Incentive Stock Option shall be exercisable
more than ten years (or, in the case of an employee who owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or any of its Subsidiaries or
parent corporations, more than five years) after the date the Option is
granted.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at or after grant; provided, however, that
except as provided in Section 5(g) and (h) and Section 10, unless
otherwise determined by the Committee at or after grant, no Stock
Option shall be exercisable prior to the first anniversary date of the
granting of the Option. The Committee may provide that a Stock Option
shall vest over a period of future service at a rate specified at the
time of grant, or that the Stock Option is exercisable only in
installments. If the Committee provides, in its sole discretion, that
any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after
grant, in whole or in part, based on such factors as the Committee
shall determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment
exercise restrictions apply under Section 5(c), Stock Options may be
exercised in whole or in part at any time during the option period, by
giving written notice of exercise to the Corporation specifying the
number of shares to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, either by check, note, or such
other instrument as the Committee may accept. As determined by the
Committee, in its sole discretion, at or (except in the case of an
Incentive Stock Option) after grant, payment in full or in part may
also be made in the form of shares of Common Stock already owned by the
optionee or, in the case of a Non-Qualified Stock Option, shares of
Restricted Stock or shares subject to such Option or another award
hereunder (in each case valued at the Fair Market Value of the Common
Stock on the date the Option is exercised). If payment of the exercise
price is made in part or in full with Common Stock, the Committee may
award to the employee a new Stock Option to replace the Common Stock
which was surrendered. If payment of the option exercise price of a
Non-Qualified Stock Option is made in whole or in part in the form of
Restricted Stock, such Restricted Stock (and any replacement shares
relating thereto) shall remain (or be) restricted in accordance with
the original terms of the Restricted Stock award in question, and any
additional Common Stock received upon the exercise shall be subject to
the same forfeiture restrictions, unless otherwise determined by the
Committee, in its sole discretion, at or after grant. No shares of
Common Stock shall be issued until full payment therefor has been made.
An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to shares subject to the Option
when
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<PAGE> 8
the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described
in Section 13(a).
(e) Transferability of Options. No Non-Qualified Stock Option
shall be transferable by the optionee without the prior written consent
of the Committee other than (i) transfers by the Optionee to a member
of his or her Immediate Family or a trust for the benefit of the
optionee or a member of his or her Immediate Family, or (ii) transfers
by will or by the laws of descent and distribution. No Incentive Stock
Option shall be transferable by the optionee otherwise than by will or
by the laws of descent and distribution and all Incentive Stock Options
shall be exercisable, during the optionee's lifetime, only by the
optionee.
(f) Bonus for Taxes. In the case of a Non-Qualified Stock
Option or an optionee who elects to make a disqualifying disposition
(as defined in Section 422(a)(1) of the Code) of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option, the Committee in
its discretion may award at the time of grant or thereafter the right
to receive upon exercise of such Stock Option a cash bonus calculated
to pay part or all of the federal and state, if any, income tax
incurred by the optionee upon such exercise.
(g) Termination by Death. Subject to Section 5(k), if an
optionee's employment by the Corporation and any Subsidiary or (except
in the case of an Incentive Stock Option) Affiliate terminates by
reason of death, any Stock Option held by such optionee may thereafter
be exercised, to the extent such option was exercisable at the time of
death or (except in the case of an Incentive Stock Option) on such
accelerated basis as the Committee may determine at or after grant (or
except in the case of an Incentive Stock Option, as may be determined
in accordance with procedures established by the Committee) by the
legal representative of the estate or by the legatee of the optionee
under the will of the optionee, for a period of one year (or such other
period as the Committee may specify at or after grant) from the date of
such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section
5(k), if an optionee's employment by the Corporation and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate
terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or (except in the case of an
Incentive Stock Option) on such accelerated basis as the Committee may
determine at or after grant (or, except in the case of an Incentive
Stock Option, as may be determined in accordance with procedures
established by the Committee), for a period of (i) three years (or such
other period as the Committee may specify at or after grant) from the
date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter, in
the case of a Non-Qualified Stock Option and (ii) one year from the
date of termination of employment or until the expiration of the stated
term of such Stock Option,
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whichever period is shorter, in the case of an Incentive Stock Option;
provided however, that, if the optionee dies within the period
specified in (i) above (or other such period as the committee shall
specify at or after grant), any unexercised Non-Qualified Stock Option
held by such optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of death for a period of twelve
months from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is shorter. In the
event of termination of employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the
exercise period applicable to Incentive Stock Options, but before the
expiration of any period that would apply if such Stock Option were a
Non-Qualified Stock Option, such Stock Option will thereafter be
treated as a NonQualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section
5(k), if an optionee's employment by the Corporation and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate
terminates by reason of Normal or Early Retirement, any Stock Option
held by such optionee may thereafter be exercised by the optionee, to
the extent it was exercisable at the time of such Retirement or (except
in the case of an Incentive Stock Option) on such accelerated basis as
the Committee may determine at or after grant (or, except in the case
of an Incentive Stock Option, as may be determined in accordance with
procedures established by the Committee), for a period of (i) three
years (or such other period as the Committee may specify at or after
grant) from the date of such termination of employment or the
expiration of the stated term of such Stock Option, whichever period is
the shorter, in the case of a Non-Qualified Stock Option and (ii) three
months from the date of such termination of employment or the
expiration of the stated term of such Stock Option, whichever period is
