<PAGE>
As filed with the Securities and Exchange Commission on March 29, 2000
Registration No. 333-94677
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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Amendment No. 3
to
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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coolsavings.com inc.
(Exact name of registrant as specified in its charter)
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Michigan 7379 38-3216102
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
8755 West Higgins Road, Suite 100
Chicago, Illinois 60631
(773) 693-1300
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
Steven M. Golden
8755 West Higgins Road, Suite 100
Chicago, Illinois 60631
(773) 693-1300
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service)
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with copies to:
PETER SUGAR DAVID R. LAMARRE
JEFFREY M. WEISS DAVINA K. KAILE
Jaffe, Raitt, Heuer & Weiss, P.C. DANIEL T. DASHIELL
One Woodward Avenue, Suite 2400 Pillsbury Madison & Sutro LLP
Detroit, Michigan 48226 P.O. Box 7880
(313) 961-8380 San Francisco, California 94120
(415) 983-1000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Title of Each Class of Maximum Proposed Maximum Amount of
Securities to be Amount to be Offering Price Aggregate Registration
Registered Registered per Unit(1) Offering Price(1) Fee(2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, without
par value.............. 4,830,000 $12.00 $57,960,000 $15,302
</TABLE>
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(1) Estimated pursuant to Rule 457(a) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
(2) Previously paid.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+The information in this prospectus is not complete and may be changed. +
+Underwriters may not confirm sales of these securities until the registration +
+statement filed with the Securities and Exchange Commission becomes +
+effective. This prospectus is not an offer to sell these securities and it is +
+not soliciting offers to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 29, 2000
PROSPECTUS
4,200,000 Shares
[LOGO OF COOLSAVINGS.COM APPEARS HERE]
Common Stock
This is an initial public offering of common stock by coolsavings.com inc.
All of the shares of common stock are being sold by CoolSavings. The estimated
initial offering price will be between $11.00 and $13.00 per share.
--------
There is currently no public market for the common stock. We have applied to
list the common stock on the Nasdaq National Market under the symbol CSAV.
--------
When the offering is completed, our principal stockholders, executive
officers and directors will, in the aggregate, beneficially own approximately
59.6% of our outstanding common stock.
--------
<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to CoolSavings, before expenses.................... $ $
</TABLE>
CoolSavings has granted the underwriters an option for a period of 30 days to
purchase up to 630,000 additional shares of common stock.
--------
Investing in the common stock involves a high degree of risk.
See "Risk Factors" beginning on page 5.
--------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
CHASE H&Q
LEHMAN BROTHERS
THOMAS WEISEL PARTNERS LLC
, 2000
<PAGE>
Inside Front Cover
Comprehensive E-Marketing Services
[Logo]
coolsavings.com
attract advertisers attracts consumers
active shoppers online and office advertisers
variety of multiple venues
promotional incentives personalized
permission based
household targeting
tracking
screenshot of coolsavings.com
home page
<PAGE>
FIRST PAGE OF GATEFOLD
Screenshot of advertisers'
site offer Tracking leads to
more effective campaigns
Broad array of incentives
on our web site customer logos
Building one-to-one
relationships
Screenshot of targeted e-mail
Variety of places for redemption
and in our targeted e-mails online retailers mall stores national and
regional chains
<PAGE>
SECOND PAGE OF GATEFOLD
Advertisers can deliver, target
and track a wide array of incentives
Broad range of promotional to promote
incentives products or
services in any
online or offline
environment
graphic of
member database
We capture and store
incentives drive detailed member
sales demographic information,
track shopping preferences
and behavior, and
neighborhood businesses with advertiser
cooperation can
track redemption of
these incentives back
to the member household
We use sophisticated
data mining to create
predictive models to
make future targeting
even more effective
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................. 1
Risk Factors....................................................... 5
Forward-Looking Statements......................................... 20
Use of Proceeds.................................................... 21
Dividend Policy.................................................... 21
Capitalization..................................................... 22
Dilution........................................................... 23
Selected Financial Data............................................ 24
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 25
Business........................................................... 33
Management......................................................... 47
Certain Transactions and Relationships............................. 56
Principal Stockholders............................................. 59
Description of Capital Stock....................................... 61
Shares Eligible For Future Sale.................................... 66
Underwriting....................................................... 68
Legal Matters...................................................... 70
Experts............................................................ 70
Where You Can Find Additional Information.......................... 71
Index to Financial Statements...................................... F-1
</TABLE>
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including "Risk Factors" and
the financial statements, before making an investment decision.
CoolSavings
We provide a comprehensive set of e-marketing services used by online and
offline advertisers to build one-to-one customer relationships. Under our
established brand, advertisers can deliver, target and track a wide array of
incentives to promote their products or services. We deliver these incentives
to targeted segments of our large audience of consumers, known as members, who
have registered their demographic profiles with us and have given us permission
to deliver personalized savings opportunities to them. These incentives can be
redeemed by our members either online or in stores depending on the particular
promotion. We generate substantially all of our revenues by providing e-
marketing services to our advertisers. Approximately 1% of our revenues are
generated from royalty and license fees and other miscellaneous sources. The
top ten advertisers from which we generated the most revenues in 1999 were
Bigstar, eNutrition.com, First USA, InsWeb, Kids "R" Us, MCI WorldCom,
overstock.com, petopia.com, petsmart.com and SmarterKids.com. During 1999, no
advertiser accounted for more than 6.8% of our revenues. As of March 1, 2000,
we had over 6.0 million registered members, representing nearly 4.8 million
households.
The compelling advantages of the Internet as a direct marketing medium have
led to the development of e-marketing services that are designed to enable
businesses to acquire and retain customers and build customer loyalty. The
Direct Marketing Association projects that online direct marketing expenditures
will increase from approximately $1.3 billion in 1999 to approximately $8.6
billion in 2004. In our experience, while online companies are the most
frequent users of our e-marketing services, traditional offline businesses such
as national retailers and consumer packaged goods manufacturers are
increasingly seeking to use our e-marketing services to drive offline sales and
build customer relationships. Furthermore, we believe many online companies and
traditional businesses are devoting larger portions of their marketing budgets
to Internet direct marketing.
Our web site, coolsavings.com, offers convenient and personalized incentives
for goods and services from a broad range of advertisers, including online
retailers, national brick-and-mortar chains, consumer packaged goods
manufacturers, large consumer service providers and neighborhood businesses. We
offer a wide array of promotional services for advertisers including printed
and electronic coupons, personalized e-mails, rebates, samples, sales notices,
gift certificates, contests and banner advertisements. According to Media
Metrix, for January 2000, CoolSavings was the ninth most frequently visited
shopping web site. During the fourth quarter of 1999, we sent an average of
approximately 17.3 million e-mails to our members per month.
With our members' permission, we capture and store detailed member
demographic information, track shopping preferences and behavior, and with
advertiser cooperation can track redemption of these incentives back to our
members' households. In doing so, we have developed an extensive database of
information that we use for the benefit of our advertisers. Although we keep
our members' identities private, we analyze our database with sophisticated
data analysis, targeting and tracking technology to help our advertisers
execute effective promotional campaigns. As our members use the incentives we
offer, we gather extensive shopping behavior and preference information which
further enriches our member profiles for future database marketing.
Our objective is to be the leading provider of e-marketing services to
advertisers. To achieve this objective, we plan to continue to add to our base
of members and advertisers through an active online and
1
<PAGE>
offline marketing program that enhances the CoolSavings brand. We must also
continue to enrich our database and develop deeper data for predictive modeling
and targeting purposes. In order to offer a comprehensive e-marketing solution
for advertisers, we plan to expand the promotional services we offer, covering
all phases of the customer relationship. Finally, we intend to continue to
pursue third-party relationships to further expand our reach to consumers and
advertisers and enhance our services.
Our business is subject to risks. In particular, we have incurred
significant losses since our inception, including net losses of $16.9 million
in 1999. Our accumulated deficit as of December 31, 1999 was $21.1 million, and
we expect to continue to incur losses for the foreseeable future. Furthermore,
we operate in an emerging and highly competitive market with relatively low
barriers to entry.
We were incorporated as Interactive Coupon Marketing Group, Inc. in Michigan
in December 1994. In November 1998, we changed our corporate name to
coolsavings.com inc. Our corporate offices are located at 8755 West Higgins
Road, Suite 100, Chicago, Illinois 60631. Our telephone number at that location
is (773) 693-1300. Our Internet address is http://www.coolsavings.com.
Information contained on our web site is not a part of this prospectus.
2
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by CoolSavings................. 4,200,000 shares
Common stock to be outstanding after this offering.. 38,905,374 shares
Use of proceeds..................................... For general corporate
purposes, including
operational expenses,
such as personnel and
sales and marketing, and
capital expenditures
Proposed Nasdaq National Market Symbol.............. CSAV
</TABLE>
Unless otherwise indicated, share information in this prospectus:
. is based on our shares outstanding as of December 31, 1999;
. assumes conversion of our convertible subordinated notes into 462,627
shares of common stock upon completion of this offering, based on an
assumed initial public offering price of $12.00 per share;
. assumes conversion of our Series A convertible preferred stock into
2,527,298 shares of common stock upon completion of this offering;
. gives effect to a 1,150-for-1 stock split which will occur prior to
completion of this offering; and
. assumes the underwriters' over-allotment option is not exercised.
------------
The number of shares to be outstanding after this offering excludes, as of
December 31, 1999:
. 4,757,317 shares of common stock reserved for issuance under our 1997
Stock Option Plan, of which 3,864,230 shares are subject to outstanding
options at a weighted average exercise price of $3.76 per share;
. 324,737 shares subject to options granted outside of our 1997 Stock
Option Plan at an exercise price of $0.28 per share; and
. 634,309 shares of common stock reserved for issuance under our 1999 Non-
Employee Director Stock Option Plan, of which 63,250 shares are subject
to outstanding options at a weighted average exercise price of $4.69 per
share.
Unless otherwise indicated, all statistical data regarding CoolSavings
referenced in this prospectus is as of December 31, 1999. This prospectus
contains statistical data regarding Internet usage and the advertising and
marketing industry that we obtained from industry publications, including
reports generated by International Data Corporation, the Direct Marketing
Association, Mediamark Research Inc., NPD Online Research and Media Metrix,
Inc.
We own service mark registrations for the mark COOLSAVINGS, as well as
several other service marks, including, among others, COOLMALLS, COOLTRAVEL,
COOLSAMPLES and COOLCATALOGS, in the United States. We also own common law
rights in these and other marks. In addition, we have applied for United States
federal registrations of several service marks, including our stylized piggy-
bank logo, SAVE. THEN SHOP., SQUEALS OF THE DAY, COOLSAVINGS COUPON MANAGER and
SAVINGSCENTER. We have also obtained a trademark registration in Australia for
COOLSAVINGS and have registration applications pending in the United Kingdom
and Canada. All other trademarks or service marks appearing in this prospectus
are trademarks or service marks of others.
3
<PAGE>
The summary financial data presented below are derived from the financial
statements of CoolSavings. The shares used to compute pro forma loss per share
include convertible subordinated notes and Series A convertible preferred stock
on an as-converted basis, as well as common stock. The pro forma balance sheet
data includes the automatic conversion of our convertible subordinated notes
and Series A convertible preferred stock upon the completion of this offering.
The pro forma as adjusted balance sheet data reflects the receipt of the net
proceeds from the sale of the 4,200,000 shares of common stock offered by
CoolSavings at an assumed initial public offering price of $12.00 per share and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses.
Summary Financial Data
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Inception
through Year Ended December 31,
December 31, --------------------------------------------------
1995 1996 1997 1998 1999
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues.......... $ -- $ -- $ 110 $ 1,143 $ 12,916
Gross profit (loss)... -- -- (38) 715 11,098
Loss from operations.. (16) (883) (2,725) (5,346) (17,133)
Net loss.............. (16) (874) (2,732) (5,741) (16,868)
Historical loss per
common share, basic
and diluted.......... $ (0.00) $ (0.06) $ (0.15) $ (0.27) $ (0.57)
Weighted average
shares used to
compute historical
basic and diluted
loss per common
share................ 10,962,809 13,697,334 18,266,572 21,547,177 29,804,681
Pro forma loss per
common share, basic
and diluted
(unaudited).......... $ (0.58)
Weighted average
shares used to
compute pro forma
basic and diluted
loss per share
(unaudited).......... 30,113,208
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
---------------------------
Pro Pro Forma
Actual Forma As Adjusted
------- ------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $17,489 $17,489 $63,429
Working capital................................... 15,703 20,699 66,471
Total assets...................................... 29,590 29,590 75,362
Long-term debt, including current portion......... 878 878 878
Total stockholders' equity........................ 19,120 24,116 69,888
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider 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 materially and adversely affect our business and
quarterly and annual results of operations and could result in a complete loss
of your investment.
Risks Related to Our Business
Our unproven business model makes it difficult to evaluate our business
We launched our web site in February 1997 and operate in a market that is
new and changing rapidly. Because we have an unproven business model, it may be
difficult for you to evaluate an investment in our common stock. In addition,
we face risks, uncertainties, expenses and difficulties frequently encountered
by early stage companies in new and rapidly evolving markets, including the
Internet advertising and direct marketing market. To address these risks and
uncertainties, we must, among other things:
. maintain relationships with existing advertisers and attract additional
advertisers;
. attract members who actively take advantage of our offers and make
purchases, request information and otherwise interact with our
advertisers;
. attract, integrate, motivate and retain qualified personnel;
. enhance our brand recognition;
. develop new promotions and services;
. continue to upgrade and develop our systems and infrastructure to
accommodate potential growth;
. anticipate and adapt to the evolving Internet advertising and direct
marketing market and changes in advertisers' promotional needs and
policies;
. maintain and defend our intellectual property rights; and
. respond to changes in government regulations.
We may not be successful in accomplishing these objectives. Our failure to
do so could harm our business, results of operations and financial condition.
We have a history of losses, we had an accumulated deficit of $21.1 million as
of December 31, 1999 and we anticipate future losses
We incurred net losses of $5.7 million in 1998 and $16.9 million in 1999. As
of December 31, 1999, our accumulated deficit was $21.1 million. We expect to
continue to incur significant operating losses and capital expenditures. In
particular, we expect to invest heavily in sales and marketing activities,
hiring new personnel, enhancing services and technology, expanding and
relocating our facilities and defending our intellectual property. As a result,
we will need to generate significant revenues to achieve and maintain
profitability. Although our revenues have grown in recent quarters, this growth
may not be sustained and we may never become profitable. Even if we do achieve
profitability, we may not sustain or increase profitability on a quarterly or
annual basis.
Our quarterly financial results may fluctuate, making our future financial
results difficult to forecast
Our future operating results may vary significantly due to a variety of
factors, including the following which may be beyond our control:
. advertisers' demand for and use of our services;
5
<PAGE>
. performance-based contracts, under which our revenues depend on our
members' responsiveness to advertisers' offers;
. our members' demand for our services and response to the offers we make
available to them; and
. litigation costs.
As a result, we believe that quarter-to-quarter comparisons of our operating
results may not be meaningful. Moreover, these factors make our revenues
difficult to forecast. In addition, we plan to significantly increase our sales
and marketing, product development and other operating expenses. We base our
estimated expenses in part on projections of future revenue, which are
inherently uncertain. We may be unable to reduce spending quickly enough to
offset any unexpected revenue shortfall, which could cause our business and
operating results to suffer. This would likely affect the market price of our
common stock in a manner which may be unrelated to our long-term operating
performance. It is likely that in one or more future quarters our operating
results will fall below the expectations of securities analysts and investors.
If this happens, our stock price will likely decline, perhaps significantly.
We derive most of our revenues from short-term contracts with our advertisers
Approximately 80% of our current advertising contracts have stated terms of
less than three months. We may be unsuccessful in securing longer commitments.
Some advertisers prefer short-term contracts because they use our service to
promote limited-time promotional events or seasonal products and services. In
addition, new advertisers often request a short-term trial to assess the
effectiveness of our services, particularly because Internet-based promotional
services are relatively new and unproven. The limited duration of our
advertising contracts makes it difficult for us to forecast our revenues. If we
cannot renew our contracts or attract new advertisers, our results of
operations and financial condition will be seriously harmed.
Our operating results are subject to seasonal fluctuations
We believe our operating results will be subject to seasonal fluctuations
that may make our stock price more volatile. Advertising sales in traditional
media, such as television and radio, generally are lower in the first and third
calendar quarters of each year. We anticipate that our future revenues will
reflect these seasonal patterns. However, our limited operating history and the
evolving nature of the Internet advertising market make it difficult for us to
predict the precise future impact of seasonal factors on our business.
We depend on compelling promotional offers by our advertisers
Our members' usage of our services, and the resulting attractiveness of our
service to advertisers, depend upon the quality of the promotional offers we
deliver and our members' interest in them. In addition, under some of our
advertising contracts, our revenues depend on members' responsiveness to
specific promotions. We currently consult with our advertisers about the type
and frequency of incentives they offer, but we cannot control their choice of
promotions or their fulfillment of incentives. If our advertisers' promotional
offers are not attractive to our members, we will not be able to maintain or
expand our membership or generate adequate revenues based on the size of our
membership or on the responses we produce. Moreover, if our members are not
satisfied with the offers our advertisers make available to them, or with the
products or services they receive upon redemption of offers, their negative
experiences might result in publicity that could damage our reputation, which
would harm our efforts to attract and retain members and advertisers.
We depend on the successful introduction of new services and features
To retain and attract members and advertisers, we intend to introduce
additional services and new features on our web site. For example, we plan to
offer advertisers the ability to deliver promotional
6
<PAGE>
incentives to small businesses, in addition to individual consumers. These new
features and services will require us to spend significant funds on product
development and on educating our advertisers and consumers about our new
service offerings. New services and features may contain errors or defects that
are discovered only after introduction. Correcting these defects may result in
significant costs, service interruptions, loss of advertisers' and members'
goodwill and damage to our reputation. In addition, our successful introduction
of new technologies will depend on our advertisers' ability to adapt to use
these technologies, over which we have no control. If we introduce a service or
feature that is not favorably received, our current members may use our web
site and other services less frequently, our existing advertisers may not renew
their contracts and we may be unable to attract new members and advertisers.
We must be able to establish and maintain relationships with operators of other
web sites to attract new members
We advertise on third-party web sites using banner advertisements and
sponsorships to attract potential new members. Historically, approximately 70%
of our members were referred to our web site through third-party web sites.
Competition for banner and sponsorship placements on the highest traffic web
sites is intense, and we may not be able to enter into these relationships on
commercially reasonable terms, or at all. Moreover, we may have to pay
significant fees to establish these relationships. For instance, in 1999, we
paid operators of third-party web sites approximately $4.1 million to attract
potential new members. Depending on the particular web site operator, these
fees were paid on the basis of each member registration we received, each
impression delivered or each click-through to our web site. Even if we enter
into or maintain our current relationships with other web site operators, those
sites may not attract significant numbers of users or increase traffic to our
web site. Some operators of other web sites may also offer competing services,
alone or through an arrangement with one of our competitors. These operators
may be reluctant to enter into relationships with us. Our business could be
harmed if we do not establish and maintain relationships with other web site
operators on commercially reasonable terms or if our relationships do not
result in additional member registrations on our web site. In addition, to
attract new members, we may enter into agreements with organizations that have
established subscription bases. These agreements may contain exclusivity
provisions that restrict our ability to enter into similar agreements with
other organizations in the same business category. For example, our agreement
with The Parenting Group prohibits us from establishing promotional programs
similar to the one we operate with The Parenting Group. These types of
exclusive arrangements may limit or eliminate sources of members and revenues
that otherwise may be available to us.
Intellectual property litigation against us can be costly and could result in
the loss of significant rights
We expect that, as the number of services and competitors in Internet
advertising and direct marketing grows, we will be increasingly subject to
intellectual property infringement, unfair competition and related claims
against us. Third parties may also seek to invalidate our United States Patent,
No. 5,761,648, entitled "Interactive Marketing Network and Process Using
Electronic Certificates." Currently, we are a defendant in four lawsuits filed
by competitors, each of which alleges that our technology or business methods
infringe on the competitor's patent. The lawsuits seek, among other things, to
prevent us from using methods that allegedly violate the competitors' patents.
In addition, some of these competitors have in the past, and may in the future,
name our customers as defendants in these suits, which may cause these
customers to terminate their relationships with us which, in turn, could harm
our business. While we intend to defend these actions vigorously, our efforts
may not be successful. Our failure to prevail in this litigation could result
in:
. our paying monetary damages, which could be tripled if the infringement
is found to have been willful;
. an injunction requiring us to stop offering our services in their current
form;
. our having to redesign our technology and business methods, which could
be costly and time-consuming even where a redesign is feasible; or
7
<PAGE>
. our having to pay fees to license intellectual property rights, which may
result in unanticipated or higher costs.
Because of the ongoing technical efforts of others in our market and the
relatively recent introduction of our technology, we may be involved with one
or more of our competitors in legal proceedings to determine the parties'
rights to various intellectual property, including the right to our continued
ownership of our existing patent. Our failure to prevail in these proceedings
could harm our business.
We cannot predict whether other third parties will assert claims of
infringement or similar charges against us, or whether any past or future
claims will harm our business. For example, we were recently notified of two
patents believed to be relevant to our business, which we are currently
evaluating. We are engaged in negotiations to license one of these patents. If
we do not successfully license this intellectual property, we have been
notified that a lawsuit will be filed against us. We are currently evaluating
the other patent for any potential infringement issues and for any usefulness
to our business. We expect that other potentially relevant patents may come to
our attention from time to time in the future. We believe that participants in
our market are increasingly attempting to obtain patent protection for their
business methods, and some competitors such as Catalina Marketing and e-
centives have announced that they have applied for additional patents. We
cannot predict when or if patents will result from these efforts, or whether
any of these third parties' patents will cover aspects of our business. The
details of currently pending United States patent applications are not publicly
disclosed until the patent is issued. Any third-party claim, with or without
merit, could be time-consuming, result in costly litigation, cause us to reduce
or alter our services, delay or prevent service enhancements or require us to
enter into royalty or licensing agreements.
In addition, legal standards regarding the validity, enforceability and
scope of intellectual property in Internet-related businesses are unproven and
continue to evolve. In this legal environment, we may be required to license
other parties' proprietary rights in an effort to clarify our ability to
conduct business or develop new services. For example, we have entered into two
license agreements with the owner of patents covering aspects of the issuance
of printed coupons and the conduct of interactive games and contests. Further
royalty or licensing agreements, if required, might not be available on terms
acceptable to us, or at all. If there is a successful claim of infringement
against us and we are unable to develop non-infringing technology or license
the infringed or similar technology on a timely basis, our business could be
substantially harmed. Please see "Business--Legal Proceedings."
Protecting our patents, trademarks and proprietary rights may be costly and may
distract our management
We regard the protection of our patent rights, copyrights, service marks,
trademarks, trade dress and trade secrets as critical to our future success.
However, the steps we take to protect these and other proprietary rights will
be costly, may require significant management resources and may be inadequate.
For example, we incurred approximately $1.0 million in legal fees and expenses
in 1999 to protect our proprietary rights. If we are unsuccessful in protecting
our proprietary rights, our business will be seriously harmed.
Patents
We have one issued United States patent and three pending United States and
17 foreign patent applications directed to different aspects of our technology
and business processes. Nevertheless, it is possible that:
. our U.S. patent and any other patent we may obtain could be successfully
challenged by third parties, which could deprive us of the right to
prevent others from exploiting the electronic certificate issuing and
processing method or other inventions claimed in our current or future
patents;
8
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. current and future competitors could devise new methods of competing with
our business that are not covered by our issued patent or any patents we
may obtain, or against which our patent and any other patent we may
obtain may be ineffective;
. our pending patent applications may not result in the issuance of
patents; and
. a third party may have or obtain one or more patents that cause specific
aspects of our business to be restricted or that require us to pay
license fees.
In addition, we cannot predict how recently enacted United States laws may
impact our proprietary rights. For example, the American Inventor's Protection
Act, which became law in October 1999, may grant partial or full immunity to
certain qualified methods of doing business from the full exclusionary rights
otherwise afforded to validly issued patents. There currently is no substantial
judicial precedent addressing this new law. We are also uncertain as to whether
countries other than the United States will grant patents for inventions
pertaining to Internet-related businesses, or as to the extent of protection
those foreign patents would afford if issued. As in the United States, the
legal standards applied abroad for intellectual property in Internet-related
businesses are evolving and unproven. Any ruling or legislation that reduces
the validity or enforceability of our patents will seriously harm our business.
We presently have six lawsuits pending against companies we believe have
infringed on our patent. This litigation has been and will continue to be
costly, and is likely to continue over the course of several years. These
lawsuits are at an early stage, and the outcome of these lawsuits may not be
favorable to us. We may not prevail and prevent others from infringing on our
patents and using our proprietary rights. Furthermore, some of the companies we
have sued have filed counterclaims or separate lawsuits against us seeking
damages or to prevent us from using features of our system or business, and one
company has advised us that it is taking steps in the United States Patent and
Trademark Office to contest our patent rights. Other defendants may take
similar actions. Please see "Business--Legal Proceedings."
Trademarks, Copyrights and Trade Secrets
We rely on a combination of laws and contractual restrictions to establish
and protect our proprietary rights. We generally have entered into
confidentiality and invention assignment agreements with our employees and
contractors, and into non-disclosure agreements with parties with which we
conduct business, in order to limit access to and disclosure of our proprietary
information. These contractual arrangements and other steps we have taken to
protect our intellectual property may not prevent misappropriation of our
proprietary rights or deter independent third-party development or use of
similar intellectual property. In addition, we have registered and have applied
for registration of trademarks and service marks in the United States and in
other countries. However, our pending registrations might not be issued and our
registered marks may not prevent others from using similar marks.
Domain Names
We currently hold the Internet domain name coolsavings.com, as well as
various other related names. The requirements for holding domain names could
change. As a result, we may not acquire or maintain the "coolsavings.com"
domain name in all of the countries in which we conduct business or in which we
wish to conduct business in the future. This could impair our efforts to build
brand recognition and to increase traffic to our web site. We also could be
subject to disputes over our ownership of our domain names, which could be
costly and disruptive.
Licenses
In the future, we may license portions of our intellectual property,
including our issued patent, to third parties. To date, we have granted one
competitor immunity from suit under our patent, on the condition that the
competitor restrict its coupon distribution in ways acceptable to us.
Similarly, we have also licensed
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two other competitors under our patent on the condition that they restrict
their coupon distribution in ways acceptable to us. If the nature or scope of
the immunity or licenses were disputed, we would need to institute proceedings
to enforce our rights under these agreements or under our patent.
We may lose business or incur liabilities to our advertisers due to
uncertainties or inaccuracies in our database information
It is important to our advertisers that we accurately track our members'
demographics, our delivery of offers and advertisements and, in some instances,
redemptions of incentives offered through CoolSavings. We have developed
systems designed to record information about our members' demographic profiles,
usage of our web site and other member information. If these systems do not
perform as intended, we may not be able to evaluate accurately our members'
household characteristics or the success of an advertiser's promotional
campaign. Advertisers' willingness to use our services depends in part on the
size of our membership base. In addition, in some cases our advertising rates
increase as our registered membership increases and some of our advertising
contracts require us to maintain or attain specified membership or usage
levels. It is difficult to report our membership numbers accurately because
some individuals may register more than once under different e-mail addresses,
and members of households already registered with us may subsequently register
themselves individually. Many of our members were registered on our web site by
other members of their households and tend to use our web site less frequently
than the members who registered them, if at all. Furthermore, we rely on the
accuracy of the demographic, income and other information provided by our
registering members. If advertisers perceive our tracking and evaluations to be
unreliable or if our members' self-reported information proves to be
inaccurate, we may lose current and potential advertisers, suffer erosion in
our advertising rates or face disputes over proper advertising charges.
Failure to promote and protect our brand will harm our business
We believe that strengthening our brand will be increasingly important
because our market is competitive and has low barriers to entry. Our ability to
promote and position our brand depends on the success of our marketing efforts
and whether we can provide high quality services that motivate our members to
use CoolSavings. To promote our brand, we will need to invest heavily in
marketing to create and maintain brand loyalty among members. We intend to
continue to expand our offline marketing efforts in such media as broadcast and
print, where we have limited experience. These initiatives have involved and
will continue to involve significant expenses. For instance, during the last
six months of 1999, we spent approximately $9.4 million to promote our brand.
The outcome of our marketing efforts is difficult to predict. If our brand
enhancement strategy is unsuccessful, our business will be harmed. In addition,
we rely on co-branding relationships as sources for new members. These co-
branded programs function together with our advertisers' established
promotional vehicles to direct consumers to a special CoolSavings web address.
To the extent anyone we co-brand with is subject to negative publicity, the
goodwill associated with our brand may be harmed.
We may not be able to compete successfully against current and future
competitors
The market for e-marketing services is new, rapidly evolving and intensely
competitive. Barriers to entry for companies in our market are low, and current
and potential competitors can launch new web sites and e-marketing services at
relatively low cost.
Currently, we compete directly with online marketing companies in several
fields:
. direct marketers, such as FreeShop, LifeMinders and YesMail;
. incentive services, such as Cybergold, MyPoints and Netcentives;
. coupon providers, such as the online division of Catalina Marketing, e-
centives and planet U; and
. sweepstakes providers, such as Promotions.com.
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We also face competition from traditional direct marketers, including
leading distributors of traditional coupons by mail or newspaper inserts and
from companies offering affinity rewards tied to responses to advertisements.
We expect that some of the leading distributors of traditional newspaper-insert
coupons, which have significant existing relationships with advertisers such as
consumer packaged goods companies, will compete against us directly by
delivering their promotions over the Internet. For example, Valassis
Communications, a leading distributor of newspaper-insert coupons, recently
began to offer online services. We also compete with other web sites, portals
and advertising networks, as well as traditional offline media such as
television, radio and print, for a share of advertisers' total advertising
budgets and for consumers' attention.
Many of our current and potential competitors have longer operating
histories, greater brand recognition, larger customer or user bases, and
significantly greater financial, marketing, technical and other resources than
we do. In addition, our competitors may be acquired by, receive investments
from or enter into other commercial relationships with larger, well-established
and well-financed companies. Therefore, some of our competitors may be able to
devote greater resources to marketing and promotional campaigns, adopt more
aggressive pricing policies and devote substantially more resources to web site
and systems development. They may also try to attract advertisers by offering
free services. Increased competition may cause us to lose brand recognition and
market share and could otherwise harm our business.
In 1999, approximately 21.6% of our revenues were derived from our five largest
advertisers and our revenues may be concentrated among a limited number of
advertisers in the future
During 1999, although no advertiser accounted for more than 6.8% of our
revenues, approximately 21.6% of our revenues were derived from our five
largest advertisers. We believe that a relatively small number of advertisers
may account for a substantial portion of our revenues in future periods. If any
of our major advertisers were to reduce their advertising purchases
substantially or to stop using our services, our business would be seriously
harmed.
Many of our customers are emerging Internet companies that represent credit
risks
A significant portion of our revenues is derived from sales of advertising
to online retailers and service providers. For instance, in 1999, approximately
51% of our revenues were generated from promotional services used predominantly
by online retailers and service providers and approximately 22% of our revenues
were generated from promotional services used by companies with both an online
and offline presence. Many of these companies have limited operating histories,
are incurring substantial losses and have limited access to capital. Many of
these companies represent credit risks and could fail. If these advertisers
experience financial difficulties or fail to achieve commercial success, our
business will suffer.
If we do not manage our growth, our business will be seriously harmed
During 1999, we experienced rapid growth in our operations and we anticipate
that further expansion will be required to address potential growth in our
member and advertiser base and market opportunities. During that year, we
expanded from 53 to 121 employees and, during the fourth quarter of 1999, we
expanded from 100 employees to 121 employees. Our new employees include a
number of managerial, marketing, planning, technical and operations personnel
who have not yet been fully integrated into our business, and we expect to add
additional personnel in the near future. This expansion has placed a
significant strain on our management, operational and financial resources, and
we expect that strain to continue.
To manage the expected growth of our operations, we will need to improve our
existing and implement new operational and financial systems, procedures and
controls. We will also need to expand our finance,
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administrative, client services and operations staff and train and manage our
growing employee base effectively. Our current and planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
Additionally, we plan to relocate our headquarters to downtown Chicago during
mid-2000, which could be costly and disruptive. We anticipate that this
relocation will cost approximately $400,000. If our new office space proves to
be inadequate for our growth, we may have to spend additional resources to
accommodate our operations.
We may also pursue acquisition or investment opportunities that would
complement our current business. If we are unable to make these acquisitions or
investments, or have difficulty integrating any new entities or technologies,
our business could be harmed. Our business, results of operations and financial
condition will suffer if we do not effectively manage our growth.
Our failure to attract, assimilate and retain highly skilled personnel would
seriously harm our business
Our future success depends on the continued services of our senior
management and other key sales and technical personnel, particularly Steven M.
Golden, our Chairman, Chief Executive Officer and President, David H. Jacobson,
our Executive Vice President, Finance and Chief Financial Officer, Matthew
Moog, our Executive Vice President, Sales and Marketing, John J. Adams, our
Executive Vice President, Operations and Technology, and Jonathan J. Smith, our
Executive Vice President, Strategic Business Development. We do not have long-
term employment agreements with any of our key personnel and maintain no "key
person" life insurance policies. The loss of the services of any of our
executive officers or other key employees would likely have a negative effect
on our business, results of operations and financial condition.
Our future success also depends on our ability to identify, attract, retain
and motivate highly skilled employees, particularly additional technical, sales
and marketing personnel. Competition for employees in our industry is intense.
We have occasionally encountered and expect to continue to encounter
difficulties in hiring and retaining highly skilled employees, particularly
qualified software developers for our web site and database systems. We may be
unable to retain our key employees or identify, attract, assimilate or retain
other highly qualified employees in the future, which may in turn harm our
business.
Our reputation and business could be damaged if we encounter system
interruptions or capacity limitations
We seek to generate a high volume of traffic and transactions on our web
site. Our database must also handle a large volume of member data and
information about members' usage of our web site. The satisfactory performance,
reliability and availability of our web site, database systems and network
infrastructure are critical to our reputation and our ability to attract and
retain large numbers of members. Our revenues depend on promotional offers
being readily available for members and our ability to process their coupon
downloads, e-mail responses or other transactions on our web site. Any system
interruptions that result in the unavailability of our service or reduced
member activity would impair the effectiveness of our service for advertisers.
Interruptions of service may also inhibit our ability to attract and retain
members, which in turn will hinder our sales and marketing efforts. We have
experienced periodic system interruptions, which may occur from time to time in
the future. For instance, for two weeks during the summer of 1998, we
experienced network access interruptions that lasted minutes at a time because
of a problem with the access routers in the local access network of our primary
Internet service provider.
Additionally, recent acts of sabotage, known as denial of service attacks,
on prominent, high traffic web sites have caused extended interruption of
services on those web sites. Like other operators of web sites, we could also
face system interruption or shutdown as a result of a denial of service attack.
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A substantial increase in rate of traffic on our web site will require us to
expand and upgrade our technology, processing systems and network
infrastructure. Any unexpected upgrades could be disruptive and costly. In
addition, our existing systems may encounter unexpected problems as our member
base expands. Our failure to handle the growth of our databases could lead to
system failures, inadequate response times or corruption of our data, and could
negatively affect our business, results of operations and financial condition.
We may be unable to expand and upgrade our systems and infrastructure to
accommodate this growth in a timely manner. Any failure to expand or upgrade
our systems could damage our reputation and our business.
Furthermore, the increased use of the Internet has caused frequent
interruptions and delays in accessing and transmitting data over the Internet.
If the use of the Internet continues to grow rapidly, the Internet's
infrastructure may not continue to support the demands placed on it and its
performance and reliability may decline. Interruptions or delays in Internet
transmissions will disrupt our members' ability to access advertisers' offers
on our web site and our ability to send targeted e-mail, which may in turn
seriously harm our business and financial results. We also rely on web browser
technology to create and target promotional offers. If access to these web-
based systems is interrupted, our ability to disseminate new offers will be
impaired, which could cause lost revenues or disputes with our advertisers.
We rely on third-party service providers, and any disruption or failure in the
services they provide will harm our business
We rely on three third-party service providers to provide access to our web
site and support its operation. One of these third parties provides a co-
location facility that houses our web servers and our database, another is an
Internet service provider and the third provides telecommunication services.
Any interruption or failure in these services or a deterioration in their
performance could disrupt our business. Our support arrangements with these
providers are for a term of one year and may be canceled on 30 days notice in
certain circumstances. In the event these arrangements are terminated, we may
not be able to find alternative service providers on a timely basis or on terms
acceptable to us, or at all, which in turn would harm our business. In
addition, we rely on software licenses from third parties, such as two software
packages from L-Soft International, Inc. that we use to transmit e-mail to our
members. If these licenses are terminated, we may not be able to find and
install satisfactory alternate software on a timely basis or on terms
acceptable to us, or at all, which will harm our business.
Our business could be damaged by natural disasters and other unexpected
problems
Our success and our ability to attract new members and motivate our members
to respond to our advertisers' offers depend on the efficient and uninterrupted
operation of our computer and communications hardware systems. Our web servers
and the database behind our system are currently located at our Chicago
headquarters. In addition, the servers we use to perform data analysis are
housed at an Exodus Communications data center in Oak Brook, Illinois. Although
we have also contracted with Exodus to host a redundant system, we have not yet
directed substantial traffic to this Exodus system. The computer systems at
each of our two hosting sites are vulnerable to damage or interruption from
floods, fires, power loss, telecommunication failures, and other natural
disasters. In addition, our Chicago facility has only two hours of emergency
back-up power. The occurrence of a natural disaster or other unanticipated
problems at our facility or at the Exodus facility could result in
interruptions in or degradation of our services. Our business interruption
insurance may not adequately compensate us for resulting losses.
Furthermore, the computer servers running our system are vulnerable to
general mechanical breakdown or component failure, computer viruses, physical
or electronic break-ins, sabotage, vandalism and similar disruptions, which
could lead to loss or corruption of data or prevent us from posting offers on
our web site, sending e-mail notifications of new offers or delivering coupons
or other certificates to our members. System failure or degradation resulting
from under-capacity or from any of these risks could harm our business.
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We may be subject to claims as a result of our data analysis activities, which
could result in loss of members
The information in our database is an integral part of our business. We have
designed our technology infrastructure and services to allow us to aggregate
data regarding specific member behavior. We have a strict privacy policy that
governs how we use information about our members. We currently do not sell
member-identifying information to third parties without the consent of the
member and have no plans to do so in the future. Furthermore, our e-mail
notices are only sent to members who have elected to receive them. However,
some people who receive promotions from us may still be unhappy that we
contacted them. In addition, while we strictly protect the identity of
individual members, we do provide advertisers with aggregate information
regarding member demographics, shopping preferences and past behavior. Our use
of this aggregated information may cause dissatisfaction among our members or
otherwise lead to negative publicity. There has been substantial publicity,
governmental investigations and litigation regarding privacy issues involving
the Internet and Internet-based advertising. To the extent that our data mining
activities conflict with any privacy protection initiatives or if any private
information is inadvertently made public, we may be subject to legal claims. If
our members become unhappy with our use of the information in our database, or
if we are subject to legal proceedings or governmental investigations regarding
our use of our database, our business will be harmed.
Our business will be harmed if our online security measures fail
Because our efforts to attract and retain members depend on potential
members' expectations of privacy in using our services, our business could be
damaged by any security breach of our database or web site. We may be required
to spend significant capital and other resources to protect against security
breaches or to alleviate problems caused by these breaches. Someone
circumventing our security measures could misappropriate proprietary
information, corrupt our database or otherwise interrupt our operations. We
could also be subject to liability as a result of any security breach or
misappropriation of our members' personal data. This could include claims for
unauthorized purchases with credit card information, impersonation or other
similar fraud claims, as well as claims based upon other misuses of personal
information, such as unauthorized marketing. These claims could result in
costly litigation and could limit our ability to attract and retain advertisers
and members. Our security measures may fail to prevent security breaches. Any
failure to prevent security breaches will damage our reputation and harm our
business.
We may be liable for supplying inaccurate promotional information to consumers
We may face liability if the promotional information in the offers available
to our members is inaccurate. Our employees may make errors in posting our
advertisers' promotions. In addition, our advertisers may make errors entering
promotional offers directly into CoolSavings using our SavingsCenter software,
and we do not proofread or otherwise verify all of these offers. Any
liabilities which we may incur because of inaccurate information in the offers
we deliver could harm our business, results of operations and financial
condition. Additionally, any negative publicity generated as a result of
inaccurate information in the offers we deliver could damage our reputation and
diminish the value of our brand name.
We may be harmed if our advertisers fail to honor their promotions on our web
site or to comply with applicable laws
Our success depends largely upon retailers honoring our printed coupons and
upon advertisers reliably delivering and accurately representing the listed
goods and services. We have occasionally received, and expect to continue to
receive, complaints from our members about retailers' failure to honor our
coupons or about the quality of the goods and services featured in our
promotions. These complaints may be accompanied by requests for reimbursement
or threats of legal action against us. Any resulting reimbursements or related
litigation could be costly for us, divert management attention, increase our
costs
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of doing business or otherwise harm our business, financial condition or
results of operations. In addition, our advertisers' promotion of their goods
and services may not comply with federal, state and local laws. Our role in
facilitating advertisers' sales activities may expose us to liability under
these laws. If we are exposed to this kind of liability, we could be required
to pay substantial fines or penalties, redesign our web site or business
processes, discontinue some of our services or otherwise spend resources to
avoid liability.
Expanding internationally could be costly and disruptive
We intend to expand our business internationally, which will require
significant management attention and financial resources. Our international
expansion efforts will focus initially on Canada, Australia and the United
Kingdom, and we expect to expand into other countries in the long term. We have
no experience in operating internationally, and we may be unable to compete
effectively in international markets. We believe that our expansion efforts
into Canada, Australia, the United Kingdom or any other country will be subject
to a number of risks and uncertainties, including:
. potentially more stringent regulation and liability standards;
. unexpected changes in regulatory requirements;
. difficulties and costs of staffing and managing international operations;
. differing technological standards;
. varying and evolving legal standards for intellectual property covering
Internet-related inventions;
. inadequate protection of intellectual property in some countries;
. difficulties and costs involved in tailoring our services to local
advertising practices and customer preferences;
. difficulties in collecting accounts receivable through foreign legal
systems;
. fluctuations in the value of the U.S. dollar relative to other
currencies; and
. potentially adverse tax consequences.
Any of these factors could impair our ability to expand into international
markets, or could significantly increase our expenses in future periods. In
addition, we may pursue our international expansion strategy by entering into
joint ventures or licensing our intellectual property to third parties. We may
be unable to control these parties' activities, which could hinder our
expansion efforts and could damage our brand.
We are a defendant in a securities-related lawsuit
We have been named as a co-defendant in a lawsuit filed in 1999 against our
Chief Executive Officer by his ex-wife. This lawsuit is based upon the
plaintiff's sale of shares of our common stock to our Chief Executive Officer
in March 1998 and makes various allegations including fraud. The suit seeks
damages in excess of $6.5 million. While we believe that this lawsuit lacks
merit, a negative outcome in this litigation could subject us to substantial
damages and negative publicity. Our defense of this litigation, even if
successful, could be costly and time-consuming.
Risks Related To Our Industry
We depend on widespread acceptance of online direct marketing and promotions
and the continued growth of online commerce
Our success depends on the continued growth and acceptance by both consumers
and advertisers of online direct marketing and other promotional services
available through the Internet. Although incentive promotions and direct
marketing have been provided for many years through newspaper inserts, direct
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mailing and other conventional marketing and sales channels, they have only
recently been offered on the Internet. Many of our current or potential
advertising customers, particularly traditional offline businesses, have little
or no experience using the Internet for advertising purposes, and may be
reluctant to spend money on our services. As a result, we face a longer sales
cycle when dealing with traditional offline businesses. At times, these sales
cycles can last more than a year. In addition, some traditional retailers may
not readily accept our computer-generated certificates as valid, in part
because of their cashiers' lack of familiarity with them and the perceived risk
that these coupons can be counterfeited. The other services we offer, including
the use of targeted e-mails to alert consumers to savings opportunities, also
represent new marketing methods whose acceptance by consumers and advertisers
is less certain than traditional marketing methods. Although we do not send
unsolicited e-mail, known as "spam," negative public perception associated with
"spam" could reduce the demand for our services.
In addition, we are dependent upon the continued growth of the Internet as a
medium for commerce. Demand for services and products sold over the Internet is
uncertain for a number of reasons, including concerns related to the security
of transactions, network reliability and poor performance. Changes in or
insufficient availability of telecommunications services to support the
Internet also could result in slower response times and reduce usage of the
Internet. If use of the Internet does not continue to grow, grows more slowly
than expected or does not become a viable commercial marketplace, our business,
results of operations and financial condition will suffer.
Changes in consumer and advertiser trends could harm our business
We derive substantially all of our revenues from fees charged to advertisers
for our promotional services. Therefore, we will be affected by changing trends
in retail advertising, such as the trend away from periodic promotions and
toward "everyday low prices." In addition, many of our advertisers are national
retailers and suppliers of consumer products and services. These businesses are
affected by the general economy as well as consumer confidence, which has at
times diminished despite otherwise strong financial conditions. Consumer
spending also can be affected by trends related to lifestyle, such as changing
tastes in fashion or entertainment. Any decline in demand for our services as a
result of changes in consumer or advertiser trends could harm our business,
results of operations and financial condition.
We may not be able to keep up with rapid technological developments and
evolving industry standards
The Internet is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product announcements,
introductions and enhancements and changing consumer and advertiser demands.
Our future success will depend on our ability to adapt our services to rapidly
changing technologies and evolving industry standards and to continually
improve the performance, features and reliability of our services. For example,
we may be required to adapt our services to be compatible with Internet-
connected devices other than traditional personal computers, such as handheld
and wireless devices. We may also need to adapt to evolving standards resulting
from the convergence of the Internet, television and other media. The
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require us to incur
substantial expenditures to modify or adapt our services or infrastructure.
Federal, state and local governments may further regulate the Internet and
Internet advertising, which could substantially harm our business
The adoption or modification of laws or regulations relating to the Internet
and Internet-based advertising could harm our business. In particular, our
business could be severely damaged by any regulatory restrictions on our
collection or use of information about our members.
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Laws and regulations that apply to Internet advertising and communications
and Internet users' privacy are becoming more prevalent. For example, the
United States Congress and Federal Trade Commission recently adopted laws and
regulations regarding the online collection and use of information from
children and the content of Internet communications, and various states
regulate e-mail marketing. However, even in areas where there has been some
legislative action, the laws governing the Internet remain largely unsettled.
There is no single government body overseeing our industry, and some existing
state laws have different and sometimes inconsistent application to our
business. It may take years to determine whether and how existing laws, such as
those governing intellectual property, privacy, libel, taxation and the need to
qualify to do business in a particular state, apply to the Internet and
Internet advertising. Also, we conduct trivia quizzes and other contests and
sweepstakes on our web site, which may be subject to gaming and sweepstakes
laws. Our attempts to comply with these laws may be inadequate, in part because
the effect of these laws on our activities is often unclear.
We expect that regulation of the Internet and Internet advertising will
intensify. New laws could slow the growth in Internet use and decrease the
acceptance of the Internet as a commercial medium, which would harm our
business. For example, a number of proposals to restrict the collection of
information about Internet users and to tax Internet-based transactions are
under consideration by federal, state, local and foreign governmental
organizations. A three-year federal moratorium on new state Internet sales tax
legislation is currently in effect, but it is scheduled to expire in 2001 and
does not preempt existing state tax laws. An increase in the taxation of online
transactions or other new regulations could increase our costs of doing
business or otherwise harm us by making the Internet less attractive for
consumers and businesses. In addition, existing laws such as those governing
intellectual property and privacy may be interpreted to apply to the Internet
and Internet advertising. Our strategy to expand into international markets
will likely subject us to additional regulation. Foreign countries, for example
those in the European Union, often regulate areas such as Internet user privacy
more strictly than the United States.
Any application of existing laws and regulations to the Internet, new
legislation or regulation that imposes stricter restrictions on privacy,
consumer protection or advertising practices, any government investigation of
our privacy practices or other business methods, or the application of laws
from jurisdictions whose laws do not currently apply to us could:
. create uncertainty in the marketplace that could reduce demand for our
services;
. limit our ability to collect and to use data from our members, which
could prevent us from attracting and retaining advertisers;
. result in expensive litigation, costly and disruptive efforts to respond
to governmental investigations and burdensome fines or penalties;
. require us to redesign our web site, registration process, database or
targeting methods, any of which could be expensive and disruptive to our
business;
. increase the cost of delivering our services to advertisers;
. require us to qualify to do business in additional jurisdictions, or
subject us to liability for having failed to qualify to do business
wherever our members reside;
. reduce the efficacy of our targeted promotional services; or
. in some other manner harm our business, results of operations and
financial condition.
Our business may suffer if the security of Internet commerce is compromised
Concerns about the security of transactions conducted on the Internet and
consumer privacy may inhibit the growth of the Internet generally, and online
commerce in particular. Any compromise of security involving Internet-based
transactions could result in negative publicity and deter people from using the
Internet or from using it to conduct transactions that involve transmitting
confidential information, such as
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registering for membership or purchasing goods and services. This could harm
our business because most of our advertisers use our services to encourage
people to purchase goods or services on the Internet.
We may be adversely affected by problems relating to the Year 2000 issue
Problems associated with software and computer systems' use of two digits to
define the year, referred to as "Year 2000" issues, could harm our business.
Although to date we are not aware of any significant Year 2000 issues relating
to our principal internally developed programs and systems, or systems provided
to us by others, these systems could experience Year 2000 problems at any time
during 2000 and beyond. These problems could disrupt our business and require
us to incur significant, unanticipated expenses to remedy them. They could also
result in claims and litigation against us, which could subject us to
significant costs and could require substantial attention from our management.
Similarly, our business could be severely harmed if our Internet service
providers and other third parties on which our services depend encounter Year
2000 issues, or if Year 2000 problems cause malfunctions at our facilities or
at Exodus Communications' facilities. In addition, Year 2000 problems may
arise, limiting our members' ability to access the Internet, "click-through" to
our advertisers' web sites or otherwise respond to offers we deliver, which
would harm our operating results.
Risks Related To This Offering
We may be unable to meet our future capital requirements
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to satisfy our anticipated needs
for working capital, capital expenditures and business expansion for at least
the next 12 months. After that time, we may need additional capital. However,
if our growth rate exceeds our expectations, we may need to raise additional
funds sooner in order to fund expansion, to develop new or enhanced products or
services, to make strategic acquisitions or to respond to competitive
pressures.
We have a $6.5 million bank line of credit. We currently do not have any
other commitments for additional financing. Additional financing may not be
available to us on favorable terms or at all. If adequate funds are not
available on acceptable terms, we may not be able to continue or expand our
business operations. This in turn could harm our business, results of
operations and financial condition. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of
our existing stockholders will be diluted. Furthermore, any new securities
could have rights, preferences and privileges senior to those of our common
stock.
Our principal stockholders, executive officers and directors will beneficially
own approximately 59.6% of our outstanding common stock after this offering
and, therefore, will exercise significant control over us, and third parties
may be deterred from acquiring us
Our executive officers, directors and entities affiliated with them will, in
the aggregate, beneficially own approximately 59.6% of our outstanding common
stock immediately after this offering. As a result, these stockholders, if
acting together, will have the ability to control all matters requiring
approval by our stockholders, including the election and removal of directors
and the approval of any merger, consolidation or sale of all or substantially
all of our assets. This could discourage others from initiating potential
merger, takeover or other change of control transactions, which could cause our
stock price to decline.
In addition, provisions of our articles of incorporation, our bylaws and
Michigan law could make it difficult for a third party to acquire us or change
our management, even if doing so would be beneficial to our stockholders. These
provisions include:
. authorizing the board to issue one or more series of preferred stock;
. limiting the persons who may call special meetings of stockholders;
18
<PAGE>
. prohibiting stockholder action by written consent;
. prohibiting stockholders to fill any vacancy on the board; and
. establishing advance notice requirements for nominations for election of
directors or for proposing matters that can be acted on by stockholders
at stockholder meetings.
Please see "Description of Capital Stock."
Our stock price is likely to be highly volatile, and you may not be able to
sell your shares at a profit
The market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in response to factors such as the
following, many of which are beyond our control:
. quarterly variations in our operating results;
. operating results that vary from the expectations of securities analysts
and investors;
. changes in expectations as to our future financial performance, including
financial estimates by securities analysts and investors;
. changes in market valuations of other Internet companies;
. governmental regulation of the Internet or Internet advertising,
including any governmental inquiry of another Internet company;
. loss of a major advertiser;
. resolution of our pending or future patent litigation or other changes in
the status of our intellectual property rights;
. announcements of significant claims or legal proceedings against us;
. announcements of technological innovations or new services by us or our
competitors;
. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
. departures of key personnel; and
. future sales of our common stock.
Domestic and international stock markets often experience extreme price and
volume fluctuations. The market prices of the securities of Internet-related
and technology companies, particularly following an initial public offering,
are often highly volatile and subject to wide fluctuations that bear little
relation to actual operating performance of these companies. As a result,
investors may be unable to sell shares of our common stock at or above the
price they paid for the stock.
In the past, some companies that have experienced volatility in the market
price of their stock have been the object of securities class action
litigation. Securities class action litigation involving CoolSavings would
result in substantial costs and a diversion of management's attention and
resources, and would harm our stock price.
Substantial sales of our common stock could cause our stock price to fall
After this offering, we will have approximately 38,905,374 shares of common
stock outstanding, or 39,535,374 shares if the underwriters' over-allotment
option is exercised in full. The 4,200,000 shares sold in this offering, or
4,830,000 shares if the underwriters' over-allotment option is exercised in
full, will be freely tradable without restriction or further registration under
the federal securities laws unless purchased by our
19
<PAGE>
affiliates. The remaining 34,705,374 shares of common stock outstanding after
this offering will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of Shares Date of Availability for Sale
---------------- -----------------------------
<S> <C>
323,035 Immediately after the date of this prospectus
120,120 At various times after the date of this prospectus and prior to
180 days after the effective date of the registration statement
containing this prospectus
31,411,184 180 days after the effective date of the registration statement
containing this prospectus (subject in some cases to volume
limitations)
2,851,035 At various times after 180 days following the effective date
of the registration statement containing this prospectus
</TABLE>
The above table assumes the effectiveness of lock-up arrangements with the
underwriters under which substantially all of our stockholders have agreed not
to sell or otherwise dispose of their shares of common stock. Most of the
shares that will be available for sale after the expiration of the lock-up
period will be subject to volume limitations because they are held by our
affiliates. In addition, Chase Securities Inc. may remove these lock-up
restrictions prior to the expiration of the lock-up period without prior
notice.
If our stockholders sell substantial amounts of common stock in the public
market, the market price of our common stock could fall. These sales also might
make it more difficult for us to sell equity or equity-related securities in
the future at a time and price that we deem appropriate. Please see "Shares
Eligible for Future Sale."
Our management has broad discretion over the use of the offering proceeds and
might not use them in a manner which yields a favorable return
The net proceeds from this offering are estimated to be approximately $45.8
million after deducting the estimated underwriting discounts and estimated
offering expenses. Our management will retain broad discretion over how to use
the proceeds of this offering. Our investments of these proceeds may not yield
a favorable return, and purchasers of common stock in this offering may
disagree with the manner in which our management elects to use these proceeds.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "could," "anticipates,"
"expects," "plans," "estimates," "intends," "believes," "predicts" and similar
expressions. Our actual results could differ materially from those discussed in
these statements. Factors that could contribute to these differences include,
but are not limited to, those discussed above under "Risk Factors" and
elsewhere in this prospectus. We do not undertake to update any of the forward-
looking statements after the date of this prospectus to conform these
statements to actual results, unless required by applicable securities laws.
20
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 4,200,000 shares of
common stock offered by us will be approximately $45.8 million, or $52.8
million if the underwriters' overallotment option is exercised in full,
assuming an initial public offering price of $12.00 per share, and after
deducting estimated underwriting discounts and commissions and other estimated
offering expenses.
The principal purposes of this offering are to increase our working capital,
create a public market for our common stock, facilitate our future access to
the public capital markets and increase our visibility in our marketplace. We
intend to use the net proceeds of this offering for general corporate purposes,
including operational expenses, such as personnel and sales and marketing, and
capital expenditures. We cannot at this time assign any particular amount to a
specific use. The amounts and timing of our actual expenditures will depend on
numerous factors, including the status of our marketing and branding
activities, the need to hire new employees and the amount of cash generated or
used by our operations. We may also use a portion of the net proceeds,
currently intended for general corporate purposes, to acquire or invest in
complementary businesses, technologies, products or services. We have no
present plans or commitments and we are not currently engaged in negotiations
for any such transactions. Our management will retain broad discretion in the
allocation of the net proceeds of this offering.
Pending these uses, we intend to invest the net proceeds in short-term,
investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared nor paid any cash dividends on our common stock. We
currently anticipate that we will retain any future earnings for the
development and operation of our business. In addition, our credit facility
currently prohibits the payment of cash dividends on our capital stock.
Accordingly, we do not anticipate paying cash dividends on our capital stock in
the foreseeable future.
21
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis after giving effect to the conversion of all
outstanding convertible subordinated notes into 462,627 shares of common
stock assuming an initial public offering price of $12.00 per share and
the conversion of all outstanding Series A convertible preferred stock
into 2,527,298 shares of common stock, both of which will occur
automatically upon completion of this offering, and the inclusion of a
beneficial conversion feature of $555,000 related to the conversion of
the convertible subordinated notes which has been reflected as additional
paid-in capital; and
. on the same pro forma basis as adjusted to reflect the receipt of the
estimated net proceeds from our sale of 4,200,000 shares of common stock
in this offering at an assumed initial public offering price of $12.00
per share.
You should read the following table with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Convertible subordinated and long-term debt,
including current portion..................... $ 5,874 $ 878 $ 878
Stockholders' equity:
Series A convertible preferred stock, no par
value, 5,000 shares authorized; 2,197.650
issued and outstanding actual; no shares
issued and outstanding pro forma; no shares
issued and outstanding pro forma, as
adjusted.................................... -- -- --
Common stock, no par value, 69,000,000 shares
authorized and 31,715,449 shares issued and
outstanding actual; 69,000,000 shares
authorized and 34,705,374 shares outstanding
pro forma; 100,000,000 shares authorized and
38,905,374 shares outstanding pro forma, as
adjusted.................................... 27,845 32,841 78,613
Additional paid-in capital................... 15,204 15,704 15,704
Notes receivable from related parties........ (2,817) (2,817) (2,817)
Accumulated deficit.......................... (21,112) (21,612) (21,612)
-------- -------- -------
Total stockholders' equity................. 19,120 24,116 69,888
-------- -------- -------
Total capitalization..................... $ 24,994 $ 24,994 $70,766
======== ======== =======
</TABLE>
Share information is based on our shares outstanding as of December 31,
1999, and excludes:
. 4,757,317 shares of common stock reserved for issuance under our 1997
Stock Option Plan, of which 3,864,230 shares were subject to outstanding
options as of December 31, 1999 at a weighted average exercise price of
$3.76 per share;
. 324,737 shares of common stock subject to options granted outside of our
1997 Stock Option Plan and outstanding as of December 31, 1999 at an
exercise price of $0.28 per share; and
. 634,309 shares of common stock reserved for issuance under our 1999 Non-
Employee Director Stock Option Plan, of which 63,250 shares were subject
to outstanding options as of December 31, 1999 at a weighted average
exercise price of $4.69 per share.
22
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $24.3 million, or $0.70 per share of common stock. Pro forma net
tangible book value per share is equal to our net tangible assets less total
liabilities, divided by the pro forma number of shares of common stock
outstanding as of December 31, 1999. At an assumed initial public offering
price of $12.00 per share, after giving effect to the conversion of outstanding
convertible subordinated notes into 462,627 shares of common stock, the
conversion of 2,197.650 shares of outstanding Series A convertible preferred
stock into 2,527,298 shares of common stock and the sale of shares of common
stock in this offering, our pro forma as adjusted net tangible book value at
December 31, 1999 would have been approximately $70.1 million, or $1.80 per
share of common stock. This amount represents an immediate increase in pro
forma net tangible book value of $1.10 per share to existing stockholders and
an immediate dilution in net tangible book value of $10.20 per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $12.00
Pro forma net tangible book value per share at December 31,
1999......................................................... $0.70
Increase per share attributable to new investors.............. 1.10
-----
Pro forma net tangible book value per share after the offering.. 1.80
------
Dilution per share to new investors............................. $10.20
======
</TABLE>
The following table summarizes, as of December 31, 1999 on the pro forma
basis described above, the total number of shares of common stock purchased
from us, the total consideration paid to us, and the average price per share
paid by our existing stockholders and by new investors purchasing shares from
us in the offering, at an assumed initial public offering price of $12.00 per
share, before deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 34,705,374 89.2% $32,841,027 39.4% $ 0.95
New investors........... 4,200,000 10.8 50,400,000 60.6 12.00
---------- ----- ----------- -----
Total............... 38,905,374 100.0% $83,241,027 100.0%
========== ===== =========== =====
</TABLE>
If the underwriters exercise their over-allotment option in full, the number
of shares of common stock held by new investors will be increased to 4,830,000
or 12.2% of the total number of shares of common stock to be outstanding
immediately after this offering.
Share information is based on our shares outstanding as of December 31,
1999, and excludes:
. 4,757,317 shares of common stock reserved for issuance under our 1997
Stock Option Plan, of which 3,864,230 shares were subject to outstanding
options as of December 31, 1999 at a weighted average exercise price of
$3.76 per share;
. 324,737 shares of common stock subject to options granted outside of our
1997 Stock Option Plan and outstanding as of December 31, 1999 at an
exercise price of $0.28 per share; and
. 634,309 shares of common stock reserved for issuance under our 1999 Non-
Employee Director Stock Option Plan, of which 63,250 shares were subject
to outstanding options as of December 31, 1999 at a weighted average
exercise price of $4.69 per share.
23
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data set forth below for the years ended
December 31, 1997, 1998 and 1999 and the balance sheet data as of December 31,
1997 and 1998 have been derived from our financial statements, which have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon is included elsewhere in this prospectus. The statement of operations
data for the period ended December 31, 1996 and the balance sheet data as of
December 31, 1996 and 1997 are derived from audited financial statements that
do not appear in this prospectus. The statement of operations data for the
period from inception through December 31, 1995 are derived from unaudited
financial statements that do not appear in this prospectus.
You should read the selected financial data set forth below with the
financial statements and related notes and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which are included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
Inception
through Year Ended December 31,
December 31, ----------------------------------------------
1995 1996 1997 1998 1999
------------ ---------- ---------- ---------- ----------
(unaudited)
(in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues........... $ -- $ -- $ 110 $ 1,143 $ 12,916
Cost of revenues....... -- -- 148 428 1,818
---------- ---------- ---------- ---------- ----------
Gross profit (loss).... -- -- (38) 715 11,098
Operating expenses:
Sales and
marketing.......... -- 253 1,202 2,494 17,838
Product
development........ -- 131 719 1,217 4,503
General and
administrative..... 16 499 766 2,350 5,890
---------- ---------- ---------- ---------- ----------
Total operating
expenses............. 16 883 2,687 6,061 28,231
---------- ---------- ---------- ---------- ----------
Loss from operations.. (16) (883) (2,725) (5,346) (17,133)
Interest income
(expense), net..... -- 9 (3) 40 265
Amortization of debt
discount........... -- -- (4) (435) --
---------- ---------- ---------- ---------- ----------
Net loss.............. $ (16) $ (874) $ (2,732) $ (5,741) $ (16,868)
========== ========== ========== ========== ==========
Historical loss per
common share, basic
and diluted.......... $ (0.00) $ (0.06) $ (0.15) $ (0.27) $ (0.57)
========== ========== ========== ========== ==========
Weighted average
shares used to
compute historical
basic and diluted
loss per common
share................ 10,962,809 13,697,334 18,266,572 21,547,177 29,804,681
Pro forma loss per
common share, basic
and diluted
(unaudited).......... $ (0.58)
==========
Shares used to compute
pro forma basic and
diluted loss per
common share
(unaudited).......... 30,113,208
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------------
1996 1997 1998 1999
------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................. $ 449 $ 64 $ 4,895 $17,489
Working capital (deficit).................. 283 (886) 3,788 15,703
Total assets............................... 466 353 6,371 29,590
Long-term debt, including current portion.. 300 241 300 878
Total stockholders' equity (deficit)....... (4) (775) 4,594 19,120
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion of our financial condition and
results of operations with the financial statements and the related notes
included elsewhere in this prospectus. This discussion contains forward-looking
statements based on our current expectations, assumptions, estimates and
projections. These forward-looking statements involve risks and uncertainties.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of numerous factors, many of which are
described in the "Risk Factors" section and elsewhere in this prospectus. We
are under no duty to update any of the forward-looking statements after the
date of this prospectus to conform these statements to actual results, unless
required by applicable securities laws.
Overview
We provide a comprehensive set of e-marketing solutions used by online and
offline advertisers to build one-to-one customer relationships. Under our
established brand, advertisers can deliver, target and track a wide array of
incentives, including printed and electronic coupons, personalized e-mails,
rebates, samples, sales notices, gift certificates, contests and banner
advertisements to promote sales of products or services in stores or online. We
were incorporated in December 1994 as Interactive Coupon Marketing Group, Inc.
and changed our corporate name to coolsavings.com inc. in November 1998. From
inception through February 1997, our primary activities consisted of initiating
sales and marketing efforts, developing our business model, building our
software and hardware infrastructure, developing and protecting our
intellectual property, raising capital and recruiting employees. We launched
our web site in February 1997 and thereafter began generating revenues.
We generate substantially all of our revenues by providing online marketing,
or e-marketing, services to our advertisers. Approximately 1% of our revenues
are generated from royalty and license fees and other miscellaneous sources. We
charge our advertisers on a variety of bases, the most common of which include:
. the number of offers delivered to members, commonly sold on a cost per
thousand, or CPM, basis;
. the number of times members click on an incentive linking the member to
the advertiser's web site (known as a click-through response);
. the number of purchases made or qualified leads generated; and
. the number of registered members in our database.
Our pricing depends upon a variety of factors, including, without
limitation, the degree of targeting, the duration of the advertising contract
and the number of offers delivered. The degree of targeting refers to the
number of identified household or member attributes, such as gender, age or
product or service preferences, used to select the audience for an offer. Our
advertising rates often are negotiated on a case-by-case basis. Generally, the
rates we charge our advertisers increase as the degree of targeting and
customization increases. Revenues subject to time-based contracts are
recognized ratably over the duration of the contract. For contracts based on
certain performance or delivery criteria, revenues are recognized in the month
performance is delivered to the customer. Most of our advertising contracts
have stated terms of less than one year and include earlier termination
provisions. In 1999, our largest advertiser accounted for approximately 6.8% of
our revenues and our top five advertisers together accounted for approximately
21.6% of our revenues.
Our revenues for each period depend on a number of factors, including the
number of advertisers sending promotional offers to our members, the size of
our membership base and the responsiveness of our members to each promotion. We
believe that our revenues will be subject to seasonal fluctuations in
accordance with general patterns of retail advertising spending, which is
typically highest during the fourth quarter. In addition, expenditures by
advertisers tend to be cyclical, reflecting overall general economic conditions
and consumer buying patterns.
25
<PAGE>
Our cost of revenues consists primarily of Internet connection charges, web
site equipment depreciation, salaries of operations personnel and other related
operations costs. Although our cost of revenues as a percentage of revenues
declined significantly for the year ended December 31, 1999, we have recently
expanded, and expect to continue to expand significantly, our web server
capacity and our investment in data mining tools and personnel. This will
require us to commit relatively large fixed expenses in advance of potential
future revenues. As a result, we expect to incur substantially higher cost of
revenues during future periods. We have added, and anticipate that we will
continue to add, new advertisers, necessitating this investment in
infrastructure. Due to these anticipated increases in our web server capacity
and other infrastructure expenditures, our fixed costs to operate our business
will rise and our gross profit will suffer in the near term until increased
revenues are realized. The demand for our services is subject to seasonal
variations. We will likely experience declines in our gross margin from quarter
to quarter.
We have incurred significant losses since our inception. As of December 31,
1999, our accumulated deficit was approximately $21.1 million. We expect to
continue to incur significant operating losses and capital expenditures. In
particular, we expect to invest heavily in sales and marketing activities,
hiring new personnel, enhancing services and technology, expanding and
relocating facilities and defending intellectual property rights. These sales
and marketing activities will include both online advertising on third-party
web sites, such as banner advertisements, to directly acquire member
registrations and offline advertising, such as television and radio
advertisements and billboards. In addition, we presently have six lawsuits
pending against companies we believe have infringed our patent, and are
defending against counterclaims in these lawsuits and against four lawsuits
filed against us. This litigation has been, and will continue to be, costly and
is likely to continue over the course of several years. For instance, during
1999, we spent approximately $1.0 million in legal fees and expenses on this
litigation. Because litigation is unpredictable, future expenses may exceed
that amount and any amounts we budget for litigation costs in the future.
Results of Operations
From our inception until December 31, 1996, we were engaged in start-up
activities and incurred approximately $899,000 of operating expenses. These
operating expenses primarily consisted of investments in technology and
personnel. We earned no revenues during this period. As a result, we believe
comparisons between the period ended December 31, 1996 and the year ended
December 31, 1997 are not meaningful.
The following is a table of our results of operations in 1997, 1998 and 1999
expressed as a percentage of net revenues represented by each line item.
Figures below are rounded to the nearest whole percentage, and thus line items
representing subtotal and total percentages may differ, due to rounding, from
the sum of the percentages for each line item.
<TABLE>
<CAPTION>
Year Ended December
31,
--------------------------
1997 1998 1999
-------- ------ ------
<S> <C> <C> <C>
Net revenues....................................... 100.0% 100.0% 100.0%
Cost of revenues................................... 134.4 37.4 14.1
-------- ------ ------
Gross profit (loss)................................ (34.4) 62.6 85.9
Operating expenses:
Sales and marketing.............................. 1,097.2 218.3 138.1
Product development.............................. 657.1 106.5 34.9
General and administrative....................... 699.7 205.6 45.6
-------- ------ ------
Total operating expenses......................... 2,454.0 530.4 218.6
-------- ------ ------
Loss from operations............................... (2,488.4) (467.8) (132.7)
Other income:
Interest income (expense), net................... (2.1) 3.5 2.1
Amortization of debt discount.................... (3.8) (38.1) --
-------- ------ ------
Net loss........................................... (2,494.3)% (502.4)% (130.6)%
======== ====== ======
</TABLE>
26
<PAGE>
Years Ended December 31, 1999 and 1998
Net Revenues
Net revenues increased 1,030% to $12.9 million in 1999, from $1.1 million in
1998. The increase in net revenues was primarily due to an increase in the
number of advertisers from 38 at December 31, 1998 to 124 at December 31, 1999,
increases in our advertising rates due to expanded service offerings, and
application of those rates to an expanded membership base. Our member base grew
from approximately 1.9 million registered members on December 31, 1998 to over
5.0 million on December 31, 1999.
Cost of Revenues
Cost of revenues increased to $1.8 million in 1999, from $428,000 in 1998.
Gross profit increased as a percentage of net revenues to 85.9% in 1999, from
62.6% in 1998. The absolute dollar increase in cost of revenues was primarily
due to building our server and networking infrastructure in response to the
growth in activity by our members and the hiring of 18 additional operations
personnel to service our increased advertiser base. The increased costs were
approximately $660,000 for infrastructure and $830,000 for operations personnel
costs. However, our gross profit percentage increased because cost of revenues
increased more slowly than net revenues.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
advertising, salaries of sales and marketing personnel, commissions paid to our
sales personnel and other marketing related expenses. Sales and marketing
expenses increased to $17.8 million, or 138% of net revenues, in 1999, from
$2.5 million, or 218% of net revenues, in 1998. The $15.3 million increase in
sales and marketing expenses was primarily due to increased expenses associated
with promotional and marketing efforts, the hiring of 22 additional sales and
marketing personnel and increased sales commissions. Our promotional and
marketing efforts included online advertising, such as banner advertisements on
high-traffic web sites, used to acquire member registrations. This online
advertising is placed primarily with operators of high traffic web sites who
are paid a fee on the basis of each member registration we receive, each
impression delivered or each click-through to our web site. We also place some
online advertising with operators of lower traffic web sites that generally
receive a fee for each member registration we receive. We spent approximately
$4.1 million for online advertising in 1999, up from approximately $1.3 million
in 1998. Fees to operators of web sites are expensed in the periods incurred.
Our promotional and marketing efforts also included offline advertising, such
as television and radio advertisements and billboards. While we incurred no
offline advertising expenses in 1998, we incurred offline advertising expenses
of approximately $9.4 million in 1999. Sales and marketing expenses as a
percentage of net revenues decreased due to the growth in net revenues. We
expect that sales and marketing expenses will grow significantly in absolute
dollars for the foreseeable future as we pursue an aggressive customer
acquisition strategy and hire additional sales and marketing personnel.
Product Development. Product development expenses consist primarily of
salaries of software development personnel and expenditures related to third-
party technical consultants. Product development expenses increased to $4.5
million, or 34.9% of net revenues, in 1999, from $1.2 million, or 106% of net
revenues, in 1998. The absolute dollar increase in product development expenses
was primarily due to the hiring of 14 additional personnel and associated
software costs related to enhancing the features and functionality of our web
site and costs incurred in our Year 2000 readiness effort. Product development
expenses decreased as a percentage of net revenues due to the growth in net
revenues. To date, all product development expenditures have been expensed as
incurred. We believe that significant investments in product development will
be necessary to remain competitive, and as a result we expect our product
development expenses will increase in absolute dollars for the foreseeable
future.
General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive and administrative
personnel, facilities, professional services, including legal expenses relating
to protection of our patent rights, travel and other general corporate
expenses. General and administrative expenses increased to $5.9 million, or
45.6% of net revenues, in 1999, from $2.3 million, or 206% of net revenues, in
1998. The absolute dollar increase in general and administrative expenses was
27
<PAGE>
primarily due to the hiring of 14 additional personnel to support the growth of
our business, recruiting costs related to filling key management positions and
legal fees. General and administrative expenses decreased as a percentage of
net revenues due to the growth in net revenues. We expect that general and
administrative expenses will grow significantly in absolute dollars for the
foreseeable future as a result of a higher occupancy expense associated with
our move to larger office space planned for mid-2000 and as we continue to
expand our administrative systems to support our planned growth and operations
as a public company.
Interest Income, Net
Interest income, net, includes income from our cash and investments and
expenses related to our financing obligations. Interest income, net, increased
to $264,000 in 1999, from $40,000 in 1998. The increase in interest income was
primarily due to a higher average cash balance during 1999 as a result of the
receipt of $8.5 million from the sale of shares of our common stock, $5.0
million from the sale of our convertible subordinated notes and $20.0 million
from the sale of shares of our Series A convertible preferred stock.
Income Taxes
As of December 31, 1999, we had approximately $23.5 million of federal and
state net operating loss carryforwards, which may be available to offset future
taxable income. Our federal and state net operating loss carryforwards expire
beginning in 2018. From our formation through June 1, 1998, we elected, under
Section 1362(a) of the Internal Revenue Code, to be treated as an S-corporation
for income tax purposes. Accordingly, we were not liable for federal income
taxes during that period and any taxable income was included in the tax returns
of our stockholders.
Years Ended December 31, 1998 and 1997
Net Revenues
Net revenues increased 944% to $1.1 million in 1998, from $110,000 in 1997.
The increase in net revenues was primarily due to an increase in the number of
advertisers, from six at December 31, 1997 to 38 at December 31, 1998, and an
increase in our advertising rates and application of those rates to our
expanded membership base.
Cost of Revenues
Cost of revenues increased to $428,000 in 1998, from $147,000, in 1997.
Gross profit increased as a percentage of net revenues to 62.6% in 1998. We do
not believe gross profit comparisons with 1997 are meaningful. In 1997, we
incurred fixed costs associated with the development of our technology
infrastructure and services prior to the realization of meaningful revenues. We
were able to use this investment in 1998 to generate revenues which accounted
for our increased gross profit.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased to $2.5 million,
or 218% of net revenues, in 1998, from $1.2 million, or 1,097% of net revenues,
in 1997. The absolute dollar increase in sales and marketing expenses was
primarily due to the addition of a direct sales force which we began building
in the second half of 1998 and increases in customer acquisition and marketing
expenses. Sales and marketing expenses as a percentage of net revenues
decreased due to the growth in net revenues.
Product Development. Product development expenses increased to $1.2 million,
or 106% of net revenues, in 1998, from $720,000, or 657% of net revenues, in
1997. The absolute dollar increase in product development expenses was
primarily due to the hiring of eight additional personnel and related costs to
support enhancement of our web site features and functionality. Product
development expenses as a percentage of net revenues decreased due to the
growth in net revenues.
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General and Administrative. General and administrative expenses increased to
$2.3 million, or 206% of net revenues, in 1998, from $766,000, or 700% of net
revenues, in 1997. The absolute dollar increase in general and administrative
expenses was primarily due to the hiring of four additional general and
administrative personnel and increases in professional services and facility
expenses to support the growth of our operations. General and administrative
expenses as a percentage of net revenues decreased due to the growth in net
revenues.
Interest Income (Expense), Net
Interest income, net, increased to $40,000 in 1998, from an interest
expense, net, of $2,000 in 1997. This increase was primarily due to a higher
average cash balance as a result of the receipt of $10.7 million from the sale
of shares of our common stock in 1998.
Amortization of Debt Discount
Amortization of debt discount increased to $435,000, or 38.1% of net
revenues, in 1998, from $4,000, or 3.8% of net revenues, in 1997. In December
1997 and during the period between January and April 1998, we entered into loan
agreements with detachable warrants. Amortization of debt discount is a non-
cash charge representing the difference between the stated value and the fair
market value of the loan.
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Quarterly Results of Operations
The following table presents unaudited quarterly statement of operations
data for each of the four quarters ended December 31, 1999, as well as the
percentage of net revenues represented by each item. This information is
unaudited and in our opinion has been prepared substantially on the same basis
as our audited financial statements, which are included elsewhere in this
prospectus. All necessary adjustments, consisting only of normal recurring
adjustments, have been included in these amounts to present fairly the
unaudited quarterly results of operations. You should read these quarterly data
together with our audited financial statements and the related notes. Our
future operating results are difficult to predict and may vary significantly.
Accordingly, you should not view our results of operations for any period as an
indication of our results of operations for any future period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1999 1999 1999 1999
--------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Net revenues........................ $ 890 $ 2,075 $ 3,276 $ 6,675
Cost of revenues.................... 256 343 416 803
------- ------- ------- -------
Gross profit........................ 634 1,732 2,860 5,872
Operating expenses:
Sales and marketing............... 1,325 1,819 4,887 9,807
Product development............... 998 1,129 1,136 1,240
General and administrative........ 1,005 1,281 1,636 1,968
------- ------- ------- -------
Total operating expenses............ 3,328 4,229 7,659 13,015
------- ------- ------- -------
Loss from operations................ (2,694) (2,497) (4,799) (7,143)
Interest income, net.............. 70 105 74 16
------- ------- ------- -------
Net loss............................ $(2,624) $(2,392) $(4,725) $(7,127)
======= ======= ======= =======
<CAPTION>
As a Percentage of Net Revenues
-----------------------------------------
<S> <C> <C> <C> <C>
Net revenues........................ 100.0% 100.0% 100.0% 100.0%
Cost of revenue..................... 28.8 16.5 12.7 12.0
------- ------- ------- -------
Gross profit........................ 71.2 83.5 87.3 88.0
Operating expenses:
Sales and marketing............... 148.9 87.7 149.2 146.9
Product development............... 112.1 54.4 34.7 18.6
General and administrative........ 112.9 61.7 49.9 29.5
------- ------- ------- -------
Total operating expenses............ 373.9 203.8 233.8 195.0
------- ------- ------- -------
Loss from operations................ (302.7) (120.3) (146.5) (107.0)
Interest income, net.............. 7.9 5.0 2.3 0.2
------- ------- ------- -------
Net loss............................ (294.8)% (115.3)% (144.2)% (106.8)%
======= ======= ======= =======
</TABLE>
Our quarterly results are subject to fluctuations. For example, for the
quarter ended September 30, 1999, we initiated an offline advertising campaign
in which we spent $2.6 million. This resulted in a significant increase, in
absolute dollars as well as a percentage of net revenues, in our sales and
marketing expenses.
Our future operating results may vary significantly due to a variety of
factors, many of which are beyond our control. In addition, we believe that
quarter-to-quarter comparisons of our operating results may not be meaningful.
Factors affecting our operating results may include:
. advertisers' demand for and use of our services;
. seasonality of our advertisers' offers and their budgeting cycles;
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. performance-based contracts, under which our revenues depend on members'
responsiveness to advertisers' offers;
. loss of advertisers, many of which are under short-term contracts with
us;
. changes in our pricing policies or those of our competitors;
. the mix of advertisements and services we sell;
. our members' demand for our services and response to the offers we make
available to them;
. litigation costs;
. the timing and amount of costs related to the expansion of our
operations; and
. changes in and the timing of the costs we incur to attract members.
As a result, our revenues are difficult to forecast. In addition, we plan to
significantly increase our sales and marketing, product development and other
operating expenses. We may be unable to reduce spending quickly enough to
offset any unexpected revenue shortfall, which could cause our business and
operating results to suffer. Our limited operating history and rapid growth
also make it difficult for us to assess the impact of seasonal factors on our
business. Advertising sales in traditional media, such as television and radio,
generally are lower in the first and third calendar quarters of each year. Our
revenues may be affected by these seasonal factors and by any seasonal and
cyclical patterns in Internet advertising spending which may develop. Please
see "Risk Factors--Our quarterly financial results may fluctuate, making our
future financial results difficult to forecast."
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through the
private placement of our capital stock and convertible subordinated notes. As
of December 31, 1999, we had approximately $17.5 million in cash and cash
equivalents.
Net cash used in operating activities was $17.4 million, $4.8 million and
$2.4 million in 1999, 1998 and 1997, respectively. In each period, net cash
used in operating activities resulted primarily from our net losses and
increases in accounts receivable, partially offset by increases in accounts
payable and accrued expenses.
Net cash used in investing activities was $3.7 million in 1999, $1.1 million
in 1998, and $225,000 in 1997. In each period, net cash used in investing
activities resulted from purchases of property and equipment and amounts used
in developing our database.
Net cash provided by financing activities was $33.6 million in 1999, $10.7
million in 1998 and $2.2 million in 1997. Net cash provided by financing
activities resulted primarily from the cash proceeds received from our issuance
of shares of common stock. We invested these proceeds in money market funds
with maturities not exceeding 90 days. We intend to continue investing our
excess cash in similar securities.
As of December 31, 1999, we had a bank line of credit of $1.0 million.
Borrowings under this line of credit were $878,000. This credit facility
provides for a $1.0 million revolving facility for capital equipment purchases,
and bears interest at the bank's prime rate plus 1.0% which, as of December 31,
1999, was 9.5%. Borrowings under this line of credit are collateralized by the
specific equipment purchased. Principal balances under these borrowings are
repaid over 36 or 48 months.
In October 1999, Lend Lease International Pty. Limited purchased
approximately $3.5 million of our convertible subordinated notes, under its
commitment entered into in April 1999. In December 1999, we completed a private
placement of 2,197.650 shares of Series A convertible preferred stock for an
aggregate purchase price of $20.0 million.
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Our future liquidity and capital requirements depend on numerous factors,
including market acceptance of our services, the resources we devote to
marketing and selling our services and our investment in developing and
promoting our brand. We have experienced a substantial increase in capital
expenditures since our inception consistent with the growth in our operations
and staffing, and we anticipate that this will continue for the foreseeable
future. We plan to relocate our headquarters to downtown Chicago in mid-2000
and we anticipate that this relocation will cost approximately $400,000.
Additionally, we will continue to evaluate possible investments in businesses,
products and technologies, and plan to expand our sales and marketing programs
and conduct more aggressive brand promotions. We currently anticipate that the
net proceeds of this offering, together with our existing line of credit and
available funds, will be sufficient to meet our anticipated needs for working
capital and capital expenditures for at least the next 12 months. If this
offering is not completed, we have the ability to revise our business plan to
reduce our operating costs, including deferring new hiring and reducing
discretionary advertising expenditures, so that cash on hand coupled with cash
flow from operations will be sufficient to satisfy our anticipated capital
needs for at least the next twelve months. Based on our current expectations,
we believe we will not require additional funds beyond the twelve months
following the offering. However, if our growth rate exceeds our expectations,
if we make strategic acquisitions, if we expend significant funds to develop
new or enhanced products or services, or if this offering is not completed, we
may require additional equity or debt financing. Additional financing may not
be available to us on favorable terms, or at all. If adequate funds are not
available on acceptable terms, we may not be able to continue or expand our
business operations which could harm our business, results of operations and
financial condition.
Year 2000 Compliance
Problems associated with software and computer systems' use of two digits to
define the year and the inability of computer systems to process dates
occurring in the year 2000 or beyond are referred to as "Year 2000" issues.
Although to date we have not experienced any significant Year 2000 issues
relating to our principal internally developed programs and systems, or systems
provided to us by others, these systems could experience Year 2000 problems at
any time during 2000 and beyond. These problems could disrupt our business and
require us to incur significant, unanticipated expenses to remedy them. We
cannot guarantee that our Internet service providers and other third parties on
which our services depend will not encounter Year 2000 issues.
In 1998, we engaged an independent consultant to assess the Year 2000
readiness of our systems and software. The consultant concluded its work in
1999. The items we examined for Year 2000 issues include: our web site and its
supporting software and hardware; our telecommunications systems and networking
infrastructure; the systems supporting our office facilities; and the hardware
and software used by our employees, vendors and partners. We also sought
assurances on Year 2000 compliance from our telecommunications providers,
material hardware and software vendors, the management company for our office
facilities and other key third-party vendors.
As of December 31, 1999, we had incurred approximately $266,000 in
connection with identifying and evaluating Year 2000 compliance issues and
mitigating identified deficiencies. However, if future expenses relating to
Year 2000 compliance are higher than anticipated, it could have a material
adverse effect on our business, results of operations and financial condition.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and hedging activities and
requires recognition of all derivatives as assets or liabilities in the
statement of financial position and measurement of those instruments at fair
value. The statement, as amended, is effective for fiscal years beginning after
June 15, 2000. As we do not have any derivative instruments or hedging
activities, SFAS No. 133 is not expected to have a material effect on our
financial results.
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BUSINESS
CoolSavings provides a comprehensive set of e-marketing services used by
online and offline advertisers to build one-to-one customer relationships.
Under our established brand, advertisers can deliver, target and track a wide
array of incentives, including printed and electronic coupons, personalized e-
mail, rebates, samples, sales notices, gift certificates, contests and banner
advertisements, to promote their products or services. We deliver these
incentives to targeted segments of our large audience of consumers through our
web site, coolsavings.com, or direct e-mails. These incentives can be redeemed
by our members either online or offline depending on the particular promotion.
Our members have registered their demographic profiles with us on our web site
and have given us permission to deliver personalized savings opportunities to
them. As of March 1, 2000, we had over 6.0 million registered members,
representing nearly 4.8 million households. Although we keep our members'
identities private, we analyze our database of member registration and shopping
preference data with sophisticated data analysis, targeting and tracking
technology to help our advertisers execute effective promotional campaigns. As
our members use the incentives we offer, we gather extensive shopping behavior
and preference information. This information further enriches our member
database allowing us to provide our advertisers with a higher degree of
targeting. The top ten advertisers from which we generated the most revenues in
1999 were Bigstar, eNutrition.com, First USA, InsWeb, Kids "R" Us, MCI
WorldCom, overstock.com, petopia.com, petsmart.com and SmarterKids.com. During
1999, no advertiser accounted for more than 6.8% of our revenues.
Industry Background
The Growth of the Internet as an Advertising and Direct Marketing Medium
The Internet has emerged as a unique global communications medium, enabling
millions of people to interact and conduct business electronically.
International Data Corporation, commonly referred to as IDC, estimates that the
number of Internet users worldwide will grow to approximately 502 million by
the end of 2003 from approximately 196 million in 1999. The rapid expansion of
the Internet combined with its business efficiencies have led to significant
growth in electronic commerce and attracted a broad group of buyers and
sellers. IDC estimates that the total value of commerce over the Internet will
increase to $1.3 trillion in 2003 from $111 billion in 1999. IDC further
estimates that the percentage of Internet users buying goods and services on
the Internet will increase to approximately 36% in 2003 from approximately 24%
at the end of 1999.
The growth of Internet use has prompted e-commerce companies to increase
their spending on advertising and direct marketing on the Internet. It has also
spurred traditional businesses to devote larger portions of their marketing
budgets to advertising and direct marketing online. During the early stages of
the development of online advertising, most businesses used the Internet to
build general brand awareness and for customer acquisition. Consequently, the
rapidly growing market for Internet marketing was dominated by banner
advertising and unsolicited e-mails sent to lists of consumers. While these
advertisements may be targeted to a limited extent by the content on the web
page or by demographic information, they generally have not permitted the
advertiser to re-contact the consumer unless the consumer makes a purchase or
voluntarily provides personal information.
The Emergence of E-Marketing Services
Advertisers use direct marketing in order to generate a specific response or
action from a targeted group of consumers. Traditionally, advertisers have used
direct mail, telemarketing and direct response television, or infomercials, in
their direct marketing campaigns. These campaigns typically provide consumers
with access to coupons, rebates, sweepstakes and loyalty programs. These types
of promotions have been recognized in offline marketing as a means to develop
and foster long-term customer relationships. According to the Direct Marketing
Association, expenditures on direct marketing, including both online direct
marketing and traditional direct marketing, are expected to grow to $240.7
billion in 2004 from $176.5 billion in 1999.
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Effective and efficient means of marketing have become more important as
advertisers seek to lower the costs of customer acquisition and retention. As
pressures from competitors raise these acquisition and retention costs,
businesses seek sophisticated and cost-effective direct marketing methods to
increase the loyalty and lifetime value of a customer through repeat visits and
purchases. At the same time, advertisers are sensitive to the growing concerns
of consumers and the government regarding the privacy of personal data and the
intrusion of unwanted advertising messages. Online and offline advertisers are
increasingly using the Internet for direct marketing to exploit its unique
interactivity and cost advantages relative to traditional methods. The Direct
Marketing Association projects that online direct marketing expenditures will
increase from approximately $1.3 billion in 1999 to approximately $8.6 billion
in 2004.
The compelling advantages of the Internet as a direct marketing medium have
led to the development of e-marketing services that are designed to enable
businesses to acquire and retain customers and build customer loyalty.
E-marketing services can take advantage of Internet technology to:
. deliver personalized promotions to those consumers most likely to
respond;
. deliver multiple forms of targeted and controlled promotions at a
household or individual level (for instance, many online advertisers seek
to reach a target audience of women, who are the principal shoppers in
approximately 72% of U.S. households, according to Mediamark Research
Inc.);
. allow businesses to take advantage of consumer-specific data, such as
registration and transaction information;
. provide marketing messages with promotions that motivate immediate
consumer response;
. enable tracking of campaign performance and shopper behavior allowing an
advertiser to learn and adjust campaigns in near real time; and
. enable data mining to target consumers based on demographic data and
shopping preference information learned from past activity.
In our experience, while online companies are the most frequent users of our
e-marketing services, traditional offline businesses such as national retailers
and consumer packaged goods manufacturers are increasingly seeking to use our
e-marketing services to drive offline sales and build customer relationships.
In addition, through e-marketing services, offline businesses that also sell
online can potentially integrate their offline and online marketing campaigns
and provide their customers the choice of shopping in stores or online.
Market Opportunity for a Comprehensive E-Marketing Solution
To date, advertisers wishing to employ e-marketing services have had to rely
on several different service providers in order to deliver a range of specific
promotional or advertising services. In addition, many e-marketing services
have been focused only on online promotional activities and have not provided
an integrated online and offline solution.
We believe there is a substantial market opportunity for a comprehensive e-
marketing solution that provides the following:
. a single source of both online and offline promotional services for
advertisers that extends over the different stages of a customer
relationship, from first-time purchase to repeat usage;
. access to a large audience of consumers who are actively seeking savings
and who are willing to share demographic data that can be used to better
target and personalize their shopping experiences;
. one-stop shopping for consumers with access to a wide range of both
online and offline promotional offers from high-quality advertisers;
. an established and consistent brand that consumers find credible; and
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. the ability to track consumer demographics and shopping preferences on an
individual and household level and to leverage that information across a
large consumer base to make promotions increasingly targeted and cost-
effective.
The CoolSavings Solution
CoolSavings provides a comprehensive set of e-marketing services used by
online and offline advertisers to build one-to-one customer relationships.
Under our established brand, advertisers can deliver, target and track a wide
array of incentives, including printed and electronic coupons, personalized e-
mails, rebates, samples, sales notices, gift certificates, contests and banner
advertisements, to promote products or services. We deliver these incentives to
targeted segments of our large audience of consumers, who have registered their
demographic profiles with us on our web site and have given us permission to
deliver personalized savings opportunities redeemable in stores or online. With
our members' permission, we store detailed member demographic information,
track shopping preferences and behavior, and with advertiser cooperation can
track redemption of these incentives back to the member households. In doing
so, we have developed an extensive database of information that we use for the
benefit of our advertisers. Although we keep our members' identities private,
we analyze our database information with sophisticated data analysis, targeting
and tracking technology to help our advertisers execute effective promotional
campaigns. The diversity of the incentives we offer and the variety of places
where our members can redeem them further enrich our member profiles for future
data analysis, known as data mining, and targeting.
Our web site, which is designed to be a leading destination for consumer
savings, offers convenient and personalized incentives for goods and services
from a broad range of advertisers, including online retailers, national brick-
and-mortar chains, consumer packaged goods manufacturers, large consumer
service providers and neighborhood businesses. Our member base grew from
approximately 1.9 million registered members as of December 31, 1998 to over
6.0 million as of March 1, 2000, representing nearly 4.8 million households. In
a recent national survey by NPD Online Research, an independent market research
firm, 51% of online coupon users reported that they had used our site. Of those
who have registered their households with us, 62% are women, the target
consumers preferred by many of our advertisers. According to Media Metrix, for
January 2000, CoolSavings was the ninth most frequently visited shopping web
site.
The benefits to advertisers of using CoolSavings include:
. Single source e-marketing solution. We offer advertisers a single source
for a full range of promotions that can be redeemed online or in stores
and targeted to any stage in the customer relationship. These tools
include printable coupons and gift certificates for brick-and-mortar
stores, electronic certificates for online purchases, mail-in rebates,
lead generation for trial subscriptions and samples, notices of ongoing
sales where no certificate is necessary, promotional contests and banner
advertisements. Advertisers can also use combinations of incentives for
customized promotions.
. Access to a large audience of qualified, receptive shoppers. Advertisers
are able to access our large audience of consumers, who visit our web
site looking for shopping values and are willing to provide demographic
data about themselves and others in their households. Of those who have
registered their households with us, 62% are women, the target consumers
for many of our advertisers. Approximately 79% of our registered
households have requested e-mail bulletins about offers available on our
web site.
. Cost-effective performance. We believe we provide advertisers with a
cost-effective solution for customer acquisition and retention. Unlike
most other direct marketing providers, we can immediately learn from each
campaign, regardless of the promotions used, to make future campaigns
more effective, to re-target responding members with more focused offers
and to convert new customers into loyal customers. We continually update
our members' profiles by tracking their page views of and responses to
promotions and, upon the request of an advertiser, the redemption of
incentives. Our tracking capabilities allow our advertisers to target
information about ongoing sales
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promotions and events to the appropriate customers at the appropriate
times. For example, an advertiser can retarget our members who have
previously responded to its offers with follow-on promotions.
. Insight into shopping behavior. Most advertisers have only limited means
of tracking their customers' preferences and behavior. With our member's
permission, we acquire information from the initial member registration,
as well as from each time a member uses our web site or e-mail to respond
to offers. As a result, we have much richer data to analyze for insight
into the interests and preferences of an advertiser's customers.
Advertisers can use our consolidated database to find predictive
correlations that can lead to more effective targeting regardless of the
types of promotions used. This information can be used by our advertisers
to acquire new customers with appropriate incentives, refine follow-on
promotions and identify co-promotion opportunities.
. Ability to coordinate online and offline promotions. For advertisers that
have both an online and offline presence, we can identify prospective
customers and then track their activities whether shopping in stores or
online. We enable these businesses to provide incentives, such as coupons
and gift certificates, redeemable in their offline stores. If the
advertiser returns the redeemed coupons to us, we can track the
redemption of in-store coupons by scanning their unique bar codes and
adding the shopping preference information to our database. For
advertisers with only an online presence, we enable them to provide
offline incentives, such as coupons and gift certificates, redeemable in
the stores of their promotional partners. We also help offline companies
without a web presence identify and reward customers with online
incentives that their customers can bring into a store or use on another
web site.
. Lower total cost of ownership and improved time to market. Our
investments in infrastructure, technology and technical personnel allow
our advertisers to deploy their promotional campaigns without the need to
lease, buy or continually upgrade the required hardware and software
systems, providing significant cost savings over an in-house solution. In
addition, using both our infrastructure and our e-marketing processes and
expertise, we enable our advertisers to deploy their e-marketing
campaigns rapidly and reliably. As a result, our advertisers can remain
focused on their core businesses while still providing compelling offers
to consumers.
Strategy
Our objective is to be the leading provider of comprehensive e-marketing
services for advertisers. Key elements of our strategy to achieve this
objective are to:
. Extend brand awareness and expand member and advertiser base. We believe
strong brand recognition is a powerful tool to attract new advertisers
and members. We plan to increase brand recognition with offline
advertising campaigns that include television, print and outdoor media.
We also intend to continue to promote our brand online, with advertising
campaigns on high-traffic web sites and cooperative campaigns with
advertisers and affiliate networks. We believe our marketing efforts will
expand our member base while preserving its current demographic
characteristics, which will strengthen the services we provide to
advertisers. As we expand our membership, we expect that our service will
be attractive to additional advertisers, which will in turn make our site
more attractive to additional consumers by providing a broader array of
available incentives.
. Enhance member profiles. As we make available additional promotional
offers and services on our web site and through e-mail, we believe the
shopping activities of our members will increase. As our members use our
site and respond to advertiser promotions, we continually enrich our
database and develop deeper data for predictive modeling and targeting
purposes. We plan to continue upgrading our tracking and data mining
tools to provide additional insight into member interests and shopping
preferences.
. Broaden promotional service offerings. In order to provide a complete e-
marketing solution for advertisers, we plan to expand the promotional
services we offer, covering all phases of the customer
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relationship. For example, we intend to provide loyalty programs, for
single advertisers and affinity groups, that incorporate popular
promotions such as mileage incentives and rewards points. For offline
promotions, we plan to connect coupon discounts and points to credit cards
and frequent shopper cards. In addition, we plan to offer our promotional
services and expertise to advertisers to target within their own customer
databases.
. Provide business-to-business promotions. We believe that advertisers seek
a cost-effective and targeted medium to reach small businesses and
independent professionals. Through minor modifications to our
registration page and database template, we intend to develop a business-
to-business service offering in which small businesses can register with
us to receive incentives appropriate for their needs and interests. We
plan to offer our advertisers the ability to deliver targeted business-
to-business product and service promotions using database information
such as type of business, size, geography and past purchasing behavior.
. Pursue third-party relationships. We intend to pursue relationships to
further build our brand, expand our reach to consumers and advertisers
and enhance our services. Our current relationships include Super Coups,
a subsidiary of ADVO, which uses its franchise sales force to sell
CoolSavings services to neighborhood merchants, First USA Bank, which
issues co-branded CoolSavings credit cards and provides us with
cardholder demographic and purchasing data, and The Parenting Group,
which will promote our CoolParenting program targeting special
promotional programs to expectant or new parents.
. Pursue international expansion. As Internet use becomes more prevalent in
other nations, we see market opportunities to extend our services to
advertisers and consumers in those countries. Our international expansion
efforts will focus initially on Canada, Australia and the United Kingdom.
These international initiatives could take the form of licensing
agreements, joint ventures or other arrangements. As a result of
international expansion, we plan to expand our database to include
consumers in other countries, which we expect will be attractive to
international advertisers and online advertisers seeking to reach an
international audience.
Services
We provide a comprehensive e-marketing solution to our advertisers. We
deliver a broad array of incentives through placement on our web site or by
targeted e-mail, to enable our advertisers to motivate consumers to purchase
products and services. Our advertisers also use our incentive programs to build
the loyalty of their existing customers. Using our tracking, targeting and data
mining capabilities, advertisers can coordinate and enhance their online and
offline promotional campaigns for customer acquisition, retention and loyalty.
Delivery of Incentives
We deliver a variety of promotional incentives to targeted segments of our
member database on behalf of our advertisers. Our advertisers generally pay for
our services based on a cost-per-thousand offers delivered. The cost of our
promotional services generally rises with the degree of targeting or
customization we provide because, in our experience, these efforts generally
result in higher response rates for the advertisers. In addition, we charge
some of our advertisers based upon the performance of the promotional offers
that we deliver for them. Approximately 80% of our current advertising
contracts have stated terms of less than three months.
The coolsavings.com web site, which is branded as a leading destination site
for consumer savings, offers convenient and personalized incentives for a broad
array of products and services. To use our service, consumers register with us,
provide demographic data about their households and shopping interests and
choose whether to receive our direct e-mails. As members, consumers can obtain
relevant incentives redeemable online or in stores from a broad range of
advertisers, including online retailers, national brick-
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and-mortar chains, consumer packaged goods manufacturers, large consumer
service providers and neighborhood businesses. We track our members' page views
of and responses to promotions in our member database. Upon an advertiser's
request and with the advertiser's cooperation, we can also track the redemption
of incentives.
The promotional services that we provide our advertisers include:
. CoolOffers. Online and offline businesses can deliver incentive offers,
including printed and electronic coupons, rebates, sales notices and gift
certificates, to targeted segments of our membership via our web site and
our targeted e-mail. Targeting is performed by demographic profile and
shopping preferences. CoolSavings members are presented a version of our
web site tailored to their personal interests, where they can "save, then
shop." Specialized sections of our web site are dedicated to specific
categories such as grocery items, regional mall stores and neighborhood
businesses. Our members can also use a search feature to find offers by
product or service category.
. CustomerDirect e-mail. Approximately 79% of our registered households as
of December 31, 1999 had elected to receive periodic e-mails notifying
them of offers that may be of personal interest. This allows us to send
targeted e-mails to these members at the request of our advertisers on
the basis of these members' demographic profiles and shopping
preferences. We can deliver e-mails either with a single promotion by a
specific advertiser or in shared messages, and appear either in full-
graphic HTML format or as plain text with web links, depending on
members' preferences and the capabilities of their computers. The e-mails
are targeted either through pre-selected criteria or using customized
models we develop for particular campaigns.
. FreeStuff. We provide advertisers a method of generating leads by
providing free samples of their products or services to our members.
These offers, such as trial magazine subscriptions, free product samples
and free Internet services, appear in the "FreeStuff" section of our web
site and are targeted by demographic profile and shopping preferences. To
receive free samples, members voluntarily provide the advertiser with
contact information such as name, e-mail and mailing address, as well as
other data about their households. Advertisers may also request secure
credit card information from members as necessary. We can tailor the
submission form to advertisers to ask additional questions of
participating members, to further qualify the leads we generate.
. CoolGames. We provide advertisers with a highly targeted method for
generating brand awareness combined with games that are also engaging for
our members. We help advertisers create trivia contests and branded
sweepstakes specific to their marketing strategies and tailored for their
targeted profiles. We can also deliver targeted e-mails announcing a
contest to generate immediate traffic and consumer response. At the
conclusion of a member's interaction with a contest page, the
advertiser's brand is reinforced by an automatic e-mail.