the shorter, in the event of an Incentive Stock Option; provided
however, that, if the optionee dies within the period specified in (i)
above (or other such period as the Committee shall specify at or after
grant), any unexercised Non-Qualified Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve months from the
date of such death or until the expiration of the stated term of such
Stock Option, whichever period is shorter. In the event of termination
of employment by reason of Retirement, if an Incentive Stock Option is
exercised after the expiration of the exercise period applicable to
Incentive Stock Options, but before the expiration of the period that
would apply if such Stock Option were a Non-Qualified Stock Option, the
option will thereafter be treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k), unless
otherwise determined by the Committee (or pursuant to procedures
established by the Committee) at or (except in the case of an Incentive
Stock Option) after grant, if an optionee's employment by the
Corporation and any Subsidiary or (except in the case of an Incentive
Stock Option) Affiliate is involuntarily terminated for any reason
other than death, Disability or Normal or Early Retirement, or if
optionee voluntarily terminates employment, the Stock Option shall
thereupon terminate, except that such Stock Option may be exercised, to
the extent otherwise then exercisable, for the lesser of three
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months or the balance of such Stock Option's term if the involuntary
termination is without Cause. The Committee has the option to extend
the exercise period until the lesser of six months or the balance of
such Stock Option's term if the involuntary termination is without
Cause. However, any Incentive Stock Option not exercised within three
months will be treated as a Non-Qualified Stock Option. For purposes of
this Plan, "Cause" means (i) a felony conviction of a participant or
the failure of a participant to contest prosecution for a felony, or
(ii) a participant's willful misconduct or dishonesty, which is
directly and materially harmful to the business or reputation of the
Corporation or any Subsidiary or Affiliate. If an optionee voluntarily
terminates employment with the Corporation and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate (except for
Disability, Normal or Early Retirement), the Stock Option shall
thereupon terminate; provided, however, that the Committee at grant or
(except in the case of an Incentive Stock Option) thereafter may extend
the exercise period in this situation for the lesser of three months or
the balance of such Stock Option's term.
(k) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive
Stock Options shall be interpreted, amended, or altered, nor shall any
discretion or authority granted under the Plan be so exercised, so as
to disqualify the Plan under Section 422 of the Code, or, without the
consent of the optionee(s) affected, to disqualify any Incentive Stock
Option under such Section 422. No Incentive Stock Option shall be
granted to any participant under the Plan if such grant would cause the
aggregate Fair Market Value (as of the date the Incentive Stock Option
is granted) of the Common Stock with respect to which all Incentive
Stock Options are exercisable for the first time by such participant
during any calendar year (under all such plans of the Company and any
Subsidiary) to exceed $100,000. To the extent permitted under Section
422 of the Code or the applicable regulations thereunder or any
applicable Internal Revenue Service pronouncement:
(i) if (x) a participant's employment is
terminated by reason of death, Disability, or Retirement and
(y) the portion of any Incentive Stock Option that is
otherwise exercisable during the post-termination period
specified under Section 5(g), (h) or (i), applied without
regard to the $100,000 limitation contained in Section 422(d)
of the Code, is greater than the portion of such Option that
is immediately exercisable as an "Incentive Stock Option"
during such post-termination period under Section 422, such
excess shall be treated as a Non-Qualified Stock Option; and
(ii) if the exercise of an Incentive Stock Option
is accelerated by reason of a Change in Control, any portion
of such Option that is not exercisable as an Incentive Stock
Option by reason of the $100,000 limitation contained in
Section 422(d) of the Code shall be treated as a Non-Qualified
Stock Option.
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(l) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash, Common Stock, or Restricted Stock an
Option previously granted, based on such terms and conditions as the
Committee shall establish and communicate to the optionee at the time
that such offer is made.
(m) Settlement Provisions. If the option agreement so provides
at grant or (except in the case of an Incentive Stock Option) is
amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the spread value of an exercised
Option take the form of Restricted Stock, which shall be valued on the
date of exercise on the basis of the Fair Market Value (as determined
by the Committee) of such Restricted Stock determined without regards
to the forfeiture restrictions involved.
(n) Performance and Other Conditions. The Committee may
condition the exercise of any Option upon the attainment of specified
performance goals or other factors as the Committee may determine, in
its sole discretion. Unless specifically provided in the option
agreement, any such conditional Option shall vest six months prior to
its expiration if the conditions to exercise have not theretofore been
satisfied.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option granted
under the Plan. In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of the grant of such
Stock Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of the grant of such Stock Option. A Stock
Appreciation Right or applicable portion thereof granted with respect
to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject
to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number
of shares covered by a related Stock Option. A Stock Appreciation Right
may be exercised by an optionee, subject to Section 6(b), in accordance
with the procedures established by the Committee for such purpose. Upon
such exercise, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options
relating to exercised Stock Appreciation Rights shall no longer be
exercisable to the extent that the related Stock Appreciation Rights
have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the
provisions of the Plan, as shall be determined from time to time by the
Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Stock
Options to which they relate shall be
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exercisable in accordance with the provisions of Section 5 and
this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right,
an optionee shall be entitled to receive an amount in cash
and/or shares of Common Stock equal in value to the excess of
the Fair Market Value of one share of Common Stock over the
option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
When payment is to be made in shares, the number of shares to
be paid shall be calculated on the basis of the Fair Market
Value of the shares on the date of exercise. When payment is
to be made in cash, such amount shall be calculated on the
basis of the Fair Market Value of the Common Stock on the date
of exercise.
(iii) Stock Appreciation Rights shall be transferable
only when and to the extent that the underlying Stock Option
would be transferable under Section 5(e) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right,
the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in
Section 3 of the Plan on the number of shares of Common Stock
to be issued under the Plan.
(v) The Committee, in its sole discretion, may also
provide that, in the event of a Change in Control and/or a
Potential Change in Control, the amount to be paid upon the
exercise of a Stock Appreciation Right shall be based on the
Change in Control Price, subject to such terms and conditions
as the Committee may specify at grant.
(vi) The Committee may condition the exercise of any
Stock Appreciation Right upon the attainment of specified
performance goals or other factors as the Committee may
determine, in its sole discretion.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued
either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside the Plan. The Committee
shall determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares of
Restricted Stock to be awarded to any person, the price (if any) to be
paid by the recipient of Restricted Stock (subject to Section 7(b)),
the time or times within which such awards may be subject to
forfeiture, and the other terms, restrictions and conditions of the
awards in addition to those set forth in Section 7(c). The Committee
may condition the
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grant of Restricted Stock upon the attainment of specified performance
goals or such other factors as the Committee may determine, in its sole
discretion. The provisions of Restricted Stock awards need not be the
same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock award shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement
evidencing the award and has delivered a fully executed copy thereof to
the Corporation, and has otherwise complied with the applicable terms
and conditions of such award.
(i) The purchase price for shares of Restricted Stock
shall be established by the Committee and may be zero.
(ii) Awards of Restricted Stock must be accepted
within a period of 60 days (or such shorter period as the
Committee may specify at grant) after the award date, by
executing a Restricted Stock Award Agreement and paying
whatever price (if any) is required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock
award shall be issued a stock certificate in respect of such
shares of Restricted Stock. Such certificate shall be
registered in the name of such participant (or a transferee
permitted by Section 13(h) hereof), and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
(iv) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the
Corporation until the restrictions thereon shall have lapsed,
and that, as a condition of any Restricted Stock award, the
participant shall have delivered a stock power, endorsed in
blank, relating to the shares of Common Stock covered by such
award.
(c) Restrictions and Conditions. The shares of Restricted
Stock awarded pursuant to this Section 7 shall be subject to the
following restrictions and conditions:
(i) In accordance with the provisions of this Plan
and the award agreement, during a period set by the Committee
commencing with the date of such award (the "Restriction
Period"), the participant shall not be permitted to sell,
transfer, pledge, assign, or otherwise encumber shares of
Restricted Stock awarded under the Plan. Within these limits,
the Committee, in its sole discretion, may provide for the
lapse of such restrictions in installments and may accelerate
or waive such restrictions, in whole or in part, based on
service, performance, such other factors or criteria as the
Committee may determine in its sole discretion.
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(ii) Except as provided in this paragraph (ii) and
Section 7(c)(i), the participant shall have, with respect to
the shares of Restricted Stock, all of the rights of a
shareholder of the Corporation, including the right to vote
the shares, and the right to receive any cash dividends. The
Committee, in its sole discretion, as determined at the time
of award, may permit or require the payment of cash dividends
to be deferred and, if the Committee so determines,
reinvested, subject to Section 14(e), in additional Restricted
Stock to the extent shares are available under Section 3, or
otherwise reinvested. Pursuant to Section 3 above, stock
dividends issued with respect to Restricted Stock shall be
treated as additional shares of Restricted Stock that are
subject to the same restrictions and other terms and
conditions that apply to the shares with respect to which such
dividends are issued. If the Committee so determines, the
award agreement may also impose restrictions on the right to
vote and the right to receive dividends.
(iii) Subject to the applicable provisions of the
award agreement and this Section 7, upon termination of a
participant's employment with the Corporation and any
Subsidiary or Affiliate for any reason during the Restriction
Period, all shares still subject to restriction will vest, or
be forfeited, in accordance with the terms and conditions
established by the Committee at or after grant.
(iv) If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to
such Restriction Period, certificates for an appropriate
number of unrestricted shares shall be delivered to the
participant (or a transferee permitted by Section 13(h)
hereof) promptly.
(d) Minimum Value Provisions. In order to better ensure that
award payments actually reflect the performance of the Corporation and
service of the participant, the Committee may provide, in its sole
discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Common Stock to the
recipient of a restricted stock award, subject to such performance,
future service, deferral, and other terms and conditions as may be
specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other Stock-Based Awards, including,
without limitation, performance shares, convertible preferred stock,
convertible debentures, exchangeable securities and Common Stock awards
or options valued by reference to earnings per share or Subsidiary
performance, may be granted either alone, in addition to, or in tandem
with Stock Options, Stock Appreciation Rights, or Restricted Stock
granted under the Plan and cash awards made outside of the Plan;
provided that no such Other Stock-Based Awards may be granted in tandem
with Incentive Stock Options if that would cause such Stock Options not
to qualify as Incentive Stock Options pursuant to Section 422 of the
Code.
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Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at
which such awards shall be made, the number of shares of Common Stock
to be awarded pursuant to such awards, and all other conditions of the
awards. The Committee may also provide for the grant of Common Stock
upon the completion of a specified performance period. The provisions
of Other Stock-Based Awards need not be the same with respect to each
recipient.
(b) Terms and Conditions. Other Stock-Based Awards made
pursuant to this Section 8 shall be subject to the following terms and
conditions:
(i) Shares subject to awards under this Section 8 and
the award agreement referred to in Section 8(b)(v) below, may
not be sold, assigned, transferred, pledged, or otherwise
encumbered prior to the date on which the shares are issued,
or, if later, the date on which any applicable restriction,
performance, or deferral period lapses.