. CoolBanners. We provide advertisers the opportunity to promote their
brands or offers throughout the web site with banner advertisements,
buttons, text links and prominently sponsored content areas. These can be
targeted based on the demographics and preferences of the viewing
members.
Customer Retention
We offer customer acquisition and reward programs that can be customized for
any product or service. We deliver initial sign-up incentives, such as gift
certificates, tailored to the target consumers, and then administer ongoing
benefits such as loyalty coupons. We also provide co-branded programs that
function together with advertisers' own established promotional vehicles, such
as their web sites, printed circulars, in-package flyers and in-store signs.
These vehicles direct consumers to a special CoolSavings web address. Consumers
entering our web site for the first time through a co-branded address will
experience our entire web site as co-branded each time they return. These
members can also receive customer-only offers targeted specifically to the
customers of the party co-branding with us, either on the co-branded web site
or in promotional e-mails. Our co-branding advertisers can use our
infrastructure to build loyalty with their own customers. We benefit by adding
those advertisers' customers to our database as CoolSavings members.
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Data Mining and Research Services
By analyzing individual, demographic and correlative information in our
database, we provide advertisers several methods to gain insight into customer
preferences and profiles. We can also apply our data mining infrastructure to
analyze the databases of our advertisers upon their request. We use
sophisticated data mining tools to analyze member data to help our advertisers
execute effective promotional campaigns. We use data-mining information to
create predictive models to make future targeting even more effective. Using e-
mail, we can also contact and survey members who have responded to a specific
offer. In addition, we are working with NFO Research, a leading provider of
consumer research to manufacturers of consumer packaged goods, to create member
panels that will provide major brands with quick feedback on new products and
services.
Sales and Marketing
We have built a sales organization dedicated to developing and maintaining
close relationships with advertisers and advertising agencies. Our sales force,
which included 22 full-time employees as of December 31, 1999, is organized
regionally and by specific industry and advertiser segments. We plan to open
sales offices in New York and San Francisco during 2000. To support our sales
efforts, we advertise regularly in trade publications, send regular mailings to
key marketing executives and exhibit at major trade shows. We intend to form
relationships with companies with existing local sales forces in order to
further penetrate local advertising markets. The first of these relationships
is our alliance with Super Coups, in which Super Coups salespersons are selling
our co-branded services to local advertisers.
Our marketing department, which included nine employees as of December 31,
1999, is dedicated to promoting the CoolSavings brand, developing our member
content and acquiring members for our service. To attract members, we rely on a
variety of advertising methods, including a national offline branding campaign
that makes use of television, print, outdoor media and radio, as well as online
advertising that includes online banner advertisements on high-traffic web
sites such as portals and search engines. Our advertising features our
identifiable piggy-bank logo character as our "CEO." We also have developed
network affiliate programs, in which other companies send consumers to the
CoolSavings web site and receive a fee per each resulting member registration.
Many of our advertisers provide links from their own web sites that click
through to offers on CoolSavings.
We also have used our advertising relationships to gain additional exposure
for the CoolSavings name and piggy-bank character in retail chains and shopping
malls and on the Internet. In some cases, we have the opportunity to feature
CoolSavings on store signs and materials, such as bags and receipts.
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Representative Advertisers
The following is a list of advertisers from which we derived at least
$40,000 of revenue in 1999, by general industry category:
Specialty and Mass Health and Grocery Entertainment and Media
Retail Allherb.com Barnesandnoble.com
Art.com eNutrition.com Bigstar
Birthday Express Healthshop.com CDNow
Bolt More.com Chuck E. Cheese's
Cooking.com MotherNature.com Doubleday Interactive
Furniture.com NetGrocer EveryCD
Hewlett Packard YourPharmacy.com The Parenting Group
Internet Shopping
Network
Reel.com
Manufacturers Uproar.com
JC Penney Coty US News & World Report
Kmart DaimlerChrysler AG
Marshall's / TJ Maxx Johnson & Johnson Children's Products
overstock.com Kodak BabyCenter.com
Paper Studio Mattel eToys
PayLess Shoes
KBKids.com
PC Flowers & Gifts Financial and Kids "R" Us
petopia.com Communications SmarterKids.com
petsmart.com E-homeCredit Corp. Toys "R" Us
Petstore.com First USA
Radio Shack H&R Block Internet Content and
REI.com InsWeb Services
Rhodes MCI WorldCom Cybergold
Sara Lee / One Hanes Telebank eGreetings.com
Place
eNews
Service Merchandise Travel Services FamilyWonder
Shop the globe.com Cruise Lines iprint
Silkies.com International LifeMinders
Holiday Inn Netcentives
Local Advertising Northwest Airlines Vstore
Super Coups priceline.com
Third-Party Relationships
We have developed the following relationships with companies that we believe
will assist us in providing more comprehensive services, building our brand and
attracting more advertisers and members:
. First Data. In February 2000, we entered into an agreement with First
Data Merchant Services Corporation to work with First Data and its
affiliated financial institutions to offer electronic coupon redemption
capability. We plan to provide the ability for purchase incentives
offered by online and offline merchants to be posted directly to members'
credit card accounts. Under this agreement, our initial program with
First Data is the CoolDining program. We are obligated to develop and
host a separate web site that displays merchant offers to our members who
enroll in the CoolDining program. In addition, we are required to promote
the CoolDining program by placing on our web site a prominent link to the
program web site and by conducting periodic program member satisfaction
surveys. We share program fees with First Data on the basis of which
party referred the merchant to the program, and we share all program
revenue with First Data. Under this agreement, First Data will be our
exclusive provider of payment processing services for Visa and MasterCard
transactions for a period of one year. The term of the agreement with
First Data is three years, but under certain circumstances, including our
material breach of the agreement or our continuing failure to meet
specified performance standards, First Data may terminate the agreement
prior to its expiration.
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. First USA. In April 1999, we entered into an agreement with First USA
Bank, N.A., a leading national credit card issuer, to create a co-branded
CoolSavings credit card that is promoted extensively on our web site.
Under this agreement, we are required, each calendar quarter, either to
post at least 5,000,000 impressions, such as banners, buttons or text
links, on our web site to promote the co-branded credit card or to
generate at least 25,000 click-through responses. In addition, First USA
has agreed to promote CoolSavings and the co-branded credit card on its
own web site, in account statements and in other promotional pieces. We
will receive fees for marketing the co-branded credit card. The initial
term of the agreement with First USA is five years, but First USA may
terminate the agreement prior to its expiration under some circumstances,
including a substantial reduction in our membership or a failure to meet
promotional goals.
. NBC. In May 1999, we entered into an agreement with National Broadcasting
Company, Inc., under which NBC is broadcasting $3.0 million of 30-second
advertisements for CoolSavings during the 12-month period that began
October 1, 1999. In exchange for this advertising, NBC received 686,766
shares of our common stock.
. NFO Research. In November 1999, we entered into an agreement with NFO
Research, a leading provider of custom research for the consumer packaged
goods industry. Under this agreement, we will design a co-branded web
site and market it to our members to help NFO recruit panelists for their
market research efforts. Under this agreement we will receive a portion
of NFO's revenue from completed surveys. CoolSavings and NFO will provide
integrated marketing services to their advertisers, offering an
innovative opportunity to link shopper-level consumer attitude and usage
data with CoolSavings' extensive member profiles. The term of the
agreement with NFO Research is one year, but NFO may terminate the
agreement if our web site ceases to operate for a period of five
consecutive days.
. Super Coups. In January 2000, we formed an alliance with Super Coups, a
subsidiary of ADVO, a leading targeted direct mail company. Super Coups
delivers targeted local merchant coupons, such as automobile service
centers, restaurants and dry cleaners, by direct mail, local cable
television and the Internet. Through this alliance, we have agreed to
design and operate a co-branded version of the CoolSavings web site that
contains a total of more than 3,000 incentive offers submitted by Super
Coups franchisees. In addition, we are required to promote the Super
Coups co-branded web page and to assist Super Coups in the preparation of
sales materials for its franchisees. Super Coups pays us a fee based on
the revenue earned by the co-branded web site and we pay Super Coups a
fee for non-program advertising revenue generated from selected
advertisers. Based on member demographics, distinct local offers are
targeted to our members in Super Coups markets across the United States.
Super Coups salespersons are also selling our co-branded services to
local advertisers. The initial term of the agreement with Super Coups
expires September 30, 2002, but under certain circumstances, including
our material breach of the agreement and our failure to be ranked among
the top five Internet coupon sites by Media Metrix, Super Coups may
terminate the agreement prior to its expiration.
. The Parenting Group. In February 2000, we entered into an agreement with
The Parenting Group, a subsidiary of Time Inc. The Parenting Group is a
leading magazine publisher and provider of advertising and marketing
services to expectant and new parents and young families. Under this
agreement, we are establishing a CoolParenting program by developing and
hosting a co-branded web site that allows advertisers to target special
offers to our members who enroll in the program by providing the age or
anticipated birthdate of their children. We pay The Parenting Group $0.70
for each person who is not a member that accesses our web site through
the CoolParenting program or through The Parenting Group and who has
enrolled for services (other than the CoolParenting program) offered on
our web site. Additionally, we and The Parenting Group share the
advertising revenue generated from the CoolParenting program. The
Parenting Group will promote the program in its Healthy Pregnancy, Baby
Talk, Parenting and Family Life print magazines, and inside over one
million "First Moments" sample and discount kits distributed annually to
expectant or new parents.
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This agreement includes exclusivity provisions restricting both us and The
Parenting Group from entering into agreements for similar programs with
competitors. The initial term of the agreement with The Parenting Group is
fourteen months from the launch of the program, but under certain
circumstances, including our material breach of the agreement, The
Parenting Group may terminate the agreement prior to its expiration.
Operations and Technology
We have developed a proprietary system to target and personalize promotional
offers from our advertisers to our members. There are five main components of
our system:
. our web server technology, which allows us to display offers of interest
for each member;
. our database, which processes the offers and stores the information about
our members and their activity on our site;
. our data mining and targeting modules, which we use to determine the
members to whom we will deliver offers and the most appropriate offers
for each member;
. CoolSavings Coupon Manager, our free software program that produces high-
quality coupons and rebate certificates on a member's personal computer
printer for in-store or mail-in use; and
. SavingsCenter software, which we and our advertisers use to create,
target and control new offers.
Our system has been designed around industry-standard architecture and is
designed to provide availability 24 hours-a-day, seven days-a-week.
Occasionally in the past, we have disconnected our servers to make upgrades or
maintenance checks on our system, leading to "down time" averaging
approximately two hours per month. Currently, our site architecture, including
multiple servers and co-hosting capabilities, usually allows us to introduce
upgrades and perform maintenance without taking our site offline. For our
database, we use servers running Microsoft Windows NT and Microsoft SQL Server
database server software. Our web service is balanced among several servers
running Microsoft Internet Information Server on the Windows NT operating
system. These servers provide VeriSign Inc. digital certificates for secure
transactions involving personal data, as well as VeriSign Authenticode
certificates for downloading our Coupon Manager software to our members'
computers. Our electronic certificates, such as printable coupons, are
transmitted in a format that requires our proprietary Coupon Manager software
to print a coupon. Information that members provide during registration is
protected by a password they can create themselves. Members can also select
Secure Socket Layer protection during the registration process.
Our web servers and the database behind our system are currently located at
our Chicago headquarters. In addition, our data mining servers as well as a
fully redundant version of our entire system are located at the Exodus
Communications data center in Oak Brook, Illinois. To date, we have directed
all site traffic to our Chicago system, but we believe our system at Exodus is
fully operational and we plan to direct a portion of site traffic to the Exodus
system during the first quarter of 2000, in order to balance the traffic load
on each system and to reduce the risk of system failure. Please see "Risk
Factors--Our business could be damaged by natural disasters and other
unexpected problems."
In 1997, 1998 and 1999, we spent $720,000, $1.2 million and $4.5 million,
respectively, on product development, which includes salaries of software
development personnel, expenditures related to third-party technical
consultants and software costs related to enhancing our web site. We expect to
devote significant resources to product development in the future as we add new
features and functionality to our service. Please see "Risk Factors--We may not
be able to keep up with rapid technological development and evolving industry
standards."
Intellectual Property
We currently hold one United States patent, No. 5,761,648, entitled
"Interactive Marketing Network and Process Using Electronic Certificates."
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We are currently pursuing legal action against six companies that we believe
to be infringing our patent. This litigation is expensive, and the outcome of
this litigation may not be favorable to us. In addition, some of these
companies have filed counterclaims or separate lawsuits or other proceedings
against us seeking to prevent us from using our patented system, and others may
do so in the future. We have also settled three prior lawsuits we brought
against companies that we believed were infringing our patent.
Currently, we are a defendant in four pending lawsuits involving an
allegation that our systems or methods infringe on competitors' patents. While
we believe the actions are without merit and intend to defend them vigorously,
our efforts may not be successful. We expect that, like other participants in
our market, we will increasingly be subject to infringement claims as the
number of services and competitors in our industry segment grows. Any
infringement claim, regardless of its merit, could be time-consuming, result in
costly litigation, cause service modifications or delays or require us to enter
into royalty or licensing agreements. These agreements might not be available
on terms that are acceptable to us or at all. As a result, any claim of
infringement could harm our business, results of operations and financial
condition.
In addition to our patent, we have registered service marks and copyrights
in the United States and other countries. Our U.S. registered service marks
include COOLSAVINGS, COOLTRAVEL, COOLMALLS, COOLCATALOGS and COOLSAMPLES. We
also own common law rights in several other marks, and have applied for United
States service mark registration for a number of marks such as our stylized
piggy-bank logo, SAVE. THEN SHOP., SQUEALS OF THE DAY, COOLSAVINGS COUPON
MANAGER and SAVINGSCENTER. We have also obtained a trademark registration in
Australia for COOLSAVINGS and have registration applications pending in the
United Kingdom and Canada.
We regard the protection of our intellectual property, including our patent,
copyrights, service marks, trademarks, trade dress and trade secrets, as
critical to our future success. We rely on a combination of these intellectual
property rights and contracts to protect the services we have created and our
competitive position in the marketplace. We have generally entered into
confidentiality and invention assignment agreements with our employees and
contractors. Where we have considered it necessary, we have required
nondisclosure agreements with our suppliers and advertisers in order to protect
confidential information about our business plans and technology. Despite these
precautions, these arrangements or the other steps which we have taken may not
protect our trade secrets or prevent another company from copying important
parts of our service. While we have registered our trademarks and service marks
in the U.S. and other countries, protection of these marks may not be available
in every country where we may do business in the future.
We also rely on software programs that we license from other companies for
key database technology, operating system and software, and specific hardware
components for the computers in our system. These licenses may not continue to
be available to us on commercially reasonable terms in the future. As a result,
we may be required to obtain substitute technology of lower quality or at
greater cost, and may incur significant costs in converting to new
technologies, which would materially affect our business, results of operations
and financial condition. Please see "Risk Factors--Intellectual property
litigation against us can be costly and could result in the loss of significant
rights," "Risk Factors--Protecting our patents, trademarks and proprietary
rights may be costly and may distract our management" and "Business--Legal
Proceedings."
Competition
The market for e-marketing services is new, rapidly evolving and intensely
competitive, and we expect competition to intensify. Barriers to entry for
companies in our market are low, and current and potential competitors can
launch new web sites and services at a relatively low cost.
Our ability to compete depends on many factors, both within and beyond our
control. These factors include:
. advertiser identification and retention;
. brand recognition and credibility;
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. pricing of our services;
. breadth of our service offerings for advertisers and consumers;
. reliability of service and quality of advertiser support;
. advertiser and member acquisition costs;
. membership size and demographics;
. frequency of use and consumer response rates; and
. technological expertise.
We believe we are well-positioned to compete in our market as a result of
the breadth and sophistication of our services, the size and demographics of
our member audience, our experienced management and staff, our proprietary
technology and our established brand recognition.
Currently, we compete directly with online marketing companies in several
fields:
. direct marketers, such as FreeShop, LifeMinders and YesMail;
. incentive services, such as Cybergold, MyPoints and Netcentives;
. coupon providers, such as the online division of Catalina Marketing, e-
centives and planet U; and
. sweepstakes providers, such as Promotions.com.
We also face indirect competition from leading distributors of traditional
coupons by mail or newspaper inserts and from companies offering frequent flyer
points or other affinity rewards tied to responses to advertisements. We expect
that some of the leading distributors of traditional newspaper-insert coupons
will soon begin to compete against us directly by delivering their promotions
over the Internet. For example, Valassis Communications, a leading distributor
of newspaper-insert coupons, recently began to offer some online services. We
also compete with other web sites, portals and advertising networks, as well as
traditional offline media such as television, radio and print, for a share of
advertisers' total advertising budgets and for consumers' attention.
Many of our current and potential competitors have longer operating
histories, greater brand recognition, larger customer or user bases, and
significantly greater financial, marketing, technical and other resources than
we do. In addition, our competitors may be acquired by, receive investments
from or enter into other commercial relationships with larger, well-established
and well-financed companies as use of the Internet and other online services
increases. Therefore, some of our competitors may be able to devote greater
resources to marketing and promotional campaigns, adopt more aggressive pricing
policies and devote substantially more resources to web site and systems
development. They may also try to attract advertisers by offering free
services. Increased competition may cause us to lose brand recognition and
market share and could otherwise harm our business.
Employees
As of December 31, 1999, we had 121 full-time employees, 43 of whom were
engaged in technology and product development, 31 in sales and marketing, 25 in
client and member services and 22 in finance, administration and operations. We
have never had a work stoppage and our employees are not covered by any
collective bargaining agreement. We consider our relations with our employees
to be good.
Facilities
Our executive and operating offices are currently located in Chicago,
Illinois, in a 13,700 square foot facility under two separate leases, one
expiring on March 16, 2002 and the other expiring on July 31, 2002. In
addition, we lease approximately 10,000 square feet of additional office space
in the same building as our other offices on a month-to-month basis. In January
2000, we entered into a lease for an approximately
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44,000 square foot facility in which we plan to consolidate our Chicago
executive and operating offices in mid-2000. This lease expires in 2010
although we have options to expand the leased space and to extend the term of
this lease.
Legal Proceedings
On August 10, 1998, we instituted a lawsuit in the Northern District of
Illinois against e-centives, Inc. (f/k/a emaginet, Inc.) for infringement of
our United States Patent No. 5,761,648, entitled "Interactive Marketing Network
and Process Using Electronic Certificates," seeking unspecified damages and a
permanent injunction against e-centives for further infringement. We have also
added Ziff-Davis, Inc. as a defendant in our suit against e-centives, Inc. e-
centives has filed counterclaims alleging invalidity of our patent and
interference with their prospective economic advantage and is seeking
unspecified damages and injunctive relief. As noted below, e-centives also
recently initiated a separate lawsuit against us alleging infringement of a
patent that has been assigned to it.
On April 27, 1999, e-centives, Inc. filed a lawsuit against us in the United
States District Court for the District of Maryland. The complaint alleges that
our systems or methods infringe on e-centives' United States Patent No.
5,710,886, and seeks to enjoin us from further infringing its patent. While the
litigation is in the early stage and its outcome cannot be predicted, we
believe that our technology does not infringe e-centives' patent and that this
litigation is therefore without merit. We intend to defend the action
vigorously.
On October 21, 1998, we instituted a lawsuit in the Northern District of
Illinois against Catalina Marketing International, Inc., and its affiliate
Supermarkets Online, Inc. for infringement of our United States Patent No.
5,761,648, seeking unspecified damages and a permanent injunction against
further infringement. The defendants have filed counterclaims alleging
invalidity of our patent and are seeking unspecified damages and injunctive
relief. As noted below, Catalina Marketing and Supermarkets Online also
recently initiated separate lawsuits against us alleging infringement of
patents assigned to them.
On October 21, 1998, we instituted a lawsuit in the United States District
Court for the Northern District of Illinois against planet U, Inc. and Brodbeck
Enterprises, Inc., d/b/a Dick's Supermarkets, for infringement of our United
States Patent No. 5,761,648, seeking unspecified damages and a permanent
injunction against further infringement. The defendants have filed
counterclaims alleging invalidity of our patent and violation of United States
antitrust laws and are seeking unspecified damages and injunctive relief.
On November 15, 1999, Catalina Marketing filed a separate lawsuit against us
in the United States District Court for the Middle District of Florida. The
complaint alleges that our systems and methods infringe Catalina Marketing's
United States Patent No. 4,674,041, and seeks to enjoin us from further
infringing its patent. While the litigation against us is in the early stage
and its outcome cannot be predicted, we believe that our technology does not
infringe Catalina's patent and that the litigation is therefore without merit.
We intend to defend the action vigorously.
On February 12, 2000, Supermarkets Online, an affiliate of Catalina
Marketing, filed a lawsuit against us in the United States District Court for
the Central District of California. The complaint alleges that our systems and
methods infringe its United States Patent No. 6,014,634, and seeks unspecified
damages and injunctive relief. Because this patent was recently issued on
January 11, 2000, we are currently evaluating this patent and claim. In
addition, on February 18, 2000, Catalina Marketing filed a request for
reexamination of our United States Patent No. 5,761,648 with the United States
Patent and Trademark Office. We are currently evaluating this reexamination
request. If the request is granted, our United States Patent No. 5,761,648 will
be reexamined, which may result in the patent being narrowed in scope or found
invalid.
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On February 16, 2000, planet U filed a lawsuit against us and one of our
customers, Pep Boys Manny Moe & Jack, Inc., d/b/a Pep Boys, in the United
States District Court for the Northern District of California. The complaint
alleges that our systems and methods infringe planet U's recently purchased
United States Patent No. 5,907,830 and seeks unspecified damages and injunctive
relief. We are currently evaluating this patent and claim. As a result of this
lawsuit, Pep Boys terminated its relationship with us.
We have instituted three other patent infringement lawsuits currently
pending in the United States District Court for the Northern District of
Illinois against IQ.commerce Corporation (filed on December 3, 1998), H.O.T.
Coupons, Inc. (filed on November 18, 1998) and Bright Street.com, Inc. (filed
on August 23, 1999). We are seeking unspecified damages and permanent
injunctive relief for each case. All of the defendants are claiming that they
are not infringing on our patent and some of the defendants are claiming that
our patent is invalid and unenforceable.
Bright Street.com recently advised us that it is taking steps in the United
States Patent and Trademark Office to contest our rights in our United States
Patent No. 5,761,648. If Bright Street is successful, we may lose some or all
of our rights in our United States Patent No. 5,761,648.
We have been advised of potential claims by Coupco regarding its recently
acquired United States Patent No. Re. 34,915, which we are currently
evaluating. Coupco has indicated that it will file a lawsuit against us for
infringement of its patent if its claims are not resolved to its satisfaction.
All of the foregoing lawsuits and allegations are at an early stage and may
not be resolved favorably to us. For example, we may not prevail and prevent
others from using our proprietary rights. We may be required to pay costs and
legal fees in connection with these cases or other damages arising from the
various counterclaims that have been asserted against us. Our patent or future
patents may be found invalid or unenforceable. Furthermore, additional
counterclaims, separate lawsuits or other proceedings may be brought against us
to invalidate our patent or force us to change our services or business
methods.
In addition, on September 21, 1999, Kathryn L. Meklir, the ex-wife of Steven
M. Golden, our Chairman, Chief Executive Officer and President, filed suit
against both Mr. Golden and CoolSavings in Oakland County, Michigan, alleging
several claims, including fraud, arising out of her March 1998 sale of 2,000
shares of our common stock to Mr. Golden, and seeking damages in excess of $6.5
million. Although the transaction was a private sale between the parties, the
plaintiff has named us as a defendant in the lawsuit. While the outcome of any
litigation is uncertain, we believe that this suit and the claims asserted
against us have no merit, and we intend to defend it vigorously. A negative
outcome in this suit could subject us to substantial damages and negative
publicity. Our defense of this litigation may be costly and time-consuming even
if we are successful.
We may be involved in additional litigation, investigations or other
proceedings in the future. Any litigation, investigation or proceeding, with or
without merit, could be costly and time-consuming and could divert our
management's attention and resources, which in turn could harm our business and
financial results.
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MANAGEMENT
Executive Officers and Directors
The executive officers and directors of CoolSavings, and their ages and
positions as of January 1, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Chairman of the Board, Chief Executive Officer
Steven M. Golden........... 46 and President
David H. Jacobson.......... 39 Executive Vice President, Finance, Chief
Financial Officer, Treasurer
and Secretary
Executive Vice President, Operations and
John J. Adams.............. 28 Technology
Matthew Moog............... 29 Executive Vice President, Sales and Marketing
Executive Vice President, Strategic Business
Jonathan J. Smith.......... 33 Development
Albert Aiello.............. 57 Director
Robert J. Kamerschen....... 63 Director
Hugh R. Lamle(1)(2)(3)..... 54 Director
Lynette H. Mayne(1)(2)(3).. 48 Director
Richard H. Rogel(1)(2)(3).. 50 Director
David E. Simon............. 38 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
Steven M. Golden founded CoolSavings in December 1994. He has served as a
director, our Chairman of the Board and Chief Executive Officer since June
1996. Mr. Golden also assumed the title of President in January 2000. Prior to
founding CoolSavings, Mr. Golden was a financial consultant with Smith Barney
from May 1993 to May 1996. From January 1989 to April 1993, Mr. Golden served
as President of Land Data Network, which was founded by Mr. Golden and was one
of the nation's first online property information systems, providing tax roll
and assessment information for various counties in the State of Michigan. Mr.
Golden holds a B.B.A. from Michigan State University.
David H. Jacobson has served as our Chief Financial Officer and Treasurer
since October 1998, as our Secretary since May 1999 and as our Executive Vice
President, Finance since October 1999. From January 1996 to October 1998, Mr.
Jacobson was the Chief Financial Officer and Treasurer of SMS Technology, Inc.,
a value added packager and distributor of specialty chemical products. From
August 1990 to January 1996, Mr. Jacobson served as Chief Financial Officer for
Sterling Capital Ltd., a private equity group. Mr. Jacobson also worked for six
years for Coopers & Lybrand in its audit and business assurance practice. Mr.
Jacobson is a Certified Public Accountant and holds a B.S. with high honors in
Business Administration and Accounting from Indiana University.
John J. Adams has served as our Executive Vice President, Operations and
Technology since October 1999. From January 1999 to October 1999, Mr. Adams
served as our Executive Vice President, Engineering and Chief Technology
Officer. Prior to joining CoolSavings, Mr. Adams worked in several capacities
for Arthur Andersen Business Consulting from July 1993 to January 1999,
including Manager--Architecture and Methodology, Manager of Client Server and
Internet Development and Senior Systems Consultant. Mr. Adams holds a B.S. from
Florida State University.
Matthew Moog has served as our Executive Vice President, Sales and Marketing
since August 1998. From October 1996 to July 1998, Mr. Moog served as our Vice
President, Sales. Prior to joining CoolSavings, Mr. Moog worked for Microsoft
Corporation in various capacities from June 1992 to September 1996, including
Strategic Integrator Account Executive, MSN Business Development Executive and
Internet Business Development Manager. Mr. Moog holds a B.A. from The George
Washington University.
47
<PAGE>
Jonathan J. Smith has served as our Executive Vice President, Strategic
Business Development since October 1999 and, from June 1998 to October 1999,
Mr. Smith served as our Vice President, Strategic Business Development. Prior
to joining CoolSavings, Mr. Smith worked in several capacities for Lend Lease
Corporation, which is an Australian-based global financial and property
services company. From July 1989 to June 1997, Mr. Smith was principally
involved in the acquisition, disposition, financing and asset management of
institutional grade commercial properties for ERE Yarmouth, a U.S. based
subsidiary of Lend Lease Corporation. Mr. Smith served as Vice President of ERE
Yarmouth from April 1994 to June 1997 and as Asset Manager for the IT+T
Investments division of Lend Lease Corporation from July 1997 to June 1998. Mr.
Smith holds a B.A. from Northwestern University.
Albert Aiello has served as a director of CoolSavings since June 1998. Since
January 1998, Mr. Aiello has served as Chief Information Officer of Lend Lease
Corporation, an Australian based global financial and property services
company. Mr. Aiello also currently serves as a director of Lend Lease
Corporation. From 1990 to January 1998, Mr. Aiello served as President of
Fidelity Systems Company, the technology division of Fidelity Investments and
also as Chief Information Officer and Managing Director of Fidelity
Investments. Mr. Aiello currently serves as a director of Advantra, an
Australian telecommunications supplier, and the Software Productivity
Corporation, a consortium of major United States defense contractors. He is
also a member of the U.S. Government Accounting Office Executive Committee with
oversight for information technology expenditures. Mr. Aiello holds a B.S.E.
from Polytechnic Institute of New York, an M.S., M.I.E. and Ph.D. from New York
University. Mr. Aiello, Mr. Kamerschen and Ms. Mayne were designated by Lend
Lease to our board of directors pursuant to the Investment Agreement described
in "Certain Transactions and Relationships--Transactions with Management and
Others."
Robert J. Kamerschen has served as a director of CoolSavings since May 1999.
Since July 1999, Mr. Kamerschen has served as Chairman and Chief Executive
Officer of DIMAC Holdings, Inc., a direct-response marketing services firm.
From November 1988 to July 1999, he served as Chairman of ADVO, Inc., a leading
direct-mail marketing company. From November 1988 to January 1999, he also
served as Chief Executive Officer of ADVO, Inc. From 1987 to 1988, Mr.
Kamerschen served as President and Chief Executive Officer of RKO/Six Flags
Entertainment, Inc. From 1984 to 1987, Mr. Kamerschen served as President and
Chief Executive Officer of Marketing Corporation of America, a leading
marketing services corporation. Mr. Kamerschen also serves as a director of IMS
Health Incorporated, R.H. Donnelley Corporation, Micrografx, Inc, Tandy
Corporation and TravelCLICK, Inc. Mr. Kamerschen holds a B.S. and an M.B.A.
from Miami University.
Hugh R. Lamle has served as a director of CoolSavings since June 1998. Since
April 1974, Mr. Lamle has served as Executive Vice President and a principal of
M.D. Sass Investors Services Inc. a registered investment advisory firm. Since
June 1995, Mr. Lamle has also served as President and Chief Investment Officer
of Chase & M.D. Sass Partners, a joint venture between Chase Manhattan Bank and
M.D. Sass Investors Services which manages portfolios for corporate and
institutional investors. Mr. Lamle also serves as President of Resurgence Asset
Management and on the advisory board of Real Estate Capital Partners, both
affiliates of M.D. Sass, as Executive Vice President and a director of
Corporate Renaissance Group, Inc., a closed-end business development company,
and as a public director of the Finex division of the New York Cotton Exchange.
Mr. Lamle holds a B.A. from Queens College and an M.B.A. from Baruch College at
the City University of New York.
Lynette H. Mayne has served as a director of CoolSavings since June 1998.
Since 1991, Ms. Mayne has served with Lend Lease Corporation, an Australian-
based global financial and property services company, as Chief Executive
Officer of various divisions including IT+T Investments, Corporate Financial
Services and Corporate Services. Prior to joining Lend Lease, Ms. Mayne was a
director of NBC from 1986 to 1988, a director of Pan American World Airways
from 1984 to 1986 and a Vice Persident of Manufacturers Hanover Trust from 1980
to 1984. Ms. Mayne is a full time non-executive director of Lend Lease
Corporation and currently a director of Advantra, an Australian
telecommunications supplier, IBM Global Services Australia
48
<PAGE>
and Centius, an Internet intellectual property company. She has also served as
Chair of an Australian state health industry council, as a member of APEC and
is a Trustee of the ACTU--Lend Lease Foundation. Ms. Mayne holds an M.B.A. from
New York University and has authored two books on information technology.
Richard H. Rogel has served as a director of CoolSavings since May 1996. In
1982, Mr. Rogel founded Preferred Provider Organization of Michigan, Inc., a
preferred provider organization, and served as its Chairman from its inception
until it was sold in 1997. Mr. Rogel is the President of the University of
Michigan Alumni Association and chairs the University of Michigan's Business
School Development Advisory Board, as well as serving on other boards of the
University. Mr. Rogel holds a B.B.A. from the University of Michigan.
David E. Simon has served as a director of CoolSavings since November 1999.
Since 1998, Mr. Simon has been the Chief Executive Officer of Simon Property
Group, Inc., a publicly traded real estate company engaged primarily in the
ownership, development, management, leasing, acquisition and expansion of
income-producing retail properties. From 1995 until 1998, Mr. Simon was the
Chief Executive Officer of Simon DeBartolo Group, Inc., a predecessor-in-
interest to Simon Property Group, Inc. In addition to serving as a director of
Simon Property Group, Inc., Mr. Simon also serves as a director of First Health
Group Corporation, a publicly-traded full service national health benefits
company. He currently serves as Second Vice Chairman of the National
Association of Real Estate Investment Trusts, Inc. and is trustee of the
International Council of Shopping Centers. Mr. Simon holds a B.S. from Indiana
University and an M.B.A. from Columbia University Graduate School of Business.
Board of Directors
Our board of directors currently consists of seven members. Each director is
elected for a one-year term at our annual meeting of stockholders and serves
until the next annual meeting of stockholders or until his or her successor is
duly elected and qualified. Richard H. Rogel and Steven M. Golden have agreed
to vote the shares of common stock held by their revocable trusts or over which
they exercise voting control in favor of election of Albert Aiello, an
affiliate of Lend Lease International Pty. Limited (Lend Lease), to our board
of directors at the annual meetings of stockholders to be held in 2000 and
2001. This is conditional upon Lend Lease properly nominating its candidate and
continuing to own at least 10% of our common stock at that time. Lend Lease may
nominate a different person as director instead of Mr. Aiello, only upon the
written consent of Mr. Rogel and Mr. Golden, which they may not unreasonably
withhold.
Board Committees
Our board of directors has a compensation committee, an audit committee and
a nominating committee.
. Compensation Committee. The compensation committee makes recommendations
to the board of directors concerning salaries and incentive compensation
for our officers and employees and administers our 1997 Stock Option
Plan. The current members of our compensation committee are Hugh R.
Lamle, Lynette H. Mayne and Richard H. Rogel.
. Audit Committee. The audit committee, among other things, reviews our
financial statements and accounting practices, makes recommendations to
the board of directors regarding the selection of independent auditors
and reviews the results and scope of the audit and other services
provided by our independent auditors. The current members of our audit
committee are Hugh R. Lamle, Lynette H. Mayne and Richard H. Rogel.
Pursuant to the rules of Nasdaq, our audit committee consists of three
independent directors with financial skills and experience.
. Nominating Committee. The nominating committee screens and nominates
candidates for election to our board of directors. The current members of
our nominating committee are Hugh R. Lamle, Lynette H. Mayne and Richard
H. Rogel.
49
<PAGE>
Director Compensation
Directors who are also employees of CoolSavings receive no compensation for
serving on the board of directors. Directors who are not employees of
CoolSavings do not currently receive any cash compensation from us for their
service as members of the board of directors, although they are reimbursed for
all travel and other expenses incurred in connection with attending board and
committee meetings. Under our 1999 Non-Employee Director Stock Option Plan,
non-employee directors are also eligible to receive automatic stock option
grants upon their initial appointment to the board of directors and at each of
our annual stockholder meetings.
Under the 1999 Non-Employee Director Stock Option Plan, the following
directors received options in 1999: Albert Aiello, Robert J. Kamerschen, Hugh
R. Lamle, Lynette H. Mayne, Richard H. Rogel and David E. Simon. Each of these
directors other than David E. Simon received an option in July 1999 to purchase
11,500 shares of common stock at an exercise price of $4.37 per share while
David E. Simon received an option in November 1999 to purchase 5,750 shares of
common stock at an exercise price of $7.91 per share. The exercise prices of
these options were fair market value on the date of grant and each of these
options vests in full on the first anniversary of the date of grant and must be
exercised within ten years after the date of grant.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is an officer or employee
of CoolSavings. No executive officer of CoolSavings serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving on our board of directors or compensation committee.
All of the members of the compensation committee have entered into loan
transactions with us. Please see "Certain Transactions and Relationships."
Until the formation of the compensation committee in December 1997, matters
concerning executive compensation were addressed by the entire board of
directors.
Executive Compensation
The following table sets forth compensation earned by or paid for services
rendered to CoolSavings in 1999 by our Chief Executive Officer and each of our
other executive officers whose total annual salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers") during 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------ ------------
Shares
Underlying
Name and Principal Position Salary($) Bonus($) Options(#)
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Steven M. Golden,
Chairman of the Board, Chief
Executive Officer and President............... $245,000 $75,000 460,000
David H. Jacobson,
Executive Vice President, Finance
and Chief Financial Officer................... 138,000 20,000 287,500
John J. Adams,
Executive Vice President, Operations
and Technology................................ 125,000 20,000 310,500
Matthew Moog,
Executive Vice President,
Sales and Marketing........................... 137,000 130,000 258,750
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------ ------------
Shares
Underlying
Name and Principal Position Salary($) Bonus($) Options(#)
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Jonathan J. Smith,
Executive Vice President, Strategic
Business Development.......................... 119,000 30,000 287,500
Hillel Levin,
Former President and Chief Operating
Officer (1)................................... 198,000 20,000 143,750
</TABLE>
- ---------------------
(1) Mr. Levin resigned as an officer effective December 31, 1999. However, he
will continue to serve as a consultant to us through December 31, 2000.
Stock Options
The following table sets forth summary information concerning individual
grants of stock options made during 1999 to each of the Named Executive
Officers:
Option Grants in 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Shares Options Exercise Appreciation for
Underlying Granted to Price Option Term(2)
Options Employees Per Expiration ---------------------
Name Granted in 1999(1) Share Date 5% ($) 10% ($)
- ---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Golden........ 230,000 9.7% $2.17 3/3/09 $ 314,447 $ 796,871
230,000 9.7 7.91 11/22/09 1,144,667 2,900,812
David H. Jacobson....... 172,500 7.3 2.17 3/3/09 235,835 597,653
115,000 4.9 7.91 11/22/09 572,334 1,450,406
John J. Adams........... 23,000 1.0 2.17 1/18/09 31,445 79,687
172,500 7.3 2.17 3/3/09 235,835 597,653
115,000 4.9 7.91 11/22/09 572,334 1,450,406
Matthew Moog............ 143,750 6.1 2.17 3/3/09 196,530 498,045
115,000 4.9 7.91 11/22/09 572,334 1,450,406
Jonathan J. Smith....... 172,500 7.3 2.17 3/3/09 235,835 597,653
115,000 4.9 7.91 11/22/09 572,334 1,450,406
Hillel Levin............ 143,750 6.1 2.17 3/3/09 196,530 498,045
</TABLE>
- ---------------------
(1) Based on a total of 2,359,800 option shares granted to our employees under
our 1997 Stock Option Plan during 1999.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price but
do not include deductions for taxes or other expenses associated with the
exercise of the options or the sale of the underlying shares of common
stock. The 5% and 10% assumed rates of appreciation are mandated by rules
of the Securities and Exchange Commission and do not represent our estimate
or projection of the future price of our common stock. There can be no
assurance that any of the values reflected in this table will be achieved.
The actual gains, if any, will depend on the future performance of the
common stock, the optionee's continued employment through applicable
vesting periods and the date on which the options are exercised.
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<PAGE>
The following table sets forth the number of shares of common stock acquired
upon the exercise of stock options by each Named Executive Officer during 1999
and the number and value of securities underlying unexercised options held by
each Named Executive Officer as of December 31, 1999:
Aggregated Option Exercises in 1999 and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-The-Money Options at
Acquired December 31, 1999 December 31, 1999(1)
on Value ------------------------- -------------------------
Name Exercise Received Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Golden........ -- -- 322,000 713,000 $3,164,000 $5,685,874
David H. Jacobson....... 9,200 $20,188 -- 301,300 -- 2,300,537
John J. Adams........... -- -- 4,600 305,900 45,200 2,345,737
Matthew Moog............ -- -- 338,537 273,700 3,942,444 2,029,337
Jonathan J. Smith....... -- -- 9,200 301,300 90,400 2,300,537
Hillel Levin............ -- -- 299,000 362,250 2,938,000 3,559,500
</TABLE>
- ---------------------
(1) The dollar values have been calculated by determining the difference
between the fair market value of the securities underlying the options at
December 31, 1999 and the exercise prices of the options. Solely for
purposes of determining the value of options at December 31, 1999, we have
assumed that the fair market value of shares of common stock issuable upon
exercise of options was $12.00 per share, the assumed initial public
offering price, because the common stock was not traded in an established
market prior to this offering.
Employee Benefit Plans
1997 Stock Option Plan
We adopted our 1997 Stock Option Plan to enable officers, key employees and
consultants of CoolSavings or any subsidiary to participate in our possible
growth and profitability, and to encourage their continuation as officers,
employees or consultants for the benefit of CoolSavings and our stockholders.
Under our 1997 Stock Option Plan, we may award incentive and non-qualified
stock options, stock appreciation rights, restricted stock, performance stock
units and other stock units which are valued by reference to our common stock.
Our officers, employees and consultants are eligible to participate in our 1997
Stock Option Plan. Our 1997 Stock Option Plan is administered by either the
board of directors or the Compensation Committee (the "Administrator") which
determines, subject to the provisions of our 1997 Stock Option Plan, who shall
receive awards, the types of awards to be made, and the terms and conditions of
each award.
The exercise price of non-qualified options may not be less than the fair
market value of the common stock at the time the option is granted, except that
non-qualified options may have an exercise price of no less than 90% of the
fair market value at the time the option is granted if that discount is
expressly granted in lieu of a reasonable amount of salary or bonus. Options
that are intended to qualify as incentive stock options under our 1997 Stock
Option Plan may not be exercisable for more than ten years after the date the
option is granted and may not be granted at an exercise price of less than the
fair market value of the common stock at the time the option is granted. In the
case of incentive stock options granted to holders of more than 10% of our
common stock, the options may not be granted at an exercise price less than
110% of the fair market value of the common stock at the time the options are
granted.
Awards granted under our 1997 Stock Option Plan generally expire three
months after the termination of the recipient's service to CoolSavings or any
subsidiary, except in the case of death, in which case awards
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<PAGE>
generally may be exercised up to 12 months following the date of death. Awards
generally expire immediately upon termination of employment for cause.
The number of shares of common stock which may be issued under our 1997
Stock Option Plan is limited to 20% of the total number of shares of common
stock issued and outstanding from time to time and the number of shares of
common stock underlying incentive stock options issued under our 1997 Stock
Option Plan is limited to 11,500,000 shares of common stock. As of December 31,
1999, there were 3,864,230 shares subject to options outstanding under our 1997
Stock Option Plan.
The Administrator shall make appropriate adjustments in the number of shares
of common stock subject to each award and the exercise price per share of each
award if there is any change in the common stock as a result of a stock
dividend, stock split, recapitalization or otherwise. The Administrator also
has the authority to accelerate award exercise rights or make other adjustments
if CoolSavings is merged or consolidated, the property or stock of CoolSavings
is acquired by another corporation or CoolSavings is reorganized, liquidated or
impacted by an extraordinary transaction.
Our 1997 Stock Option Plan will terminate when no further shares of common
stock are available for issuance upon the exercise of awards and all
outstanding awards have expired or have been exercised. The board of directors
may at any time terminate our 1997 Stock Option Plan, but termination will not
affect awards previously granted. Any awards which were granted prior to
termination would remain exercisable by the holder in accordance with the terms
of the applicable award agreement. In addition, the board of directors may at
any time amend our 1997 Stock Option Plan without stockholder approval, except
where required by applicable law.
1999 Non-Employee Director Stock Option Plan
We adopted the 1999 Non-Employee Director Stock Option Plan to attract and
retain the services of experienced and knowledgeable independent directors, and
to provide an additional incentive for those directors to work for the best
interests of CoolSavings and its stockholders.
The 1999 Non-Employee Director Stock Option Plan was approved by our
stockholders on November 17, 1999 and, unless terminated earlier, it expires in
May 2009. The 1999 Non-Employee Director Stock Option Plan is designed to work
automatically without administration. To the extent administration is
necessary, however, it will be performed by the board of directors. To the
extent that conflicts of interest arise, we expect interested directors will
abstain from both deliberations and voting regarding matters in which they have
personal interests.
The 1999 Non-Employee Director Stock Option Plan provides that each person
who is a non-employee director on the date that the 1999 Non-Employee Director
Stock Option Plan became effective and each person who becomes a non-employee
director after the date of the plan will be granted, on the later of the date
on which the optionee first becomes a non-employee director or the effective
date of the plan, a non-qualified stock option to purchase a number of shares
of common stock that have a fair market value of $50,000 on the date of
issuance. In addition, on the date of each of our annual stockholder meetings,
each non-employee director will automatically be granted an additional non-
qualified option to purchase a number of shares of common stock with a fair
market value of $50,000 if, on that date, he or she has served on our board of
directors for at least six months. All options granted under the 1999 Non-
Employee Director Stock Option Plan shall have an exercise price equal to 100%
of the fair market value of the common stock on the date of grant and will vest
in full on the first anniversary of the date of grant.
Awards granted under the 1999 Non-Employee Director Stock Option Plan
generally expire three months after the non-employee director ceases to serve
as a director, except in the case of death, in which
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<PAGE>
case awards generally may be exercised up to 12 months following the date of
death. Options granted under the 1999 Plan generally have a term of ten years.
The number of shares of common stock which may be issued under the 1999 Plan
is limited to 2% of the total number of shares of common stock issued and
outstanding from time to time. As of December 31, 1999, options to purchase
63,250 shares of common stock have been issued under the 1999 Non-Employee
Director Stock Option Plan.
Appropriate adjustments will be made in the number of shares of common stock
subject to each award and the exercise price per share of each award if there
is any change in the common stock as a result of a stock dividend, stock split,
recapitalization or otherwise. If CoolSavings is merged or consolidated, the
property or stock of CoolSavings is acquired by another corporation or
CoolSavings is reorganized, liquidated or impacted by an extraordinary
transaction, the outstanding options will become fully exercisable.
The 1999 Non-Employee Director Stock Option Plan will terminate when no
further shares of common stock are available for issuance upon the exercise of
awards and all outstanding awards have expired or have been exercised. The
board of directors may at any time terminate the 1999 Non-Employee Director
Stock Option Plan, but termination will not affect awards previously granted.
Any awards which were granted prior to termination would remain exercisable by
the holder under the terms of the applicable award agreement. In addition, the
board of directors may at any time amend the 1999 Non-Employee Director Stock
Option Plan without stockholder approval, except as required by applicable law.
401(k) Plan
We have a tax-qualified employee savings plan which covers all of our full-
time employees who are at least 21 years of age. Eligible employees may defer
up to 25% of their pre-tax earnings, subject to the Internal Revenue Service's
annual contribution limit. Our 401(k) plan permits us to make additional
discretionary matching contributions on behalf of all participants in our
401(k) plan in an amount determined by us. Our 401(k) plan is intended to
qualify under Section 401 of the Internal Revenue Code of 1986 so that
contributions by employees or by us to our 401(k) plan, and income earned on
plan contributions, are not taxable to employees until withdrawn from the plan,
and so that contributions by us, if any, will be deductible by us when made.
Employment Agreements and Severance Arrangements
Each of our executive officers has signed our standard terms of employment
detailing, among other things, his confidentiality obligations and his at-will
employment status. Currently, none of our executive officers has a formal
employment agreement with us. All of our executive officers are employees at-
will and may be terminated at any time at the discretion of our board of
directors.
In January 2000, we entered into a termination agreement with Hillel Levin,
our former President and Chief Operating Officer. Under the terms of this
agreement, (a) Mr. Levin confirmed that he voluntarily resigned from
CoolSavings effective as of December 31, 1999, (b) we agreed to pay Mr. Levin a
$20,000 bonus on or before January 15, 2000, (c) CoolSavings and Mr. Levin
agreed to enter into a one-year consulting agreement, and (d) Mr. Levin agreed
not to compete with us for a period of two years after the termination of the
consulting agreement. Under the terms of the consulting agreement, Mr. Levin
will spend up to 25 hours per week performing consulting services for us for a
period of one year and we will pay Mr. Levin a consulting fee of $120,000.
Limitation of Liability and Indemnification
As permitted by the Michigan Business Corporation Act ("MBCA"), our articles
of incorporation include a provision that limits the liability of our directors
to the maximum extent permitted by the MBCA.
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<PAGE>
The MBCA limits the liability of directors for monetary damages for breach of
fiduciary duty as a director, except for liability for (a) a breach of the
director's duty of loyalty to the corporation or its stockholders, (b) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (c) illegal loans, distributions of dividends or assets, or
stock purchases as described in Section 551(1) of the MBCA, and (d)
transactions from which the director derived an improper personal benefit.
In addition, our bylaws generally provide that we will indemnify our
directors and officers to the fullest extent authorized or permitted under the
MBCA and that we will advance expenses at the request of a director or officer.
Prior to the completion of this offering, we intend to enter into indemnity
agreements with each of our current officers and directors to give them
additional contractual assurances regarding the scope of the indemnification
set forth in our articles of incorporation and bylaws.
We believe that these indemnification and limitation of liability provisions
will assist us in attracting and retaining talented directors and officers in
light of the risk of litigation directed against directors and officers of
publicly held corporations.
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<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Transactions with Management and Others
Lend Lease
In May 1998, we borrowed $1.0 million from Lend Lease International Pty.
Limited (Lend Lease), an Australian company, under a promissory note providing
for repayment of the indebtedness in six months or upon Lend Lease making a
contemplated $5.0 million investment in CoolSavings, whichever occurred first.
We repaid the promissory note on June 1, 1998, when Lend Lease made its first
equity investment in CoolSavings.
In June 1998, we entered into an Investment Agreement with Lend Lease
pursuant to which Lend Lease committed to invest up to $18.5 million in
CoolSavings upon the occurrence of specified events. Under the Investment
Agreement, Lend Lease purchased: 2,496,443 shares of common stock for $5.0
million on June 1, 1998; 2,269,491 shares of common stock for $5.0 million on
November 4, 1998; 2,723,384 shares of common stock for $5.0 million on March
11, 1999; and 2,139,805 shares of common stock for $3.5 million on April 27,
1999.
In connection with the Investment Agreement, on June 1, 1998, CoolSavings,
Lend Lease and certain of our stockholders entered into a shareholders
agreement under which, among other things, Lend Lease designated three persons
to serve on our board of directors. Albert Aiello, Robert J. Kamerschen and
Lynette H. Mayne are currently the directors designated by Lend Lease. The
provisions in the shareholders agreement addressing the composition of our
board of directors will terminate upon the completion of this offering. Two of
our shareholders have also agreed to vote in favor of the election of a
director nominated by Lend Lease. Please see "Management--Board of Directors."
In April 1999, Lend Lease agreed to loan us up to $3.5 million, which we
could borrow in our discretion by December 31, 1999. In October 1999, we
borrowed nearly $3.5 million under convertible subordinated notes issued to
Lend Lease. These notes bear interest at a rate of 10% per annum. The principal
and interest on these notes automatically convert into shares of our common
stock upon completion of this offering at a conversion price equal to 90% of
the initial public offering price. Assuming an initial public offering price of
$12.00 per share, these notes will automatically convert into 323,737 shares of
common stock upon completion of this offering. The notes mature on June 30,
2000 if this offering is not completed before that date and, if not repaid
within 15 days after their due date, the notes will automatically convert into
800,400 shares of our common stock.
On December 31, 1999, Lend Lease purchased 549.413 shares of our Series A
convertible preferred stock, which will automatically convert into 631,825
shares of our common stock upon completion of this offering. Please see "--
Series A Convertible Preferred Stock." As of December 31, 1999, Lend Lease
owned approximately 30.0% of our capital stock and, assuming conversion of the
convertible subordinated notes into 323,739 shares at an assumed initial public
offering price of $12.00 per share, would have owned 30.5% of our capital stock
on a pro forma basis as of that date.
Loan from Director
Under a credit agreement dated December 18, 1997 between CoolSavings and the
Richard H. Rogel Revocable Living Trust u/a/d March 21, 1990, the grantor,
trustee and beneficiary of which is Richard H. Rogel, a director of CoolSavings
(the Rogel Trust), the Rogel Trust loaned us $1.05 million. In connection with
this credit agreement, we issued the Rogel Trust warrants to purchase 805,000
shares of our common stock at $1.30 per share and warrants to purchase 57,500
shares of our common stock at $2.17 per share. We have repaid the loan to the
Rogel Trust and the Rogel Trust has exercised the warrants. Please see "--Loans
to Directors."
56
<PAGE>
Loans to Directors
On February 4, 1999, our board of directors authorized the payment of the
exercise prices of outstanding options and warrants held by our directors and
other warrant holders by delivery of promissory notes to CoolSavings with the
following terms: (a) all principal and accrued and unpaid interest is due on
the fourth anniversary of the issuance of the note; (b) the note bears interest
at the rate of 4.83% per annum (the then applicable federal rate); (c) accrued
interest is payable annually; (d) the note is secured by the shares of common
stock issued upon exercise of such option or warrant; and (e) the maker is
personally liable on the note to the extent of all accrued interest on the note
plus 20% of the total principal amount of the note.
Prior to the date of this prospectus, the following directors of CoolSavings
exercised their outstanding options and warrants in exchange for the delivery
of a promissory note with the terms described above:
<TABLE>
<CAPTION>
Shares Issued
Name Upon Exercise Principal Amount of Note
- ---- ------------- ------------------------
<S> <C> <C>
Richard H. Rogel, Trustee................ 862,500 $1,181,250(a)
Albert Aiello............................ 57,500 120,922
Hugh R. Lamle............................ 57,500 120,922
Lynette Mayne............................ 57,500 120,922
</TABLE>
- ---------------------
(a) Mr. Rogel delivered 13 notes in the aggregate principal amount of
$1,050,000 upon the exercise of warrants to purchase 805,000 shares of
common stock and delivered an additional note in the principal amount of
$131,250 upon the exercise of an option to purchase 57,500 shares of common
stock. All of these notes have identical terms and conditions as described
above.
Prior to the date of this prospectus, the following former directors of
CoolSavings exercised their outstanding options in exchange for the delivery of
a promissory note with the terms as described above:
<TABLE>
<CAPTION>
Shares Issued
Name Upon Exercise Principal Amount of Note
- ---- ------------- ------------------------
<S> <C> <C>
Eve Bosak................................ 57,500 $131,250
Douglas J. Golden........................ 57,500 131,250
Elwyn Jenkins............................ 57,500 120,922
Peter Sugar.............................. 57,500 131,250
Arthur A. Weiss.......................... 57,500 131,250
</TABLE>
As of the date of this prospectus all of these promissory notes were still
outstanding.
Options to Director
On July 13, 1999, we granted to Richard H. Rogel, one of our directors, an
option to purchase 115,000 shares of our common stock at a price of $4.37 per
share. This grant is in addition to the options granted to all directors
automatically upon adoption of the 1999 Non-Employee Director Stock Option
Plan. Mr. Rogel exercised this option by delivering to CoolSavings a full
recourse promissory note in the original principal amount of $502,354. This
note bears interest at the rate of 5.86% per annum (the then applicable federal
rate), provides for annual payments of accrued interest and is due in full on
the fourth anniversary of the note.
Convertible Subordinated Notes
One of our directors, Hugh R. Lamle, controls a limited partnership, HLBL
Family Partners, LP, which purchased one of our convertible subordinated notes
in the original principal amount of $65,000. This note will be converted into
6,019 shares of our common stock upon completion of this offering, based upon
an assumed initial public offering price of $12.00 per share.
57
<PAGE>
Series A Convertible Preferred Stock
The following table summarizes the shares of our Series A convertible
preferred stock purchased by our executive officers, directors and significant
stockholders in December 1999:
<TABLE>
<CAPTION>
Number of Shares of
Series A Convertible
Name Preferred Stock Purchase Price
- ---- -------------------- --------------
<S> <C> <C>
Lend Lease International Pty. Limited...... 549.413 $5,000,000
Hugh R. Lamle(a)........................... 109.883 1,000,000
David E. Simon(b).......................... 109.880 999,977
Robert Kamerschen.......................... 30.000 273,019
David H. Jacobson.......................... 8.000 72,805
</TABLE>
- ---------------------
(a)Owned by HLBL Family Partners, LP, an entity controlled by Hugh R. Lamle.
(b)Owned by Cool Savings Investors, LLC, an entity in which David E. Simon is a
member.
Each share of Series A convertible preferred stock will automatically
convert into 1,150 shares of common stock upon completion of this offering.
Relationships with Legal Counsel
Our outside corporate counsel is Golden & Gorman, P.C. Douglas J. Golden, a
shareholder of Golden & Gorman, P.C., is the brother of Steven M. Golden, our
Chairman of the Board and Chief Executive Officer. Douglas J. Golden is also a
former director of CoolSavings and was our Secretary until May 1999. Please see
"--Loans to Directors."
Our outside securities counsel is Jaffe, Raitt, Heuer & Weiss, Professional
Corporation. Peter Sugar and Arthur A. Weiss, shareholders of Jaffe, Raitt,
Heuer & Weiss, Professional Corporation, are former directors of CoolSavings.
Please see "--Loans to Directors" and "Legal Matters."
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of December 31, 1999, by:
. each person known by us to beneficially own more than 5% of our common
stock;
. each Named Executive Officer;
. each of our directors; and
. all executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
that are currently exercisable or exercisable within 60 days after December 31,
1999, are deemed to be outstanding and to be beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of
that person, but are not treated as outstanding for the purpose of computing
the percentage ownership of any other person. Unless otherwise noted, each
person or group identified possesses sole voting and investment power with
respect to the shares indicated, subject to applicable community property laws.
Beneficial ownership percentage is based on 34,705,374 shares of common stock
outstanding as of December 31, 1999, on an as converted basis, and 38,905,374
shares of common stock outstanding after completion of this offering.
Unless indicated otherwise, the address of the beneficial owners is: c/o
coolsavings.com inc., 8755 West Higgins Road, Suite 100, Chicago, Illinois
60631.
<TABLE>
<CAPTION>
Percentage of
Shares Beneficially
Owned
Shares ----------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- ---------
<S> <C> <C> <C>
Lend Lease International Pty. Limited..... 10,584,687 30.5% 27.2%
Level 44, Australia Square
Sydney, Australia 2000
Richard H. Rogel(1)....................... 6,873,113 19.8 17.7
56 Rose Crown
Avon, Colorado 81620
Steven M. Golden(2)....................... 4,873,815 13.9 12.4
Hillel Levin(3)........................... 951,207 2.7 2.4
Matthew Moog(4)........................... 586,006 1.7 1.5
David H. Jacobson......................... 18,400 * *
John J. Adams(5).......................... 9,200 * *
Jonathan J. Smith(5)...................... 9,200 * *
Hugh R. Lamle(6).......................... 351,483 1.0 *
c/o M.D. Sass
1185 Avenue of the Americas
New York, New York 10036
Albert Aiello............................. 57,500 * *
81 Carisbrooke Rd.
Wellesley, Massachusetts 02481
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares Beneficially
Owned
Shares -----------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned Offering Offering
- ------------------------------------ ------------ -------- ----------
<S> <C> <C> <C>
Lynette H. Mayne......................... 57,500 * *
Level 44, Australia Square
Sydney, Australia 2000
David E. Simon(7)........................ 126,362 * *
c/o Simon Property Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204
Robert J. Kamerschen..................... 34,500 * *
200 Day Hill Rd.
Windsor, Connecticut 06095
All directors and executive officers as a
group
(11 persons)(8)......................... 12,997,079 36.7% 32.9%
</TABLE>
- ---------------------
* Less than 1%.
(1) All of these shares of common stock are held by a revocable trust, of which
Mr. Rogel is the trustee.
(2) Includes 4,379,315 shares of common stock held by a revocable trust, of
which Mr. Golden is the trustee, 172,500 shares of common stock held by
Steven M. Golden LLC, which is controlled by Mr. Golden, and 322,000 shares
of common stock subject to options exercisable within 60 days after
December 31, 1999.
(3) Includes 115,000 shares of common stock held by Shore Bridge, L.P., which
is controlled by Mr. Levin, and 299,000 shares of common stock subject to
options exercisable within 60 days after December 31, 1999.
(4) Includes 338,537 shares of common stock subject to options exercisable
within 60 days after December 31, 1999.
(5) Represents 9,200 shares of common stock subject to options exercisable
within 60 days after December 31, 1999.
(6) Includes 287,964 shares of common stock held in the name of HLBL Family
Partners, LP, which is controlled by Mr. Lamle.
(7) All of these shares are held in the name of Cool Savings Investors, LLC.
Mr. Simon, a member of Cool Savings Investors, LLC, disclaims beneficial
ownership of the shares held by that entity except to the extent of his
proportionate pecuniary interest therein.
(8) Includes 678,937 shares of common stock subject to options exercisable
within 60 days after December 31, 1999.
60
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, after giving effect to the filing of our
restated articles of incorporation, our authorized capital stock will consist
of 100,000,000 shares of common stock, without par value, and 10,000,000 shares
of preferred stock, without par value.
The following summary of our capital stock and restated articles of
incorporation and bylaws are qualified by reference to the restated articles of
incorporation and bylaws filed with the Securities and Exchange Commission as
exhibits to the registration statement of which this prospectus forms a part.
Common Stock
As of December 31, 1999, there were 31,715,449 shares of common stock
outstanding, held by approximately 125 stockholders of record. The holders of
outstanding shares of common stock are entitled to receive dividends out of
legally available assets at such times and in such amounts as the board of
directors may from time to time determine. Each holder is entitled to one vote
for each share of common stock held on all matters submitted to a vote of
stockholders. Cumulative voting for the election of directors is not provided
for in our articles of incorporation, which means that the holders of a
majority of the shares of common stock voted can elect all of the directors
nominated for election. Subject to preferences that may be applicable to any
then outstanding preferred stock, holders of common stock are entitled to
receive ratably the dividends, if any, that may be declared by our board of
directors out of legally available funds. Upon a liquidation, dissolution or
winding up of CoolSavings, the holders of common stock will be entitled to
share ratably in the net assets legally available for distribution to
stockholders after the payment of all debts and other liabilities of
CoolSavings, subject to the prior rights of any preferred stock then
outstanding. Holders of common stock have no preemptive or conversion rights or
other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the common stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.
Preferred Stock
As of December 31, 1999, there were 2,197.650 shares of Series A convertible
preferred stock outstanding, held by 69 stockholders of record. Upon the
completion of this offering, each share of Series A convertible preferred stock
will automatically convert into 1,150 shares of common stock. Our board of
directors has the authority, within the limitations and restrictions contained
in the articles of incorporation, to issue shares of preferred stock, in one or
more classes or series, and to fix the rights, preferences, privileges, and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of such series. The board of
directors, without stockholder approval, could issue shares of preferred stock
with voting and conversion rights which could adversely affect the voting power
or other rights of the holders of shares of common stock. The issuance of
shares of preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
have the effect of delaying, deferring or preventing a change in control of
CoolSavings and may negatively affect the market price of the common stock and
the voting and other rights of the holders of common stock. We have no current
plans to issue any shares of preferred stock.
Convertible Subordinated Notes
As of December 31, 1999, approximately $5.0 million of coolsavings.com inc.
1999 unsecured, convertible subordinated notes were outstanding. These notes
will automatically convert into shares of our common stock upon the completion
of this offering at a conversion price equal to 90% of the initial public
offering price, and mature on June 30, 2000 if this offering is not completed
before that date. If the notes are not paid within 15 days after their due
date, they will automatically convert into 1,143,783 shares of our common
stock.
61
<PAGE>
Registration Rights
Shareholders Agreement
Under an agreement between us and some of our stockholders, stockholders
holding an aggregate of 29,336,892 shares of common stock, referred to as
registrable securities, have registration rights with respect to the
registrable securities. The holders of substantially all of the registrable
securities have signed lock-up agreements in connection with this offering. See
"Shares Eligible for Future Sale--Lock-up Agreements."
When we become eligible to use a registration statement on Form S-3 to
register an offering of our securities, holders of the registrable securities
may request that we file a registration statement on Form S-3 covering all or a
portion of the registrable securities held by them, provided that the proceeds
from that offering are at least $1.0 million. We are only obligated to effect
two of these demand registrations and we have the right to delay the filing of
a registration statement on Form S-3 for up to 90 days.
In addition, the holders of registrable securities have piggyback
registration rights. If we propose to register any common stock under the
Securities Act, other than under the Form S-3 registration rights noted above
or an employee benefit plan, the holders of the registrable securities may
require us to include all or a portion of their securities in such
registration. However, the underwriters, if any, of that offering have the
right to limit the number of registrable securities proposed to be included in
that registration.
We will bear all of the costs and expenses incurred in connection with these
registrations, except that the holders of registrable securities participating
in any registration would pay their own underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of their
securities.
These registration rights terminate five years after the completion of this
offering.
Agreement with Holders of Unsecured, Convertible Subordinated Notes
Under an agreement with us, the holders of our 1999 unsecured, convertible
subordinated notes have registration rights with respect to the 462,627 shares
of common stock issuable upon conversion of the notes. The holders of
substantially all of the notes have signed lock-up agreements in connection
with this offering. See "Shares Eligible for Future Sale--Lock-Up Agreements."
The holders of the notes have piggyback registration rights. If, after the
completion of this offering, we propose to register any common stock under the
Securities Act, other than on Form S-4 (or any successor form) or under an
employee benefit plan, the holders of the notes may require us to include all
or a portion of their securities in such registration. However, the
underwriters, if any, of that offering have the right to limit the number of
registrable securities proposed to be included in that registration.
We will bear all of the costs and expenses incurred in connection with these
registrations, except that the holders of the notes participating in any
registration would pay their own underwriting discounts, selling commissions
and stock transfer taxes applicable to the sale of their securities.
These registration rights terminate two years after the completion of this
offering.
NBC Agreement
Under our stock purchase and advertising agreement with National
Broadcasting Company, Inc., NBC has registration rights with respect to its
686,766 shares of our common stock. NBC has signed a lock-up agreement in
connection with this offering. See "Shares Eligible for Future Sale--Lock-Up
Agreements."
At any time beginning six months after this offering, NBC may request that
we register at least 50% of its shares of our common stock or any lesser
percentage of its shares if the aggregate public offering price is
62
<PAGE>
greater than $5,000,000. We are only obligated to effect one of these demand
registrations and we have the right to delay the filing of a registration
statement for up to 90 days.
In addition, NBC has piggyback registration rights with respect to its
shares of our common stock. If, after the completion of this offering, we
propose to register any common stock under the Securities Act, other than in a
Rule 145 transaction or under an employee benefit plan, NBC may require us to
include all or a portion of its shares of our common stock in such
registration. However, the underwriters, if any, of that offering have the
right to limit the number of NBC shares proposed to be included in that
registration.
We will bear all of the costs and expenses incurred in connection with these
registrations except that NBC would pay its own underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of its securities.
These registration rights terminate three years after the completion of this
offering.
Agreement with Holders of Series A Convertible Preferred Stock
Under an agreement with us, the holders of our Series A convertible
preferred stock have piggyback registration rights with respect to the shares
of common stock issuable upon conversion of the Series A convertible preferred
stock. If, after the completion of this offering, we propose to register any
common stock under the Securities Act, other than on Form S-4 (or any successor
form) or under an employee benefit plan, the holders of the Series A
convertible preferred stock may require us to include all or a portion of their
securities in such registration. However, the underwriters, if any, of that
offering have the right to limit the number of registrable securities proposed
to be included in that registration. The holders of substantially all of the
Series A convertible preferred stock have signed lock-up agreements in
connection with this offering. See "Shares Eligible for Future Sale--Lock-Up
Agreements."
We will bear all of the costs and expenses incurred in connection with these
registrations, except that the holders of the Series A convertible preferred
stock participating in any registration would pay their own underwriting
discounts, selling commissions and stock transfer taxes applicable to the sale
of their securities.
These registration rights terminate two years after the completion of this
offering.
Anti-Takeover Effects of Certain Provisions of Michigan Law and Our Articles of
Incorporation and Bylaws
Michigan Anti-Takeover Statutes
Chapters 7A and 7B of the MBCA may affect attempts to acquire control of
CoolSavings. In general, unless the corporation's charter specifies otherwise,
under Chapter 7A, "business combinations" between a covered Michigan
corporation or its subsidiaries and an "interested shareholder" can be
consummated only if approved by at least 90% of the votes of each class of
shares entitled to vote and by at least two-thirds of the voting shares held by
disinterested shareholders. The MBCA defines a "business combination" to
include, among other transactions, certain mergers, dispositions of assets or
shares and recapitalizations. An "interested shareholder" is defined as the
direct or indirect beneficial owner of at least 10% of the voting power of a
covered corporation's outstanding shares. The MBCA provides an exemption to
this supermajority voting requirement if five years have elapsed after the
person involved became an "interested shareholder" and if certain price and
other conditions are satisfied. Our articles of incorporation include a
provision expressly "opting out" of Chapter 7A. Our board of directors may "opt
in" to Chapter 7A at any time by action of a majority of the directors then in
office.
In general, under Chapter 7B of the MBCA, an entity that acquires "control
shares" of a covered corporation may vote the control shares in favor of or
against any matter only if a majority of all shares, and
63
<PAGE>
of all non-"interested shares," of each class of shares entitled to vote as a
class approve the voting rights of that acquirer of "control shares." The MBCA
defines "interested shares" as shares owned by officers or employee-directors
of the corporation, or of the entity making the control share acquisition.
"Control shares" are defined as shares that, when added to shares already owned
by an entity, would give the entity voting power in the election of directors
over any of three thresholds: one-fifth, one-third and a majority. The effect
of this statute is to condition the acquisition of voting control of a
corporation on the approval of a majority of the pre-existing disinterested
shareholders. Our board of directors may amend the bylaws before a control
share acquisition occurs to provide that Chapter 7B does not apply to
CoolSavings.
In addition, some provisions of our restated articles of incorporation and
restated bylaws which will take effect upon the consummation of this offering
may have an anti-takeover effect. They may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in its best
interests, including those attempts that might result in a premium over the
market price for the shares held by our stockholders. The following summarizes
these provisions.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our restated bylaws will provide that stockholders must provide timely
written notice before bringing business before an annual meeting of
stockholders or nominating candidates for election as directors. Our restated
bylaws also specify requirements as to the form and content of a stockholder's
notice. These provisions may prevent stockholders from bringing matters before
an annual meeting of stockholders or from making nominations for directors at
an annual meeting of stockholders.
Filling Vacancies
Our restated bylaws will authorize the board of directors to fill vacant
directorships or increase the size of the board of directors, which may deter a
stockholder from removing incumbent directors and simultaneously gaining
control of the board of directors.
Supermajority Voting Provisions
Our restated articles of incorporation will require the affirmative vote of
the holders of at least two-thirds of our outstanding voting stock for the
alteration, amendment or repeal of, or the adoption of any provision
inconsistent with, our restated articles of incorporation or bylaws, unless the
alteration, amendment or repeal is recommended by the board of directors. In
that case, the affirmative vote of the holders of a majority of the voting
stock of CoolSavings is required.
Stockholder Action; Special Meeting of Stockholders
Our restated articles of incorporation will provide that stockholders may
not take action by written consent. Our restated bylaws will further provide
that special meetings of stockholders may be called only by the Chairman of the
board of directors, the Chief Executive Officer, a majority of the board of
directors or the holders of at least a majority of the shares entitled to vote
in the election of directors.
Authorized but Unissued Shares
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. We may use these
shares for a variety of corporate purposes, including future public offerings
to raise additional capital, corporate acquisitions and employee benefit plans.
This could make it more difficult or discourage an attempt to obtain control of
CoolSavings by means of a proxy contest, tender offer, merger or otherwise.
64
<PAGE>
Limitation of Liability and Indemnification Matters
Our restated articles of incorporation and our restated bylaws will provide
that we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their services to
us, which may include services in connection with takeover defense measures.
These provisions may have the effect of preventing changes in our management.
Nasdaq Symbol
We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol CSAV.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is EquiServe Trust
Company.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock and a
significant public market for our common stock may not develop or be sustained
after this offering.
If our stockholders sell substantial amounts of common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future and at a time and price that we deem appropriate.
Upon completion of this offering, we will have outstanding an aggregate of
38,905,374 shares of common stock. All of the shares of common stock 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. This
leaves 34,705,374 shares eligible for sale into the public market as follows:
<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<S> <C>
323,035 Immediately after the date of this prospectus
120,120 At various times after the date of this prospectus and prior to
180 days after the effective date of the registration statement
containing this prospectus
31,411,184 180 days after the effective date of the registration statement
containing this prospectus (subject in some cases to volume
limitations)
2,851,035 At various times after 180 days following the effective date
of the registration statement containing this prospectus
</TABLE>
Lock-Up Agreements
All of our executive officers and directors and the holders of approximately
99% of our common stock have agreed, for a period of 180 days from the
effective date of the registration statement containing this prospectus,
without the prior written consent of Chase Securities Inc., not to sell, offer,
contract to sell, transfer the economic risk of ownership in, make any short
sale, pledge or otherwise dispose of any shares of our common stock or any
securities convertible into or exchangeable or exercisable for or any other
rights to purchase or acquire our common stock, with the exception of specific
family and estate planning transfers. The only stockholders that are not
subject to these lock-up restrictions are those stockholders (holding less than
1% of our common stock in the aggregate) that refused to sign the lock-up
agreement. Chase Securities Inc. may remove these lock-up restrictions prior to
the expiration of the lock-up period without prior public notice.
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, including the holding period of any prior
owner other than an affiliate, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
. 1% of the number of shares of our common stock then outstanding, which
will equal approximately 389,054 shares immediately after this offering;
or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to that sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
CoolSavings.
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<PAGE>
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, Rule 144(k) shares may be sold immediately upon
the completion of this offering.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchase shares of our common
stock in connection with a compensatory stock or option plan or other written
agreement is eligible to resell those shares 90 days after the effective date
of this offering in reliance on Rule 144, but without compliance with some of
the restrictions, including the holding period, contained in Rule 144.
Registration Rights
After this offering, the holders of 33,006,974 shares of our common stock,
or their transferees, will be entitled to registration rights under the
Securities Act. Please see "Description of Capital Stock--Registration Rights."
After registration, these shares will generally be freely tradable without
restriction under the Securities Act. These sales could cause the trading price
of our common stock to decline, perhaps substantially.
Stock Options
As of December 31, 1999, options to purchase 4,252,217 shares of our common
stock were issued and outstanding. Within 12 months after this offering, we
intend to file a registration statement under the Securities Act covering
6,613,914 shares of our common stock subject to outstanding options or reserved
for issuance under our 1997 Stock Option Plan and 1999 Non-Employee Director
Stock Option Plan. Shares of our common stock 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 any applicable 180-day lock-up agreements expire or
are terminated.
67
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. Chase Securities Inc., Lehman Brothers Inc. and Thomas Weisel Partners
LLC are acting as representatives of the underwriters. Chase H&Q is the
business name Chase Securities Inc. uses to describe its equity underwriting
business. Subject to the terms and conditions of the underwriting agreement,
each underwriter has severally agreed to purchase the number of shares of
common stock set forth opposite its name below.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ -----------
<S> <C>
Chase Securities Inc...........................................
Lehman Brothers Inc. ..........................................
Thomas Weisel Partners LLC.....................................
-----------
Total.......................................................... 4,200,000
===========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to specified conditions, including the absence of any
material adverse change in our business and the receipt of certificates,
opinions and letters from us, our counsel and our independent auditors. The
underwriters are committed to purchase all the shares of common stock offered
by us, other than those shares covered by the over-allotment option described
below, if they purchase any of the shares.
The underwriters propose to offer the shares directly to the public at the
initial public offering price shown on the cover page of this prospectus and
to dealers at that price less a concession not in excess of $ per share.
The underwriters may allow, and those dealers may re-allow, a concession not
in excess of $ per share to other dealers. After the initial offering of
shares, the underwriters may change the public offering price and other
selling terms. The representatives have advised us that the underwriters do
not intend to confirm discretionary sales in excess of 5% of the shares of
common stock offered hereby.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 630,000 additional
shares of common stock at the initial public offering price, less the
underwriting discounts shown 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 of
those additional shares which the number of shares of common stock to be
purchased by it shown in the above table bears to the total number of shares
of common stock offered by us. We will be obligated pursuant to this 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 by us.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us in connection with this
offering. The underwriting discount was determined through negotiations with
the underwriters, and equals the public offering price per share of common
stock, less the amount paid by the underwriters to us per share of common
stock. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of our common stock.
<TABLE>
<CAPTION>
Paid to the
Underwriters
-----------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per share................................................
Total....................................................
</TABLE>
We will pay the offering expenses, estimated to be $1.1 million, excluding
the underwriting discount.
68
<PAGE>
We have agreed to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute
to payments that the underwriters may be required to make in respect of any of
those liabilities.
We, our executive officers and directors and the holders of substantially
all of our common stock have agreed for a period of 180 days from the effective
date of the registration statement containing this prospectus, without the
prior written consent of Chase Securities Inc., not to sell, offer, contract to
sell, transfer the economic risk of ownership in, make any short sale, pledge
or otherwise dispose of any shares of our common stock or any securities
convertible into or exchangeable or exercisable for or any other rights to
purchase or acquire our common stock, with certain exceptions, including
specific family and estate planning transfers. In addition, during this period,
we have agreed not to file any registration statement with respect to, and each
of our executive officers and directors and the holders of substantially all of
our common stock have agreed not to make any demand for, or exercise any right
with respect to, the registration of any shares of common stock or other
securities issued by us, without the prior written consent of Chase Securities
Inc., other than this offering.
The underwriters, at our request, have reserved for sale at the initial
public offering price up to 210,000 shares of common stock to be sold in this
offering for sale to our employees, directors and parties related to them, and
to service providers and other third parties with whom we have business
relationships. These reserved shares will be sold at the public offering price
that appears on the cover page of this prospectus. The number of shares
available for sale to the general public will be reduced to the extent that any
reserved shares are purchased by these persons. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered by this prospectus.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price for the common stock in this offering
will be determined by negotiation between us and the representatives of the
underwriters. The factors to be considered in determining the initial public
offering price include prevailing market conditions, the history of and the
prospects for the industry in which we compete, an assessment of our
management, our prospects, our capital structure, our results of operations in
recent periods and other factors deemed relevant.
Some of the persons participating in this offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
the common stock at levels above those that 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. Penalty bids permit 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 a syndicate
covering transaction. Stabilizing transactions may be effected on the Nasdaq
National Market, in the over-the-counter market, or otherwise. Stabilizing
transactions, if commenced, may be discontinued at any time.
E*OFFERING Corp., one of the underwriters, will allocate for distribution by
E*TRADE Securities, Inc. a portion of the shares that E*OFFERING is
underwriting in this offering. Copies of the prospectus in electronic format
will be made available on Internet websites maintained by E*OFFERING Corp. and
E*TRADE Securities, Inc. Customers of E*TRADE Securities, Inc. who complete and
pass an online eligibility profile may place conditional offers to purchase
shares in this offering through E*TRADE's Internet website.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners LLC has been named as a lead or co-
manager on 148 filed public offerings of equity securities, of which 106 have
69
<PAGE>
been completed, and has acted as a syndicate member in an additional 77 public
offerings of equity securities. Thomas Weisel Partners LLC does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us under the underwriting agreement entered into in connection with this
offering.
In December 1999, Hambrecht & Quist California (the predecessor in interest
to Chase Securities Inc.) purchased 15.000 shares of our Series A convertible
preferred stock, which will automatically convert into 17,250 shares of common
stock upon completion of this offering, the H&Q Employee Venture Fund 2000,
L.P. purchased 6.000 shares of our Series A convertible preferred stock, which
will automatically convert into 6,900 shares of common stock upon completion of
this offering, and Access Technology Partners Brokers Fund, L.P., purchased
1.000 share of our Series A convertible preferred stock, which will
automatically convert into 1,150 shares of common stock upon completion of this
offering, for an aggregate purchase price of $200,213.86, or $9,100.63 per
share. The foregoing shares have been deemed to be underwriting compensation by
the NASD. As a result, the holders of these shares have agreed for a period of
one year from the date of this prospectus not to sell, transfer, assign, pledge
or hypothecate these shares.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for CoolSavings by Jaffe, Raitt, Heuer & Weiss,
Professional Corporation, Detroit, Michigan. Pillsbury Madison & Sutro LLP, San
Francisco, California, is acting as counsel for the underwriters in connection
with selected legal matters relating to the shares of common stock offered by
this prospectus. Shareholders of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation beneficially own 961,897 shares of our common stock in the
aggregate. Assuming that the fair market value of a share of our common stock
is $12.00, these shares have a fair market value of approximately $11.5
million.
The statements in this prospectus relating to patents, patent licenses,
trademarks and service marks and related litigation under "Table of Contents"
and under the captions "Risk Factors--Intellectual property litigation against
us can be costly and could result in the loss of significant rights," "Risk
Factors--Protecting our patents, trademarks and proprietary rights may be
costly and may distract our management," "Business--Intellectual Property" and
the statements in this prospectus relating to intellectual property and related
litigation under the caption "Business--Legal Proceedings" have been reviewed
and approved by Niro, Scavone, Haller & Niro, Chicago, Illinois, our
intellectual property counsel, and are included in this prospectus in reliance
upon that review and approval. Shareholders of Niro, Scavone, Haller & Niro
beneficially own 234,600 shares of our common stock in the aggregate. Assuming
that the fair market value of a share of our common stock is $12.00, these
shares have a fair market value of approximately $2.8 million.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
70
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock being sold in this
offering. This prospectus, which constitutes a part of that registration
statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information with respect to CoolSavings and the common
stock offered hereby, please refer to the registration statement and the
exhibits and schedules filed as a part of the registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or any other document referred to are not necessarily complete;
reference is made in each case to the copy of the contract or document filed as
an exhibit to the registration statement. Each statement is qualified in all
respects by reference to the exhibit. You may read and copy any document we
file at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference room. Our Commission filings are
also available at the Commission's web site at http://www.sec.gov.
After this offering, we will become subject to the information and periodic
reporting requirements of the Securities Exchange Act and, accordingly, we will
file periodic reports, proxy statements and other information with the
Commission. Such periodic reports, proxy statements and other information will
be available for inspection and copying at the Commission's public reference
room and the web site of the Commission referred to above.
71
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Financial Statements:
Balance Sheets........................................................... F-3
Statements of Operations................................................. F-4
Statements of Stockholders' (Deficit) Equity............................. F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of coolsavings.com inc.:
The stock split described in Note 10c to the financial statements has not been
consummated at February 18, 2000. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, of stockholders' (deficit) equity and of cash
flows present fairly, in all material respects, the financial position of
coolsavings.com inc. at December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States, which require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above."
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 18, 2000, except as to Note 10c which is as of March , 2000
F-2
<PAGE>
COOLSAVINGS.COM INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31, Pro Forma
------------------------- December 31,
1998 1999 1999
----------- ------------ ------------
(unaudited)
(Note 1q)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 4,895,139 $ 17,488,788 $ 17,488,788
Restricted cash...................... 67,352 95,352 95,352
Accounts receivable, net of allowance
of $13,500 and $118,154 at
December 31, 1998 and 1999.......... 281,800 4,381,463 4,381,463
Prepaid advertising.................. -- 2,787,327 2,787,327
Prepaid assets....................... 74,311 290,103 290,103
Other assets......................... 10,940 498,137 498,137
----------- ------------ ------------
Total current assets............. 5,329,542 25,541,170 25,541,170
----------- ------------ ------------
Property and equipment:
Office furniture and equipment....... 298,280 453,725 453,725
Computer equipment................... 698,684 2,709,057 2,709,057
Leasehold improvements............... 282,805 332,002 332,002
Capitalized software................. 45,901 1,489,913 1,489,913
----------- ------------ ------------
1,325,670 4,984,697 4,984,697
Less accumulated depreciation and
amortization........................ (284,568) (935,862) (935,862)
----------- ------------ ------------
1,041,102 4,048,835 4,048,835
----------- ------------ ------------
Total assets......................... $ 6,370,644 $ 29,590,005 $ 29,590,005
=========== ============ ============
<CAPTION>
LIABILITIES
Current liabilities:
<S> <C> <C> <C>
Accounts payable:
Trade.............................. $ 729,573 $ 2,319,897 $ 2,319,897
Related parties.................... 4,051 24,944 24,944
Accrued liabilities.................. 522,366 1,832,874 1,832,874
Deferred revenue..................... 221,312 417,974 417,974
Current maturities of long-term
debt................................ 64,098 246,601 246,601
Convertible subordinated notes
payable, including $3,561,569 due
related parties..................... -- 4,996,369 --
----------- ------------ ------------
Total current liabilities........ 1,541,400 9,838,659 4,842,290
----------- ------------ ------------
Long-term debt, less current
maturities.......................... 235,574 631,831 631,831
----------- ------------ ------------
Commitments and contingencies (Note
5)..................................
<CAPTION>
STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Series A convertible preferred stock,
no par value, 5,000 shares
authorized 2,197.650 shares issued
and outstanding at December 31, 1999
(actual) and zero shares issued and
outstanding at December 31, 1999
(pro forma) (liquidation preference
of $9,100.63 per share)............. -- -- --
Common stock, no par value,
69,000,000 shares authorized,
24,614,899 and 31,715,449 shares
issued and outstanding at December
31, 1998 and 1999 (actual) and
34,705,374 shares issued and
outstanding at December 31, 1999
(pro forma)......................... 13,500,865 27,844,658 32,841,027
Additional paid-in capital........... (4,663,650) 15,204,073 15,703,710
Accumulated deficit.................. (4,243,545) (21,111,924) (21,611,561)
Notes receivable from related
parties............................. -- (2,817,292) (2,817,292)
----------- ------------ ------------
Total stockholders' equity........... 4,593,670 19,119,515 24,115,884
----------- ------------ ------------
Total liabilities and stockholders'
equity.............................. $ 6,370,644 $ 29,590,005 $ 29,590,005
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
COOLSAVINGS.COM INC.
Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net revenues........................... $ 109,510 $ 1,142,819 $ 12,915,732
Cost of revenues....................... 147,144 427,769 1,817,444
----------- ----------- ------------
Gross profit (loss).................... (37,634) 715,050 11,098,288
Operating expenses:
Sales and marketing.................. 1,201,564 2,494,395 17,837,722
Product development.................. 719,547 1,217,101 4,503,223
General and administrative........... 766,313 2,349,725 5,890,193
----------- ----------- ------------
Total operating expenses............... 2,687,424 6,061,221 28,231,138
----------- ----------- ------------
Loss from operations................... (2,725,058) (5,346,171) (17,132,850)
Other income (expense):
Interest and other income............ 8,911 88,322 492,971
Interest expense..................... (11,170) (48,517) (228,500)
Amortization of debt discount........ (4,204) (434,894) --
----------- ----------- ------------
Loss before income taxes............... (2,731,521) (5,741,260) (16,868,379)
Income taxes........................... -- -- --
----------- ----------- ------------
Net loss............................... $(2,731,521) $(5,741,260) $(16,868,379)
=========== =========== ============
Basic and diluted net loss per share... $ (0.15) $ (0.27) $ (0.57)
=========== =========== ============
Weighted average shares used in
calculation of basic and diluted net
loss per share........................ 18,266,572 21,547,177 29,804,681
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
COOLSAVINGS.COM INC.
Statements of Stockholders' (Deficit) Equity
Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Notes Total
Preferred Stock Common Stock Additional Receivable Stockholders'
---------------- ---------------------- Paid-In Accumulated From Related Equity
Shares Amount Shares Amount Capital Losses Parties (Deficit)
--------- ------ ---------- ----------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1996................... -- -- 16,074,792 $ 885,999 $ -- $ (889,825) $ -- $ (3,826)
Issuance of common
stock.................. 3,444,124 1,897,366 1,897,366
Issuance of warrants.... 62,730 62,730
Net loss................ (2,731,521) (2,731,521)
--------- --- ---------- ----------- ----------- ------------ ----------- ------------
Balances, December 31,
1997................... -- -- 19,518,916 2,783,365 62,730 (3,621,346) -- (775,251)
Issue of common stock... 5,095,983 10,717,500 10,717,500
Issuance of warrants.... 376,369 376,369
Stock option
compensation........... 16,312 16,312
Conversion from S-Corp
to C-Corp.............. (5,119,061) 5,119,061 --
Net loss................ (5,741,260) (5,741,260)
--------- --- ---------- ----------- ----------- ------------ ----------- ------------
Balances, December 31,
1998................... -- -- 24,614,899 13,500,865 (4,663,650) (4,243,545) -- 4,593,670
Issuance of preferred
stock, net of issuance
costs.................. 2,197.650 19,867,723 19,867,723
Issuance of common
stock.................. 4,906,594 8,500,000 8,500,000
Exercise of options and
warrants............... 1,507,190 2,843,793 (2,817,292) 26,501
Issuance of common stock
for advertising........ 686,766 3,000,000 3,000,000
Net loss................ (16,868,379) (16,868,379)
--------- --- ---------- ----------- ----------- ------------ ----------- ------------
Balances, December 31,
1999................... 2,197.650 -- 31,715,449 $27,844,658 $15,204,073 $(21,111,924) $(2,817,292) $ 19,119,515
========= === ========== =========== =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
COOLSAVINGS.COM INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows used in operating
activities:
Net loss............................... $(2,731,521) $(5,741,260) $(16,868,379)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization........ 44,995 236,557 651,294
Amortization of debt discount........ 4,204 434,894 --
Stock option compensation............ -- 16,312 --
Provision for doubtful accounts...... -- 13,500 104,654
Changes in assets and liabilities:
Increase in restricted cash.......... -- (67,352) (28,000)
Increase in accounts receivable...... (71,997) (223,303) (4,204,317)
Increase in prepaid and other current
assets.............................. (21,877) (59,656) (135,693)
Increase in accounts payable......... 520,693 45,523 1,611,217
Increase in deferred revenue......... -- 221,312 196,662
Increase (decrease) in accrued and
other liabilities................... (100,972) 323,338 1,310,508
----------- ----------- ------------
Net cash used in operating activities.. (2,356,475) (4,800,135) (17,362,054)
----------- ----------- ------------
Cash flows used in investing
activities:
Purchases of property and equipment.... (224,835) (1,040,575) (2,215,015)
Capitalized software costs............. -- (45,901) (1,444,012)
----------- ----------- ------------
Net cash used in investing activities.. (224,835) (1,086,476) (3,659,027)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from short-term debt.......... 150,000 900,000 --
Repayment of short-term debt........... -- (1,050,000) --
Advances on notes payable.............. 149,812 149,861 578,760
Proceeds from convertible notes payable
...................................... -- -- 4,996,369
Proceeds from issuance of preferred
stock ................................ -- -- 20,000,000
Proceeds from issuance of common
stock................................. 1,897,366 10,717,500 8,526,500
Cash paid for issuance costs........... -- -- (486,899)
----------- ----------- ------------
Net cash provided by financing
activities............................ 2,197,178 10,717,361 33,614,730
----------- ----------- ------------
Net increase (decrease) in cash........ (384,132) 4,830,750 12,593,649
Cash and cash equivalents, beginning of
period................................ 448,521 64,389 4,895,139
----------- ----------- ------------
Cash and cash equivalents, end of
period................................ $ 64,389 $ 4,895,139 $ 17,488,788
=========== =========== ============
Supplemental schedule of cash flow
information, interest paid............ $ 11,170 $ 48,517 $ 225,819
Non-cash financing activity:
Issuance of common stock in exchange
for stockholder notes upon exercise
of stock options and warrants....... -- -- $ 2,817,292
Issuance of common stock for
advertising......................... -- -- $ 3,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
a. The Company: coolsavings.com inc. (the "Company") provides a
comprehensive set of e-marketing services used by online and offline
advertisers to build one-to-one customer relationships. Under its
established brand, advertisers can deliver, target and track a wide
array of incentives, including printed and electronic coupons,
personalized e-mails, rebates, samples, sales notices, gift
certificates, contests, and banner advertisements to promote products or
services in any online or offline environment.
In November 1998, the Company changed its corporate name from
Interactive Coupon Marketing Group, Inc. to coolsavings.com inc.
The Company has sustained significant net losses and negative cash
flows from operations since its inception. The Company's ability to
meet its obligations in the ordinary course of business is dependent
upon its ability to establish profitable operations or raise additional
financing through public or private equity financing, bank financing,
or other sources of capital. During 1999, the Company raised
approximately $20.0 million from the sale of preferred stock, $5.0
million from the sale of convertible notes and $8.5 million from the
sale of common stock. In January 2000, the Company obtained a $6.5
million line of credit. Management believes current working capital and
other funding sources are sufficient to continue operations through
2000.
b. Cash and Cash Equivalents: The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Cash equivalents consist primarily of deposits in money
market funds and certificates of deposit.
c. Concentration of Credit Risk: Financial instruments that potentially
subject the Company to a concentration of credit risk consists of cash
and cash equivalents and accounts receivable. Cash and cash equivalents
are deposited with high credit quality financial institutions. The
Company's accounts receivable are derived from revenue earned from
customers located primarily in the U.S. and are denominated in the U.S.
dollars. During each of the periods presented, no one customer accounted
for more than 10% of net accounts receivable. During 1997, the Company
had three customers that each accounted for approximately 22% of total
net revenues. No other customer accounted for 10% or more of net
revenues for any other period presented.
d. Fair Value of Financial Instruments: The Company's financial
instruments, including cash and cash equivalents, accounts receivable
and accounts payable are carried at cost, which approximates their fair
value because of the short-term maturity of these instruments. The
carrying value for all long-term debt outstanding at the end of all
periods presented approximates fair value.
e. Property and Equipment: Property and equipment are recorded at cost.
Depreciation and amortization are computed using primarily the straight-
line method over the estimated useful lives of the assets. Useful lives
are 3 to 5 years for computer equipment and 5 to 7 years for furniture
and fixtures. Leasehold improvements are amortized over the term or the
estimated useful life, whichever is shorter. Upon sale or retirement of
property and equipment, the cost and related accumulated depreciation or
amortization are eliminated from the respective accounts, and the
resulting gain or loss is included in the determination of net income.
Maintenance and repair costs are expensed as incurred.
f. Long-Lived Assets: The Company assesses the recoverability of long-lived
assets at the entity level, whenever adverse events or changes in
circumstances or business climate indicate that an impairment may have
occurred. If the future cash flows (undiscounted and without interest)
expected to result from the use of the related assets are less than the
carrying value of such assets, an impairment has been incurred and a
loss is recognized to reduce the carrying value of the long-lived assets
to fair value, which is determined by discounting estimated future cash
flows. The Company has not recognized an impairment loss in any of the
periods presented.
F-7
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
g. Revenue Recognition: Revenue subject to time-based contracts is
recognized ratably over the duration of the contract. Deferred revenue
represents the portion of revenue that has not been recognized related
to time based contracts. For contracts based on certain performance or
delivery criteria, revenue is recognized in the month performance is
delivered to the customer.
h. Advertising: Advertising costs are expensed as incurred. Advertising
expense was $815,950, $1,426,452 and $14,136,270 during 1997, 1998 and
1999, respectively.
i. Income Taxes: Until June 1, 1998, the Company had elected, under Section
1362(a) of the Internal Revenue Code, to be treated as an S-corporation
for income tax purposes. As such, the Company was not liable for federal
income taxes and any taxable income of the Company was included in the
tax returns of the Company's stockholders. Income taxes are accounted
for using an asset and liability approach, which requires the
recognition of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the Company's financial statements
or tax returns. The measurement of current and deferred tax liabilities
and assets are based on provisions of the enacted tax law; the effects
of future changes in tax laws or rates are not anticipated. The
measurement of deferred tax assets is reduced, if necessary, by the
amount of any tax benefits that, based on available evidence, are not
expected to be realized.
j. Use of Estimates: The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
k. Capitalized Software Costs: The Company accounts for software
development costs in accordance with the American Institute of Certified
Public Accountants Statement of Position 98-1, "Accounting for the Cost
of Computer Software Developed or Obtained for Internal Use" which
requires capitalization of certain costs including the cost of outside
consultants. These costs are amortized using the straight-line method
over three years, beginning when individual modules are placed into
service. The Company recognized $111,659 in amortization expense for the
year ended December 31, 1999. The Company typically does not capitalize
internal costs as it is not reasonably cost-effective for the Company to
separate these internal costs between maintenance and relatively minor
upgrades and enhancements.
l. Stock-Based Compensation: Financial Accounting Standards Board ("FASB")
Statement of Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation" encourages, but does not require, companies to
record compensation cost for stock-based compensation at fair value. The
Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its
related Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair market value of a
share of the Company's stock at the date of the grant over the amount
that must be paid to acquire the stock. Total compensation expense
recognized in connection with nonemployee stock option grants was
$16,312 during the year ended December 31, 1998. Due to the vesting
terms of non-employee options, no future compensation expense will be
recognized in connection with these grants. No compensation expense has
been recognized in connection with stock option grants during any other
period presented. See Note 7d for the required pro forma net income and
earnings per share disclosures required by SFAS Statement No. 123.
F-8
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
m. Basic and Diluted Net Loss Per Share: The Company computes net loss per
share in accordance with the provisions of SFAS 128 "Earnings per Share"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS 128 and SAB 98, basic and diluted net loss per
share applicable to common stockholders is computed by dividing the net
loss applicable to common stockholders for the period by the weighted
average number of common shares outstanding for the period. The
calculation of diluted net loss per share excludes shares of common
stock issuable upon the conversion of unsecured convertible subordinated
notes (see Note 4), exercise of employee stock options and warrants (see
Note 7d), and the conversion of preferred stock (see Note 7a) as the
effect of such exercises would be antidilutive. Refer to Note 8--
Earnings Per Share for the reconciliation of the numerator and
denominator of the basic and diluted EPS calculation. Basic and diluted
net loss per share have been restated to reflect the stock split (see
Note 10c).
n. Comprehensive Earnings: The Company reports comprehensive earnings in
accordance with SFAS Statement No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive earnings and its components in general-purpose financial
statements. There were no components of other comprehensive income
during any of the periods presented.
o. Segment Information: SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," requires that management identify
operating segments based on the way that management desegregates the
entity for making internal operating decisions. The Company currently
operates under the definition of one segment. Therefore, SFAS No. 131
is not applicable to the Company.
p. Recent Pronouncements:
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for derivative instruments and
hedging activities and requires recognition of all derivatives as
assets or liabilities in the statement of financial position and
measurement of those instruments at fair value. The statement as
amended is effective for fiscal years beginning after June 15, 2000. As
the Company does not have any derivative instruments or hedging
activities, SFAS No. 133 is not expected to have a material effect on
its financial results.
q. Pro Forma Information:
The pro forma balance sheet as of December 31, 1999 presents the
estimated effects of certain transactions that will occur
simultaneously with the closing of the initial public offering,
including (i) the conversion of Series A convertible preferred stock
and (ii) the conversion of all convertible subordinated notes payable
and accrued interest into common stock. Additionally, in connection
with the conversion of the convertible subordinated notes payable, a
beneficial conversion feature of $555,000 has been reflected as
additional paid-in capital and interest expense. Because the preferred
stock offering closed on December 31, 1999, no accretion of the deemed
dividend associated with the beneficial conversion feature of the
preferred stock has been reflected.
2.Related Party Transactions:
a. Legal Services: The Company engages the services of certain attorneys
who were members of the Company's Board of Directors during 1997 and
1998, and are holders of the Company's stock. Total fees for services
were $71,572, $388,243 and $954,839 during 1997, 1998 and 1999,
respectively. These fees are included in general and administrative
expenses in the Company's statements of operations. Total fees payable
were $4,051 and $116,236 at December 31, 1998 and 1999, respectively.
F-9
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
b. Notes Receivable: In March, April, and July 1999, shareholders provided
a total of $2,817,292 notes receivable upon exercise of stock options
and warrants. These notes are due in 2003, with interest at the rates
ranging from 4.83% to 5.86% due annually. These notes are collateralized
by the shares of common stock issued upon exercise of the related
options and warrants and the makers of each note are personally liable
for up to 20% of the face value of the note, plus accrued interest.
c. Short-Term Borrowings: In December 1997, the Company entered into an
unsecured Line of Credit Loan (the "Loan") with a major shareholder.
Under the Loan, the Company could borrow funds as needed at a rate of
prime plus 2.0% (10.5% at December 31, 1997). The Loan became due and
was repaid during 1998. The total amount outstanding at December 31,
1997 was $150,000. Total amounts borrowed and repaid during 1998 were
$900,000.
In connection with the Loan, the lender received 115,000 and 747,500
common stock warrants during 1997 and 1998, respectively. The warrants
were immediately exercisable and had a term of five years. Of the
warrants, 805,000 were exercisable at $1.30 and 57,500 were exercisable
at $2.17 as of December 31, 1998. During the year ended December 31,
1999, all of warrants were exercised in exchange for notes receivable
(see Notes Receivable above). The proportional fair value of warrants
issued during 1997 and 1998 was $62,730 and $376,368, respectively.
Such value represents a discount from the fair value of the Loan and
the relative fair value of the warrants has been recorded in the
financial statements as stipulated by APB 14 and was amortized over the
period that the Loan was outstanding.
d. Unsecured Convertible Subordinated Notes: On May 28, 1999, the Company
issued $1.5 million of unsecured convertible subordinated notes (see
Note 4b). One note worth $65,000 is held by a member of the Board of
Directors. There was no unpaid interest as of December 31, 1999. In
October 1999, the Company borrowed approximately $3.5 million from a
major stockholder under an unsecured convertible subordinated note (see
Note 4b). There was no unpaid interest as of December 31, 1999.
3.Accrued Liabilities:
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
-------- ----------
<S> <C> <C>
Accrued payroll....................................... $139,952 $ --
Accrued marketing expense............................. 68,476 1,057,149
Other................................................. 313,938 775,725
-------- ----------
$522,366 $1,832,874
======== ==========
</TABLE>
4.Long and Short Term Debt:
a. Bank Line of Credit: The Company has a revolving line of credit
arrangement with a bank in the amount of $500,000 for the purchase of
new equipment. On May 21, 1999, the maximum amount of borrowings allowed
under this line was increased to $1.0 million. Borrowings under this
line are collateralized by the specific equipment purchased and are
repayable in 36 or 48 equal installments with interest at a rate of
prime plus 1% per annum. Amounts outstanding under this line were
$299,672 and $878,432 at December 31, 1998 and 1999, respectively. The
weighted average interest rate of these borrowings was 9.3% and 9.0% at
December 31, 1998 and 1999, respectively.
F-10
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Under this line of credit the Company is required to comply with certain
financial covenants, including maintenance of a minimum tangible net worth.
Additionally, the Company may not purchase or retire any outstanding shares
or alter or amend its capital structure without the prior consent of the
bank. The Company was not in compliance with certain nonfinancial covenants
during 1999. Waivers of the respective covenants have been received from
the lender.
The aggregate principal payments over the next five years are:
<TABLE>
<S> <C>
2000........................................................... $ 246,601
2001........................................................... 275,437
2002........................................................... 251,380
2003........................................................... 105,014
2004........................................................... --
---------
$ 878,432
=========
</TABLE>
b. Convertible Subordinated Notes Payable: On May 28, 1999, the Company
entered into $1.5 million of unsecured convertible subordinated notes.
These notes are repayable by the Company on June 30, 2000 with interest
at a rate of 10.0% per annum. Upon the closing of an initial public
offering of equity securities prior to the due date, the notes and
accrued interest will automatically convert to common stock shares based
on the principal (plus any accrued but unpaid interest) divided by 90%
of the public offering price. In the event that an initial public
offering does not occur and the notes are not repaid by the Company
within 15 days of the due date, the notes will automatically convert
into 343,383 shares of the Company's common stock.
On April 9, 1999, the Company received a commitment from a major
stockholder to advance the Company up to $3.5 million by December 31,
1999 at the Company's discretion. On October 18, 1999 the Company
borrowed $3,496,384 under the commitment through an unsecured
convertible subordinated note. Borrowings under this agreement bear
interest at an annual rate of 10.0% and the principal amount of the
convertible subordinated note will be due on June 30, 2000. Upon the
closing of an initial public offering of equity securities prior to the
due date, the notes and accrued interest will automatically convert
into shares of common stock based on the principal (plus any accrued
but unpaid interest) divided by 90% of the public offering price. In
the event that an initial public offering does not occur and the notes
are not repaid by the Company within 15 days of the due date, the notes
and accrued interest will automatically convert into 800,400 shares of
the Company's common stock.