(ii) Subject to the provisions of this Plan and the
award agreement and unless otherwise determined by the
Committee at grant, the recipient of an award under this
Section 8 shall be entitled to receive, currently or on a
deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by
the award, as determined at the time of the award by the
Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have
been reinvested in additional shares of Common Stock or
otherwise reinvested.
(iii) Any award under Section 8 and any shares of
Common Stock covered by any such award shall vest or be
forfeited to the extent so provided in the award agreement, as
determined by the Committee in its sole discretion.
(iv) In the event of the participant's Retirement,
Disability, or death, or in cases of special circumstances,
the Committee may, in its sole discretion, waive in whole or
in part any or all of the remaining limitations imposed
hereunder (if any) with respect to any or all of an award
under this Section 8.
(v) Each award under this Section 8 shall be
confirmed by, and subject to the terms of, an agreement or
other instrument by the Corporation and the participant.
(vi) Common Stock (including securities convertible
into Common Stock) issued on a bonus basis under this Section
8 may be issued for no cash consideration. Common Stock
(including securities convertible into Common Stock) purchased
pursuant to a purchase right awarded under this Section 8
shall
15
<PAGE> 16
be priced at least 85% of the Fair Market Value of the Common
Stock on the date of grant.
SECTION 9. AWARDS TO OUTSIDE DIRECTORS.
(a) The provisions of this Section 9 shall apply only to
awards to Outside Directors in accordance with this Section 9. The
Committee shall have no authority to determine the timing of or the
terms or conditions of any award under this Section 9.
(b) At the date of the Corporation's initial public offering,
each person serving as an Outside Director on such date will receive a
non-qualified stock option to purchase 25,000 shares of Common Stock at
a per share exercise price equal to the initial public offering price.
Such option shall vest and become exercisable with respect to all
25,000 shares immediately.
(c) If any person who was not previously a member of the Board
is elected or appointed an Outside Director following the initial
public offering but prior to the date of the Annual Meeting of
Shareholders of the Corporation in the year 2000, such Outside Director
will receive a non-qualified stock option to purchase 25,000 shares of
Common Stock. The exercise price per share of each option granted
pursuant to this Section 9(c) shall equal the Fair Market Value per
share of Common Stock on the date of grant. Options granted under this
Section 9(c) shall vest and become exercisable in five equal annual
installments beginning on the first anniversary of the date of grant.
(d) On the date of each Annual Meeting of Shareholders of the
Corporation beginning with the Annual Meeting of Shareholders in 2000,
unless this Plan has been previously terminated, each Outside Director
who will continue as a director following such meeting will receive a
non-qualified stock option to purchase 3,000 shares of Common Stock.
The exercise price per share of each option granted pursuant to this
Section 9(d) shall equal the Fair Market Value per share of Common
Stock on the date of grant. Such option shall vest and become
exercisable with respect to all 3,000 shares immediately.
(e) No Outside Director Option shall be exercisable prior to
vesting. Each Outside Director Option shall expire, if unexercised, on
the tenth anniversary of the date of grant. The exercise price may be
paid in cash or in shares of Common Stock, including shares of Common
Stock subject to the Outside Director Option.
(f) Outside Director Options shall not be transferable without
the prior written consent of the Board other than (i) transfers by the
optionee to a member of his or her Immediate Family or a trust for the
benefit of the optionee or a member of his or her
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<PAGE> 17
Immediate Family, (ii) transfers by will or by the laws of descent and
distribution, or (iii) transfers by the optionee to a fund affiliated
with the optionee.
(g) Grantees of Outside Director Options shall enter into a
stock option agreement with the Corporation setting forth the exercise
price and other terms as provided herein.
(h) Upon termination of an Outside Director's service as a
director of the Corporation, (i) all Outside Director Options
theretofore exercisable and held by such Outside Director will remain
vested and exercisable through the expiration date and (ii) all
remaining Outside Director Options held by such Outside Director will
become exercisable and vested and remain so through the expiration date
to the extent of any shares that would have become exercisable and
vested within a period of less than twelve months following the date of
termination of service. Any unvested Outside Director Options held by
the Outside Director on the date of termination of service will be
forfeited to the extent of any shares that would not have become vested
and exercisable until at least twelve months from the date of
termination of service. The Board may, in its sole discretion, elect to
accelerate the vesting of any Outside Director Options in connection
with the termination of service of any individual Outside Director.
(i) Outside Director Options shall be subject to Section 10.
The number of shares and the exercise price per share of each Outside
Director Option theretofore awarded shall be adjusted automatically in
the same manner as the number of shares and the exercise price for
Stock Options under Section 3(c) hereof at any time that Stock Options
are adjusted as provided in Section 3(c). The number of shares
underlying Outside Director Options to be awarded in the future shall
be adjusted automatically in the same manner as the number of shares
underlying outstanding Stock Options are adjusted under Section 3(c)
hereof at any time that Stock Options are adjusted under Section 3(c)
hereof.
(j) The Board, in its sole discretion, may determine to reduce
the size of any Outside Director Option prior to grant or to postpone
the vesting and exercisability of any Outside Director Option prior to
grant.
SECTION 10. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 10(b); or
(2) a "Potential Change in Control" as defined in
Section 10(c), but only if and to the extent so determined by
the Committee or the Board at or after grant
17
<PAGE> 18
(subject to any right of approval expressly reserved by the
Committee or the Board at the time of such determination),
(i) Subject to the limitations set forth below in this
Section 10(a), the following acceleration provisions shall
apply:
(a) Any Stock Appreciation Rights, any Stock Option
or Outside Director Option awarded under the Plan not
previously exercisable and vested shall become fully
exercisable and vested.
(b) The restrictions applicable to any Restricted
Stock and Other Stock-Based Awards, in each case to
the extent not already vested under the Plan, shall
lapse and such shares and awards shall be deemed fully
vested.
(ii) Subject to the limitations set forth below in this
Section 10(a), the value of all outstanding Stock Options,
Stock Appreciation Rights, Restricted Stock, Outside
Director Options and Other Stock-Based Awards, in each case
to the extent vested, shall, unless otherwise determined
Board or by the Committee in its sole discretion prior to
any Change in Control, be cashed out on the basis of the
"Change in Control Price" as defined in Section 10(d) as of
the date such Change in Control or such Potential Change in
Control is determined to have occurred or such other date as
the Board or Committee may determine prior to the Change in
Control.
(iii) The Board or the Committee may impose additional
conditions on the acceleration or valuation of any award in
the award agreement.
(b) Definition of Change in Control. For purposes of Section
10(a), a "Change in Control" means the happening of any of the
following:
(i) any person or entity, including a "group" as defined
in Section 13(d)(3) of the Exchange Act, other than the
Corporation or a wholly-owned subsidiary thereof or any
employee benefit plan of the Corporation or any of its
Subsidiaries, becomes the beneficial owner of the
Corporation's securities having 50% or more of the combined
voting power of the then outstanding securities of the
Corporation that may be cast for the election of directors
of the Corporation (other than as a result of an issuance of
securities initiated by the Corporation in the ordinary
course of business); or
(ii) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business
combination, sales of assets or contested election, or any
combination of the foregoing transactions, less than a
majority of the combined voting power of the then outstanding
securities of the Corporation or any
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<PAGE> 19
successor corporation or entity entitled to vote generally in
the election of the directors of the Corporation or such other
corporation or entity after such transaction are held in the
aggregate by the holders of the Corporation's securities
entitled to vote generally in the election of directors of the
Corporation immediately prior to such transaction; or
(iii) during any period of two consecutive years,
individuals who at the beginning of any such period constitute
the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for
election by the Corporation's shareholders, of each director
of the Corporation first elected during such period was
approved by a vote of at least two-thirds of the directors of
the Corporation then still in office who were directors of the
Corporation at the beginning of any such period.
(c) Definition of Potential Change in Control. For purposes of
Section 10(a), a "Potential Change in Control" means the happening of
any one of the following:
(i) The approval by shareholders of an agreement by
the Corporation, the consummation of which would result in a
Change in Control of the Corporation as defined in Section
10(b); or
(ii) The acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other
than the Corporation or a Subsidiary or any Corporation
employee benefit plan (including any trustee of such plan
acting as such trustee)) of securities of the Corporation
representing 5% or more of the combined voting power of the
Corporation's outstanding securities and the adoption by the
Committee of a resolution to the effect that a Potential
Change in Control of the Corporation has occurred for purposes
of this Plan.
(d) Change in Control Price. For purposes of this Section 10,
"Change in Control Price" means the highest price per share paid in any
transaction reported on Nasdaq or such other exchange or market as is
the principal trading market for the Common Stock, or paid or offered
in any bona fide transaction related to a Potential or actual Change in
Control of the Corporation at any time during the 60 day period
immediately preceding the occurrence of the Change in Control (or,
where applicable, the occurrence of the Potential Change in Control
event), in each case as determined by the Committee except that, in the
case of Incentive Stock Options and Stock Appreciation Rights relating
to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the optionee exercises such
Stock Appreciation Rights or, where applicable, the date on which a
cash out occurs under Section 10(a)(ii).
19
<PAGE> 20
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Corporation's shareholders,
no amendment or alteration may be made which would (a) increase the maximum
number of shares that may be issued under the Plan or increase the Section
162(m) Maximum, (b) change the provisions governing Incentive Stock Options
except as required or permitted under the provisions governing incentive stock
options under the Code, (c) amend Section 9 hereof so as to increase the size of
any award or otherwise materially increase the benefits to Outside Directors
under Section 9 hereof, or (d) make any change for which applicable law or
regulatory authority (including the regulatory authority of Nasdaq or any other
market or exchange on which the Common Stock is traded) would require
shareholder approval or for which shareholder approval would be required to
secure full deductibility of compensation received under the Plan under Section
162(m) of the Code. No amendment, alteration, or discontinuation shall be made
which would impair the rights of an optionee or participant under a Stock
Option, Stock Appreciation Right, Restricted Stock, Other Stock-Based Award or
Outside Director Option theretofore granted, without the participant's consent.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent. The Committee may also substitute new Stock Options for
previously granted Stock Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise prices. Solely
for purposes of computing the Section 162(m) Maximum, if any Stock Options or
other awards previously granted to a participant are canceled and new Stock
Options or other awards having a lower exercise price or other more favorable
terms for the participant are substituted in their place, both the initial Stock
Options or other awards and the replacement Stock Options or other awards will
be deemed to be outstanding (although the canceled Stock Options or other awards
will not be exercisable or deemed outstanding for any other purposes).
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Corporation, nothing contained herein shall give
any such participant or optionee any rights that are greater than those of a
general creditor of the Corporation. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements is consistent with the "unfunded" status of
the Plan.