Based on the conversion ratio of the convertible subordinated notes
payable in the event on an initial public offering, management has
determined that the discount received by the note holders constitutes a
beneficial conversion feature under the Emerging Issues Task Force
("EITF") Issue 98-5. The value of the beneficial conversion feature has
been computed at $555,000 and will be recorded by the Company as
additional paid in capital and interest expense upon the completion of
the proposed initial public offering. In the event that an initial
public offering does not occur, management has determined that a
beneficial conversion feature does not exist based upon the conversion
terms of the note.
5.Commitments and Contingencies:
a. Letters of Credit: At December 31, 1998 and 1999, the Company maintained
a $67,352 letter of credit to collateralize a lease deposit on its
office facility. The letter of credit expires after the termination of
the lease. A certificate of deposit for this amount has been established
by the Company in the event that the letter of credit is executed. At
December 31, 1999 the Company maintained a $28,000 certificate of
deposit to secure a line of credit.
F-11
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
b. Leases: The Company leases equipment and its office premises under
operating lease agreements. Rental expense under these agreements was
$78,395, $196,894 and $439,196 during 1997, 1998 and 1999, respectively.
At December 31, 1999, future minimum payments under noncancelable
operating leases were as follows:
For the years ended December 31:
<TABLE>
<S> <C>
2000........................................................... $ 410,406
2001........................................................... 378,416
2002........................................................... 167,722
2003........................................................... --
2004 and thereafter............................................ --
---------
$ 956,544
=========
</TABLE>
c. Litigation: The Company is a defendant in business-related litigation.
Management does not believe the outcome of such litigation will have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
6.Income Taxes:
Under Statement of Financial Accounting Standards ("SFAS") No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences of differences between the carrying amounts of assets and
liabilities and their respective tax bases and for tax carryforward items
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward............... $ 1,345,000 $ 7,989,000
Amounts to adjust from accrual method to the
cash method of accounting used for tax
purposes..................................... 385,000 (499,000)
Property and equipment........................ 41,000 76,000
Other......................................... 6,000 6,000
Valuation allowances.......................... (1,777,000) (7,572,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
The difference between the amount of income tax benefit recorded and the
amount of income tax benefit calculated using the U.S. federal statutory
rate of 34% is due to net operating losses not being benefited. For
financial reporting purposes, the entire amount of deferred tax assets
related principally to the net operating loss carryforwards has been offset
by a valuation allowance due to uncertainty regarding realization of the
asset. Accordingly, there is no provision for income taxes for the years
ended December 31, 1998 and 1999.
The Company has net operating loss carryforwards of approximately
$3,956,000 and $23,496,000 at December 31, 1998 and 1999, that expire
beginning in 2018 for federal purposes.
7.Stockholders' Equity:
a. Preferred Stock: In December 1999, the Company issued 2,197.650 shares
of no par value Series A convertible preferred stock ("Convertible
Preferred") at a price of $9,100.63 per share and received proceeds of
$20,000,000. The Company incurred $132,000 of issuance costs. The
holders of Convertible Preferred have various rights and preferences as
follows:
Voting: Each share of Convertible Preferred has the same voting rights
as a share of common stock and votes together as one class with the
common stock.
F-12
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Conversion: Each share of Convertible Preferred converts at the earlier
of December 31, 2000 or the occurrence of any of the following
Liquidity Events: an initial public offering, a change in control of
the Company as a result of a merger; consolidation or reorganization;
or a sale of substantially all of the assets of the Company. Each share
of preferred converts into 1,150 shares of common stock, subject to
adjustment.
If the conversion is the result of a Liquidity Event, then each share
will be converted into shares of common stock using a conversion ratio
based upon projected market capitalization thresholds and structured so
that the amount of the aggregate shares of common stock issued upon
conversion would constitute between 7.407% and 10.0% of the currently
issued and outstanding shares of common stock as measured on a pro
forma, as converted basis.
Such shares are not required to be registered as part of the proposed
initial public offering.
In the absence of a Liquidity Event on or before December 31, 2000,
then as of January 1, 2001, each share will be converted into a number
of shares of common stock using the respective conversion ratio that
yields the fewest shares of common stock based on either: (a) the
number of registered households on the coolsavings.com web site or (b)
the total revenue of coolsavings.com for the year 2000 with the
potential aggregate number of shares of common stock issued upon
conversion ranging between 7.407% and 10.0% of the currently issued and
outstanding shares of common stock as measured on a pro forma, as
converted basis.
The EITF Issue 98-5 requires that beneficial conversion features
present in the terms of the convertible securities should be recognized
and measured by allocating a portion of the proceeds equal to the value
of that feature to additional paid-in capital. The value of the
beneficial conversion feature related to the preferred stock offering
is in excess of the $19.9 million net proceeds. Accordingly, the
Company has allocated the full amount of net proceeds to the beneficial
conversion feature and recorded $19.9 million as additional paid in
capital as of December 31, 1999. The beneficial conversion feature will
be recognized through accretion using the interest method as a deemed
dividend during 2000 unless there is a conversion resulting from a
liquidity event such as the planned initial public offering. The
preferred stock requires mandatory conversion to common stock on
December 31, 2000.
b. Advertising Agreement: On May 28, 1999, the Company entered into an
agreement with a major television network under which the Company
purchased television advertising valued at $3.0 million in exchange for
686,766 shares of its common stock. The advertisements stipulated in the
agreement are required to be aired during the twelve-month period
beginning on October 1, 1999.
In accordance with Emerging Issue Task Force Abstract No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services," the Company has recorded the value of spots to be received
based on the fair value of the spots, as it was more reliably measured
than the fair value of the stock issued at the time that the
performance commitment by the network was reached. Amounts recorded
prior to the running of the advertising spots are classified on the
balance sheet as deferred advertising. As the advertising spots are
run, the Company recognizes advertising expense.
c. Share Warrants: During 1998 and 1997, the Company issued 747,500 and
115,000 warrants, respectively, to a stockholder in connection with
providing short-term loans to the Company. See Note 2-Related Parties,
for a description of the loans and warrants.
d. Common Stock Options: The Company has two stock-based compensation
plans, the 1997 Stock Option Plan (the "Employee Plan") and the 1999
Non-Employee Director Stock Option Plan (the "Non-Employee Plan"). The
Employee Plan and the Company's former 1997 Non-Employee Director Stock
Option Plan were established by action of the Company's Board of
Directors on December 4, 1997. In April 1999, the Company's 1997 Non-
Employee Director Stock Option Plan was terminated by the Board of
Directors. In July 1999, the Board of Directors
F-13
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
approved the establishment of the Non-Employee Plan. Vesting under the
Employee Plan is determined by the Board of Directors on an individual
grant basis and is typically incremental vesting over a period of
approximately four years. Options granted under the Non-Employee Plan
become fully vested one year from the date of the grant. The term of the
grants made under each plan is established by the Board of Directors and
may not exceed ten years. The Company is authorized to issue options
under the Employee and Non-Employee Plans for up to 15% for the Employee
Plan and 2% for the Non-Employee Plan of the total number of common
shares outstanding, including those reserved for issuance upon exercise
of stock options and warrants.
In addition to the above plans, the Company has granted options to a
certain employee in conjunction with the execution of a Board-approved
employment contract. These options are included in the disclosures that
follow.
The following information relates to stock options whose exercise price
equals the fair value of the underlying stock on the date of grant:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1997 1998 1999
------------------ ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 324,737 $0.28 1,526,487 $1.77 1,852,627 $1.84
Granted................. 1,201,750 2.17 343,850 2.17 2,538,050 4.76
Exercised............... -- -- -- -- (127,190) 4.16
Forfeited/expired....... -- -- (17,710) 2.17 (11,270) 2.85
--------- --------- ---------
Outstanding at end of
period................. 1,526,487 $1.77 1,852,627 $1.84 4,252,217 $3.51
========= ========= =========
Exercisable at end of
period................. 402,719 $1.41 784,283 $1.58 1,175,047 $1.65
========= ========= =========
Weighted average fair
value of options
granted during the
period................. $0.68 $0.68 $1.45
</TABLE>
The following information relates to stock options whose exercise price
exceeds the fair value of the underlying stock on the date of grant:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1998 1999
--------------- ---------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- -- $ -- 287,500 $2.29
Granted................. -- -- 287,500 2.29 -- --
Exercised............... -- -- -- -- (287,500) 2.29
Forfeited/expired....... -- -- -- -- -- --
---- ------- --------
Outstanding at end of
period................. -- $ -- 287,500 $2.29 -- $ --
==== ======= ========
Weighted average fair
value of options
granted during the
period................. $ -- $0.12 $ --
</TABLE>
F-14
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following information relates to stock options whose exercise price is
less than the fair value of the underlying stock on the date of grant:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1998 1999
--------------- ---------------- ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- -- $ -- 230,000 $2.10
Granted................. -- -- 230,000 2.10 -- --
Exercised............... -- -- -- -- (230,000) 2.10
Forfeited/expired....... -- -- -- -- -- --
---- ------- --------
Outstanding at end of
period................. -- $ -- 230,000 $2.10 -- --
==== ======= ========
Weighted average fair
value of options
granted during the
period................. $ -- $0.29 $ --
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------
Weighted
Average
Remaining
Exercise Options Options Contractual
Price Outstanding Exercisable Life (Years)
-------- ----------- ----------- ------------
<S> <C> <C> <C>
$0.28............ 324,737 324,737 6.80
$2.17............ 2,711,930 850,310 8.60
$4.37............ 189,750 -- 9.53
$7.91............ 1,025,800 -- 9.90
--------- ---------
Totals........... 4,252,217 1,175,047 8.81
========= =========
</TABLE>
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock Based
Compensation," upon establishing the Employee Plan and the Non-Employee
Plan. As permitted by SFAS 123, the Company continues to apply the
accounting provisions of APB Opinion Number 25, "Accounting for Stock
Issued to Employees" with regard to the measurement of compensation cost
for options granted. The Company recognized $16,312 of compensation expense
during 1998 in conjunction with grants made under its fixed stock option
plans. Had expense been recognized using the fair value method described in
SFAS 123, the Company would have reported the following results of
operations using the Black-Scholes option pricing model:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Pro forma net
loss........... $(2,913,300) $(6,005,992) $(17,608,725)
Pro forma net
loss per
diluted share.. $ (0.16) $ (0.28) $ (0.59)
</TABLE>
These costs may not be representative of the total effects on pro forma
reported income for future years. Factors that may also impact disclosures
in future years include the attribution of the awards to the service
period, the vesting period of stock options, timing of additional grants of
stock option awards and number of shares granted for future awards.
F-15
<PAGE>
COOLSAVINGS.COM INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The assumptions used for valuations of option grants calculated in
accordance with SFAS 123 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Annualized dividend yield.............. 0.0% 0.0% 0.0%
Risk free rate of return............... 5.5% 5.5% 5.6%
Expected option term (in years)........ 7.00 3.95 6.66
Expected volatility.................... 0.0% 0.0% 0.0%
</TABLE>
8. Earnings Per Share:
SFAS 128 requires companies to provide a reconciliation of the numerator and
denominator of the basic and diluted EPS computations. The calculation below
provides net loss, weighted average common shares outstanding and the
resultant net loss per share for both basic and diluted EPS for the years
ended December 31, 1997, 1998, and 1999.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Numerator:
Net loss........ $(2,731,521) $(5,741,260) $(16,868,379)
=========== =========== ============
Denominator:
Weighted average
common shares.. 18,266,572 21,547,177 29,804,681
=========== =========== ============
Earnings per
share:
Basic and
diluted........ $ (0.15) $ (0.27) $ (0.57)
=========== =========== ============
</TABLE>
9. 401(k) Plan: On February 11, 1997, the Company adopted a 401(k) plan for
employees. All employees who meet certain age requirements are eligible to
participate. Matching contributions are made at the discretion of the
Company. The Company made no matching contributions during 1997, 1998 and
1999.
10.Subsequent Events:
a. Lease: On January 3, 2000, the Company signed a lease agreement for an
office premise beginning May 1, 2000. The lease agreement has escalating
rents over the ten-year term of the lease.
b. Notes Payable: On January 31, 2000, the Company obtained a $6.5 million
line of credit. Borrowings under this line of credit are collateralized
by trade accounts receivable and fixed assets. $3.5 million of the line
is payable in installments at an interest rate of prime plus 1.25%. The
final installment payment is due on June 30, 2003. $3.0 million of the
line is a promissory note due on November 30, 2000 at an interest rate
of prime plus 1%. The line of credit requires certain minimum tangible
capital funds and other financial ratios to be maintained.
c Stock Split: On March , 2000 the Board of Directors approved a 1,150
for 1 common stock split. All share and per share amounts have been
retroactively restated to reflect the split.
F-16
<PAGE>
Inside Back Cover
Co-branded Programs
screenshot of screenshot of reward page
co-branded home page
[logo]
powered by coolsavings.com
Program Benefits to:
Co-Branding Associates CoolSavings
. customer acquisition and . new members
retention tools
. purchase and membership . enhanced data
incentives
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,200,000 Shares
[LOGO OF COOLSAVINGS.COM APPEARS HERE]
Common Stock
--------------
PROSPECTUS
--------------
CHASE H&Q
LEHMAN BROTHERS
THOMAS WEISEL PARTNERS LLC
------------
, 2000
------------
You should rely only on the 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 that 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 , 2000, all dealers that buy, sell or trade in our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the common stock being registered hereby. All the amounts
shown are estimated, except the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee.......... $ 15,302
NASD filing fee............... 6,300
Nasdaq National Market listing
fee.......................... 100,000
Printing and engraving
expenses..................... 150,000
Legal fees and expenses....... 450,000
Accounting fees and expenses.. 250,000
Blue Sky fees and expenses.... 7,500
Transfer Agent and Registrar
Fees......................... 10,000
Miscellaneous Expenses........ 110,898
----------
Total....................... $1,100,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 561 of the Michigan Business Corporation Act (the "MBCA") provides
that a Michigan corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no cause to believe his conduct was unlawful.
Section 562 of the MBCA provides that a Michigan corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that despite adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Article V of CoolSavings' bylaws provides for the indemnification of its
officers and directors in the manner, and to the fullest extent, authorized by
the MBCA. Reference is made to Exhibit 3.3 of this Registration Statement for
the complete text of the amended and restated bylaws.
As permitted by the MBCA, CoolSavings' articles of incorporation include a
provision that limits the personal liability of its directors to the maximum
extent permitted by the MBCA. Reference is made to Exhibit 3.2 of this
Registration Statement for the complete text of the restated articles of
incorporation to be filed prior to the closing of this offering.
II-1
<PAGE>
CoolSavings intends to enter into indemnification agreements with its
current directors and executive officers. CoolSavings intends to insure its
directors and officers against losses arising from any claim against them as
such for wrongful acts or omissions, subject to certain limitations.
Under Section 7 of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of CoolSavings against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement filed as Exhibit 1.1 hereto.
Item 15. Recent Sales of Unregistered Securities
Within the past three years, the registrant has issued and sold unregistered
securities in the amounts, at the times and for the aggregate amounts of
consideration listed as follows:
1. On February 11, 1997, we issued 735.7 shares of common stock to
Robert Ball and Stanley G. Feldman for an aggregate purchase price of
$300,000.00.
2. On April 1, 1997, we issued 1,029 shares of common stock to Antonio
F. Schmizzi, Bruce R. Feldman, Deneal Feldman, Leonard P. Ballas, Norman G.
Hubert, James B. Hochman, Elaine F. Wolf and Nancy and Ted Schwartzenfeld
for an aggregate purchase price of $420,000.00.
3. On August 5, 1997, we issued 688 shares of common stock to 16
investors for an aggregate purchase price of $530,865.63.
4. On October 10, 1997, we issued 401 shares of common stock to 21
investors for an aggregate purchase price of $601,500.00.
5. From December 18, 1997 through April 24, 1998, we issued warrants to
purchase an aggregate of 750 shares of common stock to the Richard H. Rogel
Revocable Living Trust in connection with a financing arrangement.
6. On May 5, 1998, we issued 287 shares of common stock to HLBL Family
Partners, L.P., Martin D. Sass, Walter Schram, Steven R. Trinborn, Steve
Schwartz, Hal Schwartz, Roger Winkelman, Kenton Hopkins, Robert D. Gorman
and Jeffrey Levitt for an aggregate purchase price of $717,500.00.
7. On June 1, 1998, we issued 2,170.82 shares of common stock to Lend
Lease International Pty. Limited for a purchase price of $5 million.
8. On November 4, 1998, we issued 1,973.47 shares of common stock to
Lend Lease International Pty. Limited for a purchase price of $5 million.
9. On March 11, 1999, we issued 2,368.16 shares of common stock to Lend
Lease International Pty. Limited for a purchase price of $5 million.
10. On April 27, 1999, we issued 1,860.70 shares of common stock to Lend
Lease International Pty. Limited for a purchase price of $3.5 million.
11. On April 27, 1999, we issued an additional 37.74 shares of common
stock to the ten investors who purchased shares on May 5, 1998, pursuant to
an agreement to render the per-share price of their investment equal to
that of Lend Lease International Pty. Limited.
12. On May 28, 1999, we issued promissory notes in the aggregate
principal amount of $1.5 million to one director and 17 other investors.
Upon completion of this offering, these promissory notes will automatically
convert into shares of common stock.
13. On May 28, 1999, we issued 597.188 shares of common stock to
National Broadcasting Company, Inc. in exchange for $3,000,000 of broadcast
advertising.
14. On October 18, 1999, we issued a promissory note in the principal
amount of approximately $3.5 million to Lend Lease International Pty.
Limited. Upon completion of this offering, this promissory note will
automatically convert into shares of common stock.
15. On December 31, 1999, we issued 2,197.650 shares of Series A
convertible preferred stock for an aggregate purchase price of $20.0
million to three directors, one officer, Lend Lease International Pty.
Limited and 64 other investors. Upon completion of this offering, the
Series A convertible preferred stock will automatically convert into shares
of common stock.
II-2
<PAGE>
16. Since inception, we have issued options to purchase an aggregate of
4,925,887 shares of common stock to our employees and directors.
No underwriters were engaged in connection with the foregoing sales of
securities. The sales of common stock, preferred stock, warrants and promissory
notes referenced in items 1, 2 and 5-15 above were made in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act of
1933 and also in Rule 506 of Regulation D promulgated thereunder for
transactions not involving a public offering. The sales of common stock
referenced in items 3 and 4 above were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933 for
transactions not involving a public offering. Issuances of options to the
Registrant's employees and directors were made under Rule 701 promulgated under
the Securities Act of 1933. The recipients of the above securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
access, through their relationship with the Registrant, to information about
the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibit Index
See exhibits listed on the Exhibit Index following the signature pages
of the Form S-1, which is incorporated herein by reference.
(b) Financial Statement Schedules:
Report of Independent Accountants
Schedule II--Valuation and Qualifying Accounts
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on March 29, 2000.
coolsavings.com inc.
/s/ Steven M. Golden
By: _________________________________
Steven M. Golden
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven M. Golden Chairman of the Board, Chief March 29, 2000
____________________________________ Executive Officer and
Steven M. Golden President (Principal
Executive Officer)
* Chief Financial Officer, March 29, 2000
____________________________________ Treasurer Secretary
David H. Jacobson (Principal Financial and
Accounting Officer)
* Director March 29, 2000
____________________________________
Richard H. Rogel
* Director March 29, 2000
____________________________________
Hugh R. Lamle
* Director March 29, 2000
____________________________________
Albert Aiello
* Director March 29, 2000
____________________________________
Lynette H. Mayne
* Director March 29, 2000
____________________________________
David E. Simon
* Director March 29, 2000
____________________________________
Robert J. Kamerschen
</TABLE>
/s/ Steven M. Golden
*By: ________________________________
(Steven M. Golden,
Attorney-in-Fact)
II-4
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
To the Board of Directors
of coolsavings.com
Our audits of the financial statements referred to in our report dated
February 18, 2000 appearing in this Registration Statement on Form S-1 also
included an audit of the financial statement schedule. In our opinion, such
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
February 18, 2000
<PAGE>
coolsavings.com inc.
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions (Reductions)
---------------------------
Balance Charged Balance
at to Costs Charged at End
Beginning and to Other Deductions of
Classification of Period Expenses Accounts (1) Period
- -------------- --------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful
receivables.................. $13,500 $122,566 $0 $17,912 $118,154
Year ended December 31, 1998:
Allowance for doubtful
receivables.................. $ 0 $13,500 $0 $ 0 $13,500
Year ended December 31, 1997:
Allowance for doubtful
receivables.................. $ 0 $ 0 $0 $ 0 $ 0
</TABLE>
- ---------------------
(1) Uncollectible accounts written off.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Articles of Incorporation+
3.2 Form of Restated Articles of Incorporation to be filed prior to the
closing of this offering+
3.3 Amended and Restated Bylaws+
4.1 Form of Common Stock Certificate
4.2 Shareholders Agreement, dated as of June 1, 1998, among CoolSavings
and certain of its Stockholders+
4.3 Form of 1999 Unsecured, Convertible Subordinated Promissory Note of
CoolSavings+
4.4 Registration Rights Agreement among CoolSavings and the holders of
the 1999 Unsecured, Convertible Subordinated Promissory Notes+
4.5 Registration Rights Agreement among CoolSavings and the holders of
the Series A Convertible Preferred Stock+
5.1 Opinion letter of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation, regarding the validity of securities being registered+
10.1 Investment Agreement, dated June 1, 1998, by and between CoolSavings
and Lend Lease International Pty. Limited+
10.2 Form of Indemnification Agreement+
10.3 1997 Stock Option Plan
10.4 1999 Director Option Plan+
10.5 Credit Agreement, dated December 18, 1997, between CoolSavings and
the Richard H. Rogel Revocable Living Trust u/a/d March 21, 1990+
10.6 Form of Promissory Note from current and former directors of
CoolSavings payable to CoolSavings in consideration for exercise of
stock options and/or warrants+
10.7 Termination Agreement, dated December 30, 1999, between CoolSavings
and Hillel Levin+
10.8 Consulting Agreement, dated as of January 1, 2000, between
CoolSavings and Hillel Levin+
10.9 Lease Agreement, dated February 24, 1997, between Prentiss
Properties Acquisition Partners, L.P. and CoolSavings
10.10 Agreement of Sublease, dated June 30, 1998, between Insurance
Company of North America and CoolSavings+
10.11 Lease Agreement, dated January 3, 2000, between 360 North Michigan
Trust and CoolSavings
10.12 Market Survey Panelist Agreement, dated as of October 25, 1999,
between CoolSavings and NFO Research, Inc.+
10.13 Bankcard Marketing Agreement, dated April 2, 1999, between
CoolSavings and First USA Bank
10.14 Stock Purchase and Advertising Agreement, dated May 28, 1999,
between CoolSavings and National Broadcasting Company, Inc.**
10.15 Agreement, dated February 8, 2000, between CoolSavings and The
Parenting Group, Inc.
10.16 Agreement, dated January 18, 2000, between CoolSavings and Mail
Coups Inc.
10.17 Program Agreement, dated February 17, 2000, between CoolSavings and
First Data Merchant Services Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.18 Loan and Security Agreement, dated January 19, 2000, between
CoolSavings and American National Bank and Trust Company of Chicago+
23.1 Consent of Jaffe, Raitt, Heuer & Weiss, Professional Corporation
(included as part of Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Niro, Scavone, Haller & Niro
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- ---------------------
+ Previously filed.
** Certain information in Exhibit 10.14 has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portion.
2
<PAGE>
COOLSAVINGS.COM INC.
4,200,000 SHARE
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
_________, 2000
Chase Securities Inc.
Lehman Brothers Inc.
Thomas Weisel Partners LLC
c/o Chase Securities Inc.
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
coolsavings.com inc., a Michigan corporation (herein called the "Company"),
proposes to issue and sell 4,200,000 shares of its authorized but unissued
Common Stock, without par value (herein called the "Common Stock") (said
4,200,000 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 630,000 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 prepared and filed with the
Securities and Exchange Commission (herein called the "Commission") a
registration statement on Form S-1 (No. 333-94677), 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 and
after
Plus an option to purchase from the Company up to 630,000 additional shares
to cover over-allotments.
1
<PAGE>
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.
Lehman Brothers Inc. has agreed to reserve a portion of the Stock to be
purchased by it under this Agreement for sale to the Company's directors,
officers, employees and business associates and other parties related to the
Company (collectively, "Participants"), as set forth in the Prospectus under the
heading "Underwriting" (the "Directed Share Program"). The Stock to be sold by
Lehman Brothers Inc. pursuant to the Directed Share Program is hereinafter
referred to as the "Directed Shares." Any Directed Shares not orally confirmed
for purchase by any Participants by the end of the business day on which this
Agreement is executed will be offered to the public by the Underwriters as set
forth in the Prospectus.
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, prospects, properties,
condition (financial or otherwise) or results of operations of the Company (a
"Material Adverse Effect"). The Company does not own or control, directly or
indirectly, any corporation, association, joint venture or other entity. The
Company has no subsidiaries.
(b) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
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 has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 p.m.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no
2
<PAGE>
proceedings for such purpose are pending before or, to the best of the
Company's knowledge, threatened by the Commission.
(d) 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;
provided, however, that none of the representations and warranties in this
subparagraph (d) shall apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in conformity
with information herein or otherwise furnished in writing to the Company by or
on behalf of the Underwriters expressly for use in the Registration Statement or
the Prospectus.
(e) Each preliminary prospectus filed as part of the Registration Statement
as originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Securities Act, complied when so filed in all material
respects with the Securities Act, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this subparagraph (e) do not apply to statements in, or
omissions from, any preliminary prospectus made in reliance upon and in
conformity with information herein or otherwise furnished in writing to the
Company by or on behalf of the Underwriters expressly for use therein.
(f) 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 stockholders or the Board of Directors of the Company will be required for
the issuance and sale of the Stock as contemplated herein.
(g) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company relating to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of the Company, except as otherwise
disclosed in the Registration Statement.
(h) All the outstanding shares of capital stock of the Company (including
the shares issued pursuant to the 1,150-for-1 share split of its common stock
effected __________, 2000) (i) have been duly authorized and validly issued and
are fully paid, non-assessable; (ii) were not issued in violation of and are not
subject to any preemptive or similar rights; and (iii) were issued in compliance
with applicable state and federal securities laws except where the noncompliance
with state securities laws would not have a Material Adverse Effect. The Stock
has been duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided by this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of the Stock will not be subject
to any preemptive or similar rights.
(i) The shares of common stock of the Company to be issued upon the
conversion of the Company's Series A Convertible Preferred Stock and convertible
subordinated notes have been duly authorized and, when issued and delivered
pursuant to the terms of the applicable certificates of designation or
securities, as the case may be, will be validly issued, fully paid and
3
<PAGE>
non-assessable, and the issuance of such shares will not be subject to any
preemptive or similar rights.
(j) The authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus.
(k) The Company is not in violation of its charter or bylaws. The Company
is not in violation of or in default in the performance of any obligation,
agreement, covenant or condition contained in any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which the Company is a party
or by which the Company or its property are bound except for such violations or
defaults that would not have a Material Adverse Effect.
(l) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as have been obtained under
the Securities Act or such as may be required under the state securities or blue
sky laws), (ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or bylaws of the Company or any
indenture, loan agreement, mortgage, lease or other agreement or instrument
filed as an exhibit to the Registration Statement or that is material to the
Company, to which the Company is a party or by which the Company or its property
is bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company or its property, except for such
violations that would not have a Material Adverse Effect, or (iv) result in the
suspension, termination or revocation of any Authorization (as defined below) of
the Company or any other impairment of the rights of the holder of any such
Authorization, except for those that would not have a Material Adverse Effect.
(m) Except as disclosed in the Registration Statement, there is no pending
or, to the knowledge of the Company, threatened action, suit, claim or
proceeding against the Company or any of its officers or any of its properties,
assets or rights before any court, arbitrator, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or over its
officers or properties or otherwise which (i) is reasonably likely to result in
any material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, (ii) is reasonably
likely to prevent consummation of the transactions contemplated hereby or (iii)
is required to be disclosed in the Registration Statement or Prospectus and is
not so disclosed; and there are no statutes, regulations, orders, judgments,
decrees, agreements, contracts, leases or documents of the Company of a
character required to be described or referred to in the Registration Statement
or Prospectus or to be filed as an exhibit to the Registration Statement by the
Securities Act which have not been accurately described in the Registration
Statement or Prospectus or filed as exhibits to the Registration Statement as
required.
(n) The Company has not violated any foreign, federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), any provisions of the Employee Retirement
Income Security Act of 1974, as amended, or any provisions of the Foreign
Corrupt Practices Act, or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect.
(o) The Company has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an "Authorization") of,
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its properties and to
conduct its
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business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force and effect
and the Company is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations contain no
restrictions that materially and adversely affect the Company; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would not,
singly or in the aggregate, have a Material Adverse Effect.
(p) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
Material Adverse Effect.
(q) This Agreement has been duly authorized, executed and delivered by the
Company.
(r) PricewaterhouseCoopers LLP are independent public accountants with
respect to the Company as required by the Securities Act.
(s) The financial statements included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), together with related
schedules and notes, present fairly the consolidated financial position, results
of operations and changes in financial position of the Company on the basis
stated therein at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the supporting
schedules, if any, included in the Registration Statement present fairly in
accordance with generally accepted accounting principles the information
required to be stated therein; and the other financial and statistical
information and data set forth in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) are, in all material respects,
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company.
(t) The Company has been advised concerning the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder; the
Company is not and, after giving effect to the offering and sale of the Stock
and the application of the proceeds thereof as described in the Prospectus, will
not be, an "investment company" as such term is defined in the 1940 Act.
(u) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person (i) the right to require the Company to file a registration statement
under the Securities Act with respect to any securities of the Company, or (ii)
to require the Company to include such securities with the Stock registered
pursuant to the Registration Statement.
(v) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus (exclusive of any amendment or
supplements thereto subsequent to the Closing Date), (i) there has not occurred
any material adverse change in the condition,
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financial or otherwise, or the earnings, business, management or operations of
the Company (a "Material Adverse Change") or any development involving a
prospective Material Adverse Change, (ii) the Company has not purchased any of
its outstanding capital stock nor declared, paid or made any dividend or other
distribution on its capital stock of any class or series, and (iii) the Company
has not incurred any material liability or obligation, direct or contingent, nor
entered into any material transaction not in the ordinary course of business
except as described in the Prospectus.
(w) The Company does not own any real property; the Company has good and
marketable title to all personal property owned by it which is material to the
business of the Company, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such that would
not have a Material Adverse Effect; and any real property and buildings held
under lease by the Company are held by it under valid, subsisting and
enforceable leases with such exceptions that are not material and do not
interfere with the use made and proposed to be made of such property and
buildings, by the Company, in each case except as described in the Prospectus.
(x) The Company owns or possesses adequate rights in all patents, patent
rights, licenses, inventions, copyrights, technology, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems, or procedures), trademarks, service marks, trade names,
and trade dress rights (collectively, "intellectual property") currently
employed by the Company in the operation of its business and all such
intellectual property which is material to the conduct of its business as
described in the Prospectus. Except as specifically disclosed in the Prospectus
under the caption "Business-Legal Proceedings," the Company is not aware of any
infringement, misappropriation or violation by others of, or conflict by others
with rights of the Company with respect to, any such intellectual property.
Except as specifically disclosed in the Prospectus under the caption "Business-
Legal Proceedings," the Company has not received any notice of and is not
otherwise aware of any infringement, misappropriation or violation by the
Company of, or conflict by the Company with rights of others with respect to,
any intellectual property of others. Without limiting the foregoing, (i) there
are no United States or foreign patents known to the Company which the Company
infringes by its present activities or has infringed by its past activities, or
which would preclude the pursuit of its business and business strategy as
described in the Prospectus and (ii) except as specifically described in the
Prospectus under the caption "Business-Legal Proceedings," there is no pending
or, to the Company's knowledge, threatened action, suit, proceeding or claim
challenging the validity, enforceability or scope of the Company's rights in or
to any such intellectual property; and except as described in the Prospectus,
there is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others that the Company has infringed, misappropriated or
otherwise violated, or is infringing, misappropriating or violating, any rights
of others in intellectual property.
(y) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the business in which it is engaged; and the Company (i) has
not received notice from any insurer or agent of such insurer that substantial
capital improvements or other material expenditures will have to be made in
order to continue such insurance and (ii) has no reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers at a cost that would
not have a Material Adverse Effect.
(z) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required by the Securities
Act to be described in the Registration Statement or the Prospectus which is not
so described.
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(aa) There is no (i) significant unfair labor practice complaint, grievance
or arbitration proceeding pending or, to the knowledge of the Company,
threatened against the Company before the National Labor Relations Board or any
state or local labor relations board, (ii) strike, labor dispute, slowdown or
stoppage pending or, to the knowledge of the Company, threatened against the
Company, or (iii) union representation question existing with respect to the
employees of the Company, except for such actions specified in clause (i), (ii)
or (iii) above which, singly or in the aggregate, would not have a Material
Adverse Effect. To the best of the Company's knowledge, no collective bargaining
organizing activities are taking place with respect to the Company.
(bb) 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.
(cc) All material tax returns required to be filed by the Company in any
jurisdiction have been filed, other than those filings being contested in good
faith, and all material taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Company have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided.
(dd) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of the members of the families of any of them,
except as disclosed in the Registration Statement and the Prospectus.
(ee) There are no issues related to the Company's preparedness for the Year
2000 that (i) are of a character required to be described or referred to in the
Registration Statement or Prospectus by the Securities Act which have not been
accurately described in the Registration Statement or Prospectus or (ii) might
reasonably be expected to result in any Material Adverse Effect. All internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component of
those products of the Company complied, by December 31, 1999, in all material
respects with the Year 2000 Qualification Requirements. "Year 2000 Qualification
Requirements" means that the internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
of each Constituent Component (as defined below) of those products of the
Company (i) have been reviewed to confirm that they store, process (including
sorting and performing mathematical operations, calculations and computations),
input and output data containing date and information correctly regardless of
whether the date contains dates and times before, on or after January 1, 2000,
(ii) have been designated to ensure date and time entry recognition and
calculations, and date data interface values that reflect the century, (iii)
accurately manage and manipulate data involving dates and times, including
single century formulas and multi-century formulas, and will not cause an
abnormal ending scenario within the application or generate incorrect values or
invalid results involving such dates, (iv) accurately process any date rollover,
and (v) accept and respond to two-digit year date input in a manner that
resolves any ambiguities as to the century. "Constituent Component" means all
software (including operating systems, programs, packages and utilities),
firmware, hardware, networking components and peripherals provided as part of
the configuration. The Company has inquired of material vendors as to their
preparedness for the Year 2000 and has disclosed in the Registration
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Statement or Prospectus any issues that might reasonably be expected to result
in any Material Adverse Effect.
(ff) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(gg) The Company has not distributed and will not distribute prior to the
later of (i) the Closing Date, or any date on which Option Stock is to be
purchased, as the case may be, and (ii) completion of the distribution of the
Stock, any offering material in connection with the offering and sale of the
Stock other than any preliminary prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Securities Act.
(hh) The Company has not taken and will not take, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Stock.
(ii) Each executive officer and director of the Company has, and the
holders of substantially all of the Common Stock have, agreed in writing that
such person will not, for a period ending one hundred eighty (180) days from the
Effective Date (the "Lock-up Period"), (y) directly or indirectly, sell, offer,
contract to sell, transfer the economic risk of ownership in, make any short
sale, pledge or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any other
rights to purchase or acquire Common Stock, without the prior written consent of
Hambrecht & Quist LLC (or its successor entity); provided, however, that such
person (a) may transfer any shares of Common Stock or securities convertible
into or exchangeable or exercisable for Common Stock to a Permitted Transferee
(as defined below); provided, however, that prior to any such transfer each
transferee shall execute an agreement, reasonably satisfactory to Hambrecht &
Quist LLC (or its successor entity), pursuant to which each transferee shall
agree to receive and hold such shares of Common Stock, or securities convertible
into or exchangeable or exercisable for the Common Stock, subject to the
provisions hereof and there shall be no further transfer except in accordance
with the provisions hereof; and (b) if the undersigned is not an executive
officer, director or controlling shareholder of the Company, the foregoing
restrictions shall not apply to shares of Common Stock acquired by such person
in the offering or shares of Common Stock acquired by such person in the public
market after the offering, or (z) make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or other
securities issued by the Company without the prior written consent of Chase
Securities Inc. (or its successor entity). For the purposes hereof, "Permitted
Transferee" shall mean (i) the spouse, lineal descendants, father, mother,
brother or sister of the undersigned, (ii) any trust which has been established
for the exclusive benefit of the undersigned or the undersigned's spouse, lineal
descendants, father, mother, brother or sister (a "Permitted Trust"), and/or
(iii) any family limited partnership or limited liability company which at the
time is, and at all times thereafter shall be, controlled by such person or any
Permitted Trust of such person or (z) make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or other
securities issued by the Company without the prior written consent of Chase
Securities Inc. (or its successor entity). Furthermore, such person has also
authorized the Company to cause the Company's transfer agent to decline to
transfer and/or to note stop transfer restrictions on the transfer books and
records of the Company with respect to any shares of Common Stock and any
securities convertible into or exercisable or exchangeable for Common Stock for
which such person is the record holder and, in the case of any such shares or
securities for which such person is the beneficial but not the record holder,
agrees to cause the record holder to cause the transfer agent to decline to
transfer and/or to note stop transfer restrictions on such books and records
with respect to such shares or securities. The Company has provided to counsel
for the Underwriters a complete and accurate list of all securityholders of the
Company and the number and type of securities held by each securityholder. The
Company has provided to counsel for the Underwriters true, accurate and complete
copies of all of the agreements pursuant to which its
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officers, directors and shareholders have agreed to such or similar restrictions
(the "Lock-up Agreements") presently in effect or effected hereby. The Company
hereby represents and warrants that it will not release any of its officers,
directors or other stockholders from any Lock-up Agreements currently existing
or hereafter effected without the prior written consent of Chase Securities,
Inc., the successor entity to Hambrecht & Quist LLC.
(jj) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
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
4,200,000 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.
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(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 630,000 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 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 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
offices of Pillsbury Madison & Sutro LLP, 2550 Hanover Street, Palo Alto,
California 94304-1115, 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 offices of Pillsbury Madison & Sutro LLP,
2550 Hanover Street, Palo Alto, California 94304, 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 wire
transfer 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
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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.
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
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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.
(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 (5) 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 stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) Not later than the 45th day following the end of the fiscal quarter
first occurring after the first anniversary of the Effective Date, the Company
will make generally available to its security holders an earnings statement in
accordance with Section 11(a) of the Securities Act and Rule 158 there under.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, 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. ("NASD") of the Registration Statement, any Preliminary
Prospectus and the Prospectus, (ii) the furnishing to the Underwriters of copies
of any Preliminary Prospectus and of the several documents required by paragraph
(c) of this Section 6 to be so furnished, (iii) the printing of this Agreement
and related documents delivered to the Underwriters, (iv) the preparation,
printing and filing of all supplements and amendments to the Prospectus referred
to in paragraph (d) of this Section 6, (v) the furnishing to you and the
Underwriters of the reports and information referred to in paragraph (g) of this
Section 6, (vi) the printing and issuance of stock certificates, including the
transfer agent's fees, (vii) incident to the offer and sale of Directed Shares,
(viii) all fees and expenses in connection with the preparation and filing of
the registration statement on Form 8-A relating to the Common Stock and all
costs and expenses incident to the listing of the Common Stock on the Nasdaq
National Market and
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(ix) all other costs and expenses incident to the performance of the obligations
of the Company hereunder for which provision is not otherwise made in this
Section.
(j) The Company agrees to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including reasonable
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 in the review
of the offering by the NASD.
(k) The Company hereby agrees that it will not, for a period ending one
hundred eighty (180) days after the Effective Date, directly or indirectly,
sell, offer, contract to sell, transfer the economic risk of ownership in, make
any short sale, pledge or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any other
rights to purchase or acquire Common Stock, without the prior written consent of
Chase Securities Inc., which consent shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, during such period (y)
the Company may grant stock options pursuant to the Company's existing stock
option plans and (z) the Company may issue shares of Common Stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof. The Company also agrees not to file any registration statement
with respect to any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock for a period ending one hundred
eighty (180) days after the Effective Date without the prior written consent of
Chase Securities Inc. (which consent shall not be unreasonably withheld,
conditioned or delayed), other than registration statements on Form S-8.
(l) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the 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.
(m) The Company is familiar with the 1940 Act, 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 1940 Act, and the rules and regulations thereunder
(n) The Company agrees to use its reasonable best efforts to list for
quotation the Common Stock on the Nasdaq National Market and to maintain the
listing of the Common Stock on the Nasdaq National Market for a period of three
(3) years after the date of this Agreement.
(o) The Company agrees to use its reasonable best efforts to do and perform
all things required or necessary to be done and performed under this Agreement
by the Company prior to the Closing Date or any late date on which the Option
Stock is purchased, as the case may be, and to satisfy all conditions precedent
to the delivery of the Stock.
(p) The Company agrees, if the Registration Statement at the time of the
effectiveness of this Agreement does not cover all the Stock, to file a Rule
462(b) Registration Statement with the Commission registering the Stock not so
covered in compliance with Rule 462(b) by 10:00 a.m., New York City time, on the
date of this Agreement and to pay to the Commission the filing fee for such Rule
462(b) Registration Statement at the time of the filing thereof or to give
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irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Securities Act.
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
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof. The indemnity agreements of
the Company contained in this paragraph (a) and the representations and
warranties of the Company contained in Section 2 hereof shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any indemnified party and shall survive the delivery of and payment
for the Stock.
(b) The Company agrees to indemnify and hold harmless Lehman Brothers Inc.
and each person (including each partner or officer thereof) who controls, or is
controlled by, Lehman Brothers Inc. (the "Lehman Entities") 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
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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;
(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; (iii)
the failure of a Participant to pay for and accept delivery of Directed Shares
that the Participant agreed to purchase; or (iv) any alleged act or failure to
act by any Lehman Entity in connection with, or relating in any manner to, the
Directed Share Program, other than any loss, claim, damage, liability or action
that are finally judicially determined to have resulted from the bad faith,
gross negligence or willful misconduct of the Lehman Entities; provided,
however, that (1) the indemnity agreements of the Company contained in this
paragraph (b) 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 (b) 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 and the untrue statement or omission of
a material fact contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented) unless the failure is
the result of noncompliance by the Company with paragraph (c) of Section 6
hereof. The indemnity agreements of the Company contained in this paragraph (b)
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.
(c) 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
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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 (c) 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.
(d) Each party indemnified under the provision of paragraphs (a), (b) and
(c) 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 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.
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(e) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a), (b) or
(c) 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), (b) or (c) 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 (e) 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 (e). 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 (e) 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 (e). Notwithstanding the provisions of this paragraph
(e), 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 (e) 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 (d) of this Section 7).
(f) 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
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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 or 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 Pillsbury Madison & Sutro LLP, counsel for the Underwriters.
(c) You shall have received from Jaffe, Raitt Heuer & Weiss, P.C., counsel
for the Company, and from Niro, Scavone, Haller & Niro, patent counsel for the
Company, opinions, addressed to the Underwriters and dated the Closing Date,
covering the matters set forth in Annex A and Annex B hereto, respectively, and
if Option Stock is purchased at any date after the Closing Date, additional
opinions from each such counsel, addressed to the Underwriters and dated such
later date, confirming that the statements expressed as of the Closing Date in
such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or
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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,
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 has not purchased any of its
outstanding capital stock nor declared, paid or made any dividend or other
distribution on its capital stock of any class or series; (v) the Company does
not have any material contingent liabilities or obligations which are not
disclosed in the Registration Statement and the Prospectus, (vi) there are not
any pending or known threatened legal proceedings to which the Company is a
party or of which property of the Company is the subject which are material and
which are not disclosed in the Registration Statement and the Prospectus, (vii)
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, (viii) 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
(ix) 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 Chief Executive Officer 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 Sections 9(a), 9(d), 9(k) and 9(l) are true and correct.
(f) You shall have received from PricewaterhouseCoopers LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Option 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 PricewaterhouseCoopers 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 December 31, 1999, did
not disclose any weakness in internal controls that they considered to be
material weaknesses.
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(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.
(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) If the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 10:00 p.m., New York City time, on the
date of this Agreement.
(k) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Option Stock
hereunder are subject to the delivery to you on the applicable date on which the
purchase of such Option Stock occurs of such documents as you may reasonably
request with respect to the good standing of the Company, the due authorization
and issuance of such Option Stock and other matters related to the issuance of
such Option Stock; and any other document necessary or desirable in connection
with the transactions contemplated hereby.
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 Pillsbury Madison & Sutro LLP, counsel for the
Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company under this Agreement,
including all costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all out-
of-pocket expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by them in connection with the transactions
contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the
Company to deliver the 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.
20
<PAGE>
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) or (b) of Section 7 of this Agreement, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
obligations under this Section 11 and the possibility that such payments might
later be held to be improper; provided, however, that (i) to the extent any such
payment is ultimately held to be improper, the persons receiving such payments
shall promptly refund them and (ii) such persons shall provide to the Company,
upon request, reasonable assurances of their ability to effect any refund, when
and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to
the benefit of the Company and the several Underwriters and, with respect to the
provisions of Section 7 hereof, the several parties (in addition to the Company
and the several Underwriters) indemnified under the provisions of said Section
7, and their respective personal representatives, successors and assigns.
Nothing in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision herein contained. The term
"successors and assigns" as herein used shall not include any purchaser, as such
purchaser, of any of the 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, telegraphed or delivered to Chase Securities Inc., One Bush Street,
San Francisco, California 94104; and if to the Company, shall be mailed,
telegraphed or delivered to it at its office, 8755 West Higgins Road, Suite 100,
Chicago, Illinois 60631, Attention: Steven Golden, with a copy to Jaffe, Raitt
Heuer & Weiss, P.C. at One Woodward Avenue, Suite 2400, Detroit, Michigan,
48226, Attention: Peter Sugar, Esq.. All notices given by telegraph shall be
promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the 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.
21
<PAGE>
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,
COOLSAVINGS.COM INC.
By
Steven M. Golden
Chief Executive Officer
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
CHASE SECURITIES INC.
Lehman Brothers Inc.
Thomas Weisel Partners LLC
By Chase Securities Inc.
By
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
22
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of
Shares to be
Underwriter Purchased
----------- ---------
Chase Securities Inc. ......................................
Lehman Brothers Inc. .......................................
Thomas Weisel Partners .....................................
Total ...................................................... ----------
23
<PAGE>
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF
JAFFE, RAITT, HEUER & WEISS, P.C.
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, and has full corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement.
(ii) The authorized capital stock of the Company consists of _______ shares
of Preferred Stock, of which there are no shares outstanding, and _______ shares
of Common Stock, without par value, of which there are _________ shares
outstanding (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 shares of Common Stock issued upon
conversion of the Company's Series A Convertible Preferred Stock and the
Company's convertible subordinated notes, the Underwritten Stock and the shares
of Option Stock issued, if any) have been duly and validly issued and are fully
paid and nonassessable and have been issued in compliance with applicable state
and federal securities laws (except where the noncompliance with state
securities laws would not have a Material Adverse Effect); 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, stockholders exist with respect to the
Stock, or the issue and sale thereof, pursuant to the Articles of Incorporation
or Bylaws of the Company and, to the knowledge of such counsel, there are no
contractual preemptive rights that have not been waived, rights of first refusal
or rights of co-sale which exist with respect to the issue and sale of the
Stock;
(iii) the Registration Statement has become effective under the Securities
Act and, to such counsel's knowledge, no stop order suspending the effectiveness
of the Registration Statement or suspending or preventing the use of the
Prospectus is in effect and no proceedings for that purpose have been instituted
or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and with the rules
and regulations of the Commission thereunder;
(v) the information required to be set forth in the Registration Statement
in answer to Items 9, 10 (insofar as it relates to such counsel), 11(c) (except
to the extent that it relates to litigation involving the Company's patents,
patent rights, patent licenses, trademarks, service marks and other intellectual
property), 11(d), 11(m), 11(n), 14 and 15 of Form S-1 is to 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, to such counsel's
knowledge, the description of the Company's stock option plans and the options
granted and which may be granted thereunder and the options granted otherwise
than under such plans set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to said plans and options to
the extent required by the Securities Act and the rules and regulations of the
Commission thereunder;
24
<PAGE>
(vi) such counsel does not know of any statutes, regulations, orders,
judgments, decrees, agreements, franchises, contracts, leases, documents or any
actions, suits, claims or legal proceedings, pending or threatened, which in the
opinion of such counsel (A) are reasonably likely to (i) result in any Material
Adverse Effect or (ii) prevent consummation of the transactions contemplated by
the Underwriting Agreement or (B) 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 accurately described and filed as
required;
(vii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(viii) the issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by the Underwriting Agreement will not (A) conflict
with, or result in a breach of, the Articles of Incorporation or Bylaws of the
Company or any agreement or instrument filed as an exhibit to the Registration
Statement 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 or (B) result in the
suspension, termination or revocation of any Authorization of the Company or any
impairment of the rights of the holder of any such Authorization, except for any
such suspension, termination, revocation or impairment that would not,
individually or in the aggregate, have a Material Adverse Effect;
(ix) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have been terminated due to the Underwriters' cutback or have
expired by reason of lapse of time following notification of the Company's
intent to file the Registration Statement;
(x) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the transactions
contemplated in the Underwriting Agreement, except such as have been obtained
under the Securities Act and such as may be required under state securities or
blue sky laws in connection with the purchase and distribution of the Stock by
the Underwriters; and
(xi) the Stock issued and sold by the Company has been duly authorized for
quotation by the Nasdaq National Market upon official notice of issuance.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
representatives of the Underwriters, Underwriters' counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus nothing
has come to the attention of such counsel which caused them to believe that the
Registration Statement (other than the financial statements including supporting
schedules and financial data derived therefrom, as to which such counsel need
express no opinion), at the Effective Date and at all times subsequent thereto
up to and on the Closing Date and on any later date on which Option Stock is to
be purchased, 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 aforesaid)
at the Closing Date or any later date on which the Option Stock is to be
purchased, as the case may be, 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, in the light of the circumstances under which
they were made, not misleading.
25
<PAGE>
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or of the State of Michigan, upon
opinions of local counsel satisfactory in form and scope to counsel for the
Underwriters. Copies of any opinions so relied upon shall be delivered to the
Representatives and to counsel for the Underwriters and the foregoing opinion
shall also state that counsel knows of no reason the Underwriters are not
entitled to rely upon the opinions of such local counsel.
26
<PAGE>
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF NIRO, SCAVONE, HALLER & NIRO
PATENT COUNSEL FOR THE COMPANY
Such counsel have been informed by the Company of the technology used by
the Company in its business and the manner of its use thereof and have read the
Registration Statement and the Prospectus, including particularly the portions
of the Registration Statement and the Prospectus referring to patents, patent
rights, patent licenses, trademarks and service marks or other proprietary
information or materials and:
(i) Such counsel believes that the Registration Statement, as of the
Effective Date, and the Prospectus as of its date and as of the Closing
Date (or as of any later date on which the Option Stock is purchased, as
applicable): (A) do not and did not contain any untrue statements of
material fact with respect to (i) patents, patent rights, patent licenses,
trademarks and service marks (collectively, "Intellectual Property") of the
Company, (ii) any claim or allegation that the Company is infringing or has
infringed any Intellectual Property of any other person or entity or (iii)
any lawsuit, arbitration or other legal proceedings with respect to
Intellectual Property to which the Company is a party; and (B) do not and
did not omit to state any material fact that relates to any (i)
Intellectual Property used or owned by the Company; (ii) Intellectual
Property known to such counsel to be possessed or licensed by the Company
or (iii) [any] legal proceeding with respect to the Intellectual Property,
and that is required to be stated in the Registration Statement or the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) in the course of such counsel's representation of the Company and
without any requirement of independent investigation or inquiry by such
counsel, nothing has come to the attention of such counsel which would
cause it to believe that the Registration Statement, at the time it became
effective, and the Prospectus, as of its date and as of the Closing Date
(or as of any later date on which the Option Stock is purchased, as
applicable), (A) contained [any] untrue statements of material fact with
respect to (i) inventions, copyrights, technology, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, "Other
Intellectual Property"), (ii) any claim that the Company is
misappropriating or violating or has misappropriated or violated any Other
Intellectual Property of any other person or entity or (iii) any lawsuit,
arbitration or other legal proceedings with respect to Other Intellectual
Property to which the Company is a party; or (B) omit to state any material
fact that relates to any (i) Other Intellectual Property used or owned by
the Company; (ii) Other Intellectual Property known to such counsel to be
possessed or licensed by the Company or (iii) any legal proceeding with
respect to the Other Intellectual Property and that is required to be
stated in the Registration Statement or the Prospectus in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(iii) The statements in the Prospectus relating to the Company's patents,
patent applications, trademarks, and service marks on the Table of Contents
page of the Prospectus and under the captions "Risk Factors-- Intellectual
property litigation against us can be costly and could result in the loss
of significant rights," "Risk Factors- Protecting our patents, trademarks
and proprietary rights may be costly and may distract our management," and
"Business--Intellectual Property" contain accurate descriptions of the
Company's patents, patent applications, trademarks and service marks and,
insofar as such statements constitute summaries of documents or matters of
law or legal
27
<PAGE>
conclusions, are accurate and fairly present such summaries, matters of law
and legal conclusions in all material respects;
(iv) The statements in the Prospectus under the caption "Business-Legal
Proceedings" (other than the last paragraph of such captioned section) insofar
as such statements constitute summaries of documents or legal proceedings,
matters of law or legal conclusions, are accurate and fairly present such
summaries, matters of law and legal conclusions in all material respects;
(v) Such counsel have reviewed the Company's patent applications filed in
the United States, Europe, Japan and other jurisdictions in which Company has
filed patent applications ("Applications"), which Applications are listed on
Schedule I to such opinion, and it is the opinion of such counsel that the
Applications were properly filed, are being satisfactorily pursued by the
Company, and are held by the Company as the sole assignee of record; such
counsel believes that the Applications were properly prepared and is not aware
of any facts or circumstances which would cause such counsel to believe the
Applications were not properly prepared, and such counsel is not aware of others
who have asserted that any claim of such Applications is derived from or jointly
invented by a person or persons not already listed as an investor for such
claim.
(vi) Such counsel is of the opinion that all issued patents held by the
Company ("Patents"), all of which are listed on Schedule I to such opinion, if
challenged in court or in any other legal proceeding, would not be found invalid
or unenforceable, and such counsel is not aware of any person who has asserted
that any claim of such Patents is derived from or jointly invented by a person
or persons not already listed as an inventor for such claim;
(vii) Except as specifically set forth in the Prospectus under the captions
"Risk Factors-- Intellectual property litigation against us can be costly and
could result in the loss of significant rights," "Risk Factors--Protecting our
patents, trademarks and proprietary rights may be costly and may distract our
management," "Business--Intellectual Property," and "Business-Legal
Proceedings," there are no legal or governmental proceedings (other than the
patent Application proceedings themselves) pending or, to the knowledge of such
counsel, threatened against the Company relating to any Intellectual Property
owned or licensed by the Company;
(viii) In the course of such counsel's representation of the Company and
without any requirement of independent investigation or inquiry by such counsel,
nothing has come to the attention of such counsel which would cause it to
believe that, except as specifically set forth in the Prospectus under the
captions "Risk Factors--Intellectual property litigation against us can be
costly and could result in the loss of significant rights," "Risk Factors--
Protecting our patents, trademarks and proprietary rights may be costly and may
distract our management," "Business--Intellectual Property," and "Business-Legal
Proceedings," there are any legal or governmental proceedings pending or
threatened against the Company relating to any Other Intellectual Property owned
or licensed by the Company;
(ix) Except as specifically set forth in the Prospectus, to such counsel's
knowledge the Company has not received any notice of infringement with respect
to any Patent or any notice challenging the validity, scope or enforceability of
any of the Patents, trademarks or service marks owned by or licensed to the
Company, and to such counsel's knowledge, the Company is not infringing any
Intellectual Property of any other person or entity or violating any license of
Intellectual Property to which the Company is a party; and such counsel is
unaware of any infringements by others of the Company's Intellectual Property
which, in the judgment of such counsel, could materially and
28
<PAGE>
adversely affect the Company's rights in such Intellectual Property, except as
specifically set forth in the Registration Statement and the Prospectus;
(x) In the course of such counsel's representation of the Company and
without any requirement of independent investigation or inquiry by such counsel,
nothing has come to the attention of such counsel which would cause it to
believe that, except as specifically set forth in the Prospectus, the Company is
misappropriating or otherwise violating any Other Intellectual Property and such
counsel is unaware of any misappropriations or violations by others of the
Company's Other Intellectual Property which, in the judgment of such counsel,
could materially and adversely affect the Company's rights in such Other
Intellectual Property, except as specifically set forth in the Prospectus;
(xi) Such counsel is of the opinion that no valid claim of U.S. Patent No.
5,710,886 or U.S. Patent No. 4,674,041 is infringed by any of the Company's
current services, products, systems or business processes; and
(xii) Such counsel is of the opinion that, except as expressly licensed by
the Company in writing to others, the Company has the full and exclusive right,
title and interest to the invention of U.S. Patent No. 5,761,648, in the United
States. Such counsel is also of the opinion that the listed inventors have
assigned all of their right, title and interest to the invention of the same
patent to the Company not only in the U.S. but also in all foreign countries.
Such counsel is also of the opinion that the Company has the right of priority
under the International Convention for the Protection of Industrial Property,
Inter-American Convention Relating to Patents, Designs and Industrial Models,
and any other international agreements to which the United States adheres and
that no third parties have any rights in the United States or in any foreign
country to the said patent, nor to any present or future continuations,
divisions or reissues of said patent or of the application from which said
patent was issued.
29
<PAGE>
COMMON STOCK COMMON STOCK
WITHOUT PAR VALUE WITHOUT PAR VALUE
- ------ ------
Number Shares
- ------ ------
(LOGO TO COME)
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF MICHIGAN AND STATEMENTS AS TO THE RIGHTS,
PREFERENCES AND PRIVILEGES OF SHARES
- ---------------------------------------------------------------
THIS CERTIFIES THAT CUSIP 216485 10 2
IS THE RECORD HOLDER OF
- ---------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK WITHOUT PAR VALUE OF
coolsavings.com inc. transferable on the books of the Corporation by the holder
hereof, in person or by duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate is not valid until countersigned
by a Transfer Agent and registered by a Registrar.
Witness the facsimile signatures of its duly authorized officers.
Dated:
/s/ Steven M. Golden
CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
EQUISERVE TRUST COMPANY, N.A.
TRANSFER AGENT
AND REGISTRAR
BY XXXXX XXXXXX
AUTHORIZED SIGNATURE
<PAGE>
coolsavings.com inc.
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Articles of
Incorporation of the Corporation and by any certificate of designation, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Secretary of the Corporation at the principal office of the
Corporation.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - .............Custodian................
(Cust) (Minor)
under Uniform Gifts to Minors
Act...................................
(State)
UNIF TRF MIN ACT - .............Custodian (until age.....)
(Cust)
................under Uniform Transfers
(Minor)
to Minors Act..........................
(State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
-----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- ------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
DATED
------------
X
------------------------------------------
X
------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS 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(s) Guaranteed
By
------------------------------------------------
THE SIGNATURE(S) SHOULD 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 17 Ad-15.
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
Article I.
Purpose and Adoption of the Plan
--------------------------------
1.01 Purpose. The purpose of the coolsavings.com inc. Stock Option Plan
-------
(the "Plan") is to provide certain employees and consultants of coolsavings.com
inc. (f/k/a Interactive Coupon Marketing Group, Inc.), a Michigan corporation
(the "Company"), with an additional incentive to promote the Company's financial
success and to provide an incentive which the Company may use to induce able
persons to enter into or remain in the service of the Company or a Subsidiary.
1.02 Adoption and Term. The initial 1997 Stock Option Plan was approved
-----------------
by the Board on December 4, 1997 and by the Company's stockholders on August 17,
1998. This Amended and Restated 1997 Stock Option Plan was approved by the
Board as of December 1, 1998, subject to the approval of the Company's
stockholders on or before December 1, 1999, and will remain in effect until all
shares authorized under the terms of the Plan have been issued, unless earlier
terminated or abandoned by action of the Board; provided, however, that no
Incentive Stock Option may be granted after December 4, 2007.
Article II.
Definitions
-----------
2.01 Administrator means the group of persons having authority to
administer the Plan pursuant to Section 3.01.
2.02 Award means any one or combination of Non-Qualified Stock Options,
Performance Based Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Share Rights or any other award made under the terms of the Plan.
2.03 Award Agreement means a written agreement between the Company and
Participant or a written acknowledgment from the Company specifically setting
forth the terms and conditions of an Award granted under the Plan.
2.04 Award Period means, with respect to an Award, the period of time set
forth in the Award Agreement during which specified conditions set forth in the
Award Agreement must be satisfied.
2.05 Beneficiary means (a) an individual, trust or estate who or which, by
will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Participant under the Plan and Award Agreement
upon the Participant's death; or (b) an individual, who by designation of the
Participant, succeeds to the rights and obligations of the Participant under the
Plan and Award Agreement upon the Participant's death.
2.06 Board means the Board of Directors of the Company.
2.07 Change of Control Event means (a) an event or series of events by
which any Person or other entity or group (as such term is used in Section 13(d)
and 14(d) of the Exchange Act) of Persons or other entities acting in concert as
a partnership or other group (a "Group of Persons") (other than Persons who are,
or Groups of Persons entirely made up of, (i) management personnel of the
Company or (ii) any affiliates of any such management personnel) shall, as a
result of a tender or exchange offer or offers, an open market purchase or
purchases, a privately negotiated purchase or purchases or otherwise, become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act,
except that a Person shall be deemed to have
<PAGE>
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 20% or more of the combined voting power of
the then outstanding voting stock of the Company; (b) the Company consolidates
with, or merges with or into, another Person (other than a Subsidiary in a
transaction which is not otherwise a Change of Control Event), or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into the Company, in any such event pursuant to a transaction
in which the outstanding voting stock of the Company is converted into or
exchanged for cash, securities or other property; (c) during any consecutive
two-year period, individuals who at the beginning of such period constituted the
Board (together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Company, was approved by a
vote of 66-2/3% of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board then in office; or (d) any liquidation or dissolution of the Company
(other than a liquidation into a Subsidiary that is not otherwise a Change of
Control Event).
2.08 Code means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
2.09 Common Stock means the Common Stock of the Company, no par value.
2.10 Company means coolsavings.com inc. (f/k/a Interactive Coupon
Marketing Group, Inc.), a Michigan corporation.
2.11 Date of Grant means the date designated by the Administrator as the
date as of which it grants an Award, which shall not be earlier than the date on
which the Administrator approves the granting of such Award.
2.12 Director means a member of the Board of Directors of the Company.
2.13 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.14 Exercise Price means, with respect to a Stock Appreciation Right, the
amount established by the Administrator, in accordance with Section 7.03
hereunder, and set forth in the Award Agreement, which is to be subtracted from
the Fair Market Value on the date of exercise in order to determine the amount
of the Incremental Value to be paid to the Participant.
2.15 Expiration Date means the date specified in an Award Agreement as the
expiration date of such Award.
2.16 Fair Market Value means, on any given date, the fair market value of
the Common Stock as determined in good faith by the Board; provided, however,
that: (a) if the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") Small-
Cap Market on the date the Option is granted, the Fair Market Value means the
average of the highest bid and lowest asked prices of the Common Stock on Nasdaq
reported for such date; (b) if the Common Stock is admitted to trading on a
national securities exchange or the Nasdaq National Market on the date the
Option is granted, the Fair Market Value means the closing price reported for
the Common Stock on such exchange or system for such date or, if no sales were
reported for such date, for the last date preceding such date for which a sale
was reported; and (c) the Fair Market Value of the Common Stock on the effective
date of the registration statement for the Company's initial public offering
shall be the initial offering price.
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2.17 Incentive Stock Option means a stock option described in Section 422
of the Code.
2.18 Incremental Value has the meaning given such term in Section 7.01 of
the Plan.
2.19 Non-Qualified Stock Option means a stock option which is not an
Incentive Stock Option.
2.20 Officer means a president, vice president, treasurer, secretary,
controller, and any other person who performs functions corresponding to the
foregoing officers for the Company, and any other participant who is deemed to
be an officer of the Company for purposes of Section 16 of the Exchange Act and
the rules thereunder, as currently in effect or as amended from time to time.
2.21 Options means all Non-Qualified Stock Options, Incentive Stock
Options and Performance Based Options granted at any time under the Plan.
2.22 Participant shall have the meaning set forth in Article V.
2.23 Performance Based Option means a stock option which, upon exercise or
at any other time, would not result in or give rise to "applicable employee
remuneration" within the meaning of Section 162(m) of the Code.
2.24 Plan means the coolsavings.com inc. Amended and Restated 1997 Stock
Option Plan, as described herein and as it may be amended from time to time.
2.25 Purchase Price, with respect to options, shall have the meaning set
forth in Section 6.02.
2.26 Restricted Share Right means a right to receive Common Stock subject
to restrictions imposed under the terms of an Award granted pursuant to Article
IX.
2.27 Rule 16b-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in effect
and as it may be amended from time to time, and any successor rule.
2.28 Stock Appreciation Right means an Award granted in accordance with
Article VII.
2.29 Subsidiary shall have the meaning set forth in Section 424(f) of the
Code.
2.30 Termination of Employment means the voluntary or involuntary
termination of a Participant's employment with the Company for any reason,
including death, disability, retirement or as the result of the divestiture of
the Participant's employer or any other similar transaction in which the
Participant's employer ceases to be the Company or a Subsidiary of the Company.
Whether an authorized leave of absence or absence on military or government
service, absence due to disability, or absence for any other reason shall
constitute Termination of Employment shall be determined in each case by the
Administrator in its sole discretion.
2.31 Trading Day means a day on which public trading of securities occurs
and is reported in the principal consolidated reporting system referred to in
Section 2.16 above, or if
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the Common Stock is not listed or admitted to trading on a national securities
exchange or included for quotation on the Nasdaq National Market, any business
day.
Article III.
Administration
--------------
3.01 Administration. The Plan shall be administered by the Board or, to
--------------
the extent determined by the Board, a committee (the "Compensation Committee")
consisting of not less than two non-employee directors of the Company (within
the meaning of Rule 16b-3) to be appointed by, and to serve at the pleasure of,
the Board (in either case, the "Administrator"). It is the intention of the
Company that, with respect to Awards designated as Performance Based Options,
each of the members of the Compensation Committee shall also be "outside
directors" within the meaning of Section 162(m) of the Code. The Administrator
shall administer the Plan in accordance with this provision and shall have the
sole discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate, to cancel Awards (including those made
pursuant to other plans of the Company) and to substitute new options (including
options granted under other plans of the Company) with the consent of the
recipient, and to take such steps in connection with the Plan and Awards granted
thereunder as it may deem necessary or advisable. The Administrator may, with
respect to Participants who are not Officers, delegate such of its powers and
authority under the Plan as it deems appropriate to designated officers or
employees of the Company.
3.02 Indemnification. Members of the Administrator shall be entitled to
---------------
indemnification and reimbursement from the Company for any action or any failure
to act in connection with service as Administrator to the full extent provided
for or permitted by the Company's articles of incorporation or bylaws or by any
insurance policy or other agreement intended for the benefit of the Company's
officers, directors or employees or by any applicable law.
Article IV.
Common Stock Issuable Pursuant to the Plan
------------------------------------------
4.01 Shares Issuable. Shares to be issued under the Plan may be
---------------
authorized and unissued shares or issued shares which have been reacquired by
the Company. Except as provided in Section 4.03, the Awards granted to any
Participant and to all Participants in the aggregate under the Plan shall be
limited so that the sum of the following shall never exceed fifteen percent
(15%) of the total number of outstanding shares of Common Stock from time to
time: (i) all shares which shall be issued upon the exercise of outstanding
Options or other Awards granted under the Plan, (ii) all shares for which
payment of Incremental Value shall be made by reason of the exercise of Stock
Appreciation Rights at any time granted under the Plan, (iii) the number of
shares otherwise issuable under an Award which are applied by the Company to
payment of the withholding or tax liability discussed in Section 11.04, and (iv)
all shares of Common Stock which shall be issued upon the exercise of the
options granted under that certain Stock Option Agreement, dated as of October
15, 1996, by and between the Company and Matthew Moog; provided, however, that
in no event shall the number of shares of Common Stock which may be issued upon
the exercise of Incentive Stock Options exceed 5,000 shares, subject to
adjustment in accordance with Section 4.03.
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<PAGE>
4.02 Shares Subject to Terminated Awards. In the event that any Award at
-----------------------------------
any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, or an award of
Stock Appreciation Rights is exercised for cash, then all shares formerly
subject to such Award as to which such Award shall not have been exercised shall
be available for any Award subsequently granted in accordance with the Plan.
Shares of Common Stock subject to Options, or portions thereof, which have been
surrendered in connection with the exercise of tandem Stock Appreciation Rights
shall not be available for subsequent Awards under the Plan, and shares of
Common Stock issued in payment of such Stock Appreciation Rights shall be
charged against the number of shares of Common Stock available for the grant of
Awards. Shares which are reacquired by the Company or shares issuable subject
to Restricted Share Rights which are forfeited pursuant to forfeiture provisions
in the Award Agreement shall be available for subsequently granted Awards only
if the forfeiting Participant received no benefits of ownership (such as
dividends actually paid to the Participant) other than voting rights of the
forfeited shares. Any shares of Common Stock issued by the Company pursuant to
its assumption or substitution of outstanding grants from acquired companies
shall not reduce the number of shares available for Awards under this Plan
unless issued under this Plan.
4.03 Adjustments to Reflect Capital Changes.
--------------------------------------
(a) Recapitalization. The number and kind of shares subject to
----------------
outstanding Awards, the Purchase Price or Exercise Price for such shares,
and the number and kind of shares available for Awards subsequently granted
under the Plan shall be appropriately adjusted to reflect any stock
dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan or the Awards granted under the Plan. The
Administrator shall have the power to determine the amount of the
adjustment to be made in each case.
(b) Sale or Reorganization. After any reorganization, merger or
----------------------
consolidation in which the Company is a surviving corporation, each
Participant shall, at no additional cost, be entitled upon exercise of an
Award to receive (subject to any required action by stockholders), in lieu
of the number of shares of Common Stock receivable or exercisable pursuant
to such Award, a number and class of shares of stock or other securities to
which such Participant would have been entitled pursuant to the terms of
the reorganization, merger or consolidation if, at the time of such
reorganization, merger or consolidation, such Participant had been the
holder of record of a number of shares of Common Stock equal to the number
of shares receivable or exercisable pursuant to such Award. Comparable
rights shall accrue to each Participant in the event of successive
reorganizations, mergers or consolidations of the character described
above.
(c) Options to Purchase Stock of Acquired Companies. After any
-----------------------------------------------
reorganization, merger or consolidation in which the Company or a
Subsidiary of the Company shall be a surviving corporation, the
Administrator may grant substituted Options under the provisions of the
Plan, pursuant to Section 424 of the Code, replacing old options granted
under a plan of another party to the reorganization, merger or
consolidation, where such party's stock may no longer be issued following
such merger or consolidation. The foregoing adjustments and manner of
application of the foregoing provisions shall be determined by the
Administrator in its sole discretion. Any adjustments may provide for the
elimination of any fractional shares which might otherwise have become
subject to any Awards.
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Article V.
Participation
-------------
5.01 Eligible Participants. Participants in the Plan shall be the
---------------------
employees and consultants of the Company or any Subsidiary, as determined and
selected from time to time by the Administrator, in its sole and absolute
discretion. The Administrator's designation of a Participant in any year shall
not require the Administrator to designate such person to receive Awards in any
other year. The Administrator shall consider such factors as it deems pertinent
in selecting Participants and in determining the type and amount of their
respective Awards.
Article VI.
Option Awards
-------------
6.01 Power to Grant Options. The Administrator may grant, to such
----------------------
Participants as the Administrator may select, Options entitling the Participant
to purchase Common Stock from the Company at such price, in such quantity and on
such terms and subject to such conditions, not inconsistent with the terms of
this Plan, as may be established by the Administrator. The terms of any Option
granted under this Plan shall be set forth in an Award Agreement.
Notwithstanding the foregoing, Options granted to Officers shall not be
exercisable for a period of at least six months from the Date of Grant.
6.02 Purchase Price of Options. The Purchase Price of each share of
-------------------------
Common Stock which may be purchased upon exercise of any Option granted under
the Plan shall be equal to or greater than the Fair Market Value on the Date of
Grant; provided, however, that the Purchase Price of each share of Common Stock
which may be purchased upon exercise of a Non-Qualified Stock Option shall be no
less than ninety percent (90%) of the Fair Market Value on the Date of Grant if
such discount is expressly granted in lieu of a reasonable amount of salary or
bonus; provided, further, that the Purchase Price for shares of Common Stock
purchased pursuant to Stock Options designated by the Administrator as Incentive
Stock Options shall be equal to or greater than the Fair Market Value on the
Date of Grant as required under Section 422 of the Code and provided further
that the Purchase Price for shares of Common Stock purchased pursuant to Stock
Options designated by the Administrator as Performance Based Options shall be
equal to or greater than the Fair Market Value on the Date of Grant.
6.03 Designation of Incentive Stock Options. Except as otherwise
--------------------------------------
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option to a Participant that is an employee of the Company or a
Subsidiary, that the Option is an Incentive Stock Option under Section 422 of
the Code.
(a) Incentive Stock Option Share Limitation. No Participant may be
---------------------------------------
granted Incentive Stock Options under the Plan (or any other plans of the
Company) which would result in stock with an aggregate Fair Market Value
(measured on the Date of Grant) of more than $100,000 first becoming
exercisable in any one calendar year, or which would entitle such
Participant to purchase a number of shares greater than the maximum number
permitted by Section 422 of the Code as in effect on the Date of Grant.
(b) Other Incentive Stock Option Terms. Whenever possible, each
----------------------------------
provision in the Plan and in every Option granted under this Plan which is
designated by the Administrator as an Incentive Stock Option shall be
interpreted in such a manner as to entitle the Option to the tax treatment
afforded by Section 422 of the Code. If any provision of this Plan or any
Option designated by the Administrator as an Incentive Stock Option shall
be held not to comply with requirements necessary to entitle such Option to
such tax treatment, then (i) such provision shall be deemed to have
contained from the outset such language as shall be necessary to entitle
the Option to the tax
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<PAGE>
treatment afforded under Section 422 of the Code, and (ii) all other
provisions of this Plan and the Award Agreement shall remain in full force
and effect. If any agreement covering an Option designated by the
Administrator to be an Incentive Stock Option under this Plan shall not
explicitly include any terms required to entitle such Incentive Stock
Option to the tax treatment afforded by Section 422 of the Code, all such
terms shall be deemed implicit in the designation of such Option and the
Option shall be deemed to have been granted subject to all such terms.
6.04 Designation of Performance Based Options. Except as otherwise
----------------------------------------
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option to a Participant that is an employee of the Company or a
Subsidiary, that the Option is a Performance Based Option. A Performance Based
Option shall have a Purchase Price not less than the Fair Market Value on the
Date of Grant and shall contain such other terms and conditions as the
Administrator may deem necessary so that, upon exercise or at any other time,
the Performance Based Option does not result in or give rise to "applicable
employee remuneration" within the meaning of Section 162(m) of the Code.
6.05 Rights as a Stockholder. The Participant or any transferee of an
-----------------------
Option pursuant to Section 8.02 or Section 11.05 shall have no rights as a
stockholder with respect to any shares of Common Stock covered by an Option
until the Participant or transferee shall have become the holder of record of
any such shares, and no adjustment shall be made for dividends and cash or other
property or distributions or other rights with respect to any such shares of
Common Stock for which the record date is prior to the date on which the
Participant or a transferee of the Option shall have become the holder of record
of any such shares covered by the Option.
Article VII.
Stock Appreciation Rights
-------------------------
7.01 Power to Grant Stock Appreciation Rights. The Administrator is
----------------------------------------
authorized to grant to any Participant, on such terms established by the
Administrator on or prior to the Date of Grant and subject to and not
inconsistent with the provisions of this Plan, the right to receive the payment
from the Company, payable as provided in Section 7.04, of an amount equal to the
Incremental Value of the Stock Appreciation Rights, which shall be an amount
equal to the remainder derived from subtracting (i) the Exercise Price for the
right established in the Award Agreement from (ii) the Fair Market Value of a
share of Common Stock on the date of exercise. The terms of any Stock
Appreciation Right granted under the Plan shall be set forth in an Award
Agreement.
7.02 Tandem Stock Appreciation Rights. The Administrator may grant to any
--------------------------------
Participant a Stock Appreciation Right consistent with the provisions of this
Plan covering any share of Common Stock which is, at the Date of Grant of the
Stock Appreciation Right, also covered by an Option granted to the same
Participant, either prior to or simultaneously with the grant to such
Participant of the Stock Appreciation Right, provided: (i) any Option covering
any share of Common Stock shall expire and not be exercisable upon the exercise
of any Stock Appreciation Right with respect to the same share; (ii) any Stock
Appreciation Right covering any share of Common Stock shall not be exercisable
upon the exercise of any related Option with respect to the same share; and
(iii) an Option and Stock Appreciation Right covering the same share of Common
Stock may not be exercised simultaneously.
7.03 Exercise Price. The Exercise Price established under any Stock
--------------
Appreciation Right granted under this Plan shall be determined by the
Administrator and, in the case of a tandem Stock Appreciation Right, shall not
be less than the Purchase Price of the related Option. Upon exercise of the
Stock Appreciation Rights, the number of shares subject to exercise under a
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<PAGE>
related Option. Upon exercise of the Stock Appreciation Rights, the number of
shares subject to exercise under a related Option shall automatically be reduced
by the number of shares of Common Stock represented by the Option or portion
thereof which is surrendered as a result of the exercise of such Stock
Appreciation Rights.
7.04 Payment of Incremental Value. Any payment which may become due from
----------------------------
the Company by reason of Participant's exercise of a Stock Appreciation Right
may be paid to the Participant as determined by the Administrator (i) all in
cash, (ii) all in Common Stock, or (iii) in any combination of cash and Common
Stock. In the event that all or a portion of the payment is made in Common
Stock, the number of shares of the Common Stock delivered in satisfaction of
such payment shall be determined by dividing the amount of the payment by the
Fair Market Value on the date of exercise. The Administrator may determine
whether payment upon exercise of a Stock Appreciation Right will be made in cash
or in stock, or a combination thereof, upon or at any time prior to the exercise
of such Stock Appreciation Right. No fractional share of Common Stock shall be
issued to make any payment; if any fractional shares would be issuable, the mix
of cash and Common Stock payable to the Participant shall be adjusted as
directed by the Administrator to avoid the issuance of any fractional share.
Payment may be made in cash to Officers only if the Stock Appreciation Right is
exercised during the "window period" required under Rule 16b-3(e)(3) and
otherwise in accordance with Rule 16b-3.
Article VIII.
Terms of Options and Stock Appreciation Rights
----------------------------------------------
8.01 Duration of Options and Stock Appreciation Rights. Options and Stock
-------------------------------------------------
Appreciation Rights shall terminate after the first to occur of the following
events:
(a) Expiration Date of the Award as provided in the Award Agreement;
or
(b) Termination of the Award as provided in Section 8.02; or
(c) In the case of an Incentive Stock Option, ten years from the Date
of Grant; or
(d) Solely in the case of tandem Stock Appreciation Rights, upon the
Expiration Date of the related Option.
8.02 Exercise on Death or Termination of Employment.
----------------------------------------------
(a) Unless otherwise provided in the Award Agreement, in the event of
the death of a Participant while an employee of the Company or a Subsidiary
of the Company, the right to exercise all unexpired Awards shall be
accelerated and shall accrue as of the date of death, and the Participant's
Awards may be exercised by his Beneficiary at any time within one year
after the date of the Participant's death.
(b) Unless otherwise provided in the Award Agreement, in the event of
a Participant's Termination of Employment at any time for any reason
(including disability or retirement) other than death or for "cause" (as
defined in paragraph (d) below), an Award may be exercised, but only to the
extent it was otherwise exercisable, on the date of Termination of
Employment, within ninety days after the date of Termination of Employment.
In the event of the death of the Participant within the ninety-day period
following Termination of Employment, his Award may be exercised by his
Beneficiary within the one year period provided in subparagraph (a) above.
(c) With respect to an Award which is intended to constitute an
Incentive Stock Option, upon Termination of Employment, such Award shall be
exercisable as
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<PAGE>
provided in Section 422 of the Code.
(d) In the event that a Participant's Termination of Employment is
for "cause", all Awards shall terminate immediately upon Termination of
Employment. A Participant's employment shall be deemed to have been
terminated for "cause" if such termination is determined, in the sole
discretion of the Administrator, to have resulted from an act or omission
by the Participant constituting active and deliberate dishonesty, as
established by a final judgment or actual receipt of an improper benefit or
profit in money, property or services, or from the Participant's continuous
failure to perform his or her duties under any employment agreement in
effect between the Participant and the Company in any material manner (or,
in the absence of such an agreement, the consistent failure or refusal of
the Participant to perform according to reasonable expectations and
standards set by the Board and/or management consistent with Participant's
title and position) after receipt of notice of such failure from the
Company specifying how the Participant has so failed to perform.
8.03 Acceleration of Exercise Time. The Administrator, in its sole
-----------------------------
discretion, shall have the right (but shall not in any case be obligated) to
permit purchase of shares under any Award prior to the time such Award would
otherwise become exercisable under the terms of the Award Agreement.
8.04 Extension of Exercise Time. The Administrator, in its sole
--------------------------
discretion, shall have the right (but shall not in any case be obligated) to
permit any Award granted under this Plan to be exercised after its Expiration
Date or after the ninety day period following Termination of Employment or
service on the Board, subject, however, to the limitations described in Section
8.01 (c) and (d).
8.05 Conditions for Exercise. An Award Agreement may contain such waiting
-----------------------
periods, exercise dates and restrictions on exercise (including, but not limited
to, periodic installments which may be cumulative) as may be determined by the
Administrator at the Date of Grant. No Stock Appreciation Right may be
exercised prior to six months from the Date of Grant.
8.06 Change of Control Event. Unless otherwise provided in the Award
-----------------------
Agreement, and subject to such other terms and conditions as the Administrator
may establish in the Award Agreement, upon the occurrence of a Change of Control
Event, irrespective of whether or not an Award is then exercisable, the
Participant shall have the right to exercise in full any unexpired Award to the
extent not theretofore exercised or terminated; provided, however, that any
Stock Appreciation Right so exercised must have a Date of Grant at least six
months prior to the date of exercise.
8.07 Exercise Procedures. Each Option and Stock Appreciation Right
-------------------
granted under the Plan shall be exercised by written notice to the Company which
must be received by the officer of the Company designated in the Award Agreement
on or before the Expiration Date of the Award. The Purchase Price of shares
purchased upon exercise of an Option granted under the Plan shall be paid in
full in cash by the Participant pursuant to the Award Agreement; provided,
however, that the Administrator may (but need not) permit payment to be made by
delivery to the Company of either (a) shares of Common Stock (including shares
issuable to the Participant pursuant to the exercise of the Option), or (b) any
combination of cash and shares of Common Stock, or (c) such other consideration
as the Administrator deems appropriate and in compliance with applicable law
(including payment in accordance with a cashless exercise program under which,
if so instructed by the Participant, shares of Common Stock may be issued
directly to the Participant's broker or dealer upon receipt of the Purchase
Price in cash from the broker or dealer.) In the event that any Common Stock
shall be transferred to the Company to
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<PAGE>
satisfy all or any part of the Purchase Price, the part of the Purchase Price
deemed to have been satisfied by such transfer of Common Stock shall be equal to
the product derived by multiplying the Fair Market Value as of the date of
exercise times the number of shares transferred. The Participant may not
transfer to the Company in satisfaction of the Purchase Price (y) a number of
shares which when multiplied times the Fair Market Value as of the date of
exercise would result in a product greater than the Purchase Price or (z) any
fractional share of Common Stock. Any part of the Purchase Price paid in cash
upon the exercise of any Option shall be added to the general funds of the
Company and used for any proper corporate purpose. Unless the Administrator
shall otherwise determine, any Common Stock transferred to the Company as
payment of all or part of the Purchase Price upon the exercise of any Option
shall be held as treasury shares.
Article IX.
Restricted Stock Awards
-----------------------
9.01 Restricted Share Awards. The Administrator may grant to any
-----------------------
Participant an Award of Restricted Share Rights entitling such person to receive
shares of Common Stock in such quantity, and on such terms, conditions and
restrictions (whether based on performance standards, periods of service or
otherwise) as the Administrator shall determine on or prior to the Date of
Grant. The terms of any Award of Restricted Share Rights granted under the Plan
shall be set forth in an Award Agreement.
9.02 Duration of Restricted Share Rights. In no event shall any
-----------------------------------
Restricted Share Rights granted entitle the holder to receive shares of Common
Stock free of all restrictions on transfer at any time prior to the expiration
of three years from the Date of Grant, and each Award Agreement shall provide
that the Participant shall remain employed by the Company or a Subsidiary for
that three year period (subject to the Company's or Subsidiary's right to
terminate such employment).
9.03 Forfeiture of Restricted Share Rights. Subject to Section 9.05, all
-------------------------------------
Restricted Share Rights shall be forfeited and all Restricted Share Awards shall
terminate unless the Participant continues in the service of the Company or a
Subsidiary until the expiration of the forfeiture and satisfies any other
conditions set forth in the Award Agreement. If the Award Agreement shall so
provide, in the case of death, disability or retirement (as defined in the Award
Agreement) of the Participant, all of the shares covered by the Restricted Share
Rights shall immediately vest and any restrictions shall lapse as of the date of
such death, disability or retirement.
9.04 Delivery of Shares Upon Vesting. Upon the lapse of the restrictions
-------------------------------
established in the Award Agreement, the Participant shall be entitled to
receive, without payment of any cash or other consideration, certificates for
the number of shares covered by the Award.
9.05 Waiver or Modification of Forfeiture Provisions. The Administrator
-----------------------------------------------
has full power and authority to modify or waive any or all terms, conditions or
restrictions (other than the minimum restriction period set forth in Section
9.02) applicable to any Restricted Share Rights granted to a Participant under
the Plan; provided that no modification shall, without consent of the
Participant, adversely affect the Participant's rights thereunder and no
modification shall reduce the employment requirement to less than three years,
except in the case of death, disability or retirement.
9.06 Rights as a Stockholder. No person shall have any rights as a
-----------------------
stockholder with respect to any shares subject to Restricted Share Rights until
such time as the person shall have been issued a certificate for such shares.
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<PAGE>
Article X.
Other Stock Based Awards
------------------------
10.01 Grant of Other Awards. Other Awards of Common Stock or other
---------------------
securities of the Company and other Awards that are valued in whole or in part
by reference to, or are otherwise based on, Common Stock ("Other Awards") may be
granted either alone or in addition to or in conjunction with Options or Stock
Appreciation Rights under the Plan. Subject to the provisions of the Plan, the
Administrator shall have the sole and complete authority to determine the
persons to whom and the time or times at which Other Awards shall be made, the
number of shares of Common Stock or other securities, if any, to be granted
pursuant to such Other Awards, and all other conditions of such Other Awards.
Any Other Award shall be confirmed by an Award Agreement executed by the
Administrator and the Participant, which agreement shall contain such provisions
as the Administrator determines to be necessary or appropriate to carry out the
intent of this Plan with respect to the Other Award.
10.02 Terms of Other Awards. In addition to the terms and conditions
---------------------
specified in the Award Agreement, Other Awards made pursuant to this Article X
shall be subject to the following:
(a) Any shares of Common Stock subject to such Other Awards may not
be sold, assigned, transferred 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; and
(b) If specified by the Administrator and the Award Agreement, the
recipient of an Other Award shall be entitled to receive, currently or on a
deferred basis, interest or dividends or dividend equivalents with respect
to the Common Stock or other securities covered by the Other Award; and
(c) The Award Agreement with respect to any Other Award shall
contain provisions providing for the disposition of such Other Award in the
event of Termination of Employment prior to the exercise, realization or
payment of such Other Award, with such provisions to take account of the
specific nature and purpose of the Other Award.
Article XI.
Terms Applicable to All Awards
------------------------------
11.01 Award Agreement. The grant and the terms and conditions of the Award
---------------
shall be set forth in an Award Agreement between the Company and the
Participant. No person shall have any rights under any Award granted under the
Plan unless and until the Administrator and the Participant to whom the Award is
granted shall have executed and delivered an Award Agreement expressly granting
the Award to such person and setting forth the terms of the Award.
11.02 Plan Provisions Control Award Terms. The terms of the Plan shall
-----------------------------------
govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant any Award under the Plan which is contrary
to any of the provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan as constituted
on the Date of Grant of such Award, the term in the Plan as constituted on the
Date of Grant of such Award shall control. Except as provided in Section 4.03,
(i) the terms of any Award granted under the Plan may not be changed after the
granting of such Award without the express approval of the Participant and (ii)
no modification may be made to an Award granted to an Officer except in
compliance with Rule 16b-3.
11.03 Modification of Award After Grant. Each Award granted under the Plan
---------------------------------
to a
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<PAGE>
Participant other than an Officer may be modified after the date of its grant by
express written agreement between the Company and the Participant, provided that
such change (i) shall not be inconsistent with the terms of the Plan and (ii)
shall be approved by the Administrator. No modifications may be made to any
Awards granted to an Officer except in compliance with Rule 16b-3.
11.04 Taxes. The Company shall be entitled, if the Administrator deems it
-----
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Participant's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and the Company may defer payment or
issuance of the cash or stock upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for such tax. The amount
of such withholding or tax payment shall be determined by the Administrator and,
unless otherwise provided by the Administrator, shall be payable by the
Participant at the time of issuance or payment in accordance with the following
rules:
(a) A Participant, other than an Officer, shall have the right to
elect to meet his or her withholding requirement by: (1) having the
Company withhold from such Award the appropriate number of shares of Common
Stock, rounded out to the next whole number, the Fair Market Value of which
is equal to such amount, or, in the case of the cash payment, the amount of
cash, as is determined by the Company to be sufficient to satisfy
applicable tax withholding requirements; or (2) direct payment to the
Company in cash of the amount of any taxes required to be withheld with
respect to such Award.
(b) Unless otherwise provided by the Administrator, with respect to
Officers, the Company shall withhold from such Award the appropriate number
of shares of Common Stock, rounded up to the next whole number, the Fair
Market Value of which is equal to the amount, as determined by the
Administrator, (or, in the case of a cash payment, the amount of cash)
required to satisfy applicable tax withholding requirements.
(c) In the event that an Award or property received upon exercise of
an Award has already been transferred to the Participant on the date upon
which withholding requirements apply, the Participant shall pay directly to
the Company the cash amount determined by the Company to be sufficient to
satisfy applicable federal, state or local withholding requirements. The
Participant shall provide to the Company such information as the Company
shall require to determine the amounts to be withheld and the time such
withholding requirements become applicable.
(d) If permitted under applicable federal income tax laws, a
Participant may elect to be taxed in the year in which an Award is
exercised or received, even if it would not otherwise have become taxable
to the Participant. If the Participant makes such an election, the
Participant shall promptly notify the Company in writing and shall provide
the Company with a copy of the executed election form as filed with the
Internal Revenue Service no later than thirty days from the date of
exercise or receipt. Promptly following such notification, the Participant
shall pay directly to the Company the cash amount determined by the Company
to be sufficient to satisfy applicable federal, state or local withholding
tax requirements.
11.05 Limitations on Transfer. A Participant's rights and interest under
-----------------------
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution. Notwithstanding the foregoing, or any other provision
of this Plan, a Participant who holds Non-Qualified Stock Options may transfer
such Options to his or her spouse, lineal ascendants, lineal
-12-
<PAGE>
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Options so transferred may thereafter be transferred only to
the Participant who originally received the Options or to an individual or trust
to whom the Participant could have initially transferred the Option pursuant to
this Section 11.05. Options which are transferred pursuant to this Section 11.05
shall be exercisable by the transferee according to the same terms and
conditions as applied to the Participant.
11.06 General Restriction. Notwithstanding anything to the contrary
-------------------
herein, the Company shall have no obligation or liability to deliver any shares
of Common Stock under the Plan or to make any other distribution of benefits
under the Plan unless such delivery or distribution would comply with all
applicable laws, rules and regulations, including, without limitation, the
Securities Act of 1933, as amended, and the Exchange Act.
11.07 Surrender of Awards. Any Award granted under the Plan may be
-------------------
surrendered to the Company for cancellation on such terms as the Administrator
and Participant approve, including, but not limited to, terms which provide that
upon such surrender the Company will pay to the Participant cash or Common
Stock, or a combination of cash and Common Stock.
Article XII.
General Provisions
------------------
12.01 Amendment and Termination of Plan.
---------------------------------
(a) Amendment. The Board shall have complete power and authority to
---------
amend the Plan at any time and to add any other stock based Award or other
incentive compensation programs to the Plan as it deems necessary or
appropriate and no approval by the stockholders of the Company or by any
other person, committee or entity of any kind shall be required to make any
amendment; provided, however, that the Board shall not, without the
requisite affirmative approval of the stockholders of the Company, (i) make
any amendment which requires stockholder approval under any applicable law,
including Rule 16b-3 or the Code; or (ii) which, unless approved by the
requisite affirmative approval of stockholders of the Company, would cause,
result in or give rise to "applicable employee remuneration" within the
meaning of Section 162(m) of the Code with respect to any Performance Based
Option. No termination or amendment of the Plan may, without the consent
of the Participant to whom any Award shall theretofore have been granted
under the Plan, adversely affect the right of such individual under such
Award. For the purposes of this section, an amendment to the Plan shall be
deemed to have the affirmative approval of the stockholders of the Company
if such amendment shall have been submitted for a vote by the stockholders
at a duly called meeting of such stockholders at which a quorum was present
and the majority of votes cast with respect to such amendment at such
meeting shall have been cast in favor of such amendment, or if the holders
of outstanding stock having not less than a majority of the outstanding
shares consent to such amendment in writing in the manner provided under
the Company's bylaws.
(b) Termination. The Board shall have the right and the power to
-----------
terminate the Plan at any time. If the Plan is not earlier terminated, the
Plan shall terminate when all shares authorized under the Plan have been
issued. No Award shall be granted under the Plan after the termination of
the Plan, but the termination of the Plan shall not have any other effect
and any Award outstanding at the time of the termination of the Plan may be
exercised after termination of the Plan at any time prior to the expiration
date of such Award to the same extent such award would have been
exercisable if the Plan had not been terminated.
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<PAGE>
12.02 No Right To Employment. No employee or other person shall have any
----------------------
claim or right to be granted an Award under this Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or a Subsidiary of the Company.
12.03 Compliance with Rule 16b-3. It is intended that the Plan be applied
--------------------------
and administered in compliance with Rule 16b-3. If any provision of the Plan
would be in violation of Rule 16b-3 if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Administrator. The Board is authorized to amend the
Plan and to make any such modifications to Award Agreements to comply with Rule
16b-3, as it may be amended from time to time, and to make any other such
amendments or modifications as it deems necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to Rule 16b-
3.
12.04 Securities Law Restrictions. The shares of Common Stock issuable
---------------------------
pursuant to the terms of any Awards granted under the Plan may not be issued by
the Company without registration or qualification of such shares under the
Securities Act of 1933, as amended, or under various state securities laws or
without an exemption from such registration requirements. Unless the shares to
be issued under the Plan have been registered and/or qualified as appropriate,
the Company shall be under no obligation to issue shares of Common Stock upon
exercise of an Award unless and until such time as there is an appropriate
exemption available from the registration or qualification requirements of
federal or state law as determined by the Administrator in its sole discretion.
The Administrator may require any person who is granted an award hereunder to
agree with the Company to represent and agree in writing that if such shares are
issuable under an exemption from registration requirements, the shares will be
"restricted" securities which may be resold only in compliance with applicable
securities laws, and that such person is acquiring the shares issued upon
exercise of the Award for investment, and not with the view toward distribution.
12.05 Nonexclusivity of the Plan. Neither the adoption of the Plan by the
--------------------------
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock or stock options otherwise
than under the Plan.
12.06 Captions. The captions (i.e., all section headings) used in the Plan
--------
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
12.07 Severability. Whenever possible, each provision in the Plan and
------------
every Award at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
12.08 No Strict Construction. No rule of strict construction shall be
----------------------
implied against the Company, the Administrator, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Administrator.
12.09 Choice of Law. The Plan shall be governed by and construed in
-------------
accordance with the laws of the State of Michigan.
-14-
<PAGE>
coolsavings.com inc.
SECOND AMENDED AND RESTATED 1997 STOCK OPTION PLAN
Article I.
Purpose and Adoption of the Plan
--------------------------------
1.01 Purpose. The purpose of the coolsavings.com inc. Stock Option Plan
(the "Plan") is to provide certain employees and consultants of coolsavings.com
inc. (f/k/a Interactive Coupon Marketing Group, Inc.), a Michigan corporation
(the "Company"), with an additional incentive to promote the Company's financial
success and to provide an incentive which the Company may use to induce able
persons to enter into or remain in the service of the Company or a Subsidiary.
1.02 Adoption and Term. The initial 1997 Stock Option Plan was approved by
the Board on December 4, 1997 and by the Company's stockholders on August 17,
1998. The Amended and Restated 1997 Stock Option Plan was approved by the Board
as of December 1, 1998 and by the Company's stockholders on November 17, 1999.
This Second Amended and Restated 1997 Stock Option Plan was approved by the
Board and by the Company's stockholders as of March 23, 2000, and will remain in
effect until all shares authorized under the terms of the Plan have been issued,
unless earlier terminated or abandoned by action of the Board; provided,
however, that no Incentive Stock Option may be granted after December 4, 2007.
Article II.
Definitions
-----------
2.01 Administrator means the group of persons having authority to
administer the Plan pursuant to Section 3.01.
2.02 Award means any one or combination of Non-Qualified Stock Options,
Performance Based Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Share Rights or any other award made under the terms of the Plan.
2.03 Award Agreement means a written agreement between the Company and
Participant or a written acknowledgment from the Company specifically setting
forth the terms and conditions of an Award granted under the Plan.
2.04 Award Period means, with respect to an Award, the period of time set
forth in the Award Agreement during which specified conditions set forth in the
Award Agreement must be satisfied.
2.05 Beneficiary means (a) an individual, trust or estate who or which, by
will or by operation of the laws of descent and distribution, succeeds to the
rights and obligations of the Participant under the Plan and Award Agreement
upon the Participant's death; or (b) an individual, who by designation of the
Participant, succeeds to the rights and obligations of the Participant under the
Plan and Award Agreement upon the Participant's death.
2.06 Board means the Board of Directors of the Company.
2.07 Change of Control Event means (a) an event or series of events by
which any Person or other entity or group (as such term is used in Section 13(d)
and 14(d) of the Exchange Act) of Persons or other entities acting in concert as
a partnership or other group (a "Group of Persons") (other than Persons who are,
or Groups of Persons entirely made up of, (i) management personnel of the
Company or (ii) any affiliates of any such management personnel) shall, as a
result of a tender or exchange offer or offers, an open market purchase or
purchases, a
<PAGE>
privately negotiated purchase or purchases or otherwise, become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of 20%
or more of the combined voting power of the then outstanding voting stock of the
Company; (b) the Company consolidates with, or merges with or into, another
Person (other than a Subsidiary in a transaction which is not otherwise a Change
of Control Event), or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is converted into or exchanged for cash, securities or other property; (c)
during any consecutive two-year period, individuals who at the beginning of such
period constituted the Board (together with any new directors whose election by
such Board or whose nomination for election by the stockholders of the Company,
was approved by a vote of 66-2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board then in office; or (d) any liquidation or dissolution of
the Company (other than a liquidation into a Subsidiary that is not otherwise a
Change of Control Event).
2.08 Code means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
that section.
2.09 Common Stock means the Common Stock of the Company, no par value.
2.10 Company means coolsavings.com inc. (f/k/a Interactive Coupon
Marketing Group, Inc.), a Michigan corporation.
2.11 Date of Grant means the date designated by the Administrator as the
date as of which it grants an Award, which shall not be earlier than the date on
which the Administrator approves the granting of such Award.
2.12 Director means a member of the Board of Directors of the Company.
2.13 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.14 Exercise Price means, with respect to a Stock Appreciation Right, the
amount established by the Administrator, in accordance with Section 7.03
hereunder, and set forth in the Award Agreement, which is to be subtracted from
the Fair Market Value on the date of exercise in order to determine the amount
of the Incremental Value to be paid to the Participant.
2.15 Expiration Date means the date specified in an Award Agreement as the
expiration date of such Award.
2.16 Fair Market Value means, on any given date, the fair market value of
the Common Stock as determined in good faith by the Board; provided, however,
that: (a) if the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq") Small-
Cap Market on the date the Option is granted, the Fair Market Value means the
average of the highest bid and lowest asked prices of the Common Stock on Nasdaq
reported for such date; (b) if the Common Stock is admitted to trading on a
national securities exchange or the Nasdaq National Market on the date the
Option is granted, the Fair Market Value means the closing price reported for
the Common Stock on such exchange or system for such date or, if no sales were
reported for such date, for the last date preceding such date for which a sale
was reported; and (c) the Fair Market Value of the Common
-2-
<PAGE>
Stock on the effective date of the registration statement for the Company's
initial public offering shall be the initial offering price.
2.17 Incentive Stock Option means a stock option described in Section 422
of the Code.
2.18 Incremental Value has the meaning given such term in Section 7.01 of
the Plan.
2.19 Non-Qualified Stock Option means a stock option which is not an
Incentive Stock Option.
2.20 Officer means a president, vice president, treasurer, secretary,
controller, and any other person who performs functions corresponding to the
foregoing officers for the Company, and any other participant who is deemed to
be an officer of the Company for purposes of Section 16 of the Exchange Act and
the rules thereunder, as currently in effect or as amended from time to time.
2.21 Options means all Non-Qualified Stock Options, Incentive Stock
Options and Performance Based Options granted at any time under the Plan.
2.22 Participant shall have the meaning set forth in Article V.
2.23 Performance Based Option means a stock option which, upon exercise or
at any other time, would not result in or give rise to "applicable employee
remuneration" within the meaning of Section 162(m) of the Code.
2.24 Plan means the coolsavings.com inc. Second Amended and Restated 1997
Stock Option Plan, as described herein and as it may be amended from time to
time.
2.25 Purchase Price, with respect to options, shall have the meaning set
forth in Section 6.02.
2.26 Restricted Share Right means a right to receive Common Stock subject
to restrictions imposed under the terms of an Award granted pursuant to Article
IX.
2.27 Rule 16b-3 means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act, as currently in effect
and as it may be amended from time to time, and any successor rule.
2.28 Stock Appreciation Right means an Award granted in accordance with
Article VII.
2.29 Subsidiary shall have the meaning set forth in Section 424(f) of the
Code.
2.30 Termination of Employment means the voluntary or involuntary
termination of a Participant's employment with the Company for any reason,
including death, disability, retirement or as the result of the divestiture of
the Participant's employer or any other similar transaction in which the
Participant's employer ceases to be the Company or a Subsidiary of the Company.
Whether an authorized leave of absence or absence on military or government
service, absence due to disability, or absence for any other reason shall
constitute Termination of Employment shall be determined in each case by the
Administrator in its sole discretion.