20
<PAGE> 21
SECTION 13. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares
pursuant to a Stock Option or other award under the Plan to represent
to and agree with the Corporation in writing that the optionee or
participant is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on
transfer. All certificates for shares of Common Stock or other
securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Commission, any stock exchange upon which the Common Stock is then
listed, and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in
specific cases.
(c) The adoption of the Plan shall not confer upon any
employee of the Corporation or any Subsidiary or Affiliate any right to
continued employment with the Corporation or a Subsidiary or Affiliate,
as the case may be, nor shall it interfere in any way with the right of
the Corporation or a Subsidiary or Affiliate to terminate the
employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income
tax purposes with respect to any award under the Plan, the participant
shall pay to the Corporation, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state, or local taxes
of any kind required by law to be withheld with respect to such amount.
The Committee may require withholding obligations to be settled with
Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the
Corporation under the Plan shall be conditional on such payment or
arrangements and the Corporation and its Subsidiaries or Affiliates
shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the
participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or other types of Plan
awards) at the time of any dividend payment shall only be permissible
if sufficient shares of Common Stock are available under Section 3 for
such reinvestment (taking into account then outstanding Stock Options
and other Plan awards).
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<PAGE> 22
(f) The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of Tennessee.
(g) The members of the Committee and the Board shall not be
liable to any employee or other person with respect to any
determination made hereunder in a manner that is not inconsistent with
their legal obligations as members of the Board. In addition to such
other rights of indemnification as they may have as directors or as
members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses,
including attorneys' fees actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted thereunder, and against
all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Corporation) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the
performance of his duties; provided that within 60 days after
institution of any such action, suit or proceeding, the Committee
member shall in writing offer the Corporation the opportunity, at its
own expense, to handle and defend the same.
(h) In addition to any other restrictions on transfer that may
be applicable under the terms of this Plan or the applicable award
agreement, no Stock Option, Stock Appreciation Right, Restricted Stock
award, or Other Stock-Based Award or other right issued under this Plan
is transferable by the participant without the prior written consent of
the Committee, or, in the case of an Outside Director, the Board, other
than (i) transfers by an optionee to a member of his or her Immediate
Family or a trust for the benefit of the optionee or a member of his or
her Immediate Family or (ii) transfers by will or by the laws of
descent and distribution. The designation of a beneficiary will not
constitute a transfer.
(i) The Committee may, at or after grant, condition the
receipt of any payment in respect of any award or the transfer of any
shares subject to an award on the satisfaction of a six-month holding
period, if such holding period is required for compliance with Section
16 under the Exchange Act.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective upon the date of the closing of the
Corporation's initial public offering (the "Effective Date"), provided that it
has been approved by the Board of the Corporation and by a majority of the votes
cast by the holders of the Corporation's Common Stock.
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<PAGE> 23
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock Award,
Other Stock-Based Award or Outside Director Option award shall be granted
pursuant to the Plan on or after the tenth anniversary of the Effective Date of
the Plan, but awards granted prior to such tenth anniversary may be extended
beyond that date.
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<PAGE> 1
EXHIBIT 10.8
SEVERANCE COMPENSATION AGREEMENT
SEVERANCE COMPENSATION AGREEMENT dated as of _________ __, 1999,
between @plan.inc., a Tennessee corporation (the "Company"), and _______________
(the "Executive").
The Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of certain
members of the Company's senior management, including the Executive, to their
assigned duties without distraction in potentially disturbing circumstances
arising from the possibility of a change in control of the Company.
This Agreement sets forth the severance compensation which the Company
agrees it will pay to the Executive if the Executive's employment with the
Company terminates under one of the circumstances described herein following a
Change In Control of the Company (as defined herein).
1. TERM. This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) five years from the date hereof if a Change in Control of the
Company has not occurred within such five-year period; (ii) the termination of
the Executive's employment with the Company based on death, Disability (as
defined in Section 3(b)), Retirement (as defined in Section 3(c)) or Cause (as
defined in Section 3(d)) or by the Executive other than for Good Reason (as
defined in Section 3(e)); and (iii) six months from the date of a Change in
Control of the Company if the Executive has not terminated his employment for
Good Reason as of such time.
2. CHANGE IN CONTROL. No compensation shall be payable under this
Agreement unless and until (a) there shall have been a Change in Control of the
Company while the Executive is still an employee of the Company, and (b) the
Executive's employment by the Company thereafter shall have been terminated in
accordance with Section 3. For purposes of this Agreement, a Change in Control
means the happening of any of the following:
(i) any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, other than
the Company, a wholly-owned subsidiary thereof, any employee benefit
plan of the Company, any shareholder of the Company as of the date of
this Agreement or any of the Company's Subsidiaries becomes the
beneficial owner of the Company's securities having 30% or more of the
combined voting power of the then outstanding securities of the
Company that may be cast for the election of directors of the Company
(other than as a result of an issuance of securities initiated by the
Company in the ordinary course of business); or
(ii) as the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing
transactions less than a majority of the combined voting power of the
then outstanding securities of the Company or any successor
corporation or entity entitled to vote generally in the election of
the directors of the Company or such other corporation or entity after
such transaction are held in the aggregate by the holders of the
<PAGE> 2
Company's securities entitled to vote generally in the election of
directors of the Company immediately prior to such transaction; or
(iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board cease for
any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's
shareholders, of each director of the Company first elected during
such period was approved by a vote of at least two-thirds of the
directors of the Company then still in office who were directors of
the Company at the beginning of any such period.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. (a) If a Change in Control
of the Company shall have occurred while the Executive is still an employee of
the Company, the Executive shall be entitled to the compensation provided in
Section 4 upon the subsequent termination of the Executive's employment with the
Company by the Executive or by the Company unless such termination is as a
result of (i) the Executive's death; (ii) the Executive's Disability (as defined
in Section (3)(b) below); (iii) the Executive's Retirement (as defined in
Section 3(c) below); (iv) the Executive's termination by the Company for Cause
(as defined in Section 3(d) below); or (v) the Executive's decision to terminate
employment other than for Good Reason (as defined in Section 3(e) below).