-3-
<PAGE>
2.31 Trading Day means a day on which public trading of securities occurs
and is reported in the principal consolidated reporting system referred to in
Section 2.16 above, or if the Common Stock is not listed or admitted to trading
on a national securities exchange or included for quotation on the Nasdaq
National Market, any business day.
Article III.
Administration
--------------
3.01 Administration. The Plan shall be administered by the Board or, to
the extent determined by the Board, a committee (the "Compensation Committee")
consisting of not less than two non-employee directors of the Company (within
the meaning of Rule 16b-3) to be appointed by, and to serve at the pleasure of,
the Board (in either case, the "Administrator"). It is the intention of the
Company that, with respect to Awards designated as Performance Based Options,
each of the members of the Compensation Committee shall also be "outside
directors" within the meaning of Section 162(m) of the Code. The Administrator
shall administer the Plan in accordance with this provision and shall have the
sole discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate, to cancel Awards (including those made
pursuant to other plans of the Company) and to substitute new options (including
options granted under other plans of the Company) with the consent of the
recipient, and to take such steps in connection with the Plan and Awards granted
thereunder as it may deem necessary or advisable. The Administrator may, with
respect to Participants who are not Officers, delegate such of its powers and
authority under the Plan as it deems appropriate to designated officers or
employees of the Company.
3.02 Indemnification. Members of the Administrator shall be entitled to
indemnification and reimbursement from the Company for any action or any failure
to act in connection with service as Administrator to the full extent provided
for or permitted by the Company's articles of incorporation or bylaws or by any
insurance policy or other agreement intended for the benefit of the Company's
officers, directors or employees or by any applicable law.
Article IV.
Common Stock Issuable Pursuant to the Plan
------------------------------------------
4.01 Shares Issuable. Shares to be issued under the Plan may be authorized
and unissued shares or issued shares which have been reacquired by the Company.
Except as provided in Section 4.03, the Awards granted to any Participant and to
all Participants in the aggregate under the Plan shall be limited so that the
sum of the following shall never exceed twenty percent (20%) of the total number
of outstanding shares of Common Stock from time to time: (i) all shares which
shall be issued upon the exercise of outstanding Options or other Awards granted
under the Plan, (ii) all shares for which payment of Incremental Value shall be
made by reason of the exercise of Stock Appreciation Rights at any time granted
under the Plan, (iii) the number of shares otherwise issuable under an Award
which are applied by the Company to payment of the withholding or tax liability
discussed in Section 11.04, and (iv) all shares of Common Stock which shall be
issued upon the exercise of the options granted under that certain Stock Option
Agreement, dated as of October 15, 1996, by and between the Company and Matthew
Moog; provided, however, that in no event shall the number of shares of Common
Stock which may be issued upon the exercise of Incentive Stock Options exceed
10,000 shares, subject to adjustment in accordance with Section 4.03.
-4-
<PAGE>
4.02 Shares Subject to Terminated Awards. In the event that any Award at
any time granted under the Plan shall be surrendered to the Company, be
terminated or expire before it shall have been fully exercised, or an award of
Stock Appreciation Rights is exercised for cash, then all shares formerly
subject to such Award as to which such Award shall not have been exercised shall
be available for any Award subsequently granted in accordance with the Plan.
Shares of Common Stock subject to Options, or portions thereof, which have been
surrendered in connection with the exercise of tandem Stock Appreciation Rights
shall not be available for subsequent Awards under the Plan, and shares of
Common Stock issued in payment of such Stock Appreciation Rights shall be
charged against the number of shares of Common Stock available for the grant of
Awards. Shares which are reacquired by the Company or shares issuable subject to
Restricted Share Rights which are forfeited pursuant to forfeiture provisions in
the Award Agreement shall be available for subsequently granted Awards only if
the forfeiting Participant received no benefits of ownership (such as dividends
actually paid to the Participant) other than voting rights of the forfeited
shares. Any shares of Common Stock issued by the Company pursuant to its
assumption or substitution of outstanding grants from acquired companies shall
not reduce the number of shares available for Awards under this Plan unless
issued under this Plan.
4.03 Adjustments to Reflect Capital Changes.
--------------------------------------
(a) Recapitalization. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such shares,
and the number and kind of shares available for Awards subsequently granted
under the Plan shall be appropriately adjusted to reflect any stock
dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan or the Awards granted under the Plan. The
Administrator shall have the power to determine the amount of the
adjustment to be made in each case.
(b) Sale or Reorganization. After any reorganization, merger or
consolidation in which the Company is a surviving corporation, each
Participant shall, at no additional cost, be entitled upon exercise of an
Award to receive (subject to any required action by stockholders), in lieu
of the number of shares of Common Stock receivable or exercisable pursuant
to such Award, a number and class of shares of stock or other securities to
which such Participant would have been entitled pursuant to the terms of
the reorganization, merger or consolidation if, at the time of such
reorganization, merger or consolidation, such Participant had been the
holder of record of a number of shares of Common Stock equal to the number
of shares receivable or exercisable pursuant to such Award. Comparable
rights shall accrue to each Participant in the event of successive
reorganizations, mergers or consolidations of the character described
above.
(c) Options to Purchase Stock of Acquired Companies. After any
reorganization, merger or consolidation in which the Company or a
Subsidiary of the Company shall be a surviving corporation, the
Administrator may grant substituted Options under the provisions of the
Plan, pursuant to Section 424 of the Code, replacing old options granted
under a plan of another party to the reorganization, merger or
consolidation, where such party's stock may no longer be issued following
such merger or consolidation. The foregoing adjustments and manner of
application of the foregoing provisions shall be determined by the
Administrator in its sole discretion. Any adjustments may provide for the
elimination of any fractional shares which might otherwise have become
subject to any Awards.
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<PAGE>
Article V.
Participation
-------------
5.01 Eligible Participants. Participants in the Plan shall be the
employees and consultants of the Company or any Subsidiary, as determined and
selected from time to time by the Administrator, in its sole and absolute
discretion. The Administrator's designation of a Participant in any year shall
not require the Administrator to designate such person to receive Awards in any
other year. The Administrator shall consider such factors as it deems pertinent
in selecting Participants and in determining the type and amount of their
respective Awards.
Article VI.
Option Awards
-------------
6.01 Power to Grant Options. The Administrator may grant, to such
Participants as the Administrator may select, Options entitling the Participant
to purchase Common Stock from the Company at such price, in such quantity and on
such terms and subject to such conditions, not inconsistent with the terms of
this Plan, as may be established by the Administrator. The terms of any Option
granted under this Plan shall be set forth in an Award Agreement.
Notwithstanding the foregoing, Options granted to Officers shall not be
exercisable for a period of at least six months from the Date of Grant.
6.02 Purchase Price of Options. The Purchase Price of each share of Common
Stock which may be purchased upon exercise of any Option granted under the Plan
shall be equal to or greater than the Fair Market Value on the Date of Grant;
provided, however, that the Purchase Price of each share of Common Stock which
may be purchased upon exercise of a Non-Qualified Stock Option shall be no less
than ninety percent (90%) of the Fair Market Value on the Date of Grant if such
discount is expressly granted in lieu of a reasonable amount of salary or bonus;
provided, further, that the Purchase Price for shares of Common Stock purchased
pursuant to Stock Options designated by the Administrator as Incentive Stock
Options shall be equal to or greater than the Fair Market Value on the Date of
Grant as required under Section 422 of the Code and provided further that the
Purchase Price for shares of Common Stock purchased pursuant to Stock Options
designated by the Administrator as Performance Based Options shall be equal to
or greater than the Fair Market Value on the Date of Grant.
6.03 Designation of Incentive Stock Options. Except as otherwise expressly
provided in the Plan, the Administrator may designate, at the Date of Grant of
each Option to a Participant that is an employee of the Company or a Subsidiary,
that the Option is an Incentive Stock Option under Section 422 of the Code.
(a) Incentive Stock Option Share Limitation. No Participant may be
granted Incentive Stock Options under the Plan (or any other plans of the
Company) which would result in stock with an aggregate Fair Market Value
(measured on the Date of Grant) of more than $100,000 first becoming
exercisable in any one calendar year, or which would entitle such
Participant to purchase a number of shares greater than the maximum number
permitted by Section 422 of the Code as in effect on the Date of Grant.
(b) Other Incentive Stock Option Terms. Whenever possible, each
provision in the Plan and in every Option granted under this Plan which is
designated by the Administrator as an Incentive Stock Option shall be
interpreted in such a manner as to entitle the Option to the tax treatment
afforded by Section 422 of the Code. If any provision of this Plan or any
Option designated by the Administrator as an Incentive Stock Option shall
be held not to comply with requirements necessary to entitle such Option to
such tax treatment, then (i) such provision shall be deemed to have
contained
-6-
<PAGE>
from the outset such language as shall be necessary to entitle the Option
to the tax treatment afforded under Section 422 of the Code, and (ii) all
other provisions of this Plan and the Award Agreement shall remain in full
force and effect. If any agreement covering an Option designated by the
Administrator to be an Incentive Stock Option under this Plan shall not
explicitly include any terms required to entitle such Incentive Stock
Option to the tax treatment afforded by Section 422 of the Code, all such
terms shall be deemed implicit in the designation of such Option and the
Option shall be deemed to have been granted subject to all such terms.
6.04 Designation of Performance Based Options. Except as otherwise
expressly provided in the Plan, the Administrator may designate, at the Date of
Grant of each Option to a Participant that is an employee of the Company or a
Subsidiary, that the Option is a Performance Based Option. A Performance Based
Option shall have a Purchase Price not less than the Fair Market Value on the
Date of Grant and shall contain such other terms and conditions as the
Administrator may deem necessary so that, upon exercise or at any other time,
the Performance Based Option does not result in or give rise to "applicable
employee remuneration" within the meaning of Section 162(m) of the Code.
6.05 Rights as a Stockholder. The Participant or any transferee of an
Option pursuant to Section 8.02 or Section 11.05 shall have no rights as a
stockholder with respect to any shares of Common Stock covered by an Option
until the Participant or transferee shall have become the holder of record of
any such shares, and no adjustment shall be made for dividends and cash or other
property or distributions or other rights with respect to any such shares of
Common Stock for which the record date is prior to the date on which the
Participant or a transferee of the Option shall have become the holder of record
of any such shares covered by the Option.
Article VII.
Stock Appreciation Rights
-------------------------
7.01 Power to Grant Stock Appreciation Rights. The Administrator is
authorized to grant to any Participant, on such terms established by the
Administrator on or prior to the Date of Grant and subject to and not
inconsistent with the provisions of this Plan, the right to receive the payment
from the Company, payable as provided in Section 7.04, of an amount equal to the
Incremental Value of the Stock Appreciation Rights, which shall be an amount
equal to the remainder derived from subtracting (i) the Exercise Price for the
right established in the Award Agreement from (ii) the Fair Market Value of a
share of Common Stock on the date of exercise. The terms of any Stock
Appreciation Right granted under the Plan shall be set forth in an Award
Agreement.
7.02 Tandem Stock Appreciation Rights. The Administrator may grant to any
Participant a Stock Appreciation Right consistent with the provisions of this
Plan covering any share of Common Stock which is, at the Date of Grant of the
Stock Appreciation Right, also covered by an Option granted to the same
Participant, either prior to or simultaneously with the grant to such
Participant of the Stock Appreciation Right, provided: (i) any Option covering
any share of Common Stock shall expire and not be exercisable upon the exercise
of any Stock Appreciation Right with respect to the same share; (ii) any Stock
Appreciation Right covering any share of Common Stock shall not be exercisable
upon the exercise of any related Option with respect to the same share; and
(iii) an Option and Stock Appreciation Right covering the same share of Common
Stock may not be exercised simultaneously.
7.03 Exercise Price. The Exercise Price established under any Stock
Appreciation Right granted under this Plan shall be determined by the
Administrator and, in the case of a
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<PAGE>
tandem Stock Appreciation Right, shall not be less than the Purchase Price of
the related Option. Upon exercise of the Stock Appreciation Rights, the number
of shares subject to exercise under a related Option shall automatically be
reduced by the number of shares of Common Stock represented by the Option or
portion thereof which is surrendered as a result of the exercise of such Stock
Appreciation Rights.
7.04 Payment of Incremental Value. Any payment which may become due from
the Company by reason of Participant's exercise of a Stock Appreciation Right
may be paid to the Participant as determined by the Administrator (i) all in
cash, (ii) all in Common Stock, or (iii) in any combination of cash and Common
Stock. In the event that all or a portion of the payment is made in Common
Stock, the number of shares of the Common Stock delivered in satisfaction of
such payment shall be determined by dividing the amount of the payment by the
Fair Market Value on the date of exercise. The Administrator may determine
whether payment upon exercise of a Stock Appreciation Right will be made in cash
or in stock, or a combination thereof, upon or at any time prior to the exercise
of such Stock Appreciation Right. No fractional share of Common Stock shall be
issued to make any payment; if any fractional shares would be issuable, the mix
of cash and Common Stock payable to the Participant shall be adjusted as
directed by the Administrator to avoid the issuance of any fractional share.
Payment may be made in cash to Officers only if the Stock Appreciation Right is
exercised during the "window period" required under Rule 16b-3(e)(3) and
otherwise in accordance with Rule 16b-3.
Article VIII.
Terms of Options and Stock Appreciation Rights
----------------------------------------------
8.01 Duration of Options and Stock Appreciation Rights. Options and Stock
Appreciation Rights shall terminate after the first to occur of the following
events:
(a) Expiration Date of the Award as provided in the Award Agreement;
or
(b) Termination of the Award as provided in Section 8.02; or
(c) In the case of an Incentive Stock Option, ten years from the
Date of Grant; or
(d) Solely in the case of tandem Stock Appreciation Rights, upon the
Expiration Date of the related Option.
8.02 Exercise on Death or Termination of Employment.
----------------------------------------------
(a) Unless otherwise provided in the Award Agreement, in the event
of the death of a Participant while an employee of the Company or a
Subsidiary of the Company, the right to exercise all unexpired Awards shall
be accelerated and shall accrue as of the date of death, and the
Participant's Awards may be exercised by his Beneficiary at any time within
one year after the date of the Participant's death.
(b) Unless otherwise provided in the Award Agreement, in the event
of a Participant's Termination of Employment at any time for any reason
(including disability or retirement) other than death or for "cause" (as
defined in paragraph (d) below), an Award may be exercised, but only to the
extent it was otherwise exercisable, on the date of Termination of
Employment, within ninety days after the date of Termination of Employment.
In the event of the death of the Participant within the ninety-day period
following Termination of Employment, his Award may be exercised by his
Beneficiary within the one year period provided in subparagraph (a) above.
-8-
<PAGE>
(c) With respect to an Award which is intended to constitute an
Incentive Stock Option, upon Termination of Employment, such Award shall be
exercisable as provided in Section 422 of the Code.
(d) In the event that a Participant's Termination of Employment is
for "cause", all Awards shall terminate immediately upon Termination of
Employment. A Participant's employment shall be deemed to have been
terminated for "cause" if such termination is determined, in the sole
discretion of the Administrator, to have resulted from an act or omission
by the Participant constituting active and deliberate dishonesty, as
established by a final judgment or actual receipt of an improper benefit or
profit in money, property or services, or from the Participant's continuous
failure to perform his or her duties under any employment agreement in
effect between the Participant and the Company in any material manner (or,
in the absence of such an agreement, the consistent failure or refusal of
the Participant to perform according to reasonable expectations and
standards set by the Board and/or management consistent with Participant's
title and position) after receipt of notice of such failure from the
Company specifying how the Participant has so failed to perform.
8.03 Acceleration of Exercise Time. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit purchase of shares under any Award prior to the time such Award would
otherwise become exercisable under the terms of the Award Agreement.
8.04 Extension of Exercise Time. The Administrator, in its sole
discretion, shall have the right (but shall not in any case be obligated) to
permit any Award granted under this Plan to be exercised after its Expiration
Date or after the ninety day period following Termination of Employment or
service on the Board, subject, however, to the limitations described in Section
8.01 (c) and (d).
8.05 Conditions for Exercise. An Award Agreement may contain such waiting
periods, exercise dates and restrictions on exercise (including, but not limited
to, periodic installments which may be cumulative) as may be determined by the
Administrator at the Date of Grant. No Stock Appreciation Right may be exercised
prior to six months from the Date of Grant.
8.06 Change of Control Event. Unless otherwise provided in the Award
Agreement, and subject to such other terms and conditions as the Administrator
may establish in the Award Agreement, upon the occurrence of a Change of Control
Event, irrespective of whether or not an Award is then exercisable, the
Participant shall have the right to exercise in full any unexpired Award to the
extent not theretofore exercised or terminated; provided, however, that any
Stock Appreciation Right so exercised must have a Date of Grant at least six
months prior to the date of exercise.
8.07 Exercise Procedures. Each Option and Stock Appreciation Right granted
under the Plan shall be exercised by written notice to the Company which must be
received by the officer of the Company designated in the Award Agreement on or
before the Expiration Date of the Award. The Purchase Price of shares purchased
upon exercise of an Option granted under the Plan shall be paid in full in cash
by the Participant pursuant to the Award Agreement; provided, however, that the
Administrator may (but need not) permit payment to be made by delivery to the
Company of either (a) shares of Common Stock (including shares issuable to the
Participant pursuant to the exercise of the Option), or (b) any combination of
cash and shares of Common Stock, or (c) such other consideration as the
Administrator deems appropriate and in compliance with applicable law (including
payment in accordance with a cashless exercise
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<PAGE>
program under which, if so instructed by the Participant, shares of Common Stock
may be issued directly to the Participant's broker or dealer upon receipt of the
Purchase Price in cash from the broker or dealer.) In the event that any Common
Stock shall be transferred to the Company to satisfy all or any part of the
Purchase Price, the part of the Purchase Price deemed to have been satisfied by
such transfer of Common Stock shall be equal to the product derived by
multiplying the Fair Market Value as of the date of exercise times the number of
shares transferred. The Participant may not transfer to the Company in
satisfaction of the Purchase Price (y) a number of shares which when multiplied
times the Fair Market Value as of the date of exercise would result in a product
greater than the Purchase Price or (z) any fractional share of Common Stock. Any
part of the Purchase Price paid in cash upon the exercise of any Option shall be
added to the general funds of the Company and used for any proper corporate
purpose. Unless the Administrator shall otherwise determine, any Common Stock
transferred to the Company as payment of all or part of the Purchase Price upon
the exercise of any Option shall be held as treasury shares.
Article IX.
Restricted Stock Awards
-----------------------
9.01 Restricted Share Awards. The Administrator may grant to any
Participant an Award of Restricted Share Rights entitling such person to receive
shares of Common Stock in such quantity, and on such terms, conditions and
restrictions (whether based on performance standards, periods of service or
otherwise) as the Administrator shall determine on or prior to the Date of
Grant. The terms of any Award of Restricted Share Rights granted under the Plan
shall be set forth in an Award Agreement.
9.02 Duration of Restricted Share Rights. In no event shall any Restricted
Share Rights granted entitle the holder to receive shares of Common Stock free
of all restrictions on transfer at any time prior to the expiration of three
years from the Date of Grant, and each Award Agreement shall provide that the
Participant shall remain employed by the Company or a Subsidiary for that three
year period (subject to the Company's or Subsidiary's right to terminate such
employment).
9.03 Forfeiture of Restricted Share Rights. Subject to Section 9.05, all
Restricted Share Rights shall be forfeited and all Restricted Share Awards shall
terminate unless the Participant continues in the service of the Company or a
Subsidiary until the expiration of the forfeiture and satisfies any other
conditions set forth in the Award Agreement. If the Award Agreement shall so
provide, in the case of death, disability or retirement (as defined in the Award
Agreement) of the Participant, all of the shares covered by the Restricted Share
Rights shall immediately vest and any restrictions shall lapse as of the date of
such death, disability or retirement.
9.04 Delivery of Shares Upon Vesting. Upon the lapse of the restrictions
established in the Award Agreement, the Participant shall be entitled to
receive, without payment of any cash or other consideration, certificates for
the number of shares covered by the Award.
9.05 Waiver or Modification of Forfeiture Provisions. The Administrator
has full power and authority to modify or waive any or all terms, conditions or
restrictions (other than the minimum restriction period set forth in Section
9.02) applicable to any Restricted Share Rights granted to a Participant under
the Plan; provided that no modification shall, without consent of the
Participant, adversely affect the Participant's rights thereunder and no
modification shall reduce the employment requirement to less than three years,
except in the case of death, disability or retirement.
9.06 Rights as a Stockholder. No person shall have any rights as a
stockholder
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<PAGE>
with respect to any shares subject to Restricted Share Rights until such time as
the person shall have been issued a certificate for such shares.
Article X.
Other Stock Based Awards
------------------------
10.01 Grant of Other Awards. Other Awards of Common Stock or other
securities of the Company and other Awards that are valued in whole or in part
by reference to, or are otherwise based on, Common Stock ("Other Awards") may be
granted either alone or in addition to or in conjunction with Options or Stock
Appreciation Rights under the Plan. Subject to the provisions of the Plan, the
Administrator shall have the sole and complete authority to determine the
persons to whom and the time or times at which Other Awards shall be made, the
number of shares of Common Stock or other securities, if any, to be granted
pursuant to such Other Awards, and all other conditions of such Other Awards.
Any Other Award shall be confirmed by an Award Agreement executed by the
Administrator and the Participant, which agreement shall contain such provisions
as the Administrator determines to be necessary or appropriate to carry out the
intent of this Plan with respect to the Other Award.
10.02 Terms of Other Awards. In addition to the terms and conditions
specified in the Award Agreement, Other Awards made pursuant to this Article X
shall be subject to the following:
(a) Any shares of Common Stock subject to such Other Awards may not
be sold, assigned, transferred 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; and
(b) If specified by the Administrator and the Award Agreement, the
recipient of an Other Award shall be entitled to receive, currently or on a
deferred basis, interest or dividends or dividend equivalents with respect
to the Common Stock or other securities covered by the Other Award; and
(c) The Award Agreement with respect to any Other Award shall
contain provisions providing for the disposition of such Other Award in the
event of Termination of Employment prior to the exercise, realization or
payment of such Other Award, with such provisions to take account of the
specific nature and purpose of the Other Award.
Article XI.
Terms Applicable to All Awards
------------------------------
11.01 Award Agreement. The grant and the terms and conditions of the Award
shall be set forth in an Award Agreement between the Company and the
Participant. No person shall have any rights under any Award granted under the
Plan unless and until the Administrator and the Participant to whom the Award is
granted shall have executed and delivered an Award Agreement expressly granting
the Award to such person and setting forth the terms of the Award.
11.02 Plan Provisions Control Award Terms. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the
Administrator have the power to grant any Award under the Plan which is contrary
to any of the provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan as constituted
on the Date of Grant of such Award, the term in the Plan as constituted on the
Date of Grant of such Award shall control. Except as provided in Section 4.03,
(i) the terms of any Award granted under the Plan may not be changed after the
granting of such Award without the
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<PAGE>
express approval of the Participant and (ii) no modification may be made to an
Award granted to an Officer except in compliance with Rule 16b-3.
11.03 Modification of Award After Grant. Each Award granted under the Plan
to a Participant other than an Officer may be modified after the date of its
grant by express written agreement between the Company and the Participant,
provided that such change (i) shall not be inconsistent with the terms of the
Plan and (ii) shall be approved by the Administrator. No modifications may be
made to any Awards granted to an Officer except in compliance with Rule 16b-3.
11.04 Taxes. The Company shall be entitled, if the Administrator deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Participant's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and the Company may defer payment or
issuance of the cash or stock upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for such tax. The amount
of such withholding or tax payment shall be determined by the Administrator and,
unless otherwise provided by the Administrator, shall be payable by the
Participant at the time of issuance or payment in accordance with the following
rules:
(a) A Participant, other than an Officer, shall have the right to
elect to meet his or her withholding requirement by: (1) having the Company
withhold from such Award the appropriate number of shares of Common Stock,
rounded out to the next whole number, the Fair Market Value of which is
equal to such amount, or, in the case of the cash payment, the amount of
cash, as is determined by the Company to be sufficient to satisfy
applicable tax withholding requirements; or (2) direct payment to the
Company in cash of the amount of any taxes required to be withheld with
respect to such Award.
(b) Unless otherwise provided by the Administrator, with respect to
Officers, the Company shall withhold from such Award the appropriate number
of shares of Common Stock, rounded up to the next whole number, the Fair
Market Value of which is equal to the amount, as determined by the
Administrator, (or, in the case of a cash payment, the amount of cash)
required to satisfy applicable tax withholding requirements.
(c) In the event that an Award or property received upon exercise of
an Award has already been transferred to the Participant on the date upon
which withholding requirements apply, the Participant shall pay directly to
the Company the cash amount determined by the Company to be sufficient to
satisfy applicable federal, state or local withholding requirements. The
Participant shall provide to the Company such information as the Company
shall require to determine the amounts to be withheld and the time such
withholding requirements become applicable.
(d) If permitted under applicable federal income tax laws, a
Participant may elect to be taxed in the year in which an Award is
exercised or received, even if it would not otherwise have become taxable
to the Participant. If the Participant makes such an election, the
Participant shall promptly notify the Company in writing and shall provide
the Company with a copy of the executed election form as filed with the
Internal Revenue Service no later than thirty days from the date of
exercise or receipt. Promptly following such notification, the Participant
shall pay directly to the Company the cash amount determined by the Company
to be sufficient to satisfy applicable federal, state or local withholding
tax requirements.
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<PAGE>
11.05 Limitations on Transfer. A Participant's rights and interest under
the Plan may not be assigned or transferred other than by will or the laws of
descent and distribution. Notwithstanding the foregoing, or any other provision
of this Plan, a Participant who holds Non-Qualified Stock Options may transfer
such Options to his or her spouse, lineal ascendants, lineal descendants, or to
a duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the Participant who
originally received the Options or to an individual or trust to whom the
Participant could have initially transferred the Option pursuant to this Section
11.05. Options which are transferred pursuant to this Section 11.05 shall be
exercisable by the transferee according to the same terms and conditions as
applied to the Participant.
11.06 General Restriction. Notwithstanding anything to the contrary
herein, the Company shall have no obligation or liability to deliver any shares
of Common Stock under the Plan or to make any other distribution of benefits
under the Plan unless such delivery or distribution would comply with all
applicable laws, rules and regulations, including, without limitation, the
Securities Act of 1933, as amended, and the Exchange Act.
11.07 Surrender of Awards. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Administrator
and Participant approve, including, but not limited to, terms which provide that
upon such surrender the Company will pay to the Participant cash or Common
Stock, or a combination of cash and Common Stock.
Article XII.
General Provisions
------------------
12.01 Amendment and Termination of Plan.
---------------------------------
(a) Amendment. The Board shall have complete power and authority to
amend the Plan at any time and to add any other stock based Award or other
incentive compensation programs to the Plan as it deems necessary or
appropriate and no approval by the stockholders of the Company or by any
other person, committee or entity of any kind shall be required to make any
amendment; provided, however, that the Board shall not, without the
requisite affirmative approval of the stockholders of the Company, (i) make
any amendment which requires stockholder approval under any applicable law,
including Rule 16b-3 or the Code; or (ii) which, unless approved by the
requisite affirmative approval of stockholders of the Company, would cause,
result in or give rise to "applicable employee remuneration" within the
meaning of Section 162(m) of the Code with respect to any Performance Based
Option. No termination or amendment of the Plan may, without the consent of
the Participant to whom any Award shall theretofore have been granted under
the Plan, adversely affect the right of such individual under such Award.
For the purposes of this section, an amendment to the Plan shall be deemed
to have the affirmative approval of the stockholders of the Company if such
amendment shall have been submitted for a vote by the stockholders at a
duly called meeting of such stockholders at which a quorum was present and
the majority of votes cast with respect to such amendment at such meeting
shall have been cast in favor of such amendment, or if the holders of
outstanding stock having not less than a majority of the outstanding shares
consent to such amendment in writing in the manner provided under the
Company's bylaws.
(b) Termination. The Board shall have the right and the power to
terminate the Plan at any time. If the Plan is not earlier terminated, the
Plan shall terminate when all shares authorized under the Plan have been
issued. No Award shall be granted under the Plan after the termination of
the Plan, but the termination of the Plan shall not have any other effect
and any Award outstanding at the time of the termination of the Plan may
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<PAGE>
be exercised after termination of the Plan at any time prior to the
expiration date of such Award to the same extent such award would have been
exercisable if the Plan had not been terminated.
12.02 No Right To Employment. No employee or other person shall have any
claim or right to be granted an Award under this Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or a Subsidiary of the Company.
12.03 Compliance with Rule 16b-3. It is intended that the Plan be applied
and administered in compliance with Rule 16b-3. If any provision of the Plan
would be in violation of Rule 16b-3 if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Administrator. The Board is authorized to amend the
Plan and to make any such modifications to Award Agreements to comply with Rule
16b-3, as it may be amended from time to time, and to make any other such
amendments or modifications as it deems necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to
Rule 16b-3.
12.04 Securities Law Restrictions. The shares of Common Stock issuable
pursuant to the terms of any Awards granted under the Plan may not be issued by
the Company without registration or qualification of such shares under the
Securities Act of 1933, as amended, or under various state securities laws or
without an exemption from such registration requirements. Unless the shares to
be issued under the Plan have been registered and/or qualified as appropriate,
the Company shall be under no obligation to issue shares of Common Stock upon
exercise of an Award unless and until such time as there is an appropriate
exemption available from the registration or qualification requirements of
federal or state law as determined by the Administrator in its sole discretion.
The Administrator may require any person who is granted an award hereunder to
agree with the Company to represent and agree in writing that if such shares are
issuable under an exemption from registration requirements, the shares will be
"restricted" securities which may be resold only in compliance with applicable
securities laws, and that such person is acquiring the shares issued upon
exercise of the Award for investment, and not with the view toward distribution.
12.05 Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock or stock options otherwise
than under the Plan.
12.06 Captions. The captions (i.e., all section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
12.07 Severability. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
12.08 No Strict Construction. No rule of strict construction shall be
implied against the Company, the Administrator, or any other person in the
interpretation of any of the terms of
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<PAGE>
the Plan, any Award granted under the Plan or any rule or procedure established
by the Administrator.
12.09 Choice of Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Michigan.
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<PAGE>
Exhibit 10.9
LEASE AGREEMENT
BETWEEN
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.,
a Delaware limited partnership
(Landlord)
AND
INTERACTIVE COUPON MARKETING GROUP, INC.,
a Michigan corporation
(Tenant)
O'Hare Plaza II
8755 West Higgins Road
Chicago, Illinois
Dated: February 24, 1997
------------
<PAGE>
Section Page
- ------- ----
21 SECURITY DEPOSIT .................................................... 33
22 BROKERAGE ........................................................... 34
23 OBSERVANCE OF RULES AND REGULATIONS ................................. 34
24 NOTICES ............................................................. 34
25 MISCELLANEOUS ....................................................... 35
26 SUBSTITUTION SPACE .................................................. 39
27 OTHER DEFINITIONS ................................................... 41
28 CANCELLATION ........................................................ 42
ii
<PAGE>
EXHIBITS AND RIDERS
-------------------
The following Exhibits are attached hereto and by this reference made a
part of this Lease:
EXHIBIT A - FLOOR PLAN OF THE PREMISES
EXHIBIT B - THE LAND
EXHIBIT C - BASE RENT SCHEDULE
EXHIBIT D - RULES AND REGULATIONS
EXHIBIT E - INTENTIONALLY OMITTED
EXHIBIT F - FORM OF COMMENCEMENT NOTICE
iii
<PAGE>
INDEX OF DEFINED TERMS
----------------------
Definitions of certain terms used in this Lease are found in the following
sections:
TERM LOCATION OF DEFINITION
- ---- ----------------------
Additional Rent Section 1.1N
Bankruptcy Code Section 8.6
Base Rent Section 1.1M
Basic Lease Information and Certain Definitions Article 1
Broker Section 1.1W
Building Section 1.1B
Building Standard Article 27
Business Days Article 27
Central Article 27
Commencement Date Section 1.1F
Common Areas Article 27
days Article 27
Events of Default Section 13.1
Expiration Date Section 1.1G
herein, hereof, hereby, hereunder and words of similar import Article 27
include and including Article 27
Interest Rate Section 4.2
Land Section 1.1C
Landlord Preamble
Landlord's Address for Notice Section 1.1T
Landlord's Address for Payment Section 1.1U
Landlord's Operating Costs Estimate Section 5.1A
Net Rentable Area of the Building Section 1.1J
Net Rentable Area of the Premises Section 1.11
Parking Facility Section 1.1D
Parking Permits Section 1.1P
Project Section 1.1E
Premises Section 1.1A
Reference to Landlord as having "no liability
to Tenant" or being "without liability to
Tenant" or words of like import Article 27
Rent Section 1.1L
repair Article 27
Security Deposit Section 1.1R
Successor Landlord Section 18.2
Taxes Section 5.2
iv
<PAGE>
Tenant Preamble & Article 27
Tenant Delay Exhibit C
Tenant's Address for Notice Section 1.1V
Tenant's Permitted Uses Section 1.1Q
Tenant's Property Section 14.1A(a)
Tenant's Share Section 1.1K
Term Section 1.1H
termination of this Lease and words of like import Article 27
terms of this Lease Article 27
this Lease Preamble
year Article 27
v
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT ("this Lease") is made and entered into by and between
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware limited partnership
("Landlord") and INTERACTIVE COUPON MARKETING GROUP, INC.. d/b/a Interactive
Coupon Network, a Michigan corporation ("Tenant"). upon all the terms set forth
in this Lease and in all Exhibits hereto, to each and all of which terms
Landlord and Tenant hereby mutually agree, and in consideration of One Dollar
($l.0O) and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and of the rents, agreements and benefits flowing
between the parties hereto, as follows:
ARTICLE 1
---------
BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS
-----------------------------------------------
Section 1.1 Each reference in this Lease to information and definitions
contained in the Basic Lease Information and Certain Definitions and each use of
the terms capitalized and defined in this Section 1.1 shall be deemed to refer
to, and shall have the respective meaning set forth in, this Section 1.1.
A. Premises: The portion of the 1st floor of the Building,
presently known as Suite No. 100. as said space is
identified by diagonal lines or shaded area on the
floor plan attached hereto as Exhibit A.
B. Building: The building on that portion of the Land generally
located at 8755 West Higgins Road, Chicago, Illinois
and being known as O'Hare Plaza II.
C. Land: Those certain parcels of land described under the
caption "Land" in Exhibit B hereof.
D. Parking Facility: The multi-level parking garage which is located
adjacent to the Building and the surface parking
adjacent to the Building.
<PAGE>
E. Project: The Land and all improvements thereon,
including the Building, the Parking
Facility, and all Common Areas.
F. Commencement Date: That certain date on which the Term
shall commence, as determined pursuant
to the provisions of Article 3 hereof.
G. Expiration Date: The day before the 5th anniversary of
the Commencement Date.
H. Term: Five (5) years, beginning on the
Commencement Date and ending at 11:59
p.m. on the Expiration Date, unless this
Lease is sooner terminated as provided
herein.
I. Net Rentable Area of the Premises: Approximately 3,252 square feet.
J. Net Rentable Area of the Building: Approximately 232,943 square feet.
K. Tenant's Share: 1.396%, representing a fraction, the
numerator of which is the Net Rentable
Area of the Premises and the denominator
of which is the Net Rentable Area of the
Building, subject to future adjustment
pursuant to the provisions of Section
5.4 hereof.
L. Rent: The Base Rent and the Additional Rent.
M. Base Rent: The Base Rent shall be the amounts set
forth on the Base Rent Schedule attached
hereto as Exhibit C, subject to such
increases as may be provided herein.
Base Rent includes Base Year Operating
Costs.
N. Additional Rent: The Additional Rent shall be all other
sums due and payable by Tenant under the
Lease, including, but not limited to,
Tenant's Share of Operating Costs and
Tenant's Share of Electrical Costs.
O. Base Year Operating Costs: The actual grossed up Operating Costs
for the first full or partial calendar
year of the Term.
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P. Parking Permits: Tenant shall be entitled to, at no
charge during the initial Term, 10
Parking Permits for unassigned parking
spaces to be used in common with others
in the Parking Facility
Q. Tenant's Permitted Uses: Tenant may use the Premises for
executive and administrative offices for
the conduct of Tenant's business and for
no other purpose.
R. Security Deposit: $11,999.88, which may be reduced to
$5,999.94 after the third (3rd)
anniversary of the Commencement Date as
more fully provided for in Article 21
below.
S. Brokers: Prentiss Properties Limited, Inc. and
Julien J. Studley, Inc.
T. Landlords Address for Notice: Prentiss Properties Acquisition
Partners, L.P.
3890 W. Northwest Highway, Suite 400
Dallas, Texas 75220
Attention: Thomas F. August
With a copy to:
Prentiss Properties Acquisition
Partners, L.P.
c/o Prentiss Properties Management, L.P.
8755 West Higgins Road
Chicago, Illinois 60631
U. Landlord's Address for Payment: Prentiss Properties Acquisition
Partners, L. P.
P.O. Box 70776
Chicago, Illinois 60673-0776
V. Tenant's Address for Notice: Interactive Coupon Marketing Group, Inc.
8755 West Higgins Road
Suite 100
Chicago, Illinois 60631
3
<PAGE>
with a copy to:
Douglas Golden, Esq.
110 Brown Street Centre
255 East Brown Street
Birmingham, Michigan 48009
ARTICLE 2
---------
PREMISES AND QUIET ENJOYMENT
----------------------------
Section 2.1 Landlord hereby leases the Premises to Tenant, and Tenant
hereby rents and hires the Premises from Landlord for the Term. During the Term,
Tenant shall have the right to use, in common with others and in accordance with
the Rules and Regulations (as set forth in Exhibit D attached hereto), the
Common Areas. Tenant shall be subject to the terms, conditions and provisions of
any and all ground leases, deeds to secure debt, mortgages, restrictive
covenants, easements and other encumbrances now or hereafter affecting the
Premises or the Project, including, without limitation, all Declarations of
Covenants, Conditions and Restrictions (collectively, the "Declarations") which
may now, or in the future may, be filed of record against all or any portion of
the Project in the Recorder's Office of Cook County, Illinois, including any
amendments to any of the foregoing documents.
Section 2.2 Provided that Tenant fully and timely performs all the terms of
this Lease on Tenant's part to be performed, including payment by Tenant of all
Rent, Tenant shall have, hold and enjoy the Premises during the Term without
hindrance or disturbance from or by Landlord or any parties or persons claiming
by, through or under Landlord.
ARTICLE 3
---------
TERM; COMMENCEMENT DATE;
------------------------
DELIVERY AND ACCEPTANCE OF PREMISES
-----------------------------------
Section 3.1 The Commencement Date shall be the earlier of (a) the date the
Premises are deemed available for occupancy pursuant to Section 3.2 hereof or
(b) the date Tenant, or anyone claiming by, through or under Tenant, occupies
any portion of the Premises for the purpose of the conduct of Tenant's (or such
other person's) business therein.
Section 3.2 The Premises shall be deemed available for occupancy as soon as
Landlord has delivered possession of the Premises to Tenant. After delivery of
possession of the Premises to Tenant. Tenant intends on repainting the office
areas of the Premises and cleaning the existing carpeting in the office areas of
the Premises. Landlord shall reimburse Tenant up to $6,504 for
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<PAGE>
the cost of such repainting and carpet cleaning incurred by Tenant within thirty
(30) days after delivery by Tenant to Landlord of paid invoices for such work.
In no event shall Tenant be entitled to any credit for any unused portion of
said amount. Landlord shall endeavor to give Tenant prior notice of when the
Premises will be available for occupancy.
Section 3.3 The Net Rentable Area of the Premises and the Building are as
stated in Sections 1.1I and J, respectively. By written instrument
substantially in the form of Exhibit F attached hereto, Landlord shall notify
Tenant of the Commencement Date, the Net Rentable Area of the Premises and all
other matters stated therein. Such Commencement Notice shall be conclusive and
binding on Tenant as to all matters set forth therein, unless within ten (10)
days following delivery of such Commencement Notice. Tenant contests any of the
matters contained therein by notifying Landlord in writing of Tenant's
objections. The foregoing notwithstanding, Landlord's failure to deliver any
Commencement Notice to Tenant shall not affect Landlord's determination of the
Commencement Date.
Section 3.4 Tenant may not enter or occupy the Premises prior to the
Commencement Date without Landlord's express written consent and any entry by
Tenant shall be subject to all of the terms of this Lease; provided however,
that no such early entry shall change the Commencement Date or the Expiration
Date.
Section 3.5 Occupancy of the Premises or any portion thereof by Tenant or
anyone claiming through or under Tenant for the conduct of Tenant's, or such
other person's business therein shall be conclusive evidence that Tenant and all
parties claiming through or under Tenant (a) have accepted the Premises or such
portion as suitable for the purposes for which the Premises are leased
hereunder, (b) have accepted the Common Areas as being in a good and
satisfactory condition and (c) have waived any defects in the Premises and the
Project. Landlord shall have no liability, except for gross negligence or
willful misconduct, to Tenant or any of Tenant's agents, employees, licensees,
servants or invitees for any injury or damage to any person or property due to
the condition or design of, or any defect in, the Premises or the Project,
including any electrical, plumbing or mechanical systems and equipment of the
Premises or the Project and the condition of or any defect in the Land; and
Tenant, for itself and its agents and employees and all other parties claiming
by, through or under Tenant, hereby releases Landlord and its agents and
employees from any, and all claims relating to injury or damage to person or
property, either proximate or remote, resulting from the condition of the
Premises or the Project. In the event of any conflict between the foregoing
release and the waiver of subrogation agreement set forth in Section 14.4 below,
the terms and provisions of Section 14.4 shall control.
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<PAGE>
ARTICLE 4
---------
RENT
----
Section 4.1 Tenant shall pay to Landlord, without notice, demand, offset
or deduction, in lawful money of the United States of America, at Landlord's
Address for Payment, or at such other place as Landlord shall designate in
writing from time to time: (a) the Base Rent in equal monthly installments, in
advance, on the first day of each calendar month during the Term, and (b) the
Additional Rent, at the respective times required hereunder. The first monthly
installment of Base Rent and the Additional Rent payable under Article 5 hereof
shall be paid in advance on the date of Tenant's execution of this Lease and
applied to the first installments of Base Rent and such Additional Rent coming
due under this Lease. Payment of Rent shall begin on the Commencement Date:
provided, however, that, if either the Commencement Date or the Expiration Date
falls on a date other than the first day of a calendar month, the Rent due for
such fractional month shall be prorated on a per diem basis between Landlord and
Tenant so as to charge Tenant only for the portion of such fractional month
falling within the Term.
Section 4.2 All past due installments of Rent shall be subject to a late
charge of five percent (5%) of the amount of the late payment and shall further
bear interest until paid at a rate per annum (the "Interest Rate") equal to the
greater of fifteen percent (15%) or four percent (4%) above the prime rate of
interest from time to time publicly announced by The First National Bank of
Chicago, a national banking association, or any successor thereof: provided,
however, that, if at the time such interest is sought to be imposed, the rate of
interest exceeds the maximum rate permitted under federal law or under the laws
of the State of Illinois, the rate of interest on such past due installments of
Rent shall be the maximum rate of interest then permitted by applicable law.
ARTICLE 5
---------
OPERATING COSTS
---------------
Section 5.1 Tenant shall pay to Landlord as Additional Rent, for each year
or fractional year during the Term, an amount ("Tenant's Operating Costs
Payment") of money equal to Tenant's Share of Operating Costs, for such year in
excess of Tenant's Share of Base Year Operating Costs, such amount to be
calculated and paid as follows:
A. Beginning on January 1st of the year following the year in which the
Commencement Date occurs, and on the first day of January of each year during
the Term thereafter, or as soon thereafter as is practicable, Landlord shall
furnish Tenant with a statement ("Landlord's Operating Costs Estimate") setting
forth Landlord's reasonable estimate of grossed up (as provided in Section 5.3
below) Operating Costs for the forthcoming year and Tenant's Operating Costs
Payment for such year. On the first day of each calendar month during such
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<PAGE>
year. Tenant shall pay to Landlord one-twelfth (1/12th) of Tenant's Operating
Costs Payment as estimated on Landlord's Operating Costs Estimate. If for any
reason Landlord has not provided Tenant with Landlord's Operating Costs Estimate
on the first day of January of any year during the Term, then (a) until the
first day of the calendar month following the month in which Tenant is given
Landlord's Operating Costs Estimate. Tenant shall continue to pay to Landlord on
the first day of each calendar month the sum, if any, payable by Tenant under
this Section 5.1 for the month of December of the preceding year, and (b)
promptly after Landlords' Operating Costs Estimate is furnished to Tenant.
Landlord shall give notice to Tenant stating whether the installments of
Tenant's Operating Costs Payments previously made for such year were greater or
less than the installments of Tenant's Operating Costs Payments to be made for
such year. and (i) if there shall be a deficiency, Tenant shall pay the amount
thereof to Landlord within ten (10) days after the delivery of Landlord's
Operating Costs Estimate, or (ii) if there shall have been an overpayment,
Landlord shall apply such overpayment as a credit against the next accruing
monthly installment(s) of Tenant's Operating Costs Payment due from Tenant until
fully credited to Tenant, and (iii) on the first day of the calendar month
following the month in which Landlord's Operating Costs Estimate is given to
Tenant and on the first day of each calendar month throughout the remainder of
such year, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th)
of Tenant's Operating Costs Payment.
B. On the first day of March of each year during the Term (beginning on the
first day of March of the second year following the year in which the
Commencement Date occurs), or as soon thereafter as is practicable, Landlord
shall furnish Tenant with a statement of the actual grossed up Operating Costs
for the preceding year. Within thirty (30) days after Landlord's giving of such
statement, Tenant shall make a lump sum payment to Landlord in the amount, if
any, by which Tenant's Operating Costs Payment for such preceding year as shown
on such Landlord's statement, exceeds the aggregate of the monthly installments
of Tenant's Operating Costs Payments paid during such preceding year. If
Tenant's Operating Costs Payment, as shown on such Landlord's statement, is less
than the aggregate of the monthly installments of Tenant's Operating Costs
Payment actually paid by Tenant during such preceding year, then Landlord shall
apply such amount to the next accruing monthly installment(s) of Tenant's
Operating Costs Payment due from Tenant until fully credited to Tenant or, if
the Term has expired, Landlord shall pay such difference to Tenant within
forty-five (45) days after such final reconciliation. Notwithstanding the
foregoing, Tenant acknowledges that because of the current method of billing for
real estate taxes in Cook County, Illinois, Landlord will not know the actual
amount of the real estate tax component of Operating Costs until approximately
August of the following year. Accordingly, Tenant acknowledges and agrees that
Landlord may issue a separate statement for the real estate tax component of
Operating Costs later in the following year and may separately reconcile
Tenant's Operating Cost Payments for such real estate tax component of Operating
Costs, making an appropriate allocation of Tenant's Operating Costs Payment for
real estate taxes.
C. If the Term ends on a date other than the last day of December, the
actual Operating Costs for the year in which the Expiration Date occurs, shall
be prorated so that
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<PAGE>
Tenant shall pay that portion of Tenant's Operating Costs Payment for such year
represented by a fraction, the numerator of which shall be the number of days
during such fractional year falling within the Term, and the denominator of
which is 365 (or 366, in the case of a leap year). The provisions of this
Section 5.1 shall survive the Expiration Date or any sooner termination provided
for in this Lease.
Section 5.2 A. For purposes of this Lease, the term "Operating Costs" shall
mean any and all expenses, costs and disbursements of every kind which Landlord
pays, incurs or becomes obligated to pay in connection with the operation,
management, repair and maintenance of all or any portion of the Project. All
Operating Costs shall be determined according to generally accepted accounting
principles which shall be consistently applied. Operating Costs include, without
limitation, the following: (a) Wages, salaries, benefits and fees (including all
reasonable education, travel and professional fees) of all personnel or entities
engaged in the operation, repair, maintenance, management, or safekeeping of the
Project, including taxes, insurance and benefits relating thereto and the costs
of all supplies and materials (including work clothes and uniforms) used in the
operation, repair, maintenance and security of the Project; (b) Cost of
performance by Landlord's personnel of, or of all service agreements for,
maintenance, janitorial services, access control, alarm service, window
cleaning, elevator maintenance and landscaping for the Project. Such cost shall
include the rental of personal property used by Landlord's personnel in the
maintenance and repair of the Project: (c) Cost of utilities for the Project,
including water, sewer, gas, fuel and Common Area power, electricity, lighting
and air-conditioning, heating and ventilating, with Tenant to directly pay the
utility provider for separately metered electrical costs for the Premises; (d)
Cost of all insurance, including casualty and liability insurance, applicable to
the Project and to Landlord's equipment, fixtures and personal property used in
connection therewith, business interruption or rent insurance against such
perils as are commonly insured against by prudent landlords, such other
insurance as may be required by any lessor or mortgagee of Landlord, and such
other insurance which Landlord considers reasonably necessary in the operation
of the Project, together with all appraisal and consultant's fees in connection
with such insurance; (e) All Taxes, For purposes hereof, the term "Taxes" shall
mean, all taxes, assessments, and other governmental charges, applicable to or
assessed against the Project or any portion thereof, or applicable to or
assessed against Landlord's personal property used in connection therewith,
whether federal, state, county, or municipal and whether assessed by taxing
districts or authorities presently taxing the Project or the operation thereof
or by other taxing authorities subsequently created, or otherwise, and any other
taxes and assessments attributable to or assessed against all or any part of the
Project or its operation, including any reasonable expenses, including fees and
disbursements of attorneys, tax consultants, arbitrators, appraisers, experts
and other witnesses, incurred by Landlord in contesting any taxes or the
assessed valuation of all or any part of the Project. Tenant acknowledges that
Taxes "for" a given calendar year are those Taxes assessed against the Project
even if payable in a subsequent calendar year. If at any time during the Term
there shall be levied, assessed, or imposed on Landlord or all or any part of
the Project by any governmental entity any general or special ad valorem or
other charge or tax directly upon rents received under leases, or if any fee,
tax, assessment, or other charge is imposed which is
8
<PAGE>
measured by or based, in whole or in part, upon such rents, or if any charge or
tax is made based directly or indirectly upon the transactions represented by
leases or the occupancy or use of the Project or any portion thereof, such
taxes, fees, assessments or other charges shall be deemed to be Taxes.
Notwithstanding the foregoing, any (A) franchise, corporation, income or net
profits tax, unless substituted for real estate taxes or imposed as additional
charges in connection with the ownership of the Project, which may be assessed
against Landlord or the Project or both, (B) transfer taxes assessed against
Landlord or the Project or both, (C) penalties or interest on any late payments
of Landlord, (D) personal property taxes of Tenant or other tenants in the
Project and (E) special assessments for any so-called "public sector financing"
for an expansion of the Project by Landlord, as opposed to any special
assessments for new or replacement services for the existing Project, shall be
excluded from Taxes. If any or all of the Taxes paid hereunder are by law
permitted to be paid in installments, notwithstanding how Landlord pays the
same, then, for purposes of calculating Operating Costs, such Taxes shall be
deemed to have been divided and paid in the maximum number of installments
permitted by law, and there shall be included in Operating Costs for each year
only such installments as are required by law to be paid within such year,
together with interest thereon and on future such installments as provided by
law; (f) Legal and accounting costs incurred by Landlord or paid by Landlord to
third parties (exclusive of legal fees with respect to disputes with individual
tenants, negotiations of tenant leases, or with respect to the ownership rather
than the operation of the Project), appraisal fees, consulting fees, all other
professional fees and disbursements and all association dues: (g) Cost of non-
capitalized repairs and general maintenance for the Project (excluding repairs
and general maintenance paid by proceeds of insurance or by Tenant, other
tenants of the Project or other third parties); (h) Amortization of the cost of
improvements or equipment which are capital in nature and which (i) are for the
purpose of reducing Operating Costs for the Project, up to the amount saved as a
result of the installation thereof, as reasonably estimated by Landlord, or (ii)
enhance the Project for the general benefit of tenants or occupants thereof, or
(iii) are required by any governmental authority (provided, however, that
notwithstanding the foregoing, Landlord shall not pass through to Tenant the
cost of correcting any violations of applicable laws. ordinances or codes which
Landlord has been given notice of prior to the date of this Lease). All such
costs, including interest thereon, shall be amortized on a straight-line basis
over the useful life of the capital investment items, as reasonably determined
by Landlord, but in no event beyond the reasonable useful life of the Project as
a first class office project; (i) the Project management office rent or rental
value; (j) a management fee (whether or not Landlord engages a manager for the
Project or manages the Project with Landlord's personnel) and all items
reimbursable to the Project manager, if any, pursuant to any management contract
for the Project. The management fee shall be three percent (3%) of the gross
receipts from the operation of the Project; and (k) any and all amounts payable
pursuant to Declaration, which may now, or in the future, affect the Project, as
amended from time to time.
B. "Operating Costs" shall not include (a) specific costs for any capital
repairs, replacements or improvements, except as provided above; (b) expenses
for which Landlord is reimbursed or indemnified (either by an insurer,
condemnor, tenant, warrantor or otherwise) to
9
<PAGE>
the extent of funds received by Landlord: (c) expenses incurred in leasing or
procuring tenants (including lease commissions, advertising expenses and
expenses of renovating space for tenants): (d) payments for rented equipment,
the cost of which would constitute a capital expenditure not permitted pursuant
to the foregoing if the equipment were purchased: (e) interest or amortization
payments on any mortgages: (f) net basic rents under ground leases: (g) costs
representing an amount paid to an affiliate of Landlord which is in excess of
the amount which would have been paid in the absence of such relationship: or
(h) costs specially billed to and paid by specific tenants. There shall be no
duplication of costs or reimbursements.
Section 5.3 If the Building is not fully occupied (meaning one-hundred
percent (100%) of the Net Rentable Area of the Building) during any full or
fractional year of the Term, components of the actual Operating Costs which vary
with the level of occupancy shall be adjusted for such year to an amount which
Landlord estimates would have been incurred in Landlord's reasonable judgment
had the Building been fully occupied. The foregoing adjustment is to fully
reimburse Landlord for Operating Costs incurred by Landlord, but is not intended
to result in a profit to Landlord.
Section 5.4 If during the Term any change occurs in either the number of
square feet of the Net Rentable Area of the Premises or of the Net Rentable Area
of the Building, each as reasonably determined by Landlord. Tenant's Share of
Operating Costs shall be adjusted, effective as of the date of any such change.
Landlord shall promptly notify Tenant in writing of such change and the reason
therefor. Any changes made pursuant to this Section 5.4 shall not alter the
computation of Operating Costs as provided in this Article 5, but, on and after
the date of any such change, Tenant's Operating Costs Payment pursuant to
Section 5. lA shall be computed upon Tenant's Share thereof, as adjusted. If
such estimated payments of Tenant's Share are so adjusted during a year. a
reconciliation payment for Tenant's Share of Operating Costs pursuant to this
Article 5 for the calendar year in which such change occurs shall be computed
pursuant to the method set forth in Section 5.lB, such computation to take into
account the daily weighted average of Tenant's Share of Operating Costs during
such year.
ARTICLE 6
---------
PARKING
-------
Section 6.1 Landlord hereby grants to Tenant a license to use in common
with other tenants and with the public the Parking Facility and shall issue
Parking Permits for such use. Each such Parking Permit shall entitle Tenant to
one (1) unassigned parking space in the Parking Facility. The number of Parking
Permits to be issued to Tenant is set forth in Section 1.1P. Landlord shall not
be obligated to provide Tenant with any additional Parking Permits. If Tenant
fails to observe the Rules and Regulations with respect to the Parking Facility,
then Landlord, at its option, shall have the right to treat such failure as a
default under this Lease and to terminate Tenant's Parking Permits, without
legal process, and to remove Tenant. Tenant's
10
<PAGE>
vehicles and those of its employees, licensees or invitees and all of Tenant's
personal property from the Parking Facility.
Section 6.2 If all or any portion of the Parking Facility shall be damaged
or rendered unusable by fire or other casualty or any taking pursuant to eminent
domain proceeding (or deed in lieu thereof). and as a result thereof Landlord or
the garage operator is unable to make available to Tenant the parking provided
for herein, then the number of cars which Tenant shall be entitled to park
hereunder shall be proportionately reduced so that the number of cars which
Tenant may park in the Parking Facility after the casualty or condemnation in
question shall bear the same ratio to the total number of cars which can be
parked in the Parking Facility at such time as the number of cars Tenant had
the right to park in the Parking Facility prior to such casualty or condemnation
bore to the aggregate number of cars which could be parked therein at that time.
Notwithstanding anything contained herein to the contrary, and in particular
notwithstanding anything in Article 15 and 16 below to the contrary, in the
event the Parking Facility shall be damaged or rendered unusable by fire or
other casualty or any taking pursuant to eminent domain proceedings (or deed in
lieu thereof), and if as a result thereof there is insufficient parking
available to satisfy applicable governmental requirements, and if Landlord does
not provide substitute parking within a reasonable period of time, then Tenant's
Rent obligations hereunder shall abate by an amount equal to the percentage that
the available parking fails to satisfy applicable governmental requirements
until such time, if any, as Landlord provides substitute parking satisfying
applicable governmental requirements. Further, notwithstanding anything
contained herein to the contrary, if Landlord does not provide substitute
parking within one hundred twenty (120) days after the casualty or taking
pursuant to eminent domain proceedings (or deed in lieu thereof) sufficient to
satisfy applicable governmental requirements, then Tenant shall have the right
to terminate this Lease by written notice given to Landlord within fifteen (15)
days after expiration of said one hundred twenty (120) day period.
ARTICLE 7
---------
SERVICES OF LANDLORD
--------------------
Section 7.1 A. During the Term, Landlord shall furnish Tenant with the
following services: (a) hot and cold water in Building Standard bathrooms and
chilled water in Building Standard drinking fountains; (b) permit Tenant to use
Central systems, such as then-existing feeders and risers, to obtain electrical
power from the public utility sufficient for lighting the Premises and for the
operation therein of typewriters. voicewriters, calculating machines,
wordprocessing equipment, photographic reproduction equipment, copying machines,
personal computers and similar items of business equipment which consume, in the
aggregate, less than five (5) watts per square foot of Net Rentable Area of the
Premises and require a voltage of 120 volt single phase or less: (c) heating,
ventilating or air-conditioning, as appropriate, to the Common Areas of the
Project, during Business Hours at such temperatures and in such amounts
11
<PAGE>
as customarily and seasonally provided to tenants occupying comparable space in
first-class office buildings in the Chicago suburban area: (d) electric lighting
for the Common Areas of the Project: (e) passenger elevator service, in common
with others, for access to and from the Premises twenty-four (24) hours per day,
seven (7) day per week: provided, however, that Landlord shall have the right to
limit the number of (but not cease to operate all) elevators to be operated
after Business Hours and on Saturdays, Sundays and Holidays: (f) janitorial
cleaning services; (g) facilities for Tenant's loading, unloading, delivery and
pick-up activities, including access thereto during Business Hours, subject to
the Rules and Regulations, the type of facilities, and other limitations of such
loading facilities; and (h) replacement, as necessary, of all Building Standard
lamps and ballasts in Building Standard light fixtures within the Premises, with
Tenant to pay for all bulbs and ballasts and to purchase such bulbs and ballasts
solely from Landlord. All services referred to in this Section 7.1A shall be
provided by Landlord and paid for by Tenant as part of Tenant's Operating Costs
Payment.
B. If Tenant requires services, including cleaning services, routinely
supplied by Landlord for hours or days in addition to the hours and days
specified in Section 7.1A, Landlord shall make reasonable efforts to provide
such additional service after reasonable prior written request therefor from
Tenant, and Tenant shall reimburse Landlord for the cost of such additional
service, including a fifteen percent (15%) markup for Landlord's overhead;
provided however, that, if any other tenants in the Building served by the
equipment providing such additional service to the Premises request that
Landlord concurrently provide such service to such other tenants, the cost of
Landlord's providing such additional and concurrent service shall be prorated
among all of the tenants requesting such service. Landlord shall have no
obligation to provide any additional service to Tenant at any time Tenant is in
default under this Lease unless Tenant pays to Landlord, in advance, the cost of
such additional service. If any machinery or equipment which generates abnormal
heat or otherwise creates unusual demands on the air-conditioning or heating
system serving the Premises is used in the Premises and if Tenant has not,
within five (5) days after demand from Landlord, taken such steps, at Tenant's
expense, as shall be necessary to cease such adverse affect on the
air-conditioning or heating system. Landlord shall have the right to install
supplemental air-conditioning or heating units in the Premises, and the full
cost of such supplemental units (including the cost of acquisition,
installation, operation, use and maintenance thereof) shall be paid by Tenant to
Landlord in advance or on demand.
C. If Tenant's requirements for or consumption of electricity exceed the
capacities specified in clause (b) of Section 7.1A hereof. Landlord shall, at
Tenant's sole cost and expense, make reasonable efforts to supply such service
through the then-existing feeders and risers serving the Building and the
Premises and shall bill Tenant periodically for such additional service. At no
time shall use of electricity in the Premises exceed the capacity of existing
feeders and risers to or wiring in the Premises. Any risers or wiring to meet
Tenant's excess electrical requirements shall, upon Tenant's written request, be
installed by Landlord, at Tenant's sole cost, if, in Landlord's reasonable
judgment, the same are necessary and shall not (i) cause permanent damage or
injury to the Project, the Building or the Premises, (ii) cause or
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<PAGE>
create a dangerous or hazardous condition, (iii) entail excessive or
unreasonable alterations, repairs or expenses or (iv) interfere with or disturb
other tenants or occupants of the Building.
Section 7.2 Although Landlord permits Tenant to use the Central systems as
more fully provided in Section 7.lA above. Landlord shall not be obligated to
furnish electrical services to the Premises. Tenant shall make all necessary
arrangements with the public utility supplying electric or other utility service
directly to the Building to furnish electric or other utility service to the
Premises, and, shall be subject to the rules and regulations of the supplier of
such electricity services and the rules and regulations of any municipal or
other governmental authority regulating the business of providing electricity
services. Tenant shall be responsible for contracting promptly and directly with
such public utility supplying such electrical service and for paying all
deposits for, and all costs relating to, such electrical service, so that
electrical services are available to the Premises for Tenant's use on the
Commencement Date.
Section 7.3 No failure to furnish, or any stoppage of, the services
referred to in this Article 7 resulting from any cause shall make Landlord
liable in any respect for damages to any person, property or business, or be
construed as an eviction of Tenant, or entitle Tenant to any abatement of Rent
or other relief from any of Tenant's obligations under this Lease. Should any
malfunction of any systems or facilities occur within the Project or should
maintenance or alterations of such systems or facilities become necessary,
Landlord shall repair the same promptly and with reasonable diligence, and
Tenant shall have no claim for rebate, abatement of Rent, or damages because of
malfunctions or any such interruptions in service. Notwithstanding the
foregoing, in the event any such failure or delay of such services is caused by
the negligence or wilful misconduct of Landlord and causes the Premises to be
untenantable and, as a result thereof. Tenant in fact ceases to use the Premises
for the conduct of business (which Landlord acknowledges does not include
continued operation of the computers located in the Premises) for a period in
excess of seven (7) consecutive days, then commencing on the eighth (8th)
consecutive day of such untenantability and non-use. Rent payable by Tenant
shall be abated until the earliest to occur of (a) the date such failure or
delay is remedied, (b) the date the Premises are again tenantable or (C) the
date Tenant resumes use of the Premises for the conduct of business.
ARTICLE 8
---------
ASSIGNMENT AND SUBLETTING
-------------------------
Section 8.1 Except as hereinafter specifically permitted under Section 8.3,
neither Tenant nor its legal representatives or successors in interest shall, by
operation of law or otherwise, assign, mortgage, pledge, encumber or otherwise
transfer this Lease or any part hereof, or the interest of Tenant under this
Lease, or in any sublease or the rent thereunder. The Premises or any part
thereof shall not be sublet, occupied or used for any purpose by anyone other
than Tenant, without Tenant's obtaining in each instance the prior written
consent of Landlord in the
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manner hereinafter provided, which shall not be unreasonably withheld as more
fully provided in Section 8.4 below and which shall be provided, or withheld,
within the time periods required under this Article 8. Tenant shall not modify,
extend or amend a sublease previously consented to by Landlord without obtaining
Landlord's prior written consent thereto, which consent shall not be
unreasonably withheld.
Section 8.2 An assignment of this Lease shall be deemed to have occurred
(a) if in a single transaction or in a series of transactions more than 50% in
interest in Tenant, any guarantor of this Lease, or any subtenant (whether
stock, partnership, interest or otherwise) is transferred, diluted, reduced or
otherwise affected with the result that the present holder or owners of Tenant,
such guarantor, or such subtenant have less than a 50% interest in Tenant, such
guarantor or such subtenant, or (b) if Tenant's obligations under this Lease are
taken over or assumed in consideration of Tenant leasing space in another office
building. The transfer of the outstanding capital stock of any corporate Tenant,
guarantor or subtenant through the "over-the-counter" market or any recognized
national securities exchange (other than by persons owning 5% or more of the
voting calculation of such 50% interest of clause 8.2(a) above), including an
initial public offering, shall not be included in the calculation of such 50%
interest in clause (a) above.
Section 8.3 Notwithstanding anything to the contrary in Section 8.1, Tenant
shall have the right, upon ten (10) days' prior written notice to Landlord, to
(a) sublet all or part of the Premises to any related corporation or other
entity which controls Tenant, is controlled by Tenant or is under common control
with Tenant; or (b) assign this Lease to a successor corporation or other entity
into which or with which Tenant is merged or consolidated (including through any
related series of transactions) or which acquired substantially all of Tenant's
stock or assets and property; or (c) assign this Lease as a part of a sale of a
majority ownership interest in Tenant in connection with the new issuance of
stock of Tenant; provided that in all cases (i) such successor corporation
assumes substantially all of the obligations and liabilities of Tenant and shall
have assets, capitalization and net worth at least equal to the assets,
capitalization and net worth of Tenant as of the date of this Lease as
determined by generally accepted accounting principles, and (ii) Tenant shall
provide in its notice to Landlord the information required in Section 8.4. For
the purpose hereof "control" shall mean ownership of not less than 50% of all
the voting stock or legal and equitable interest in such corporation or entity.
Section 8.4 If Tenant should desire to assign this Lease or sublet the
Premises (or any part thereof), Tenant shall give Landlord written notice no
later than the time required for notice under Section 8.3 in the case of an
assignment or subletting to a related or successor entity as more fully provided
under Section 8.3, or thirty (30) days in advance of the proposed effective date
of any other proposed assignment or sublease, specifying (a) the name, current
address and business of the proposed assignee or sublessee, (b) the amount and
location of the space within the Premises proposed to be so subleased, (c) the
proposed effective date and duration of the assignment or subletting, and (d)
the proposed rent or consideration to be paid to Tenant by such
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assignee or sublessee. Tenant shall promptly supply Landlord with financial
statements and other information as Landlord may request to evaluate the
proposed assignment or sublease. For assignments and sublettings other than
those permitted by Section 8.3, Landlord shall have thirty (30) days following
receipt of such notice and other information requested by Landlord within which
to notify Tenant in writing that Landlord elects: (i) to terminate this Lease as
to the space so affected as of the proposed effective date set forth in Tenant's
notice, in which event Tenant shall be relieved of all further obligations
hereunder as to such space, except for obligations under Articles 17 and 22 and
all other provisions of this Lease which expressly survive the termination
hereof: or (ii) to permit Tenant to assign or sublet such space: provided,
however, that, if the rent rate agreed upon between Tenant and its proposed
subtenant is greater than the rent rate that Tenant must pay Landlord hereunder
for that portion of the Premises, or if any consideration shall be promised to
or received by Tenant in connection with such proposed assignment or sublease
(in addition to rent), then 80% of such excess rent and other consideration
received by Tenant shall be considered Additional Rent owed by Tenant to
Landlord (less brokerage commissions, attorneys' fees and other disbursements
reasonably incurred by Tenant for such assignment and subletting if acceptable
evidence of such disbursements is delivered to Landlord), and shall be paid by
Tenant to Landlord, in the case of excess rent, in the same manner that Tenant
pays Base Rent and, in the case of any other consideration, within ten (10)
Business Days after receipt thereof by Tenant: or (iii) to refuse, in Landlord's
reasonable discretion, to consent to Tenant's assignment or subleasing of such
space and to continue this Lease in full force and effect as to the entire
Premises. The parties agree that Landlord may reasonably refuse to consent to an
assignment or subletting if the proposed assignee or subtenant is not
financially creditworthy, is a governmental authority or agency, an organization
or person enjoying sovereign or diplomatic immunity, a medical or dental
practice or a user that will attract a volume, frequency or type of visitor or
employee to the Building which is not consistent with the standards of a high
quality office building or that will impose an excessive demand on or use of the
facilities or services of the Building. It shall also be reasonable for Landlord
to refuse to consent to any assignment or subletting if (i) Tenant is then in
default under this Lease, or (ii) such assignment of subletting would cause a
default under another lease in the Building or under any ground lease, deed of
trust, mortgage, restrictive covenant, easement or other encumbrance affecting
the Project. If Landlord should fail to notify Tenant in writing of such
election within the aforesaid thirty (30) day period, Landlord shall be deemed
to have elected option (iii) above. Tenant agrees to reimburse Landlord for
legal fees and any other reasonable costs incurred by Landlord in connection
with any proposed assignment or subletting and such payment shall not be
deducted from the Additional Rent, if any, owed to Landlord pursuant to
subsection (ii) above. Tenant shall deliver to Landlord copies of all documents
executed in connection with any permitted assignment or subletting, which
documents shall be in form and substance reasonably satisfactory to Landlord and
which shall require any assignee to assume performance of all terms of this
Lease to be performed by Tenant or any subtenant to comply with all the terms of
this Lease to be performed by Tenant. No acceptance by Landlord of any Rent or
any other sum of money from any assignee, sublessee or other category of
transferee shall be deemed to constitute Landlord's consent to any assignment,
sublease, or transfer. Unless otherwise agreed to in
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writing by Landlord, no such permitted assignment or sublease shall release
Tenant from any of its obligations under this Lease.
Section 8.5 Any attempted assignment or sublease by Tenant in violation of
the terms and provisions of this Article 8 shall be void and shall constitute a
material breach of this Lease. In no event, shall any assignment, subletting
or transfer, whether or not with Landlord's consent, relieve Tenant of its
primary liability under this Lease for the entire Term, and Tenant shall in no
way be released from the full and complete performance of all the terms hereof.
If Landlord takes possession of the Premises before the expiration of the Term
of this Lease, Landlord shall have the right, at its option, to terminate all
subleases, or to take over any sublease of the Premises or any portion thereof
and such subtenant shall attorn to Landlord, as its landlord, under all the
terms and obligations of such sublease occurring from and after such date, but
excluding previous acts, omissions, negligence or defaults of Tenant and any
repair or obligation in excess of available net insurance proceeds or
condemnation award.
Section 8.6 A. Tenant acknowledges that this Lease is a lease of
nonresidential real property and therefore agrees that Tenant, as the debtor in
possession, or the trustee for Tenant (collectively the "Trustee") in any
proceeding under Title 11 of the United State Bankruptcy Code relating to
Bankruptcy, as amended (the "Bankruptcy Code"), shall not seek or request any
extension of time to assume or reject this Lease or to perform any obligations
of this Lease.
B. The Trustee shall have the right to assume or assign Tenant's rights and
obligations under this Lease only if the Trustee: (a) promptly cures or provides
adequate assurance that the Trustee will promptly cure any default under the
Lease; (b) compensates or provides adequate assurance that the Trustee will
promptly compensate Landlord for any actual pecuniary loss incurred by Landlord
as a result of Tenant's default under this Lease; and (c) provides adequate
assurance of future performance under the Lease. All payments of Rent required
of Tenant under this Lease, whether or not expressly denominated as such in this
Lease, shall constitute rent for the purposes of Title 11 of the Bankruptcy
Code.
Section 8.7 The term "Landlord," as used in this Lease, so far as covenants
or obligations on the part of Landlord are concerned, shall be limited to mean
and include only the owner or owners, at the time in question, of the fee title
to, or a lessee's interest in a ground lease of, the Land or the Building. In
the event of any transfer, assignment or other conveyance or transfers of any
such title or interest, Landlord herein named (and in case of any subsequent
transfers or conveyances of any such title or interest, the then grantor) shall
be automatically freed and relieved from and after the date of such transfer,
assignment or conveyance of all liability as respects the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed and, without further agreement, the transferee of
such title or interest shall be deemed to have assumed and agreed to observe and
perform any and all obligations of Landlord hereunder, during its ownership of
the Project. Landlord may transfer its interest in the Project, or portions
thereof or interest thereon, without the consent of
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Tenant and such transfer or subsequent transfer shall not be deemed a violation
on Landlord's part of any of the terms of this Lease.
ARTICLE 9
---------
REPAIRS
-------
Section 9.1 Except for ordinary wear and tear and except as otherwise
provided in Section 9.2. Landlord shall perform all maintenance and make all
repairs and replacements to the Premises. Tenant shall pay to Landlord the
actual cost (including a fee equal to fifteen percent (15%) of actual costs to
cover Landlord's overhead and a fee for Landlord's agent or manager) for (a) all
maintenance, repairs and replacements within the Premises, other than (i)
repairs and replacements necessitated by the willful misconduct or gross
negligence of Landlord or its agents, employees, contractors, invitees or
licensees to the extent the cost thereof is not collectible under Tenant's
insurance, or, if Tenant is not carrying all of the insurance described in
Section 14.1A. to the extent such cost would not be covered by the insurance
described in Section 14.1A, if the same were in effect. (ii) maintenance,
repairs and replacements to the Central systems of the Building located within
the Premises; and (iii) services of Landlord described under Article 7 above to
the extent the costs of such services are included within Operating Costs; and
(b) all repairs and replacements necessitated by damage to the Project
(including the Building structure and the Central systems of the Building within
the Premises) caused by the negligence or willful misconduct of Tenant or its
agents, contractors, invitees and licensees but only to the extent the cost
thereof is not collectible under Landlord's insurance, or, if Landlord is not
carrying all of the insurance described in Section 14.2, to the extent that such
cost would not be covered by the insurance described in Section 14.2 if the same
were in effect. Amounts payable by Tenant pursuant to this Section 9.1 shall be
payable on demand after receipt of an invoice therefor from Landlord. Landlord
has no obligation and has made no promise to maintain, alter, remodel, improve,
repair, decorate or paint the Premises or any part thereof, except as
specifically set forth in this Lease, including as specifically set forth in
Article 7 above. In no event shall Landlord have any obligation to maintain,
repair or replace any furniture, furnishings, fixtures or personal property of
Tenant.
Section 9.2 Tenant shall keep the Premises in good order and in a safe,
neat and clean condition. No representations respecting the condition of the
Premises or the Building or the other portions of the Project have been made by
Landlord to Tenant except as specifically set forth in this Lease. Except as
provided in Section 10.1 or specifically consented to by Landlord. Tenant shall
not perform any maintenance or repair work or make any replacement in or to the
Premises but rather shall promptly notify Landlord of the need for such
maintenance, repair or replacement so that Landlord may proceed to perform the
same pursuant to the provisions of Section 9.1. In the event Landlord
specifically consents to the performance of any maintenance or the making of
any repairs or replacements by Tenant and Tenant fails to promptly commence and
diligently pursue the performance of such maintenance or the making of such
repairs or
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replacements, then Landlord, at its option, may perform such maintenance or make
such repairs and Tenant shall reimburse Landlord, on demand after Tenant
receives an invoice therefor, the cost thereof plus a fee equal to fifteen
percent (15%) of the actual costs to cover overhead and a fee for Landlord's
agent or manager.
Section 9.3 All repairs made by Tenant pursuant to Section 9.2 shall be
performed in a good and workmanlike manner by contractors or other repair
personnel selected by Tenant from an approved list of contractors and repair
personnel maintained by Landlord in the Project's management office; provided,
however, that neither Tenant nor its contractors or repair personnel shall be
permitted to do any work affecting the Central systems of the Building. In no
event shall such work be done for Landlord's account or in a manner which allows
any liens to be filed in violation of Article 11. To the extent any repairs
involve the making of alterations to the Premises, Tenant shall comply with the
provisions of Article 10.
Section 9.4 Subject to the other provisions of this Lease imposing
obligations regarding repair upon Tenant. Landlord shall repair all machinery
and equipment necessary to provide the services of Landlord described in Article
7 (provided that Tenant shall pay the costs of any repair to such systems or any
part thereof damaged by Tenant and Tenant's employees, customers, clients,
agents, licensees and invitees) and for repair of all portions of the Project
which do not comprise a part of the Premises and are not leased to others.
ARTICLE 10
----------
ALTERATIONS
-----------
Section 10.1 Tenant shall not at any time during the Term make any
alterations to the Premises without first obtaining Landlord's written consent
thereto, which consent Landlord shall not unreasonably withhold or delay;
provided, however, that Landlord shall not be deemed unreasonable by refusing to
consent to any alterations which are visible from the exterior of the Building
or the Project, which will or are likely to cause any weakening of any part of
the structure of the Premises, the Building or the Project or which will or are
likely to cause damage or disruption to the Central Building systems or which
are prohibited by any underlying ground lease or mortgage or the Declarations.
Should Tenant desire to make any alterations to the Premises, Tenant shall
submit all plans and specifications for such proposed alterations to Landlord
for Landlord's review before Tenant allows any such work to commence, and
Landlord shall promptly approve or disapprove such plans and specifications for
any of the reasons set forth in this Section 10.1 or for any other reason
reasonably deemed sufficient by Landlord. Tenant shall select and use only
contractors, subcontractors or other repair personnel from those listed on
Landlord's approved list maintained by Landlord in the Project management office
or such other contractor as may be approved in writing by Landlord. Upon
Tenant's receipt of written approval from Landlord and any required approval of
any mortgagee or lessor of Landlord, and upon Tenant's payment to Landlord of
(a) a reasonable fee prescribed by
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Landlord for the work of Landlord and Landlord's employees and representatives
in reviewing and approving such plans and specifications and (b) the fees, if
any charged by any mortgagee or lessor of Landlord for such review and approval.
Tenant shall have the right to proceed with the construction of all approved
alterations, but only so long as such alterations are in strict compliance with
the plans and specifications so approved by Landlord and with the provisions of
this Article 10 Landlord. All alterations shall be made at Tenant's sole cost
and expense, either by Tenant's contractors or, at Tenant's option, by Landlord
on terms reasonably satisfactory to Tenant, including a fee of fifteen percent
(15%) of the actual costs of such work to cover Landlord's overhead and a fee
for Landlord's agent or manager in supervising and coordinating such work. If
Tenant's contractor performs such work, a fee of seven and one-half percent
(7.5%) of the actual costs of such work fee for Landlord's agent or manager in
supervising and coordinating such work to cover overhead and a fee for
Landlord's agent or manager for supervising and coordinating such work. In no
event, however, shall anyone other than Landlord or Landlord's employees or
representatives perform work to be done which affects the Central systems of the
Building.
Section 10.2 All construction, alterations and repair work done by or for
Tenant shall (a) be performed in such a manner as to maintain harmonious labor
relations: (b) not adversely affect the safety of the Project, the Building or
the Premises or the systems thereof and not affect the Central systems of the
Building; (c) comply with all building, safety, fire, plumbing, electrical and
other codes and governmental and insurance requirements: (d) not result in any
usage in excess of Building Standard of water, electricity, gas, or other
utilities or of heating, ventilating or air-conditioning (either during or after
such work) unless prior written arrangements satisfactory to Landlord are made
with respect thereto; (e) be completed promptly and in a good and workmanlike
manner and in compliance with, and subject to, all of Landlord's reasonable
rules and regulations pertaining to construction activities in the Building: and
(f) not disturb Landlord or other tenants in the Building. After completion of
any alterations to the Premises, Tenant will deliver to Landlord a copy of "as
built" plans and specifications depicting and describing such alterations.
Section 10.3 All leasehold improvements, alterations and other physical
additions made to or installed by or for Tenant in the Premises shall be and
remain Landlord's property (except for Tenant's furniture, personal property and
movable trade fixtures) and shall not be removed without Landlord's written
consent. Tenant agrees to remove, at its sole cost and expense, all of Tenant's
furniture, personal property and movable trade fixtures, and, if directed to or
permitted to do so by Landlord in writing, all, or any part of the leasehold
improvements, alterations and other physical additions made by Tenant to the
Premises, on or before the Expiration Date or any earlier date of, termination
of this Lease. Tenant shall repair, or promptly reimburse Landlord for the cost
of repairing, all damage done to the Premises or the Building by such removal.
Any leasehold improvements, alterations or physical additions made by Tenant
which Landlord does not direct or permit Tenant to remove at any time during or
at the end of the Term shall become the property of Landlord at the end of the
Term without any payment to Tenant. If Tenant fails to remove any of Tenant's
furniture, personal property or
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movable trade fixtures by the Expiration Date or any sooner date of termination
of the Lease or, if Tenant fails to remove any leasehold improvements,
alterations and other physical additions made by Tenant to the Premises which
Landlord has in writing directed Tenant to remove. Landlord shall have the
right, on the fifth (5th) day after Landlord's delivery of written notice to
Tenant, to deem such property abandoned by Tenant and to remove, store, sell,
discard or otherwise deal with or dispose of such abandoned property in a
commercially reasonable manner. Tenant shall be liable for all costs of such
disposition of Tenant's abandoned property and Landlord shall have no liability
to Tenant in any respect regarding such property of Tenant. The provisions of
this Section 10.3 shall survive the expiration or any earlier termination of
this Lease.
ARTICLE 11
----------
LIENS
-----
Section 11.1 Tenant shall keep the Project, the Building and the Premises
and Landlord's interest therein from any liens arising from any work performed,
materials furnished, or obligations incurred by, or on behalf of Tenant. Notice
is hereby given that neither Landlord nor any mortgagee or lessor of Landlord
shall be liable for any labor or materials furnished to Tenant. If any lien is
filed for such work or materials, such lien shall encumber only Tenant's
interest in leasehold improvements on the Premises. Within ten (10) days after
Tenant learns of the filing of any such lien, Tenant shall notify Landlord of
such lien and shall either discharge and cancel such lien of record or post a
bond sufficient under the laws of the State of Illinois to cover the amount of
the lien claim plus any penalties, interest, attorneys' fees, court costs, and
other legal expenses in connection with such lien. If Tenant fails to so
discharge or bond such lien within ten (10) calendar days after written demand
from Landlord, Landlord shall have the right, at Landlord's option, to pay the
full amount of such lien without inquiry into the validity thereof, and Landlord
shall be promptly reimbursed by Tenant, as Additional Rent, for all amounts so
paid by Landlord, including expenses, interest, and attorneys' fees.
ARTICLE 12
----------
USE AND COMPLIANCE WITH LAWS
----------------------------
Section 12.1 The Premises shall be used only for executive and
administrative offices for the conduct of Tenant's business limited to the uses
specifically set forth in Section 1.1Q and for no other purposes whatsoever.
Tenant shall use and maintain the Premises in a clean, careful, safe, lawful and
proper manner and shall not allow within the Premises, any offensive noise,
odor, conduct or private or public nuisance or permit Tenant's employees,
agents, licensees or invitees to create a public or private nuisance or act in a
disorderly manner within
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the Building or in the Project. Any statement as to the particular nature of the
business to be conducted by Tenant in the Premises and uses to be made thereof
by Tenant as set forth in Section 1.lQ hereof shall not constitute a
representation or warranty by Landlord that such business or uses are lawful or
permissible under any certificate or occupancy for the Premises or the Building
or are otherwise permitted by law. Landlord does, however, represent that any
certificate of occupancy issued with respect to the Premises shall allow use for
executive and administrative offices.
Section 12.2 Tenant shall, at Tenant's sole expense, (a) comply with all
laws, orders, ordinances, and regulations of federal, state, county, and
municipal authorities having jurisdiction over the Premises, (b) comply with any
directive, order or citation made pursuant to law by any public officer
requiring abatement of any nuisance or which imposes upon Landlord or Tenant any
duty or obligation arising from Tenant's occupancy or use of the Premises or
from conditions which have been created by or at the request or insistence of
Tenant, or required by reason of a breach of any of Tenant's obligations
hereunder or by or through other fault of Tenant, (c) comply with all insurance
requirements applicable to the Premises and (d) indemnify and hold Landlord
harmless from any loss, cost, claim or expense which Landlord incurs or suffers
by reason of Tenant's failure to comply with its obligations under clauses (a),
(b) or (c) above. If Tenant receives notice of any such directive, order
citation or of any violation of any law, order, ordinance, regulation or any
insurance requirement, Tenant shall promptly notify Landlord in writing of such
alleged violation and furnish Landlord with a copy of such notice.
ARTICLE 13
----------
DEFAULT AND REMEDIES
--------------------
Section 13.1 The occurrence of any one or more of the following events
shall constitute an Event of Default (herein so called) of Tenant under this
Lease: (a) if Tenant fails to pay any Rent hereunder as and when such Rent
becomes due and such failure shall continue for more than five (5) days after
Landlord gives Tenant notice of past due Rent: (b) if Tenant fails to pay Rent
on time more than twice in any period of twelve (12) months, notwithstanding
that such payments have been made within the applicable cure period; (c) if the
Premises become vacant, deserted, or abandoned (provided, however, that Tenant
vacating the Premises temporarily in connection with a remodeling or
construction of alterations shall not be considered a vacation, desertion or
abandonment hereunder) for more than ten (10) consecutive days of if Tenant
fails to take possession of the Premises on the Commencement Date or promptly
thereafter: (d) if Tenant permits to be done anything which creates a lien upon
the Premises and fails to discharge or bond such lien or post such security with
Landlord as is required by Article 11; (e) if Tenant violates the provisions of
Article 8 by attempting to make an unpermitted assignment or sublease; (f) if
Tenant fails to maintain in force all policies of insurance required by this
Lease and such failure shall continue for more than ten (10) days after Landlord
gives Tenant written
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notice of such failure: (g) if any petition is filed by or against Tenant or any
guarantor of this Lease under any present or future section or chapter of the
Bankruptcy Code, or under any similar law or statute of the United States or any
state thereof (which, in the case of an involuntary proceeding, is not
permanently discharged, dismissed, stayed, or vacated, as the case may be,
within sixty (60) days of commencement), or if any order for relief shall be
entered against Tenant or any guarantor of this Lease in any such proceedings;
(h) if Tenant or any guarantor of this Lease becomes insolvent or makes a
transfer in fraud of creditors or makes an assignment for the benefit of
creditors; (i) if a receiver, custodian, or trustee is appointed for the
Premises or for all or substantially all of the assets of Tenant or of any
guarantor of this Lease, which appointment is not vacated within sixty (60) days
following the date of such appointment; or (j) if Tenant fails to perform or
observe any other terms of this Lease and such failure shall continue for more
than thirty (30) days after Landlord gives Tenant notice of such failure, or, if
such failure cannot be corrected within such thirty (30) day period, if Tenant
does not commence to correct such default within said thirty (30) day period and
thereafter diligently prosecute the correction of same to completion within a
reasonable time and in any event prior to the time a failure to complete such
correction could cause Landlord to be subject to prosecution for violation of
any law, rule, ordinance or regulation or causes, or could cause, a default
under any mortgage, underlying lease, tenant leases or other agreements
applicable to the Project.
Section 13.2 Upon the occurrence of any Event of Default, Landlord shall
have the right, at Landlord's option, to elect to do any one or more of the
following without further notice or demand to Tenant, Tenant hereby expressly
waiving the requirement of service of any statutory notice or demand as a
condition precedent to Landlord's exercising of the following rights: (a)
terminate this Lease, in which event Tenant shall immediately surrender the
Premises to Landlord, and, if Tenant fails to so surrender, Landlord shall have
the right, without notice or demand, to enter upon and take possession of the
Premises and to expel or remove Tenant and its effects without being liable for
prosecution or any claim for damages therefor; and Tenant shall, and hereby
agrees to, indemnify Landlord for all loss and damage which Landlord suffers by
reason of such termination, including damages in an amount equal to the total of
(l) the costs of recovering the Premises and all other expenses incurred by
Landlord in connection with Tenant's default; (2) the unpaid Rent earned as of
the date of termination, plus interest at the Interest Rate; (3) the total Rent
which Landlord would have received under this Lease for the remainder of the
Term, but discounted to the then present value at a rate of eight percent (8%)
per annum, over the fair market rental value on a net basis of the balance of
the Term as of the time of such default, discounted to the then present value at
a rate of eight percent (8%) per annum; and (4) all other sums of money and
damages owing by Tenant to Landlord; or (b) enter upon and take possession of
the Premises without terminating this Lease and without being liable to
prosecution or any claim for damages therefor, and, if Landlord elects, relet
the Premises on such terms as Landlord deems advisable, in which event Tenant
shall pay to Landlord on demand the reasonable cost of repossession, renovating,
repairing and altering the Premises for a new tenant or tenants in a manner and
to a level reasonably necessary to so relet the Premises, which may include
renovating and altering the Premises to the then
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current Building standard condition, and any deficiency between the Rent payable
hereunder and the rent paid under such reletting; provided, however, that Tenant
shall not be entitled to any excess payments received by Landlord from such
reletting. Landlord's failure to relet the Premises shall not release or affect
Tenant's liability for Rent or for damages; or (c) enter the Premises without
terminating this Lease and without being liable for prosecution or any claim for
damages therefor and maintain the Premises and repair or replace any damage
thereto or do anything for which Tenant is responsible hereunder. Tenant shall
reimburse Landlord immediately upon demand for any expenses which Landlord
incurs in thus effecting Tenant's compliance under this Lease, and Landlord
shall not be liable to Tenant for any damages with respect thereto.
Section 13.3 No agreement to accept a surrender of the Premises and no act
or omission by Landlord or Landlord's agents during the Term shall constitute an
acceptance or surrender of the Premises unless made in writing and signed by
Landlord. No re-entry or taking possession of the Premises by Landlord shall
constitute an election by Landlord to terminate this Lease unless a written
notice of such intention is given to Tenant. No provision of this Lease shall be
construed as an obligation upon Landlord to mitigate Landlord's damages under
the Lease.
Section 13.4 No provision of this Lease shall be deemed to have been waived
by Landlord unless such waiver is in writing and signed by Landlord. Landlord's
acceptance of Rent following an Event of Default hereunder shall not be
construed as a waiver of such Event of Default. No custom or practice which may
grow up between the parties in connection with the terms of this Lease shall be
construed to waive or lessen Landlord's right to insist upon strict performance
of the terms of this Lease, without a written notice thereof to Tenant from
Landlord.
Section 13.5 The rights granted to Landlord in this Article 13 shall be
cumulative of every other right or remedy provided in this Lease or which
Landlord may otherwise have at law or in equity or by statute, and the exercise
of one or more rights or remedies shall not prejudice or impair the concurrent
or subsequent exercise of other rights or remedies or constitute a forfeiture or
waiver of Rent or damages accruing to Landlord by reason of any Event of Default
under this Lease. Tenant agrees to pay to Landlord all costs and expenses
incurred by Landlord in the enforcement of this Lease, including all attorneys'
fees incurred in connection with the collection of any sums due hereunder or the
enforcement of any right or remedy of Landlord.
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ARTICLE 14
----------
INSURANCE
---------
Section 14.1 A. Tenant, at its sole expense, shall obtain and keep in force
during the Term the following insurance: (a) "All Risk" insurance insuring
Tenant's interest in the Premises and all property located in the Premises,
including furniture, equipment, fittings, installations, fixtures, supplies and
any other personal property, leasehold improvements and alterations ("Tenant's
Property"), in an amount equal to the full replacement value, it being
understood that no lack or inadequacy of insurance by Tenant shall in any event
make Landlord subject to any claim by virtue of any theft of or loss or damage
to any uninsured or inadequately insured property; (b) Business Interruption
insurance in an amount that will reimburse Tenant for direct or indirect loss of
earnings attributable to all perils insured against under Section 14.1(a) or
attributable to the prevention of access to the Premises by civil authority, and
sufficient to reimburse Tenant for Rent in the event of a casualty to, or
temporary taking of, the Building or the Premises; (c) Commercial General Public
Liability insurance including personal injury, bodily injury, broad form
property damage, operations hazard, owner's protective coverage, contractual
liability, with a cross liability clause and a severability of interests clause
to cover Tenant's indemnities set forth herein, and products and completed
operations liability, in limits not less than $1,000,000.00 inclusive per
occurrence or such higher limits as Landlord may require from time to time
during the Term; (d) Worker's Compensation and Employer's Liability insurance,
with a waiver of subrogation endorsement, in form and amount as required by
applicable law; (e) in the event Tenant performs any repairs or alterations in
the Premises, Builder's Risk insurance on an "All Risk" basis (including
collapse) on a completed value (non-reporting) form for full replacement value
covering all work incorporated in the Building and all materials and equipment
in or about the Premises; (f) Tenant's "All Risk" Legal Liability insurance for
the replacement cost value of the Premises; and (g) any other form or forms of
insurance or any changes or endorsements to the insurance required herein as
Landlord, or any mortgagee or lessor of Landlord may require, from time to time,
in form or in amount.
B. Tenant shall have the right to include the insurance required by Section
14.lA under Tenant's policies of "blanket insurance," provided that no other
loss which may also be insured by such blanket insurance shall affect the
insurance coverages required hereby and further provided that Tenant delivers to
Landlord a certificate specifically stating that such coverages apply to
Landlord, the Premises and the Project. All such policies of insurance or
certificates thereof shall name Tenant and Landlord as named insureds thereunder
and shall name all mortgagees and lessors of Landlord, of which Tenant has been
notified, additional named insureds, all as their respective interest may
appear. All such policies or certificates shall be issued by insurers acceptable
to Landlord and in form satisfactory to Landlord. Tenant shall deliver to
Landlord certificates with copies of policies, together with satisfactory
evidence of payment of premiums for such policies, by the Commencement Date and,
with respect to renewals of such policies, not later than thirty (30) days prior
to the end of the expiring term of coverage. Upon Landlord's request Tenant
shall deliver to Landlord certified copies of such
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policies. All policies of insurance shall be primary and Tenant shall not carry
any separate or additional insurance concurrent in form or contributing in the
event of any loss or damage with any insurance required to be maintained by
Tenant under this Lease. All such policies and certificates shall contain an
agreement by the insurers that the policies will not be invalidated as they
affect the interests of Landlord and Landlord's mortgagees by reason of any
breach or violation of warranties. representations. declarations or conditions
contained in the policies and that the insurers shall notify Landlord and any
mortgagee or lessor of Landlord in writing, by Registered U.S. mail, return
receipt requested. not less than thirty C30) days before any material change.
reduction in coverage. cancellation, including cancellation for nonpayment of
premium. or other termination thereof or chance therein and shall include a
clause or endorsement denying the insurer any rights or subrogation against
Landlord, if such clause or endorsement is available without additional cost to
Tenant.
Section 14.2 Landlord shall insure the Building against damage with
casualty and commercial general public liability insurance, all in such amounts
and with such deductible as Landlord reasonably deems appropriate.
Notwithstanding any contribution by Tenant to the cost of insurance premiums, as
provided hereinabove. Landlord shall not be required to carry insurance of any
kind on Tenant's Property, and Tenant hereby agrees that Tenant shall have no
right to receive any proceeds from any insurance policies carried by Landlord.
Section 14.3 Tenant shall not conduct or knowingly permit to be conducted
in the Premises any activity, or place any equipment in or about the Premises or
the Building, which will invalidate the insurance coverage in effect or increase
the rate of fire insurance or other insurance on the Premises or the Building,
and Tenant shall comply with all requirements and regulations of Landlord's
casualty and liability insurer. If any invalidation of coverage or increase in
the rate of fire insurance or other insurance occurs or is threatened by any
insurance company due to any act or omission by Tenant, or its agents,
employees, representatives, or contractors, such statement or threat shall be
conclusive evidence that the increase in such rate is due to such act of Tenant
or the contents or equipment in or about the Premises, and, as a result thereof,
Tenant shall be liable for such increase and shall be considered Additional Rent
payable with the next monthly installment of Base Rent due under this Lease. In
no event shall Tenant introduce or permit to be kept on the Premises or brought
into the Building any dangerous, noxious, radioactive or explosive substance.
Section 14.4 Landlord and Tenant each hereby waive any right of subrogation
and right of recovery or cause of action for injury or loss to the extent that
such injury or loss is covered by fire, extended coverage, "All Risk" or similar
policies covering real property of personal property (or which would have been
covered if Tenant or Landlord, as the case may be, was carrying the insurance
required by this Lease). Said waivers shall be in addition to, and not in
limitation or derogation or, any other waiver or release contained in this
Lease. Written notice of the terms of the above mutual waivers shall be given to
the insurance carriers of Landlord and Tenant and the parties' insurance
policies shall be properly endorsed, if necessary, to prevent the invalidation
of said policies by reason of such waivers.
25
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ARTICLE 15
----------
DAMAGE BY FIRE OR OTHER CAUSE
-----------------------------
Section 15.1 If the Project or any portion thereof is damaged or destroyed
by any casualty to the extent that, in Landlord's reasonable judgment, (a)
repair of such damage or destruction would not be economically feasible, or (b)
the damage or destruction to the Project cannot be repaired, in Landlord's
reasonable judgement, within one hundred eighty (180) days after receipt of
insurance proceeds relating to such damage or destruction, or (c) if the
proceeds from insurance remaining after any required payment to any mortgagee or
lessor of Landlord are insufficient to repair such damage or destruction,
Landlord shall have the right, at Landlord's option, to terminate this Lease by
giving Tenant notice of such termination, within sixty (60) days after the date
of such damage or destruction and, with respect to damage or destruction
described in clause (b) above, and if such damage or destruction renders the
Premises untenantable, Tenant shall have the right, at Tenant's option, to
terminate this Lease by giving Landlord notice of such termination within sixty
(60) days after the date of such damage or destruction, provided, however, that
if Landlord determines that the Project cannot be rebuilt or made fit for
Tenant's purposes within one hundred and eighty (180) days after the date of
such damage or destruction but does not elect to terminate this Lease as
provided above, then Landlord shall provide Tenant with written notice of such
determination within forty-five (45) days after the date of such damage or
destruction so that Tenant can exercise its termination right within the sixty
(60) day period provided above.
Section 15.2 If the Premises or any portion thereof is damaged or destroyed
by any casualty against which Tenant is required to be insured under Section
14.1, and if, in Landlord's reasonable opinion, the Premises cannot be rebuilt
or made fit for Tenant's purposes within one hundred eighty days (180) after the
date of such damage or destruction, or if the proceeds from the insurance Tenant
is required to maintain pursuant to Article 14 hereof (or the amount of proceeds
which would have been available if Tenant was carrying such insurance) are
insufficient to repair such damage or destruction, then either Landlord or
Tenant shall have the right, at the option of either party, to terminate this
Lease by giving the other written notice, within sixty (60) days after such
damage or destruction.
Section 15.3 In the event of partial destruction or damage to the Building
or the Premises which is not subject to Section 15.1 or 15.2. but which renders
the Premises partially but not wholly untenantable, this Lease shall not
terminate and Rent shall be abated in proportion to the area of the Premises
which, in Landlord's reasonable opinion, cannot be used or occupied by Tenant as
a result of such casualty. Landlord shall in such event, within a reasonable
time after the date of such destruction or damage, subject to force majeure (as
defined in Section 25.6) or to Tenant caused delay and to the extent and
availability of insurance proceeds, restore the Premises to as near the same
condition as existed prior to such partial damage or destruction, provided that
Tenant pays to Landlord Tenant's insurance proceeds as required in
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Section 15.5 In no event shall Rent abate or shall any termination occur if
damage to or destruction of the Premises is the result of the gross negligence
or willful act of Tenant, or Tenant's agents, employees, representatives,
contractors, successors, assigns, licensees or invitees.
Section 15.4 If the Building or the Premises or any portion thereof is
destroyed by fire or other causes at any time during the last year of the Term,
then either Landlord or Tenant shall have the right, at the option of either
party, to terminate this Lease by giving written notice to the other within
sixty (60) days after the date of such destruction.
Section 15.5 Landlord shall have no liability to Tenant for inconvenience,
loss of business, or annoyance arising from any repair of any portion of the
Premises or the Project. If Landlord is required by this Lease or by any
mortgagee or lessor of Landlord to repair or if Landlord undertakes to repair,
Tenant shall pay to Landlord that amount of Tenant's insurance proceeds (or the
amount which would have been received by Tenant if Tenant was carrying the
insurance required by this Lease) which insures such damage to the Premises or
Building as a contribution towards such repair, and Landlord shall use
reasonable efforts to have such repairs made promptly and in a manner which will
not unnecessarily interfere with Tenant's occupancy.
Section 15.6 In the event of termination of this Lease pursuant to Sections
15.1, 15.2, or 15.4, then all Rent shall be apportioned and paid to the date on
which possession is relinquished or the date of such damage, whichever last
occurs, and Tenant shall immediately vacate the Premises according to such
notice of termination: provided, however, that those provisions of this Lease
which are designated to cover matters of termination and the period thereafter
shall survive the termination hereof.
ARTICLE 16
----------
CONDEMNATION
------------
Section 16.1 In the event the whole or substantially the whole of the
Building or the whole or any portion of the Premises are taken or condemned by
eminent domain or by any conveyance in lieu thereof (such taking, condemnation
or conveyance in lieu thereof being hereinafter referred to as "condemnation"),
the Term shall cease and this Lease shall terminate on the earlier of the date
the condemning authority takes possession or the date title vests in the
condemning authority.
Section 16.2 In the event any portion of the Building shall be taken by
condemnation (whether or not such taking includes any portion of the Premises),
which taking, in Landlord's reasonable judgment, is such that the Building
cannot be restored in an economically feasible manner for use substantially as
originally designed, then Landlord shall have the right, at
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Landlord's option, to terminate this Lease, effective as of the date specified
by Landlord in a written notice of termination from Landlord to Tenant.
Section 16.3 In the event any portion of the Parking Facility shall be
taken by condemnation, which taking in Landlord's judgment is such that the
Parking Facility cannot be restored in an economically feasible manner for use
substantially as originally designed including in such consideration the
possible use of additional Parking Facility in the vicinity of the Building,
then Landlord shall have the right, at Landlord's option, to terminate this
Lease, effective as of the date specified by Landlord in a written notice of
termination from Landlord to Tenant.
Section 16.4 In the event that a portion. but less than substantially the
whole, of the Premises shall be taken by condemnation, then this Lease shall be
terminated as of the date of such condemnation as to the portion of the Premises
so taken, and unless Landlord exercises its option to terminate this Lease
pursuant to Section 16.2, this Lease shall remain in full force and effect as to
the remainder of the Premises.
Section 16.5 In the event of termination of this Lease pursuant to the
provisions of Section 16.1, 16.2, or 16.3, the Rent shall be apportioned as of
such date of termination: provided, however, that those provisions of this Lease
which are designated to cover matters of termination and the period thereafter
shall survive the termination hereof.
Section 16.6 All compensation awarded or paid upon a condemnation of any
portion of the Project shall belong to and be the property of Landlord without
participation by Tenant. Nothing herein shall be construed, however, to preclude
Tenant from prosecuting any claim directly against the condemning authority for
loss of business, loss of good will, moving expenses, damage to, and cost of
removal of, trade fixtures, furniture and other personal property belonging to
Tenant: provided, however, that Tenant shall make no claim which shall diminish
or adversely affect any award claimed or received by Landlord.
Section 16.7 Except as otherwise provided herein, if any portion of the
Project other than the Building is taken by condemnation or if the temporary use
or occupancy of all or any part of the Premises shall be taken by condemnation
during the Term, this Lease shall be and remain unaffected by such condemnation,
and Tenant shall continue to pay in full the Rent payable hereunder. In the
event of any such temporary taking for use or occupancy of all or any part of
the Premises, Tenant shall be entitled to appear, claim, prove and receive the
portion of the award for such taking that represents compensation for use or
occupancy of the Premises during the Term and Landlord shall be entitled to
appear, claim, prove and receive the portion of the award that represents the
cost of restoration of the Premises and the use or occupancy of the Premises
after the end of the Term hereof. In the event of any such condemnation of any
portion of the Project other than the Building, Landlord shall be entitled to
appear, claim, prove and receive all of that award.
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<PAGE>
ARTICLE 17
----------
INDEMNIFICATION
---------------
Section 17.1 Tenant hereby waives all claims against Landlord for damage
to any property or injury to, or death of, any person in, upon, or about the
Project, including the Premises, arising at any time and from any cause other
than the negligence or willful misconduct of Landlord, its agents, employees,
representatives, or contractors. Tenant shall, and hereby agrees to, indemnify
and hold Landlord harmless from any damage to any property or injury to, or
death of, any person arising from the use or occupancy of the Common Areas and
the Premises by Tenant, its agents, employees, representatives, contractors,
successors, assigns, licensees, or invitees, except to the extent such damage is
caused by the negligence or willful misconduct of Landlord, its agents,
employees, representatives, or contractors and except, with respect to the
Common Areas only. Tenant's indemnification set forth above shall not include
any such damage caused by other tenants of the Building or other third parties.
Without limiting the generality of the foregoing, Landlord shall not be liable
for any injury or damage to persons or property resulting from the condition or
design of, or any defective, Building or its mechanical systems or equipment
which may exist or occur or from any fire, explosion, falling plaster, steam,
gas, electricity, water, rain, flood, snow, or leaks from any part of the
Premises or from the pipes, appliances, plumbing works, roof, or subsurface of
any floor or ceiling, or from the street or any other place, or by dampness or
by any other similar cause, except to the extent caused by the negligence or
willful misconduct of Landlord, its agents, employees, representatives or
contractors. Landlord shall not be liable for any such damage caused by other
tenants or persons in the Building or by occupants of adjacent property thereto,
or by the public, or caused by construction (except to the extent caused by the
negligence or willful misconduct of Landlord) or by any private, public or
quasi-public work. Tenant, for itself and its agents, employees,
representatives, contractors, successors, assigns, invitees and licensees,
expressly assumes all risks of injury or damage to person or property, whether
proximate or remote, resulting from the condition of the Project or any part
thereof, except to the extent caused by the negligence or willful misconduct of
Landlord. Tenant's foregoing indemnity shall include attorneys' fees,
investigation costs, and all other reasonable costs and expenses incurred by
Landlord in any connection therewith. The provisions of this Article 17 shall
survive the expiration or termination of this Lease with respect to any damage,
injury, or death occurring before such expiration or termination. If Landlord is
made a party to any litigation commenced by or against Tenant or relating to
this Lease or to the Premises, and provided that in any such litigation Landlord
is not finally adjudicated to be solely at fault, then Tenant shall pay all
costs and expenses, including attorneys' fees and court costs, incurred by or
imposed upon Landlord because of any such litigation, and the amount of all such
costs and expenses, including attorneys' fees and court costs, shall be a demand
obligation owing by Tenant to Landlord. Notwithstanding anything in this Article
17 to the contrary, Landlord shall not be liable to Tenant for any claims
resulting from the negligence or willful misconduct of Landlord, its agents,
employees, representatives, or contractors to the extent such claims are covered
by the types of insurance Tenant is to maintain pursuant to Section 14.lA.
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Section 17.2 Landlord shall, and hereby agrees to, indemnify and hold
Tenant harmless from any damages in connection with loss of life, bodily or
personal injury or property damage arising from any occurrence in the Common
Areas of the Project, except to the extent the result of the negligence or
willful misconduct of Tenant and to the extent not covered by Tenant's
insurance.
ARTICLE 18
----------
SUBORDINATION AND ESTOPPEL CERTIFICATES
---------------------------------------
Section 18.1 This Lease and all rights of Tenant hereunder are subject and
subordinate to all underlying leases now or hereafter in existence, and to any
supplements, amendments, modifications, and extensions of such leases heretofore
or hereafter made and to any deeds to secure debt, mortgages, or other security
instruments which now or hereafter cover all or any portion of the Project or
any interest of Landlord therein, and to any advances made on the security
thereof, and to any increases, renewals, modifications, consolidations,
replacements, and extensions of any of such mortgages. This provision is
declared by Landlord and Tenant to be self-operative and no further instrument
shall be required to effect such subordination of this Lease. Upon demand,
however, Tenant shall execute, acknowledge, and deliver to Landlord any further
instruments and certificates evidencing such subordination as Landlord, and any
mortgagee or lessor of Landlord shall reasonably require, and if Tenant fails to
so execute, acknowledge and deliver such instruments within ten (10) days after
Landlord's request, Landlord is hereby empowered to do so in Tenant's name and
on Tenant's behalf; Tenant hereby irrevocably appoints Landlord as Tenant's
agent and attorney-in-fact for the purpose of executing, acknowledging, and
delivering any such instruments and certificates. Tenant shall not unreasonably
withhold, delay, or defer its written consent reasonable modifications in this
Lease which are a condition of any construction, interim or permanent financing
for the Project or any reciprocal easement agreement with facilities in the
vicinity of the Building, provided that such modifications do not increase the
obligations of Tenant hereunder or materially and adversely affect Tenant's use
and enjoyment of the Premises. This Lease is further subject and subordinate to:
(a) all applicable ordinances of any government authority having jurisdiction
over the Project, relating to easements, franchises, and other interests or
rights upon, across, or appurtenant to the Project; and (b) all utility
easements and agreements, now or hereafter created for the benefit of the
Project.
Section 18.2 Notwithstanding the generality of the foregoing provisions of
Section 18.1, any mortgagee or lessor of Landlord shall have the right at any
time to subordinate any such mortgage or underlying lease to this Lease, or to
any of the provisions hereof, on such terms and subject to such conditions as
such mortgagee or lessor of Landlord may consider appropriate in its discretion.
At any time, before or after the institution of any proceedings for the
foreclosure of any such mortgage, or the sale of the Building under any such
mortgage, or the termination of any underlying lease, Tenant shall, upon request
of such mortgagee or any person
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or entities succeeding to the interest of such mortgagee or the purchaser at any
foreclosure sale ("Successor Landlord"), automatically become the Tenant (or if
the Premises has been validly subleased, the subtenant) of the Successor
Landlord, without change in the terms or other provisions of this Lease (or, in
the case of a permitted sublease, without change in this Lease or in the
instrument setting forth the terms of such sublease); provided, however, that
the Successor Landlord shall not be (i) bound by any payment made by Tenant of
Rent or Additional Rent for more than one (1) month in advance, except for a
Security Deposit previously paid to Landlord (and then only if such Security
Deposit has been deposited with and is under the control of the Successor
Landlord), (ii) bound by any termination, modification, amendment or surrender
of the Lease done without the consent of the mortgagee or ground lessor, if any,
at the time of such termination, modification, amendment or surrender. (iii)
liable for any damages or subject to any offset or defense by Tenant to the
payment of Rent by reason of any act or omission of any' prior landlord
(including Landlord), or (iv) personally or corporately liable, in any event,
beyond the limitations on landlord liability set forth in Section 25.5 of this
Lease. This agreement of Tenant to attorn to a Successor Landlord shall survive
any such foreclosure sale, trustee's sale conveyance in lieu thereof or
termination of any underlying lease. Tenant shall upon demand at any time,
before or after any such foreclosure or termination execute, acknowledge, and
deliver to the Successor Landlord any written instruments and certificates
evidencing such attornment as such Successor Landlord may reasonably require:
provided, however, that Landlord shall use its reasonable efforts to require
that such agreement provide that upon such attornment as long as Tenant is not
in default hereunder, Tenant's possession of the Premises under this Lease shall
not be disturbed.
Section 18.3 Tenant shall, from time to time, within ten (10) days after
request from Landlord, or from any mortgagee or lessor of Landlord, execute,
acknowledge and deliver in recordable form a certificate certifying, to the
extent true, that this Lease is in full force and effect and unmodified (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications); that the Term has commenced and the
full amount of the Rent then accruing hereunder; the dates to which the Rent has
been paid; that Tenant has accepted possession of the Premises and that any
improvements required by the terms of this Lease to be made by Landlord have
been completed to the satisfaction of Tenant; the amount, if any, that Tenant
has paid to Landlord as a Security Deposit; that no Rent under this Lease has
been paid more than thirty (30) days in advance of its due date (or, if there
has been such a prepayment, the amount of such prepayment); that the address for
notices to be sent to Tenant is as set forth in this Lease (or has been changed
by notice duly given and is as set forth in the certificate); that Tenant, as
of the date of such certificate, has no charge, lien, or claim of offset under
this Lease or otherwise against Rent or other charges due or to become due
hereunder: that, to the knowledge of Tenant, Landlord is not then in default
under this Lease; and such other matters as may be reasonably requested by
Landlord or any mortgagee or lessor of Landlord. Any such certificate may be
relied upon by Landlord, any Successor Landlord, or any mortgagee or lessor of
Landlord. Landlord agrees periodically to furnish, when reasonably requested in
writing by Tenant, certificates signed by Landlord containing information
similar to the foregoing information.
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Section 18.4 No act or failure to act on the part of Landlord which would
entitle Tenant under the terms of this Lease, or by law, to be relieved of
Tenant's obligations hereunder or to terminate this Lease, shall result in a
release of such obligations or a termination of this Lease unless (a) Tenant has
given notice by registered or certified mail to any mortgagee or lessor of
Landlord whose address shall have been furnished to Tenant, and (b) Tenant
offers such mortgagee or lessor of Landlord a reasonable opportunity with due
diligence to cure the default, including time to obtain possession of the
Premises by power of sale or judicial foreclosure, if such should prove
necessary to effect a cure.
ARTICLE 19
----------
SURRENDER OF THE PREMISES
-------------------------
Section 19.1 Upon the Expiration Date or earlier termination of this Lease,
or upon any re-entry of the Premises by Landlord without terminating this Lease
pursuant to Section 13.2(b), Tenant, at Tenant's sole cost and expense, shall
peacefully vacate and surrender the Premises to Landlord in good order, broom
clean and in the same condition as at the beginning of the Term or as the
Premises may thereafter have been improved by Landlord or Tenant (provided that
Tenant's improvements were made with Landlord's consent), reasonable use and
wear thereof and repairs which are Landlord's obligations under Articles 9, 15
and 16 only excepted, and Tenant shall remove all of Tenant's Property and turn
over all keys for the Premises to Landlord. Should Tenant continue to hold the
Premises after the expiration or earlier termination of this Lease, such holding
over, unless otherwise agreed to by Landlord in writing, shall constitute and be
construed as a tenancy at sufferance at monthly installments of Rent equal the
greater of to two hundred percent (200%) of the monthly portion of Rent in
effect as of the date of expiration or earlier termination or two hundred
percent (200%) of the fair market rental value of the Premises, and subject to
all of the other terms, charges and expenses set forth herein except any right
to renew this Lease or to expand the Premises or any right to additional
services. Tenant shall also be liable to Landlord for all damage which Landlord
suffers because of any holding over by Tenant, and Tenant shall indemnify
Landlord against all claims made by any other tenant or prospective tenant
against Landlord resulting from delay by Landlord in delivering possession of
the Premises to such other tenant or prospective tenant. The provisions of this
Article 19 shall survive the expiration or earlier termination of this Lease.
ARTICLE 20
----------
LANDLORD'S RIGHT TO INSPECT
---------------------------
Section 20.1 Landlord shall retain duplicate keys, cards, access codes or
other access means to all doors of the Premises. Tenant shall provide Landlord
with new keys should Tenant
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receive Landlord's consent to change the locks. Landlord shall have the right to
enter the Premises at reasonable hours (or, in the event of an emergency, at any
hour) (a) to exhibit the same to present to prospective mortgagees, lessors or
purchasers during the Term and to prospective tenants during the last year of
the Term. (b) to inspect the Premises. (c) to confirm that Tenant is complying
with all of Tenant's covenants and obligations under this Lease. (d) to clean or
make repairs required of Landlord under the terms of this Lease. (e) to make
repairs to areas adjoining the Premises, and (f) to repair and service utility
lines or other components of the Building; provided, however, Landlord shall use
reasonable efforts to minimize interference with Tenant's business. Landlord
shall not be liable to Tenant for the exercise of Landlord's rights under this
Article 20 and Tenant hereby waives any claims for damages for any injury,
inconvenience or interference with Tenant's business, any loss of occupancy or
quiet enjoyment of the Premises, and any other loss occasioned thereby.
ARTICLE 21
----------
SECURITY DEPOSIT
----------------
Section 21.1 Tenant's Security Deposit shall be held by Landlord, without
liability for interest except to the extent required by law, as security for the
performance of Tenant's obligations under this Lease. Unless required by
applicable law, Landlord shall not be required to keep the Security Deposit
segregated from other funds of Landlord. Tenant shall not assign or in a any way
encumber the Security Deposit. Upon the occurrence of any Event of Default by
Tenant, Landlord shall have the right, without prejudice to any other remedy, to
use the Security Deposit, or portions thereof, to the extent necessary to pay
any arrearages in Rent, and any other damage, injury or expense. Following any
such application of all or any portion of the Security Deposit, Tenant shall pay
to Landlord, on demand, the amount so applied in order to restore the Security
Deposit to its original amount. If Tenant is not in default at the termination
of this Lease, any remaining balance of the Security Deposit shall be promptly
returned to Tenant, provided that Tenant surrenders the Premises without damage
pursuant to Article 19 hereof. If Landlord transfers its interest in the
Premises during the Term, Landlord shall assign the Security Deposit to the
transferee, and thereafter Landlord shall have no further liability to Tenant
for the Security Deposit. Notwithstanding anything contained herein to the
contrary, after the third (3rd) anniversary of the Commencement Date, Tenant may
request that Landlord decrease the amount of Security Deposit to S5,999,94.
Landlord will agree to such decrease so long as Tenant has not been in default
under this Lease during the preceding three (3) years.
33
<PAGE>
ARTICLE 22
----------
BROKERAGE
---------
Section 22.1 Tenant and Landlord each represent and warrant to the other
that it has not entered into any agreement with, or otherwise had any dealings
with, any broker or agent in connection with the negotiation or execution of
this Lease which could form the basis of any claim by any such broker or agent
for a brokerage fee or commission, finder's fee, or any other compensation of
any kind or nature in connection herewith, other than with Brokers, and each
party shall, and hereby agrees to, indemnify and hold the other harmless from
all costs (including court costs, investigation costs, and attorneys' fees),
expenses, or liability for commissions or other compensation claimed by any
broker or agent with respect to this Lease which arise out of any agreement or
dealings, or alleged agreement or dealings, between the indemnifying party and
any such agent or broker, other than with Brokers. Landlord is responsible for
paying the Brokers pursuant to separate agreements with the Brokers. This
provision shall survive the expiration or earlier termination of this Lease.
ARTICLE 23
----------
OBSERVANCE OF RULES AND REGULATIONS
-----------------------------------
Section 23.1 Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully and comply strictly with all Rules and
Regulations (herein so called) attached to this Lease as such Rules and
Regulations may be changed from time to time. Landlord shall at all times have
the right to make reasonable changes in and additions to such Rules and
Regulations: provided Landlord gives Tenant prior notice of such changes and
provided that such new rules and regulations or changes in existing rules and
regulations do not conflict with this Lease, and do not materially interfere
with the lawful conduct of Tenant's business in the Premises. Any failure by
Landlord to enforce any of the Rules and Regulations now or hereafter in effect,
either against Tenant or any other tenant in the Building, shall not constitute
a waiver of any such Rules and Regulations. Landlord shall not be liable to
Tenant for the failure or refusal by any other tenant, guest, invitee, visitor,
or occupant of the Building to comply with any of the Rules and Regulations.
ARTICLE 24
----------
NOTICES
-------
Section 24.1 All notices, consents, demands, requests, documents, or other
communications (other than payment of Rent) required or permitted hereunder
(collectively,
34
<PAGE>
"notices") shall be deemed given, whether actually received or not, upon
delivery by hand or delivery by air express courier (with signed receipts) to
the other party, or on the second Business Day after deposit in the United
States mail, postage prepaid, certified, return receipt requested, except for
notice of change of address which shall be deemed given only upon actual
receipt. The addresses of the parties for notices are set forth in Article 1, or
any such other addresses subsequently specified by each party in notices given
pursuant to this Section 24.1.
ARTICLE 25
----------
MISCELLANEOUS
-------------
Section 25.1 Professional Fees. In any action or proceeding brought by
-----------------
either party against the other under this Lease, the prevailing party shall be
entitled to recover from the other party its professional fees for attorneys,
appraisers and accountants, its investigation costs, and any other legal
expenses and court costs incurred by the prevailing party in such action or
proceeding.
Section 25.2 Reimbursements. Wherever the Lease requires Tenant to
--------------
reimburse Landlord for the cost of any item, such costs will be the reasonable
and customary charge periodically established by Landlord for such item.
Landlord shall keep in its on-site manager's office a schedule of such charges
(which Landlord may periodically change) for Tenant's examination. The schedule
of charges may include, at the discretion of Landlord, a reasonable allocation
of overhead, administrative, and related costs and a reasonable fee for
Landlord's agent or manager who performs such services or arranges for
performance of such services. All such charges shall be payable upon demand as
Additional Rent.
Section 25.3 Severability. Every agreement contained in this Lease is, and
------------
shall be construed as, a separate and independent agreement. If any term of this
Lease or the application thereof to any person or circumstances shall be
invalid or unenforceable, the remaining agreements contained in this Lease shall
not be affected.
Section 25.4 Non-Merger. There shall be no merger of this Lease with any
----------
ground leasehold interest or the fee estate in the Project or any part thereof
by reason of the fact that the same person may acquire or hold, directly or
indirectly, this Lease or any interest in this Lease as well as any ground
leasehold interest or fee estate in the Project or any interest in such fee
estate.
Section 25.5 Landlord's Liability. Anything contained in this Lease to the
--------------------
contrary notwithstanding, Tenant agrees that Tenant shall look solely to the
estate and property of Landlord in the Project, including all applicable
insurance proceeds, for the collection of any judgment or other judicial process
requiring the payment of money by Landlord for any default
35
<PAGE>
or breach by Landlord under this Lease, subject, however, to the prior rights of
any mortgagee or lessor of the Project. No other assets of Landlord or any
partners, shareholders, or other principals of Landlord shall be subject to
levy, execution or other judicial process for the satisfaction of Tenant's
claim.
Section 25.6 Force Majeure. Whenever the period of time is herein
-------------
prescribed for action to be taken by Landlord or Tenant, Landlord or Tenant
shall not be liable or responsible for, and there shall be excluded from the
computation for any such period of time, any delays due to force majeure, which
term shall include strikes, riots, acts of God, shortages of labor or materials,
war, governmental approvals, laws, regulations, or restrictions, or any other
cause of any kind whatsoever which is beyond the reasonable control of Landlord
or Tenant. Force Majeure shall not excuse or delay Tenant's obligation to Rent
or any other amount due under this Lease.
Section 25.7 Headings. The article headings contained in this Lease are for
--------
convenience only and shall not enlarge or limit the scope or meaning of the
various and several articles hereof. Words in the singular number shall be held
to include the plural, unless the context otherwise requires. All agreements and
covenants herein contained shall be binding upon the respective heirs, personal
representatives, and successors and assigns of the parties thereto.
Section 25.8 Successors and Assigns. All agreements and covenants herein
----------------------
contained shall be binding upon the respective heirs, personal representatives,
successors and assigns or the parties hereto. If there be more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and several. If
there is a guarantor of Tenant's obligations hereunder, Tenant's obligations
shall be joint and several obligations of Tenant and such guarantor, and
Landlord need not first proceed against Tenant hereunder before proceeding
against such guarantor, and any such guarantor shall not be released from its
guarantee for any reason, including any amendment of this Lease, any forbearance
by Landlord or waiver of any of Landlord's rights, the failure to give Tenant or
such guarantor any notices, or the release of any party liable for the payment
or performance of Tenant's obligations hereunder. Notwithstanding the foregoing,
nothing contained in this Section 25.8 shall be deemed to override Article 8.
Section 25.9 Landlord's Representations. Neither Landlord nor Landlord's
--------------------------
agents or brokers have made any representations or promises with respect to the
Premises, the Building, the Parking Facility, the Land, or any other portions of
the Project except as herein expressly set forth and all reliance with respect
to any representations or promises is based solely on those contained herein. No
rights, easements, or licenses are acquired by Tenant under this Lease by
implication or otherwise except as, and unless, expressly set forth in this
Lease.
Section 25.10 Entire Agreement: Amendments. This Lease and the Exhibits and
----------------------------
Riders attached hereto set forth the entire agreement between the parties and
cancel all prior negotiations, arrangements, brochures, agreements, and
understandings, if any, between
36
<PAGE>
Landlord and Tenant regarding the subject matter of this Lease. No amendment or
modification of this Lease shall be binding or valid unless expressed in writing
executed by both parties hereto and, as more fully provided under Section 18.2
above, shall not be binding without the consent of any then existing mortgagee
or ground lessor.
Section 25.11 Tenant's Authority. If Tenant signs as a corporation,
------------------
execution hereof shall constitute a representation and warranty by Tenant that
Tenant is a duly organized and existing corporation, that Tenant has been and is
qualified to do business in the State of Illinois and in good standing with the
State of Illinois, that the corporation has full right and authority to enter
into this Lease, and that all persons signing on behalf of the corporation were
authorized to do so by appropriate corporate action. If Tenant signs as a
partnership, trust, or other legal entity, execution hereof shall constitute a
representation and warranty by Tenant that Tenant has complied with all
applicable laws, rules, and governmental regulations relative to Tenant's right
to do business in the State of Illinois, that such entity has the full right and
authority to enter into this Lease, and that all persons signing on behalf of
Tenant were authorized to do so by any and all necessary or appropriate
partnership, trust, or other actions.
Section 25.12 Governing Law. This Lease shall be governed by and construed
-------------
under the laws of the State of Illinois. Any action brought to enforce or
interpret this Lease shall be brought in the court of appropriate jurisdiction
in Cook County, Illinois. Should any provision of this Lease require judicial
interpretation, Landlord and Tenant hereby agree and stipulate that the court
interpreting or considering same shall not apply the presumption that the terms
hereof shall be more strictly construed against a party by reason of any rule or
conclusion that a document should be construed more strictly against the party
who itself or through its agents prepared the same, it being agreed that all
parties hereto have participated in the preparation of this Lease and that each
party had full opportunity to consult legal counsel of its choice before the
execution of this Lease.
Section 25.13 Tenant's Use of Name of the Building. Tenant shall not,
------------------------------------
without the prior written consent of Landlord, use the name of the Building for
any purpose other than as the address of the business to be conducted by Tenant
in the Premises, and Tenant shall not do or permit the doing of anything in
connection with Tenant's business or advertising (including brokers' flyers
promoting sublease space) which in the reasonable judgment of Landlord may
reflect unfavorably on Landlord or the Building or confuse or mislead the public
as to any apparent connection or relationship between Tenant and Landlord, the
Building, or the Land.
Section 25.14 Adjacent Lights. Any elimination or shutting off of light,
---------------
air, or view by any structure which may be erected on lands adjacent to the
Building shall in no way affect this Lease and Landlord shall have no liability
to Tenant with respect thereto.
Section 25.15 Chances to Project by Landlord. Landlord shall have the
------------------------------
unrestricted right to make changes to all portions of the Project in Landlord's
reasonable discretion for the
37
<PAGE>
purpose of improving access or security to the Project or the flow of pedestrian
and vehicular traffic therein. Landlord shall have the right at any time,
without the same constituting an actual or constructive eviction and without
incurring any liability to Tenant therefor, to change the arrangement or
location of entrances or passageways, doors and doorways, corridors, elevators,
stairs, bathrooms, or any other Common Areas so long as reasonable access to the
Premises remains available. Landlord shall also have the right to (a) rearrange.
change, expand or contract portions of the Project constituting Common Areas (b)
to use Common Areas while engaged in making improvements, repairs or alterations
to the Project, or any portion thereof, and (c) to do and perform such other
acts and make such other changes in to or with respect to the Project, or any
portion thereof, as Landlord may, in the exercise of sound business judgment,
deem to be appropriate. Landlord shall be entitled to change the name or address
of the Building or the Project. Landlord shall have the right to close, from
time to time, the Common Areas and other portions of the Project for such
temporary periods as Landlord deems legally sufficient to evidence Landlord's
ownership and control thereof and to prevent any claim of adverse possession by,
or any implied or actual dedication to, the public or any party other than
Landlord.
Section 25.16 Time of Essence. Time is of the essence of this Lease.
---------------
Section 25.17 Landlord's Acceptance of Lease. The submission of this Lease
------------------------------
to Tenant shall not be construed as an offer and Tenant shall not have any
rights with respect thereto unless said Lease is consented to by mortgagee, and
any lessor of Landlord, to the extent such consent is required, and Landlord
executes a copy of this Lease and delivers the same to Tenant.
Section 25.18 Performance by Tenant. All covenants and agreements to be
---------------------
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant, at Tenant's sole cost and expense, and without any abatement of Rent. If
Tenant shall fail to pay any Rent, other than Base Rent, required to be paid by
it hereunder or shall fail to perform any other act on its part to be performed
hereunder, and such failure shall continue for longer than the period of cure,
if any, permitted in Section 13.1, Landlord may, at its option, without waiving
or releasing Tenant from obligations of Tenant, make any such payment or perform
any such other act on behalf of Tenant. All sums so paid by Landlord/and all
necessary incidental costs, together with interest thereon at the Interest Rate,
from the date of such payment by Landlord, shall be payable to Landlord on
demand. Tenant covenants to pay any such sums, and Landlord shall have (in
addition to any other right or remedy of Landlord) the same rights and remedies
in the event of the non-payment thereof by Tenant as in the case of default by
Tenant in the payment of Rent.
Section 25.19 Financial Statements. At any time during the term of this
--------------------
Lease, Tenant shall, upon twenty (20) days prior written notice from Landlord,
provide Landlord with a current financial statement and financial statements of
the two (2) years prior to the current financial
38
<PAGE>
statement year. Such statement shall be prepared in accordance with generally
accepted accounting principles and, if such is the normal practice of Tenant,
shall be audited by an independent certified public accountant.
Section 25.20 Signage. Tenant shall be entitled to Building standard
-------
identification in the Building directory and Building standard identification on
the entrance to the Premises.
ARTICLE 26
----------
SUBSTITUTION SPACE
------------------
Section 26.1 Landlord shall have the right at any time prior to the end of
the Term of this Lease, or any renewal or extension hereof, to substitute,
instead of the Premises, other space within the Building (which space shall have
a Net Rentable Area, as reasonably determined by Landlord, of not less than 90%
of the Net Rentable Area in the Premises as of the date of such substitution)
hereinafter called the "Substitution Space". The Substitution Space shall be in
a commercially reasonable configuration.
Section 26.2 If Landlord desires to exercise such right prior to the
Commencement Date. Landlord shall give written notice thereof to Tenant not
later than thirty (30) days prior to the effective date of such substitution,
which notice shall specify the Substitution Space in question and the
description of the Premises set forth in the Lease shall, without further act on
the part of Landlord or Tenant, be deemed amended so that the Substitution Space
shall, for all purposes, be deemed the Premises hereunder and all of the terms,
covenants, conditions, provisions, and agreements of this lease, including those
agreements to pay Rent, appropriately adjusted based upon the square footage of
the Substitution Space. shall continue in full force and effect and shall apply
to the Substitution Space.
Section 26.3 If Landlord desires to exercise such right after the
Commencement Date. Landlord shall give Tenant at least sixty (60) days' prior
written notice thereof specifying the effective date of such substitution,
whereupon, as of such effective date: (a) the description of the Premises set
forth in this lease shall, without further act on the part of Landlord or
Tenant, be deemed amended so that the Substitution Space shall, for all
purposes, be deemed the Premises hereunder, and all of the terms, covenants,
conditions, provisions, and agreements of this Lease, including those agreements
to pay Rent, shall continue in full force and effect and shall apply to the
Substitution Space. and (b) Tenant shall move from the present Premises into
the Substitution Space and shall vacate and surrender possession to Landlord of
the present Premises. and if Tenant continues to occupy the present Premises
after such effective date, then thereafter, during the period of such holdover
occupancy in the present Premises, Tenant shall pay Rent for the present
Premises as set forth in this Lease. in addition to the Rent for the
Substitution Space at the above-described rates. Tenant shall accept possession
of the
39
<PAGE>
Substitution Space in its "as-is" condition as of such effective date, except
that any painted surfaces shall be either cleaned or repainted and any carpeting
shall be either replaced or cleaned so that they are in a similar condition
to the painting and carpeting in the Premises and if the Central systems of the
Building through which Tenant will obtain telephone and electrical services in
the Substitution Space is not capable of providing the same or better services
to the Substitution Space as is provided to the Premises prior to such
relocation. Landlord shall provide such Central systems for telephone and
electrical services to the Substitution Space, including. without limitation,
any so called T-1 communications lines available to the present Premises.
Section 26.4 Notwithstanding the provisions of Section 26.3 above, if
Landlord exercises its right to substitute the Substitution Space for the
Premises after the Commencement Date, then Tenant shall have the option to
require Landlord to alter the Substitution Space in a similar manner as the
present Premises were delivered to Tenant. Such option shall be exercised, if at
all, by notice from Tenant to Landlord within fifteen (15) days after the
aforesaid notice from Landlord to Tenant of such proposed substitution;
otherwise, such option in favor of Tenant shall be null and void. Tenant shall
not have the right to exercise such option at any time when Tenant is in default
under any of the terms, covenants, conditions, provisions, or agreements of this
Lease. If such option is validly so exercised by Tenant: (a) Tenant shall
continue to occupy the present Premises (upon all of the terms, covenants,
conditions, provisions, and agreements of this Lease, including the covenant for
the payment of Rent) until the date on which Landlord shall have substantially
completed such alteration work in the Substitution Space: and (b) Tenant shall
move from the present Premises into the Substitution Space within seven (7) days
after the date of such substantial completion by Landlord and shall vacate and
surrender possession to Landlord of the present Premises after such date, then,
thereafter during the period of such occupancy, Tenant shall pay Rent for the
present Premises as set forth in this lease in addition to the Rent for the
Substitution Space at the above-described rates. With respect to such alteration
work in the Substitution Space, if Tenant requests materials or installations
other than those originally installed by Landlord, or if Tenant shall make
changes in the work (such non-original materials or installations or changes
being subject to Landlord's prior written approval), and if such non-original
materials or installations or changes shall delay the work to be performed by
Landlord, or if Tenant shall otherwise delay the substantial completion of the
work, the occurrence of such delays shall in no event postpone the date for the
commencement of the payment of Rent for such Substitution Space beyond the date
on which such work would have been substantially completed but for such delays,
and in addition, Tenant shall continue to pay Rent for the present Premises as
set forth in this Lease until it vacates and surrenders same as aforesaid.
Landlord at its discretion may substitute materials of like quality for the
materials originally utilized.
Section 26.5 If Landlord exercises this relocation right after the
Commencement Date. Landlord shall reimburse Tenant for Tenant's reasonable
out-of-pocket expenses for moving Tenant's furniture, equipment, supplies and
telephones and telephone equipment and other communications equipment from the
present Premises to the Substitution Space and for reprinting Tenant's
stationery of the same quality and quantity of Tenant's stationery supply on
40
<PAGE>
hand immediately prior to Landlord's notice to Tenant of the exercise of this
substitution right.
ARTICLE 27
----------
OTHER DEFINITIONS
-----------------
When used in this Lease, the terms set forth hereinbelow shall have the
following meanings: (a) "Building Standard" means the quality of materials,
finishes and workmanship from time to time specified by Landlord for the
Building. (b) "Business Days" shall mean Monday through Friday (except for
Holidays); "Business Hours" shall mean 8:00 a.m. to 6:00 p.m. on Monday through
Friday and 9:00 a.m. to 1:00 p.m. on Saturdays (except for Holidays); and
"Holidays" shall mean those holidays designated by Landlord, which holidays
shall be consistent with those holidays designated by landlords of other
first-class office buildings in the Chicago suburban area. (c) "Central" shall
be defined as that portion of any Building system or component which is within
the core and/or common to and/or serves or exists for the benefit of other
tenants in the Building. (d) "Common Areas" shall mean those certain areas and
facilities of the Building and the Parking Facility and those certain
improvements to the Land which are from time to time provided by Landlord for
the use of tenants of the Building and their employees, clients, customers,
licensees and invitees or for use by the public, which facilities and
improvements include any and all corridors, elevator foyers, vending areas,
bathrooms, electrical and telephone rooms, mechanical rooms, janitorial areas
and other similar facilities of the Building and of the Parking Facility and any
and all grounds, parks, landscaped areas, outside sitting areas, sidewalks,
walkways, tunnels, pedestrianways, skybridges, and generally all other
improvements located on the Land, or which connect the Land to other buildings.
(e) The words "day" or "days" shall refer to calendar days, except where
"Business Days" are specified. (f) The words "herein", "hereof", "hereby",
"hereunder" and words of similar import shall be construed to refer to this
Lease as a whole and not to any particular Article or Section thereof unless
expressly so stated. (g) The words "include" and "including" shall be construed
as if followed by the phrase "without being limited to." (h) Reference to
Landlord as having "no liability to Tenant" or being "without liability to
Tenant" or words of like import 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 Tenant's other obligations hereunder, or to be compensated
for loss or injury suffered or to enforce any other right or kind of liability
whatsoever against Landlord under or with respect to this Lease or with respect
to Tenant's use or occupancy of the Premises. (i) A "repair" shall be deemed to
include such rebuilding, replacement and restoration as may be necessary to
achieve and maintain good working order and condition. (j) The "termination of
this Lease" and words of like import includes the expiration of the Term or the
cancellation of this Lease pursuant to any of the provisions of this Lease or to
law. Upon the termination of this Lease, the Term shall end at 11:59 p.m. on the
date of termination as if such date were the Expiration Date, and neither party'
shall have any further obligation or liability to the other after
41
<PAGE>
such termination except (i) as shall be expressly provided for in this Lease and
(ii) 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 be apportioned as of the date of such
termination) 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
"terms of this Lease" shall be deemed to include all terms, covenants,
conditions, provisions, obligations, limitations, restrictions, reservations and
agreements contained in this Lease. (l) "Tenant" shall be deemed to include
Tenant's successors and assigns (to the extent permitted by Landlord) and any
and all occupants of the Premises permitted by Landlord and claiming by, through
or under Tenant. (m) A "year" shall mean a calendar year.
ARTICLE 28
----------
CANCELLATION
------------
Tenant shall have the option, to be exercised as hereinafter provided, to
terminate the term of this Lease effective as of the day before the third (3rd)
anniversary of the Commencement Date (the "Termination Date"). Such option shall
be exercised, if at all, time being of the essence, by written notice (the
Termination Notice") given by Tenant to Landlord no later than nine (9) months
prior to the Termination Date, and subject to payment by Tenant to Landlord of
the sum of $12,218.00 (the "Termination Fee"). The Termination Fee shall be paid
by Tenant simultaneously with the giving of the Termination Notice. Tenant may
not, unless Landlord otherwise agrees, exercise its option to terminate this
Lease pursuant to this Article 28 at any time at which a default by Tenant
exists under this Lease, and no such termination shall be effective if such
default exists unless Landlord otherwise agrees. Any notice of exercise of
Tenant's option to terminate the term of this Lease pursuant to this Article 28
shall be irrevocable by Tenant once given. If Tenant so exercises its option to
terminate the term of this Lease and pays to Landlord the Termination Fee as
above provided, then effective as of the Termination Date, this Lease shall be
deemed to have expired by lapse of time as if the Termination Date were the
originally stated Expiration Date, and Tenant shall return the Premises to
Landlord on the Termination Date in accordance with the requirements of this
Lease.
42
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have set their hands and Seals
hereunto and have caused this Lease to be executed by duly authorized officials
thereof, as of the day and year set forth on the cover page hereof.
LANDLORD:
PRENTISS PROPERTIES
ACQUISITION PARTNERS, L.P., a
Delaware limited partnership
By: Prentiss Properties I, Inc..
general partner
By:/s/ L J. Krueger
-----------------------------
Name: L J. Krueger
------------------------
Title: EVP
-----------------------
By:/s/ J Kevan Dilbeck
-----------------------------
Name: J Kevan Dilbeck
------------------------
Title: Vice President
-----------------------
TENANT:
INTERACTIVE COUPON
MARKETING GROUP, INC., a
Michigan corporation
By:/s/ Hillel Levin
-----------------------------
Name: Hillel Levin
------------------------
Title: President
-----------------------
43
<PAGE>
EXHIBIT C
BASE RENT SCHEDULE
- --------------------------------------------------------------------------------
Annual Base Rent Per
Period Annual Base Rent Square Foot
- --------------------------------------------------------------------------------
From the Commencement Date to the day
before the 1st anniversary of the
Commencement Date $71,999.28 $22.14
- --------------------------------------------------------------------------------
From the 1st anniversary of the
Commencement Date to the day before the
2nd anniversary of the Commencement Date $86,178.00 $26.50
- --------------------------------------------------------------------------------
From the 2nd anniversary of the
Commencement Date to the day before the
3rd anniversary of the Commencement Date $89,430.00 $27.50
- --------------------------------------------------------------------------------
From the 3rd anniversary of the
Commencement Date to the day before the
4th anniversary of the Commencement Date $92,129.16 $28.33
- --------------------------------------------------------------------------------
From the 4th anniversary of the
Commencement Date to the Expiration $94,860.84 $29.17
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 10.11
================================================================================
LEASE AGREEMENT
BETWEEN
360 NORTH MICHIGAN TRUST, A DELAWARE BUSINESS TRUST,
AS LANDLORD,
AND
COOLSAVINGS.COM INC.,
A MICHIGAN CORPORATION,
AS TENANT
DATED: JANUARY 3, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
LEASE INFORMATION SUMMARY ............................................................. iv
1. LEASE GRANT ........................................................................ 1
2. TERM ............................................................................... 1
2.1. Commencement Date ............................................................. 1
2.2. Condition of Premises ......................................................... 1
2.3. INTENTIONALLY DELETED ......................................................... 1
3. RENT ............................................................................... 1
3.1. Base Rent ..................................................................... 1
3.2. Additional Rent ............................................................... 1
3.3. Payment ....................................................................... 4
3.4. Rent Abatement ................................................................ 5
4. SECURITY DEPOSIT ................................................................... 5
4.1. Cash .......................................................................... 5
4.2. Letter of Credit .............................................................. 5
4.3. INTENTIONALLY DELETED ......................................................... 6
5. LANDLORD'S OBLIGATIONS ............................................................. 6
5.1. Services ...................................................................... 6
5.2. Utilities ..................................................................... 7
5.3. Excess Utility Use ............................................................ 7
5.4. Restoration of Services ....................................................... 8
6. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE .................................... 8
6.1. Improvements; Alterations ..................................................... 8
6.2. Repairs and Maintenance ....................................................... 9
6.3. Performance of Work ........................................................... 9
6.4. Mechanic's Liens .............................................................. 9
6.5. Rooftop Communications Equipment .............................................. 10
6.6. Construction of Roof Deck ..................................................... 10
6.7. Installation of Electrical Generator(s) ....................................... 10
7. USE ................................................................................ 11
8. ASSIGNMENT AND SUBLETTING .......................................................... 11
8.1. Transfers; Consent ............................................................ 11
8.2. Recapture ..................................................................... 13
8.3. Additional Compensation ....................................................... 13
9. INSURANCE; WAIVERS; SUBROGATION; INDEMNITY ......................................... 13
9.1. Insurance ..................................................................... 13
9.2. Waiver of Negligence; No Subrogation .......................................... 14
9.3. Indemnity by Tenant ........................................................... 14
9.4. Indemnity by Landlord ......................................................... 15
10. SUBORDINATION; ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE ......................... 15
10.1. Subordination ............................................................... 15
10.2. Attornment .................................................................. 15
</TABLE>
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<TABLE>
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10.3. Notice to Landlord's Mortgagee .............................................. 15
11. RULES AND REGULATIONS ............................................................. 15
12. CONDEMNATION ...................................................................... 16
12.1. Total Taking ................................................................ 16
12.2. Partial Taking -- Tenant's Rights ........................................... 16
12.3. Partial Taking -- Landlord's Rights ......................................... 16
12.4. Award ....................................................................... 16
13. FIRE OR OTHER CASUALTY ............................................................. 17
13.1. Landlord's Rights ............................................................ 17
13.2. Repair Obligation ............................................................ 17
14. PERSONAL PROPERTY TAXES ............................................................ 17
15. DEFAULT ............................................................................ 18
15.1. Events of Default ............................................................ 18
15.2. Default Interest ............................................................. 19
16. REMEDIES ........................................................................... 19
16.1. Right To Terminate ........................................................... 19
16.2. Receipt Of Money After Termination ........................................... 19
16.3. Recovery Of Damages .......................................................... 19
16.4. Right To Re-Enter ............................................................ 19
16.5. Independent Covenant ......................................................... 20
16.6. Legal Expenses ............................................................... 20
17. PAYMENT BY TENANT; NON-WAIVER ...................................................... 20
17.1. Payment by Tenant ............................................................ 20
17.2. No Waiver .................................................................... 21
18. SURRENDER OF PREMISES .............................................................. 21
19. HOLDING OVER ....................................................................... 21
20. CERTAIN RIGHTS RESERVED BY LANDLORD ................................................ 22
21. MISCELLANEOUS ...................................................................... 23
21.1. Landlord Transfer ............................................................ 23
21.2. Landlord's Liability ......................................................... 24
21.3. Force Majeure ................................................................ 24
21.4. Brokerage .................................................................... 24
21.5. Estoppel Certificates ........................................................ 24
21.6. Notices ...................................................................... 25
21.7. Severability ................................................................. 25
21.8. Amendments; and Binding Effect ............................................... 25
21.9. Quiet Enjoyment .............................................................. 25
21.10. No Merger ................................................................... 25
21.11. No Offer .................................................................... 26
21.12. Entire Agreement ............................................................ 26
21.13. Calendar Days ............................................................... 26
21.14. Prohibition Against Leasehold Mortgages ..................................... 26
21.15. Waiver of Trial by Jury ..................................................... 26
21.16. Landlord's Remedies Cumulative .............................................. 26
</TABLE>
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<TABLE>
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21.17. Prohibition Against Recordation ............................. 27
21.18. Joint and Several Liability ................................. 27
21.19. Corporate Tenants ........................................... 27
21.20. Right of First Offer ........................................ 27
21.21. Right of First Refusal ...................................... 28
21.22. Option To Renew ............................................. 29
21.23. Tenant's First Expansion Option ............................. 29
21.24. Tenant's Second Expansion Option ............................ 30
21.25. Tenant's Third Expansion Option ............................. 31
21.26. Arbitration ................................................. 32
21.27. Tenant's Termination Right .................................. 33
</TABLE>
EXHIBIT A - OUTLINE OF PREMISES
EXHIBIT B - BUILDING RULES AND REGULATIONS
EXHIBIT C - LETTER OF CREDIT
EXHIBIT D - ESTOPPEL CERTIFICATE
EXHIBIT E - INTENTIONALLY DELETED
EXHIBIT F - WORKLETTER
EXHIBIT G - CERTIFICATE OF COMMENCEMENT DATE
EXHIBIT H - LANDLORD'S BASE BUILDING WORK
EXHIBIT I - SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
EXHIBIT J - SIGNAGE
iii
<PAGE>
LEASE INFORMATION SUMMARY
-------------------------
I. LEASE DATE January 3, 2000
----------
II PARTIES AND ADDRESSES
----------------------
A. Landlord: 360 North Michigan Trust, a Delaware business
trust
B. Landlord's Address for c/o Douglas Elliman-Beitler Management
Notices: Corporation
360 North Michigan Avenue
Chicago, Illinois 60601
Attention: General Manager
With copies to:
Mr. J. Paul Beitler
181 West Madison Street
Suite 3900
Chicago, Illinois 60602
And to:
Emmet, Marvin & Martin, LLP
120 Broadway
New York, New York 10271
Attention: Patrick A. McCartney, Esq.
And to:
Much Shelist Freed Denenberg Ament &
Rubenstein, P.C.
200 North LaSalle Street
Suite 2100
Chicago, Illinois 60601
Attention: Michael B. Sadoff, Esq.
C. Tenant: coolsavings.com inc., a Michigan corporation
D. Tenant's Address for 8755 West Higgins Road
Notices Prior to the Suite 100
Commencement Date: Chicago, Illinois 60631
Attention: President
With a copy to:
Golden & Gorman, P.C.
255 East Brown Street
Suite 110
Birmingham, Michigan 48009
Attention: Robert D. Gorman, Esq.
iv
<PAGE>
E. Tenant's Address for 360 North Michigan Avenue
Notices After the Suite 1800
Commencement Date: Chicago, Illinois 60601
Attention: President
With a copy to:
Golden & Gorman, P.C.
Suite 110
Birmingham, Michigan 48009
Attention: Robert D. Gorman, Esq.
F. Guarantor: None
III. PROPERTY INFORMATION
--------------------
A. Building: 360 North Michigan Avenue, Chicago, Illinois
60601, including all related land, landscaped
areas, driveways, parking facilities and
similar improvements to the extent applicable
B. Premises: Suite No. 1800 in the Building comprising
approximately forty-three thousand eight
hundred forty-nine (43,849) rentable square
feet on the 8/th/, 18/th/, 19/th/ and 21/st/
floors (Section 1)
IV. TERM
----
A. Term of Lease: Ten (10) years beginning on the Commencement
Date and ending on the Termination Date;
provided, however, if the Commencement Date
occurs on any date which is not the first day
of a calendar month, then the Term shall be
increased to ten (10) years plus a partial
month beginning on the Commencement Date
through and including the last day of the
calendar month in which the Commencement Date
occurs (Section 2)
B. Commencement Date: The later of (i) May 1, 2000, or (ii) seven
(7) days after Landlord notifies Tenant that
Landlord has substantially completed the
Premises, provided that if the Premises are
not substantially completed as defined in the
Workletter on or before August 1, 2000 for
any reason due to the fault of Landlord, then
Base Rent will abate until the Premises are
substantially completed, and once the Term
commences, Tenant will receive one (1) day of
free rent for each day after August 1, 1999
that the Premises were not substantially
completed (Section 2)
v
<PAGE>
C. Termination Date: The date preceding the tenth (10th)
anniversary of the Commencement Date, unless
the Commencement Date occurs on any date
which is not the first day of a calendar
month, in which event the Termination Date
shall be the last day of the calendar month
in which the tenth (10/th/) anniversary of
the Commencement Date falls, subject to
Tenant's right to extend the Term as set
forth in Section 21.22 of this Lease
(Section 2)
V. RENT
----
A. Base Rent: No Rent shall be due from Tenant during the
first month of the first lease year;
$24.85 per square foot, subject to $0.50 per
square foot annual escalations commencing in
the second lease year;
$1,089,647.60 per year ($90,803.97 per month;
$24.85 per sq. ft.) during the first lease
year;$1,111,572.10 per year ($92,631.01 per
month; $25.35 per sq. ft.) during the second
lease year;$1,133,496.60 per year ($94,458.05
per month; $25.85 per sq. ft.) during the
third lease year;$1,155,421.10 per year
($96,285.09 per month; $26.35 per sq. ft.)
during the fourth lease year; $1,177,345.60
per year ($98,112.13 per month; $26.85 per
sq. ft.) during the fifth lease
year;$1,199,270.10 per year ($99,939.18 per
month; $27.35 per sq. ft.) during the sixth
lease year;$1,221,194.60 per year
($101,766.21 per month; $27.85 per sq. ft.)
during the seventh lease year;$1,243,119.10
per year ($103,593.25 per month; $28.35 per
sq. ft.) during the eighth lease
year;$1,265,043.60 per year ($105,420.30 per
month; $28.85 per sq. ft.) during the ninth
lease year; and$1,286,968.10 per year
($107,247.34 per month; $29.35 per sq. ft.)
during the tenth lease year (Section 3.1)
B. Landlord's Address for Douglas Elliman-Beitler Management
Payment of Rent: Corporation A/A/F 360 North Michigan Trust
7516 Collections Center Drive Chicago,
Illinois 60693 (Sections 3.1 and 3.3)
C. Tenant's Proportionate sixteen and eighty-one one-hundredths percent
Share: (16.81%), which equals the percentage that
the rentable square footage of the Premises
(which is stipulated by the parties to be
43,849 square feet) bears to the total square
footage of all rentable office space in the
Building (which is stipulated by the parties
to be 260,823 square feet) (Section 3.2)
D. Base Year: 2001 (Section 3.2)
E. Operating Costs Tenant's Proportionate Share of the amount by
which
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<PAGE>
Adjustment: the Operating Costs incurred during any
calendar year during the Term exceed the
Operating Costs incurred during the Base
Year. (Section 3.2)
F. Tax Adjustment: Tenant's Proportionate Share of the amounts
by which the Taxes paid during any calendar
year of the Term exceed the Taxes paid during
the Base Year (Section 3.2)
VI. OTHER PROVISIONS
----------------
A. Security Deposit: Zero until the earlier of (i) the end of the
fifth (5/th/) lease year, or (ii) the date
the Letter of Credit described below is no
longer required by Landlord; $272,411.91 on
the earlier of (a) the first day of the sixth
(6/th/) lease year, or (b) the date the
Letter of Credit described below is no longer
required by Landlord, and continuing through
the Termination Date (Section 4.1); and
Letter of Credit in the following amounts:
$1,250,000.00 during the first lease year;
$1,250,000.00 during the second lease year;
$ 937,500.00 during the third lease year;
$ 625,000.00 during the fourth lease year;
$ 312,500.00 during the fifth lease year;
and
zero during the sixth (6/th/) through tenth
(10/th/) lease years.
Notwithstanding the foregoing, but subject to
the terms of Sections 21.20, 21.21, 21.23,
21.24, and 21.25 of the Lease, if at any time
during the first five (5) lease years Tenant
becomes a company whose stock is publicly
traded, and if Tenant demonstrates to
Landlord that Tenant has cash or cash
equivalents in an amount not less than
$30,000,000.00, then the amount of the letter
of credit shall be reduced to $500,000.00,
and thereafter the amount of the letter of
credit shall be further reduced by twenty-
five percent (25%) annually. In addition,
provided that within thirty (30) days before
or after the first, second and third
anniversary dates of the date that the amount
of the letter of credit was reduced to
$500,000.00 Tenant demonstrates to Landlord
that Tenant has cash or cash equivalents in
an amount not less than $30,000,00.00, then
the letter of credit will no longer be
required by Landlord, and the only security
deposit which Tenant shall be required to
maintain with Landlord shall be cash in an
amount equal to three (3) months of Rent at
the rental rate then being paid by Tenant
under this Lease (Section 4.2)
B. Electrical Usage Rate: Separately metered (Section 5.2)
vii
<PAGE>
C. Permitted Use: General office and administrative use and for
the operation of a computer internet company
and hosting related equipment (Section 7)
D. Landlord's Broker: Douglas Elliman-Beitler Management
Corporation (Section 21.4)
E. Tenant's Broker: Julien J. Studley, Inc. (Section 21.4)
The summary of lease information set forth above and any addendum and/or
exhibit(s) attached to this Lease are incorporated into and made a part of the
following Lease. Each reference in this Lease to any of the lease information
set forth above means the respective information above, including all of the
terms provided under the particular section of this Lease pertaining to such
information. In the event of any conflict between the summary of lease
information and the provisions of this Lease, the latter will control. All
section references in this summary refer to the sections of the Lease where such
provision is described.
LANDLORD:
---------
360 NORTH MICHIGAN TRUST,
a Delaware business trust
By: DOUGLAS ELLIMAN-BEITLER
MANAGEMENT CORPORATION, an Illinois
corporation, its agent
By /s/ J. Paul Beitler
_____________________________________
Its: President
___________________________________
TENANT:
-------
coolsavings.com inc.,
a Michigan corporation
By /s/ Steven M. Golden
_____________________________________
Its: CEO
___________________________________
viii
<PAGE>
THIS LEASE AGREEMENT (the "Lease") is made and entered into as of the Lease
Date between Landlord and Tenant. All capitalized terms not otherwise defined in
the body of the Lease have the meanings established in the Lease Information
Summary above.
1. LEASE GRANT.
Subject to the terms of this Lease, Landlord leases to Tenant and Tenant
rents from Landlord the Premises in the Building. The Premises are outlined on
the floor plan attached to this Lease as Exhibit A.
---------
2. TERM.
2.1. Commencement Date.
The term of this Lease (the "Term") will commence on the Commencement Date
and will end on the Termination Date, unless earlier terminated in accordance
with the terms of Section 21.27 below. Upon taking occupancy of the Premises,
Tenant agrees to sign the Certificate of Commencement Date attached to this
Lease as Exhibit G confirming the Commencement Date and the Termination Date.
---------
2.2. Condition of Premises.
Tenant's acceptance of possession of any portion of the Premises will be
deemed conclusive evidence that Tenant has approved and accepted that portion of
the Premises in its "AS-IS" condition on the date Tenant accepts possession,
subject to the completion of normal punchlist items. Landlord has no obligation
to make any changes or improvements to the Premises except as set forth in
Section 6.1 below. The cost of any other changes and/or improvements will be
paid for by Tenant.
2.3. INTENTIONALLY DELETED.
3. RENT.
3.1. Base Rent.
Base Rent is payable by Tenant throughout the Term in the amounts and at
the times set forth in the Lease Information Summary above. The first monthly
installment of Base Rent is due and payable contemporaneously with the execution
of this Lease; subsequently, Base Rent is payable no later than the first day of
each month beginning on the second full calendar month of the Term. The monthly
Base Rent for any partial month at the beginning of the Term will equal the
product of 1/365 of the annual Base Rent in effect during the partial month
multiplied by the number of days in the partial month from and after the
Commencement Date.
3.2. Additional Rent.
(a) Payment of Additional Rent. Commencing on January 1/st/ of the
--------------------------
calendar year immediately following the Base Year, Tenant will pay to
Landlord as Additional Rent ("Additional Rent") the Operating Costs
Adjustment and the Tax Adjustment, which will be calculated and determined
by Landlord as set forth below.
(b) Definition - Operating Costs. The term "Operating Costs" means
----------------------------
all expenses and disbursements (subject to the limitations set forth below)
that Landlord incurs in connection with the ownership, operation,
maintenance and management of the Building, determined in accordance with
sound accounting principles consistently
1
<PAGE>
applied, including, but not limited to, the following costs: (1) wages and
salaries (including management fees and reimbursements of expenses incurred
by Landlord's management agent) of all employees engaged in the operation,
maintenance, and security of the Building, including taxes, insurance and
benefits relating to such costs; (2) all uniforms, supplies, tools and
materials used in the operation, supervision, maintenance, repair,
replacement and security of the Building; (3) costs for improvements made
to the Building which, although capital in nature, are reasonably expected
to reduce the normal operating costs of the Building, as well as capital
improvements made in order to comply with any law, statute, ordinance,
code, regulation or insurance requirement(s) promulgated by any
governmental authority and which is enacted or amended after the date of
this Lease, as amortized over the useful economic life of such improvements
as determined by Landlord in its reasonable discretion; (4) cost of all
utilities, except the cost of utilities reimbursable to Landlord by the
Building's tenants; (5) insurance expenses; (6) repairs, replacements, and
general maintenance of the Building, including costs of inspecting and
depreciation of machinery and equipment; (7) service or maintenance
contracts and/or agreements for the operation, maintenance, repair,
replacement, or security of the Building (including, without limitation,
alarm service, window washing, landscaping, elevator maintenance, HVAC
system maintenance, security, cleaning, trash removal, sweeping and snow
removal); (8) legal, accounting, engineering and other professional fees
and expenses relating to managing and maintaining the Building; (9) costs,
including reasonable attorney's fees, incurred in contesting, protesting,
attempting to reduce and/or attempting to restrict increases in taxes; and
(10) all other costs properly constituting operating costs according to
sound accounting principles consistently applied.
(c) Exclusions From Operation Costs. Operating Costs do not include
-------------------------------
costs for (1) capital improvements made to the Building (except capital
improvements described in Section 3.2(b)(3) above; (2) repair, replacements
and general maintenance paid by proceeds of insurance or by Tenant or other
third parties; (3) interest, principal, amortization, costs, fees, expenses
or other payments relating to any loan(s) made to Landlord which is(are)
secured by the Building, except for interest payments made in connection
with Subsection 3.2(b)(3) above; (4) depreciation; (5) real estate
brokerage and/or leasing commissions; and (6) renovations, alterations or
improvements to the space of other tenants or occupants of the Building or
vacant space in the Building; (7) any tenant work performed or alteration
of space leased to Tenant or other tenants or occupants of the Building,
whether such work or alteration is performed for the initial occupancy by
such tenants or occupants or thereafter; (8) any cash or other
consideration paid by Landlord on account of, with respect to or in lieu of
the tenant work or alterations described in clause (7) above; (9) ground
rent; (10) repairs necessitated by the negligence of Landlord or required
to cure violations of laws in effect on the Lease execution date and any
penalties or interest incurred or accumulated for any such violations; (11)
legal fees and costs associated with the negotiating, entering into and or
enforcement of any leases (other than enforcement of rules and
regulations); (12)compensation paid to officers or executives of Landlord;
(13) leasing commissions and advertising and promotional expenses; (14) the
cost of repairs incurred by reason of fire or other casualty or
condemnation to the extent that either (i) Landlord is compensated therefor
through proceeds of insurance or condemnation awards, (ii) Landlord failed
to obtain insurance against such fire or casualty, if insurance was
available at a commercially reasonable rate, against a risk of such nature
at the time of
2
<PAGE>
same (except to the extent of a commercially reasonable insurance
deductible amount or except to the extent of Landlord's payment up to the
amount of such deductible), or (iii) Landlord is not fully compensated
therefor due to the coinsurance provisions of its insurance policies on
account of Landlord's failure to obtain a sufficient amount of coverage
against such risk (except to the extent of a commercially reasonable
insurance deductible amount or except to the extent of Landlord's payment
up to the amount of such deductible); (15) overtime HVAC costs or
electricity costs if charged separately to Building tenants; (16) the cost
of performing additional services or installation to or for tenants to the
extent that such service exceeds that provided by Landlord to Tenant
without charge hereunder; (17) "takeover expenses" (i.e., expenses incurred
by Landlord with respect to space located in another building of any kind
or nature in connection with the leasing of space in the Building); (18)
any amounts payable by Landlord by way of indemnity or for damages or which
constitute a fine, interest or penalty, including interest or penalties for
any late payments of operating costs; (19) any improvement installed or
work performed or any other cost or expense incurred by Landlord in order
to comply with the requirements for the obtaining or renewal of a
certificate of occupancy for the Building or any space therein; (20) any
cost representing an amount paid for services or materials to a related
person, firm or entity to the extent such amount exceeds the amount that
would be paid for such services or materials at the then existing market
rates to an unrelated person, firm or corporation; (21) expenses
attributable to the parking garage or the storage space, the operating
costs incurred by Landlord relative to retail stores and any specialty
service in the Building; (22) the cost of correcting defects in
construction which occur or of which Landlord becomes aware within one (1)
year of the completion of such construction; and (23) the cost of overtime
or other expenses to Landlord in curing its defaults under this Lease.
(d) Definition - Taxes. The term "Taxes" means all taxes,
------------------
assessments, and governmental charges payable in a calendar year,
regardless when such Taxes become a lien upon the Building, including but
not limited to all real estate and transit district taxes and assessments,
sewer charges, sales and use taxes, ad valorem taxes, personal property
taxes, the Illinois Property Replacement Tax and any other taxes and
assessments attributable to the Building (or its operation), the grounds,
parking areas, driveways, and alleys around the Building, but excluding any
federal and state taxes on the income of Landlord from the operation of the
Building. If the present method of taxation changes so that in lieu of the
whole or any part of any Taxes, there is levied on Landlord a capital tax
directly on the rents received from the Building or a franchise tax,
assessment, or charge based, in whole or in part, upon such rents for the
Building, then all such taxes, assessments, or charges, or the part of such
taxes so based, will be deemed to be included within the term "Taxes" for
purposes of this Lease.
(e) Payment of Additional Rent. Landlord will make a good faith
--------------------------
estimate of the Additional Rent to be due from Tenant for all or part of
any calendar year during the Term, and Tenant agrees to pay to Landlord, on
January 1, 2002 and on the first day of each subsequent calendar month
during the Term, an amount equal to 1/12/th/ of the estimated Additional
Rent for such full or partial calendar year. From time to time, Landlord
may estimate and re-estimate the Additional Rent to be due from Tenant and
deliver a copy of the estimate or re-estimate to Tenant. Subsequently, the
monthly installments of Additional Rent payable by Tenant will be
appropriately adjusted in accordance with Landlord's estimations so that by
the end of the calendar year in question Tenant will have paid all of the
Additional Rent as estimated by Landlord. By
3
<PAGE>
April 1 of each calendar year, or as soon after that date as practicable,
Landlord will furnish to Tenant a statement of Operating Costs paid for the
previous year, adjusted as provided in Section 3.2(f) below (the "Operating
Costs Statement"). By September 1 of each calendar year, or as soon after
that date as practicable, Landlord will furnish to Tenant a statement of
the Taxes paid for the previous year, adjusted as provided in Section
3.2(f) below (the "Tax Statement"). If the Operating Costs Statement and/or
the Tax Statement reveal(s) that Tenant paid more in Operating Costs
Adjustment or Tax Adjustment than the actual amount for the year for which
such statement was prepared, then Landlord will either credit Tenant for
such excess within thirty (30) days or refund such excess amount to Tenant
if this Lease has expired or been terminated. Likewise, if Tenant paid less
in Operating Costs Adjustment than the actual amount for the year for which
such statement was prepared, then Tenant shall pay such deficiency to
Landlord within ten (10) days after Landlord's demand. This provision will
survive the Termination Date of this Lease.
(f) Occupancy and Tax Adjustment. With respect to any calendar year
----------------------------
or partial calendar year in which the Building is not fully occupied, the
Operating Costs and/or Taxes for such period will, for the purposes of this
Lease, be increased to the amount which would have been incurred had the
Building been fully occupied.
(g) Audit of Books and Records. Landlord shall maintain books and
--------------------------
records with respect to Operating Costs and Taxes in accordance with sound
accounting and management practices. Tenant shall have the right to examine
such books and records showing the Operating Costs and Taxes upon
reasonable prior notice to Landlord and during normal business hours within
sixty (60) days following the delivery of the Operating Costs Statement and
the Tax Statement described in Section 3.2(e) above. Unless Tenant takes
written exception to any item of Operating Costs or Taxes and specifies to
Landlord in detail the reasons for such exception as to a particular item
within sixty (60) days after the delivery of the Operating Costs Statement
and the Tax Statement, the Operating Costs Statement and the Tax Statement
shall be considered as final and accepted by Tenant. Notwithstanding any
exception made by Tenant, Tenant shall pay to Landlord the full amount of
the Operating Costs Adjustment and the Tax Adjustment, subject to
readjustment at such time as any such exception may be resolved. If Tenant
takes exception to the Operating Costs Adjustment and/or the Tax Adjustment
and so notifies Landlord in writing prior to the expiration of said sixty
(60) day period, then Landlord will seek certification from Landlord's
independent certified public accountant or consultant as to the proper
amount of the Operating Costs Adjustment and/or the Tax Adjustment. In such
event, the certification obtained by Landlord shall be considered final and
binding on both Landlord and Tenant and Tenant shall reimburse Landlord
immediately upon demand for the cost of obtaining such certification,
unless the certification reveals that the Operating Costs Adjustment and/or
the Tax Adjustment were overstated by at least five percent (5%), in which
event the cost of obtaining such certification shall be borne by Landlord.
3.3. Payment.
Tenant agrees to timely pay to Landlord during the Term Base Rent,
Additional Rent and all additional sums to be paid by Tenant to Landlord under
this Lease (collectively the "Rent"), without notice, demand, abatement,
deduction, setoff or counterclaim, at Landlord's Address for Payment of Rent or
as otherwise specified by Landlord. Tenant further agrees to pay a late fee
equal to two percent (2%) of any delinquent payment which is more than five (5)
4
<PAGE>
days late to reimburse Landlord for its cost and inconvenience incurred as a
consequence of Tenant's delinquency. In no event, however, will the charges
permitted under this Section 3.3 or elsewhere in this Lease, to the extent they
are considered to be interest under law, exceed the maximum lawful rate of
interest.
3.4. Rent Abatement.
In the event any of the Base Building Work described on Exhibit H attached
---------
hereto which Landlord is required to perform under this Lease is not
substantially completed on or before the end of the first lease year of the Term
for any reason other than force majeure or a delay caused by Tenant, then the
Base Rent due from Tenant beginning in the second lease year shall remain equal
to the Base Rent owed by Tenant hereunder during the first lease year, and there
will be no escalation of Base Rent until said items are substantially completed.
Tenant acknowledges that it shall have no other remedy against Landlord relating
to or resulting from any delay(s) in the substantial completion of said items
unless the Base Building Work described in Exhibit H is not completed on or
---------
before December 31, 2000, in which event Tenant may bring an action for specific
performance to enforce the terms of this Lease.
4. SECURITY DEPOSIT.
4.1. Cash.
Tenant shall pay, in cash, simultaneously with the execution of this Lease,
the amount of the Security Deposit which will be held by Landlord to secure
Tenant's performance of its obligations under this Lease. Landlord will have no
obligation to pay any interest on the Security Deposit to Tenant. The Security
Deposit is not an advance payment of Rent nor a measure or limit of Landlord's
damages upon an Event of Default (as defined in Section 15 below). Landlord may,
from time to time and without prejudice to any other remedy, use all or a part
of the Security Deposit to perform any obligation Tenant fails to perform under
this Lease. Following any such application of the Security Deposit, Tenant
agrees to pay to Landlord on demand the amount so applied in order to restore
the Security Deposit to its original amount. Provided that Tenant has performed
all of its obligations under this Lease, Landlord will, within thirty (30) days
after the end of the Term, return to Tenant the portion of the Security Deposit
which was not applied to satisfy Tenant's obligations. If Landlord transfers its
interest in the Premises and the transferee assumes Landlord's obligations under
this Lease, then Landlord will deliver or credit the Security Deposit to the
transferee and Landlord subsequently will have no further liability for the
return of the Security Deposit.
4.2. Letter of Credit.
At any time prior to the end of the fifth (5/th/) lease year of the Term,
upon notice from Landlord to Tenant that Landlord is prepared to enter into a
contract with its general contractor to perform the "Work" (as defined in the
Workletter), Tenant shall promptly deliver to Landlord a letter of credit (the
"Letter of Credit") in the applicable amounts and for the time periods set forth
in Article VI of the Lease Information Summary above as security for the prompt,
full and faithful performance by Tenant of the terms and provisions of this
Lease, subject to the following provisions:
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(a) Form and Issuer. The Letter of Credit must be a clean,
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unconditional, stand-by, irrevocable Letter of Credit in favor of Landlord in
substantially the form attached as Exhibit C, issued by a federally insured
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national banking association located in Chicago, Illinois which is acceptable to
Landlord in all respects.
(b) Expiration; Extension or Replacement. The Letter of Credit must:
------------------------------------
(i) have an expiration date no earlier than the Termination Date of this Lease,
or (ii) be renewed annually through the Termination Date, in which event Tenant
must submit to Landlord original amendments extending the Letter of Credit
expiration date (or replacement Letters of Credit with extended expiration
dates), on an annual basis no later than thirty (30) days prior to the
expiration date of the Letter of Credit then in effect. Failure to so extend the
expiration date of the Letter of Credit in the foregoing manner will, in
addition to all of Landlord's other remedies, entitle Landlord to draw down the
Letter of Credit without notice to Tenant and to hold or apply the proceeds as
provided in this Lease.
(c) Draws. If Tenant violates this Lease, Landlord, without notice
-----
to Tenant, may but is not obligated to draw down on the Letter of Credit in an
amount equal to the extent of the default by Tenant and apply the proceeds to
the payment of any sum owing or any other sum which Landlord may be required or
deems necessary to spend or incur by reason of such violation. Following any
such application of the Security Deposit as described above, Tenant agrees to
provide Landlord with a replacement or amended Letter of Credit or pay to
Landlord on demand the amount so applied in order to restore the Security
Deposit to its original amount. Provided that Tenant has performed all of its
obligations under this Lease, Landlord will, within thirty (30) days after the
end of the Term, return the Letter of Credit to Tenant. If Landlord transfers
its interest in the Premises and the transferee assumes Landlord's obligations
under this Lease, then Landlord will assign the Security Deposit to the
transferee and Landlord subsequently will have no further liability for the
return of the Letter of Credit.
4.3. INTENTIONALLY DELETED.
5. LANDLORD'S OBLIGATIONS.
5.1. Services.
Landlord will furnish to the Premises (1) water at those points of supply
provided for general use of tenants of the Building; (2) heating and air
conditioning between 8:00 a.m. and 6:00 p.m. on weekdays and from 8:00 a.m. to
1:00 p.m. on Saturdays (collectively "Normal Business Hours"); (3) janitorial
service to the Premises on weekdays, other than holidays, for Building-standard
installations and such window washing as may, from time to time, be reasonably
required; (4) passenger elevators for ingress and egress, provided that Landlord
may reasonably limit the number of operating elevators during non-business hours
and holidays; and (5) electrical current for Tenant's equipment in a sufficient
quantity to meet Tenant's Permitted Use in accordance with the terms of Exhibit
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H attached hereto, provided that Tenant will be responsible for the cost of any
- -
additional electrical requirements beyond the usage contemplated under this
Lease in accordance with Section 5.3 below. At the request of Tenant, Landlord
will perform routine maintenance in the Premises (i.e. changing light bulbs,
repairing door handles, etc.) and upon demand from Landlord, Tenant will
promptly pay to Landlord the cost of such repairs and/or services at rates
determined by Landlord from time to time. Landlord will maintain the common
areas of the Building in reasonably good order and condition, except for damage
caused by Tenant, or its employees, agents or invitees. If Tenant desires any
heating or air conditioning at any time other than during Normal Business Hours,
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then such services will be supplied to Tenant upon the written request of Tenant
delivered to Landlord not less than twenty-four (24) hours prior to the business
day preceding such extra usage, and Tenant, upon demand from Landlord, will pay
Landlord for such services, at rates determined by Landlord from time to time,
which rate is currently Thirty Dollars ($30.00) per hour. Landlord and Tenant
acknowledge that Tenant has access to the Building twenty-four (24) hours a day,
seven (7) days a week.
5.2. Utilities.
Tenant shall pay directly to the provider of electricity to the Premises
the cost of such electricity used or consumed at, on or in the Premises as and
when the charges for the same become due and payable. If Tenant fails to pay for
such electricity when the same becomes due and payable, then Landlord will have
the right but not the duty to pay the same, which amount so paid will be deemed
Rent and will be payable immediately upon demand from Landlord. Tenant agrees to
(i) keep and cause to be kept closed all windows in the Premises, (ii) at all
times cooperate fully with Landlord in the operation of the heating and air
conditioning systems, and (iii) abide by all reasonable regulations and
requirements which Landlord may prescribe to permit the proper functioning and
protection of the heating and air conditioning systems.
5.3. Excess Utility Use.
Landlord is not required to furnish electrical current for equipment whose
electrical energy consumption exceeds Tenant's Permitted Use as set forth on
Tenant's electrical and HVAC plans described in the Workletter, except that
Landlord will provide seven (7) watts per foot on floors 18 and above and five
(5) watts per foot on floors 17 and below. If Tenant's requirements for or
consumption of electricity exceed the electricity to be provided by Landlord as
described in Section 5.1 above, Landlord will, at Tenant's expense, make
reasonable efforts to supply such service through the then-existing feeders and
risers serving the Building and the Premises, and Tenant agrees to pay to
Landlord the cost of such service within ten days after Landlord has delivered
to Tenant an invoice for such services. Landlord may determine the amount of
such additional consumption and potential consumption by any verifiable method,
including installation of a separate meter in the Premises installed,
maintained, and read by Landlord, at Tenant's expense. Tenant may not install
any electrical equipment requiring special wiring or requiring voltage in excess
of normal office usage or otherwise exceeding Building capacity unless approved
in advance and in writing by Landlord, which approval will not be unreasonably
withheld. Tenant agrees not to use electricity in the Premises which exceeds the
capacity of existing feeders and risers to or wiring in the Premises. If
approved by Landlord, any risers or wiring required to meet Tenant's excess
electrical requirements will be installed by Landlord, upon Tenant's request and
at Tenant's cost, if, in Landlord's judgment, the same are necessary and will
not cause permanent damage to the Building or the Premises, cause or create a
dangerous or hazardous condition, entail excessive or unreasonable alterations
or repairs, or expenses, or interfere with or disturb other tenants of the
Building. If Tenant uses machines or equipment in the Premises which affect the
temperature otherwise maintained by the air conditioning system or otherwise
overload any utility, Landlord may install supplemental air conditioning units
or other supplemental equipment in the Premises, and such cost, including the
cost of installation, operation, use, and maintenance, will be paid by Tenant to
Landlord within ten (10) days after Landlord has delivered to Tenant an invoice
for such cost.
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5.4. Restoration of Services.
Landlord agrees to use reasonable efforts to restore any service that
becomes unavailable. Except as specifically set forth below, such unavailability
will not, however, render Landlord liable for any damages, be a constructive
eviction of Tenant, constitute a breach of any implied warranty, or entitle
Tenant to any abatement of Tenant's obligations under this Lease.
Notwithstanding anything in this Section 5.4 to the contrary, (i) in the event
that a disruption in any service which is within the reasonable control of
Landlord results in the Premises becoming untenantable for the Permitted Use for
fifteen (15) consecutive days, then commencing on the sixteenth (16/th/) day
Base Rent shall abate until such services are restored; and (ii) in the event
that a disruption in any service which is within the reasonable control of
Landlord results in the Premises becoming untenantable for the Permitted Use for
ninety (90) consecutive days, then at anytime after the ninety-first (91/st/)
day Tenant shall have the right to terminate this Lease effective thirty (30)
days following Tenant's notice of termination to Landlord.
6. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE.
6.1. Improvements; Alterations.
Landlord will, at its own expense, perform the base building work as
described on Exhibit H attached hereto. In addition, Landlord will afford
---------
Tenant an allowance of approximately $40.456 per rentable square foot to cover
the cost of construction of certain non-structural, tenant improvements to be
made to the Premises, including but not limited to architectural, mechanical,
plumbing and engineering fees. Tenant acknowledges and agrees that no more than
$4.00 per rentable square foot of said allowance may be used towards
telephone/data systems and moving expenses. Tenant shall have the right to
submit to Landlord the names of two (2) prospective general contractors
acceptable to Landlord to perform the tenant improvements to the Premises,
Landlord shall submit to Tenant the names of two (2) additional general
contractors acceptable to Landlord to perform the tenant improvements to the
Premises. From such group of general contractors, Landlord shall select one (1)
of said contractors to perform the work based on the lowest bid, unless
otherwise directed by Tenant. The cost of any tenant improvements and all fees
and expenses relating thereto in excess of the amount of said allowance shall be
borne and paid for by Tenant. No alterations or physical additions in or to the
Premises may be made without Landlord's prior written consent. Landlord may
withhold its consent to any alteration or addition that could affect the
Building's structure or its HVAC, plumbing, electrical or mechanical systems.
Tenant may not paint or install lighting, signs, window or door lettering, or
advertising media of any type on or about the Premises without the prior written
consent of Landlord. Landlord may withhold its consent to any such painting or
installation which could affect the appearance of the exterior of the Building
or of any common areas of the Building. All alterations, additions, and
improvements installed in the Premises must be (i) performed at Tenant's expense
and only in accordance with plans and specifications which have been previously
submitted to and approved in writing by Landlord, and (ii) constructed,
maintained and used by Tenant at its own risk and expense in accordance with all
laws. Landlord's approval of the plans and specifications is not a
representation by Landlord that such alterations, additions, or improvements
comply with any law. Tenant agrees that it will remove or cause its
contractor(s) to remove all waste and debris from the Premises upon the
completion of any alterations, additions or improvements which are performed by
Tenant. Notwithstanding anything in this Section 6.1 to the contrary, Tenant
shall have the right to make alterations, additions or
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improvements to the Premises without the consent of Landlord so long as (i) such
alterations, additions or improvements do not affect the mechanical systems or
structural components of the Building and (ii) the cost of such alterations,
additions or improvements made in any twelve (12) consecutive month period do
not exceed the sum of One Hundred Thousand Dollars ($100,000.00). Prior to
commencing any of such alterations, additions or improvements, Tenant will
notify Landlord of such work.
6.2. Repairs and Maintenance.
Subject to Landlord's duties under Section 5.1 above, Tenant agrees to
maintain the Premises in a clean, safe, and operable condition, and will not
permit or allow to remain any waste or damage to any portion of the Premises.
Tenant agrees to pay for the cost of repairing or replacing, subject to
Landlord's direction and supervision, any damage to the Premises and the
Building caused by Tenant, Tenant's employees, Tenant's transferees, or their
respective agents, contractors, or invitees. If Tenant fails to make such
repairs or replacements within fifteen (15) days after the occurrence of such
damage, then Landlord may make the same at Tenant's cost. If any such damage
occurs outside of the Premises, then Landlord may elect to repair such damage at
Tenant's expense, rather than having Tenant repair such damage. The cost of all
repair or replacement work performed by Landlord under this Section 6.2 must be
paid by Tenant to Landlord within ten (10) days after Landlord has invoiced
Tenant for such cost and will constitute Rent under this Lease.
6.3. Performance of Work.
Only Landlord or contractors and subcontractors approved in writing by
Landlord may perform the work described in this Section 6. Tenant will cause
all contractors and subcontractors to procure and maintain insurance coverage
naming Landlord as an additional insured against such risks, in such amounts,
and with such companies as Landlord may reasonably require. All such work must
be performed in accordance with all applicable governmental requirements and in
a good and workmanlike manner so as not to damage the Premises, the Building or
the components of the Building. Tenant agrees to defend, indemnify and hold
Landlord, its trustees, beneficiaries, employees, successors and assigns
harmless from and against any claims, liabilities, damages, losses, costs and
expenses, including but not limited to attorney's fees and court costs, suffered
or incurred by Landlord arising from any of Tenant's alterations, additions or
improvements to the Premises.
6.4. Mechanic's Liens.
Tenant must not permit any mechanic's lien(s) to be filed against the
Premises or the Building for any work performed, materials furnished, or
obligations incurred by or at the request of Tenant, unless caused by the
failure of the Landlord to timely pay the allowance. If such a lien is filed,
then, within ten (10) days after Landlord has delivered notice of the filing to
Tenant, Tenant must either pay the amount of the lien or diligently contest such
lien and deliver to Landlord a bond or other security reasonably satisfactory to
Landlord. If Tenant fails to timely take either such action, then Landlord may
pay the lien claim, and any amounts so paid, including expenses and interest,
will constitute Rent payable by Tenant to Landlord within ten (10) days after
Landlord has invoiced Tenant for such payment. Tenant agrees to defend,
indemnify and hold Landlord, its trustees, beneficiaries, employees, successors
and assigns harmless from and against any claims, liabilities, direct damages,
losses, costs and expenses, including but not limited to attorney's fees and
court costs, suffered or incurred by Landlord arising from the presence or
removal of any mechanic's lien(s) affecting the Premises and/or
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the Building relating to any work performed, materials furnished or obligations
incurred by or at the request of Tenant.
6.5. Rooftop Communications Equipment.
Tenant shall have the right, at its sole cost and expense, only after
obtaining Landlord's prior written approval, which approval shall not be
unreasonably withheld or delayed, to cause certain data and communications
equipment to be professionally installed on the roof of the Building subject to
and in compliance with all applicable federal, state and local statutes, laws,
ordinances, codes, rules and regulations (collectively "Laws"), provided that
(i) Landlord may oversee such installation, (ii) the location of such equipment
must be approved in advance by Landlord, (iii) Tenant will be responsible for
obtaining all necessary licenses and permits and complying with all City of
Chicago zoning and building codes and ordinances applicable to said equipment,
and (iv) upon Landlord's request, Tenant will cause said equipment to be removed
from the roof and repair any damage thereto upon the expiration or earlier
termination of this Lease. Tenant agrees to defend, indemnify and hold Landlord,
its trustees, beneficiaries, employees, agents, successors and assigns harmless
from and against any and all claims, liabilities, direct damages, causes of
action, suits, judgments, losses, costs and expenses (including attorneys' fees
and court costs) incurred or suffered by Landlord relating to the installation
of such equipment and/or the violation of any Laws arising from the presence or
use of such equipment. This indemnity provision will survive the termination or
expiration of this Lease.
6.6. Construction of Roof Deck.
Tenant shall have the right, at its sole cost and expense, only after
obtaining Landlord's prior written approval, which approval shall not be
unreasonably withheld or delayed, to cause a deck to be constructed on a portion
of the roof of the Building subject to and in compliance with all Laws, provided
that (i) Landlord may oversee such installation, (ii) the location of the deck
and the hours and dates when the deck may be used must be approved in advance by
Landlord, (iii) Tenant will be responsible for obtaining all necessary licenses
and permits and complying with all City of Chicago zoning and building codes and
ordinances applicable to said deck, and (iv) at Landlord's request, Tenant will
remove the deck from the roof and repair any damage thereto upon the expiration
or earlier termination of this Lease. Tenant acknowledges and agrees that
Landlord makes no representation or warranty with respect to the design of the
deck, nor shall Landlord be liable or responsible for any defects in the design
or construction of the deck. Tenant agrees to defend, indemnify and hold
Landlord, its trustees, beneficiaries, employees, agents, successors and assigns
harmless from and against any and all claims, liabilities, direct damages,
causes of action, suits, judgments, losses, costs and expenses (including
attorneys' fees and court costs) incurred or suffered by Landlord relating to
the installation of such deck and/or the violation of any Laws arising from the
presence or use of such deck. This indemnity provision will survive the
termination or expiration of this Lease.
6.7. Installation of Electrical Generator(s).
Tenant may, at its sole cost and expense, only after obtaining Landlord's
prior written consent, cause an electrical generator(s) to be professionally
installed in the Building, subject to and in compliance with all Laws, provided
that (i) Landlord may oversee such installation, (ii) the location of the
generator(s) must be approved in advance by Landlord, (iii) Tenant will be
responsible for obtaining all necessary licenses and permits and complying with
all City of Chicago zoning and building codes and ordinances applicable to said
generator(s), and (iv) upon Landlord's request, Tenant will cause said
generator(s) to be removed and repair any
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damage therefrom upon the expiration or earlier termination of this Lease.
Tenant agrees to defend, indemnify and hold Landlord, its trustees,
beneficiaries, employees, agents, successors and assigns harmless from and
against any and all claims, liabilities, direct damages, causes of action,
suits, judgments, losses, costs and expenses (including attorneys' fees and
court costs) incurred or suffered by Landlord relating to the installation of
any generator(s) and/or the violation of any Laws arising from the presence or
use of such generator(s). This indemnity provision will survive the termination
or expiration of this Lease.
7. USE.
Tenant may use the Premises only for the Permitted Use, and must comply
with all applicable statutes, laws, ordinances, codes, orders, rules and
regulations, as well as all requirements of any of Landlord's insurance
providers, relating to the use, condition and occupancy of the Premises. The
Premises may not be used for any use other than the Permitted Use which (i) is
disreputable, creates fire hazards, or results in an increased rate of insurance
on the Building or its contents; (ii) would violate any covenant, agreement,
term, provision or condition of this Lease or is in contravention of the
certificate of occupancy or zoning ordinances pertaining to the Building; (iii)
would alter, affect or interfere with or would overload the electrical,
mechanical or HVAC systems or any other component of the Building, or would
exceed the floor load per square foot which the floor was designed to carry and
which is allowed by law; or (iv) would, in Landlord's reasonable judgment, in
any way impair or tend to impair or exceed the design criteria, structural
integrity, character, reputation or appearance of the Building. Tenant will not
conduct or permit the generation, transportation, storage, installation,
treatment or disposal, either in the Building or in the Premises, of any
hazardous or toxic materials (other than those customarily used by office
tenants in the normal course of business), and Tenant will keep the Building and
the Premises free of any lien or claim imposed under any federal, state or local
environmental statute, law, ordinance, code, rule or regulation. If, because of
Tenant's acts (which are outside of the Permitted Use and have not been approved
in writing by Landlord), the rate of insurance on the Building or its contents
increases, then such acts will constitute an Event of Default, Tenant must pay
to Landlord the amount of such increase on demand, and acceptance of such
payment will not waive any of Landlord's other rights. Tenant agrees to conduct
its business and control its agents, employees, and invitees in such a manner as
not to create any nuisance or unreasonably interfere with other tenants or
Landlord in its management of the Building.
8. ASSIGNMENT AND SUBLETTING.
8.1. Transfers; Consent.
(a) Transfers. Tenant may not, without the prior written consent of
Landlord, which consent, subject to the provisions of Section 8.1(b) below,
shall not be unreasonably withheld or delayed, do any of the following:
(i) assign, transfer, or encumber this Lease or any estate
or interest in this Lease, whether directly or by operation of law;
(ii) permit any other entity to become Tenant under this Lease by
merger, consolidation, or other reorganization; provided, however,
Tenant does not need to obtain Landlord's consent if, after giving
effect to such merger, consolidation or other reorganization, the
minimum tangible net worth of such new entity is the same as that of
Tenant at the beginning of this Lease;
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(iii) sublet any portion of the Premises;
(iv) grant any license, concession, or other right of occupancy
of any portion of the Premises; or
(v) permit the use of the Premises by any parties other
than Tenant.
Any of the events listed in Section 8.1(a)(i) through 8.1(a)(vi)
above are referred to as a "Transfer".
(b) Consent. Without limiting Landlord's right to reasonably
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withhold its consent, Tenant acknowledges and agrees that Landlord's
withholding of such consent will be deemed reasonable if:
(i) In the reasonable judgment of Landlord, the proposed
subtenant or assignee or the individual or principal owners or
operators of the proposed subtenant or assignee (A) is not of
reputable character or is engaged in a business or proposes to use the
Premises in a manner which is not in keeping with the Permitted Use or
the standards of Landlord for the Building, or (B) has an unfavorable
credit standing or poor business history;
(ii) Either the area of the Premises to be sublet or the
remaining area of the Premises is not regular in shape with
appropriate means of ingress and egress suitable for normal renting
purposes;
(iii) Tenant is in default under this Lease;
(iv) The proposed sublessee or assignee is a local, state or
federal governmental agency; or
(v) The proposed sublessee or assignee is already a tenant in
the Building and is leasing space on any floor which is neither
vertically nor horizontally adjacent to any portion of the Premises.
(c) Procedure to Obtain Consent. If Tenant requests Landlord's
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consent to a Transfer, then Tenant must provide Landlord with a written
description of all terms and conditions of the proposed Transfer, copies of
the proposed documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory information
about its business and business history; its proposed use of the Premises;
banking, financial, and other credit information that Landlord may request;
and general references sufficient to enable Landlord to determine the
proposed transferee's creditworthiness and character. Landlord will attempt
to provide Tenant with a written response to such Transfer request as soon
as possible but not later than fifteen (15) days after Landlord's receipt
of Tenant's written request. Concurrently with Tenant's request for consent
to a Transfer, Tenant agrees to (i) pay to Landlord an assignment fee in
the amount of Five Hundred and 00/100 Dollars ($500.00), and (ii) reimburse
Landlord immediately upon its request for all of its reasonable out-of-
pocket expenses (including but not limited to attorneys' fees and
administrative fees) incurred in connection with considering any request
for consent to a Transfer. Nothing in this Section 8.1(c) may be construed
as granting to any third party the rights of a third-party beneficiary, so
as to entitle such third party to seek to enforce any of the above
provisions.
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(d) Obligations After Transfer. If Landlord consents to a proposed
--------------------------
transfer, then both Tenant and the proposed transferee must (i) deliver to
Landlord a written agreement acceptable in all respects to Landlord under
which the proposed transferee expressly assumes all of Tenant's obligations
under this Lease, and (ii) if requested by Landlord, execute the consent
form required by Landlord. Landlord's consent to a Transfer will not
release Tenant from its obligations under this Lease, but rather Tenant and
its transferee will be jointly and severally liable for such obligations.
Landlord's consent to any Transfer does not waive Landlord's rights as to
any subsequent Transfers. If an Event of Default occurs while the Premises
or any part of the Premises are subject to a Transfer, then Landlord, in
addition to its other remedies, may collect rent due and owing directly
from such transferee and apply such rent against Rent. Tenant authorizes
its transferees to make payments of rent directly to Landlord upon receipt
of notice from Landlord to do so.
8.2. Recapture.
In the event Tenant causes or seeks to cause a Transfer of either (a) the
entire Premises, or (b) any portion of the Premises for the remainder of the
Term of this Lease, Landlord may elect to terminate this Lease and recapture the
applicable space (i) as of the date the proposed Transfer is to be effective, or
(ii) within thirty (30) days after the date of Landlord's discovery of the
Transfer, as the case may be. Landlord may exercise this termination right
within thirty (30) days after Landlord's receipt of Tenant's written request for
Landlord's consent, or within thirty (30) days after learning of such Transfer
if Landlord's consent has not been requested by Tenant. Notwithstanding anything
above to the contrary, in the event Landlord exercises its right to terminate
this lease and recapture the applicable space under clause (i) of the first
sentence of this Section 8.2, then within five (5) days of receipt of Landlord's
notice Tenant may rescind its proposal for the Transfer and the Lease shall
continue as if such proposal for the Transfer had never occurred If Landlord
terminates this Lease as provided above, then this Lease will cease as to the
portion of the Premises recaptured by Landlord and Tenant shall pay to Landlord
all Rent accrued through the date the Lease ceases. Subsequently, Landlord may
lease the Premises to the prospective transferee (or to any other person)
without liability to Tenant.
8.3. Additional Compensation.
Tenant agrees to pay to Landlord, immediately upon receipt, fifty (50%) of
all funds received by Tenant (net of Tenant's reasonable expenses to relet) for
a Transfer in excess of the Rent allocable to the Premises.
8.4 Injunctive Relief.
Notwithstanding anything in this Lease to the contrary, in the event
Landlord wrongfully prevents a Transfer by Tenant, or if Landlord commits any
other default under this Section 8, Tenant's sole remedy will be limited to an
action for injunctive relief to permit the Transfer to occur.
9. INSURANCE; WAIVERS; SUBROGATION; INDEMNITY.
9.1. Insurance.
Tenant agrees to maintain throughout the Term the following insurance
policies:
(a) comprehensive general liability insurance in amounts of not less
than a combined single limit of $2,000,000 or such other amounts as
Landlord may, from time
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to time, reasonably require, insuring Tenant, Landlord, Landlord's agents
and their respective affiliates against all liability for injury to or
death of a person or persons or damage to property arising from the use and
occupancy of the Premises;
(b) insurance covering the full value of Tenant's property and
improvements, and other property (including property of others) in the
Premises;
(c) contractual liability insurance sufficient to cover Tenant's
indemnity obligations under this Lease;
(d) worker's compensation insurance, containing a waiver of
subrogation endorsement acceptable to Landlord; and
(e) business interruption insurance.
Tenant will, prior to taking possession of the Premises and prior to the
commencement of any work in the Premises, furnish Landlord with certificates of
such insurance and such other evidence satisfactory to Landlord confirming
Tenant's maintenance of all insurance coverages required under this Lease and
naming Landlord and any other parties requested by Landlord as additional
insured(s). Each certificate must contain a written obligation on the part of
each insurance company to notify Landlord at least thirty (30) days before
cancellation or a material change of any such insurance policies. All such
insurance policies must be (i) issued by insurers authorized to do business in
the State of Illinois and which are rated at least A+XII in Best's Key Rating
Guide, and (ii) issued by companies and be in form and substance reasonably
satisfactory to Landlord. The term "affiliate" means any person or entity,
directly or indirectly, controlling, controlled by, or under common control with
the party in question. Tenant acknowledges and agrees that it is not permitted
to self-insure under this Lease.
9.2. Waiver of Negligence; No Subrogation.
Landlord and Tenant each waives any claim it might have against the other
for damage to or theft, destruction, loss, or loss of use of any property (a
"Loss"), to the extent the same is insured against under any insurance policy
that covers the Building, the Premises, Landlord's or Tenant's fixtures,
personal property, leasehold improvements, or business, or with respect to such
matters as are required to be insured against under the terms of this Section 9,
regardless of whether the negligence of the other party caused such loss. Each
party's waiver under this Section 9.2 will not, however, include any deductible
amounts on insurance policies carried by either party or to any coinsurance
penalty which either party may sustain. Each party will cause its insurance
carrier to endorse all applicable policies waiving the carrier's rights of
recovery under subrogation or otherwise against the other party.
9.3. Indemnity by Tenant.
Subject to the provisions of Section 9.2 above, and except to the extent
any Loss is caused solely by the negligence or willful misconduct of Landlord or
its agents, Tenant agrees to defend, indemnify and hold Landlord, its trustees,
beneficiaries, employees and agents harmless from and against (i) all claims,
demands, liabilities, causes of action, suits, judgments, and expenses
(including attorneys' fees) for any Loss arising from any occurrence on the
Premises and the Building caused or contributed to by Tenant, its subtenants,
licensees, employees, invitees, contractors and/or agents (collectively
"Tenant's Affiliates"), and (ii) Tenant's or any of Tenant's Affiliates' failure
to perform its obligations under this Lease. This indemnity provision will
survive the termination or expiration of this Lease.
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9.4. Indemnity by Landlord.
Landlord agrees to defend, indemnify and hold Tenant harmless from and
against any loss or damage (including reasonable attorneys' fees) suffered by
Tenant resulting from Landlord's negligence to the extent such loss or damage is
not covered by Tenant's insurance.
10. SUBORDINATION; ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE.
10.1. Subordination.
Provided Landlord furnishes Tenant with a subordination, nondisturbance and
attornment agreement (the "SNDA") in form and substance customarily given by the
current "Landlord's Mortgagee" (as defined below), this Lease is automatically
subordinate to any deed of trust, mortgage, other security instrument, ground
lease, master lease or primary lease that now or subsequently covers all or any
part of the Building without any further action or writing of the parties (the
mortgagee under any such mortgage or the lessor under any such lease is referred
to below as a "Landlord's Mortgagee"). However, any Landlord's Mortgagee may at
any time unilaterally elect to make this Lease superior to its mortgage, ground
lease or other interest in the Premises by so notifying Tenant in writing. Not
later than sixty (60) days after the execution of this Lease, Landlord shall
deliver to Tenant an SNDA from the current Landlord's Mortgagee in the form
attached hereto as Exhibit I.
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10.2. Attornment.
Tenant agrees to attorn to any party succeeding to Landlord's interest in
the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure,
power of sale, attornment, termination of lease, or otherwise. Within ten (10)
days after such party's written request, Tenant will execute and deliver to the
requesting party a written agreement(s) confirming such attornment. If Tenant
fails to deliver the attornment agreement(s) described herein within the ten
(10) day period, Tenant acknowledges and agrees that Landlord is authorized to
act as Tenant's attorney-in-fact to execute the agreement(s) on behalf of
Tenant, and Tenant will be bound by the commercially reasonable terms of the
agreement(s) executed by Landlord.
10.3. Notice to Landlord's Mortgagee.
Tenant may not seek to enforce any remedy it may have for any default on
the part of the Landlord without first giving written notice by certified mail,
return receipt requested, specifying the default in reasonable detail, to any
Landlord's Mortgagee whose address has been given to Tenant, and affording such
Landlord's Mortgagee a reasonable opportunity to perform Landlord's obligations
under this Lease.
11. RULES AND REGULATIONS.
Tenant must comply with the rules and regulations of the Building which are
attached as Exhibit B. Landlord may, from time to time by notifying Tenant in
---------
writing of such changes, change such rules and regulations for the safety, care,
or cleanliness of the Building and related facilities, provided that such
changes will not unreasonably interfere with Tenant's use of the Premises.
Tenant is responsible for the compliance with such rules and regulations by its
employees, agents, and invitees.
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12. CONDEMNATION.
12.1. Total Taking.
If the entire Building or Premises is taken by right of eminent domain or
conveyed in lieu of eminent domain (a "Taking"), this Lease will terminate and
Rent will be apportioned as of the date of the Taking, and Tenant will have no
claim against Landlord for the value of the unexpired Term.
12.2. Partial Taking -- Tenant's Rights.
If any part of the Building becomes subject to a Taking and such Taking
will prevent Tenant from conducting its business in the Premises in a manner
reasonably comparable to that conducted immediately before such Taking for a
period of more than one hundred eighty (180) days, then Tenant may terminate
this Lease as of the date of such Taking by giving written notice to Landlord
within thirty (30) days after the Taking, and Rent will be apportioned as of the
date of such Taking. If Tenant does not terminate this Lease, then Rent will
abate on a basis reasonably determined by Landlord as to that portion of the
Premises rendered untenantable by the Taking.
12.3. Partial Taking -- Landlord's Rights.
If any material portion but less than all of the Building becomes subject
to a Taking and Landlord makes a good faith determination that (i) such Taking
will prevent Tenant from conducting its business in the Premises in a manner
reasonably comparable to that conducted immediately before such Taking for a
period of more than one hundred eighty (180) days, (ii) restoring the Premises
would be uneconomical, (iii) the condemnation award is insufficient to rebuild
or restore the Building or the Premises, or (iv) Landlord is required to pay any
condemnation award arising from the Taking to any Landlord's Mortgagee, then
Landlord may terminate this Lease by delivering written notice to Tenant within
forty-five (45) days after such Taking (or on such earlier date as Landlord is
required to surrender the Building or the Premises pursuant to the terms of the
Taking). Tenant shall vacate the Premises on or before the earlier of (a) one
hundred twenty (120) days after its receipt of Landlord's notice, or (b) the
date when Landlord is required to surrender the Building or the Premises to the
condemning authority, and Rent will be apportioned as of the date Tenant vacates
the Building. If Landlord does not so terminate this Lease, then this Lease
will continue, but if any portion of the Premises has been taken, Rent will
abate as provided in the last sentence of Section 12.2 above.
12.4. Award.
If any Taking occurs, then Landlord is entitled to receive the entire award
or other compensation for the land on which the Building is situated, the
Building, and other improvements taken, and Tenant may separately pursue a claim
against the condemnor for the value of Tenant's personal property which Tenant
is entitled to remove under this Lease (but because of the condemnation is
unable to move such property), moving costs, unamortized portion of any tenant
improvements paid for by Tenant, and other claims it may have so long as such
claim does not diminish Landlord's award. In no event may Tenant seek or file
any claim against Landlord.
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13. FIRE OR OTHER CASUALTY.
13.1. Landlord's Rights.
If all or any material portion of the Building and/or the Premises is(are)
damaged by fire or other casualty (a "Casualty"), and if Landlord makes a good
faith determination that (i) restoring the Premises would be uneconomical, (ii)
there are insufficient insurance proceeds to rebuild or restore the Building or
the Premises, or (iii) Landlord is required to pay any insurance proceeds
arising out of the Casualty to any Landlord's Mortgagee, then Landlord may
terminate this Lease by giving Tenant written notice of Landlord's election to
terminate (the "Casualty Termination Notice") within one hundred twenty (120)
days after the Casualty (the "Casualty Determination Period") has occurred, and
Base Rent and Additional Rent will abate as of the date of the Casualty, unless
such damage is due to the gross negligence or willful misconduct of Tenant or
Tenant's Affiliates, in which event Tenant shall continue to pay Rent without
abatement. Such termination shall be effective ninety (90) days after the date
of the Casualty Termination Notice so long as the Building is tenantable.
13.2. Repair Obligation.
If Landlord elects not to terminate this Lease following a Casualty
pursuant to the terms of Section 13.1 above, Landlord shall, prior to the
expiration of the Casualty Termination Period, notify Tenant of Landlord's good
faith determination (the "Restoration Estimate Notice") of the time period
required to restore the Building and/or Premises. In the event such time period
exceeds one (1) year from the date of the Casualty, Tenant shall have the right
to terminate this Lease within thirty (30) days after receipt of the Restoration
Estimate Notice. If neither Landlord nor Tenant elects to terminate this Lease,
as set forth above, then Landlord will proceed with reasonable diligence to
repair, restore or rehabilitate the Building and/or the Premises, as the case
may be, to substantially the same condition as they existed immediately before
such Casualty. However, Landlord will not be required to repair or replace any
of the furniture, equipment, fixtures, and other leasehold improvements which
may have been placed by or at the request of Tenant or other occupants in the
Building or the Premises and required to be insured by Tenant or other tenants.
In the event that Landlord elects not to terminate the Lease and Landlord
proceeds to repair the Building and/or the Premises, then Tenant must apply to
the replacement or restoration of the furniture, equipment, fixtures and other
improvements in the Premises (if replacement or restoration is necessary because
of the Casualty) any proceeds of insurance that it may have received from its
policy(ies) on account of the Casualty allocable to such fixtures and other
improvements. During such repair or rebuilding of the Building and/or the
Premises, Rent for the portion of the Premises rendered untenantable by the
damage will be abated on a reasonable basis determined by Landlord from the date
of damage until the completion of the repair, restoration or rehabilitation,
unless the Casualty was caused by Tenant or any of Tenant's Affiliates, in which
event Tenant shall continue to pay Rent without abatement.
In the event Landlord fails to substantially complete the restoration of
the Building and/or the Premises within one (1) year from the date of the
Casualty, Tenant shall have the right to terminate this Lease at any time after
the expiration of such one (1) year period.
14. PERSONAL PROPERTY TAXES.
Tenant is liable for all taxes based upon this Lease or the receipt of Rent
due under this Lease and all taxes levied or assessed against any personal
property, furniture or fixtures
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placed by Tenant in the Premises. If any taxes for which Tenant is liable are
levied or assessed against Landlord or Landlord's property and Landlord elects
to pay the same, or if the assessed value of Landlord's property is increased by
inclusion of such personal property, furniture or fixtures and Landlord elects
to pay the taxes based on such increase, then Tenant shall pay to Landlord as
Rent, upon demand, the part of such taxes for which Tenant is primarily liable
under this Lease. Landlord may not, however, pay such amount if Tenant notifies
Landlord that it will contest the validity or amount of such taxes before
Landlord makes such payment, and subsequently diligently proceeds with such
contest in accordance with law and if the non-payment does not pose a threat of
lien or other cloud on Landlord's title to the Building, or threat of loss or
seizure of the Building or interest of Landlord in the Building.
15. DEFAULT.
15.1. Events of Default.
Each of the following occurrences will constitute an "Event of Default":
(a) Tenant's failure to pay Rent on or before the date when due;
provided, however, not more than two (2) times in any calendar year during
the Term, Landlord agrees to give Tenant notice and Tenant shall have five
(5) days after its receipt of such notice to cure such failure to pay rent,
which, if cured in a timely manner, will not constitute an Event of
Default.
(b) Tenant's failure to perform, comply with, or observe any other
agreement or obligation of Tenant under this Lease and the continuance of
such failure for a period of more than thirty (30) days after Landlord has
delivered to Tenant written notice, provided that if such default is
incapable of being cured within said thirty (30) day period, then Tenant
shall have up to an additional sixty (60) days after the initial thirty
(30) day period to cure the default so long as Tenant is at all times
diligently proceeding to cure the default;
(c) The filing of a petition by or against Tenant (the term "Tenant"
includes, for the purpose of this Section 15(c), any guarantor of the
Tenant's obligations under this Lease) (1) in any bankruptcy or other
insolvency proceeding; (2) seeking any relief under any state or federal
debtor relief law; (3) for the appointment of a liquidator or receiver for
all or substantially all of Tenant's property or for Tenant's interest in
this Lease; or (4) for the reorganization or modification of Tenant's
capital structure in any bankruptcy proceeding or under any State or
Federal debtor relief law. If, however, such a petition is filed against
Tenant, then such filing will not be an Event of Default unless Tenant
fails to have the proceedings initiated by such petition dismissed within
sixty (60) days after such filing;
(d) The failure by Tenant to take possession of the Premises in
accordance with the terms of this Lease;
(e) The discontinuance of its business by Tenant for thirty (30) or
more consecutive days unless the Premises are untenantable;
(f) The failure of any guarantor(s) of this Lease to comply with the
terms and conditions of its(their) guaranty.