(b) DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for six months and within 30 days after
written notice of termination is thereafter given by the Company the Executive
shall not have returned to the full-time performance of the Executive's duties,
the Company may terminate this Agreement for "Disability."
(c) RETIREMENT. The term "Retirement" as used in this Agreement
shall mean termination by the Company or the Executive of the Executive's
employment based on the Executive's having reached age 65 or such other age as
shall have been fixed in any arrangement established with the Executive's
consent with respect to the Executive.
(d) CAUSE. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement only, the Company shall have "Cause" to
terminate the Executive's employment hereunder only on the basis of fraud,
misappropriation or embezzlement on the part of the Executive. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the membership of the Company's Board of Directors (excluding
the Executive if the Executive is then a member of the Board of Directors) at a
meeting of the Board called and held for the purpose (after reasonable notice to
the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board), finding that in the good
faith opinion of the Board the Executive was guilty of conduct set forth in the
second sentence of this Section 3(d) and specifying the particulars thereof in
detail.
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<PAGE> 3
(e) GOOD REASON. The Executive may terminate the Executive's
employment for Good Reason at any time during the term of this Agreement. For
purposes of this Agreement "Good Reason" shall mean any of the following
(without the Executive's express written consent):
(i) the assignment to the Executive by the Company of
duties inconsistent with the Executive's position, duties,
responsibilities and status with the Company immediately prior to a
Change in Control of the Company, or a change in the Executive's titles
or offices as in effect immediately prior to a Change in Control of the
Company, or any removal of the Executive from or any failure to reelect
the Executive to any of such positions, except in connection with the
termination of his employment for Disability, Retirement or Cause or as
a result of the Executive's death or by the Executive other than for
Good Reason;
(ii) a reduction by the Company in the Executive's base
salary as in effect on the date hereof or as the same may be increased
from time to time during the term of this Agreement;
(iii) a relocation of the Company's principal executive
offices or the Executive's relocation to any place other than the
location at which the Executive performed the Executive's duties prior
to a Change in Control of the Company, except for required travel by
the Executive on the Company's business to an extent substantially
consistent with the Executive's business travel obligations at the time
of a Change in Control of the Company;
(iv) any material breach by the Company of any provision
of this Agreement;
(v) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; or
(vi) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3(f), and for purposes of this
Agreement, no such purported termination shall be effective.
(f) NOTICE OF TERMINATION. Any termination by the Company
pursuant to Section 3(b), 3(c) or 3(d) shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean a written notice which shall indicate those specific termination provisions
in this Agreement relied upon and which sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. For purposes of this
Agreement, no such purported termination by the Company shall be effective
without such Notice of Termination.
3
<PAGE> 4
(g) DATE OF TERMINATION. "Date of Termination" shall mean (a) if
this Agreement is terminated by the Company for Disability, 30 days after Notice
of Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30-day period) or (b) if the Executive's employment is terminated by
the Company for any other reason, the date on which a Notice of Termination is
given.
4. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT. (a) If the
Company shall terminate the Executive's employment following a Change in Control
other than pursuant to Section 3(b), 3(c) or 3(d) or if the Executive shall
terminate his employment following a Change in Control for Good Reason, then the
Company shall pay to the Executive as severance pay in a lump sum, in cash, on
the fifth day following the Date of Termination, an amount equal to six months
of the Executive's base salary (with such base salary being determined as the
highest base salary Executive shall have received during the two years prior to
the Change in Control); provided, however, that if the lump sum severance
payment under this Section 4, either alone or together with other payments which
the Executive has the right to receive from the Company, would constitute a
"parachute payment" (as defined in Section 28OG of the Internal Revenue Code of
1986, as amended (the "Code")), such lump sum severance payment shall be reduced
to the largest amount as will result in no portion of the lump sum severance
payment under this Section 4 being subject to the excise tax imposed by Section
4999 of the Code.
(b) In addition to the lump sum payment provided in Section 4(a), if
the Company shall terminate the Executive's employment following a Change in
Control other than pursuant to Section 3(b), 3(c) or 3(d) or if the Executive
shall terminate his employment following a Change in Control for Good Reason,
then the Company shall provide to the Executive health insurance equivalent to
that provided to the Executive immediately prior to termination until the
earlier of: (i) six months following the Date of Termination or (ii) such time
as Executive is employed by another employer and is covered or permitted to be
covered by benefit plans of another employer providing substantially similar
coverage.
5. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS. (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any benefit plan, incentive plan or stock
option plan, employment agreement or other contract, plan or arrangement.
6. SUCCESSOR TO THE COMPANY. (a) The Company will require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially
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<PAGE> 5
all of the business and/or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 6 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. If at any time during the term of this Agreement the Executive is employed
by any corporation a majority of the voting securities of which is then owned by
the Company, "Company" as used in Sections 3, 4, 11 and 12 hereof shall in
addition include such employer. In such event, the Company agrees that it shall
pay or shall cause such employer to pay any amounts owed to the Executive
pursuant to Section 4 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
7. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
@plan.inc.