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15.2. Default Interest.
All past due Rent and any other payments required of Tenant under this
Lease will be deemed Rent and interest will accrue from the date due until paid
at the rate of interest equal to two percent (2%) over the corporate base rate
or so-called "prime rate" as announced from time to time by Bank One
Corporation.
16. REMEDIES.
Upon any Event of Default, Landlord may, at its election, in addition to
all other rights and remedies afforded Landlord under this Lease or by law or
equity, take any one or more of the following actions:
16.1. Right To Terminate.
Upon the occurrence of an Event of Default, Landlord has the right to
terminate the Lease and obtain possession of the Premises. Landlord may make its
election to terminate known to Tenant by delivery of a notice of termination.
Such termination is immediately effective and Landlord, if necessary, is
entitled to commence immediately an action in summary proceedings to recover
possession of the Premises.
16.2. Receipt Of Money After Termination.
No receipt of money by the Landlord from the Tenant after the termination
of this Lease acts to reinstate, continue or extend the Term, nor affect or
waive any notice given by the Landlord to the Tenant prior to such receipt of
money.
16.3. Recovery Of Damages.
Landlord agrees to use commercially reasonable efforts to mitigate damages
caused by a default or breach of Tenant. If Landlord at any time terminates
this Lease upon the occurrence of an Event of Default, then in addition to any
other remedies it may have, Landlord may recover from Tenant by reason of such
breach all Rent and Additional Rent accrued and unpaid for the period up to and
including such termination date, as well as all other additional sums payable by
Tenant under this Lease. In addition, upon the occurrence of an Event of
Default, Landlord may recover as damages for loss of the bargain and not as a
penalty the sum of (i) the unamortized cost to Landlord, computed and determined
in accordance with generally accepted accounting principles, of any tenant
improvements provided by Landlord at its expense, (ii) the aggregate sum which
at the time of such termination represents the excess, if any, of the present
value of the aggregate Rent and Additional Rent at the same annual rate for the
remainder of the Term as then in effect over the then present value of the then
aggregate fair rental value of the Premises for the balance of the Term
immediately prior to such termination, such present worth to be computed in each
case on the basis of a five percent (5%) per annum discount from the respective
dates upon which Rent would have been payable under this Lease had the Term not
been terminated, and (iii) any additional damages, including any costs or
expenditures to fit the Premises to the needs of Tenant, reasonable attorneys'
fees and court costs which Landlord sustains by reason of the breach of any of
the covenants of this Lease other than for the payment of Base Rent and
Additional Rent.
16.4. Right To Re-Enter.
If the Event of Default is the nonpayment of Rent, Landlord may, as an
alternative to terminating the Lease, serve a written demand for possession or
payment. Unless the Rent is paid in accordance with the demand for possession or
payment, Landlord is entitled to
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possession of the premises and Tenant will then have no further right to
possession under the Lease. Tenant remains liable to Landlord for the payment of
all Rent and other charges which Tenant has agreed to pay under this Lease
throughout the remainder of its Term. If Landlord elects to re-enter, as
provided, it may from time to time, without terminating this Lease, make such
alterations and repairs as may be necessary in order to relet the Premises, and
relet all or any part of such Premises for such term or terms (which may be for
a term extending beyond the Term of this Lease) and at such rental or rentals
and upon such other terms and conditions as Landlord in its reasonable
discretion may deem advisable. Upon each such reletting all rentals and other
sums received by Landlord from such reletting are applied, first, to the payment
of any indebtedness other than rent due under this Lease from Tenant to
Landlord; second, to the payment of any costs and expenses of such reletting,
including reasonable brokerage fees and attorneys' fees and of costs of such
alterations and repairs; third, to the payment of Rent and other charges due
from Tenant, and the residue, if any, will be held by Landlord and applied in
payment of future rent as the same may become due and payable. If such rentals
and other sums received from such reletting during any month are insufficient to
pay the Rent and other charges due from Tenant, Tenant agrees to pay such
deficiency to Landlord. Such deficiency will be calculated and paid monthly. No
such re-entry or taking possession of such premises by Landlord may be construed
as an election on its part to terminate this Lease. Notwithstanding any such
reletting without termination, Landlord may at any time elect to terminate this
Lease for such previous breach.
16.5. Independent Covenant.
Tenant acknowledges and agrees that its obligation to pay Rent under this
Lease is an independent covenant and that such obligation to pay rent is not
subject to setoff or recoupment in connection with any action for summary
proceedings to recover possession of the Premises.
16.6. Legal Expenses.
If Landlord or Tenant brings an action arising out of the covenants, terms,
conditions or provisions of this Lease, or if Landlord undertakes an action for
summary proceedings to recover possession of the Premises, the prevailing party
will be reimbursed by the other party for such reasonable costs and attorneys'
fees as the prevailing party may incur in connection with such action.
17. PAYMENT BY TENANT; NON-WAIVER.
17.1. Payment by Tenant.
Upon any Event of Default, Tenant agrees to pay to Landlord all costs
incurred by Landlord (including court costs and reasonable attorneys' fees and
expenses) in (1) obtaining possession of the Premises, (2) removing and storing
Tenant's or any other occupant's property, (3) repairing, restoring,
commercially reasonably altering, commercially reasonably remodeling or
otherwise putting the Premises into a condition acceptable to a new tenant, (4)
if Tenant is dispossessed of the Premises and this Lease is not terminated,
reletting all or any part of the Premises (including brokerage commissions,
commercially reasonable costs of tenant finish work and other costs incidental
to such reletting), (5) performing Tenant's obligations which Tenant failed to
perform, and (6) enforcing its rights, remedies, and recourses arising out of
the Event of Default or in obtaining advice about same. To the full extent
permitted by law, Landlord and Tenant agree the federal and state courts of the
state in which
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the Premises and Building are located have exclusive jurisdiction over any
matter relating to or arising from this Lease and the parties' rights and
obligations under this Lease.
17.2. No Waiver.
Landlord's acceptance of any payment from Tenant following an Event of
Default will be deemed Rent and will not waive Landlord's rights regarding such
Event of Default. No waiver by Landlord of any violation or breach of any of
the terms contained in this Lease will waive Landlord's rights regarding any
future violation of such term. Landlord's acceptance of any partial payment of
Rent will not waive Landlord's rights with regard to the remaining portion of
the Rent that is due, regardless of any endorsement or other statement on any
instrument delivered in payment of Rent or any writing delivered in connection
with such Rent. Accordingly, Landlord's acceptance of a partial payment of Rent
will not constitute an accord and satisfaction of the full amount of the Rent
that is due.
18. SURRENDER OF PREMISES.
No act by Landlord will be deemed an acceptance of a surrender of the
Premises, and no agreement to accept a surrender of the Premises will be valid
unless it is in writing and signed by Landlord. At the expiration or
termination of this Lease, Tenant must deliver to Landlord the Premises with all
improvements in good repair and condition, broom-clean, except for reasonable
wear and tear (and condemnation and Casualty damage not caused by Tenant, as to
which Sections 12 and 13 above control). All alterations, additions,
improvements, equipment, wiring and furniture made in or upon the Premises (but
excluding all of the Work contemplated under the Workletter and excluding any
other alterations, additions, etc. for which Landlord's consent is required
under this Lease and which Landlord does not specifically require removal at the
time of such consent) must, at Landlord's option upon notice to Tenant, either
be removed by Tenant (and Tenant must repair all damage caused by such removal)
or remain on the Premises without compensation to Tenant. Tenant must also
deliver to Landlord all keys to the Premises. Provided that Tenant has
performed all of its obligations under this Lease, Tenant may remove all
unattached trade fixtures and personal property placed in the Premises by
Tenant. Tenant is obligated to repair all damage caused by such removal. All
items not so removed will be deemed to have been abandoned by Tenant and may be
appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord
without notice to Tenant and without any obligation to account for such items.
The provisions of this Section 18 will survive the end of the Term.
19. HOLDING OVER.
If Tenant fails to vacate the Premises at the end of the Term, then Tenant
will be a tenant-at-will and, in addition to all other damages and remedies to
which Landlord may be entitled for such holding over, Tenant must pay to
Landlord a monthly Base Rent for all or any part of a month equal to 150% of the
aggregate Base Rent plus all other Rent payable during the last month of the
Term. Tenant is also responsible for all direct damages, and if Tenant holds
over for more than thirty (30) days, Tenant is responsible for consequential
damages incurred or sustained by Landlord by reason of such retention, together
with all costs incurred by Landlord (including but not limited to reasonable
attorneys' fees) in connection with such holdover. In addition, Landlord may
elect, upon notice to Tenant, that such holding over will constitute a renewal
of this Lease on a month-to-month term at the stated holdover rate, but
acceptance by Landlord of Rent after such termination will not in and of itself
constitute a
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renewal. Nothing contained in this Section 19, however, will be construed or
operate as a waiver of Landlord's right of re-entry or any other right of
Landlord.
20. CERTAIN RIGHTS RESERVED BY LANDLORD.
Landlord reserves the following rights which may be exercised without
notice (except as otherwise expressly provided below) and without liability to
Tenant for damage or injury to property, person or business, and without
effecting an eviction or disturbance of Tenant's use or possession of the
Premises, nor giving rise to any claim for setoff or abatement or Rent or
affecting any of Tenant's obligations under this Lease:
(a) To decorate (other than elevator lobbies on the full floors
occupied by Tenant which shall be solely determined by and shall be the
responsibility of Tenant) and to make inspections, repairs, alterations,
additions, changes, or improvements, whether structural or otherwise, in
and about the Building during ordinary business hours, and if Tenant
desires to have such work done during other than business hours, Tenant
agrees to pay all overtime and additional expenses resulting from such
work; to enter upon the Premises and, during the continuance of any such
work, to temporarily close doors, entryways, public space, and corridors in
the Building; and to interrupt or temporarily suspend Building services and
facilities agreed to be furnished by Landlord, all without the same
constituting an eviction of Tenant in whole or in part and without
abatement of Rent by reason of loss or interruption of the business of
Tenant or otherwise and without in any manner rendering Landlord liable for
damages or relieving Tenant from the performance of Tenant's obligations
under this Lease; provided, however, that reasonable access to the Premises
will be maintained and the business of Tenant may not be interfered with
unreasonably;
(b) To change the name and street address of the Building (but not the
suite number(s) of the Premises); and to change the arrangement and
location of entrances or passageways, doors, and doorways, corridors,
elevators, stairs, restrooms, or other public parts of the Building, in
which event Landlord will reimburse Tenant for the cost of replacing its
stationary in an amount not to exceed Five Thousand and 00/100 Dollars
($5,000.00);
(c) To take such reasonable measures as Landlord deems advisable for
the security of the Building and its occupants; evacuating the Building for
cause, suspected cause, or for drill purposes; temporarily denying access
to the Building for safety or other commercially reasonable measures; and
closing the Building after normal business hours and on Sundays and
holidays, subject, however, to Tenant's right to enter when the Building is
closed after normal business hours under such reasonable regulations as
Landlord may prescribe from time to time for application to and for the
benefit and protection of all tenants of the Building;
(d) Upon reasonable prior oral notice to Tenant, to enter the Premises
during reasonable business hours (i) at any time during the Term to show
the Premises to prospective purchasers or lenders, or (ii) during the last
twelve (12) months of the Term to show the Premises to prospective tenants,
and to decorate, remodel, repair, alter or otherwise prepare the Premises
for reoccupancy at any time after Tenant vacates or abandons the Premises;
(e) INTENTIONALLY DELETED;
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(f) To maintain within the lobby of the Building a directory
containing a standard listing with Tenant's name;
(g) To install and maintain signs on the exterior and interior of the
Building and to approve any signs which Tenant desires to install on the
exterior of the Building, provided that Landlord agrees to install a sign
on the northeast corner of the exterior of the Building bearing Tenant's
name in the manner depicted on Exhibit J attached hereto;
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(h) To prescribe and approve in advance the location and style of any
suite number and identification sign or lettering on the door to the
Premises occupied by Tenant, the cost of which signage shall be borne by
Tenant;
(i) To retain at all times and to use in appropriate instances pass
keys to the Premises;
(j) To grant to anyone the right to conduct any business or render any
service in the Building, whether or not it is the same as or similar to the
use expressly permitted to Tenant in Section 7 above;
(k) To have access for Landlord and other tenants of the Building to
all mail chutes according to the rules of the United States Post Office;
(l) To enter the Premises at any time for reasonable purposes,
including and supplying janitor service or other service to be provided to
Tenant under this Lease;
(m) To require all persons entering or leaving the Building during
such hours as Landlord may from time to time determine to identify
themselves to watchmen or security personnel by registration or otherwise,
and to establish their right to enter or leave the Building; provided
Landlord will not be liable in damages for any error with respect to
admission to or eviction or exclusion of any person from the Building. In
case of fire, invasion, insurrection, mob, riot, civil disorder, public
excitement or other commotion, or threat thereof, Landlord reserves the
right to limit or prevent access to the Building during the continuance of
same, shut down elevator service, activate elevator emergency controls, or
otherwise take such action or preventive measures deemed necessary by
Landlord for the safety of the tenants or other occupants of the Building
or the protection of the Building and the property in the Building. Tenant
agrees to cooperate in any reasonable safety program developed by Landlord;
and
(n) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment or
modification of the rules and regulations contained in Exhibit B attached
---------
to this Lease or other sections of this Lease, for the protection and
welfare of the Building, its tenants and occupants, as Landlord may
determine, and Tenant agrees to abide by all such rules and regulations
upon receiving a written copy of the same.
21. MISCELLANEOUS.
21.1. Landlord Transfer.
Landlord may transfer any portion of the Building and any of its rights
under this Lease. If Landlord assigns its rights under this Lease, then Landlord
will be released from any further obligations under this Lease, provided that
the assignee assumes Landlord's obligations under this Lease in writing.
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21.2. Landlord's Liability.
The liability of Landlord and Landlord's Affiliates (as defined below) to
Tenant for any default by Landlord under the terms of this Lease will be
recoverable only from the interest of Landlord in the Building, and any
insurance covering the Building or Landlord to which Landlord is entitled and
Tenant agrees to look solely to Landlord's interest in the Building and any
insurance covering the Building or Landlord to which Landlord is entitled, for
the enforcement of any judgment, award, order or other remedy under or in
connection with this Lease. Under no circumstances will Landlord or Landlord's
Affiliates have any personal liability for any of the foregoing matters. The
term "Landlord's Affiliates" means collectively Landlord's property manager and
its and Landlord's respective current and future affiliates, trustees,
beneficiaries, principals, investors, directors, officers, general or limited
partners, shareholders, managers, employees, agents, representatives, successors
and assigns.
21.3. Force Majeure.
Other than for Tenant's obligations under this Lease that can be performed
by the payment of money (e.g., payment of Rent and maintenance of insurance),
whenever a period of time is prescribed for action to be taken by either party,
such party will not be liable or responsible for, and there will be excluded
from the computation of any such period of time, any delays due to strikes,
riots, acts of God, shortages of labor or materials, war, governmental laws,
regulations, or restrictions, or any other causes of any kind whatsoever which
are beyond the reasonable control of such party.
21.4. Brokerage.
Tenant has not dealt with any broker or agent in connection with the
negotiation or execution of this Lease, other than Landlord's Broker and
Tenant's Broker, whose commissions are payable by Landlord. Tenant agrees to
defend, indemnify and hold Landlord harmless from and against all claims,
damages, costs, expenses, attorneys' fees and other liabilities for commissions
or other compensation claimed by any other broker or agent.
21.5. Estoppel Certificates.
From time to time, Tenant agrees to furnish to Landlord, Landlord's
Mortgagee or any third party designated by Landlord, within ten (10) days after
Landlord has made a request, a written estoppel certificate signed by Tenant or
an authorized signatory of Tenant in the form attached as Exhibit D, confirming
---------
and certifying to such party, as of the date of such estoppel certificate, to
the extent factual or known, (i) that Tenant is in possession of the Premises,
(ii) that this Lease is unmodified and in full force and effect (or if there
have been modifications, that this Lease is in full force and effect as modified
and setting forth such modification); (iii) that Tenant has no offsets, claims
or defenses against Rent or the enforcement of any right or remedy of Landlord,
or any duty or obligation of Tenant under this Lease (and, if so, specifying the
same in detail); (iv) the dates through which Base Rent and Additional Rent have
been paid; (v) that Tenant has no knowledge of any then uncured defaults on the
part of Landlord under this Lease (or if Tenant has knowledge of any such
uncured defaults, specifying the same in detail); (vi) that Tenant having made
due investigation has no knowledge of any event having occurred that authorizes
the termination of this Lease by Tenant (or if Tenant has such knowledge,
specifying the same in detail): (vii) the amount of any Security Deposit held by
Landlord; (viii) that there are no actions, whether voluntary or otherwise,
pending against Tenant; and (ix) other matters reasonably requested by Landlord
or such other party. If Tenant fails to deliver the estoppel certificate
described above within such ten (10) day period, Tenant
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acknowledges and agrees that Landlord is authorized to act as Tenant's attorney-
in-fact to execute the estoppel certificate on behalf of Tenant, and Tenant will
be bound by the terms of the estoppel certificate prepared and executed by
Landlord, provided the terms of such certificate are factually true and correct.
21.6. Notices.
All notices and other communications given pursuant to this Lease must be
in writing and must be sent to the parties listed in the Lease Information
Summary above by (1) first class mail, United States Mail, postage prepaid,
certified, with return receipt requested, and addressed to the parties at the
address specified next to their signature block, (2) a nationally recognized
overnight courier, (3) personal delivery to the intended address, or (4) prepaid
telegram, cable, facsimile transmission or telex with confirmation of successful
transmission followed by a confirmatory letter. All notices will be effective
upon delivery to the address of the addressee, or, if the addressee refuses
delivery, then delivery will be deemed effective as of the date of the attempted
delivery. The parties may change their addresses by giving notice of such
change to the other party in conformity with this provision.
21.7. Severability.
If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws, then the remainder of this Lease
will not be affected, and in lieu of such clause or provision, a clause or
provision as similar in terms to such illegal, invalid, or unenforceable clause
or provision will be deemed added to this Lease as may be possible and be legal,
valid, and enforceable.
21.8. Amendments; and Binding Effect.
This Lease may not be amended except by instrument in writing signed by
Landlord and Tenant. No provision of this Lease will be deemed to have been
modified or waived by Landlord unless such modification or waiver is in writing
signed by the party against whom such modification is to be enforced. No custom
or practice which may evolve between the parties in the administration of the
terms of this Lease will waive or diminish the right of Landlord to insist upon
the performance by Tenant in strict accordance with the terms of this Lease,
except as expressly modified in writing signed by Landlord and Tenant. The terms
and conditions contained in this Lease will inure to the benefit of and be
binding upon the parties, and upon their respective successors in interest and
legal representatives, except as otherwise expressly provided. This Lease is for
the sole benefit of Landlord and Tenant, and, other than Landlord's Mortgagee,
no third party may be deemed a third party beneficiary.
21.9. Quiet Enjoyment.
Provided Tenant has performed all of its obligations under this Lease,
Tenant may peaceably and quietly hold and enjoy the Premises for the Term,
without hindrance from Landlord or any party claiming by, through, or under
Landlord, subject to the terms and conditions of this Lease.
21.10. No Merger.
No merger of the leasehold estate created under this Lease with the fee
estate in all or any part of the Premises will occur if the same person acquires
or holds, directly or indirectly, this Lease or any interest in this Lease and
the fee estate in the leasehold Premises or any interest in such fee estate.
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21.11. No Offer.
The submission of this Lease to Tenant may not be construed as an offer,
and Tenant will have no rights under this Lease unless Landlord executes a copy
of this Lease and delivers it to Tenant.
21.12. Entire Agreement.
This Lease constitutes the entire agreement between Landlord and Tenant
regarding the subject matter of this Lease and supersedes all prior related oral
statements and writings. Except for those set forth in this Lease, no
representations, warranties, or agreements have been made by Landlord or Tenant
to the other with respect to this Lease or the obligations of Landlord or Tenant
in connection with this Lease.
21.13. Calendar Days.
All references in this Agreement to a certain number of days will be deemed
to mean calendar days, unless otherwise expressly stated.
21.14. Prohibition Against Leasehold Mortgages.
Tenant will not mortgage, pledge or otherwise encumber its interest in this
Lease or in the Premises during the Term.
21.15. Waiver of Trial by Jury.
Landlord and Tenant mutually, knowingly, irrevocably, voluntarily and
intentionally waive the right to a trial by jury in any action, proceeding or
counterclaim brought by either of the parties against the other in connection
with this Lease. Each party further warrants and represents that it has
reviewed this waiver with its legal counsel and that each has waived its jury
trial rights following consultation with legal counsel. This waiver applies to
any and all subsequent amendments and any other agreements relating to this
Lease. In the event of litigation, this Lease may be filed as a written consent
to a trial by the court sitting without a jury. Tenant further agrees that in
the event Landlord commences any summary proceeding for non-payment of Rent,
Tenant will not interpose any counterclaim of any nature or description in such
proceeding.
21.16. Landlord's Remedies Cumulative.
No reference to any specific right or remedy will preclude Landlord from
exercising any other right, having any other remedy or maintaining any action to
which it may otherwise be entitled at law or in equity. No failure by Landlord
to insist upon the strict performance of any agreement, term, covenant or
condition of this Lease, or to exercise any right or remedy consequent upon a
breach thereof, and no acceptance of full or partial Rent during the continuance
of any such breach will constitute a waiver of any such breach, agreement, term,
covenant or condition. No waiver by Landlord of any breach by Tenant under this
Lease or of any breach by any other tenant under any other lease or any portion
of the Building will affect or alter this Lease in any way whatsoever. No
covenant, term or condition of this Lease will be deemed waived by Landlord
unless such waiver is in writing and executed by Landlord. Landlord may accept
a partial payment of Rent or other sums due under this Lease without such
acceptance constituting an accord and satisfaction and without prejudice to
Landlord's right to demand the balance of such Rent or other sum,
notwithstanding any notation on a check or letter accompanying such partial
payment, unless Landlord expressly waives its right to such balance in writing.
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21.17. Prohibition Against Recordation.
Tenant may not record all or any part of this Lease or any memorandum of
this Lease. Any recording by Tenant of all or any part of this Lease or any
memorandum of this Lease will be in violation of this Lease and will be void,
and Tenant agrees to indemnify Landlord, its trustees, beneficiaries, agents,
successors and assigns for any losses, damages or expenses of any nature
whatsoever incurred by reason of such recording. In the event Tenant records or
causes all or any part of this Lease or any memorandum of this Lease to be
recorded, Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-
fact, coupled with an interest, to execute and record a certificate to clear any
cloud on the title to the Building created by the improper recordation.
21.18. Joint and Several Liability.
If two (2) or more individuals, corporations, partnerships or other
business associations (or any combination of two (2) or more thereof) sign this
Lease as Tenant, the liability of each such individual, corporation, partnership
or other business association to pay Rent and perform all of Tenant's other
obligations under this Lease are deemed to be joint and several.
21.19. Corporate Tenants.
If Tenant is a corporation, the persons executing this Lease on behalf of
Tenant hereby covenant and warrant that Tenant is a duly constituted corporation
qualified to do business in the State of Illinois; all of Tenant's franchise and
corporate taxes have been paid to date; all future forms, reports, fees and
other documents necessary for Tenant to comply with all applicable laws will be
filed by Tenant when due; and such persons are duly authorized by the board of
directors of such corporation to execute and deliver this Lease on behalf of
Tenant.
21.20. Right of First Offer.
Provided that as of the date Tenant notifies Landlord of its desire to
exercise its "Right of First Offer" (as defined below) (i) Tenant is not in
default under the terms and conditions of this Lease, (ii) no event has occurred
but for the passage of time or the giving of notice, or both, that would
constitute a material default under this Lease which has not been cured or
waived, and (iii) Tenant is then occupying the Premises, during the initial Term
of this Lease Tenant shall have an ongoing right of first offer (the "Right of
First Offer") to rent any available space on the 20/th/ floor of the Building
(the "ROFO Premises"), subject to the terms and conditions set forth below.
Prior to submitting any proposal to a third party with respect to the leasing of
the ROFO Premises, Landlord agrees to notify Tenant in writing as to the date in
the future (the "Availability Date") when the ROFO Premises can be made
available to Tenant ("Landlord's Notice"). Tenant must notify Landlord in
writing within ten (10) business days after Tenant's receipt of Landlord's
Notice whether Tenant desires to exercise its Right of First Offer. Tenant's
Right of First Offer must be exercised as to one hundred percent (100%) of the
ROFO Premises. If Tenant does not notify Landlord of its election to exercise
its Right of First Offer with respect to the ROFO Premises within said ten (10)
business period, then Tenant will be deemed to have elected not to exercise its
Right of First Offer with respect to the ROFO Premises and to have waived its
Right of First Offer with respect to the ROFO Premises until such time as
Landlord presents another proposal to an entirely new third party with respect
to the ROFO Premises. If Tenant elects to exercise its Right of First Offer and
so notifies Landlord within said ten (10) business day period, then Landlord
will, at its own expense, perform the base building work in the ROFO Premises
consistent with the terms of Exhibit H attached hereto, and Tenant will accept
---------
the ROFO Premises as of the Availability Date in its
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then "AS-IS" condition and subject to the same terms and conditions contained in
the Lease, except that (a) the Base Rent for the ROFO Premises will be the then
prevailing market rental rate (taking into account then prevailing market
concessions, if any) for buildings of a similar size and class located in the
downtown Chicago area as determined jointly by Landlord and Tenant, failing
which the Base Rent for the ROFO Premises shall be determined in accordance with
the terms of Section 21.26 below; (b) the term "Premises" for all purposes of
this Lease will include the ROFO Premises; (c) the numerator of Tenant's
Proportionate Share will increase by the amount of rentable square feet
contained within the ROFO Premises; (d) Tenant's lease of the ROFO Premises will
be coterminous with the Term of this Lease; and (e) on or before the
Availability Date Tenant will cause the Security Deposit (be it cash or the
Letter of Credit) to be increased by an amount equal to sixty percent (60%) of
the cost of any tenant improvements in the ROFO Premises to be performed or paid
for by Landlord; provided, however, if Tenant's stock is publicly traded as of
the Availability Date, and so long as Tenant has satisfied the requirements of
Section A of Article VI of the Lease Information Summary with respect to cash or
cash equivalents, then instead of increasing the Security Deposit as described
above, Tenant shall, on or before the Availability Date, deposit with Landlord a
new Letter of Credit in conformity with the terms and provisions of Section 4.2
above and in an amount equal to the product of Eleven and 40/100 Dollars
($11.40) multiplied by the square footage of the ROFO Premises being leased by
Tenant on the Availability Date, which Letter of Credit shall be reduced in the
same manner described in Section A of Article VI of the Lease Information
Summary. Tenant will commence paying Rent for the ROFO Premises on the
Availability Date in the manner provided in Section 3.1 above.
21.21. Right of First Refusal.
Subject to the right(s) of any tenant(s) of the Building existing on the
date of this Lease to lease the "Additional Premises" (as defined below) or any
portion of the Additional Premises, and provided Tenant has continuously
occupied the Premises and is not in default under any terms and conditions of
this Lease as of the date Tenant notifies Landlord of its desire to exercise its
"Right of First Refusal" (as defined below), and so long as no event has
occurred but for the passage of time or the giving of notice, or both, that
would constitute a default under this Lease which has not been cured or waived,
during the first five (5) lease years Tenant shall have a right of first refusal
(the "Right of First Refusal") to rent any contiguous space which comprises more
than 7,500 rentable square feet and which is situated no lower than the twelfth
(12/th/) floor and no higher than the twentieth (20/th/) floor of the Building
(the "Additional Premises"), subject to the terms and conditions set forth
below. Prior to entering into any lease or other agreement with a third party
with respect to the Additional Premises during the first five (5) years of the
Term, Landlord will give Tenant written notice ("Landlord's Notice") of the
terms upon which a third party is willing to rent the Additional Premises.
Tenant must notify Landlord in writing within ten (10) business days after
Tenant's receipt of Landlord's Notice whether Tenant desires to exercise its
Right of First Refusal. Tenant's Right of First Refusal may only be exercised
as to the entire Additional Premises and on the same terms as offered by
Landlord to the third party. If Tenant does not notify Landlord of its election
to exercise its Right of First Refusal for the Additional Premises within the
ten (10) business day period described herein, then Tenant will be deemed to
have waived and elected not to exercise its Right of First Refusal with respect
to the Additional Premises, and Landlord may enter into a lease or other
agreement with any third party for the Additional Premises on the same terms and
conditions set forth in Landlord's Notice. However, if Landlord does not enter
into a lease or other agreement with a third party for the Additional Premises
on the same terms and conditions set forth in Landlord's Notice within six (6)
months after the expiration of said ten (10)
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business day period, or if Landlord intends to enter into a lease with a third
party for the Additional Premises on terms materially different from the terms
and conditions set forth in Landlord's Notice, then Landlord must first give
Tenant a new Landlord's Notice and another opportunity to exercise its Right of
First Refusal in accordance with this Section 21.21. If Tenant elects to
exercise its Right of First Refusal and so notifies Landlord within such ten
(10) business day period, then Tenant will accept the Additional Premises in
"AS-IS" condition and subject to the same terms and conditions as offered to the
third party, including the payment of Rent, except that (i) the term "Premises"
for all purposes of this Lease will thereafter include the Additional Premises,
(ii) the numerator of Tenant's Proportionate Share will increase by the amount
of rentable square feet contained within the Additional Premises, (iii) Tenant's
Lease of the Additional Premises will be coterminous within the Term of this
Lease, including any extensions of the Term; and (iv) on or before taking
possession of the Additional Premises Tenant will cause the Security Deposit (be
it cash or the Letter of Credit) to be increased by an amount equal to sixty
percent (60%) of the cost of any tenant improvements in the Additional Premises
to be performed or paid for by Landlord; provided, however, if Tenant's stock is
publicly traded as of the date Tenant takes possession of the Additional
Premises, and so long as Tenant has satisfied the requirements of Section A of
Article VI of the Lease Information Summary with respect to cash or cash
equivalents, then instead of increasing the Security Deposit as described above,
Tenant shall, on or before the date Tenant takes possession of the Additional
Premises, deposit with Landlord a new Letter of Credit in conformity with the
terms and provisions of Section 4.2 above and in an amount equal to the product
of Eleven and 40/100 Dollars ($11.40) multiplied by the square footage of the
Additional Premises being leased by Tenant on the date Tenant takes possession
of the Additional Premises, which Letter of Credit shall be reduced in the same
manner described in Section A of Article VI of the Lease Information Summary.
21.22. Option To Renew.
Provided Tenant has continuously occupied the Premises and is not in
default under the terms and conditions of this Lease, and so long as no event
has occurred but for the passage of time or the giving of notice, or both, would
constitute a default under this Lease which has not been cured or waived, Tenant
has the option (the "Renewal Option") to extend the Term of this Lease for one
(1) additional five (5) year period (the "Renewal Period"). If Tenant desires
to exercise the Renewal Option, Tenant must deliver written notice (the "Renewal
Notice") to Landlord not less than fourteen (14) months prior to the scheduled
expiration of the Term. The same terms and conditions as contained in this
Lease will apply during the Renewal Period, except the Base Rent will be equal
to ninety-five percent (95%) of the then prevailing market rental rate (taking
into account then prevailing market concessions, if any) for buildings of
similar size and class located in the downtown Chicago area as determined
pursuant to the terms of Section 21.26 below. Any attempt by Tenant to exercise
the Renewal Option by any method, at any time or in any circumstances, except as
specifically set forth herein, will be null and void and of no force or effect
at the sole option and discretion of Landlord.
21.23. Tenant's First Expansion Option.
Provided Tenant has continuously occupied the Premises and is not in
default under the terms and conditions of this Lease, and so long as no event
has occurred but for the passage of time or the giving of notice, or both, that
would constitute a default under this Lease which has not been cured or waived,
Tenant shall have the option to rent certain additional space in
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the Building to be designated by Landlord comprising not less than 8,500
rentable square feet and not more than 11,500 rentable square feet (the "First
Expansion Space") commencing on the first day of the second (2/nd/) lease year
of the Term (the "First Expansion Space Commencement Date") by giving Landlord
not less than six (6) months prior written notice of Tenant's election to rent
the First Expansion Space. Landlord agrees that in no event will the First
Expansion Space comprise more than two thousand (2,000) square feet in excess of
the additional space requested by Tenant, and that if the First Expansion Space
comprises more than five hundred (500) square feet in excess of the additional
space requested by Tenant, then Tenant shall be entitled to three (3) months of
gross Rent abatement only with respect to that portion of the First Expansion
Space which comprises more than five hundred (500) square feet in excess of the
additional space requested by Tenant. If Tenant exercises its option to rent the
First Expansion Space in the manner described herein, then Landlord will, at its
own expense, perform the base building work in the First Expansion Space
consistent with the terms of Exhibit H attached hereto and deliver the First
---------
Expansion Space to Tenant not less than sixty (60) days prior to the First
Expansion Space Commencement Date to enable Tenant to complete its tenant
improvements, and Tenant will accept the First Expansion Space in its then "AS-
IS" condition and subject to the same terms and conditions contained in the
Lease, except that beginning on the First Expansion Space Commencement Date (i)
Tenant will pay to Landlord Base Rent for the First Expansion Space in the
manner provided in Section 3.1 above at the same rate of Base Rent then being
paid by Tenant for the Premises under this Lease; (ii) the term "Premises" for
all purposes of this Lease will include the First Expansion Space; (iii) the
numerator of Tenant's Proportionate Share will increase by the rentable square
feet contained within the First Expansion Space; (iv) Landlord will afford
Tenant an allowance to cover the cost of certain non-structural, tenant
improvements to be made to the First Expansion Space (including but not limited
to architectural, mechanical, plumbing and engineering fees), which allowance
shall equal the product of $40.00 per square foot of the First Expansion Space
multiplied by a fraction, the numerator of which is the number of months
remaining from and after the First Expansion Space Commencement Date until the
end of the Term and the denominator of which is 120; and (v) Tenant will cause
the Security Deposit (be it cash or the Letter of Credit) to be increased by an
amount equal to sixty percent (60%) of the cost of any tenant improvements in
the First Expansion Space to be performed or paid for by Landlord; provided,
however, if Tenant's stock is publicly traded as of the First Expansion Space
Commencement Date, and so long as Tenant has satisfied the requirements of
Section A of Article VI of the Lease Information Summary with respect to cash or
cash equivalents, then instead of increasing the Security Deposit as described
above, Tenant shall, on or before the First Expansion Space Commencement Date,
deposit with Landlord a new Letter of Credit in conformity with the terms and
provisions of Section 4.2 above and in an amount equal to the product of Eleven
and 40/100 Dollars ($11.40) multiplied by the square footage of the First
Expansion Space being leased by Tenant on the First Expansion Space Commencement
Date, which Letter of Credit shall be reduced in the same manner described in
Section A of Article VI of the Lease Information Summary.
21.24. Tenant's Second Expansion Option.
Provided Tenant has continuously occupied the Premises and is not in
default under the terms and conditions of this Lease, and so long as no event
has occurred but for the passage of time or the giving of notice, or both, that
would constitute a default under this Lease which has not been cured or waived.
Tenant shall have the option to rent certain additional space in the Building to
be designated by Landlord comprising not less than 8,500 rentable square feet
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and not more than 11,500 rentable square feet (the "Second Expansion Space")
commencing on the earlier of (a) the date Landlord delivers possession of the
Second Expansion Space with all tenant improvements having been completed to
Tenant, or (b) the first day of the fourth (4/th/) month of the third (3/rd/)
lease year of the Term (such earlier date being the "Second Expansion Space
Commencement Date") by giving Landlord not less than nine (9) months prior
written notice of Tenant's election to rent the Second Expansion Space.
Landlord agrees that in no event will the Second Expansion Space comprise more
than two thousand (2,000) square feet in excess of the additional space
requested by Tenant, and that if the Second Expansion Space comprises more than
five hundred (500) square feet in excess of the additional space requested by
Tenant, then Tenant shall be entitled to three (3) months of gross Rent
abatement only with respect to that portion of the Second Expansion Space which
comprises more than five hundred (500) square feet in excess of the additional
space requested by Tenant. If Tenant exercises its option to rent the Second
Expansion Space in the manner described herein, then Landlord will, at its own
expense, perform the base building work in the Second Expansion Space consistent
with the terms of Exhibit H attached hereto and deliver the Second Expansion
---------
Space to Tenant not less than sixty (60) days prior to the Second Expansion
Space Commencement Date to enable Tenant to complete its tenant improvements,
and Tenant will accept the Second Expansion Space in its then "AS-IS" condition
and subject to the same terms and conditions contained in the Lease, except that
beginning on the Second Expansion Space Commencement Date (i) Tenant will pay to
Landlord Base Rent for the Second Expansion Space in the manner provided in
Section 3.1 above at the same rate of Base Rent then being paid by Tenant for
the Premises under this Lease; (ii) the term "Premises" for all purposes of this
Lease will include the Second Expansion Space; (iii) the numerator of Tenant's
Proportionate Share will increase by the rentable square feet contained within
the Second Expansion Space; (iv) Landlord will afford Tenant an allowance to
cover the cost of certain non-structural, tenant improvements to be made to the
Second Expansion Space (including but not limited to architectural, mechanical,
plumbing and engineering fees), which allowance shall equal the product of
$40.00 per square foot of the Second Expansion Space multiplied by a fraction,
the numerator of which is the number of months remaining from and after the
Second Expansion Space Commencement Date until the end of the Term and the
denominator of which is 120; and (v) Tenant will cause the Security Deposit (be
it cash or the Letter of Credit) to be increased by an amount equal to sixty
percent (60%) of the cost of any tenant improvements in the Second Expansion
Space to be performed or paid for by Landlord; provided, however, if Tenant's
stock is publicly traded as of the Second Expansion Space Commencement Date, and
so long as Tenant has satisfied the requirements of Section A of Article VI of
the Lease Information Summary with respect to cash or cash equivalents, then
instead of increasing the Security Deposit as described above, Tenant shall, on
or before the Second Expansion Space Commencement Date, deposit with Landlord a
new Letter of Credit in conformity with the terms and provisions of Section 4.2
above and in an amount equal to the product of Eleven and 40/100 Dollars
($11.40) multiplied by the square footage of the Second Expansion Space being
leased by Tenant on the Second Expansion Space Commencement Date, which Letter
of Credit shall be reduced in the same manner described in Section A of Article
VI of the Lease Information Summary.
21.25. Tenant's Third Expansion Option.
Provided Tenant has continuously occupied the Premises and is not in
default under the terms and conditions of this Lease, and so long as no event
has occurred but for the passage of time or the giving of notice, or both, would
constitute a default under this Lease, Tenant shall
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have the option to rent certain additional space in the Building to be
designated by Landlord comprising not less than 8,500 rentable square feet and
not more than 11,500 rentable square feet (the "Third Expansion Space")
commencing on the earlier of (a) the date Landlord delivers possession of the
Third Expansion Space with all tenant improvements having been completed to
Tenant, or (b) the first day of the sixth (6/th/) lease year of the Term (such
earlier date being the "Third Expansion Space Commencement Date") by giving
Landlord not less than fifteen (15) months prior written notice of Tenant's
election to rent the Third Expansion Space. Landlord agrees that in no event
will the Third Expansion Space comprise more than two thousand (2,000) square
feet in excess of the additional space requested by Tenant, and that if the
Third Expansion Space comprises more than five hundred (500) square feet in
excess of the additional space requested by Tenant, then Tenant shall be
entitled to three (3) months of gross Rent abatement only with respect to that
portion of the Third Expansion Space which comprises more than five hundred
(500) square feet in excess of the additional space requested by Tenant. If
Tenant exercises its option to rent the Third Expansion Space in the manner
described herein, then Landlord will, at its own expense, perform the base
building work in the Third Expansion Space consistent with the terms of
Exhibit H attached hereto and deliver the Third Expansion Space to Tenant not
- ---------
less than sixty (60) days prior to the Third Expansion Space Commencement Date
to enable Tenant to complete its tenant improvements, and Tenant will accept the
Third Expansion Space in its then "AS-IS" condition and subject to the same
terms and conditions contained in the Lease, except that beginning on the Third
Expansion Space Commencement Date (i) Tenant will pay to Landlord Base Rent for
the Third Expansion Space in the manner provided in Section 3.1 above at the
same rate of Base Rent then being paid by Tenant for the Premises under this
Lease; (ii) the term "Premises" for all purposes of this Lease will include the
Third Expansion Space; (iii) the numerator of Tenant's Proportionate Share will
increase by the rentable square feet contained within the Third Expansion Space;
(iv) Landlord will afford Tenant an allowance to cover the cost of certain non-
structural, tenant improvements to be made to the Third Expansion Space
(including but not limited to architectural, mechanical, plumbing and
engineering fees), which allowance shall equal the product of $40.00 per square
foot of the Third Expansion Space multiplied by a fraction, the numerator of
which is the number of months remaining from and after the Third Expansion Space
Commencement Date until the end of the Term and the denominator of which is 120;
and (v) Tenant will cause the Security Deposit (be it cash or the Letter of
Credit) to be increased by an amount equal to sixty percent (60%) of the cost of
any tenant improvements in the Third Expansion Space to be performed or paid for
by Landlord; provided, however, if Tenant's stock is publicly traded as of the
Third Expansion Space Commencement Date, and so long as Tenant has satisfied the
requirements of Section A of Article VI of the Lease Information Summary with
respect to cash or cash equivalents, then instead of increasing the Security
Deposit as described above, Tenant shall, on or before the Third Expansion Space
Commencement Date, deposit with Landlord a new Letter of Credit in conformity
with the terms and provisions of Section 4.2 above and in an amount equal to the
product of Eleven and 40/100 Dollars ($11.40) multiplied by the square footage
of the Third Expansion Space being leased by Tenant on the Third Expansion Space
Commencement Date, which Letter of Credit shall be reduced in the same manner
described in Section A of Article VI of the Lease Information Summary.
21.26. Arbitration.
In the event Tenant disputes Landlord's determination of the prevailing
market rental rate under this Lease, and if the parties cannot mutually agree on
the prevailing market rental
32
<PAGE>
rate within thirty (30) days thereafter, then either party may notify the other
party in writing (the "Arbitration Notice") that it intends to arbitrate the
dispute, in which event within ten (10) business days after the recipient's
receipt of the Arbitration Notice, Landlord and Tenant shall each designate a
commercial real estate broker licensed in the State of Illinois and each being
experienced in determining rental rates for office buildings comparable to the
Building. If the brokers so designated fail to agree upon the prevailing market
rental rate of the Premises within twenty (20) days after their designation,
then the two (2) named brokers shall promptly and jointly select a third
commercial broker licensed in the State of Illinois and experienced in
determining rental rates for office buildings comparable to the Building, and
the third broker shall then determine conclusively the then prevailing market
rental rate for the Premises, which decision shall be binding on both Landlord
and Tenant. If either party fails to designate its respective broker within the
time allowed, then the broker designated by the other party shall act alone.
21.27. Tenant's Termination Right.
Notwithstanding anything to the contrary contained in this Lease, Tenant
shall have a one (1) time option to terminate this Lease at the end of the
seventh (7/th/) lease year of the Term by giving Landlord written notice of
Tenant's election to terminate this Lease on or before the last day of the sixth
(6/th/) month of the sixth (6/th/) lease year, which notice must be accompanied
by payment of a termination fee to Landlord in an amount equal to the total Rent
due from Tenant to Landlord during the seventh (7/th/) lease year. Tenant
agrees to vacate and surrender possession of the Premises to Landlord at the end
of the seventh (7/th/) lease year. This right of termination is reserved to
Tenant and will not inure to the benefit of any assignees, sublessees,
transferees, successors and/or assigns of Tenant.
LANDLORD:
---------
360 NORTH MICHIGAN TRUST,
a Delaware business trust
By: DOUGLAS ELLIMAN-BEITLER
MANAGEMENT CORPORATION, an
Illinois corporation, its
agent
By: /s/ J. Paul Beitter
--------------------------
Its: President
-------------------------
TENANT:
-------
coolsavings.com inc.,
a Michigan corporation
By: /s/ Steven M. Golden
-------------------------------
Its: CEO
------------------------------
33
<PAGE>
EXHIBIT A
---------
OUTLINE OF PREMISES
-------------------
1
<PAGE>
11,930 Rentable Square Feet
[Outline of Floor Plan Appears Here]
380 North Michigan Avenue
8th Floor
2
<PAGE>
10, 898 Rentable Square Feet
[Outline of Floor Plan Appears Here]
360 North Michigan Avenue
18th Floor
3
<PAGE>
10,716 Rentable Square Feet
[Outline of Floor Plan Appears Here]
360 North Michigan Avenue
19th Floor
4
<PAGE>
10,305 Rentable Square Feet
[Outline of Floor Plan Appears Here]
360 North Michigan Avenue
21st Floor
5
<PAGE>
EXHIBIT B
---------
BUILDING RULES AND REGULATIONS
------------------------------
The following rules and regulations will apply to the Premises, the
Building and any appurtenances:
Sidewalks, doorways, vestibules, halls, stairways, and other similar areas
may not be obstructed by tenants or used by any tenant for purposes other than
ingress and egress to and from their respective leased premises and for going
from one to another part of the Building.
Plumbing fixtures and appliances may be used only for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable material may
be thrown or deposited in such fixtures and appliances. Damage resulting to any
such fixtures or appliances from misuse by a tenant or its agents, employees or
invitees, shall be paid by such tenant.
No signs, advertisements or notices may be painted or affixed on or to any
windows or doors or other part of the Building without the prior written consent
of Landlord. No nails, hooks or screws may be driven or inserted in any part of
the Building except by Building maintenance personnel. No curtains or other
window treatments may be placed between the glass and the Building standard
window treatments.
Landlord will provide and maintain an alphabetical directory for all
tenants in the main lobby of the Building.
Landlord will provide all door locks in each tenant's leased premises, at
the cost of such tenant, and no tenant may place any additional door locks in
its leased premises without Landlord's prior written consent. Landlord will
furnish to each tenant a reasonable number of keys to such tenant's leased
premises, at such tenant's cost, and no tenant may make a duplicate.
Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by tenants of any bulky material, merchandise or materials
which require use of elevators or stairways, or movement through the Building
entrances or lobby may be conducted under Landlord's supervision at such times
and in such a manner as Landlord may reasonably require. Each tenant assumes all
risks of and will be liable for all damage to articles moved and injury to
persons or public engaged or not engaged in such movement, including equipment,
property and personnel of Landlord if damaged or injured as a result of acts in
connection with carrying out this service for such tenant.
Landlord may prescribe weight limitations and determine the locations for
safes and other heavy equipment or items, which will in all cases be placed in
the Building so as to distribute weight in a manner acceptable to Landlord which
may include the use of such supporting devices as Landlord may require. All
damages to the Building caused by the installation or removal of any property of
a tenant, or done by a tenant's property while in the Building, will be repaired
at the expense of such tenant.
Corridor doors, when not in use, must be kept closed. Nothing may be swept
or thrown into the corridors, halls, elevator shafts or stairways. No birds or
animals may be brought into or kept in, on or about any tenant's leased
premises. No portion of any tenant's leased premises may at any time be used or
occupied as sleeping or lodging quarters.
6
<PAGE>
Tenant will cooperate with Landlord's employees in keeping its leased
premises neat and clean. Tenants will not employ any person for the purpose of
such cleaning other than the Building's cleaning and maintenance personnel.
To ensure orderly operation of the Building, no ice, mineral or other
water, towels, newspapers, etc. may be delivered to any leased area except by
persons approved by Landlord.
Tenant may not make or permit any improper, objectionable or unpleasant
noises or odors in the Building or otherwise interfere in any way with other
tenants or persons having business with them.
No machinery of any kind (other than normal office equipment) may be
operated by any tenant on its leased area without Landlord's prior written
consent, nor may any tenant use or keep in the Building any flammable or
explosive fluid or substance.
Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against entry or
not.
No vending or dispensing machines of any kind may be maintained in any
leased premises without the prior written permission of Landlord.
7
<PAGE>
EXHIBIT C
---------
LETTER OF CREDIT
----------------
8
<PAGE>
EXHIBIT D
---------
ESTOPPEL CERTIFICATE
--------------------
The undersigned tenant ("TENANT") certifies as follows:
1. Tenant entered into a written lease dated January 3, 2000 (the "LEASE")
with 360 North Michigan Trust, as landlord ("LANDLORD"), under which Lease
Landlord leased to Tenant and Tenant rented from Landlord certain premises on
the 18th, 19th, 20th and 21st floors of the building located at 360 North
Michigan Avenue, Chicago, Illinois 60601 (the "PREMISES").
2. The Lease is in full force and effect; Tenant accepted and presently
occupies the Premises and is paying rent currently; Tenant has no setoffs,
claims or defenses to the enforcement of the Lease; and Tenant has not assigned
or transferred its interest thereunder.
3. Tenant's Base Rent under the Lease is currently $____________.
4. As of this date, Tenant is not in default in the performance of the Lease,
has not committed any breach of the Lease and no notice of default has been
given to Tenant.
5. As of this date, Landlord is not in default under the Lease, and no notice
of default has been given to Landlord.
6. No rent or other moneys have been paid to Landlord or Landlord's agent by
Tenant more than thirty (30) days in advance under the Lease, and a security
deposit has been paid by Tenant in the amount of $_____________.
7. The term of the Lease expires on __________________, and Tenant has no
rights to extend the term of the Lease nor purchase all or any portion of the
Premises except as follows:
____________________________________________________________________.
8. Tenant has no claim against Landlord for any security deposit or prepaid
rent except as follows:
_____________________________________________________________.
9. The Lease constitutes the only agreement between Landlord and Tenant with
respect to the Premises, and the Lease has not been amended, modified or
superseded.
Dated: January ____, 2000.
TENANT:
coolsavings.com inc.,
a Michigan corporation
By:__________________________
Its:__________________________
9
<PAGE>
EXHIBIT E
---------
INTENTIONALLY DELETED
---------------------
EXHIBIT F
---------
WORKLETTER
----------
THIS WORKLETTER (the "WORKLETTER") is referred to in and specifically made a
part of that certain lease dated January 3, 2000 (the "LEASE") between DOUGLAS
ELLIMAN-BEITLER MANAGEMENT CORPORATION, as agent for 360 North Michigan Trust, a
Delaware business trust ("LANDLORD"), and coolsavings.com inc., a Michigan
corporation ("TENANT").
Landlord and Tenant agree that their respective rights and obligations with
respect to the construction of the Premises shall be as provided in the Lease
and in this Workletter. All of the terms used herein which are defined in the
Lease shall have the same meanings as provided in the Lease unless otherwise
stated herein.
1. TENANT'S PLANS AND SPECIFICATIONS
---------------------------------
(A) Tenant, at Tenant's sole cost and expense, except as otherwise
provided herein, shall cause Partners by Design to prepare complete,
finished architectural plans and specifications in sufficient detail as to
heat loads, ventilation, electrical loads and plumbing requirements for
preparation of HVAC, mechanical, electrical, plumbing, fire protection,
structural and telephone drawings by other professionals engaged by Tenant,
including all dimensions and specifications for all work to be performed in
the Premises as tenant improvements (collectively "TENANT'S PLANS").
(B) Tenant's Plans shall include all information which may be required
by Landlord's engineers in connection with mechanical plans, including but
not limited to the following:
(1) Any special floor loading conditions which may exceed the
structural weights limits of any floor;
(2) Specifications of any heat emanating equipment to be
installed by Tenant which may require special air conditioning;
(3) Telephone specifications and electrical specifications of any
equipment that requires additional electrical power or outlets;
(4) Complete specifications of any dataline wiring required,
including routing, conduit size, cable type and similar items.
(5) Furniture plans (including locations of files) showing
details of space occupancy;
(6) Reflected ceiling plans;
(7) Partition and door location plans;
10
<PAGE>
(8) Fire safety plans;
(9) Detail and finish plans and schedules, together with
specifications for any "TENANT'S WORK" (as hereinafter defined) to be
performed in the Premises; and
(10) Plans for any stairwell to be constructed in the Premises.
(C) Tenant's Plans are expressly subject to Landlord's prior written
approval. Landlord shall, within ten (10) business days after submission of
any of Tenant's Plans, either (i) approve Tenant's Plans as submitted, or
(ii) advise Tenant of the changes required in Tenant's Plans in order to
meet Landlord's requirements. If Landlord does not respond to Tenant within
said ten (10) business day period, then Tenant's Plans shall be deemed
approved as submitted. Neither review nor approval by Landlord of any of
Tenant's Plans shall constitute a representation or warranty by Landlord
that Tenant's Plans are complete or suitable for their intended purpose, or
comply with applicable laws, ordinances, codes and regulations, it being
expressly agreed by Tenant that Landlord assumes no responsibility or
liability to Tenant or to any other person or entity for such completeness,
suitability or compliance.
(D) Tenant shall make no material changes in Tenant's Plans after
approval thereof by Landlord without the prior written consent of Landlord.
(E) Tenant's preliminary space plans have been delivered to Landlord.
Tenant's final mechanical and engineering plans and specifications, and
final architectural plans shall be delivered to Landlord on or before
January 14, 2000. Revised plans incorporating any changes reasonably
requested by Landlord shall be resubmitted to Landlord within ten (10)
business days after notice of disapproval is delivered to Tenant.
(F) All requests by Tenant for reimbursement of expenses as provided in
this Workletter shall be paid by Landlord within thirty (30) days after
Landlord's receipt of such written request, accompanied by invoices or
other appropriate documentation reasonably satisfactory to Landlord which
evidences the actual charges incurred by Tenant pursuant to subparagraph
(E) above. All costs in excess of the maximum reimbursements specified
herein or in the Lease shall be paid by Tenant.
2. THE WORK. Upon receipt and approval by Landlord of all of Tenant's Plans,
Landlord shall cause the Premises to be improved in accordance with Tenant's
Plans. The improvement of the Premises in accordance with Tenant's Plans is
sometimes referred to herein as the "WORK". Upon approval by Landlord of
Tenant's Plans, Landlord shall cause Tenant's Plans to be filed with the
governmental agencies having jurisdiction thereof in order to obtain all
governmental permits and authorizations which may be required in connection with
the Work to be done.
3. ACCEPTANCE OF WORK. Landlord shall give Tenant or shall cause Landlord's
architect or interior space planner to give Tenant written notice (the
"COMPLETION NOTICE") of the date on which (i) the Work is "SUBSTANTIALLY
COMPLETED" in accordance with Tenant's Plans (the "SUBSTANTIAL COMPLETION
DATE"), which determination shall be made jointly by Landlord's architect or
interior space planner and Tenant's architect, and (ii) the Premises are "READY
FOR OCCUPANCY". Tenant shall then have the obligation, within ten (10) business
days after Landlord's delivery of the Completion Notice, to prepare a
11
<PAGE>
punchlist (to be signed by both Landlord and Tenant) of all items to be
completed and/or corrected (the "PUNCHLIST ITEMS") based on Tenant's inspection
of the Premises with Landlord or Landlord's representative(s) within said ten
(10) business day period. Any items not listed or described on such punchlist
(other than latent defects which will be cured in accordance with the provisions
of the warranties of the general contractor performing the Work) shall be deemed
accepted by Tenant. Subject to any "EXCUSED DELAY", Landlord shall correct the
Punchlist Items within a reasonable period of time after the Substantial
Completion Date; provided, however, in no event shall such period exceed sixty
(60) days. The determination by Landlord's architect or interior space planner
that the Work has been substantially completed shall be final, conclusive and
binding on Tenant as to whether the Premises are substantially complete in
accordance with Tenant's Plans and Ready for Occupancy. Substantial completion
of the Work shall mean the completion of the Work in a good and workmanlike
manner and substantially in accordance with Tenant's Plans, as the same may be
amended from time to time, with the exception of minor or insubstantial details
of construction, mechanical adjustment or decoration, the incompletion of which
will not unreasonably interfere with the normal use or occupancy of the Premises
by Tenant.
4. LANDLORD'S CONTRIBUTION. Landlord shall contribute the sum of
$1,773,960.00 (the "CONTRIBUTION") toward the "COST OF THE WORK" (as hereinafter
defined). As used herein, "COST OF THE WORK" shall mean the costs of all labor
and materials for improvements to the Premises in accordance with Tenant's
Plans, the preparation of Tenant's Plans, general contractor's fees, costs of
built-in furniture, costs of separately metering electricity to the Premises and
costs for the purchase, delivery and installation of any other item which, when
installed in the Premises, shall be deemed a fixture or a permanent improvement
to the Premises. No supervisory fees shall be payable to Landlord in connection
with the Work. In the event the Cost of the Work is for an amount in excess of
the Contribution, or, as a result of approved change orders, becomes in excess
of the Contribution, or if the Cost of the Work is or becomes in excess of the
Contribution, then Tenant shall deposit the amount of such excess with Landlord.
In no event shall Landlord have any liability or responsibility for any Cost of
the Work in excess of the Contribution.
5. ACCESS BY TENANT PRIOR TO COMPLETION OF WORK. If Tenant desires to do any
construction, decorating or finish work in the Premises in addition to the Work
("TENANT'S WORK"), then Tenant's Work shall comply with all of the provisions of
the Lease, including, without limitation, section 6 of the Lease. Landlord will
permit Tenant and Tenant's agents, suppliers, contractors and workmen to enter
the Premises to perform Tenant's Work prior to the Commencement Date, provided
that Tenant's Work does not interfere with or delay the completion of the Work
to the extent applicable. Landlord shall also provide Tenant with access to
loading docks, freight elevators, construction hoists and electrical service
prior to the Commencement Date in connection with the completion of Tenant's
Work. Tenant agrees to reimburse Landlord for any costs and/or charges incurred
by Landlord relating to Tenant's use of the freight elevators after normal
business hours. In addition, Tenant shall reimburse Landlord for the cost of
the use of the construction hoists by Tenant, and for the cost of the use of the
construction hoists by Landlord or its contractors after normal business hours
(whether performing work for Tenant or others) to the extent that the use of
such hoists after normal business hours was made necessary by the use of the
hoists by Tenant and Tenant's contractors during normal business hours.
Scheduling of Tenant's Work in the Premises and the use of loading docks,
freight elevators and construction hoists shall be subject to advance scheduling
as reasonably determined by Landlord. Tenant's right of entry as provided
herein shall be a license only, conditioned upon Tenant fully performing and
complying with each of the following covenants, conditions and requirements:
12
<PAGE>
(A) Tenant and Tenant's agents, contractors, workmen, mechanics,
suppliers and invitees shall work in harmony and not interfere with
Landlord and Landlord's agents in the performance of the Work or work for
other tenants and occupants of the Building. If at any time such entry
shall, in the judgment of Landlord, cause or threaten to cause disharmony
or interference, Landlord shall have the right to withdraw such permission
upon twenty-four (24) hours notice to Tenant;
(B) Tenant agrees that any such entry into the Premises shall be deemed
to be under all of the terms, covenants, conditions and provisions of the
Lease, except as to the covenant to pay Rent, and Tenant further agrees
that in connection therewith Landlord shall not be liable in any way for
any injury, loss or damage which may occur to any of Tenant's Work and/or
to property placed in the Premises prior to the Commencement Date and
thereafter, the same being at Tenant's sole risk. Tenant shall allow
Landlord access to the Premises for inspection purposes at all times during
the period that Tenant is performing any Tenant's Work. If Tenant or any
entity performing Tenant's Work on behalf of Tenant causes any injury to
any person or any damage to the Premises, the Building, any other property
of Landlord or to any other person, then Tenant agrees to indemnify, defend
and hold Landlord harmless from and against any loss, damage or injury
suffered in connection with any such damage or injury. Further, Tenant
shall cause such damage to be repaired at Tenant's expense, and if Tenant
fails to cause such damage to be repaired promptly upon Landlord's demand
therefor, then Landlord may, in addition to any other rights or remedies
available to Landlord under this Lease or at law or in equity, cause such
damage to be repaired, in which event Tenant shall promptly upon Landlord's
demand pay to Landlord the cost of such repairs;
(C) All contractors and subcontractors performing Tenant's Work shall
use only those service corridors and service entrances designated by
Landlord for ingress and egress of personnel, and the delivery and removal
of equipment and material through or across any common areas of the
Building shall only be permitted with the written approval of Landlord and
during hours determined by Landlord. Landlord shall have the right to order
Tenant or any contractor or subcontractor who violates these requirements
to cease work in the Building and remove its equipment and its employees
from the Building. At Landlord's option, Landlord may require Tenant to
remove any work that has not been done according to approved plans, and to
restore any portion of the Building on which Tenant has performed such
nonconforming work to its original condition;
(D) During the performance of Tenant's Work and Tenant's fixturing,
Landlord shall provide trash removal service from a location designated by
Landlord. Tenant shall be responsible for breaking down boxes and placing
trash in Landlord's containers at such designated location. Tenant shall
accumulate its trash in containers supplied by Landlord and shall not
permit trash to accumulate within the Premises or in any Building corridors
or public areas. Tenant shall perform Tenant's Work in a manner that dust
or dirt is contained entirely within the Premises, and Tenant shall cause
Tenant's contractors to leave the Premises in broom clean condition at the
end of each day. Should Landlord deem it necessary to remove Tenant's trash
because of accumulation, Tenant shall pay to Landlord an additional charge
for such removal on a time and material basis;
13
<PAGE>
(E) Tenant agrees that all services and work performed on the Premises
by, on behalf of or for the account of Tenant, including installation of
telephones, carpeting, materials and personal property delivered to the
Premises, shall be done in a first-class, workmanlike manner using only
good grades of material and shall be performed only by persons covered by a
collective bargaining agreement with the appropriate trade union; and
(F) Tenant agrees to protect, indemnify, defend and hold Landlord and
its agents, partners, contractors and employees harmless from and against
any and all losses, damages, liabilities, claims, liens, costs and expenses
(except those caused by the grossly negligent or intentional actions of
Landlord), including reasonable attorney's fees, of whatever nature,
including those to the person and property of Tenant, its employees,
agents, invitees, licensees and others arising out of or in connection with
the activities of Tenant or Tenant's contractors in or about the Premises
or the Building, and the cost of any repairs to the Premises or the
Building necessitated by activities of Tenant or Tenant's contractors.
6. COMPLETION OF WORK. Subject to any Tenant Delay or "EXCUSED DELAY" (as
defined below), the Premises shall be Ready For Occupancy on the Commencement
Date. Notwithstanding the foregoing, subject to any Tenant Delay or Excused
Delay, Landlord agrees to use reasonable efforts to have the Premises Ready for
Occupancy on May 1, 2000. In the event the Premises are not Ready for Occupancy
on the Commencement Date as a result of any Tenant Delay, Rent shall commence as
scheduled on the Commencement Date. As used herein, the following terms are
defined as follows:
(A) "EXCUSED DELAY" means any delay caused by strike, lockout or labor
trouble; civil disorder; inability to procure materials, provided that
failure to order materials in a commercially reasonable and timely manner
shall not be deemed to be inability to procure such materials; failure of
power; restrictive governmental laws and regulations not in effect on the
date the Lease is executed; riots, insurrections or war; fuel shortages;
accidents; casualties; acts of God; or any other cause beyond the
reasonable control of Landlord.
(B) "TENANT DELAY" means any delay (which delays the completion of the
Work beyond the Commencement Date) caused by (i) Tenant's failure to submit
Tenant's Plans, supply information or give authorizations, approvals or
responses within the time periods set forth herein; (ii) changes,
alterations or additions to the Work required by Tenant in the improvement
of the Premises; (iii) Tenant's performance of any Tenant Work in a manner
that interferes with or delays the completion of the Work; (iv) special
equipment, fixtures or materials ordered by or requested by Tenant
requiring long lead times and not included in Tenant's Plans; or (v) any
other delay or default on the part of Tenant or its agents or contractors.
(C) The Premises shall be deemed "READY FOR OCCUPANCY" on the date of
substantial completion of the Work in a manner which will allow Tenant to
occupy the Premises for its intended use, even though punchlist items
relating to construction, decoration or mechanical adjustments remain to be
completed.
In no event shall Landlord incur any liability for failure to deliver the
Premises to Tenant on the Commencement Date if such failure is caused by any
Tenant Delay or any Excused Delay.
7. MISCELLANEOUS.
-------------
14
<PAGE>
(A) Except as expressly set forth herein, Landlord has no other
agreement with Tenant to improve the Premises and has no other obligation
to do any other work or pay any amounts with respect to the Premises. Any
other work in the Premises which may be permitted by Landlord pursuant to
the terms and conditions of the Lease or this Workletter shall be done at
Tenant's sole cost and expense and in accordance with the terms and
conditions of the Lease.
15
<PAGE>
(B) This Workletter shall not be deemed applicable to any additional
space added to the original Premises at any time or from time to time,
whether by any options under the Lease or otherwise, or to any portion of
the original Premises or any additions thereto if the initial term of the
Lease is renewed or extended, whether by any options under the Lease or
otherwise, unless expressly so provided in the Lease or any amendment or
supplement thereto.
(C) The failure by Tenant to pay any amount(s) due Landlord pursuant to
this Workletter within the time periods herein stated shall be deemed a
default under the terms of the Lease, for which Landlord shall be entitled
to exercise all remedies available to Landlord for nonpayment of Rent, and
all late payments shall be subject to interest and late charges as provided
in the Lease.
(D) This Workletter is being executed in conjunction with the Lease and
is subject to the limitation of Landlord's liability set forth therein. In
the event of a conflict between the Lease and this Workletter, the terms of
this Workletter shall govern.
(E) Tenant agrees that any existing improvements in the Premises not
used in construction of the Work, including but not limited to doors, door
frames, lighting, light fixtures and other detachable improvements, shall
be returned to Landlord for its use.
IN WITNESS WHEREOF, the parties hereto have executed this Workletter as of this
3rd day of January, 2000.
LANDLORD: TENANT:
- -------- ------
DOUGLAS ELLIMAN-BEITLER coolsavings.com inc.,
MANAGEMENT CORPORATION, as a Michigan corporation
agent for 360 North Michigan Trust,
a Delaware business trust
By: ___________________________ By:__________________________
Its:____________________________ Its:__________________________
16
<PAGE>
EXHIBIT G
---------
CERTIFICATE OF COMMENCEMENT DATE
--------------------------------
With respect to that certain Lease Agreement dated January 3, 2000 (the
"LEASE") for the premises commonly known as Suite 1800 in the Building located
at 360 North Michigan Avenue, Chicago, Illinois, the undersigned certify and
agree that the date of the commencement of the Term of the Lease is
__________________, and the date of expiration of the Term of the Lease will be
___________________.
Dated this 3rd day of January, 2000.
LANDLORD:
---------
360 NORTH MICHIGAN TRUST
A Delaware business trust
By: DOUGLAS ELLIMAN-BEITLER
MANAGEMENT CORPORATION
Illinois corporation, its agent
By:_____________________________
Its:____________________________
TENANT:
-------
coolsavings.com inc.,
A Michigan corporation
By:_________________________________
Its:________________________________
17
<PAGE>
EXHIBIT H
---------
LANDLORD'S BASE BUILDING WORK
-----------------------------
Base Building/Shell & Core Improvements
Demolition - Landlord in all vacant spaces on the 8th, 18/th/, 19th and 21/st/
floors will remove existing conditions, including:
y Partition Walls and non-structural walls
y Interior Doors
y Ceiling and Lighting
y Mechanical, Electrical, and Plumbing Systems
y Millwork
y Floor and Wall Finishes as necessary
y All unused plumbing and piping
y Window Treatments
Heating, Ventilation, Air Conditioning - Landlord will provide main supply
ductwork and air handling system with medium pressure distribution using 5
variable air volume zones per floor, and perimeter heating coils with convector
covers. HVAC on the 21/st/ floor will be provided consistently with the levels
provided on the 8/th/, 18/th/, and 19/th/ floors. New convectors will be
installed on the 21/st/ floor. The prop box fans will be securely attached to
the walls with new back draft dampers installed. Existing HVAC units in the
basketball court area will remain and be retrofitted with hot water heating
coils.
Electrical - Landlord will install an electrical panel on each floor. The
building will be capable of supporting a total tenant lighting and receptacle
load of 7 watts per rentable square foot on floors 18, 19 and 21 with a panel to
support the same. The 8/th/ floor shall only have an electrical capacity of 5
watts per foot.
Plumbing - Landlord will provide new cold water, sanitary and vent connections
at four wet columns located on each floor with valve taps. One water cooler
will be installed on the 20/th/ floor. The 10 inch pipe at the entry to
basketball court area will be raised to the maximum height possible and a 2.5
inch pipe will be installed. The length of this new section of pipe will be
approximately 25 feet.
Bathrooms - Bathrooms will be created or upgraded as applicable on each floor.
There will be three or four toilets in the women's bathroom. There will be two
toilets and two urinals in the men's bathroom. The bathrooms on the 8/th/,
18/th/ and 21/st/ floors will be fully ADA compliant, and the 19/th/ floor
bathroom will be 95% ADA compliant.
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Windows - Landlord will strip and paint interior sides of windows, remove
existing hardware, replace broken glass as necessary, and caulk/seal shut all
windows. Windows will be primed and ready to accept Tenant's paint finish. The
two skylights on the 21/st/ floor will be removed and replaced with new
skylights which will be translucent. This work will be completed prior to
tenant taking occupancy.
Walls - Landlord will repair as necessary, exterior and core walls and deliver
to Tenant in sound condition in order to receive prime coat by Tenant. All
columns will be delivered to Tenant ready for Tenant finishes.
Floor and Core Wall Penetrations - Landlord will seal and firestop existing
floor and core wall penetrations. Landlord will remove wood floor in southwest
room which was the photo developing area on the 21/st/ floor. This area will be
delivered with a floor ready to accept tenant finishes.
Asbestos Abatement - Landlord will remove and/or encapsulate asbestos containing
materials in during the demolition process prior to the commencement of Tenant's
buildout.
Life Safety System - Landlord will provide the following code-required life
safety elements in common areas:
y Emergency Lighting
y Fire Alarm Speaker and Strobes
y Smoke Detectors
y Fire Hose Valve Connections and Fire Extinguishers
Common Areas - The building's entry, main lobby, elevators and elevator lobbies
along with all common areas will be renovated. If Tenant chooses to install a
non-standard elevator lobby, a credit will be issued to the tenant for the value
of the improvements not installed. It is the intent of Ownership to restore the
building to its original elegance and beauty.
Roof Area - The remaining area of the roof which has not been refinished will be
completed prior to tenant build-out commencing.
Elevator Room - Landlord recommends that Tenant review the location of data
center relative to elevator motor room on the 22/nd/ floor.
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LANDLORD'S CONSTRUCTION SCHEDULE
--------------------------------
Elevators: The replacement of the elevator equipment and cabs will be a staged
(phased in) process. We intend to have the first two modern, high-
speed elevators installed and operable by July 31, 2000. Every 16 to
20 weeks two new cars should be installed and be operable.
1/st/ Floor Total completion of the lobby will occur no later than September,
Lobby: 2000. Work is scheduled to begin pending final completion of
drawings and permitting. Work commenced on or about August 31,1999.
HVAC: Each floor will have a separate mechanical room. Tenant will have
HVAC with occupancy. The completion date for all HVAC work
throughout the building is October, 2000. Tenant will be able to
connect to base building chilled water loop on each floor.
Exterior: Exterior cleaning of the building has been completed. The exterior
lighting of the building will begin no later than September, 2000.
Restrooms: Each floor will have one men's and women's restroom. The restrooms
will be completed with Tenant occupancy.
Windows: Landlord will restore the existing windows throughout the building.
The window restoration will be completed with Tenant occupancy.
(Note: restoration means refurbishment of the existing interior
frame and window.) All windows will be touched up, sealed and
prepared for Tenant finishes. Fire escape access doors will remain
functional. In addition, 1 inch white mini-blinds will be installed
at each window by Landlord.
Data Cable/ Tenant will have telephone/data service with Tenant occupancy.
Telecomm: The new building "back bone" should be completly installed by
January 31, 2000.
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EXHIBIT I
---------
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
AFTER RECORDING, RETURN TO:
______________________________
______________________________
______________________________
______________________________
______________________________
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (hereinafter
referred to as the "AGREEMENT") is dated as of ___________, 2000 by and among
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited liability
company, having an office at 11 Madison Avenue, New York, New York 10010
(hereinafter referred to as "MORTGAGEE"), COOLSAVINGS.COM INC., a Michigan
corporation, having an office at 360 North Michigan Avenue, Suite 1800, Chicago,
Illinois 60601 (hereinafter referred to as "TENANT"), and 360 NORTH MICHIGAN
TRUST, a Delaware business trust, having an office at 360 North Michigan Avenue,
Chicago, Illinois 60601 (hereinafter referred to as "LANDLORD").
W I T N E S S E T H:
WHEREAS, Mortgagee made a loan to Landlord which is secured by a mortgage
encumbering certain real property described in Exhibit A attached hereto and
made a part hereof (hereinafter called the "MORTGAGED PROPERTY"), which was
executed by Landlord as of ______________, 19__ and recorded in the Office of
the Recorder of Deeds of Cook County, Illinois on ___________, 19__ as Document
No. ___________ (hereinafter called the "MORTGAGE");
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WHEREAS, by written Lease Agreement dated January 3, 2000 (hereinafter
called the "LEASE") Tenant has leased a portion of the Mortgaged Property as
more fully described in the Lease (the "PREMISES") for an initial term
commencing on the "COMMENCEMENT DATE" and ending on the "TERMINATION DATE" (as
such terms are defined in the Lease), subject to being shortened or extended on
terms and conditions specified in the Lease; and
WHEREAS, Tenant has agreed to acknowledge the subordination of the Lease to
the lien of the Mortgage and Mortgagee has agreed to grant non-disturbance to
Tenant under the Lease.
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) paid by
each party to the other, the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
1. Provided Tenant is not in default under the Lease, (a) the rights of
Tenant under the Lease shall not be affected or disturbed by Mortgagee in the
exercise of any of its rights under the Mortgage or any note secured thereby,
(b) any sale of the Mortgaged Property pursuant to the exercise of any rights
and remedies under the Mortgage or otherwise shall be made subject to Tenant's
right of possession under the Lease, and (c) Mortgagee shall not join Tenant in
any foreclosure or summary proceedings.
2. Tenant shall attorn to Mortgagee, any receiver or any other person or
entity which acquires title to the Mortgaged Property pursuant to any remedy set
forth in the Mortgage or by deed in lieu of foreclosure (any such person or
entity being hereinafter referred to as a "SUCCESSOR LANDLORD"), and the Lease
shall continue in accordance with its terms between Tenant and Mortgagee or such
Successor Landlord, except as modified by this Agreement.
3. (a) Neither Mortgagee nor any Successor Landlord shall be (i) liable
for any act or omission of any prior landlord (including Landlord), (ii) liable
for the return of any security deposit not actually received by Successor
Landlord, (iii) subject to any offsets or defenses which Tenant might have
against any prior landlord (including Landlord), (iv) bound by any advance
payment of rent or additional rent made by Tenant to Landlord except for rent or
additional rent applicable to the then current month, (v) bound by any amendment
or modification of the Lease made without the written consent of Mortgagee, or
(vi) bound to effect or pay for any construction for Tenant' s occupancy.
Notwithstanding the foregoing, nothing contained in this section 3(a) shall be
construed to modify or amend any existing rights of Tenant under the Lease.
(b) Tenant agrees that it will not, without the prior consent of
Mortgagee, do any of the following, and any such purported action without such
consent shall be void as against Mortgagee and any Successor Landlord: (i)
modify or amend the Lease, (ii) terminate the Lease, (iii) enter into any
extensions or renewals of the lease in such a way as to reduce the rent,
accelerate rent payments, shorten the term of the Lease, or change any renewal
option, or (iv) tender or accept a surrender of the Lease or make a prepayment
in excess of one month of rent thereunder. Notwithstanding the foregoing,
nothing contained in this section 3(b) shall be construed to modify or amend any
existing rights of Tenant under the Lease.
4. The Lease and the rights of Tenant thereunder shall be subject
and subordinate to the lien of the Mortgage and to all of the terms, conditions
and provisions thereof, to all advances made or to be
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made thereunder, and to all renewals, extensions, modifications and replacements
thereof, including any increases therein or supplements thereto.
5. The foregoing provisions shall be self-operative. However, Tenant
agrees to execute and deliver to Mortgagee or to any person to whom Tenant
herein agrees to attorn, such other instrument as either shall reasonably
request in order to effectuate said provisions.
6. Tenant certifies that there are no known defaults on the part of
Landlord, that the Lease is a complete statement of the agreement of the parties
thereto with respect to the letting of the Premises, that (after the release of
any escrow governing the delivery of the Lease pending receipt by Tenant of this
Agreement) the Lease is in full force and effect and that all conditions to the
effectiveness and continuing effectiveness thereof required to be satisfied at
the date hereof have been satisfied.
7. Tenant shall notify Mortgagee at the aforesaid address, by
registered or certified mail, return receipt requested, of any default of
Landlord which would entitle Tenant to cancel the Lease or abate the rent
payable thereunder or exercise any rights of "self-help", and Tenant agrees that
notwithstanding any provision of the Lease to the contrary, (i) no notice of
cancellation thereof shall be effective unless Mortgagee has received a copy of
the aforesaid notice and has failed within the period provided in the Lease for
Landlord to cure such default plus an additional twenty (20) days to cure
Landlord's default or, if the default cannot be cured within such period, has
failed within such period to commence and to thereafter diligently prosecute the
cure of Landlord's default which gave rise to such right of cancellation; and
(ii) no abatement shall be effective and no right of "self-help" shall be
exercised unless Mortgagee has received a copy of the aforesaid notice and has
failed to cure Landlord's default within the period provided for in the Lease
for Landlord to cure such default, or, if the default cannot be cured within
such period, has failed within such period to commence and to thereafter
diligently prosecute the cure of Landlord's default which gave rise to such
right of abatement or "self-help". Notwithstanding the foregoing, Mortgagee may
but shall not be obligated to so cure Landlord's default.
8. Tenant agrees that notice from Mortgagee to Tenant shall have the
same effect under the Lease as notice to Tenant from Landlord thereunder and
Tenant agrees to be bound by such notice notwithstanding the existence or
nonexistence of a default under the Mortgage or any dispute with respect thereto
between Mortgagee and the mortgagor under the Mortgage.
9. In the event that a default occurs under the terms of the
Mortgage, Tenant agrees, upon written notification from Mortgagee of said
default made to Tenant, to pay all rents then due or to become due directly to
Mortgagee (which notice Mortgagee agrees shall only be given in accordance with
the terms of the Mortgage) or until further notice is received from Mortgagee.
Landlord agrees that any such payment to Mortgagee shall satisfy pro tanto the
obligations of Tenant under the Lease. Tenant shall continue to look to
Landlord for the performance of Landlord's obligations under the Lease.
10. Any notice required or desired to be given hereunder shall be in
writing and shall be sent by certified or registered mail, return receipt
requested, addressed as follows:
If to Mortgagee: Credit Suisse First Boston Mortgage Capital LLC
11 Madison Avenue
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New York, New York 10010
Attention: Ms. Suzette Fandino
If to Tenant: coolsavings.com inc.
360 North Michigan Avenue
Suite 1800
Chicago, Illinois 60601
Attention: President
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<PAGE>
If to Landlord: 360 North Michigan Trust
360 North Michigan Avenue
Chicago, Illinois 60601
Attention: General Manager
11. Anything herein or in the Lease to the contrary notwithstanding,
in the event that Successor Landlord shall acquire title to the Mortgaged
Property, Successor Landlord shall have no obligation, nor incur any liability,
beyond its then interest, if any, in the Mortgaged Property and Tenant shall
look exclusively to such interest, if any, of Successor Landlord in the
Mortgaged Property for the payment and discharge of all obligations and
liabilities imposed upon Mortgagee hereunder or under the Lease, and Successor
Landlord is hereby released and relieved of any and all other obligations and
liabilities hereunder and under the Lease in excess of Successor Landlord's
interest in the Mortgaged Property. Tenant agrees that, with respect to any
money judgment which may be obtained or secured by Tenant against Successor
Landlord, Tenant shall look solely to the estate or interest owned by Successor
Landlord in the Mortgaged Property, and Tenant will not collect or attempt to
collect any such judgment out of any other assets of Successor Landlord.
12. This Agreement shall inure to the benefit of and be binding upon
Tenant and any successor or assignee of Tenant which pursuant to the provisions
of the Lease is entitled to succeed to Tenant's interest therein. This Agreement
shall inure to the benefit of and be binding upon Mortgagee and its successors
and assigns, including any purchaser of the Mortgaged Property at a foreclosure
sale and the Landlord and its successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
MORTGAGEE:
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
By:________________________________
Name:___________________________
Title:____________________________
TENANT:
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COOLSAVINGS.COM INC.,
a Michigan corporation
By:________________________________
Name:___________________________
Title:____________________________
LANDLORD:
360 NORTH MICHIGAN TRUST, a
Delaware business trust
By:________________________________
Name:___________________________
Title:____________________________
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<PAGE>
STATE OF ____________ )
) SS:
COUNTY OF __________ )
On the ____ day of January in the year 2000 before me, the undersigned, a
notary public in and for said state, personally appeared ___________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
____________________
Notary Public
My Commission Expires: ______________
STATE OF ____________ )
) SS:
COUNTY OF __________ )
On the ____ day of January in the year 2000 before me, the undersigned, a
notary public in and for said state, personally appeared ___________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
______________________________
Notary Public
My Commission Expires: ______________
27
<PAGE>
STATE OF ____________ )
) SS:
COUNTY OF __________ )
On the ____ day of January in the year 2000 before me, the undersigned, a
notary public in and for said state, personally appeared ___________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of which
the individual acted, executed the instrument.
______________________________
Notary Public
My Commission Expires: ______________
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<PAGE>
EXHIBIT J
---------
SIGNAGE
-------
29
<PAGE>
360
North Michigan
Avenue
Crain Communication
Coolsavings.com
Prospective Tenant
Prospective Tenant
The name of coolsavings.com should be listed on the top panel in the event that
the Landlord does not enter into a lease with Crain Communication or one of its
affiliates.
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<PAGE>
Exhibit 10.13
CONFIDENTIAL
BANKCARD MARKETING AGREEMENT
THIS AGREEMENT, made this 2nd day of April, 1999 (the "Effective Date"), by
and between coolsavings.com inc., a Michigan corporation having its principal
office at 8755 West Higgins Road, Chicago, Illinois 60631 (the "Company") and
FIRST USA BANK, N.A., a national banking association, having its principal
offices at Three Christina Centre, 201 North Walnut Street, Wilmington,
Delaware, 19801 ("FUSA"), sometimes referred to as the "Parties" and
Individually as a "Party".
RECITALS:
WHEREAS, FUSA desires to offer MasterCard and/or Visa consumer credit
cards and related services identified herein to the subscribers and customers of
Company (the "Company Users" and/or "Users"), as follows: (i) FUSA issued
credit cards; and (ii) credit cards that bear the Company's Marks, as defined
herein ("Branded Credit Cards"). All references in this Agreement to "Credit
Cards" shall be deemed to refer to all above identified credit cards issued by
FUSA and covered by this Agreement (including Branded Credit Cards); and
WHEREAS, Company desires to issue Branded Credit Cards and Company is
willing to promote the offering of all Credit Cards to and among Company Users
through its Internet website currently known as http://www.coolsavings.com (the
Company Website") and any other Internet websites owned and controlled by the
Company, subject to the terms and conditions hereinafter contained; and
WHEREAS, according to Media Metrix, the Company's number of "unique
visitors" for the month of December 1998 was approximately 1,800,000.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the Parties herein contained and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Parties hereby
agree as follows:
1. License to Use Marks.
(a) During the term of this Agreement, FUSA shall have the right
and license to use the current and future respective name, trademarks,
servicemarks, copyrights and logo of Company (collectively, the "Marks") solely
in connection with FUSA's marketing of Credit Cards to Company Users under
this Agreement (the "Program"). Examples of Company's Current Marks are set
forth in Exhibit "B" attached hereto. Such right and license is restricted
as set forth herein and shall not apply or extend to any other product or
service offered by FUSA. Company hereby agrees that the Marks may be used on
the Branded Credit Cards as well on merchandise (which has been approved in
writing by Company) used to encourage individuals to apply for or use the
Credit Cards ("Premiums"). The Parties agree that Company may offer Visa and/or
MasterCard as the Bankcard Association for the Branded Credit Cards to be
issued pursuant to this Agreement. If the Company elects to discontinue a Bank-
card Association relationship after the Bankcard Association has been selected
for the Company Branded Credit Card, then, Company shall bear and promptly
reimburse FUSA for any additional expenses incurred by FUSA in connection with
the discontinuance, except, however, Company shall not be required to
reimburse FUSA for such expenses if Company: (1) provides FUSA with at least one
hundred and eighty (180) days advance notice of such pending discontinuance;
(ii) permits FUSA to exhaust its existing mailing inventories with respect to
the Program; and (iii) does not require FUSA to cancel existing Issued Credit
Cards and issue
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replacement Credit Cards which bear the new Bankcard Association. Following
termination or expiration of this Agreement, Branded Credit Cards issued during
the term hereof may continue to bear the Marks until the normal expiration date
thereof. Subject to and consistent with the rules and regulations of Visa or
Master Card (as applicable), FUSA shall comply with the standards established by
Company with respect to the form of the Marks and their usage.
(b) During the term of this Agreement, Company shall have the right
and license to use the respective name, trademarks, servicemarks, copyrights and
logo of FUSA (the "FUSA Marks") solely in connection with the delivery of on-
line Impressions Pursuant to Paragraph 4(a), and off-line solicitations pursuant
to Paragraph 3(c) of this Agreement. Examples of the current FUSA Marks are set
forth in Exhibit "B" attached hereto. Such right and license is restricted as
set forth herein and shall not apply or extend to any other use by Company.
Company shall comply with the standards established by FUSA with respect to the
form of the FUSA Marks and their usage.
(c) Subject to the foregoing, each of the Parties hereto is and shall
remain the owner of all rights in and to its name and logo, as the same now
exist or as they may hereafter be modified, including all rights in and to any
copyright, trademark, servicemark and/or like rights pertaining thereto. Any
and all rights to Company's Marks or the FUSA Marks not herein specifically
granted and licensed are reserved to the respective entity. Except as otherwise
specifically provided for in Paragraph 1(a) hereof, upon the termination or
expiration of this Agreement, all rights conveyed by either Party with respect
to the use of either Party's Marks shall cease, and all such rights shall revert
to the respective Party. Upon termination or expiration of this Agreement,
neither Party shall have any further right to market or to further utilize any
promotional materials containing the other Party's Marks. However, nothing
contained herein shall require FUSA to cancel any Account (as such term is
defined in Paragraph 5(c) below) or to terminate any Credit Card issued in
connection with this Agreement.
2. Credit Cards to be offered for this Program.
(a) The Parties shall perform the following obligations by the
following deadlines:
(i) No later than thirty (30) days after the Effective Date,
FUSA shall offer and be able to issue Credit Cards, to
Company Users.
(ii) No later than sixty (60) days after the Effective Date,
FUSA shall design the Company Branded Credit Card in
accordance with the Company's reasonable design criteria
and the Company shall have the right to approve the front
design of the Company Branded Credit Card to be offered
and issued by FUSA to Company Users pursuant to this
Program. The Parties agree to utilize their best efforts to
design and complete the Company Branded Credit Card
within the time frame referenced above.
(iii) No later than one hundred fifty (150) days after Company
has approved the front design of the Company Branded
Credit Card, FUSA shall offer and be able to issue the
Company Branded Credit Card to Company Users.
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<PAGE>
(iv) The Parties agree that for a period of one hundred and
twenty (120) days after the first day the Company Branded
Credit Cards are offered and available to Company Users,
only Company Branded Credit Cards (and not other Credit
Cards) will be offered on the Company's Website.
Thereafter, to afford the best opportunity to maximize the
net response rate to offers under this Program. the
Company's Website may promote the Company Branded Credit
Cards only, Credit Cards only, or both, as determined from
time to time by the mutual agreement of the Parties. If the
Parties are unable to so agree at any time, then each Party
may offer either card alone, or both, under the Program as
that Party, deems appropriate.
(b) The front of the Company Branded Credit Card shall contain the
Company's logo and URL Internet address. FUSA reserves the night to designate on
the back of the Company Branded Credit Card such information as FUSA, in its
sole and absolute discretion, deems appropriate, provided that such information
does not materially and adversely effect the Company's reasonable business
objectives. FUSA shall have the right to designate on all other Credit Cards
issued pursuant to this Agreement, such information as FUSA shall, in its sole
discretion, deem appropriate. In the event the Company makes any changes in its
Marks after the design of the Company Branded Credit Card, then the Company
shall bear and promptly reimburse FUSA for any additional expenses incurred by
FUSA in connection with the mutually agreed upon implementation and use of the
altered Marks.
(c) No later than one hundred twenty (120) days after the Effective
Date, FUSA shall create (and thereafter operate and host at all times while this
Agreement is in effect) a website to process Credit Card applications on-line in
the same manner and in the same time frame as is generally made available to
other Internet companies for whom FUSA is providing affinity on-line programs,
provided that processing applications in such manner does not violate applicable
laws or regulations. Subject to the requirements in the prior sentence, the
design, operation and hosting of the aforementioned website shall be at FUSA's
sole discretion and cost. Company shall provide a link from Company's website
whereby Company Users shall be connected to FUSA's Credit Card application
vehicle.
3. Marketing Promoting and Soliciting Credit Cards.
(a) Subject to Section 4 below, FUSA shall design and develop, in
consultation with the Company, such marketing, promotional and solicitation
materials as the Parties deem appropriate to promote the Program among Company
Users. FUSA shall submit to Company, for its prior written approval, samples of
all marketing. promotion and solicitation materials, printed or otherwise, which
FUSA desires to utilize to market the Program among Company Users. Company shall
review Such materials and respond to FUSA's requests for approval on a
reasonable and timely basis. Approval by Company of any such materials submitted
by FUSA for review shall not be unreasonably withheld or delayed. Upon Company's
approval of such marketing, promotion and solicitation materials, Company shall
reasonably promote and reasonably assist FUSA with the administration of such
promotional and solicitation activities. Provided however that, FUSA reserves
the right to limit its solicitation materials to those persons deemed by it to
be creditworthy in accordance with FUSA's normal credit criteria and credit
practices.
(b) FUSA shall have the right to change the marketing, promotional
and solicitation materials at anytime in order to enhance the promotion of the
Credit Cards
3
<PAGE>
subject to obtaining the Company's prior written approval for such changed
materials as set forth in subsection 3(a) above, such approval shall not be
unreasonably withheld or delayed.
(c) Upon request by Company and with prior written approval by FUSA.
FUSA shall permit Company, subject to reasonable restrictions set forth by FUSA,
to directly and indirectly solicit applications for Credit Cards from Company
Users (in mediums other than the Internet) without the direct participation of
FUSA ("Company Direct Promotions"). Any marketing materials developed by Company
must be approved in writing by FUSA prior to distribution by Company, however,
any Credit Card applications used for this Program must be supplied to Company
by FUSA. Unless otherwise agreed to by FUSA and Company, all expenses associated
with Company Direct Promotions shall be borne solely by Company. In the event
that FUSA is requested by the Company to provide any materials (including Credit
Card applications) to be used in conjunction with a Company Direct Promotion,
and FUSA advances monies to pay or such materials. FUSA may thereafter offset
such expenditures against the total Marketing Fees and Company Direct Marketing
Fees earned by Company pursuant to this Agreement, until payment of the same in
full. All materials provided or procured by FUSA for which Company is liable,
shall only be provided and/or procured at, and Company shall only be liable for,
commercially reasonable prices. All approvals required under this subparagraph
3(c) shall not be unreasonably withheld or delayed.
4. Internet Offering of Credit Cards.
(a) The Parties shall offer Credit Cards to Company Users on the
Company Website. The Company shall post Impressions (as defined herein) on the
Company Website on an on-going basis as, when, and how deemed appropriate by
Company in its sole discretion. An "Impression" is hereby defined as a single
advertising exposure opportunity rendered by any banner, button, text link,
window, e-mall, "pop-up interstitial, transitional, or other form of Internet
advertisement currently existing or developed in the future, which is served by
Company on an Internet or Intranet delivery vehicle (including. but not limited
to, web pages, e-mails, newsgroup posts, proprietary online service content, on-
premise kiosks, and any other Internet or Intranet delivery vehicle currently
existing or developed in the future), the purpose of which is to attract Company
Users to apply for and/or obtain a Credit Card (or such other credit product or
service which may subsequently become covered by this Agreement) via an active
link to a FUSA or Company website. Company shall determine the type, content,
appearance. and location of all Impressions subject only to FUSA's rights, and
Company's obligations, relative to FUSA's Marks set forth in Paragraph 1(b)
herein.
(b) The Company, in the exercise of its reasonable business judgment,
shall determine those Internet marketing resources at its disposal to be
utilized for this Program in order to produce the maximum response rates based
upon the Parties mutual testing, of the Program.
(c) During each "Quarter" (as such term is defined in Exhibit A
attached hereto) of this Agreement (including each Quarter of any, renewal
term), provided that FUSA has delivered marketing, promotional and solicitation
materials approved by the Company (as set forth above in Section 3)(a)), to
Company, or to a third party, selected by FUSA that is responsible for posting
Impressions, the Company will satisfy one of the following: (i) posting (or
making available the opportunity to post, if posting is to be done by a third
party selected BY FUSA) of not less than five million (5.000,000) Impressions on
the Company 's Website: or (ii) twenty five thousand (25,000) "Click Thrus" (as
such term is defined herein). A "Click Thru" is hereby defined as the activation
of a link in an
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<PAGE>
Impression to transport the Company User to a FUSA or the Company Website
(whether in the same browser window, within a different currently open browser
window, or within a newly initiated "pop up" browser window), wherein the
Company User may apply for and/or obtain a Credit Card (or such other credit
product or service which may subsequently become covered by this Agreement). The
Parties agree that at the end of each Quarter during the Initial Term and any
renewal term, FUSA and the Company will meet to review the year-to-date
performance of the Program. The Company acknowledges and agrees that the
Company's provision of these Impressions and/or the Click Thrus is material to
FUSA's decision to enter into this transaction with the Company and that a
failure to post (or the opportunity to post, as the case may be) the number of
Impressions or the Click Thrus described herein, in any given Quarter may, at
FUSA's sole discretion, be deemed and declared a default under Section 14(c) of
this Agreement.
(d) Notwithstanding anything contained in this Agreement which can be
construed to the contrary, the Parties agree that the Company shall have the
right to make any reasonably necessary changes in the types of marketing,
promotional and solicitation materials to be offered through the Company Website
for the purpose of maintaining the integrity of the Company's Marks, or ensuring
that the material complies with: (i) the Company's commercially reasonable
content and advertising guidelines; (ii) reasonable restrictions imposed upon
the Company by third parties as a result of contracts that pre-exist this
Agreement; (iii) quality standards required to protect the Company's goodwill;
and/or (iv) ensuring the Company's compliance with applicable laws governing
the Company's business.
5. Issuance of Credit Cards.
(a) FUSA shall issue Credit Cards, in accordance with FUSA's standard
consumer Credit Card Issuing policies and credit practices, to Company Users who
apply and who are approved for a Credit Card. All decisions concerning the
creditworthiness of any potential Company User shall be made at the sole
discretion of FUSA.
(b) Credit Card(s) issued by FUSA pursuant to the Program shall be
governed by terms of cardmember agreement to be entered into between such person
and FUSA. Such cardmember agreement shall specify that the laws of the State of
Delaware, and as applicable, federal law, shall govern the terms and conditions
of such Account and the extension of credit by FUSA to the cardmember. FUSA
shall have the right to amend such cardmember agreements at any time in
accordance with applicable law. Notwithstanding the forgoing, FUSA shall
continue to offer competitive Credit Card pricing to Company Users throughout
the term of this Agreement. Such pricing shall be comparable to that which is
generally offered in other agreements which are in effect between FUSA and other
like Internet companies for whom FUSA is providing on-line affinity programs
with like financial terms. Company hereby acknowledges that such pricing is
represented by a combination of items including, but not limited to, fees and
royalties paid to such other Internet companies.
(c) Company shall not possess any ownership interest in Credit Cards
issued and accounts established pursuant to this Agreement (the "Accounts"). In
addition, any and all outstanding balances with respect thereto (including,
without limitation, all amounts owing for the payments of goods and services,
periodic finance charges, late and other charges) and all records developed and
retained by FUSA in connection therewith shall be the sole property of FUSA or
its assigns and Company shall have no rights or interests therein.
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(d) FUSA further reserves the right to communicate information to the
cardmember, which it normally sends its other cardmembers and does not utilize
the Company's name or logo, without having to obtain the prior approval of
Company.
6. Fees.
(a) During the term of this Agreement (including any renewal terms as
provided in Paragraph 13 hereof) FUSA shall pay to Company certain Marketing
Fees, Company Direct Marketing Fees and Sales Royalties (collectively, the
"Fees") as set forth on Exhibit A attached hereto.
(b) Notwithstanding any of the above, FUSA shall not be obligated to
pay to Company any duplicate Marketing Fees or Company Direct Marketing Fees
described in items 1 and 2 on Exhibit A in the event that the Account on which
such fees are calculated represents a "substitute" Account. A "substitute"
Account is hereby defined as an Account which is established by one or more
cardmembers on such Account, to replace the existing Account (thereby canceling
the existing Account), for any reason whatsoever.
(c) FUSA shall provide Company with a reconciliation report within
forty-five (45) days following the end of each calendar quarter setting forth
the amount of Fees earned by Company during such calendar quarter. For Marketing
Fees and Direct Marketing Fees, said report shall identify those Accounts opened
on-line, those Accounts opened pursuant to a 1-800 telephone number obtained
from the Company's Website, such other sites as are mutually agreed upon by the
Parties, pursuant to an on-line marketing program of the Company or a Click
Thru, and those Accounts opened off-line as a result of Company's efforts
pursuant to Section 3(c) herein. For Sales Royalties, said report shall set
forth the Net Retail Sales on all Company Branded Credit Card Accounts during
the previous quarter. Any Fees owed to Company and payable pursuant to the terms
of this Paragraph 6 shall be paid to Company within forty-five (45) days
following the end of such calendar quarter.
(d) FUSA's obligation to pay any of the aforementioned Fees to the
Company shall cease immediately upon the termination or expiration of this
Agreement for any reason whatsoever, provided that such Fees shall be reconciled
and paid to the effective date of termination or expiration.
7. Audit Rights.
(a) FUSA, by its duly authorized agents and/or representatives, shall
have the right, at its expense, upon ten (10) days advance written notice to
Company, during Company's normal business hours only, to audit such books,
documents and other material reasonably necessary to confirm Company's
performance of its obligations under this Agreement. All such audits shall be
performed at Company's offices unless otherwise agreed to in writing by Company.
FUSA shall be entitled to make copies of such books, documents and other
material, subject to the confidentiality provisions of Paragraph 11 herein,
such security procedures as Company may reasonably impose, and subject to such
limitations as may be required under applicable rules, regulations or statutes
governing the conduct of Company's business.
(b) Company, by its duly authorized agents and/or representatives,
shall have the right to annually, at its expense, upon ten (10) days advance
written notice to FUSA, during FUSA's normal business hours only, audit such
books, documents and other material reasonably necessary to confirm FUSA's
performance of its obligations
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under this Agreement, including but not limited to the books and records of FUSA
necessary to confirm the amounts of any Fees due to Company under this
Agreement. All such audits shall be performed at FUSA's offices unless otherwise
agreed to in writing by FUSA. Company shall be entitled to make copies of such
books, documents and other material, subject to the confidentiality provisions
of Paragraph 11 herein, such security procedures as FUSA may reasonably impose,
and subject to such limitations as may by required under applicable rules,
regulations or statutes governing the conduct of FUSA's business. In the event
any such audit reveals a shortfall in any payment owing to Company, then FUSA
shall promptly pay such shortfall amount to Company. Further, should any such
shortfall exceed ten percent (10%) of the proper amount due for the period
audited, then in addition to paying the amount of the shortfall, FUSA shall
promptly reimburse Company for all reasonable costs paid by the Company of the
audit. Provide however, in no event shall FUSA be obligated to reimburse Company
in excess of one thousand ($1,000) dollars annually for the reasonable audit
fees incurred by the Company in the above described situation.
8. Cardmember Statements and Data Profiling.
(a) FUSA shall include, at FUSA's cost, Company's name, logo, and URL
address on all Company Branded Credit Card statements of account ("Account
Statements"). Subject to reasonable space, weight, size, content, and scheduling
restrictions (which in no event shall be materially different than those imposed
by FUSA upon other third parties seeking inserts or statement messages), and
upon FUSA's prior review and approval (which approval shall not be unreasonably
withheld or delayed), the Company may periodically include informational inserts
and/or statement, messages in the Account Statements. Notwithstanding the
foregoing and subject to the operation constraint listed above as well as
regulatory requirements, FUSA hereby agrees that the Company shall be entitled
to a minimum of twelve (12) inserts or equivalent statement messages or
substitute promotions in Account Statements, each year while this Agreement is
in effect.
(b) In the event any insert exceeds FUSA's Usual and customary weight
standard for an insert such that it will increase the postal expense incurred by
FUSA to mail such insert with the statements, then FUSA shall inform Company in
advance, and provided Company agrees to reimburse FUSA for such incremental
postage expense, FUSA will include such insertion.
(c) For every twenty thousand (20,000) new Accounts opened pursuant to
this Program, the Company, shall be entitled to one million (1,000,000) inserts
or equivalent statement messages or Substitute promotions (collectively
"Inserts") advertising the Company Website in the monthly statements of account
of FUSA cardmembers who are not Company Branded Credit Card holders (i.e.
statements other than Account Statements). FUSA shall include such Inserts in
said Statements of account upon request by the Company, subject only to
reasonable operational constraints upon FUSA and prohibitive contractual
provisions in Agreements between FUSA and third parties. The Inserts shall not
market any credit card, charge card, stored value card, credit card-type
unsecured and/or secured cards, revolving, line of credit, and/or card
enhancement product during the term of this Agreement, and any Renewal Term
except as otherwise permitted hereunder. The Company shall, at its own expense,
supply any such Inserts and shall reimburse FUSA, at cost, for charters, if any,
incurred for including such Inserts in the billing statements.
(d) Subject to any Force Majeure occurrence, FUSA agrees to use
commercially reasonable efforts to meet the customer service standards for the
Program.
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The customer service standards for the Program shall be comparable to the
customer service standards applied to credit card accounts that FUSA owns or
that FUSA manages for similarly situated programs. Provided however, at a
minimum FUSA shall administer Account services in accordance with the basic
servicing standards established herein and incorporated as Exhibit "C" of this
Agreement ("Account Servicing Standards"). FUSA agrees to share all applicable
monthly and/or quarterly reports (or such other reports as may be mutually
agreed) with Company outlining the customer service statistics regarding the
Program Account holders.
9. Records and Reports.
(a) During the term of this Agreement, FUSA agrees that it will
maintain accurate records with respect to (i) Net Retail Sales (as defined in
Exhibit A), (ii) all Accounts established under this Agreement, and (ii) all
other obligations of FUSA under this Agreement. In addition to Company's audit
rights under Paragraph 7 herein, such records shall be open for inspection by
representatives of Company at reasonable times upon reasonable advance notice,
provided that any inspection shall be subject to such security procedures as
FUSA may reasonably impose and subject to such limitations as may be required
under applicable rules, regulations or statutes governing the conduct of
FUSA's business.
(b) During the term of this Agreement, Company agrees that it will
maintain accurate records with respect (i) Impressions delivered; (ii) the
number of monthly Click Thrus; and (iii) all other obligations of Company under
this Agreement. In addition to FUSA's audit rights under Paragraph 7 herein,
such records shall be open for inspection by representatives of FUSA at
reasonable times, upon reasonable advance notice, provided that any inspection
shall be subject to such security procedures as Company may reasonably impose
and subject to such limitations as may be required under applicable rules,
regulations or statutes governing the conduct of Company's business.
(c) Within forty-five (45) days after the end of each Quarter under
this Agreement, FUSA shall (to the extent permitted by the Fair Credit Reporting
Act) provide Company with general demographic information regarding Company
Branded Credit Card holders. Further, at all times while this Agreement is in
effect, FUSA shall provide the Company with on-going full access via the
Internet to VisaView (or other like marketing data sources for other general
Account holder information) and the ability to download the aggregate
information relating to: (i) the number and amount of merchant transactions on
Company Branded Credit Card Accounts, and (ii) such other reasonable information
that is customarily available from VisaView (or other like marketing data
sources for other general Account holder information). Provided however, that
the foregoing shall not require the dissemination of information that would
result in FUSA being classified as a credit reporting agency or result in the
violation by FUSA of any privacy law.
10. Relationship. Nothing in this Agreement is intended to or shall be
construed to constitute or establish an agency, joint venture, partnership or
fiduciary relationship between the Parties, and neither Party shall have the
right or authority to act for or on behalf of the other Party.
11. Confidentiality.
(a) The Parties acknowledge and agree that the terms of this Agreement
and all information which is (i) proprietary to a Party, and (ii) provided to or
in connection with a Party's performance under this Agreement, and (iii) marked
"CONFIDENTIAL" at
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the time of tender to the other Party, shall be considered confidential and
proprietary information ("Confidential Information") and shall not be disclosed
to any third party without the prior written consent of the Party providing the
Confidential Information ("Disclosing Party"), except as provided in Section 11
(b). Confidential Information may include, without limitation: (1) names,
addresses, and demographic, behavioral, and credit information relating to FUSA
cardmembers or potential FUSA cardmembers; (ii) marketing materials, strategies
and targeting methods; (iii) business objectives, assets and properties; and
(iv) programming techniques and technical, developmental, cost and processing
information. Notwithstanding the forgoing, Confidential Information shall not
include information relative to Credit Card holders or other FUSA cardmembers
wherein such information is used in any manner which does not reveal the
identity of the individual cardmember to a third party (e.g. demographical
reports, statistical analyses, targeted marketing).
(b) The Party receiving such Confidential Information ("Receiving
Party") shall use Confidential lnformation only for the purpose of performing
the terms of this Agreement and shall not accumulate in any way or make use of
Confidential Information for any other purpose. The Receiving Party shall not
disclose the Confidential Information to any third party without the prior
written consent of the Disclosing Party, except for its employees, agents, and
subcontractors who: (i) need to know such Confidential Information to perform
the Receiving Party's obligations or enforce the Receiving Party's rights under
this Agreement; and (ii) agree to be bound by the provisions of this Section.
(c) The obligations with respect to Confidential Information shall not
apply to Confidential Information that: (i) either Party or its personnel
already know at the time it is disclosed as shown by their written records;
(ii) is publicly known without breach of this Agreement; (iii) either Party
received from a third party authorized to disclose it without restriction; (iv)
either Party, its agents or subcontractors, developed independently without use
of Confidential Information; or (v) either Party is required by law, regulation
or valid court or governmental agency order to disclose, in which case the Party
receiving such an order must give notice to the other Party, allowing them to
seek a protective order.
(d) Each Party agrees that any unauthorized use or disclosure of
Confidential Information may cause immediate and irreparable harm to the
Disclosing Party for which money damages may not constitute an adequate remedy.
In that event, each Party agrees that injunctive relief may be warranted in
addition to any other remedies the Disclosing Party may have. In addition, the
Receiving Party agrees promptly to advise the Disclosing Party in writing of any
unauthorized misappropriation, disclosure or use by any person of the
Confidential Information which may come to its attention and to take all steps
at its own expense reasonably requested by the Disclosing Party to limit, stop
or otherwise remedy any misappropriation, disclosure or use by its own
representatives, agents or employees.
(e) Upon either Party's demand, or upon the termination or expiration
of this Agreement, the Parties shall comply with each other's reasonable
instructions regarding the disposition of Confidential Information which may
include return of any and all Confidential Information (including any copies or
reproductions thereof). Such compliance shall be certified in writing, including
a statement that no copies of Confidential Information have been kept. Provided
however, nothing contained herein shall be construed to require the Company to
return any data relative to Credit Card holders or other FUSA cardmembers stored
in the Company's data warehouse which cannot be used by a third party to
discover the identity of the individual holder/cardmember.
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(f) Except as necessary for its performance under this Agreement,
neither Party shall use the name of the other Party, its affiliates or
subsidiaries, in connection with any representation, solicitation, promotion,
sales or marketing publication or advertisement, without the prior consent of
the other.
(g) Except as may be required by law, regulation or any Governmental
Authority, neither Party, nor any of its affiliates, shall issue a press release
or make any similar public announcement related to the transactions contemplated
by this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed. The Parties shall use their best
efforts to agree upon and issue a press release within thirty (30) days of the
Effective Date of this Agreement.
(h) The obligations of this Paragraph 11 shall survive the
termination or expiration of this Agreement for a period of two (2) years.
12. Representations and Warranties.
(a) FUSA represents and warrants that: (i) it is a national banking
association duly organized, valid1y existing and in good standing under the laws
of the United States and (ii) the execution and delivery by FUSA of this
Agreement, and the performance by FUSA of the transactions contemplated hereby,
are within FUSA's corporate powers, have been duly authorized by all necessary
corporate action, do not require any consent or other action by or in respect
of, or filing with, any third party or governmental body or agency (other than
informational filings required by MasterCard or Visa), and do not contravene,
violate or conflict with, or constitute a default under, any provision of
applicable law or regulation or of the charter or by-laws of FUSA or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
FUSA; (iii) it is not currently aware of any claims, and is not currently
involved in any litigation, challenging FUSA's ownership of the FUSA Marks that
would materially effect FUSA's obligations pursuant to this Agreement; (iv) it
is not aware of any claims, and is not currently involved in any litigation,
challenging FUSA's access to the Web and/or the Internet and/or its hosting and
operation of its "instant credit approvals" on its website that would
materially effect FUSA's ability to perform pursuant to this Agreement; and
(v) it has the right, power and authority to execute this Agreement and act in
accordance herewith.
(b) Company represents and warrants that it is a Michigan corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan. Company further represents and warrants that (i) the
execution and delivery by Company of this Agreement, and the performance by
Company of the transactions contemplated hereby, are within Company's powers,
have been duly authorized by all necessary action, do not require any consent or
other action by or in respect of, filing with, any third party or any
governmental body or agency, and do not contravene, violate or conflict with, or
constitute a default under, any provision of applicable law, regulation, or
under any governing documents, charter or bylaw, or any agreement, judgment,
injunction, order, decree or other instrument binding on Company; (ii) it is not
currently aware of any claims, and is not currently involved in any litigation,
challenging Company's ownership of the Marks; (iii) it is not aware of any
claims, and is not currently involved in any litigation, challenging Company's
access to the Web and/or the Internet; and (iv) it has the right, power and
authority to execute this Agreement and act in accordance herewith.
(c) EXCEPT AS SPECIFIED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTY IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT AND HEREBY
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DISCLAIMS ANY AND ALL IMPLIED WARRANTIES, INCLUDING ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE REGARDING SUCH SUBJECT
MATTER. THE FOREGOING WAIVER SHALL NOT BE CONSTRUED TO LIMIT OR PROHIBIT EITHER
PARTY HEREUNDER FROM PURSUING THE REMEDIES SET FORTH ELSEWHERE IN THIS AGREEMENT
OR AS OTHERWISE AVAILABLE AT LAW OR IN EQUITY FOR A BREACH BY THE OTHER PARTY
HEREUNDER OF ANY CONTRACTUAL OBLIGATION UNDER THIS AGREEMENT.
13. Release and Indemnification.
(a) FUSA shall not be responsible in any way for any
misrepresentation, negligent act or omission or willful misconduct of Company,
its affiliates, officers, directors, agents, or employees in connection with the
entry into or performance of any obligation of Company under this Agreement.
Further, Company shall indemnify, defend and hold FUSA harmless from and against
all claims, actions, suits or other proceedings, and any and all losses,
judgments, damages, expenses or other costs (including reasonable counsel fees
and disbursements), arising from or in any way relating to (i) any actual or
alleged violation or inaccuracy of any representation or warranty of Company
contained in Paragraph 12 above, (ii) any actual or alleged infringement of any
trademark, copyright, trade name or other proprietary ownership interest
resulting from the use by FUSA of the Marks of Company as contemplated by this
Agreement, and (iii) any negligent act or omission or willful misconduct of
Company or its directors, officers, employees, agents or assigns in connection
with the entry into or performance of this Agreement.
(b) Company shall not be responsible in any way for any
misrepresentation, negligent act or omission or willful misconduct of FUSA, its
affiliates, officers, directors, agents, or employees in connection with the
entry into or performance of any obligation of FUSA under this Agreement.
Further, FUSA shall indemnify, defend and hold Company harmless from and against
all claims, actions, suits or other proceedings, and any and all losses,
judgments, damages, expenses or other costs (including reasonable counsel fees
and disbursements), arising from or in any way relating to (i) any actual or
alleged violation or inaccuracy of any representation or warranty of FUSA
contained in Paragraph 12 above, (ii) any actual or alleged infringement of any
trademark, copyright, trade name or other proprietary ownership interest
resulting from the use by Company of the FUSA Marks as contemplated by this
Agreement, (iii) any act or omission of FUSA in connection with the issuance of
Credit Card(s) and/or the administration of Credit Card Accounts which
constitutes a violation of the laws of the State of Delaware or any federal or
state banking or consumer credit laws or regulations, and (iv) any negligent act
or omission or willful misconduct of FUSA or its directors, officers, employees,
agents or assigns connection with the entry or performance of this Agreement.
(c) EXCEPT AS SPECIFIED IN THIS AGREEMENT, IN NO EVENT WILL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR
OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE.
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14. Term/Termination.
(a) Subject to any termination pursuant to subparagraphs 14(b), (c),
(d). (e), (f), (a), (h), and (i) below, this Agreement shall be effective as of
the Effective Date and shall continue for an initial term of five (5) years
(the "Initial Term"). Following the Initial Term, this Agreement shall be
automatically renewed for successive renewal terms of three (3) years each
unless. at least one hundred and eighty days (180) days prior to the expiration
of the Initial Term or the then current renewal term, either Party shall have
notified the other in writing of its decision not to renew this Agreement. If
the terms hereof are to be amended in connection with any renewal, an
appropriate addendum shall be added hereto reflecting, as applicable, the
revised terms hereof.
(b) Should: (i) the Company fail to earn an amount in any Quarter
greater than or equal to the amount of the Advance paid to it by FUSA for such
Quarter (a "Quarterly Advance Shortfall"); and (ii) the Company failed to cure
such Quarterly Advance Shortfall in the ensuing two (2) consecutive Quarters by
earning an amount equal to the applicable Quarterly Advance Shortfall from
monies earned in excess of the Advance (for either or both of the ensuing two
(2) consecutive Quarters (essentially, a Surplus as defined within Exhibit A)
then, FUSA may, in its sole and absolute discretion, terminate this Agreement,
effective seven (7) days after written notice to the Company. Provided however,
in no event, shall FUSA's right to terminate hereunder be exercisable before the
earlier of either: (x) one (1) year after the first marketing effort for the
Company Branded Credit Cards. or (y) eighteen (18) months after the Effective
Date. Notwithstanding the preceding sentence, if Company has in the interim
cured the default which led to the unexersizable right before the right can be
exercised, then, FUSA shall have no right to terminate as a result of such
default.
(c) If there is a material default by either Party in the performance
of the terms and conditions of this Agreement, and such default shall continue
for a period of thirty (30) days after receipt by the defaulting Party of
written notice thereof from the non-defaulting Party (setting forth in detail
the nature of such default), then this Agreement shall terminate at the option
of the non-defaulting Party as of the thirty-first (31st) day following the
receipt of such written notice. If, however, the default cannot be remedied
within such thirty (30) day period, such time period shall be extended for an
additional period of not more than thirty (30) days, so long as the defaulting
Party has notified the non-defaulting Party in writing and in detail of its
plans to initiate substantive steps to remedy the default and diligently
thereafter pursues the same to completion within such additional thirty (30) day
period.
(d) This Agreement shall be deemed immediately terminated, without the
requirement of further action or notice by either Party, in the event that
either Party, or a direct or indirect holding company of either Party, shall
become subject to: (i) voluntary bankruptcy, insolvency, receivership,
conservatorship or like proceedings; or (ii) involuntary bankruptcy, insolvency,
receivership, conservatorship or like proceedings, (including, but not limited
to, the takeover of such Party by the applicable regulatory agency) pursuant to
applicable state or federal law, which is not discharged within sixty (60) days.
(e) In the event that any material change in any federal, state or
local law, statute, operating rule or regulation, or any material change in any
operating rule or regulation of MasterCard or Visa makes the continued
performance of this Agreement under the then current terms and conditions
unreasonably and unduly burdensome, then FUSA shall have the right to terminate
this Agreement upon ninety (90) days advance
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written notice to Company. Such written notice shall include a detailed
explanation and evidence of the unreasonable burden imposed as a result of such
change. The Parties agree that if the material change can be cured and in
FUSA's sole and absolute discretion, the cure is economically viable, then the
Parties shall work together to cure the condition. If the condition is not
cured within thirty (30) days, then, FUSA shall have the right to terminate this
Agreement upon ninety (90) days written notice.
(f) In the event that any representation or warranty of a Party set
forth in Paragraph 12 of this Agreement shall prove to be untrue, then the other
Party shall have the right to immediately terminate this Agreement and all
of its obligations contained herein effective seven (7) days after written
notice to the other Party.
(g) In the event that Company enters into any merger, acquisition,
agreement, transfer of control or sale of substantially all of its assets to,
or any similar transaction with, (a) any competitor of FUSA or any entity that
owns a competitor FUSA, or (b) any entity that due to its products, services
and/or reputation creates a demonstrable and material conflict of interest for
FUSA, then, FUSA shall have the right to terminate this Agreement effective
thirty (30) days after written notice to Company.
(h) In the event that (i) the number of registered Users on the
Company's Website decreases to one million (1,000,000) or less, or (ii) Company
divests itself of its on-line business(es), then FUSA shall have the right to
immediately terminate this Agreement and all of its obligations contained herein
effective seven (7) days after written notice to Company.
(i) Upon termination or expiration of this Agreement:
1. Each Party shall promptly return to the other Party all
marketing materials that have been supplied to such Party
by the other Party;
2. All Accounts which have been opened pursuant to the terms
hereof, together with all Accounts for which applications
have been received but not yet processed by FUSA as of the
effective date of such termination or expiration, shall
remain the sole and exclusive property of FUSA;
3. FUSA shall have the right, but not the obligation, to
issue credit cards in its own name and without any reference
to Company on such credit cards, to cardmembers holding
Credit Cards pursuant to this Agreement and to applicants
whose applications are received after the effective date of
such termination or expiration,
4. all monies payable to Company under this Agreement
(including, but not limited to, the Fees pursuant to items
1, 2, and 3 of Exhibit A earned through the effective date
of termination or expiration) shall be reconciled and paid
to Company by FUSA within thirty (30) days of the effective
date of termination or expiration (the "Reconciliation
Amount").
5. If this Agreement is terminated by Company due to an
uncured material default by FUSA, or by either Party's
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election not to renew this Agreement, then Company shall
not be required to remit to FUSA any unearned portion of
any Advance as of the effective date of termination or
expiration (and FUSA shall not be entitled to any credit
for such amount in the determination of the Reconciliation
Amount).
6. If this Agreement is terminated by FUSA pursuant to
subsection 14(c), (d), (f), (g) or (h) above, then the
Company shall be required to remit to FUSA any
"Overpayment" of Advances as of the effective date of
termination, if any. "Overpayment" is hereby defined as:
(i) the total amount of the Advances paid by FUSA to the
Company; minus (ii) the number of Accounts opened each
Quarter multiplied by $50.
7. If this Agreement is terminated by FUSA pursuant to
subsection 14(b) above, then the Company shall be required
to remit to FUSA any Overpayment of Advances as of the
effective date of termination or expiration, if any.
Notwithstanding the foregoing, the Parties agree that if
FUSA terminates as a result of Section 14(b) above, that
the Advances paid in the 1st and 2nd Quarters of the 1st
year of this Agreement, shall not be subject to any
adjustment, reconciliation, or repayment obligation of the
Company upon termination.
8. If this Agreement is terminated by FUSA pursuant to
subsection 14(e) above, then the Company shall not be
required to remit to FUSA any Overpayment of Advances as
of the effective date of termination.
9. If this Agreement is properly terminated by FUSA as
permitted by, and in accordance with, the terms of this
Section 14, then the payment of any and all future Advances
shall immediately cease.
15. Exclusivity.
(a) During the term of this Agreement, FUSA shall have the exclusive right
to perform the credit card services contemplated by this Agreement, and Company
agrees that during the term hereof it shall not, by itself or in conjunction
with others, directly or indirectly, offer, advertise, promote, endorse, or
enter into any agreement with others for the provision of, credit cards,
charge cards or credit card related products or services (i.e. Credit Card
protection insurance, Credit Card disability insurance) on the Company Website.
For the purposes of this Agreement, providing advertising and/or sponsorships
for American Express shall not be construed a breach of this provision so long
as the marketing services provided to American Express do not include: (i) the
ability to complete an application on the Company Website for a consumer card
product with any Company User; or (ii) an endorsement by the Company. The term
"Endorsement" as used in this Agreement is intended to portray a situation
where the Company states a preference towards one provider versus the other.
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(b) FUSA shall also have a right of first refusal to enter into an
agreement with the Company, on the same terms and conditions offered to the
Company by a third party, to promote any debit cards to Company Users via the
Company Website. The Company shall provide FUSA with a copy of any such offer it
intends to accept with a third party, and FUSA shall have thirty (30) days from
the date of receipt thereof to either (i) decline to exercise its right of first
refusal or (ii) to exercise its right of first refusal and execute a
commercially reasonable agreement with the Company upon the same material terms
and conditions as those contained in the offer. The failure of the Company and
FUSA to execute such agreement within said thirty (30) day period shall entitle
the Company to enter into an agreement with the third party upon the same
material terms and conditions contained in the offer. Provided however, if the
Company does not execute an agreement with the third party within ninety (90)
days after it (x) receives notice of FUSA's decision to decline to exercise its
right of first refusal, or (y) the expiration of the thirty (30) day right of
first refusal period, whichever occurs first, then FUSA's right of first refusal
shall be reinstated as to that product(s) which was the subject matter of the
offer.
(c) The Company agrees that if it elects to accept bids for the promotion
or utilization of any stored value cards through the Company Website, that, the
Company shall notify FUSA and FUSA shall have the right to submit a bid to for
the stored value card program. Provided however, the decision to enter into, and
with whom to enter into, the agreement for a stored value card shall be made by
the Company in its sole and absolute discretion.
(d) Notwithstanding the foregoing, the Company may accept advertising and
sponsorships from Visa and MasterCard or other bankcard associations or similar
entities provided that such advertising or sponsorship does not result in the
Company endorsing or providing credit cards, charge cards, stored value card,
debit cards, or any credit or charge card related product or service, to which
FUSA has any exclusive rights or unexpired/unwaived rights of first refusal
under this Agreement.
16. Non-Competition. With respect to all Accounts established pursuant to
this Agreement, the Company agrees that neither the Company nor any entity
which the Company controls shall by itself or in conjunction with others,
directly or indirectly, during the term of this Agreement (including any
Renewal Term) and for a period of one (1) year following the termination or
expiration of this Agreement for any reason whatsoever, specifically target any
offer of a credit card or credit card related product to cardmembers possessing
an Account. Nothing to the contrary withstanding, the Company may, after
termination or expiration of this Agreement, offer current Account holders the
opportunity to participate in another credit card program promoted by the
Company, provided that: (i) the Company does not specifically target Account
holders only, or because they are Account holders (i.e. the Company may target
Account holders as a part of a general solicitation to Company Users); and
(ii) no existing Account holder is directly or indirectly identified as a
cardmember of FUSA, or offered incentives different from that offered to the
other Company Users included in the general solicitation.
17. Notices. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be delivered
either by personal delivery; by telex, telegram, mailgram or telecopy; by
nationally recognized overnight courier service; or by certified or
registered mail, return receipt requested, addressed as follows:
15
<PAGE>
If to FUSA, to:
FIRST USA BANK
Three Christina Centre
201 North Walnut Street
Wilmington, DE 19801
Attention: Kurt Campisano
Senior Vice President
with a copy to:
General Counsel
facsimile: 302-884-8361
If to Company, to:
COOLSAVINGS.COM
8755 West Higgins Road
Chicago, Illinois 60631
Attn: Jonathan Smith
Vice President
Facsimile: (773) 693-1311
with copies to:
Golden & Gorman, P.C.
255 E. Brown St. Suite 110
Birmingham, MI 48009
Attn: Douglas J. Golden
Facsimile: (248) 433-1014
or to such other person or address as either Party shall have previously
designated to the other by written notice given in the manner set forth above.
Notices shall be deemed given one day after sent, if sent by telex, telegram,
mailgram, telecopy or by overnight courier; when delivered and receipted for, if
hand delivered; or when receipted for (or upon the date of attempted delivery
where delivery is refused) if sent by certified or registered mail, return
receipt requested. Where notice requires a response in ten (10) or less business
days, the notice should be sent by hand delivery or telecopy.
18. Entire Agreement/Amendment. This Agreement, including exhibits,
constitutes the entire understanding between the Parties with respect to the
subject matter, and supersedes all prior written and oral proposals,
understandings, agreements and representations, all of which are merged herein.
No amendment or modification of this agreement shall be effective unless it is
in writing and executed by all of the Parties hereto.
19. Non-Waiver of Default. No waiver under this Agreement shall be
effective unless it is in writing and executed by all of the Parties hereto.
The failure of either Party to insist, in any one or more instances, on the
performance of any terms or conditions of this Agreement shall not be construed
as a waiver or relinquishment of any rights granted hereunder or of the future
performance of any such term or condition, and the obligations of the non-
performing Party with respect thereto shall continue in full force and effect.
16
<PAGE>
20. Severability. In the event that any provision of this Agreement shall,
for any reason, be deemed to be invalid and unenforceable, the remaining
provisions of this Agreement shall remain in full force and effect.
21. Alternative Dispute Resolution. Company and FUSA hereby waive their
rights to resolve disputes through any court proceeding or litigation and
acknowledge that all disputes shall be resolved Pursuant to Paragraphs 22 and 23
below, except, notwithstanding the terms of Paragraphs 22 and 23: (i) equitable
relief may be immediately sought pursuant to Paragraph 11 from any court of
competent jusrisdiction; and (ii) any award rendered in any arbitration pursuant
to this Agreement may be enforced in a court of competent jurisdiction. Both
Parties represent to the other that this waiver is made knowingly and
voluntarily after consultation with and upon the advice of counsel and is a
material part of this Agreement.
22. Informal Dispute Resolution. Any controversy or claim between Company,
on the one hand, and FUSA on the other hand, arising from or in connection with
this Agreement or the relationship of the Parties under this agreement whether
based on contract, tort, common law, equity, statute, regulation, order or
otherwise ("Dispute") shall be attempted to be resolved as follows:
(a) Upon the written request to negotiate the Dispute of either
Company, on the one hand, or FUSA on the other hand, a duly appointed
representative(s) of each party will meet for the purpose of attempting to
resolve such Dispute. Said meeting shall be in person or by telephone, at a
mutually convenient time, but in no event later than seven (7) days after the
written request is deemed received pursuant to Paragraph 17 herein. Should they
be unable to resolve the Dispute, an executive representative of Company will
meet with FUSA's Executive Vice President of Marketing (the "Executives") in an
effort to resolve the Dispute. Said meeting shall be in person or by telephone,
at a mutually convenient time, but in no event later than seven (7) days after
the aforementioned meeting, between the other duly appointed representatives.
(b) The Executives shall meet as often as the Parties agree to discuss
the problem in an effort to resolve the Dispute without the necessity of any
formal proceeding pursuant to Paragraph 23.
(c) Formal proceedings pursuant to Paragraph 23 for the resolution of
a Dispute may not be commenced until the earlier of:
i. the Parties concluding in good faith that amicable resolution
through the procedures set forth in subparagraphs (a)-(b)
hereof does not appear likely; or
ii. the expiration of a thirty-five (35) day period immediately
following the initial written request to negotiate the
Dispute:
provided, however, that this Paragraph will not be construed to prevent a Party
from Instituting formal proceedings earlier to avoid the expiration of any
applicable limitations period, to preserve a superior position with respect to
other creditors or to seek temporary or preliminary injunctive relief. The
commencement of a proceeding pursuant to this provision does not relieve a
Party, from the executive consultation requirement contained in this Paragraph.
17
<PAGE>
23. Arbitration.
(a) If the Parties are unable to resolve any Dispute as contemplated
above, such Dispute shall be submitted to mandatory and binding arbitration at
the election of either Company, on the one hand, or FUSA on the other hand (the
"Disputing Party"). The arbitration shall be pursuant to the Commercial
Arbitration Rules of the American Arbitration Association ("AAA").
(b) To initiate arbitration, the Disputing Party shall notify the
other Party, in writing (the "Arbitration Demand") with a copy to AAA, which
shall (i) describe in reasonable detail the nature of the Dispute, (ii) state
the amount of the claim, and, (iii) specify the requested relief. Within
fifteen (15) days after the other Party's receipt of the Arbitration Demand,
such other Party shall file and serve on the Disputing Party a written
statement responding to the claims set forth in the Arbitration Demand as well
as including any affirmative defenses of such Party; asserting any and all
counterclaims, which shall counterclaim shall describe in reasonable detail the
nature of the Dispute relating to the counterclaim, state the amount of the
counterclaim, and specify the requested relief.
(c) If the amount of the controversy set forth in either the claim or
counterclaim is less than $100,000, then the matter shall be resolved by a
single Arbitrator selected pursuant to the rules of the AAA.
(d) If the amount of the controversy set forth in either the claim or
counterclaim is equal to or exceeds $100,000, then the matter shall be resolved
by a panel of three arbitrators (the "Arbitration Panel") selected pursuant to
the rules of the AAA. Decisions of a majority of the members of the Arbitration
Panel shall be determinative.
(e) The arbitration hearing shall be held in such neutral location as
the Parties may mutually agree or, if they cannot agree, Wilmington, Delaware.
The Arbitrator or Arbitration Panel is specifically authorized in proceeding
pursuant to subparagraph (d) to render partial or full summary judgment as
provided for in the Federal Rules of Civil Procedure. Unless otherwise agreed by
the Parties, partial or full summary judgment shall not be available in
proceedings pursuant to subparagraph (c) above. In the event summary judgment or
partial summary judgment is granted, the non-prevailing Party may not raise as a
basis for a motion to vacate an award that the Arbitrator or Arbitration Panel
failed or refused to consider evidence bearing on the dismissed claim(s) or
issue(s). The Federal Rules of Evidence shall apply to the arbitration hearing.
The Party bringing a particular claim or asserting an affirmative defense will
have the burden of proof with respect thereto. The arbitration proceedings and
all testimony, filings, documents and information relating to or presented
during the arbitration proceedings which would otherwise be subject to the
confidentiality provisions of Paragraph 11 herein shall remain subject to said
provisions. The Arbitration Panel will have no power or authority, under the
Commercial Arbitration Rules of the AAA or otherwise, to relieve the Parties
from their agreement hereunder to arbitrate or otherwise to amend or disregard
any provision of this Agreement, including, without limitation, the provisions
of this Paragraph.
(f) Should an Arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Paragraph, the Arbitrator shall be
replaced pursuant to the rules of the AAA. If an Arbitrator is replaced after
the arbitration hearing has commenced, then a rehearing shall take place in
accordance with this Paragraph and the Commercial Arbitration Rules of the AAA.
18
<PAGE>
(g) Within fifteen (15) days after the closing of the
arbitration hearing, the Arbitrator or Arbitration Panel will prepare and
distribute to the Parties a writing setting forth the Arbitrator's or
Arbitration Panel's findings of fact and conclusions of law relating to the
Dispute, including the justification for the granting or denying of any award.
(h) The Arbitrator or Arbitration Panel is instructed to
schedule promptly all discovery and other procedural steps and otherwise to
assume case management initiative and control to effect an efficient and
expeditious resolution of the Dispute. The Arbitrator or Arbitration Panel is
authorized to issue monetary sanctions against either Party if, upon a showing
of good cause, such Party is unreasonably delaying the proceeding.
(i) Any award rendered by the Arbitrator or Arbitration Panel
will be final, conclusive and binding upon the Parties and any judgment thereon
may be entered and enforced in any court of competent jurisdiction.
(j) Each Party will bear a pro rata share of all fees, costs and
expenses of the Arbitrators, and notwithstanding any law to the contrary, each
Party will bear all the fees, costs and expenses of its own attorneys, experts
and witnesses; provided, however, that in connection with any judicial
proceeding to compel arbitration pursuant to this Agreement or to confirm,
vacate or enforce any award rendered by the Arbitrator or Arbitration Panel, the
prevailing Party in such a proceeding shall be entitled to recover reasonable
attorney's fees and expenses incurred in connection with such proceedings, in
addition to any other relief to which it may be entitled.
24. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of Delaware without regard to
its conflict of law principles.
25. Assignment. Any assignment by either Party of that Party's rights
and/or obligations pursuant to the Agreement shall be subject to the prior
written consent of the other Party to this Agreement. In addition, and
notwithstanding the foregoing, (i) FUSA may, without prior written consent,
assign this Agreement and any of FUSA's rights and obligations, to any other
federally regulated financial institution upon the condition that the assignee
shall assume, either expressly or by operation of law, all of FUSA's obligations
hereunder, upon the delivery of prior written notice thereof to Company; (ii)
FUSA may, without prior notice or consent, assign its obligations regarding
marketing and card acquisition to First Credit Card Services, USA LLC and (iii)
Company, without prior written notice or consent, may assign its rights to
receive Fees and Royalties pursuant to this Agreement to a commercial lending
institution which provides a credit facility to Company as collateral security
for such credit facility.
26. Force Majeure. In the event that either Party fails to perform its
obligations under this Agreement in whole or in part as a consequence of acts of
God, fire, explosion, public utility failure, accident, floods, embargoes, war.
nuclear disaster or riot, such failure to perform shall not be considered a
breach of this Agreement during the period of such disability. In the event of
any "Force Majeure" occurrence as set forth in this Section 26, Party shall use
its best efforts to meet its obligations under this Agreement. The disabled
Party shall promptly and in writing advise the other Party, if it is unable to
perform due to a Force Majeure occurrence, the expected duration of such
inability to perform and of any developments (or changes therein) that appear
likely to affect the ability of that Party to perform any of its obligations
hereunder in whole or in part.
19
<PAGE>
27. Approvals. All approvals required by this Agreement shall not be
unreasonably withheld or delaved. Unless the urgency of a situation and good
faith requires a lesser time period for response, all such approvals shall be
granted or denied, in writing, within ten (10) business days of the date a
request for an approval is deemed received by a Party under Paragraph 17 of this
Agreement.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
day and year first above written.
coolsavings.com inc.
By: /s/ Steven M. Golden
------------------------------------
(type/print name & title below line)
Chairman/CEO
FIRST USA BANK, N.A
By: /s/ Kurt Campisano
--------------------------------------------
Kurt Campisano, Senior Vice President
20
<PAGE>
EXHIBIT A
FEES
-------------
During the term of this Agreement
and any renewal terms thereof, FUSA agrees to pay to Company the following Fees:
1. For each Account opened, the application for which was generated
during the term of this Agreement and during any extensions and/or
renewals (i) by on-line marketing programs conducted by the Company on
the Company's Website, or (ii) by Click Thrus generated by the
Company, or (iii) by a 1-800 telephone number obtained from the
Company's Website or third party websites pursuant to an on-line
marketing program of the Company or a Click Thru, FUSA shall pay the
Company a fee of fifty and 00/100 ($50.00) Dollars per Account (the
"Marketing Fee").
2. For each Account opened that was generated through efforts or
marketing programs by the Company pursuant to Section 3(c) of this
Agreement, FUSA shall pay the Company a fee of forty and 00/100
($40.00) Dollars per Account (the "Company Direct Marketing Fee").
3. For each Branded Credit Card Account opened. FUSA shall pay the
Company one-tenth of one percent (0.10%) of the amount of Net Retail
Sales posted to such Branded Credit Card Account (the "Sales
Royalties"). For Purposes of this Agreement, "Net Retail Sales" shall
mean the aggregate amount of individual purchases posted to an
Account, but shall not include the aggregate amount of (i) all refunds
to such Account, such as credits for returned merchandise or disputed
billing items, (ii) those amounts representing annual fees, finance
charges and other bank fees or charges posted to such Account (such
fees to include, but not be limited to, late fees, return check fees,
overlimit fees, credit insurance premiums, cash advance fees,
collection costs and administrative fees); and (iii) the amount of all
cash advance transactions fees. The Sales Royalties shall also
exclude any Net Retail Sales posted to an Account whose card(s) have
been reported lost or stolen and which have not been subsequently
replaced or reissued by FUSA.
4. Commencing on the Effective Date, and on the first day of every
ensuing three (3) month period thereafter during the Initial Term of
this Agreement (each a "Quarter"). FUSA shall pay to Company an
advance against the Marketing Fees and the Company Direct Marketing
Fees (items 1 and 2 above) which may be earned by Company in the
forthcoming Quarter (an "Advance"), as follows:
a. The amount of the Advance for each of the first (1st) and second
(2nd) Quarters of the first (1st) year of this Agreement shall be
one hundred twenty five thousand and 00/100 ($125,000) Dollars.
b. The amount of the Advance for the third (3rd) Quarter of the
first (1st) year of this Agreement, shall be determined as
follows: (i) the number of Accounts opened in the 2nd Quarter of
the first year multiplied by $50; minus (ii) fifty percent (50%)
of the "2nd Qtr. Shortfall" (as hereinafter defined), if any.
1
<PAGE>
"2nd Qtr. Shortfall" shall mean the difference between $125,000
and (the number of Accounts opened in the 2nd Quarter of the
first year of this Agreement multiplied by $50).
c. The amount of the Advance for the fourth (4th Quarter of the
first (1st) year of this Agreement, shall be determined as
follows: (1) the number of Accounts opened in the 3rd Quarter of
the first year multiplied by $50; minus (ii) fifty percent (50%)
of the "2nd Qtr. Shortfall" (as defined in subparagraph b above),
if any.
d. The amount of the Advance to be paid for each Quarter thereafter.
shall be determined by multiplying the number of Accounts opened
in the previous Quarter by $50 and reducing that amount by any
Surplus, as defined below, necessary to cure a Quarterly Advance
Shortfall.
Commencing at the end of the first Quarter of the first year of this
Agreement, in the event the amount of fees earned in the previous Quarter was
greater than the Advance paid for such Quarter (a "Surplus"), and such Surplus
is not required to be applied to cure any Quarterly Advance Shortfall pursuant
to Section 14(b) of the Agreement, then FUSA shall pay the Surplus to Company
within said forty-five (45) day period.
The Parties agree that FUSA may exercise its night to terminate in
accordance with Section 14 (b) if the Company falls to perform as required
therein.
2
<PAGE>
EXHIBIT B
LICENSED MARKS
--------------
[Attach Company Marks]
[Attach FUSA Marks]
3
<PAGE>
EXHIBIT C
FUSA Account Servicing Standards
Credit Car Application processing:
- ----------------------------------
Data Capture (Imaging) per application 2-5 calendar days
Credit Decisioning per application 1-2 calendar days
Operations Support 2-3 calendar days
Total Turnaround Time
(including FDR processing) 10 days
Customer Service:
- -----------------
Percent of call answered
Within 20 seconds 80%
Average Speed of Answer 20 seconds
Abandoned Calls Rate 3% or less
4
<PAGE>
EXHIBIT 10.14
STOCK PURCHASE AND ADVERTISING AGREEMENT
----------------------------------------
THIS STOCK PURCHASE AND ADVERTISING AGREEMENT (this "Agreement") is
dated as of the 28th day of May, 1999 by and between the National Broadcasting
Company, Inc. ("NBC") and coolsavings.com inc., a Michigan corporation (the
"Company").
RECITALS:
A. coolsavings.com inc. was formed on December 21, 1994 as
Interactive Coupon Marketing Group, Inc., and changed its name to
coolsavings.com inc. on November 18, 1998. The Company is in the business
("Business") of providing direct marketing services, including targeted sales
promotions and coupons on the Internet.
B. The Company desires to issue and sell 597.188 shares of its
Common Stock, no par value (the "Shares") to NBC and NBC desires to purchase the
Shares from the Company on the terms and subject to the conditions set forth in
this Agreement.
C. The Company desires to purchase and use, and NBC desires to
provide to the Company, certain NBC Television Network ("NBC TV") advertising
inventory on the terms and subject to the conditions set forth in this
Agreement.
SECTION 1
AUTHORIZATION AND SALE OF SHARES
1.1 Authorization of the Shares. The Company has authorized the sale
---------------------------
and issuance of 597.188 shares of its Common Stock, no par value (the "Shares")
to NBC. The Shares shall have the rights, privileges and preferences set forth
in the Company's Articles of Incorporation attached as Exhibit A hereto (the
---------
"Articles").
1.2 Purchase and Sale of Common Stock; Antidilution.
-----------------------------------------------
1.2.1 Purchase and Sale. Upon the terms and subject to the
-----------------
conditions hereof and in reliance upon the representations, warranties and
agreements contained herein, the Company hereby issues and sells to NBC and NBC
hereby purchases from the Company, 597.188 shares of the Company's Common Stock,
at a purchase price of $5,023.54 per share.
1.2.2 Antidilution. If, after the date of this Agreement and
------------
prior to the first to occur of the completion of the Company's initial public
offering or August 1, 2000, the Company issues its Common Stock, or securities
which are convertible into the Company's Common Stock, at a price per share (the
"New Issuance Price") of less than $5,023.54, then the Company shall issue that
number of additional shares of its Common Stock to NBC equal to the product of
(a) the number of shares of Company Stock issued to NBC under this Agreement,
after adjustment , if any, pursuant to Section 2.3, and (b) a fraction, the
numerator of which is $5,023.54 minus the New Issuance Price and the denominator
of which is the New Issuance Price. The calculations under this clause 1.2.2
will be adjusted to reflect the numbers of shares and price per share of the
Company's Common Stock appropriate to account for any stock split,
<PAGE>
stock dividend, reclassification or other similar change in the Company's Common
Stock affecting all shares of Common Stock generally.
1.3 Delivery. Concurrent with execution and delivery of this
---------
Agreement, the Company is delivering to NBC a certificate representing the
Shares registered in NBC's name under the terms and subject to the conditions of
this Agreement against payment of the purchase price for the Shares by telecast
of the Spots pursuant to Section 2 of this Agreement.
SECTION 2
PURCHASE OF ADVERTISING
2.1 Spots. NBC shall provide the Company with the use of thirty (30)
-----
second advertising spots (each, a "Spot") to be telecast on NBC TV during the 12
month period (the "Broadcast Period") beginning on October 1, 1999 or such other
date as NBC and the Company shall agree in writing signed by both the Company
and NBC. The Spots will be aired during the programs set forth in the attached
Exhibit B, or at other dates, days and times and during programs substantially
- ---------
similar in the aggregate to those set forth in Exhibit B. All such Spots run by
---------
the Company shall be subject to NBC TV's standard terms and conditions for such
advertising which are described in the "Participating Sponsorship Agreement"
attached hereto as Exhibit C (the "Standard Terms") and which are made a part of
---------
this Agreement in their entirety; provided, however, that in the case of a
-------- -------
conflict between the terms of this Agreement and the terms of the Standard
Terms, the terms of this Agreement shall govern. For purposes of the Standard
Terms, the Company shall be both the "Advertiser" and the "Agency" as such terms
are used therein. The Company acknowledges that if it fails to deliver any of
the material required by NBC to air the Company's Spots during any particular
Program pursuant to the procedures in the Standard Terms, then NBC TV shall be
deemed to have telecast such Spot during the relevant Program for purposes
hereof even if such Spot is not actually shown when the Program is telecast.
2.2 Value of Spots. NBC agrees to telecast Spots with a total spot
--------------
value of $3,000,000 (the "Total Spot Value") calculated, for each Spot, at [*].
The Company agrees that NBC makes no guarantee regarding what the actual rating
for any particular Program will be and, therefore, will not be obligated to
provide any make-goods hereunder.
2.3 Liability for Failure to Broadcast Spots. In the event that NBC
----------------------------------------
does not telecast Spots equal to the Total Spot Value within the Broadcast
Period, then as liquidated damages and not a penalty, and as the sole damages
for such failure, NBC shall pay the Company, on or before October 5, 2000, an
amount equal to the difference (the "Differential Value") between the Total
Spot Value and the value of the Spots actually telecast, as calculated pursuant
to Section 2.2 above. The Differential Value will be paid by the surrender to
the Company by NBC of that number of the Shares equal to the Differential Value
divided by $5,023.54.
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTION.
-2-
<PAGE>
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to NBC as follows:
3.1 Organization and Standing; Charter and By-laws. The Company is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan, and the Company is authorized to exercise all of its
corporate powers, rights and privileges. True and accurate copies of the
Articles of Incorporation and the by-laws of the Company, each as in effect on
the date hereof, have been delivered to the Purchasers. The Company has no
direct or indirect subsidiaries.
3.2 Capitalization. The authorized capital stock of the Company on
---------------
the date hereof consists of 60,000 shares of Common Stock, no par value ("Common
Stock"). On the date hereof, before giving effect to the issuance of the
Shares, 26,873.463 shares of Common Stock are outstanding. The Company has
reserved 2,642.38 shares of Common Stock for issuance to employees, consultants
and directors pursuant to outstanding options under its 1997 Stock Option Plan.
Except as set forth herein and in Schedule 3.2 attached, there are no
------------
outstanding rights, options, warrants, preemptive rights, conversion or exchange
rights or agreements for the purchase, acquisition or receipt from the Company
of any shares of capital stock or any other securities of the Company. The
right of first refusal afforded IntelliQuest Information Group, Inc. does not
apply to the issuance of the Shares. The Company is not a party to any existing
agreement with any person or entity which requires the Company to purchase from
such person or entity any of its capital stock, any securities convertible into
or exchangeable or exercisable for any of its capital stock, or any right,
options or warrants for its capital stock. All voting rights in the Company are
vested in the Common Stock as set forth in the Articles of Incorporation.
Except as set forth in Schedule 3.2 attached, the Company is not a party to any
------------
voting trusts, voting agreements, proxies or other agreements, instruments or
understandings, and to the knowledge of the CEO, COO and CFO of the Company,
there are no other voting trusts, voting agreements, proxies or other
agreements, instruments or understandings with respect to the voting of the
capital stock of the Company. Subject to the accuracy of the representations
and warranties of NBC set forth in Section 4, all of the Shares are being issued
in compliance with all applicable Federal and state securities laws.
3.3 Corporate Power: Authorization. The Company has all requisite
-------------------------------
legal and corporate power to enter into this Agreement, to issue and sell the
Shares as provided hereunder, and to carry out and perform its obligations under
the terms of this Agreement. All corporate action on the part of the Company and
its officers, directors and stockholders that is necessary for the
authorization, execution and delivery of this Agreement by the Company, for the
performance of the Company's obligations hereunder and for the issuance and
delivery of the Shares has been taken; and this Agreement constitutes a legal
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to: (i) judicial principles respecting or
limiting the availability of specific performance, injunctive relief and other
equitable remedies; and (ii) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect generally relating to or
affecting creditors' rights. The execution and delivery of this Agreement by
the Company and the performance of its obligations hereunder will not violate or
conflict with any order of any court or other agency of government, any
judgment, decree, or any agreement, license or other instrument, or to the
-3-
<PAGE>
knowledge of the CEO, COO and CFO of the Company, any statute, regulation, rule
or provision of law to which the Company is a party or by which it or any of its
assets are bound.
3.4 Validity of Securities. The Shares, when issued, sold, delivered
-----------------------
and paid for in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid and non-assessable and will be free and clear of any
liens, charges, encumbrances, restrictions, preemptive rights or rights of first
refusal of any kind; provided, however, that the Shares will be subject to the
restrictions of the Agreement referenced in Section 5 and may be subject to
restrictions on transfer under state and federal securities laws.
3.5 Consents and Waivers. The Company has obtained any and all
---------------------
consents, permits and waivers and made all filings necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
3.6 Financial Statements. Attached hereto as Exhibit E are the
-------------------- ---------
following financial statements (collectively the "Financial Statements"): (i)
audited balance sheet and statement of income, changes in stockholders' equity,
and cash flow as of and for the fiscal year ended December 31, 1998 (the "Most
Recent Fiscal Year End") for the Company; and (ii) unaudited balance sheet and
statement of income, changes in stockholders' equity, and cash flow (the "Most
Recent Financial Statements") as of and for the three (3) months ended March 31,
1999 for the Company. The Financial Statements (including the notes thereto)
have been prepared in accordance with GAAP (except that the Most Recent
Financial Statements are subject to normal, recurring year-end adjustments and
do not have footnotes which may be required by GAAP) applied on a consistent
basis throughout the periods covered thereby, taken as a whole present fairly
the financial condition of the Company as of such dates and the results of
operations of the Company for such periods, and are consistent with the books
and records of the Company (which books and records are correct and complete in
all material respects). Since the date of the Most Recent Financial
Statements, there has been no material adverse change in the assets, liabilities
or financial condition of the Company from that reflected on the Most Recent
Financial Statements, except for changes in the ordinary course of business.
3.7 Title to Assets. Except as set forth on Schedule 3.7 attached,
--------------- ------------
the Company has good and marketable title to all of its owned assets, and good
leasehold interests in its leased properties, free and clear of all
encumbrances, except for (a) liens arising by operation of law in the ordinary
course of business that, individually and in the aggregate, do not in any
material respect interfere with the use of any of the assets subject thereto,
(b) minor imperfections of title which do not materially detract from the value
of the property affected or materially impair the operations of the Company and
(c) liens for taxes not yet due and payable.
3.8 Intellectual Property Rights. The Company owns, is licensed to
----------------------------
use or otherwise has sufficient rights to use, or is in the process of acquiring
sufficient rights to use, such patents, trademarks, copyrights, service marks
and applications and registrations therefor, and trade names, customer lists,
trade secrets, proprietary processes and formulae, inventions, know-how, other
confidential proprietary information, and other industrial and intellectual
property rights as are necessary to permit the Company to carry on its business
as presently conducted or as presently proposed to be conducted. Except as set
forth on Schedule 3.8 attached, the Company has not received notice from any
------------
third party nor is the Company otherwise aware that any product or service
marketed or sold by the Company violates any intellectual property
-4-
<PAGE>
right of a third party. Except as set forth on Schedule 3.8 attached, there is
------------
no pending or, to the knowledge of the CEO, COO or CFO of the Company,
threatened claim or litigation against the Company contesting the right to use
its intellectual property rights, asserting the misuse of any thereof, or
asserting the infringement or other violation of any intellectual property
rights of a third party.
3.9 Compliance with Laws; Governmental Authorizations. The Company
-------------------------------------------------
is in compliance with all laws, rules and regulations that, if violated, would
have a material adverse effect on its assets, business, or property. The
Company is not required to hold or maintain any material governmental
authorizations, licenses or permits in the conduct of its business as presently
conducted and as currently proposed to be conducted.
3.10 Litigation. Except as set forth on Schedule 3.8 attached, there
---------- ------------
are no (a) actions, suits, claims, investigations or other proceedings by or
before any governmental authority or arbitrator pending or, to the knowledge of
the CEO, COO or CFO of the Company, threatened against the Company, or (b)
judgments, decrees, injunctions or orders of any governmental authority or
arbitrator against the Company, except to the extent that any of the foregoing
if determined adversely to the Company, would not have a material adverse effect
on the Company, its financial condition or its assets.
3.11 Taxes. The Company has filed all tax returns, Federal, state,
-----
foreign, county and local, required to be filed by it, and has paid all taxes
shown to be due by such returns as well as all other taxes, assessments and
governmental charges which have become due or payable, other than those being
contested in good faith. The Company has established adequate reserves for all
taxes accrued but not yet payable.
3.12 Brokers and Finders. No person or entity acting on behalf or
-------------------
under the authority of the Company is or will be entitled to any broker's,
finder's, or similar fee or commission in connection with the issuance of the
Shares or the consummation of any of the transactions contemplated herein.
3.13 Insurance. The Company maintains fire and casualty insurance
---------
policies, with extended coverage, sufficient in amount to allow it to replace
any of its properties which might be damaged or destroyed, and liability
policies in amounts reasonable and customary for the Company's business.
SECTION 4
REPRESENTATIONS, WARRANTIES OF NBC
AND RESTRICTIONS ON TRANSFER IMPOSED BY THE ACT
4.1 Representations and Warranties. NBC hereby represents and
-------------------------------
warrants to the Company as follows:
4.1.1 Authorization.
--------------
All action on the part of NBC necessary for the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby has been taken and, assuming due execution and delivery by
the Company, this
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<PAGE>
Agreement constitutes a legal, valid, binding and enforceable obligation of NBC,
subject to: (i) judicial principles respecting or limiting the availability of
specific performance, injunctive relief, and other equitable remedies; and (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights.
4.1.2 Investment.
-----------
(a) NBC has been advised that the Shares have not been registered
under the Securities Act of 1933, as amended (the "Act"), or registered or
qualified under any applicable state securities laws on the ground that no
distribution or public offering of the Shares is to be effected, and that in
this connection the Company is relying in part on the representations of NBC set
forth in this Section 4;
(b) NBC has been further advised that no public market now exists
for any of the securities issued by the Company and that a public market may
never exist for the Shares;
(c) NBC is purchasing the Shares for its own account and not for
any other person;
(d) By reason of its business or financial experience, NBC has the
capacity to protect its own interest in connection with the transactions
contemplated hereunder, is able to bear the risks of an investment in the
Company, and can afford a complete loss of such investment;
(e) NBC is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares; and
(f) NBC has had the opportunity to ask questions regarding the
Company and the Company has provided information in response to the questions.
4.1.3 Federal Securities Laws. In order to enable the Company to
-----------------------
determine whether the sale of the Shares is exempt from registration under the
Act, NBC represents that it is an Accredited Investor (as defined in Rule 501 of
the Rules and Regulations under the Securities Act of 1933) and is acquiring the
Shares for its own account, for investment, and not with a view to, or for sale
in connection with, any distribution thereof.
4.2 Transfer of Securities. The Shares shall not be transferable except
-----------------------
(a) to an affiliate of NBC who expressly agrees to be bound by the terms of this
Agreement and the letter agreement with the underwriters named therein
referenced in Exhibit F or (b) upon the conditions specified in this Section
---------
4.2, which conditions are intended to insure compliance with the provisions of
the Act with respect to the transfer of such securities.
4.2.1 Legend. Unless and until otherwise permitted by this Section
-------
4.2, each certificate representing the Shares will be endorsed with a legend
substantially in the following form:
-6-
<PAGE>
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A)
COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (B) THE COMPANY HAS BEEN FURNISHED WITH AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE
EFFECT THAT SUCH SALE, PLEDGE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REOUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
4.2.2 Restrictions on Transfer. The Shares shall not be sold,
-------------------------
assigned, pledged or transferred, and the Company shall not be required to
record any such sale, assignment, pledge or transfer, in its stock transfer
records unless and until one of the following events shall have occurred:
(a) the Company shall have received an opinion of counsel, which may
be NBC in-house counsel, in form and substance reasonably acceptable to the
Company and its counsel, stating that the contemplated transfer is exempt from
registration under the Act as then in effect, and the Rules and Regulations of
the Securities and Exchange Commission (the "Commission") thereunder and any
applicable state securities laws, which may include an opinion that the Shares
can be sold pursuant to Rule 144 under the Act;
(b) the Company shall have been furnished with a letter from the
Commission in response to a written request in form and substance reasonably
acceptable to counsel for the Company setting forth all of the facts and
circumstances surrounding the contemplated sale, assignment, pledge or transfer,
stating that the Commission will take no action with regard to the contemplated
sale, assignment, pledge or transfer; or
(c) the Shares are transferred pursuant to a registration statement
which has been filed with the Commission and has become effective.
Within three business days after delivery to the Company and its
counsel of an opinion described in clause (a) above, the Company either shall
deliver to the proposed transferor a statement to the effect that such opinion
is not satisfactory in the reasonable opinion of its counsel (and shall specify
in detail the legal analysis supporting any such conclusion) or shall authorize
the Company's transfer agent to make the requested transfer.
4.2.3 Termination of Restrictions and Removal of Legend. The
--------------------------------------------------
restrictions on transfer imposed by this Section 4.2 shall cease and terminate
as to the Shares when (i) such securities (as applicable) shall have been
effectively registered under the Act and sold by the holder thereof in
accordance with such registration, or (ii) an acceptable opinion as described in
Section 4.2.2 (a) or a "no action" letter described in Section 4.2.2 (b)
states that all future transfers of such securities by the transferor or the
contemplated transferee would be exempt from registration under the Act. When
the restrictions on transfer contained in this Section 4.2 have terminated as
provided above, the holder of the securities as to which such restrictions
-7-
<PAGE>
shall have terminated or the transferee of such holder shall be entitled to
receive promptly from the Company, without expense to him, new certificates not
bearing the legends set forth in Section 4.2.1 hereof.
4.2.4 Brokers and Finders. No person or entity acting on behalf or
-------------------
under the authority of NBC is or will be entitled to any broker's, finder's, or
similar fee or commission in connection with the issuance of the Shares or the
consummation of any of the transactions contemplated herein.
SECTION 5
UNDERWRITERS' LOCK-UP AGREEMENT
5.1 Underwriters' Letter Agreement. Simultaneously with the execution and
------------------------------
delivery of this Agreement, NBC will execute and deliver to the underwriters
named therein a letter in the form attached as Exhibit F.
---------
SECTION 6
REGISTRATION RIGHTS
The Company covenants and agrees as follows:
6.l Definitions. For purposes of this Section 6:
------------
(a) The terms "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the Shares; and (ii)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the Shares; provided, however, that Common Stock or other securities shall only
be treated as Registrable Securities if and so long as (1) they have not been
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction, and (2) they have not been sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities;
(d) The term "Holder" means any person who is the record owner of
Registrable Securities, or any assignee thereof in accordance with Section 6.12
hereof; and
-8-
<PAGE>
(e) The term "SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Act.
6.2 Company Registration. If, after completion of the Company's initial
---------------------
public offering of Common Stock, and for a period of three years thereafter,
(but without any obligation to do so) the Company proposes to register any of
its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a SEC Rule 145 transaction),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within ten (10)
days after receipt of such notice by the Holder given in accordance with Section
8.4, the Company shall, subject to the provisions of Sections 6.4, 6.5, 6.6, 6.7
and 6.8, cause to be registered under the Act all of the Registrable Securities
that each such Holder has requested to be registered. Notwithstanding the
foregoing, the Company will not be required to give notice to the Holders of
Registrable Securities if the underwriters managing the proposed offering have
advised the Company in writing that in their judgment market conditions will not
allow the inclusion of any secondary shares in such offering. In the event the
managing underwriters and the Company subsequently determine to add any
secondary shares in the offering, such notice shall be provided, and each Holder
shall have the registration rights provided in this Section 6.
6.3 Demand Registration. Subject to the terms of this Agreement, in the
-------------------
event that prior to a date three years after the date of this Agreement (the
"Demand Expiration Date"), the Company shall receive from the Holders of Shares
representing at least seventy-five percent (75%) of the Registrable Securities
then outstanding, at any time after six (6) months after the effective date of
the registration statement covering the Company's initial public offering, a
written notice that it or they intend to offer or cause to be offered for public
sale at least fifty percent (50%) of the Registrable Securities then outstanding
(or any lesser percentage if the aggregate offering price to the public is
greater than $5,000,000), the Company will so notify all Holders. Upon written
request of any Holder given within fifteen (15) days after the receipt by such
Holder from the Company of such notification, the Company will use its best
efforts to cause such of the Registrable Securities as may be requested by any
Holder (including the Holder giving the initial notice of intent to offer) to be
registered under the Securities Act as expeditiously as possible (a "Demand
Registration"). The Company shall not be required to effect more than one (1)
Demand Registration pursuant to this Section 6.3. If (i) in the good faith
judgment of the Board of Directors of the Company, a Demand Registration would
be materially detrimental to the Company and the Board of Directors of the
Company concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to each
Holder a certificate signed by the President of the Company stating that, in the
good faith judgment of the Board of Directors of the Company, it would be
materially detrimental to the Company for such registration statement to be
filed in the near future, then the Company shall have the right to defer such
filing for the period during which such Demand Registration would be materially
detrimental, provided that the Company may not defer the filing for a period of
more than ninety (90) days after receipt of the request for a Demand
Registration, and more than once in any 12-month period. In the event that the
Company elects to defer a Demand Registration to a date occurring after the
Demand
-9-
<PAGE>
Expiration Date, the Demand Expiration Date shall be extended until such time as
the Demand Registration is complete.
6.4 Obligations of the Company. Whenever required under Section 6.2 or
---------------------------
6.3 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 135 days or until all of the
securities registered thereunder are sold, whichever occurs sooner.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement. In the event the Company elects to participate in the
offering by selling securities for the Company's account, the Company shall be
entitled to select the underwriter(s).
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Use best efforts to cause the Registrable Securities covered by
such registration to be listed with any securities exchange on which the
Company's common Stock is then listed.
-10-
<PAGE>
Each Holder agrees that, upon receipt of any notice from the Company of the
happening of any event described in Section 6.4(f), such Holder shall forthwith
discontinue disposition of Registrable Securities until receipt of notice that
such condition no longer exists.
6.5 Furnish Information. It shall be a condition precedent to the
--------------------
obligations of the Company to take any action pursuant to this Section 6 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of such securities
as shall be reasonably requested by the Company or as shall be required to
effect the registration of such Holder's Registrable Securities.
6.6 Underwriting Requirements. In connection with any offering involving
--------------------------
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 6.2 or 6.3 to include any of the Holders' securities
in such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by the persons entitled
to select the underwriters, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by selling stockholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among all selling stockholders according to the total amount of securities
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders). For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder" and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
6.7 Delay of Registration. No Holder shall have any right to obtain or
----------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 6.
6.8 Indemnification. In the event any Registrable Securities are included
---------------
in a registration statement under this Section 6:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder and each officer and director thereof, any underwriter
(as defined in the Act) for such Holder and each person, if any, who controls
such Holder or underwriter within the meaning of the Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act or other federal or state law, insofar as such
losses,
-11-
<PAGE>
claims, damages, or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, officer, director,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by one law firm retained by them (or such additional law
firms retained by a Holder or Holders if such Holder or Holders reasonably
believe there exists a conflict of interest among them) in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
6.8(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any loss, claim, damage, liability or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and bold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, or the 1934 Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 6.8(b), in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 6.8(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided, that, in no event shall
any indemnity under this subsection 6.8(b) exceed the net proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
6.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying patty under this Section 6.8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified
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<PAGE>
parties which may be represented without conflict by one counsel) shall have the
right to retain one separate counsel, with the fees and expenses to be paid by
the indemnifying patty, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if and only to the extent such failure is
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6.8, but the failure to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 6.8. No indemnifying party will consent to
entry of any judgment or enter into any settlement (i) without the consent of
the indemnified party, which consent shall not be unreasonably withheld, or (ii)
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
with respect to such claim or litigation.
(d) The obligations of the Company and Holders under this Section 6.8
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 6, and otherwise.
6.9 Reports Under Securities Exchange Act of 1934. With a view to making
----------------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation of the SEC
which permits the selling of any such securities without registration or
pursuant to such form.
6.10 Expenses of Registration. The Company shall bear and pay all expenses
-------------------------
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to any registration pursuant to Section 6.2
and only one registration pursuant to Section 6.3, including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto, but excluding underwriting
discounts
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<PAGE>
and commissions, legal or other professional fees of the Holders and stock
transfer taxes relating to Registrable Securities.
6.11 Assignment of Registration Rights. The rights to cause the Company to
----------------------------------
register Registrable Securities pursuant to this Section 6 may only be assigned
to a purchaser, assignee or transferee of the underlying Registrable Securities,
who agrees to be bound by the terms of this Agreement.
6.12 Limitations on Subsequent Registration Rights. From and after the
----------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder to include such
securities in any registration filed under Section 6.3 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders which is included; provided, however, the Company may grant additional
rights to participate in Company registrations not filed pursuant to Section 6.3
to other holders such that any participation will be pro rata to such holders'
ownership of Company Common Stock.
6.13 Amendment of Registration Rights. Any provision of this Section 6 may
---------------------------------
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any Registrable
Securities then outstanding, each future holder of all such Registrable
Securities, and the Company.
6.14 Termination. Except as provided in Sections 6.2 and 6.3, the rights
-----------
provided in this Section 6 shall terminate on the third anniversary of this
Agreement.
SECTION 7
CONFIDENTIALITY, DISCLOSURE AND INFORMATION RIGHTS
7.1 Confidentiality and Disclosure. Neither party shall issue a press
------------------------------
release or make any statement to the general public concerning this Agreement,
the Spots, or the existence thereof, without the express prior written consent
of the other; provided, however, that NBC agrees that the Company may file this
-------- -------
Agreement with the Securities and Exchange Commission (the "SEC") and may
describe the terms of this transaction identifying NBC and the subject matter of
this Agreement in any filing with the SEC and other applicable regulatory
agencies substantially in the form attached as Schedule 7.1. The Company agrees
------------
that any description not in the form of that in Schedule 7.1 will first be
------------
submitted to NBC for not less than three business days for prior approval, which
approval will not unreasonably be withheld, conditioned or delayed. The Company
agrees to request from the SEC confidential treatment of the pricing terms
(including the calculation of the Differential Value) of this Agreement, Exhibit
-------
B to this Agreement and any other terms mutually agreed upon by the parties.
- -
-14-
<PAGE>
7.2 Information Rights. For so long as NBC is a stockholder of the
------------------
Company and the Company is not subject to the periodic reporting requirements of
the Securities Exchange Act of 1934, the Company shall furnish to NBC: (a) its
audited annual financial statements as soon as practicable after the end of each
fiscal year, and (b) its most recent quarterly financial statements (which may
or may not be audited) as soon as practicable after NBC requests the same. NBC
shall keep all documents provided to it under this Section 7.2 strictly
confidential and shall not disclose any of such information to any person or
entity without the prior written consent of the Company.
SECTION 8
MISCELLANEOUS
8.1 Governing Law. This Agreement shall be governed in all respects by
--------------
the laws of the State of Michigan.
8.2 Successors and Assigns. Except as otherwise expressly provided
-----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
8.3 Entire Agreement. This Agreement and the other documents delivered
-----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
8.4 Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery, upon receipt by verified facsimile transmission, upon
receipt by overnight courier or upon the third day following mailing by
registered air mail, postage prepaid, addressed (a) if to NBC, to 30 Rockefeller
Plaza, New York, New York 10112, Attn: Michael Jeffrey, with a copy to Law
Department, Corporate and Transactions Group, or at such other address as it
shall have furnished to the Company, (b) if to the Company, to coolsavings.com
inc., 8755 West Higgins Road, Suite 100, Chicago, Illinois 60631-2708, Attn:
Steven Golden, with a copy to Douglas Golden, Golden & Gorman, P.C., 255 East
Brown Street, Suite 110, Birmingham, Michigan 48009, or at such other address as
the Company shall have furnished to NBC.
8.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 Drafting. This Agreement has been drafted jointly by the Company and
--------
NBC and the terms and provisions hereof shall not be construed in favor of
either party on the basis of that party's participation in or contribution to
the drafting of such terms or provisions.
8.7 Arbitration. Any and all disputes between the parties arising out of
-----------
any provision of this Agreement shall be resolved in accordance with the
procedure set forth in this Section 8.7. The Parties shall submit all disputes
under this Agreement to arbitration. Such arbitration shall be conducted in
accordance with the rules of the Center for Public Resources Rules for Non-
Administered Arbitration of Business Disputes by one arbitrator from the CPR
-15-
<PAGE>
Panels of Distinguished Neutrals. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C., Sections 1 - 16, and judgment on the
award rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The place of the arbitration shall be the New York, New York
metropolitan area. The arbitrator shall make written findings of fact and
conclusions of law, and the decision of the arbitrator shall be final. Each
party shall pay its own expenses of arbitration and the expense of the
arbitrator shall be equally shared; provided, however, that if in the opinion of
the arbitrator any claim for indemnification under the Agreement or any defense
in objection thereto was unreasonable, the arbitrator may assess, as part of
their award, all or any part of the arbitration expenses (including reasonable
attorney's fees) of the other party and of the arbitrator against the party
raising such unreasonable claim, defense or objection.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
themselves or by their respective representatives thereunto duly authorized as
of the day and year first above written.
coolsavings.com inc.
By: /s/ Steven Golden Dated: May 28, 1999
- ----------------------------------- ------------------------------
Steven Golden
Chief Executive Officer
National Broadcasting Company, Inc.
By: /s/ Thomas A. Rogers Dated: May 28, 1999
- ----------------------------------- ------------------------------
Its: Executive Vice President
- -----------------------------------
-16-
<PAGE>
EXHIBIT C
PARTICIPATING SPONSORSHIP AGREEMENT
1
<PAGE>
Participating Sponsorship Agreement -
Part II
1. DENFINITIONS
"Advertiser" means the advertiser named in Part I.
"Agency" means the advertising agency named in Part I (see also paragraph 23).
"NBC" means NBC Television Network, a Division of National Broadcasting Company,
Inc.
"paragraph" - all references to 'paragraphs' by numbers apply to this Part II.
"participation" means a sponsorship unit which entitles Advertiser to 30 seconds
of commercial time unless otherwise specified in Part II hereof.
"Program" means the program(s) and/or event(s) described in Part I intended for
telecast in which Advertiser is a sponsor.
"Section" - references to 'Sections' by numbers apply to Part I of which this
Part II is a part (by attachment or by reference) and without which this Part II
shall be invalid.
"telecast" means tho presentation and transmission of any of the programs
described in Part I on one occasion to any or all sta-tions.
The four digit numerals within parentheses at the conclusion of certain
paragraphs are internal NBC printing codes and are not a
Part of this agreement.
Certain paragraphs are intentionally omitted for reasons of inapplicability.
(0491)
2. STATIONS
a: Stations Ordered. Stations ordered for Advertiser for the Program(s)
shall be the interconnected affiliated stations identified in the NBC TV Station
List and such other stations as NBC may elect to include in the Program's
stations lineup, including delays, if any. NBC shall endeavor to make available
as many stations as possible. The sta____ of available of all ordered stations
whether available or not, shall be included in the NBC TV Station List which
shall be furnished to Agency upon request.
b. Station Lineup, Station lineup as used herein shall comprise all
stations which are available or may become available or may become available for
the telecast(s) on either a live or tape delayed.
c. Addition of Ordered Stations. Stations which are initially reported
unavailable but which become available for the telecast(s) on either a live or
tape delayed basis shall become part of Advertiser's station lineup effective
immediately. (0491)
4. PACKAGE PRICE
The package price(s) indicated in Part I include all charges except the
applicable Integrated Networking Charges and other changes for special
commercial requirements. (0491)
5. INTERGRATED NETWORKING CHARGE
The Integrated networking Charge listed in the current NBC Television Network
Commercial Integration Manual shall be applicable to each commercial insertion
up to and including 60 seconds in length. Announcements in excess of 60 seconds
will be billed at a proportionately higher charge. This production facilities
charge includes the services, as required, for program origination. Videotaped
repeat network telecast(s), and satellite transmissions. Also included are the
normal insertions of tape commercials when originated from network control
points in New York an/or Burbank and the normal insertion of commercials into
delayed broadcasting tapes. Additional production charges may be made of
special commercial requirements in accordance with the NBC O & TS Rate Card.
With respect to late delivery of commercial material charges and other
conditions will be in accordance with the NBC Television Network Commercial
Integration Manual. (0593)
6. PROGRAM
a. Supplier, The Program(s) set forth in Part I will be supplied by NBC and
NBC will furnish for such Program(s) all the necessary creative elements,
production facilities and services therefore and personnel and talent required
for the appropriate television presentation of the Program(s). Each program will
conform to NBC's programming and operating policies and technical standards.
(1089)
2
<PAGE>
d. Production Facilities and Services, Production facilities and services
charges applicable to the Program(s) are included in the package price. Agency
will furnish all elements for ran will bear all cost of the commercials. To the
extent feasible, NBC will provide, if requested, production facilities and/or
personnel for the production and presentation of commercials. Rates therefore
will be charged to Agency in accordance with the O&TS rate Card (or at rates
quoted upon request where such Rate Card rates do not apply). (0593)
Agency must deliver commercial material to NBC no later than 14 days prior to
the scheduled telecast and NBC shall insert such material into the program(s) to
be telecast. (0882)
7. AGENCY-FURNIHED MATERIAL
a. Furnishing and Submission. All commercial announcements and talent and
material therfor and billboards where applicable (except as may be furnished by
NBC) and any other material furnished by Agency for the telecasts are
hereinafter collectively and individually referred to as Agency material.
Agency material must be furnished to NBC at least 14 days in advance of airdate.
Agency warrants that is has obtained all necessary rights for the performance
and use of said agency material, including music performance.
(0489)
b. Compliance With Standards. Agency material must conform to the
programming and operating policies of NBC, and the quality of recorded Agency
material must comply with NBC's technical standards, and shall not contain copy
or material which conflicts with product protection rights granted to others by
NBC. NBC has the continuing right to require Agency and Advertiser to edit and
modify any and all Agency material to the extent NBC deems necessary to confirm
to the public interest and to the programming and operating policies of NBC.
NBC reserves the right to refuse to accept for telecasting or to refuse to
telecast any Agency material which does not in its judgement conform to the
public interest or to such policies and standards, or which in the reasonable
opinion of NBC may violate the rights of others. (0882)
c. Substitution by Agency. In the event of NBC's refusal to accept any
Agency material, Agency will substitute other material therefor acceptable to
NBC. The acceptance or rejection by NBC of any substitutes hereunder shall be
made by NBC in accordance with the requirements of paragraph 7b.
(1062)
d.NBC Rights on Agency's Failure to Furnish. In the event Agency fails to
furnish any Agency material as herein provided, or in the event NBC disapproves
any Agency material and Agency fails to furnish substitutes therefor
satisfactory to NBC, NBC may, at its option, schedule promotional or public
service type announcements inplace of Agency's regularly scheduled commercial
material without identification of Advertiser except as required by Law or
administrative regulation. No such action on the part of MBC under5 this
paragraph shall reliever Agency of its obligation to make payments for all
charges as provided for hereunder.
9. INCREASES AND PROTECTION
NBC reserves the right to change production facilities and services charges,
including the integrated Networking Charge, effective on such date as announced
by NBC to the trade. Any such change which results in an increase to Advertiser
wil lnot apply until three months after the date upon which such change is
announced by NBC. (0593)
10. ADVERTISING AGENCY COMMISSION
The package price (s) set forth in Part I and the Integrated Networking Charge
include an advertising agency commission of 15%. (0489)
11. BILLING AND PAYMENT
All charges hereunder will be billed to Agency on the second business day
following the month of telecast(s) and shall be paid on or before the 15th day
of the billing month (or such earlier date as set forth by any special payment
terms or as designated in Part I), it being agreed that time of payment is of
the essence. Notwithstanding disagreement between the parties as to particular
items of charge of credit as of the due date, all charges not specifically and
reasonable questioned by Agency shall be paid by such date, NBC's obligations
under this agreement are also conditioned upon full payment by Agency of all
obligations to NBC under preceding or concurrent agreements with NBC for the
same advertiser. (0491)
12. DAY AND TIME PERIOD OF SPONSHIP
Part I reflects the day, starting time, program length and program to be
sponsored on a participating basis by Advertiser on the dates shown, expressed
in New York City Time (NYCT). Time for the purpose of this paragraph is
approximate. NBC reserves the right to advance or delay the starting time shown
and the further right to expand or contract the program length indicated.
The program(s) hereunder are distributed across the country in various
configurations which utilize live and tape delay transmission to stations.
Specific information with respect to such transmission is available on request.
(0491)
3
<PAGE>
14. COMMERICAL ENTITLEMENT
Each date listed in Part I represents a 30-second participation for
commerical utilization in the program indicated, unless otherwise specified.
(0489)
15. COMMERICAL POSITONS
The placement and designation of commercial positions shall be determined
by NBC. NBC reserved the right to revise any or all elements of the commercial
format in each of the programs hereunder to include changing of commercial
placement within programs. In certain program series, NBC retains the right to
move within the same program a participation(s) form on day of the week to
another day of the same week. NBC reserves the further rights to format the
programs so as to accommodate any combination of commercial elements and to
expand or contract any or all elements of the commercial format at any time to
meet the competitive forces of the industry. (0489)
16. CAST COMMERICALS
Cast Commercials, including placement thereof, are subject to the review
and approval of NBC Advertising Standards and Sales Services. (0593)
17. PRODUCTS TO BE ADVERTISED
a. Protected Products. NBC will endeavor to avoid scheduling products
competitive or annitheical to single-product commericals of at least 30 seconds
duration within the commercial interruption (i.e. pod) in which such commercial
is scheduled. Such competitive or antibetical avoidance is known as product
protection. Product protection throughout this paragraph 17 applies only to
other network advertisers obtained by the NBC Television Network.
Production protection will not be granted to commercials which are multi-
product 30-second commercials not to any commercial of less than 20-seconds in
length.
Changes in designation of protected products may be made only upon receipt
of NBC's approval. Requests for such changes in designation must be submitted to
the NBC Television Network Sales Department not less than 14 days prior to the
desired date of such change(s).
c. Non-Exclusive Basis Products. Advertiser's products other than protected
products may be advertised hereunder on a non-exclusive basis providing NBC's
approval had been obtained in advance in writing. The advertising of non-
exclusive basis products is subject to discontinuance on 24 hours notice in the
event the advertising of such non-exclusive basis products conflicts with
product commitments made by NBC to others.
d. Other Products. Products other than protected and NBC approved non-
exclusive basis products may not be advertised on any program hereunder.
Commercials forsuch other products may be removed or deleted by NBC without,
prior notice and Advertiser will not be relieved of its obligation for any of
the charges hereunder by reason of such removal or deletion.
e. Nature of Approvals. Approvals referred to above in this paragraph 17
must be obtained in writing from NBC. Approval of products or commercial
material for compliance with NBC's Advertising Standards, while ultimately
required under paragraph 7, does not constitute NBC's approval ;under this
paragraph 17. (0593)
17. BILLBOARDS
Certain programs provide billboards. The billboard is a brief announcement
identifying the sponsor or partial sponsor of a program. It is not intended for
use as a commercial announcement. If so indicated in Part I. Advertiser shall
be allowed to billboard of the type and duration specified therein. Such
billboard will consist of visual and/or audio material acceptable to NBC.
Placement of billboards shall be designated by NBC and may be scheduled adjacent
to billboards and/or commercials of other sponsors in the program. (0489)
19. LEAD-INS
Leal-ins copy of a transitional nature may be used in certain types of
programs. Such copy must be limited to five seconds in length and must be devoid
of commercial sell and comparative references. The program host or other
individual designated by NBC shall be made available for lead-ins. In no event
may lead-ins be used separately from the commercial it was intended to be lead
into, not combined to form a longer lead-in. (0489)
20. AGENCY TERMINATION RIGHTS
If so provided in Part Il, Agency shall have the right to terminate a
portion of Advertiser's sponsorship, effective with the termination dates shown
in Part I, on prior written notice to NBC as provided therein. (0593)
4
<PAGE>
21. PROGRAM SUBSTITUTION AND TRANSFER
a. Program Substitution. Except as set forth in paragraphs 21c and 21d
hereof, NBC may substitute another program for any program hereunder. In such
event, Advertiser's participation(s) will be scheduled by NBC in a replacement
program(s) provided such replacement program(s):
i. is(are) of comparable quality with comparable demographics.
ii. is(are) available to advertisers on a participation basis.
iii. is(are) comparably priced and
iv. present(s) no product or scheduling conflicts.
c. Daytime Programs (Monday through Friday 9:00am - 4:30pm NYCT), NBC had
the right to change the time period and/or discontinue telecasting any or all of
its Daytime Programs on reasonable prior notice. In the event of such
discontinuance or time period change, Advertiser's participation(s) so affected
will be transferred to a mutually agreeable substitute program(s) where
available.
d. Unique Programs. The provisions of this paragraph 21 are not applicable
to unique programs such as major sporting events, major award presentation
programs, and coverage of a special news event. (0593)
22. IMPOSSIBILITY OF AGENCY PERFORMANCE
In the event Agency is unable or fails to supply agency material, NBC may,
at its option, in addition to any other remedies which may be available to it,
terminate this agreement forthwith, and upon such termination, Agency,
Advertiser, and NBC will be relieved of further liability hereunder except with
respect to obligations incurred or arising out of telecasts made prior to such
termination. (0489)
24. PREEMPTION
a. General. NBC reserves the right to preempt all or any portion of any
telecast of any of the programs hereunder in order to telecast events or
programs of public importance, news reports, political programs, sports events,
special programs, or special events. NBC agrees that in the event of such
preemption as much advance notice as is practicable will be given to Agency. In
the event of a preemption involving the elimination of Advertiser's
participation(s), NBC will be relieved of its obligation to telecast
Advertiser's participation(s) hereunder and Agency will be relieved from paying
any charges hereunder for the participation(s) so eliminated unless Advertiser's
participation(s) are rescheduled as may be provided for elsewhere herein.
b. Partial Political. NBC also reserves the right to preempt the last five
minutes of any telecast preceding an election day generally observed throughout
a majority of the United States. In the event of such five minute preemption
which does not affect Advertiser's participation(s), the affected program will
be edited to the required length at NBC's expense and there shall not be any
adjustment in any of the charges hereunder to Agency. (0489)
25. NETWORK FAILURE TO TELECAST
In the event NBC fails to present over its network facilities any telecast
hereunder because of unavailability of technical facilities, defect or breakdown
or equipment or transmission facilities, labor dispute, government action, the
unforseen absence of a principal performer, or any cause beyond the control of
NBC, whether of a similar or dissimilar nature, NBC's liability therefor shall
be limited solely to cancellation of all charges to Agency hereunder for such
affected telecast and such failure to telecast shall not constitute a breach of
this agreement. (0489)
26. LOSS OF SPONSORSHIP.AUDIENCE DEFICIENCY
For the purpose for determining loss, each participation shall be treated
as a complete and separate sponsorship. Where split 30-second commercials, three
contiguous announcements in a 60-second commercial, and 15-second commercials
are utilized, each component shall be deemed a complete and separate
sponsorship.
If NBC fails to carry all or any part of Advertiser's commercial to the
extent that the substance of the commercial announcement is lost on the entire
station lineup, NBC will negotiate in good faith for a makegood. (0491)
If NBC fails to achieve agreed upon audience delivery, NBC will negotiate
in good faith and deliver a makegood no later than by the end of the calendar
year following the end of a broadcast season. (0196)
27. INDEMNIFICATION AND DEFENSE
a. NBC Obligation. NBC agrees to indemnify and bold harmless Advertiser
Agency and their respective directors, officers, agents and employees against
and from any and all claims, liability, loss and damage, including reasonable
attorney's fees, caused by or arising wholly or in part out of the telecasting
of NBC material hereunder and to defend at its own expense any litigation
instituted by others against any of them resulting therefrom.
5
<PAGE>
b. Agency Obligation. Agency agrees to indemnify and hold harmless NBC, the
stations over which________ ______ ________ are carried and their owners, the
package producer of the program (if any involved) and the talent thereof and the
other advertisers in the program and their agencies, and their respective
directors, officers, agents and employees against and from any and all claims,
liability, loss and damage, including reasonable attorney's fees, caused by or
arising wholly or inpart out of the telecasting of Agency material hereunder and
to defend at its own expense any litigation instituted by other against any of
them resulting therefrom.
c. Distinction. For the purposes of this paragraph 27 only, Agency
material (see paragraph 72) shall be deemed to include ad lib acts or utterances
of personnel furnished by Agency or Advertiser, and NBC material shall be deemed
to include material furnished by NBC as referred to in paragraph 6 and ab lib
acts and utterances of personnel furnished by NBC and material furnished by
other agencies or advertisers for the telecasts. NBC's acceptance or approval
of Agency material will not affect Agency's obligation for defense and
indemptficaiton hereunder. (0489)
d. Control of Litigation. The indemnitor hereunder shall have full control
of the defense of such litigation and may settle, compromise or adjust the same,
provided, however, that the indemnitee, upon relieving the indemnitor in writing
of the obligations imposed hereunder for defense and indemnificaion, shall have
the right, if it so elects, to conduct such litigation at its own expense by its
own counsel.
e. Notice and Duration. The following obligation foe defense and
indemnification shall be imposed only if (1) the indemnitee sends to the
indemnitor timely written notice of first service of process upon the indemnitee
and a timely written request to defend the litigation (such notice and request
shall be deemed timely if given with a reasonable length of time after receipt
of service by the indemnitee and a reasonable length of time prior to the date
by which first response to such process is legally required, considering all the
circumstances: and (2) while such litigation pending, the indemntee upon
request, shall furnish to the indeminitor all relevant facts and documentary
material in the formers possession or under its control, and shall make its
employees or other persons under its control with knowledge of relevant facts
available to the indemnitor for consultation and as witnesses at their
customary places of business. The indemnity right and defense obligations
hereunder shall survive the termination or expiration of this agreement and of
the agreement and of Agency's status as advertising agency for Advertiser.
(1062)
29. ABSENCE, INCAPACITY, OR DEATH
The temporary or sudden absence for any reason, or death, of any regular
principal performer, including but not limited to newscasters and sportscasters,
on the program(s) hereunder will be accommodated for as NBC deems appropriate,
by substitution of a performer of comparable stature or, if practicable, by
writing our of the character portrayed or by substitution of another comparable
program. (1089)
30. USE OF NAME AND LIKENESS
Except for programs which consist of motion picture films, NBC hereby
authorized Agency and Advertiser to use and license others to use during the
term hereof the title of the Program(s) and the name, sobriquet, biography and
likeness of regular featured performers in the Program(s) for informative
purposes and to advertise and publicize the network and the Programs(s) through
tune-in advertising either alone or in conjunction with the advertising of the
protected products of Advertiser as designated hereunder. Names, sobriquets,
biographies and likenesses of the regular featured performers will not be used
without the prior written approval of NBC. No such use in connection with the
Program(s) hereunder may contrive beyond the termination of Advertiser's
sponsorship in any such Program(s) or of the participation of such characters of
persons in the Program(s), and Agency will take all reasonable steps to require
discontinuance of utilization of any previously released display material
involving any such use within 30 days after such termination. (0465)
For a sports program, the reference to featured performers is to the
announcers furnished by NBC and not to any participant in the sporting event.
For programs which consist of motion picture films, the NBC authorization
within this paragraph 20 shall be limited to the title of the program and shall
not apply to the title of a specific motion picture nor to any of the featured
performers of the motion picture film. (0465)
31. RIGHTS AND RESTRICTIONS ON USE OF TELECASTS
NBC may use or license to be used al or any part of the programs hereunder
by or for the Armed Services and for telecasting in connection with documentary
programs. Neither Agency nor Advertiser will authorize anyone to telecast or to
utilize for any commercial purposes, other than for telecasts hereunder, the
actual telecasts made by NBC, or any part of such telecasts, including material
supplied by Agency, whether such other use of the actual telecasts by by means
of tape of film, except for recording of Agency material specifically authorized
and released in accordance with applicable NBC policy. Nothing herein contained
shall prevent Agency from making subsequent use of Agency material (as
distinguished from telecast by NBC of such material). (1185)
6
<PAGE>
32. MATERIAL AND PROPERTY OF AGENCY OR ADVERTISER
Material or property (other than recorded commercial material) furnished by
Agency or Advertiser for use on or in connection with the telecasts hereunder
must be removed form NBC areas at Agency's expense within six days after the
date of program performance, and if not so removed, Agency will be billed and
will pay storage charges effective commencing the day following the date of
program performance. All recorded commercial material which has not been
telecast for a period of 45 days will be destroyed. If Advertiser submits a
wr5itten request to NBC to return such recorded commercial material prior to the
expiration of the 45 day period, NBC will endeavor to comply at Agency's
expense. Agency and Advertiser hereby release NBC from any liability arising
out of damage to or loss of any material or property furnished by Agency or
Advertiser for use on or in connection with telecasts hereunder except for
damage or loss caused by the demonstrable negligence of NBC or its employees.
In no event will NBC be responsible for damage to or loss of any such material
or property left with NBC for any extended period except such material or
property so left pursuant to written agreement of the parties specifically
identifying the same. Unless otherwise agreed to in writing, NBC retains title
to all scenery, props, costumes and other material furnished by NBC.(0489)
NBC will be under no liability with respect to the handleing of audience
mail addresses to NBC or stations listed in the Station List intended for use
only by or for the benefit of Agency or Advirtiser. (0672)
33. PARTIES
This agreement is entered into for Advertiser by Agency as Advertiser's
agent. Agency represents and warrants that it is the duly authorized agent of
Advertiser for the purposes of this agreement and the matters contemplated
hereby and that its arrangements with Advertiser specifically contemplate the
placement of the advertising herein provided and th eservicing thereof and the
allowance of agency commission as herein provided. It is understood that Agency
functions as paying agent for Advertiser hereunder and in no sense as an agent
or representative of NBC and the Advertiser will continue to be obligated for
all payments due to NBC hereunder until the actual receipt thereof by NBC.
(1062)
If at any time during the term hereof Agency ceased to be the advertising
agency for Advertiser, the then rights and duties of Agency herein shall,
subject to the provisions of paragraph 327 hereof, insure to the benefit of and
be binding on any other advertising agency, acceptable to NBC as to financial
responsibility, designated by Advertiser in writing to NBC therefor. If this
agreement6 is executed by Advertiser rather than its advertising agency, or if
at any time during the term hereof Agency ceases to be the advertising agency
for Advertiser, and if NBC has not exercised its right of termination under
paragraph 22, and Advertiser has not designated to NBC in writing another
advertising agency similarly acceptable, the term "Agency" shall mean
"Advertiser" (0489)
34. NOTICES
Notices to Agency and NBC hereunder shall be given by personal delivery
postpaid mail, or overnight courier service to the Agency at it address and to
the person if any, shown in Part I and to NBC at 30 Rockefeller Plaza, New York,
New York, 10112, attention of President, Sales, Television Network. The date of
such personal delivery, mailing, or delivery to courier service shall be deemed
to the date of service. (0196)
35. GENERAL PROVISIONS
This agreement is made subject to all Federal, State and Municipal laws and
regulations now or hereafter in force and is not assignable in whole or in part,
except as otherwise herein specifically provided, without the consent of NBC and
shall be governed by the laws of the State of New York, excluding all principles
of referral, to the laws of other jurisdictions which might otherwise be
applicable under doctrines of conflicts of laws. Agency and Advertiser
represent and warrant that this agreement represents a sponsorship arrangement
exclusively between Advertiser and any other person or entity. Wavier of rights
resulting from breach of any provision hereof shall not be deemed to constitute
a waiver of rights resulting from any previous of succeeding beach of the dame
or any other provision. Except as herein otherwise specifically provided, this
agreement constitutes the entire Agreement between the parties relating to the
subject matter hereof and may not be changed, modified, reviewed, extended or
discharge except by an agreement in writing, signed by the party against whom
enforcement of the change, modification, renewal, extension or discharge is
sought. (0593)
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EXHIBIT 10.15
AGREEMENT
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This Agreement (the "Agreement") is entered into this 8th day of
February 2000 (the "Effective Date") by and between coolsavings.com inc., a
Michigan corporation ("CS"), with its principal place of business at 8755 W.
Higgins Road, Suite 100, Chicago, Illinois 60631, and The Parenting Group Inc.,
a Delaware corporation, with its principal place of business at 1325 Avenue of
the Americas, New York, NY 10019 ("TPG").
1. Definitions
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A. "CS Member" shall mean a person or entity other than a TPG Referred
Member that has enrolled for services offered at the CS Web Site.
B. "CS Program Participant" shall mean each CS Member who enrolls to
participate in the Program by providing the date of birth of at least
one of his/her children who is between the ages of 0-12 (or the
anticipated date of birth for an expected newborn) and such other
information as CS and TPG may otherwise agree upon in writing.
C. "CS/TPG Category Page" shall mean that customized web page on the CS
Web Site that: (i) bears the names and/or logos of both CS and TPG;
and (ii) is only accessible and usable by Program Participants.
D. "CS/TPG Registration Page" shall mean that web page on the CS Web Site
bearing the names and/or logos of both CS and TPG wherein TPG
Referrals and TPG Referred Members may enroll to become a TPG Program
Participant.
E. "CS Web Site" shall mean CS' U.S. English version web site currently
located at www.coolsavings.com, or it's equivalent.
F. "Impression" shall mean a single advertising exposure opportunity
rendered by any banner, button, text link, window, e-mail, "pop-up",
interstitial, transitional, or other form of Internet advertisement
currently existing or developed in the future, which is served on an
Internet or Intranet delivery vehicle (including, but not limited to,
web pages, e-mails, newsgroup posts, proprietary online service
content, on-premise kiosks, and any other Internet or Intranet
delivery vehicle currently existing or developed in the future).
G. "Launch Date" shall be the first day that all of the following
conditions are satisfied: (i) the CS/TPG Category Page contains offers
exclusive to the Program; (ii) the CS/TPG Category Page contains
content provided by TPG pursuant to Section 5A2; and (iii) the first
written promotion of the CS/TPG Category Page has been distributed to
consumers by TPG; but in no event later than ninety (90) days from the
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Effective Date. The parties shall confirm the Launch Date in writing
within thirty (30) days of the Launch Date.
H. "Members" shall mean CS Members and TPG Referred Members.
I. "Program" shall mean Program Services and informational content
targeted at families either expecting a child or with children ages 0-
12, that (i) is located on, or is accessible from, the CS/TPG Category
Page, and (ii) is only available to Program Participants.
J. "Program Participants" shall mean CS Program Participants and TPG
Program Participants.
K. "Program Services" shall mean those advertiser services (e.g. coupons,
e-mails) identified on the Rate Card attached hereto as Exhibit B that
are accessible by and available only to Program Participants.
L. "Program URL Addresses" shall mean the following URL addresses which
shall deliver a TPG Referral to the CS/TPG Registration Page or a TPG
Program Participant to the CS/TPG Category Page:
www.parenting.coolsavings.com;
www.parenttime.coolsavings.com;
www.babytalk.coolsavings.com;
www.healthypregnancy.coolsavings.com;
www.familylife.coolsavings.com;
www.parenttime.com;
www.parenting.com
www.babytalk.com
www.healthypregancy.com
www.familylife.com
and such other addresses as the parties may otherwise agree upon in
writing.
M. "TPG Program Participant" shall mean each TPG Referred Member who
enrolls to participate in the Program by providing the date of birth
of at least one of his/her children who is between the ages of 0-12
(or the anticipated date of birth for an expected newborn) and such
other information as CS and TPG may otherwise agree upon in writing.
N. "TPG Referrals" shall mean persons who are not Members who access the
CS Web Site (i) via an Impression on the TPG Web Site, (ii) via a
Program URL Address, or (iii) via a link in an e-mail sent by CS
pursuant to Section 5C herein.
O. "TPG Referred Member" shall mean a TPG Referral who has enrolled for
services (other than the Program) offered at the CS Web Site.
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P. "TPG Web Site" shall mean TPG's U.S. English version web site, to be
designated by TPG from time to time.
Q. "Trial Offer" for a TPG Magazine shall mean an offer by TPG to a
potential subscriber for one or more trial issues of Parenting,
BabyTalk, or Family Life Magazines.
2. Term/Termination.
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A. The term of this Agreement shall commence on the Effective Date and
expire fourteen (14) months from the Launch Date (the "Initial
Term"). This Agreement shall be renewed for a two (2) year term (the
"Renewal Term"), if both parties agree in writing to so renew not less
than sixty (60) days prior to the end of the Initial Term.
B. TPG may terminate this agreement immediately upon written notice to CS
that TPG has received notice of a claim against TPG for patent
infringement in connection with the Program. In addition, either
party may terminate this Agreement pursuant to Section 3.B or as
provided in this Section 2.B:
1. upon a material breach of this Agreement (other than a breach of
Section 14, which is addressed in Section 2.B.4 by the other
party, effective thirty (30) days after written notice to the
other party setting forth such breach, provided that such other
party has not cured such material breach within such thirty (30)
day period.
2. if the Agreement is renewed, effective sixty (60) days after
notice to the other party, if, as of the date that is 12 months
following the Launch Date (the "Launch Anniversary Date"): (i)
total Net Advertising Revenues (as defined in Section 8B) were
less than $350,000; or (ii) less than 250,000 Program
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Participants were enrolled; or (iii) TPG Program Participants
constituted less than twenty-five percent (25%) of all Program
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Participants. Any such notice of termination hereunder shall not
be valid unless sent to the other party within sixty (60) days of
the date TPG receives from CS notice of the amount of total Net
Advertising Revenues, the number of Program Participants, and the
number of TPG Program Participants, as of the Launch Anniversary
Date. Such information shall be sent in accordance with Section 8
herein.
3. if the Agreement is renewed, upon the expiration of the 12 month
period following the Initial Term (i.e., 26 months following the
Launch Date), effective sixty (60) days after notice to the other
party, if, as of the date that is 12 months following the Launch
Anniversary Date (the "Second Anniversary Date"): (i) total Net
Advertising Revenues (as defined in Section 8B) for such 12 month
period were less than $1,000,000; or (ii) less than 500,000
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Program Participants were enrolled by the Second Anniversary
Date. Any such notice of termination hereunder shall not be valid
unless sent to the other party within sixty (60) days of the date
TPG receives from CS notice of the amount
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of total Net Advertising Revenues and the number of Program
Participants, as of the Second Anniversary Date. Such information
shall be sent in accordance with Section 8 herein.
4. Immediately upon written notice to the other party of the breach
of any warranty under Section 14 herein by the other party.
C. Upon the effective date of expiration or termination of this
Agreement, as specifically set forth in this Section 2C:
1. Neither party shall ever use the Program URL Addresses containing
any trademark of the other party for any purpose whatsoever and
this obligation shall survive the expiration or termination of
this Agreement.
2. If such termination was by CS or TPG pursuant to Section 2.B.2 or
2.B.3 only, then for a period from the effective date of
termination through that day which is three (3) years from the
Launch Date, CS shall pay TPG ten percent (10%) of all revenues
it receives from third parties for savings offers appearing in
the Babies and Children category on the CS Web Site that are
targeted to former Program Participants using the date of birth
of a child of the former Program Participant as the targeting
variable. CS shall pay such amounts to TPG at the end of each
calendar quarter during such period, within thirty (30) days of
the end of such quarter, and each payment shall include a
reasonably detailed reconciliation.
3. CS shall remove the TPG name(s), logo(s), all TPG-owned mark(s),
and all TPG-supplied content from the CS Web Site.
4. CS shall notify Program Participants of the termination of the
Program. Said notice may only inform Program Members of the end
of the Program, the effective date of the end of the Program, and
of the continuation of the CS category for Babies and Children
(or its successor). The notice shall not give any statement of
the reason for the end of the Program. CS shall consult with TPG
on the contents of such notice.
5. Only if TPG offers to renew this Agreement, and CS does not
accept the offer to renew this Agreement, for a term of at least
one (1) year on substantially the same terms and conditions, then
for a period of one (1) year from the effective date of
expiration, CS shall pay TPG ten percent (10%) of all revenues it
receives from third parties for savings offers appearing in the
Babies and Children category on the CS Web Site that are targeted
to former Program Participants using the date of birth of a child
of the former Program Participant as the targeting variable. CS
shall pay such amounts to TPG at the end of each calendar quarter
during such one-year period, within thirty (30) days of the end
of such quarter, and each payment shall include a reasonably
detailed reconciliation.
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3. The CS/TPG Category Page and the Program.
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A. CS will develop and host the CS/TPG Category Page, which (i) may be
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accessed by CS Program Participants under the category "Babies and
Children" from an Impression on the home page of the CS Web Site, and
(ii) will be the first web page seen by TPG Program Participants upon
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accessing the CS Web Site. Subject to the provisions of Section 6, CS
may continue to offer and maintain the category entitled "Babies and
Children" currently found on the main page of the CS Web Site, and CS
Members accessing CS web pages under such category may encounter
offers relevant to such category from advertisers that have contracted
with CS; provided however, such CS Members shall not encounter offers
for Program Services. Program Participants accessing the CS/TPG
Category Page shall encounter the same content available to CS Members
accessing CS web pages under the category entitled "Babies and
Children" PLUS offers for Program Services; provided however: (x)
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offers for Program Services shall be set apart from the other offers
on the CS/TPG Category Page; and (y) the CS/TPG Category Page shall
contain a link (located above the fold) to a separate page on which
only offers for Program Services appear.
B. CS and TPG shall use commercially reasonable efforts to have the
Launch Date occur within sixty (60) days of the Effective Date. CS
shall provide TPG with general screen designs for the CS/TPG Category
Page and the CS/TPG Registration Page no later than thirty (30) days
after the Effective Date and TPG will have ten (10) business days from
receipt thereof to approve or reject such designs. In the event TPG
rejects any such designs, CS will use its best efforts to provide TPG
with alternative designs within fifteen (15) business days of CS'
receipt of such notice of rejection and TPG will have ten (10)
business days from receipt thereof to accept or reject such
alternative designs. TPG's failure to notify CS in writing within
said 10 business day period of its approval or rejection of any such
alternative design shall be deemed a rejection of such alternative
design. In the event TPG rejects said alternative designs, then each
party may, at its sole discretion, (i) continue attempting to create
an acceptable design, or (ii) terminate this Agreement effective
immediately upon written notice to the other. CS shall not materially
alter any screen designs approved by TPG without TPG's consent.
C. TPG Referrals accessing the CS Web Site will be linked to the CS/TPG
Registration Page. Members who are not Program Participants will be
promoted (as provided in Sections 3A and 3K) to enroll in the Program
on the CS Web Site. TPG Referrals accessing the CS/TPG Registration
Page will be offered the opportunity to enroll on such page to become
a TPG Program Participant, and a TPG Referred Member (to the extent
that he/she is not already a CS Member). The CS/TPG Registration Page
shall contain a link to the CS Privacy Policy. All TPG Referrals who
become TPG Referred Members and/or TPG Program Participants will be
tagged by CS such that thereafter, at all times while this Agreement
is in
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effect or until the TPG Referred Member and/or TPG Program Participant
requests otherwise, that TPG Referred Member or TPG Program
Participant can be identified by CS as a TPG Referred Member and/or
TPG Program Participant.
D. The CS/TPG Category Page shall contain all of the following: an
Impression that enables Members to access the TPG Web Site; an
Impression that enables Members to access the main CS Web Site; and
the CS logo and the TPG Parenting logo in equal size. The TPG
Parenting logo shall appear on the CS/TPG Category Page in the special
messaging area where Program Services are presented. CS shall control
the appearance and operation of the CS/TPG Category Page (including
but not limited to, determining the type, content, appearance, and
location of all Impressions thereon) subject only to (x) TPG's prior
written approval of the screen designs (as provided in Section 3B
above) and any material changes thereto, and (y) CS' obligations
relative to the TPG Marks set forth in the preceding sentence and in
Section 7 herein. CS shall operate and maintain the CS/TPG Category
Page in the same manner as it maintains other pages on the CS Web
Site. By way of example but not limitation, the CS/TPG Category Page
will offer the same coupon downloading software made available by CS
to Members elsewhere on the CS Web Site.
E. CS and TPG shall jointly own the following data: (i) Program Services
aggregate clip data; and (ii) all enrollment information provided by
TPG Program Participants who authorized CS to share such information
with TPG. On the registration page for TPG Referrals, CS shall
provide a "check" box for TPG Referrals to authorize the sharing of
such information with TPG, the default position of which shall be
"checked" thereby authorizing the sharing of such information, unless
the TPG Referral acts to revoke such authorization by "un-checking"
such box.
F. Program Participants shall be given the option to enroll to receive
special e-mails promoting the Program. Subject to the last sentence of
this subsection F, CS shall send such special e-mails to Program
Participants not less than once each month. CS may only send e-mails
to Program Participants who have enrolled to receive such e-mails and
all such e-mails shall contain: (i) the names of both CS and TPG, or
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the CS Squealer Sam logo and the TPG Parenting logo (next to each
other in approximately equal size and prominence); (ii) offers from
advertisers that purchase such e-mail solicitation Program Services;
and (iii) content provided by TPG pursuant to Section 5A2 which is
acceptable to CS. CS shall not include in any e-mail any content
previously provided by TPG unless TPG has approved such content for
use in such e-mail. CS shall provide TPG with a copy of the proposed
e-mail (including TPG editorial content and all advertising offers) in
its entirety and TPG shall notify CS in writing of its approval or
disapproval of the use of such content in such e-mail within two (2)
business days. CS acknowledges and agrees that TPG may reject use of
its content in such emails for failure to comply with ASME guidelines
or other reasons. If TPG does not approve such email in its entirety
or does not provide replacement
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content acceptable to CS within said two business days, then CS may,
at its option, elect to (x) send such e-mail without content provided
by TPG, or (y) not send an e-mail for that particular month.
G. The CS/TPG Category Page shall contain a splash page accessed from a
link on the CS/TPG Category Page entitled "About the Site" or such
other title mutually agreed upon by the parties. Said splash page
shall contain an explanation of the Program and the relationship
between TPG and CS. TPG shall draft the content of such page and
provide it to CS for its approval no later than sixty (60) days after
the Effective Date. No content shall appear on the CS/TPG Category
Page or any splash page without CS' prior written approval.
H. TPG shall be entitled to promote subscriptions to BabyTalk, Family
Life, Parenting, and Healthy Pregnancy magazines on the CS/TPG
Category Page subject to CS' control over the location of all such
promotions on the CS/TPG Category Page. TPG shall control the design
and/or appearance of such promotions subject to CS' right to reject or
cancel any promotion deemed unacceptable by CS in its sole discretion.
CS shall provide an Impression from the CS/TPG Category Page to a
location selected by TPG whereby Program Participants wishing to
subscribe will be able to subscribe for such publications. CS shall
have no rights to or in any subscription data for such magazines
accumulated by TPG or its agents at any location outside of the CS Web
Site. TPG shall not be obligated to pay any fees for such promotions
except for: (i) production costs, if any, incurred by CS (at CS' cost)
with the prior written authorization of TPG; and (ii) a commission to
CS for each "Trial Offer" from TPG or its affiliates that is accepted
by a Program Participant as more fully set forth in Section 8D herein.
Provided however, in the event TPG does not authorize any production
costs for a promotion as set forth above, then CS shall not be
obligated to place such promotion on the CS/TPG Category Page.
I. CS and TPG will each designate an account manager to work directly
with the other party to implement and promote the Program. By way of
example but not limitation, these managers will coordinate the
marketing efforts of the parties to prevent advertiser confusion that
might arise from the two parties' sales staffs simultaneously selling
the Program. The account managers shall devote not less than one
weekly telephone conference to the Program and its promotion and
conduct. CS and TPG will provide their respective account managers
with training on the selling points and services of the Program.
J. J.CS will provide customer service support for Program Participants
via e-mail in the same manner and of the same quality as it provides
such service to CS Members.