Three Landmark Square, Suite 400
Stamford, Connecticut 06901
Attention: Chief Executive Officer
If to the Executive:
--------------------------
Three Landmark Square, Suite 400
Stamford, Connecticut 06901
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
5
<PAGE> 6
8. MISCELLANEOUS. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Connecticut.
9. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
12. CONFIDENTIALITY. The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.
The provisions of this Section 12 are not intended to restrict the ability of
the Executive following termination of employment for any reason to engage in
any business which is, directly or indirectly, competitive with the business
conducted by the Company.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
@plan.inc.
By:
----------------------------------
Name:
Title:
-----------------------------------
---------------------
7
<PAGE> 1
Exhibit 10.9
PROMISSORY NOTE
$160,000.00 Stamford, Connecticut June 10, 1997
FOR VALUE RECEIVED, the undersigned, Karl Spangenberg, a resident of
Weston, Massachusetts ("Maker"), promises to pay to the order of @PLAN.INC., a
Tennessee corporation ("Payee"; Payee and any subsequent holder[s] hereof are
hereinafter individually and collectively referred to as "Holder"), the
principal sum of ONE HUNDRED SIXTY THOUSAND AND 00/100THS DOLLARS ($160,000.00),
together with interest on the outstanding principal balance hereof from date at
the rate of FOUR AND 9/10 percent (4.9%) per annum.
The principal balance, together with all accrued interest, shall be due
and payable upon the earlier of the sale of Maker's residence located at One
Laxfield Road, Weston, Massachusetts, and September 1, 1997.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without premium or penalty.
If any payment hereunder is not paid when due, the indebtedness
evidenced by this Note may be declared to be immediately due and payable in full
without notice at the option of Holder. Upon the occurrence of any such default,
at the option of Holder and without notice to Maker, all accrued and unpaid
interest, if any, shall be added to the outstanding principal balance, and the
entire outstanding principal balance, as so adjusted, shall bear interest
thereafter, at an annual rate equal to the rate that is 5 percentage points (5%)
in excess of the above-specified interest rate. Holder may waive any default
before or after the same has been declared and restore this Note to full force
and effect without impairing the right to declare the indebtedness evidenced
hereby due for a subsequent default, this right being a continuing one.
In the event that this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, the undersigned agrees to pay a reasonable
attorney's fee, all court and other costs and the reasonable costs of any other
collection efforts.
All parties hereto waive demand, notice, presentment and protest.
This Note shall be construed in accordance with and governed by the
laws of the State of Connecticut applicable to contracts that are to be
performed in said state.
/s/ Karl Spangenberg
-----------------------------------
Karl Spangenberg
<PAGE> 1
Exhibit 11
COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
Period from
Inception (May Year Ended Three Months
29, 1996) to December 31, Ended
December 31, -------------------------- March 31, 1999
1996 1997 1998 (unaudited)
--------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Basic and diluted
loss per share:
Net loss.................... $(660,638) $(2,813,939) $(1,870,879) $ (341,898)
Weighted average
shares outstanding........ 900,000 900,000 901,993 907,200
--------- ----------- ----------- ----------
Loss per share......... $ (0.73) $ (3.13) $ (2.07) $ (0.38)
========= =========== =========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 16
KRAFTCPAs
----------------------------
Kraft Bros., Esstman
Patton & Harrell, PLLC
Certified Public Accountants
----------------------------
Member BKR International
May 3, 1999
Office of the Chief Accountant
Securities and Exchange Commission
450 Fifth Street N.W.
Washington D.C. 20549
Dear Ladies and Gentlemen:
We have read the "Change in Independent Certified Public Accountants"
section included in the @plan.inc Form S-1 (File No 333-74507) filed with the
Securities and Exchange Commission. We are in agreement with the statements
contained therein except for the following two items:
(1) There were no reportable events, as defined in regulations of the
Securities and Exchange Commission, through March 9, 1998, the date of
our report for the year ended December 31, 1997. We have not performed
any auditing procedures subsequent to March 9, 1998.
(2) We have no knowledge as to whether @plan.inc had consulted with Arthur
Andersen LLP regarding accounting principles prior to retaining
Arthur Andersen LLP.
Very truly yours
/s/ Rebecca J. Harrell
Rebecca J. Harrell, CPA
Member
cc: Nancy A. Lazaros
Chief Financial Officer
@plan.inc
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To @plan.inc:
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
New York, New York
May 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the March 31,
1999 financial statements of @plan.inc and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,156,857
<SECURITIES> 0
<RECEIVABLES> 2,237,606
<ALLOWANCES> (155,000)
<INVENTORY> 0
<CURRENT-ASSETS> 5,491,804
<PP&E> 245,140
<DEPRECIATION> (130,253)
<TOTAL-ASSETS> 6,043,368
<CURRENT-LIABILITIES> 2,082,441
<BONDS> 0
9,582,802
0
<COMMON> 8,001
<OTHER-SE> (5,629,876)
<TOTAL-LIABILITY-AND-EQUITY> 6,043,368
<SALES> 1,337,122
<TOTAL-REVENUES> 1,337,122
<CGS> 740,480
<TOTAL-COSTS> 1,712,450
<OTHER-EXPENSES> 971,970
<LOSS-PROVISION> 75,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (338,598)
<INCOME-TAX> 3,300
<INCOME-CONTINUING> (341,898)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (341,898)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