K. Subject to the last sentence of this subsection K, no later than
thirty (30) days after the Launch Date CS shall send a targeted e-mail
promoting the CS/TPG Category Page and the Program to not less than
400,000 CS Members fitting the following profile:
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parents between the ages of 26 and 39 with one or more children
between the ages of 0 - 12. CS shall not include in any e-mail any
content previously provided by TPG unless TPG has approved such
content for use in such e-mail. CS shall provide TPG with a copy of
the proposed e-mail (including TPG editorial content and all
advertising offers) in its entirety and TPG shall notify CS in writing
of its approval or disapproval of the use of such content in such e-
mail within two (2) business days. CS acknowledges and agrees that TPG
may reject use of its content in such e-mails for failure to comply
with ASME guidelines or other reasons. If TPG does not approve such
email in its entirety or does not provide replacement content
acceptable to CS within said two business days, then CS may, at its
option, elect to (x) send such e-mail without content provided by TPG,
or (y) not send such targeted e-mail.
L. All TPG advertising of the CS/TPG Category Page shall include one of
the Program URL Addresses and the CS logo.
M. No advertising may appear on the CS/TPG Category Page unless both of
the following conditions have been satisfied: (i) a written contract
covering such advertising has been executed by CS and the advertiser;
and (ii) both CS and TPG have approved the advertising. TPG shall
notify CS in writing of its approval or disapproval of any such
advertising within two (2) business days. TPG's failure to so notify
CS shall be deemed an approval of such advertising; provided however,
TPG shall be entitled to later revoke any such deemed approval upon
written notice to CS, and upon receipt thereof, CS shall promptly
remove such advertising from the CS/TPG Category Page. A copy of CS'
standard form advertiser contract is attached hereto as Exhibit "C".
CS shall retain sole discretion over the acceptable terms and
conditions of any contract between CS and an advertiser provided that
such terms and conditions do not breach the other provisions of this
Agreement. A material breach by CS of its obligations under its
contract with an advertiser shall constitute a breach of this
Agreement entitling TPG to terminate this Agreement, effective thirty
(30) days after written notice to CS, as its sole and exclusive
remedy, provided that TPG retains any rights under Section 13 under
this Agreement as a result of any such breach by CS.
N. The CS/TPG Category Page shall not accept any advertising from any of
the following magazines (which TPG hereby identifies as competitors
with its Baby Talk, Healthy Pregnancy, Parenting, or Family Life
magazines): American Baby, Child, Family Fun, Lamaze, Parents, Sesame
Street, Working Mother, Working Woman.
O. Notwithstanding anything contained in this Agreement that can be
construed to the contrary, neither CS nor TPG shall knowingly permit
any on-line content related to the Program on the CS Web Site that may
reasonably be considered to be obscene, indecent, inappropriate,
misleading, inaccurate, false or defamatory, or infringing on any
trademark, copyright, any right of privacy or right of publicity, or
any other right of any third party.
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4. Marketing of Program Services. Both CS and TPG shall market Program
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Services and the rates for such services shall be in accordance with the
schedule attached hereto as Exhibit "B" hereto, as amended from time to
time by the parties (the "Rate Card"). The rates set forth on the Rate
Card shall apply to all advertisers for Program Services unless both
parties agree in writing to a deviation therefrom. A party shall respond
to a written request to approve a deviation from the Rate Card within five
(5) business days of receipt thereof. A failure to respond to any such
request for a deviation of fifty percent (50%) or less, within such time
period shall be deemed an approval of such request. Any deviation in excess
of fifty percent (50%) shall at all times require the written approval of
both parties hereto. The parties shall review the Rate Card every calendar
quarter.
5. TPG Obligations.
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A. TPG shall promote CS/TPG Category Page by providing the following:
1. Advertising deliverables, during the Initial Term and each year
thereafter while this Agreement is in effect, as more fully set
forth on Exhibit E.
2. Provide CS each month, at no charge, with five (5) parenting
"tips" for posting on the CS/TPG Category Page and/or inclusion
in the monthly e-mails to be distributed by CS pursuant to
Section 3F. Each of said "tips" shall be not less than forty
(40) words in length and each month one such "tip" shall be
targeted to parents of children of each of the following age
groups: prenatal to 6 months; 6+ months to 12 months; 12+ months
to 24 months; 24+ months to 4 years; and 4+ years to 12 years.
Each "tip" for a particular month shall be delivered to CS no
later than the fifteenth (15/th/) of the preceding month (e.g.
content to go live on in January 2000 must be delivered by
December 15, 1999) except for the 5 "tips" for the launch of the
Program which shall be delivered to CS at least 48 hours prior to
the Launch Date. The content of a "tip" need not be created
exclusively for the Program; it may be identical to that
appearing, or having appeared, in any other media as long as TPG
has the right to re-publish it on the CS Web Site.
B. Intentionally Deleted.
C. Provided that such action does not have an adverse impact upon TPG's
business (as determined by TPG in the exercise of its business
judgment), TPG shall test for a limited period of time to be
determined by TPG: (i) collection of the e-mail addresses of persons
contacted by TPG who have consented to receive e-mail or savings
offers from CS; and (ii) forwarding of the e-mail addresses of such
persons to CS. CS shall send an e-mail to such persons inviting them
to enroll in the Program, in accordance with Section 3K.
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D. Within sixty (60) days of the Effective Date of this Agreement, TPG
shall provide CS with a list of names and addresses of Parenting,
BabyTalk, and Family Life magazine subscribers (the "TPG Magazine
Subscription Lists"). Upon receipt thereof, CS shall determine,
within thirty (30) days of receipt of the list, which of said
subscribers are also CS Members. CS shall send an e-mail to each such
CS Member who has consented to receive e-mails from CS, inviting them
to enroll in the Program. CS agrees not to disclose the list to any
third party, or to any employees except as required to determine which
of such subscribers are also CS members. CS agrees not to make any
copies of the list, and to return the list to TPG by Federal Express
within 35 days of receipt by CS of the list. Any breach by CS of its
obligations under this Section 5D shall be a material breach of this
Agreement and such breach shall also entitle TPG to the remedies set
forth in Section 12D.
6. Exclusivity.
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A. During the term of this Agreement neither party shall enter into any
relationship with a third party to establish an on-line marketing or
sales program which satisfies all of the following requirements: (i)
the on-line program requires participants to furnish a date of birth
of a child in order to participate; (ii) the on-line program is for
on-line product discount coupon services or benefits targeted by
advertisers to participant groups whose individual members' identities
are protected from disclosure to advertisers; and (iii) the on-line
program sells on-line advertising to advertisers, and markets on-line
discount coupons or benefits from such advertisers, to members based
upon the dates of birth of the children provided by such members. CS
shall be entitled to create with third parties co-branded web sites
that are located within the CS Web Site (e.g. coolsavings/ivillage),
provided that: (x) such co-branded sites offer visitors to the home
pages of the co-branded sites the opportunity to become a Program
Participant from such co-branded sites via the category "Babies and
Children" on the home pages of the co-branded sites; and (y) such co-
branded sites do not satisfy all of the requirements in subsections
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6A(i), (ii), and (iii) hereinabove.
B. During the term of this Agreement and for a one (1) year period
commencing immediately after the expiration or termination of this
Agreement, CS shall not, directly or indirectly, enter into an
agreement with any of the following named third parties to establish a
program promoting services based upon a child's date of birth to a
select portion of CS Members who enroll in a special program via a
general category on the main page of the CS Web Site: Gruner & Jahr;
American Baby; Lamaze; Disney; or Gift Pax.
C. Intentionally Deleted.
D. During the term of this Agreement and for a one (1) year period
commencing immediately after the expiration or termination of this
Agreement, TPG shall not,
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directly or indirectly, enter into an agreement with any of the
following named third parties to provide or receive on-line product
discount coupon services or benefits based upon a child's date of
birth, targeted by advertisers to participant groups whose individual
members' identities are protected from disclosure to advertisers:
ValuPage/Catalina; PlanetU/NewsAmerica; Ecentives; Coupon Surfer;
ValuePass.com; ValPak; Hot Coupon/Money Mailer; MyPoints; and
Lifeminders.
7. Marks/Use of Name/Press Releases.
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A. CS' trademarks, trade names, product identifications, artwork and
other symbols and devices associated with CS' products and services,
including, but not limited to, the name "coolsavings" and the Squealer
Sam logo (the "CS Marks") are and shall remain CS' sole and exclusive
property. Except as provided in Section 7C hereinbelow, all CS Marks
and uses of any CS Marks may not be displayed, referenced, or
distributed anywhere by TPG without CS' prior written approval (which
approval shall not be unreasonably withheld or delayed) subject to CS'
right to reject or change any such uses by TPG of the CS Marks at any
time. The right to use the CS Marks is non-exclusive, non-assignable
and non-transferable. All uses by TPG of the CS Marks shall inure
solely to the benefit of CS.
B. TPG's trademarks, trade names, product identifications, artwork and
other symbols and devices associated with TPG's products and services,
including, but not limited to, the name The Parenting Group and the
Parenting name and logo (the "TPG Marks") are and shall remain TPG's
sole and exclusive property. Except as provided in Section 7C
hereinbelow, all TPG Marks and uses of any TPG Marks may not be
displayed, referenced, or distributed anywhere by CS without TPG's
prior written approval (which approval shall not be unreasonably
withheld or delayed) subject to TPG's right to reject or change any
such uses by CS of the TPG Marks at any time. The right to use the TPG
Marks is non-exclusive, non-assignable and non-transferable. All uses
by CS of the TPG Marks shall inure solely to the benefit of TPG.
C. Neither party shall use the name or Mark of the other party, its
affiliates or subsidiaries, in connection with any written or on-line
representation, solicitation, promotion, sales or marketing
publication or advertisement, without the prior written consent of the
other, except as follows: (i) wherein the name and/or Mark appears in
a list with the names of other entities doing business with a party
hereto, or (ii) wherein the name and/or Mark appears in a reproduction
of a screen that is used in the Program.
D. Except as may be required by law, regulation or any governmental
authority, neither Party, nor any of its affiliates, shall issue a
press release or make any similar public announcement related to the
transactions contemplated by this Agreement without the prior written
consent of the other, which consent shall not be unreasonably withheld
or delayed. The Parties shall use their best efforts to
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agree upon and issue a press release within thirty (30) days of the
Effective Date of this Agreement.
8. Fees/Audit.
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A. CS shall pay TPG a fee equal to Seventy cents ($0.70) for each TPG
Referred Member. PROVIDED HOWEVER, CS shall not be obligated to pay
----------------
any fees for: (i) more than one TPG Referred Member in any one
household (i.e. the fee is limited to one fee per household regardless
of the number of TPG Referred Members enrolling from such household);
and (ii) duplicate registrations (e.g. the same person registering
under different names, or more than one registration from the same e-
mail address) as reasonably determined by CS; and in the event CS has
already paid a fee hereunder for any TPG Referred Member who is
subsequently determined to be from the same household as another TPG
Referred Member or for a duplicate registration, then CS shall be
entitled to a credit against any other payments which may thereafter
be due to TPG hereunder, or a refund from TPG if no further payments
are owing hereunder. All fees owing hereunder shall be paid to TPG at
the end of each calendar quarter, no later than thirty (30) days after
the end of the calendar quarter, and shall be accompanied by a report
of the total number of TPG Referred Members, and the total number from
each TPG source (e.g. TPG URL's, TPG Magazines) who enrolled during
such calendar quarter.
B. CS and TPG shall divide the Net Advertising Revenues (as defined
below) received by CS in the previous calendar quarter from
advertisers for Program Services only as follows:
1. On Net Advertising Revenues collected during the first four
---------------------------------------------------------------
calendar quarters following the Launch Date:
-------------------------------------------
Fifty percent (50%) to CS; Fifty percent 50% to TPG;
2. On Net Advertising Revenues collected during all subsequent
----------------------------------------------------------------
calendar quarters:
-----------------
Twenty Five percent (25%) to CS; Twenty Five percent 25% to TPG;
and the remaining Fifty percent (50%) (the "Balance") shall be
divided between the parties as follows:
(a) To CS: Balance x [total cumulative CS Program
Participants/total cumulative Program Participants]
(b) To TPG: Balance x [total cumulative TPG Program
Participants/total cumulative Program Participants]
12
<PAGE>
The total cumulative number of Program Participants shall be
determined as of the end of the calendar quarter for which the
determination is being made
Example: Net Advertising Revenue for a calendar quarter =
$500,000; the Balance = $250,000; total Program Participants =
100,000; CS Program Participants = 40,000; TPG Program
Participants = 60,000.
CS will receive $125,000 (=25% of $500,000) + $100,000 ($250,000
x 40,000/100,000) for a total of $225,000.
TPG will receive $125,000 (=25% of $500,000) + $150,000
($250,000 x 60,000/100,000) for a total of $275,000.
All fees owing hereunder shall be paid to TPG by CS at the end of each calendar
quarter, no later than thirty (30) days after the end of the calendar quarter.
Each quarterly payment by CS shall be accompanied by a quarterly report on the
total number of TPG Program Participants, and the total number of TPG Program
Participants from each TPG source, and such report on the fourth quarter shall
be accompanied by a report including the cumulative information for the year.
"Net Advertising Revenues" as used herein shall mean gross revenues for Program
Services only (e.g. offers on the CS/TPG Category Page available to Program
Participants only and Program e-mails to Program Participants only), received by
CS minus all commissions and off-line fulfillment costs (e.g. direct mail)
-----
payable by CS to third parties other than TPG for obtaining such advertising.
"Net Advertising Revenues" shall not include any revenues received by CS for
---
advertising that is not exclusive to Program Participants (i.e. advertising
other than Program Services appearing on the CS/TPG Category Page or e-mails
which are also available to CS Members who are not Program Participants).
C. Not more than once each calendar year, TPG shall have the right, at
its expense, upon five (5) business days advance written notice to CS,
during CS' normal business hours only, to audit the books and records
of CS necessary to confirm the amounts of any payments due to TPG and
the accuracy of the CS quarterly and annual reports to TPG under this
Agreement. All such audits shall: (i) only be performed by TPG, its
affiliated companies Time Inc., or Time Warner Inc., or an accountant
retained by TPG or such affiliated companies; and (ii) be performed at
CS' offices unless otherwise agreed to in writing by CS. The auditors
shall not disclose any information to TPG other than the amount owing,
if any, to TPG, the numbers of Program Participants and TPG Program
Participants and the accuracy of the CS quarterly and annual reports
to TPG, and any additional information necessary (i) to support any
TPG claim of underpayment by CS or inaccuracy in the CS reports, or
(ii) to enforce TPG's rights under this Agreement. In the event any
such audit reveals a shortfall in any payment owing to TPG, then CS
shall pay
13
<PAGE>
such shortfall amount to TPG within thirty (30) days of notice by TPG
to CS. Further, should any such shortfall exceed ten percent (10%) of
the proper amount due for the period audited, then in addition to
paying the amount of the shortfall, CS shall promptly (x) pay TPG
interest on the amount of the shortfall at the rate of Two Percent
over the Prime Rate of Bank One (as announced by Bank One) from the
date the payment was due until the amount is paid; and (y) reimburse
TPG for all reasonable costs of the audit. Nothing contained herein
shall be construed to limit or deny CS the right to contest the
conclusion of any audit performed under this Section 8C.
D. TPG shall pay CS a commission for each "trial offer" from TPG or its
affiliates accepted by a Program Participant, as follows:
(i) for the first 5000 Trial Offers per month accepted by Program
Participants: $0.00;
(ii) for all Trial Offers in excess of 5000 in any month accepted by
Program Participants: Twenty five Cents ($0.25) per trial offer.
All fees owing hereunder shall be paid to CS at the end of each calendar
quarter, no later than thirty (30) days after the end of the calendar quarter,
and shall be accompanied by a report of the number of "Trial Offers" (by Program
Participant) accepted by Program Participants in such calendar quarter.
E. Intentionally Deleted.
F. This Section 8 shall survive the expiration or termination of this
Agreement.
9. Relationship of the Parties. Neither CS nor TPG will have any authority to
---------------------------
bind the other by contract or otherwise to make representations as to the
policies and procedures of the other, other than as specifically authorized
by this Agreement. TPG and CS acknowledge and agree that the relationship
arising from this Agreement does not constitute or create a general agency,
joint venture, partnership, employee relationship or franchise between them
and that each is an independent contractor with respect to the services
provided by it under this Agreement.
10. Reports.
-------
A. CS will provide TPG with written or on-line reports relative to the
CS/TPG Category Page no later than the 15/th/ day of each month
containing the following information relative to the prior month: (i)
number of TPG Referrals that month; (ii) number of TPG Referred
Members enrolled in that month; (iii) number of TPG Program
Participants enrolled in that month; (iv) number of CS Program
Participants enrolled in that month; (v) total number of Program
Participants as of the end of the month (with a breakdown between CS
Program Participants and
14
<PAGE>
TPG Program Participants); (vi) a list of all Program Services' offers
appearing on the CS/TPG Category Page in that month and the number of
clips on such offers; (vii) the number of TPG Program Participants
from each source identified in Sec. 1.N; and (viii) aggregate
demographic profiles of Program Participants. Cumulative information
in categories (i) - (viii) shall be provided at year end.
B. CS shall provide each Program Services' advertiser with written or on-
line reports about its Program Services' offers no later than the
15/th/ day of each month containing the following information about
the prior month (a copy of which shall be provided to TPG): the
aggregate number of Program Services' coupons clipped during the
previous month and a list of the categories (as per CS' category
groupings) from which the coupons were clipped.
11. No Consequential or Punitive Damages. NEITHER PARTY WILL BE LIABLE TO THE
------------------------------------
OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE OTHER
PARTY'S RIGHTS) FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, PUNITIVE
OR EXEMPLARY DAMAGES OF ANY KIND - INCLUDING LOST REVENUES OR PROFITS, LOSS
OF BUSINESS OR LOSS OF DATA - ARISING OUT OF THIS AGREEMENT (INCLUDING
WITHOUT LIMITATION AS A RESULT OF ANY BREACH OF ANY WARRANTY OR OTHER TERM
OF THIS AGREEMENT), REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY
LIABLE WAS ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE
POSSIBILITY THEREOF. PROVIDED HOWEVER, NOTHING CONTAINED HEREIN SHALL BE
CONSTRUED TO DENY OR LIMIT A PARTY'S RIGHT TO BE MADE WHOLE UNDER ANY
INDEMNIFICATION OBLIGATION UNDER SECTION 13, EVEN IF THE DAMAGE AMOUNT
AWARDED TO THE THIRD PARTY IN (AND ASSESSED AGAINST THE INDEMNIFIED PARTY),
OR INCURRED IN ANY SETTLEMENT OF, THE CLAIM FOR WHICH INDEMNIFICATION IS
REQUIRED UNDER THIS AGREEMENT INCLUDES INCIDENTAL, INDIRECT, CONSEQUENTIAL,
SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND - INCLUDING LOST
REVENUES OR PROFITS, LOSS OF BUSINESS OR LOSS OF DATA.
12. Confidentiality.
---------------
A. The Parties acknowledge and agree that the terms of this Agreement and
all information which is (i) proprietary to a Party, and (ii) provided
to or in connection with a Party's performance under this Agreement,
and (iii) marked "CONFIDENTIAL" at the time of tender to the other
Party, shall be considered confidential and proprietary information
("Confidential Information") and shall not be disclosed to any third
party without the prior written consent of the Party providing the
confidential Information ("Disclosing Party"), except as provided in
Section 12B. The parties acknowledge that the TPG Magazine
Subscription Lists
15
<PAGE>
are confidential information of TPG, regardless of whether such lists
are marked "CONFIDENTIAL".
B. The Party receiving such Confidential Information ("Receiving Party")
shall use Confidential Information only for the purpose of performing
the terms of this Agreement and shall not accumulate in any way or
make use of Confidential Information for any other purpose. The
Receiving Party shall not disclose the Confidential Information to any
third party without the prior written consent of the Disclosing Party,
except for its officers, directors, employees, agents, affiliated
companies, and subcontractors who: (i) need to know such Confidential
Information to perform the Receiving Party's obligations or enforce
the Receiving Party's rights under this Agreement; and (ii) agree to
be bound by the provisions of this Section.
C. The obligations with respect to Confidential Information shall not
apply to Confidential Information that: (i) either Party or its
personnel already know at the time it is disclosed as shown by their
written records; (ii) is publicly known without breach of this
Agreement; (iii) either Party received from a third party authorized
to disclose it without restriction; (iv) either Party, its agents or
subcontractors, developed independently without use of Confidential
Information; (v) either Party is required by law, regulation or rule
(including but not limited to the rules and regulations of the
Securities Exchange Commission) to disclose, or (vi) either Party is
required by a valid court or governmental agency order to disclose, in
which case the Party receiving such an order must give notice to the
other Party, allowing them to seek a protective order.
D. Each Party agrees that any unauthorized use or disclosure of
Confidential Information may cause immediate and irreparable harm to
the Disclosing Party for which money damages may not constitute an
adequate remedy. In that event, each Party agrees that injunctive
relief may be warranted in addition to any other remedies the
Disclosing Party may have. In addition, the Receiving Party agrees
promptly to advise the Disclosing Party in writing of any unauthorized
misappropriation, disclosure or use by any person of the Confidential
Information which may come to its attention and to take all
commercially reasonable steps at its own expense reasonably requested
by the Disclosing Party to limit, stop or otherwise remedy any
misappropriation, disclosure or use by its own officers, directors,
representatives, subcontractors, affiliated companies, agents or
employees.
E. Upon either Party's demand, or upon the termination of this Agreement,
the Parties shall comply with each other's reasonable instructions
regarding the disposition of Confidential Information that may include
destruction (but not return, except as required by Section 5D herein
or any other section of this Agreement) of any and all Confidential
Information (including any copies or
16
<PAGE>
reproductions thereof). Such compliance shall be certified in writing,
including a statement that no copies of Confidential Information have
been kept.
F. The obligations of this Section 12 shall survive the termination of
this Agreement for a period of two (2) years.
13. Indemnification.
---------------
A. CS shall indemnify, defend and hold TPG harmless from any and all
third-party claims, demands, liabilities, suits and proceedings
(including any brought in or before any court, government or
administrative body, arbitration panel or other tribunal) and any and
all expenses arising therefrom, including damages of any kind and
reasonable attorney's fees, on account of or arising out of CS'
negligence or tortious conduct, or any breach by CS of any
representation or warranty under this Agreement, or any breach of this
Agreement by CS, or acts or omissions by CS in discharging obligations
under this Agreement, or any violation by CS of the provisions of any
law, regulation, ordinance or rule of any governmental body or agency,
or any infringement or breach by CS of any right of any third party
(including but not limited to any infringement of any patent,
copyright or trademark, misappropriation, violations of privacy or
publicity rights) in connection with the Program (provided that such
infringement does not arise out of intellectual property owned,
controlled or supplied solely by TPG, including but not limited to TPG
marks or content). For purposes of Section 13A, TPG is defined as
TPG, Time Warner Inc., Time Inc., and all of their current (i.e.
existing at any time during the term of the Agreement) and former
parents, subsidiaries, divisions, affiliates, officers, directors,
employees, members, agents, attorneys and representatives.
B. TPG shall indemnify, defend and hold CS harmless from any and all
third-party claims, demands, liabilities, suits and proceedings
(including any brought in or before any court, government or
administrative body, arbitration panel or other tribunal) and any and
all expenses arising therefrom, including damages of any kind and
reasonable attorney's fees, on account of or arising out of TPG's
negligence or tortious conduct, or any breach by TPG of any
representation or warranty under this Agreement, or any breach of this
Agreement by TPG, or acts or omissions by TPG in discharging
obligations under this Agreement, or any violation by TPG of the
provisions of any law, regulation, ordinance or rule of any
governmental body or agency, or any infringement or breach by TPG of
any right of any third party (including but not limited to any
infringement of any copyright or trademark, misappropriation,
violations of privacy or publicity rights) in connection with the
Program (provided that such infringement does not arise out of
intellectual property owned, controlled or supplied solely by CS,
including but not limited to CS patents, marks or content). For
purposes of Section 13B, CS is defined as coolsavings.com inc., and
all of its current (i.e.
17
<PAGE>
existing at any time during the term of the Agreement) and former
parents, subsidiaries, divisions, affiliates, officers, directors,
employees, members, agents, attorneys and representatives.
C. Promptly after receipt by an indemnified party under this Agreement of
notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under this Agreement, notify each party
against whom indemnification is to be sought in writing of the
commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Agreement except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may
have otherwise). In case any such claim, demand, liability, suit or
proceeding is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein. The indemnified party
may elect, by written notice delivered to the indemnifying party, to
require the indemnifying party to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party shall have the
right to employ its or their own counsel in any such case. Anything
in this Agreement to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action
effected without its written consent, provided that such consent was
not unreasonably withheld or delayed. An indemnifying party will not,
without the prior written consent of the indemnified party, settle,
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, investigation, inquiry, suit or
proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified party is an actual or
potential party to such claim or action), unless such settlement,
compromise or consent (x) includes a dismissal with prejudice of the
litigation being settled, or an unconditional release of each
indemnified party from all liability arising out of such claim,
demand, liability, suit or proceeding, and (y) does not include a
statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
14. Warranties
----------
A. CS hereby represents and warrants that:
(i) it has all requisite corporate power and authority to enter into this
Agreement and carry out the transactions contemplated hereby;
(ii) the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate
18
<PAGE>
action and does not violate any agreement which CS is bound by or any law,
rule or regulation to which CS is subject.
B. TPG hereby represents and warrants that:
(i) it has all requisite corporate power and authority to enter into this
Agreement and carry out the transactions contemplated hereby; and
(ii) the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action and does not violate any
agreement which TPG is bound by or any law, rule or regulation to which TPG
is subject.
C. EXCEPT AS EXPRESSLY PROVIDED HEREIN: (i), NEITHER PARTY WARRANTS THAT
THE TPG WEB SITEOR THE CS WEB SITE (INCLUDING THE CS/TPG CATEGORY
PAGE), AS THE CASE MAY BE, WILL PERFORM IN THE MANNER EXPECTED OR
WITHOUT INTERRUPTION, ERROR OR DEFECT; AND (ii) NEITHER PARTY MAKES
ANY WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
15. Insurance.
----------
A. CS shall maintain (1) commercial general liability ("CGL") insurance
covering all of its business activities, and either: (2) a specific
endorsement to the CGL providing personal and advertising injury
coverage for all of CS' business activities; or (3), Internet, media,
--
advertiser's, or similar professional liability insurance, covering
all of CS' business activities and responding to claims for copyright
and trademark infringement, invasion of privacy, defamation (including
libel, slander, and any other forms), and misappropriation of
advertising ideas or style of doing business. All policies required
hereunder shall provide limits of not less than $1,000,000 per
occurrence, shall include TPG as an additional insured, shall be
primary with respect to any other insurance maintained on behalf of
TPG, and shall be underwritten by insurers with A.M. Best ratings of
not less than A-, XIII. CS shall provide TPG with certificates of
insurance evidencing the coverages required hereunder (including
specific reference to CS' business activities) prior to the Launch
Date, and, upon request, shall submit copies of the complete policies.
B. TPG shall maintain (1) commercial general liability ("CGL") insurance
covering all of its business activities, and either: (2) a specific
endorsement to the CGL providing personal and advertising injury
coverage for all of TPG's business
19
<PAGE>
activities; or (3), Internet, media, advertiser's, or similar
--
professional liability insurance, covering all of TPG's business
activities and responding to claims for copyright and trademark
infringement, invasion of privacy, defamation (including libel,
slander, and any other forms), and misappropriation of advertising
ideas or style of doing business. All policies required hereunder
shall provide limits of not less than $1,000,000 per occurrence, shall
include CS as an additional insured, shall be primary with respect to
any other insurance maintained on behalf of CS, and shall be
underwritten by insurers with A.M. Best ratings of not less than A-,
XIII. TPG shall provide CS with certificates of insurance evidencing
the coverages required hereunder (including specific reference to
TPG's business activities) prior to the Launch Date, and, upon
request, shall submit copies of the complete policies.
16. Notices. Any notices relating to this Agreement shall be given in writing
-------
and shall be deemed sufficiently given, served, and received for all
purposes upon the first to occur of actual receipt, or delivery by
generally recognized overnight courier service, or by facsimile
transmission (with the original subsequently delivered by other means
permitted by this Agreement, although the effective date of such notice
shall be the date of such facsimile transmission provided the original is
subsequently delivered as provided herein), or three (3) days after deposit
in the United States Mail, certified or registered, return receipt
requested, with postage prepaid, addressed as follows:
CS TPG
-- ---
coolsavings.com inc. The Parenting Group Inc.
8755 West Higgins Road 1325 Avenue of the Americas
Suite 100 New York, New York 10010
Chicago, Illinois 60631 Attention: President
Attn: General Counsel Fax: (212) 522-4662
Fax: (773) 693-1311
with a copy to:
Time Inc.
Law Department
1271 Avenue of the Americas
New York, NY 10020
Attn: Senior V.P., General Counsel, and
Secretary
17. Modification/Waiver. No provision of this Agreement may be altered,
-------------------
amended and/or waived, except by a written document signed by both parties
hereto setting forth such alteration, amendment, and/or waiver. The
parties hereto agree that the failure to enforce any provision or
obligation under this Agreement shall not constitute a waiver thereof or
serve as a bar to the subsequent enforcement of such provision or
obligation or any other provisions or obligation under this Agreement.
20
<PAGE>
18. Severability. The provisions of this Agreement shall be deemed severable,
------------
and the invalidity or unenforceability of any one or more of the provisions
hereof shall not affect the validity and enforceability of the other
provisions hereof.
19. Joint Drafting. Each of the parties hereto has joined in and contributed
--------------
to drafting this Agreement; there shall be no presumption favoring or
burdening any one or more parties hereto based upon draftsmanship.
20. Approvals/Disapprovals. Other than as set forth elsewhere in this
----------------------
Agreement, all approvals, consents or disapprovals required under this
Agreement shall be given in writing within five (5) business days of a
party's receipt of the item requiring its approval, consent, or
disapproval. Other than as set forth elsewhere in this Agreement, a
party's failure to provide the other party with written consent or approval
of any item within the required period shall be deemed a rejection or
disapproval of such item.
21. Assignment. Neither party may assign or transfer any of its rights or
----------
obligations under this Agreement without the prior written consent of the
other party; provided however, in the event TPG desires to assign or
transfer such rights or obligations to one of its affiliates, then: (i) TPG
shall notify CS in writing of the identity of the affiliate and request CS'
consent to such assignment; (ii) CS shall, in writing to TPG, consent or
decline to consent within thirty (30) days of the date of CS' receipt of
TPG's request for consent, provided that CS' consent shall not be
unreasonably withheld (and CS' failure to respond within said 30 day period
shall be deemed a consent by CS); and (iii) should CS timely decline in
writing to consent, then, for a period of thirty (30) days from the date of
TPG's receipt of such declination, TPG shall be entitled to terminate this
Agreement, effective immediately upon CS' receipt of written notice of such
termination from TPG.
22. Survival. The provisions of Sections 2.C, 6.B, 6.D, 7, 8, 10 (to the
--------
extent necessary to wind up the parties' obligations only), 11, 12, 13, 14
and 15 survive the expiration or termination of this Agreement.
23. Entire Agreement. This Agreement (including Exhibits A-G attached hereto)
----------------
constitutes the entire agreement between the parties hereto and contains
all of the agreements between said parties with respect to the subject
matter hereof. There is no statement, promise, agreement, or obligation in
existence which may conflict with the terms of this Agreement or may
modify, enlarge, or invalidate this Agreement or any provision hereof.
None of the prior and/or contemporaneous negotiations, preliminary drafts,
or prior versions of this Agreement leading up to its execution and not set
forth herein shall be used by any of the parties to construe or affect the
validity of this Agreement. Neither party shall be liable for any breach
of this Agreement (other than for breach of payment obligations) resulting
from strikes, work stoppages, riots, accidents, fires, Acts of God or any
other circumstances not within that party's control. The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
21
<PAGE>
Agreement. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument. Facsimile signatures shall have
the same force and effect as original signatures. Each party acknowledges
that no representation, inducement or condition not set forth herein has
been made or relied upon by either party. Further, this Agreement
supersedes any and all other agreements, either oral or in writing, between
the parties hereto with respect to the subject matter hereof.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COOLSAVINGS.COM INC.
By: /s/ Steven M. Golden
-----------------------------
Name: Steven M. Golden
----------------------------
Title: Chairman/CEO
----------------------------
THE PARENTING GROUP INC.
By: /s/ John Hartig
------------------------------
Name: John Hartig
-----------------------------
Title: President/CEO
---------------------------
23
<PAGE>
EXHIBIT A
[GRAPHIC]
enroll now and
start saving!
Dear shopper,
CoolSavings is the place for BIG savings One minute to enroll
from your favorite strore, online merchants, will get you a lifetime of savings!
restaurants and travel companies.
[GRAPHIC]
enable secure enrollment
[GRAPHIC] First Name*
Enroll now to receive great
Thanksgiving savings.
Last Name*
Lifetime membership and unlimited use of
CoolSavings is FREE! Your privacy is
guaranteed. Enroll now and join over 4 Address
million other smart shoppers.
o FREE lifetime membership City
o FREE unlimited use of CoolSavings!
Already a Member? Click Here to login State Zip* Area Code*
Select
[GRAPHIC] Your Gender*
Select
[GRAPHIC] CoolKids?
Enter your kids information below
and you'll be enrolled to
receive exclusive CoolKids
savings offers(coming soon!)
date of birth gender
*Babies' and Children's Items month day year
*Books, Games and Music Select Select
*Clothes and Accessories
*Computers and Electronics Select Select
*Groceries and Fresh Food
*Health and Beauty Items Select Select
*Home, Bed and Bath Items
*Office Needs __ you may share my household
*Restaurants information with The Parenting
*Sports, Fitness and Nutrition Group Inc.
and more...
Birthday
*Laser, ink or bubble jet printer required. Select
Please note that the savings currently month day year
offered on CoolSavings are for use in the
USA only.
E-mail Address*
Periodic e-mail offers from
coolsavings.com?
yes, with graphics(HTML)
tell me more [GRAPHIC]
Create Password*
<PAGE>
EXHIBIT B
CoolKids Program
- --------------------------------------------------------------------------------
Program Features
- --------------------------------------------------------------------------------
CoolKids * Company Name Placement -- Text link in pulldown menu
Program * More Info Page -- Branding, logo and offer description
Exclusively for * Advertiser Results Showcase -- When 3+ offers are
members of CoolKids available, logo and text on page
* Advertiser Squeals -- Targeted offers will be prioritized
in category Squeals box
* Shared Monthly E-mail -- Offers will be highlighted
with text link in shared e-mail
* Optional Free Stuff -- Targeted offers will be prioritized
in category Free Stuff
* 0ptional Solo E-mail -- Branded HTML and text e-mail
targeted to child age group.
- --------------------------------------------------------------------------------
Position & Placement
- --------------------------------------------------------------------------------
Position & The CoolKids program will be promoted on the CoolSavings
Placement homepage to users who have been identified as Young Parents
-- aged 26 to 39 with children. The Parenting and CoolKids
logos and content will be featured on the Babies & Children
Category Page and highlighted offers will appear in category
Squeals, Free Stuff and site-wide results pages only for our
members who have provided the DOB of their children. There
will also be a link to value-added content provided by The
Parenting Group and select advertisers. These offers and the
content will be highly targeted.
- --------------------------------------------------------------------------------
Targeting and Prioritization
- --------------------------------------------------------------------------------
Child's DOB Date of Birth
CoolKids Age Groups (Prioritized by profile matching and age):
Prenatal -- Family Planning to 6 months
Baby -- 6 to 12 months
Young Toddler -- 12 to 24 months
Older Toddler -- 2 to 4 years
School-Aged -- 4 to 9 years
Pre-Teens --9 to 12 years
- --------------------------------------------------------------------------------
Reporting
- --------------------------------------------------------------------------------
Schedule Daily results are refreshed within 48 hours on the web
- --------------------------------------------------------------------------------
Response By offer and target, views of each more info page, clips of
Information each coupon and click through to advertiser's site
- --------------------------------------------------------------------------------
Demographic Profile An aggregate profile of all respondents.
- --------------------------------------------------------------------------------
CoolKids Rates
CoolKids Program - with up to 5 offers
site exposure and a monthly e-mail to CoolKids members
- ----------------------------------------------------------
Quarterly Offers and
Quarter Membership Average Shared E-mail
- ----------------------------------------------------------
60.00 CPM/mo
==========================================================
Jan.-Mar/00 200 TO 280 240 16,560
- ----------------------------------------------------------
April-June 280 TO 350 315 21,735
- ----------------------------------------------------------
July-Sept 350 TO 410 380 26,220
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Oct--Dec 410 TO 470 440 30,360
- ----------------------------------------------------------
There is a $5,000 minimum charge per month per advertiser for CoolKids
participation.
There is a 50% discount for CoolKids Offers and Monthly Shared E-mail if an
advertiser purchases CoolOffers Single Channel concurrently
Term Discounts: Advertisers who commit to 4, 6 and 12 month agreements will
receive 10%, 15% and 20% discounts, respectively.
CoolKids FreeStuff and E-Mail Rates -- Target on Child's DOB
FreeStuff
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Cost per Qualified Lead Each
- -------------------------------------
E-mail and name $3.45
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Name, address & e-mail $5.75
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Additional questions $ .35
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10% discount with $50,000 commitment
2,500 minimum monthly lead commitment
Targeted Direct E-Mail
- ----------------------------------------------------------------
Minimum monthly Maximum Open Rate Min. Monthly
quantity Versions (CPM) Cost
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50,000 2 $345.00 $17,250
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100,000 3 $284.28 $28,428
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250,000 4 $267.72 $66,930
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500,000+ 5 $249.78 $124,890
- ----------------------------------------------------------------
$10,000 minimum monthly commitment, 20% surcharge for HTML format, term
discounts apply
<PAGE>
EXHIBIT C
[GRAPHIC]
coolsavings.com inc
8755 West Higgins, Suite 100
Chicago, Il 60631-2708
Tel: 773 693 1300
Fax: 773 893 1775
Advertising Agreement
Order From: Bill [ ] Advertiser:(if different) Bill [ ]
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Business Name Business Name
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Contact Name Contact Name
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Address Address
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City/State/Zip City/State/Zip
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Telephone Telephone
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Fax Fax
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Effective Dates Description Monthly Rate Total
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Special Remarks:
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This agreement for advertising ('Agreement') is made by CoolSavings, Inc.
("CSI") and the undersigned advertiser ("Advertiser"). Advertiser has read
and understands this entire agreement including, but NOT LIMITED TO THE
TERMS AND CONDITIONS ON THE REVERSE SIDE and hereby place the following
advertising space.
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/ / / /
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Signed for the Advertiser Date Signed for CoolSavings Date
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Name(Print) Name(Print)
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Title Title
<PAGE>
EXHIBIT D
CS Marks
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Docket Number Status Trademark Name
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TM1155 Registered DINELINE
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TM1156 Registered EVENTSLINE
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TM1204 Abandoned INTERACTIVE COUPON NETWORK
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TM1216 Registered COOLSAVINGS
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TM1216AU Registered COOLSAVINGS
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TM1216CA Pending COOLSAVINGS
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TMI216UK Registered COOLSAVINGS
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TM1282 Registered COOLTRAVEL
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TM1312 Registered COOLMALLS
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TM1322 Registered COOLCATALOGS
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TM1323 Registered COOLSAMPLES
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TM1447 Published MISC DESIGN (Piggy Bank)
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TM1500 Pending COOLDINING
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TM15O1 Pending COOLNEIGHBORHOOD
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TM1502 Pending COOLGROCERS
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TM1503 Pending COOLSUPERMARKETS
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TM1504 Pending COOLSCHOLLS
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TM1505 Pending COOLCAMPUS
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TM1506 Pending COOLEVENTS
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TM1507 Pending COOLCOLLEGES
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TM1508 Pending CLIP HERE NOW
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TM1509 Pending SAVINGSCENTER
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TMI51O Pending COOLSAVINGS COUPON MANAGER
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TM1530 Published SQUEALS OF THE DAY
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TM1588 Pending Save. Then Shop.
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TM1592 Pending COOLCASH
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TM1593 Pending COOLSTAMPS
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TM1594 Pending COOLGREENSTAMPS
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<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
EXHIBIT E
Advertising Deliverables
1. Six (6) ads annually, minimum full page in size, in the
following magazines: Parenting; Baby talk; and Family
Life; which satisfy the following conditions: (i) at least
one (1) ad to appear in each of said magazines each year;
and (ii) at least one (1) ad to appear m each calendar
quarter each year.
2. One (1) ad, minimum 1/2 page in size, to appear in any one printing
of Healthy Pregnancy once each year.
3. The inclusion of CS/TPG advertising flyers (the production cost
and delivery cost to First Moments Inc. of which shall be split
equally by CS and TPG), each year, in 1.2 million samples/coupons
kits that TPG will distribute to expectant or new parents through
First Moments Inc., provided that such flyers: (i) are delivered to
First Moments in accordance with its shipping schedules; and (ii)
satisfy the following size and weight requirements:
8.5 x 11 inches on a maximum 70 lb. paper, folded
The content and design of the advertising deliverables referenced in
Paragraphs 1, 2 and 3 above shall be created by CS but shall require the
approval of TPO (which will not be unreasonably withheld or delayed), and
shall be subject to the terms and conditions of the respective TPG magazine
rate cards, attached as Exhibit F, and the distribution policies of First
Moments, attached as Exhibit G, except:
(i) the advertising rates for set forth on the rate cards shall not
apply to this Agreement as CS is not required to pay for the
advertising it is to receive under this Agreement; and
(ii) the terms and conditions of this Agreement shall control in
the event of any conflict or ambiguity between the terms of this
Agreement and the terms and conditions of any rate card or
distribution policies. By way of example but not limitation,
wherein a rate card provides that the advertiser's sole remedy in
the event its ad is not placed is the refund of monies paid for the
ad, such provision shall not apply to this Agreement. Rather, TPG's
failure to provide CS with the advertising it is entitled to
receive under this Agreement shall be a breach of this Agreement
and CS shall be entitled to all remedies for such breach as
provided by the terms of this Agreement.
Upon written request from CS, TPC will provide CS with reasonable
supporting documentation of its satisfaction of its obligations under this
Exhibit E.
29692
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Exhibit 10.16
AGREEMENT
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THIS AGREEMENT is executed on this 18th day of January, 2000, and
shall be effective as of the 1st day of October 1999, by and between
coolsavings.com inc. ("CS"), a Michigan corporation and Mail Coups Inc., a
Delaware corporation, which also does business under the name of Super Coups
("Super Coups").
W I T N E S S E T H:
WHEREAS, CS has developed, owns and/or operates various online computer
services capable of providing marketing services directly to consumers over the
Internet, including but not limited to, the distribution of coupons, saving
notices, and other promotional incentives; and
WHEREAS, Super Coups is a nationally franchised business that distributes
co-operative direct mail coupon envelopes through franchisees in local markets;
and
WHEREAS, the parties wish to provide for the creation of a co-branded local
offer page (to be located within the CS Web Site) for the distribution to
Members of local area coupons and other promotional incentives offered by
customers of Super Coups' franchisees; and
WHEREAS, the parties wish to have Super Coups' franchisees actively market
such co-branded local offer page to both neighborhood retailers and consumers.
NOW, THEREFORE, in consideration of the mutual promises, agreements,
covenants and representations set forth herein, the adequacy, sufficiency and
receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. As used herein, the following terms shall have the following
meanings:
1.1. "Advertisers" shall mean persons or entities that contract to post:
(i) Local Advertising on the SC Page pursuant to an agreement with Super Coups
or a Franchisee; or (ii) or Local Advertising or Other Advertising anywhere on
the CS Web Site pursuant to an agreement with CS.
1.2. "Advertising" shall mean Local Advertising and Other Advertising.
1.3. "CS Web Site" shall mean CS' U.S. English version web site on the
Internet currently located at URL: http://www.coolsavings.com or its equivalent,
including the SC Page and all other web pages operated by CS.
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1.4. "Franchisee" shall mean a person or entity that, pursuant to a
written agreement with Super Coups: (i) has the exclusive right to distribute
co-operative direct mail coupons ("Coupons") in a Franchise Zone; (ii)
distributes Coupons in such Franchise Zone not less than once per calendar
quarter to (x) a minimum of 40,000 households within one (1) year of entering
into a written agreement with Super Coups as described in (i) above, and (y) not
less than 75% of all households, located in such Franchise Zone; and (iii) is
obligated by the terms of its contract with Super Coups (or an addendum thereto)
to, or has elected to, participate in the program set forth in this Agreement
1.5. "Franchise Zone" shall mean the Zip Code(s) for which a Franchisee
has received the exclusive right to distribute co-operative direct mail coupons.
1.6. "Link" shall mean highlighted text, button or banner appearing on an
Internet web page which when "pushed" or otherwise activated, results in the
user being automatically transferred to an advertiser offer or an Internet web
site indicated by such highlighted text.
1.7. "Local Advertising" shall mean any coupons, savings notices, free
gifts, rebates, free trials or other promotional discounts or purchase
incentives offered by an Advertiser that relates to either: (a) a neighborhood
retail store, restaurant, service or other business located in a specific
Franchise Zone, or (b) a neighborhood retail store, restaurant, service or other
business which is located outside of a specific Franchise Zone, that will only
be offered to households within a specific Franchise Zone or specific Franchise
Zones located in one metropolitan area. By way of example but not limitation,
Local Advertising includes coupons offered by a national retailer or franchiser
that relate to specific business outlets, that are offered to Member households
located in a specific Franchise Zone (i.e. coupons that are not available to
Member households in more than one Franchise Zone of several Franchise Zones
located in one metropolitan area).
1.8. "Other Advertising" shall mean any coupons, savings notices, free
gifts, rebates, free trials or other promotional discounts or purchase
incentives other than Local Advertising offered, or permitted by CS to be
offered, anywhere on the CS Web Site, including the SC Page pursuant to an
agreement between CS and an Advertiser.
1.9. "Member" shall mean a person or entity that has completed enrollment
with CS.
1.10. "Designated Account" or "Designated Accounts" shall mean one or all
(as applicable) of those Advertisers listed on Exhibit "A" attached hereto.
1.11. "SC Page" shall mean those web pages on the CS Web Site bearing the
names and/or logos of both CS and Super Coups and containing Advertising.
1.12. "Super Coups Administrator" shall mean the Super Coups employee who
is responsible for editing, proofing and approving proposed Advertising before
it is forwarded to CS for testing, final approval and posting on the SC Page.
1.13. "Zip Code" shall mean an area of the United States that is
delineated by a U.S.
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postal zip code.
2. CS' Obligations. CS shall perform the following obligations:
2.1 CS shall host, operate and maintain the SC Page. CS shall promote the
SC Page: (i) prominently on the home page of the CS Web Site; and (ii) via push
e-mail to Members in each Franchise Zone not less than once per month.
2.2 The SC Page shall offer Advertising. CS will consult with Super Coups
on the number, type and location of all Advertising on the SC Page. In the
event the parties are unable to agree on the number, type and location of any
Advertising on the SC Page, then CS shall make such determination in the good
faith exercise of its reasonable business judgment.
2.3 CS will provide Super Coups with access to the CS web-based offer
preparation software through any industry standard Internet dial up connection.
Access to such software will be in a password secure environment. All
Advertising shall be located on CS' Internet server only. CS shall provide the
following software and/or application tools ("CS Software") to the following
entities/persons: (i) to Super Coups, an import data spreadsheet on which the
Super Coups Administrator may prepare proposed Local Advertising (in batch
format for multiple Franchisees and multiple Advertisers) for submission to CS;
and (ii) to Super Coups and Franchisees designated by Super Coups, Savings
Center(TM), CS' proprietary software, which Super Coups and such designated
Franchisees only are hereby authorized to use to create, edit, proof and approve
proposed Local Advertising for submission to CS. Super Coups and each such
designated Franchisee shall execute a software Access Agreement (attached hereto
as Exhibit "B") for Savings Center(TM), and deliver the same to CS, prior to any
use thereof by such entity/person. Upon execution of this Agreement, CS shall
provide Super Coups with its current standards for Advertising (e.g. style, data
entry, and content standards) ("Standards") and thereafter, all modifications
thereto. CS will post Local Advertising on the SC Page that complies with all
of CS' Standards within five (5) days of receipt thereof. Super Coups and its
designated Franchisees must have access to Netscape Navigator 4.1 (or later
versions) or Explorer 4.0 (or later versions) to utilize the software and
application tools referenced herein.
2.4 From time to time, CS may conduct quality assurance testing on
samples of proposed Local Advertising created, proofed and approved by Super
Coups or its designated Franchisees to ensure such proposed Local Advertising
complies with CS' Standards then in effect. The first time in any calendar year
that a material number of samples in a particular month, or for a particular
offer campaign, which were proofed and approved by Super Coups fail to pass such
testing, CS shall notify Super Coups in writing, and Super Coups shall take
reasonable efforts within thirty (30) days of such notice to cure any failures
to comply with CS' Standards, to ensure that proposed Local Advertising
submitted to CS thereafter complies with CS' Standards then in effect. The
second time in any calendar year that a material number of samples fail to pass
such testing for a one month period, or for a particular offer campaign, which
were proofed and approved by Super Coups, CS shall be entitled to terminate this
Agreement effective thirty (30) days after written notice to Super Coups. In the
event that either (a) Super Coups determines that an individual Franchisee is
not materially complying with the Standards and provides written
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notice of such determination to CS or (b) CS determines that an individual
Franchisee is not materially complying with the Standards; then CS shall
promptly deny such non-complying Franchisee access to the CS Software, pursuant
to the terms of the Access Agreement executed by such Franchisee.
2.5 CS shall provide a prominent Link from the SC Page to a web site
address to be designated by Super Coups for Members interested in becoming
Franchisees and for Advertisers interested in mailing coupons through Super
Coups.
2.6 CS shall at all times designate one (1) employee to serve as an
account manager and liaison with Super Coups.
2.7 CS shall provide Super Coups with design and artwork for the CS name,
logo product description, marketing text and graphics ("CS Artwork") for the
"Outside Envelope PM" and the "Inside Envelope PM" (collectively referred to as
"Envelope PMs") as defined herein. An "Outside Envelope PM" shall mean CS
Artwork that prominently appears on the rear exterior of an envelope that Super
Coups or its Franchisees distribute to consumers in the approximate size and
prominence as those Outside Envelope PMs sent by Super Coups and/or its
franchisees prior to the date of execution of this Agreement. An "Inside
Envelope PM" shall mean CS Artwork that appears on the double-sided, four-color
inserts to be included in envelopes distributed to consumers by Super Coups or
its Franchisees in the approximate size and prominence as those Inside Envelope
PMs sent by Super Coups and/or its franchisees prior to the date of execution of
this Agreement. Two different Inside Envelope PM's shall be provided by CS to
Super Coups; one for placement in envelopes distributed by or on behalf of
Franchisees, and the second for placement in envelopes distributed by or on
behalf of Super Coups' other franchisees. Notwithstanding anything to the
contrary contained herein, no Envelope PMs on which any CS Mark (as defined in
Section 5.1) appears shall be distributed without the prior written approval of
CS and Super Coups. CS shall provide Super Coups with written approval or
disapproval of the CS Artwork within five (5) business days of its receipt of a
written request for such approval, which approval will not unreasonably be
withheld.
2.8 In the event Franchisees make cable television commercial spots
available to CS pursuant to Section 3.2B herein, CS may at its option, elect to
use any such spot. Should CS elect to use any such spot, CS shall provide Super
Coups, at CS' cost, a thirty (30) second commercial, which shall include a
trailer highlighting the Super Coups relationship, to be run in such cable
television commercial spots.
2.9. Except as provided in Section 2.10, CS shall produce the design and
artwork for all co-branded in-store promotional tools, such as window displays,
countertop displays, and point of sale decals (collectively, the "In Store
PMs"). Notwithstanding anything to the contrary contained herein, no In Store
PMs on which any Super Coups Mark (as defined in Section 5.2) appears shall be
distributed without the prior written approval of Super Coups. Super Coups shall
provide CS with written approval or disapproval within five (5) business days of
its receipt of a written request for an approval. Super Coups shall reimburse
CS forty (40%) percent of the total cost of the production of such In Store PMs
within thirty (30) days of receipt of an invoice therefor.
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2.10. If CS notifies Super Coups in writing that it wishes, or consents
to, Super Coups producing any In Store PM, then Super Coups shall produce such
In Store PM. Notwithstanding anything to the contrary contained herein, no In
Store PMs on which any CS Mark (as defined in Section 5.1) appears shall be
distributed without the prior written approval of CS. CS shall provide Super
Coups with written approval or disapproval within five (5) business days of its
receipt of a written request for an approval. CS shall reimburse Super Coups
sixty (60%) percent of the total cost of the production of such In Store PM
within thirty (30) days of receipt of an invoice therefor.
2.11. CS shall provide reasonable assistance to Super Coups in the
preparation of Web-based and offline sales support materials for Franchisees.
2.12. In the year 2000, CS, at its own expense, shall send representatives
to Super Coups' two sets of regional training conferences for Franchisees and
the national training conference for Franchisees, whereat Super Coups shall
introduce CS, the SC Page, and the program contemplated by this Agreement to
Franchisees, and such CS representatives shall provide a presentation relative
to such program and related training sessions for Franchisees. In years
subsequent to 2000, CS, at its own expense, shall send a representative to Super
Coups' annual training conference to provide a presentation relative to the SC
Page and the program contemplated herein.
2.13. CS shall provide reporting to Super Coups as outlined in Section 12.
2.14 CS shall proof and otherwise edit all proposed Other Advertising
without cost or expense to Super Coups, for accuracy, propriety and consistency
with the CS Standards then in effect.
2.15 The SC Page shall bear the Super Coups name and logo in equal size
and comparable prominence as that of the CS name and logo.
3. Super Coups' Obligations. Super Coups shall perform the following
obligations:
3.1 Super Coups shall promote the program set forth in this Agreement.
To the extent that Super Coups cannot now obligate its franchisees to become
Franchisees under this Agreement, then Super Coups shall use its best efforts to
convince them to become Franchisees under this Agreement (i.e. to sell Local
Advertising) and further impose such obligation upon all of its franchisees as
soon as reasonably possible. Super Coups shall send an e-mail promoting the SC
Page to all then current subscribers on Super Coups e-mail list.
3.2 At all times while this Agreement is in effect, Super Coups shall,
at its cost:
A. Subject to CS' consent as provided in Section 2.7 and 2.10: (i)
produce and include the Outside Envelope PM on all envelopes
distributed to consumers by Super Coups and/or its Franchisees for
programs of Super Coups and/or its Franchisees (i.e. excluding
envelopes distributed for parties other than Super Coups or its
Franchisees); (ii) produce and include the Inside Envelope PM on all
envelopes distributed to consumers by Super Coups and/or its
Franchisees; (iii) use the In Store PMs in all in-store promotion
displays of Super Coups and/or its Franchisees and use its best
efforts to have Advertisers post the In Store PMs at
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appropriate locations in their stores/businesses. Super Coups'
agreement with each Franchisee shall require such Franchisee to
distribute at least four (4) mailings per calendar year, for each
calendar year commencing one (1) year after the date of execution of
such agreement between Super Coups and such Franchisee.
B. Use its best efforts to encourage its Franchisees to provide CS
with thirty (30) second cable television commercial spots run by its
Franchisees for broadcasting the thirty (30) second commercial
provided by CS pursuant to Section 2.8. above.
C. Produce promotion and sales support materials for Franchisees;
provided however, all such materials referencing CS shall require CS'
prior written approval. CS shall provide Super Coups with written
approval or disapproval within five (5) business days of its receipt
of a written request for an approval. Further, Super Coups shall
consult with CS on the development and contents of all such materials.
3.3 Super Coups shall promptly provide to each designated Franchisee with
a copy of the CS Standards, and any modifications or updates thereto from time
to time supplied by CS to Super Coups. Super Coups and its designated
Franchisees shall use, as provided in Section 2.3 above, (i) the import
spreadsheet or (ii) Savings Center/TM/, to create, edit and proof proposed Local
Advertising for submission to CS for posting by CS on the SC Page. Super Coups
and Franchisees will be responsible for collecting appropriate information, and
creating and editing proposed Local Advertising. All proposed Local Advertising
shall be first submitted to the Super Coups Administrator. The Super Coups
Administrator shall proof and otherwise edit all proposed Local Advertising for
accuracy, propriety and consistency with the CS Standards then in effect, prior
to submission to CS. Upon the Super Coups Administrator approving any proposed
Local Advertising, he/she shall forward the same to CS. Super Coups shall be
responsible and liable for the content of all Local Advertising submitted by the
Super Coups Administrator that appears on the SC Page and shall indemnify CS for
the same as provided in Section 9. In the event CS discovers material non-
typographical errors or any improprieties in any proposed Local Advertising or
any Local Advertising appearing on the SC Page, then Super Coups shall
immediately reimburse CS for the reasonable costs incurred by CS in reviewing,
editing, and/or removing the offending Local Advertising. Upon submission of any
proposed Local Advertising to CS, Super Coups will become obligated to pay to CS
fees in accordance with Section 10 herein for the entire period during which
such Local Advertising appears (and appeared) on the SC Page. Notwithstanding
the foregoing, for Franchisees that utilize Apple/Macintosh computers only,
until such time as CS delivers to Super Coups an Apple/ Macintosh compatible
version of the Savings Center/TM/ software, CS shall, at its election, either:
(i) provide to Super Coups an import spreadsheet compatible with the CS Web Site
for Franchisees to enter Local Advertising data, whereupon Super Coups shall
review, edit and proof such Local Advertising as set forth above; or (ii) enter,
edit and post the Local Advertising data provided by Super Coups onto the SC
Page.
3.4 For those Franchisees who are Apple/Macintosh computer users and who
submit their Advertisers Local Advertising data through an import spreadsheet
(i.e. not through the Savings Center/TM/ software) as described in Section 3.3
above, Super Coups shall assign each such
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Advertiser an exclusive identification number, and maintain a database on each
such Advertiser containing the Advertiser's name, address, contact information
and the exclusive identification number, and such other information as is
reasonably necessary to support such Advertiser in the creation of proposed
Local Advertising.
3.5 Commencing January 1, 2000, neither Super Coups nor any Franchisee
shall submit any proposed Local Advertising to CS, without the prior written
consent of the Advertiser.
3.6 Super Coups shall provide a Link from its web site at
www.supercoups.com and all successors thereto, to the CS Web Site.
3.7 Super Coups shall at all times designate at least one (1) employee to
serve as an account manager and liaison with CS. The account manager may also be
the Super Coups Administrator, as determined by Super Coups in its sole
discretion.
3.8 On or before January 1, 2000, Super Coups shall discontinue the
offering and/or distribution of all coupons, savings notices or other purchase
incentives on any web site other than the CS Web Site.
3.9 Unless otherwise specifically agreed to in writing by CS and Super
Coups or as otherwise provided herein, Super Coups will conduct all dealings
with its Franchisees and their Advertisers for Local Advertising. Super Coups
will conduct all dealings with CS relative to itself, its Franchisees, and their
Advertisers for Local Advertising.
4. Limitations and Exclusivity.
4.1. Super Coups' may: (i) promote and sell Local Advertising to
Advertisers; and (ii) promote Other Advertising on the CS Web Site (including
the SC Page) to Designated Accounts. However, Super Coups may not sell Other
Advertising on the CS Web Site (including the SC Page) to Designated Accounts.
Notwithstanding anything contained in this Agreement which can be construed to
the contrary, no Local Advertising or Other Advertising of a Designated Account
may appear on the CS Web Site (including the SC Page) unless that Designated
Account has entered into an agreement directly with CS. In the event CS enters
into an agreement with a Designated Account for any Local Advertising or Other
Advertising that appears anywhere on the CS Web Site (including the SC Page),
then CS shall pay Super Coups the SC Referral Fee as provided in Section 10. CS
shall have sole authority and discretion over whether or not to enter into any
agreement with a Designated Account and the terms and conditions of any such
agreement it elects to enter into with a Designated Account.
4.2. Except as provided in Section 4.3, during the term of this Agreement
CS shall not: (i) contract with any cooperative direct mail coupon envelope
company ("Direct Mailer") other than Advo Inc. or Super Coups, to sell
Advertising to neighborhood merchants/small businesses ("Neighborhood
Businesses") that are located in a Franchise Zone; (ii) contract with any Direct
Mailer to sell Advertising to Neighborhood Businesses that are not located in a
Franchise Zone unless CS gives Super Coups written notice to Super Coups of its
intent to do so not less than 30
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days prior to doing so; or (iii) post on the SC Page any Advertising of a
Neighborhood Business located in a Zip Code that is not a Franchise Zone;
without Super Coups prior written consent. During the term of this Agreement, CS
shall not contract with Val-Pak or Money Mailer for the posting of Advertising
on the CS Web Site. Except as specifically prohibited in this Section 4.2, CS
may contract with any entity or person, including a Direct Mailer, to sell
Advertising to appear on the CS Web Site; however, CS hereby agrees that if it
contracts with a Direct Mailer for any Zip Code which is not in a Franchise
Zone, the offers of such Direct Mailer shall only be available to Members
residing in Zip Codes which are not in a Franchise Zone. By way of example but
not limitation, provided that CS has given Super Coups the notice required in
subsection (ii) hereinabove, CS may contract with a Direct Mailer to sell
Advertising to appear on the CS Web Site in a location other than the SC Page,
to Neighborhood Businesses that are located in a Zip Code that is not in a
Franchise Zone, as long as that Advertising is not available to Members residing
in Zip Codes which are in a Franchise Zone. Such agreement(s) with Direct
Mailers shall provide that upon not more than six (6) months advance notice, CS
may terminate such agreement as to particular Zip Codes.
4.3. No later than the 15th day of each month, Super Coups shall provide
CS with a list of all current Franchisees, their respective Franchise Zones, and
the frequency Mailers are sent for or on behalf of such Franchisee. In the event
that (i) any such notice identifies a Franchise Zone that was not listed in the
prior monthly notice, and (ii) such Franchise Zone contains a Zip Code for which
CS then has in effect an agreement with a Direct Mailer for the sale of
Advertising (a "Competing Agreement"), then CS will provide Super Coups with
preferred placement on the Home Page of the CS Web Site (i.e. better placement
than such Direct Mailer), until such time as the Competing Agreement ceases to
apply to the Zip Code located in the Franchise Zone. Further, at CS' option, CS
will do one of the following within 6 months of the receipt the notice described
in this section 4.3: (i) to the extent permitted by such Competing Agreement,
terminate the Competing Agreement as it pertains to such Zip Code; or (ii) upon
expiration of the Competing Agreement, not renew the Competing Agreement as it
pertains to the Zip Code located in that Franchise Zone (if a Franchise Zone
including that Zip Code still exists at the time of such renewal).
5. License to Use Marks.
5.1 During the term of this Agreement, Super Coups shall have the right
and license to use the current and future respective name, trademarks,
servicemarks, copyrights and logo of CS (collectively, the "CS Marks") solely in
connection with Super Coups' marketing of Local Advertising, promotion of the SC
Page and performance of its obligations under this Agreement. Examples of
current CS Marks are set forth in Exhibit "C" attached hereto. Such right and
license is restricted as set forth herein and shall not apply or extend to any
other use by Super Coups.
5.2 During the term of this Agreement, CS shall have the right and license
to use the respective name, trademarks, servicemarks, copyrights and logo of
Super Coups (the "Super Coups Marks") solely in connection with the promotion of
the SC Page and the performance of its obligations under this Agreement.
Examples of the current Super Coups' Marks are set forth
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in Exhibit "D" attached hereto. Such right and license is restricted as set
forth herein and shall not apply or extend to any other use by CS.
5.3 Subject to the foregoing, each of the parties hereto is and shall
remain the owner of all rights in and to its name and logo, as the same now
exist or as they may hereafter be modified, including all rights in and to any
copyright, trademark, servicemark and/or like rights pertaining thereto. Any
and all rights to the CS Marks or the Super Coups Marks not herein specifically
granted and licensed are reserved to the respective entity. Upon termination of
this Agreement: (i) all rights conveyed by either party with respect to the use
of either party's Marks shall cease, and all such rights shall revert to the
respective party; and (ii) neither Party shall have any further right to market
or to further utilize any promotional materials containing the other party's
Marks.
6. Term/Termination. This Agreement shall begin as of August 9, 1999 (the
"Commencement Date") and shall continue until September 30, 2002 unless earlier
terminated as provided herein.
A. Either party may terminate this Agreement upon a material breach by
the other party effective thirty (30) days after written notice to the breaching
party setting forth such breach, provided that the breaching party has not cured
such material breach within such thirty (30) day period.
B. In the event that CS shall not be ranked among the top five (5)
internet couponing sites (ranked by hits) as determined by Media Metrix (or in
the event that Media Metrix is no longer tracking this industry, such other
independent comparable tracking service as designated by CS) for a period of
three consecutive monthly reporting periods (or if reported less frequently than
monthly, the next three occurring reporting periods; provided that such
reporting periods shall not be less frequently than quarter annually), then for
a period of thirty (30) days after the expiration of such three month period,
Super Coups shall have a right to terminate this Agreement upon delivery to CS
of thirty (30) days advance written notice of termination.
7. Advertising Content. Super Coups shall be responsible for determinations
relative to the Advertising content, and the number of coupons or other saving
certificates to be distributed. Super Coups acknowledges that CS has previously
granted to certain third parties exclusive rights to advertise on the CS Web
Site certain products or services ("Exclusives") as set forth on Exhibit E
attached hereto. Super Coups shall not post on the CS Web Site any Advertising
which advertises any product or service which is described on Exhibit E.
NOTHING TO THE CONTRARY WITHSTANDING, ALL ADVERTISING IS AT ALL TIMES SUBJECT TO
CS' APPROVAL. CS RESERVES THE RIGHT AT ALL TIMES TO REFUSE, REJECT, CENSOR, OR
WITHDRAW (COLLECTIVELY "CANCEL"), WITHOUT NOTICE, ANY ADVERTISING WHICH CS
DEEMS: (A) IN CS'S SOLE DISCRETION (i) MAY POTENTIALLY BE VIOLATIVE OF ANOTHER
PARTIES INTELLECTUAL PROPERTY RIGHTS, (ii) MAY POTENTIALLY CAUSE LIABILITY TO
CS, (iii) IS NOT IN KEEPING WITH THE CS STANDARDS, (iv) MAY BE VIOLATIVE OF ANY
LAW, RULE OR REGULATION, (v) IS IN BAD TASTE, (vi) MAY DAMAGE THE IMAGE OR
REPUTATION OF CS, OR (vii)
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CONFLICTS WITH ANY EXCLUSIVE SET FORTH ON EXHIBIT E ATTACHED HERETO; OR (B)
IMPROPER FOR ANY OTHER REASON WHATSOEVER, AS DETERMINED BY CS IN ITS GOOD FAITH
BUSINESS JUDGEMENT. Provided however, CS may not use its right to Cancel any
Local Advertising on the SC Page based primarily on any conflict with any
exclusive rights to advertise on the CS Web Site granted to third parties after
the date of execution hereof. In the event CS Cancels any Advertising, CS shall
be entitled to permanently exclude such Advertiser from the CS Web Site.
8. Disclaimer.
CS shall not be liable for any loss or damage whatsoever suffered by Super Coups
or any third party, including but not limited to Franchisees and Advertisers, as
a result of, or arising from, any Advertising (including but not limited to, the
failure of any Advertising, at any time, to appear on the CS Web Site, function
or be distributed by CS) unless caused by the gross negligence or intentional
wrongful act of CS. The parties acknowledge that in the event that any
Advertising fails for any reason to appear on the CS Web Site, the sole and
exclusive remedy shall be the placement of such Advertising on the CS Web Site
for an additional period equal to the period in which it fails to appear.
Neither party shall be liable for any delay or failure in performance of any
part of this Agreement, other than for any delay or failure to pay money owed
hereunder, by reason of acts of God, fire, strikes, shortages of labor or
materials, present or future governmental laws, or for any other reason beyond
the party's reasonable control.
9. Indemnification.
A. Super Coups does hereby indemnify and hold harmless CS against all
claims, actions, suits, proceedings, fines, damages, costs and expenses,
including actual attorney fees, (collectively "Damages") which CS may suffer as
a result of the following: (i) the content or publication of any Local
Advertising; or (ii) the negligent or improper use by Super Coups, its
Franchisees, and/or any Advertisers of any software (including but not limited
to, Savings Center/TM/ provided by CS; but excluding those Damages suffered by
CS as a result of (x) its own negligence, and (y) alterations to any Advertising
done by CS without the consent of Super Coups, Franchisees, or Advertisers. By
way of example but not limitation, this indemnification shall include all
Damages arising out of any illegal, libelous, slanderous, or defamatory matter
contained in any Advertising, or any infringement by any one of them of any
copyright, patent, design or intellectual property right. This indemnification
shall survive the expiration or termination of this Agreement.
B. CS does hereby indemnify and hold harmless Super Coups against all
Damages which Super Coups may suffer as a result of alterations to any Local
Advertising done by CS without the consent of Super Coups, Franchisees, or
Advertisers, but excluding those Damages suffered by Super Coups as a result of
its own negligence or the negligence of its Franchisees or Advertisers. By way
of example but not limitation, this indemnification shall include all Damages
arising out of: (i) any illegal, libelous, slanderous, or defamatory matter
contained in any Advertising; or (ii) any infringement by Super Coups of any
copyright, patent, design or intellectual property right; as a result of
alterations to any Advertising done by CS without the consent of Super
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Coups, Franchisees, or Advertisers. This indemnification shall survive the
expiration or termination of this Agreement.
C. CS does hereby indemnify and hold harmless Super Coups against all
Damages which Super Coups may suffer as a result of the appearance of Other
Advertising on the SC Page, but excluding those Damages suffered by Super Coups
as a result of its own negligence or the negligence of its Franchisees. By way
of example but not limitation, this indemnification shall include all Damages
arising out of any illegal, libelous, slanderous, or defamatory matter contained
in any Other Advertising appearing on the SC Page. This indemnification shall
survive the expiration or termination of this Agreement.
10. Fees.
10.1. The following terms shall have the following meanings for purposes
of this Section 10:
a. "Designated CS Web Site Revenue" shall mean all fees received by CS
from Designated Accounts in a particular period for Other
Advertising appearing on the CS Web Site somewhere other than on the
SC Page, pursuant to contracts entered into between CS and
Designated Accounts while this Agreement is in effect.
b. "Designated SC Page Revenue" shall mean all fees received by CS from
Designated Accounts in a particular period for Advertising appearing
on the SC Page, pursuant to contracts entered into between CS and
Designated Accounts while this Agreement is in effect.
c. "Earned Designated SC Page Fees" shall mean 60% of Designated SC
Page Revenue, which amount CS shall be entitled to retain/receive.
d. "Earned Fees" shall mean the greater of the following amounts for a
specific period of time (i) the sum of Earned Local Fees plus Earned
Designated SC Page Fees, or (ii) the Guaranteed Fees; which amount
CS shall be entitled to retain/receive.
e. "Earned Local Fees" shall mean fees that CS is entitled to receive
for Local Advertising, in an amount equal to Local Revenue
multiplied by the Local Percentage.
f. "Guaranteed Fees" shall mean the minimum amounts Super Coups shall
pay to CS during each month of the term of this Agreement, as
determined in accordance with Section 10.2.
g. "Guaranteed Fees Paid" shall mean the Guaranteed Fees actually
received by CS.
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h. "Local Percentage" shall mean the following percentages during the
following time periods: 10/1/99 - 12/31/00: 100%; 1/1/01 - 9/30/02:
60%.
i. "Local Revenue" shall mean all revenue earned and/or deemed earned by
Super Coups in a particular time period for Local Advertising as more
fully described in Section 10.6 below.
j. "Quarter" shall mean a calendar quarter, except that the period from
9/1/99 through 12/31/99 shall be deemed the first Quarter under this
Agreement.
k. "SC Referral Fee" shall mean 15% of Designated CS Web Site Revenue.
l. "Underpayment/Overpayment" shall mean the remainder of the following
formula: Earned Fees minus Guaranteed Fees Paid minus Designated SC
Page Revenue. To the extent that remainder is a positive number, it
shall be deemed an Underpayment. To the extent that the remainder is
a negative number, it shall be deemed an Overpayment.
10.2 CS' Guaranteed Fees. Beginning on October 1, 1999, and on the first
(1st) day of each month during the following periods, Super Coups shall pay to
CS Guaranteed Fees in the following amounts:
<TABLE>
<CAPTION>
---------------------------------------------
Time Period Monthly Guaranteed Fee
---------------------------------------------
<S> <C>
10/1/99 - 6/30/00 $30,000
7/1/00 - 12/31/00 $40,000
1/1/01 - 9/30/01 $60,000
10/01/01 - 9/30/02 $80,000
---------------------------------------------
</TABLE>
10.3 CS' Earned Fees. CS shall be entitled to receive Earned Fees as
provided herein. Beginning on January 15, 2000, and no later than the fifteenth
(15th) day of the first month of each Quarter thereafter: (i) Super Coups shall
determine the amount of Earned Local Fees, if any, for the preceding Quarter and
notify CS in writing of the same; and (ii) CS shall determine the amount of
Earned Designated SC Page Fees, if any, for the preceding Quarter and notify
Super Coups in writing of the same. Super Coups' notice shall contain
information sufficient for CS to be able to confirm the accuracy of the
determination of Earned Local Fees for the Quarter, including but not limited
to, the following information with respect to each Franchisee: the number of
Mailed Advertisements and the Rate for each such Mailed Advertisement (as such
terms are defined in Section 10.6 below). CS' notice shall contain information
sufficient for Super Coups to be able to confirm the accuracy of the
determination of Earned Designated SC Page Fees for the Quarter, including but
not limited to, the following information: the name of each Designated Account
who contracted for Advertising during the prior month; and the fees charged to
such Advertiser for such Advertising.
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Beginning on January 30, 2000, and no later than the thirtieth (30th) day
of the first month of each Quarter thereafter, CS shall prepare a reconciliation
of the two notices required above that sets forth the amount owed by CS to Super
Coups, or by Super Coups to CS, by determining the Overpayment/Underpayment (the
"Reconciliation").
a. If an Underpayment exists, then Super Coups shall pay such amount to
CS within thirty (30) days of receipt of the Reconciliation. If an
Overpayment exists, then CS shall pay such amount to Super Coups
simultaneously with the delivery of the Reconciliation.
Examples (all occurring for the Quarter ending 12/31/01):
Example 1. Assume Local Revenue of $600,000, Designated SC Page
Revenue of $30,000, and Guaranteed Fees Paid of $180,000:
Earned Local Fees: $600,000 x .6 = $360,000
Earned Designated SC Page Fees: $30,000 x .6 = $18,000
Earned Fees: $360,000 + $18,000 = $378,000 (which is greater than
the Guaranteed Fees of $180,000)
Overpayment/Underpayment: $378,000 - $180,000 - $30,000 =
$168,000
Super Coups must pay CS the Underpayment of $168,000.
Example 2. Assume Local Revenue of $200,000, Designated SC Page
Revenue of $150,000, and Guaranteed Fees Paid of $180,000:
Earned Local Fees: $200,000 x .6 = $120,000
Earned Designated Fees: $150,000 x .6 = $90,000
Earned Fees: $120,000 + $90,000 = $210,000 (which is in excess
of the Guaranteed Fees of $180,000)
Overpayment/Underpayment: $210,000 - $180,000 - $150,000 =
($120,000)
CS must pay Super Coups the Overpayment of $120,000.
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Example 3. Assume Local Revenue of $120,000, Designated SC Page
Revenue of $150,000, and Guaranteed Fees Paid of $180,000:
Earned Local Fees: $120,000 x .6 = $72,000
Earned Designated Fees: $150,000 x .6 = $90,000
Earned Fees: $72,000 + $90,000 = $162,000 which is less than the
Guaranteed Fees of $180,000; thus by definition Earned Fees will
be $180,000
Overpayment/Underpayment: $180,000 - $180,000 - $150,000 =
($150,000)
CS must pay Super Coups the Overpayment of $150,000.
Example 4. Same assumptions as in Example 3 above except this Example
4 assumes a failure by Super Coups to pay one (1) of the three (3) required
monthly Guaranteed Fee payments. (i.e. Guaranteed Fees Paid of $120,000):
Earned Local Fees: $120,000 x .6 = $72,000
Earned Designated Fees: $150,000 x .6 = $90,000
Earned Fees: $72,000 + $90,000 = $162,000 which is less than the
Guaranteed Fees of $180,000; thus by definition Earned Fees will
be $180,000
Overpayment/Underpayment: $180,000 - $120,000 - $150,000 =
($90,000)
CS must pay Super Coups the Overpayment of $90,000.
Example 5. Assume Local Revenue of $100,000, Designated SC Page
Revenue of $90,000, and Guaranteed Fees Paid of $60,000:
Earned Local Fees: $100,000 x .6 = $60,000
Earned Designated SC Page Fees: $90,000 x .6 = $54,000
Earned Fees: $60,000 + $54,000 = $114,000 which is less than the
Guaranteed Fees of $180,000; thus by definition Earned Fees will
be $180,000.
Overpayment/Underpayment = $180,000 - 60,000 - 90,000 = $30,000
Super Coups must pay CS the Underpayment of $30,000
10.4 SC Referral Fee. Beginning on January 15, 2000 and no later than the
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fifteenth (15th) day of the first month of each Quarter thereafter, CS shall pay
Super Coups the SC Referral fee for the prior Quarter together with a
reconciliation of how such amount was determined.
10.5 Right of Offset. Notwithstanding anything contained in this Section
10 that can be construed to the contrary, in no event whatsoever shall CS be
required to pay any monies to Super Coups (other than the SC Referral Fee) if
such payment would result in the net monies received and retained by CS pursuant
to this Agreement, for the period in issue, being less than the Earned Fees for
such period as determined in accordance with Section 10.3 hereinabove. In the
event of any conflict between this Section 10.5 and any other subsection of this
Section 10, then the terms and conditions of this Section 10.5 shall control.
CS may offset the SC Referral Fee against any monies due to CS from Super Coups.
Example: For the Quarter ended December 31, 2001, assume Local Revenue of
$250,000, Designated SC Page Revenue of $70,000, Guaranteed Fees Paid of
$120,000, and Designated CS Web Site Revenue of $120,000:
Earned Local Fees: $250,000 x .6 = $150,000
Earned Designated Fees: $70,000 x .6 = $42,000
Earned Fees: $150,000 + $42,000 = $192,000 (which is greater than
the Guaranteed Fees of $180,000)
Underpayment/Overpayment: $192,000 - $120,000 - $70,000 = $2,000
SC Referral Fee: $120,000 x .15 = $18,000
In this example, CS shall pay Super Coups $16,000 (the Underpayment
is offset from the SC Referral Fee).
10.6. Local Revenue.
A. Definitions. For the purposes of this Section 10, the following
terms shall have the following meanings:
(1) "Basic Service" shall mean geographic targeting of up to three
(3) Local Advertisements for the same advertiser appearing on the SC Page to
Members residing within: (x) a Franchise Zone; or (y) an established radius from
the Advertiser's business outlet in a Franchise Zone; as determined by CS. A
different radius shall be applicable to each merchant category determined by CS
and the length of that radius (e.g. 3 miles or 25 miles) shall be determined by
CS after consultation with Super Coups.
(2) "Franchisee Revenue" shall mean with respect to a particular
Franchisee and for a particular time period, the sum of all Mailing Zone Revenue
for all Mailing Zones contained in a Franchise Zone.
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(3) "Mailed Advertisements" shall mean a printed coupon, rebate
offer, marketing piece, or other advertisement that is mailed to households in a
Mailer.
(4) "Mailer" shall mean an envelope or other packaging containing one
or more Mailed Advertisements which is sent to residences in a Mailing Zone.
(5) "Mailing Zone" shall mean a group of up to 10,000 residences
contained in one Franchise Zone, to which either Super Coups or a Franchisee
sends a Mailer. Each Franchise Zone is comprised of multiple Mailing Zones.
(6) "Mailing Zone Revenue" shall mean the product of the number of
Mailed Advertisements contained in a Mailer multiplied by the Rate.
(7) "Rate" shall mean the rate set forth in Column B below based on
the number of Mailers per calendar year sent out by or on behalf of a Franchisee
in a Franchise Zone:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Column A: # of Mailers sent by the Franchisee Column B: Rate per Mailed Advertisement per
per calendar year Mailing Zone
- -----------------------------------------------------------------------------------------------
<S> <C>
4 or less $7
- -----------------------------------------------------------------------------------------------
5 $6
- -----------------------------------------------------------------------------------------------
6 $5
- -----------------------------------------------------------------------------------------------
7 $4
- -----------------------------------------------------------------------------------------------
8 or 9 $3
- -----------------------------------------------------------------------------------------------
10 or more $3
- -----------------------------------------------------------------------------------------------
</TABLE>
B. For the period of October 1, 1999 to December 31, 2000:
The parties acknowledge that Super Coups and each Franchisee shall include
the cost of Basic Service in its base price charged to its customers for the
production of a Mailed Advertisement and/or the inclusion of a Mailed
Advertisement in a Mailer. The parties further acknowledge that multiple
Franchisees may distribute Mailed Advertisements for the same advertiser. From
the commencement of the term hereof, until December 31, 2000, for a particular
time period, Super Coups shall be deemed to have earned Local Revenue in an
amount equal to the sum of Franchiser Revenue for all Franchisees for such time
period. The parties acknowledge that Local Revenue for this period shall be
based on the number of Mailed Advertisements contained in the Mailers, and not
on the number of Local Advertisements appearing on the SC Page.
Example: Assume the following: for the month of March, 2000 there were 2
Franchisees which sent Mailers, being Franchisee X and Franchisee Y, each of
which have 5 Mailing Zones in their Franchise Zone. During the month of March
2000, Franchisee X sent one Mailer containing 20 Mailed Advertisements in zones
X1, X2, X3, and X4, and sent one Mailer containing 25 Mailed Advertisements in
zone X5. Franchisee Y sent one Mailer containing 10 Mailed Advertisements to
zones Y1, Y2 and Y3, and sent one Mailer containing 15 Mailed Advertisements to
zones Y4 and
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Y5. Franchisee X sends 4 Mailers per year, and Franchisee Y sends 6 Mailers per
year.
Local Revenue shall be deemed earned by Super Coups for the month of March
2000 as follows:
For Franchisee X:
Rate = $7
Mailing Zone Revenue:
Zone X1 - Mailing Zone Revenue : 20 x $7 = $140
Zone X2 - Mailing Zone Revenue : 20 x $7 = $140
Zone X3 - Mailing Zone Revenue : 20 x $7 = $140
Zone X4 - Mailing Zone Revenue : 20 x $7 = $140
Zone X5 - Mailing Zone Revenue : 25 x $7 = $175
Franchisee X Revenue = $140 + $140 + $140 + $140 + $175 = $735
For Franchisee Y:
Rate = $5
Mailing Zone Revenue:
Zone Y1 - Mailing Zone Revenue : 10 x $5 = $50
Zone Y2 - Mailing Zone Revenue : 10 x $5 = $50
Zone Y3 - Mailing Zone Revenue : 10 x $5 = $50
Zone Y4 - Mailing Zone Revenue : 15 x $5 = $75
Zone Y5 - Mailing Zone Revenue : 15 x $5 = $75
Franchisee Y Revenue = $50 + $50 + $50 + $75 + $75 = $300
Total Local Revenue for March, 2000 = 735 +300 = $1,035
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B. For the period commencing January 1, 2001 and for each calendar year
thereafter:
On or before October 1, 2000, and on or before October 1 of each year
thereafter, the parties shall jointly agree in writing on the amount of Local
Revenue for Basic Service deemed to be earned by Super Coups for Local
Advertising appearing on the SC Page for the following year. The parties shall
act in good faith using reasonable business efforts to agree upon the Local
Revenue for any period commencing after December 31, 2000. In the event that on
or before December 31, 2000 (or on or before December 31 of any year
thereafter), the parties are unable to mutually agree on the amount of Local
Revenue deemed earned by Super Coups for Local Advertising appearing on the SC
Page for the following year, then, for a sixty (60) day period following such
date, either party may terminate this Agreement by delivery to the other party
of thirty (30) days written notice of termination. In the event that neither
party terminates during such sixty (60) day period, then Super Coups shall be
deemed to earn Local Revenue for Basic Service appearing on the SC Page for the
then current year at the same rate as the immediately preceding year.
C. The scope and pricing of any other services relating to the CS Web
Site which are to be marketed by Super Coups or the Franchisees to Neighborhood
Businesses and which shall be included in Local Revenue, must be agreed upon in
writing executed by both parties.
11. Audit Rights. During the term of this Agreement and for a period of six
(6) months following the termination or expiration thereof, each party shall
have the right, upon fifteen (15) business days advance written notice to the
other party, to audit the books and records of the other party (during normal
business hours) necessary to confirm the accuracy of any determination relative
to monies paid or payable under this Agreement. All such audits shall be
performed at the offices of the party being audited unless otherwise agreed to
in writing by the party being audited. In the event any such audit reveals an
error in any amount paid or payable under this Agreement, then the party
entitled to recover monies as a result of such audit shall be promptly paid by
the other party, the amount properly due under Section 10 (the "Adjustment
Amount"). Further, should the amount of any Adjustment Amount exceed five
percent (5%) of the amount that should have been paid for the period audited,
then in addition to paying the Adjustment Amount, the owing party shall promptly
pay the other party interest on the Adjustment Amount at the Prime Rate plus two
(2%) percent as posted from time to time in the Wall Street Journal, National
Edition, from the date the monies were originally due until the Adjustment
Amount is paid, and (ii) reimburse the other party for all reasonable costs of
the audit.
12. CS Reports. CS will provide Super Coups with the following reports as of
the end of each month, no later than the 15th day of the ensuing month: (i) the
number and demographic profile of Members who have registered to the URL
www.coolsavings.com/supercoups, but excluding any data identifiable to
individual persons or households and (ii) the clips/responses to Advertising in
each Franchise Zone sorted by individual Franchisee, advertiser, salesperson and
product category based on the timely receipt by CS of all offer campaign data
needed by CS (in a
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form acceptable to CS) to produce such reports.
13. Press Releases. CS and Super Coups will jointly prepare all materials
released to the public describing this Agreement. Each party retains the right
to have final approval for each news/press release from the other party
mentioning any or all activities arising out of or related to this Agreement.
Notwithstanding the foregoing, upon expiration or termination of this Agreement,
the parties may issue news/press releases which only inform of the end of the
parties relationship, the effective date of the end of the parties relationship
without attributing blame or fault to either party. The notice shall not give
any statement of the reason for the end of the parties relationship. Each party
shall consult with the other party on the contents of such notice. Nothing
herein shall be construed to limit either party from disclosing any information
which such party has been advised by legal counsel is legally required to be
disclosed whenever possible, such disclosing party shall provide the other party
with advance notice of such required disclosure
14. Warranty Disclaimer. THERE ARE NO UNDERSTANDINGS, AGREEMENTS,
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (INCLUDING ANY REGARDING THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), NOT SPECIFIED HEREIN,
RESPECTING THIS AGREEMENT OR THE SERVICES TO BE PROVIDED BY CS HEREUNDER. EXCEPT
AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY WARRANTS THAT THE SC PAGE, THE CS
WEB SITE, OR ANY WEB SITE OF SUPER COUPS, AS THE CASE MAY BE, WILL PERFORM IN
THE MANNER EXPECTED OR WITHOUT INTERRUPTION, ERROR OR DEFECT. EXCEPT AS SET
EXPRESSLY FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR WARRANTIES AGAINST INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY RIGHTS NOT SPECIFICALLY ENUMERATED.
15. Limitation on Damages. EXCEPT FOR ANY INDEMNIFICATION OBLIGATIONS
SPECIFICALLY ASSUMED BY ANY PARTY UNDER THE TERMS OF THIS AGREEMENT, IN NO EVENT
WHATSOEVER (INCLUDING BUT NOT LIMITED TO ANY BREACH OF ANY WARRANTY UNDER THIS
AGREEMENT OR ANY OTHER BREACH OF THIS AGREEMENT) SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY (OR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE OTHER PARTY'S
RIGHTS) FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY
DAMAGES OF ANY KIND - INCLUDING LOST REVENUES OR PROFITS, LOSS OF BUSINESS OR
LOSS OF DATA - ARISING OUT OF THIS AGREEMENT (INCLUDING WITHOUT LIMITATION AS A
RESULT OF ANY BREACH OF ANY WARRANTY OR OTHER TERM OF THIS AGREEMENT),
REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS ADVISED, HAD
OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY THEREOF. CS' LIABILITY
SHALL IN ALL EVENTS BE LIMITED TO THE TOTAL AMOUNT PAID BY SUPERCOUPS TO CS
UNDER THIS AGREEMENT DURING THE SIX (6) MONTHS IMMEDIATELY PRECEDING THE DATE OF
THE BREACH.
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16. Arbitration. In the event of a dispute between the parties with regard to
any of the matters set forth in this Agreement, the parties will first make
reasonable efforts to resolve such dispute among themselves. If the parties are
unable to resolve the dispute within thirty (30) calendar days of the initiation
of such procedure, the dispute will be settled by arbitration as provided for
below, which will be the sole and exclusive procedure for the resolution of any
such dispute. The arbitration will be governed by the then existing rules of
the American Arbitration Association. One arbitrator shall be chosen pursuant to
the rules of the American Arbitration Association, provided however, that the
arbitrator so chosen shall not be employee, consultant, officer or director of
any party or of any affiliate of either party and who has not received any
compensation, directly or indirectly, from any party or any affiliate of any
party. The determination of the arbitrator as to the resolution of any dispute
will be binding and conclusive upon the parties. The fees and expenses of the
arbitrator will be paid 50% by each party. The arbitrator may award the
prevailing party its costs and expenses (including attorneys fees) of the
arbitration, as they deem appropriate and just. Any arbitration pursuant to
this Section 16 will be conducted in metropolitan Chicago, Illinois (in a place
mutually acceptable to the parties or selected by the arbitrators) if such
arbitration is commenced by Super Coups, and will be conducted in metropolitan
Boston, Massachusetts (in a place mutually acceptable to the parties or selected
by the arbitrators) if such arbitration is commenced by CS. Any arbitration
award may be entered in and enforced by any court having jurisdiction thereof,
and the parties consent and commit themselves to the jurisdiction of the courts
of the State of Illinois for purposes of the enforcement of any arbitration
award.
17. Governing Law. This Agreement shall be governed by the laws of the State
of Illinois. The parties hereto agree that any action to enforce the provisions
of this Agreement shall only be brought in the courts of the State of Illinois.
18. Notices. Any notices relating to this Agreement shall be given in writing
and shall be deemed sufficiently given, served, and received for all purposes
upon the first to occur of: actual receipt; delivery by generally recognized
overnight courier service; facsimile transmission with confirmation of
successful transmission (provided that, although such notice by facsimile shall
be effective upon such confirmation, the party sending such notice shall send an
additional copy of such notice in another manner permitted by this Agreement);
or three (3) days after deposit in the United States Mail, certified or
registered, return receipt requested, with postage prepaid, addressed as
follows:
CS Super Coups
-- -----------
8755 West Higgins Road 180 Bodwell Street
Suite 100 Avon Industrial Park
Chicago, Illinois 60631 Avon, MA 02322
Fax: (773) 693-1311 Fax: (508) 559-0220
Attention: President Attention: President and CEO
and General Counsel
20
<PAGE>
With a copy to: With a copy to:
Robert Gorman, Esq. Allen Holland, Esq.
Golden & Gorman, P.C. Lynch, Brewer, Hoffman & Sands
255 E. Brown Street 101 Federal Street
Suite 110 Boston, MA 02110
Birmingham, MI 48009 Fax: 617-951-0811
Fax: 248-433-1014
Or to such other address as a party shall provide written notice of to the other
party.
19. Modification/Waiver. No provision of this Agreement may be altered,
amended and/or waived, except by a written document signed by both parties
hereto setting forth such alteration, amendment, and/or waiver. The parties
hereto agree that the failure to enforce any provision or obligation under this
Agreement shall not constitute a waiver thereof or serve as a bar to the
subsequent enforcement of such provision or obligation or any other provisions
or obligation under this Agreement.
20. Severability. The provisions of this Agreement shall be deemed severable,
and the invalidity or unenforceability of any one or more of the provisions
hereof shall not affect the validity and enforceability of the other provisions
hereof.
21. Joint Drafting. Each of the parties hereto has joined in and contributed
to drafting this Agreement; there shall be no presumption favoring or burdening
any one or more parties hereto based upon draftsmanship.
22. Approvals. Any approval or consent required of any party hereto shall not
be unreasonably withheld or delayed. Further, any approval, consent or
disapproval not issued within any time period specified in this Agreement shall
be deemed to be an approval or consent.
23. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto and contains all of the agreements between said parties with
respect to the subject matter hereof. There is no statement, promise,
agreement, or obligation in existence which may conflict with the terms of this
Agreement or may modify, enlarge, or invalidate this Agreement or any provision
hereof. None of the prior and/or contemporaneous negotiations, preliminary
drafts, or prior versions of this Agreement leading up to its execution and not
set forth herein shall be used by any of the parties to construe or affect the
validity of this Agreement. Each party acknowledges that no representation,
inducement or condition not set forth herein has been made or relied upon by
either party. Further, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
subject matter hereof including that certain Letter Agreement between the
parties, dated as of August 10, 1999.
24. Assignment. Neither party may assign its rights or obligations hereunder
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the foregoing, either party
may, without the consent of the other party, assign this Agreement as part of a
merger or a sale of all or substantially all of such party's
21
<PAGE>
assets. This Agreement will bind and inure to the benefit of the successors and
assigns of the parties.
25. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. Photostatic or facsimile reproductions of this Agreement may be made
and relied upon to the same extent as originals.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"CS"
By: /s/ Steven M. Golden
------------------------------
Steven M. Golden,
Its: President/CEO
-----------------------------
"Super Coups"
By: /s/ E. Donald McKenzie
------------------------------
E. Donald McKenzie,
Its: President/CEO
-----------------------------
22
<PAGE>
EXHIBIT A
Designated Accounts
800-CONTACTS Poland Springs Inn
800-Mobiles Popular Book Club
ADT Security Professional Career Inst.
American Dry Basement Sear's Optical
Artistic Labels Stephen Kin-Book Club
Brinks Alarm System Stratford Career Institute
Cascade Auto Glass Ultramatic Sleep of FL
Castle Window-NJ Union Missions/World Vision
Castle Windows-CT United Family Buyer
Check Gallery Yves Rocher
Checks in the Mail
Child Magazine
Children's BOMClub
Columbia House
Columbia University-Clinic
Current Checks
Current Labels
Designer Checks
District Photo
Doubleday-Book Club
Doubleday-Crossings
Franklin Mint
FreeI.Net
Frugal Flowers
Global Life
Grolier Books
Guarantee Reserve
Home 1-2-3
Home Mortgage USA
Hosiery Corp.
House Doctors
Image Checks
Indiana Botanic
Information Labels
International Correspondence School
Kohl Group
Lane Bryant
Lenox
Michigan Bulb
Mousepad
Oreck Vacuum
Perrier Water
23
<PAGE>
EXHIBIT B
Form Of Access Agreement
1
<PAGE>
EXHIBIT C
CS Marks
2
<PAGE>
EXHIBIT D
Super Coups Marks
3
<PAGE>
EXHIBIT E
Exclusives
The following exclusives have been granted by CS to third parties, and no Local
Advertising may contain any coupons, discounts, rebates or other offers relating
to these exclusives:
1 All Consumer Packaged Goods
2 Credit Card Products - including, but not limited to charge cards, credit
cards, and other credit card related products (i.e. credit card protection
insurance, credit card disability insurance, etc.)
3 Internet (ISP) Products - including, but not limited to the following:
internet service providers
internet telephones
DSL services
ISP Cable access
ISDN services
dial up ISP access
internet or online service providers
4 Mortgages and mortgage related services
5 Telecommunications Services - including, but not limited to the following:
Residential Long Distance, domestic and international (including
resellers)
Local Telephone service
Intralata
Callings cards
Pre-paid calling cards
Personal 800 service
Telephone Directory Assistance
Collect Calling (Dom. & Int'l)
Dial around access (10-10-XXX)
IP Telephony
4
<PAGE>
EXHIBIT E - CONTINUED
Exclusives
6 Advertisements from or relating to the products or services of the
following specific companies:
America Online
Ameritech
AT&T
Bell Atlantic
Bell South
Cable & Wireless Communications
Compuserve
Earthlink
Excite
GTE
Lycos
NexTel
MicrosoftMSN
Mindspring
Qwest
SBC Communications
Sprint
SNET
Tel-Save
US West
Yahoo
5
<PAGE>
ACCESS AGREEMENT
THIS ACCESS AGREEMENT is effective as of the ____ day of ____________,
2000, by and between coolsavings.com inc., a Michigan corporation (hereinafter
referred to as ("CS") and ___________________________________, a ______________
corporation (hereinafter referred to as "Franchisee").
W I T N E S S E T H:
WHEREAS, Franchisee desires access to CS's website to post advertising for
local neighborhood retailers pursuant to CS's agreement with Mail Coups Inc.,
("Super Coups"), dated____________.
NOW, THEREFORE, in consideration of the mutual promises, agreements,
covenants and representations set forth herein, the adequacy, sufficiency and
receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. CS Website Access. Upon the full execution of this Agreement, CS will
provide Franchisee with access to CS's proprietary web based offer preparation
software known as Savings Center and other proprietary software (collectively
the "Software"), through any industry standard internet dial up connection.
Franchisee is hereby only authorized to use the Software to create, edit proof
and approve proposed advertising for submission to Super Coups and CS.
Franchisee acknowledges that CS retains all ownership rights to the Software and
that CS retains the right to withdraw Franchisee's access and terminate this
Agreement at any time, without reason. Franchisee further acknowledges that it
acquires no right or license to any version of iteration of the Software by
virtue of Franchisee's use thereof, this Agreement or any contribution
Franchisee may make to the Software.
2. Advertising Content. Any advertising posted on CS's website by
Franchisee ("Advertising") shall conform with CS's standards ("Standards") then
in effect, which Standards shall be made available to Franchisee by CS from time
to time, as well as all modifications thereto.
2.1 Notwithstanding anything to the contrary, all advertising is at
all times subject to CS' approval. CS reserves the right at all times to
refuse, reject, censor or withdraw (collectively cancel) without notice any
Advertising which CS deems to be potentially violative of another parties
intellectual property rights, is in bad taste, is not in accordance with the
Standards, is not in keeping with the CS or Super Coups brand image, may
potentially cause liability to CS, or is otherwise improper as determined by CS
in its sole business discretion.
3. Disclaimer of Liability. CS shall not be liable for any loss or damage
whatsoever suffered by Franchisee or an advertiser as a result of, or arising
from, any Advertising (including but not limited to, the failure of any
Advertising, at any time, to appear on, function, or be distributed by CS's
website, wherein CS's sole liability shall be to post such Advertising on its
website at a later date).
4. Warranty Disclaimer. THERE ARE NO UNDERSTANDINGS, AGREEMENTS,
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED (INCLUDING ANY REGARDING THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), NOT SPECIFIED HEREIN,
RESPECTING THE SOFTWARE THIS AGREEMENT OR THE SERVICES TO BE PROVIDED BY CS. It
is further agreed that in no event whatsoever (including but not limited to any
1
<PAGE>
breach of any warranty under this Agreement or any other breach of this
Agreement) shall CS be liable for any direct, indirect, special or consequential
damages.
5. Miscellaneous. The provisions of this Agreement are severable. This
Agreement constitutes the entire agreement between the parties hereto and
contains all of the agreements between said parties with respect to the subject
matter hereof. This Agreement shall be governed by the laws, and Franchisee
hereby consents to the jurisdiction of the courts, of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date set forth above.
Witnesses: "CS"
coolsavings.com inc.
_____________________________ By:____________________________________
_____________________________ Its:___________________________________
"FRANCHISEE"
_____________________________ By:____________________________________
_____________________________ Its:___________________________________
2
<PAGE>
EXHIBIT D
SUPER COUPS MARKS
3
<PAGE>
Mark Serial No. Registration No. Registration Date
SUPER COUPS
MONEY-SAVING COUPONS
FOR THE WHOLE FAMILY
and design
The Mark was previously assigned from Super Coups, Inc.: recorded on March 9,
1989 at Reel 0642 and Frame 0348.
COMMUNITY MARKETING 74-583831 2000455 September 10, 1996
PROFILES
<PAGE>
[GRAPHIC]
THE UNITED STATES OP AMERICA
CERTIFICATE OF REGISTRATION
This is to certify that the records of the Patent and Trademark Office show that
an application was filed in said Ofice for registration of the Mark shown herin,
a copy of said Mark and pertinent data from the Application being annexed hereto
and made a part hereof.
And there having been due compliance with the requirements of the law and with
the regulations prescribed by the Commissiones of Patents and Trademarks.
Upon examination, it appeared that the applicant was entitled to have said Mark
registered under the Trademark Act of 1946, and the said Mark has been duly
registered this day in the Patent and Trademark Office on the
PRINCIPAL REGISTER
to the registrant named herein.
This registration shall remain in force for Twenty Years unless sooner
terminated as provided by law.
In Testimony Whereof I have hereunto set my hand and
caused the seal of the Patent and Trademark Office
to be affixed this eleventh day of March 1986.
/s/ Donald [ILLEGIBLE]
Commissioner of Patents and Trademarks
[SEAL]
<PAGE>
NOTICE
This Registration will be canceled by the Commissioner of Patents and
Trademarks at the end of six years following the date of registration, unless
within one year next preceding the expiration of such six years, the registrant
files in the Patent and Trademark Office an affidavit showing that said mark is
in use in Commerce or showing that its nonuse is due to special circumstances
which excuse such nonuse and is not due to any intention to abandon the mark*.
* A fee for each class must accompany the affidavit. Consult 37 CFR (ss.)2.6 to
determine the appropriate fee at time of filing.
<PAGE>
Int. Cl: 35
Prior U.S. Cl.:101
Reg. No. 1,386,255
United States Patent and Trademark Office Registered Mar. 21 1986
SERVICE MARK
PRINCIPAL REGISTER
[GRAPHIC]
SUPER COUPS, INC. (MASSACHUSETTS COR- NO CLAIM IS MADE TO THE EXCLUSIVE
PORATION) RIGHT TO USE "SUPER" AND "MONEY-
55 CENTRAL STREET SAVING COUPONS", APART FROM THE
STOUGHTON, MA 02072 MARK AS SHOWN
FOR: DIRECT MAIL ADVERTISING SERV- SER. NO. 462,946, FILED 1-27-1984
ICES IN CLASS 35 (U.S. CL 101)
FIRST USE 2-10-1981; IN COMMERCE AMOS T. MATTHEWS, JR. EXAMINING AT-
2-30-1981 TORNEY
<PAGE>
NOTICE
This registration will be canceled by the Commissioner of Patents and Trademarks
at the end of six years following the date of registration, unless within one
year next preceding the expiration of such six years, the registrant files in
the Patent and Trademark Office an affadavit showing the said mark is in use in
Commerce or showing that its nonuse is due to special circumstances which excuse
such nonuse and is not due to any intention to abandon the mark*.
*A fee for each class must accompany the affadavit. Consult 37 CFR (ss.)2.6 to
determine the appropriate fee at time of filing.
<PAGE>
Exhibit 10.17
PROGRAM AGREEMENT
-----------------
THIS PROGRAM AGREEMENT by and between First Data Merchant Services
Corporation, a Florida corporation ("FDMS"), and coolsavings.com inc., a
Michigan corporation ("CSI"), is made this 17th day of February, 2000 (the
"Effective Date").
R E C I T A L S:
WHEREAS, FDMS has entered into certain processing services agreements with
its Channels, as defined below, pursuant to which such Channels acquire merchant
credit card transactions through merchant processing agreements between the
respective Channel and merchants;
WHEREAS, CSI operates a savings destination site on the Internet at
www.coolsavings.com (the "CSI Web Site") wherein consumers who are enrolled with
CSI ("CSI Members") may obtain many varied savings, including but not limited
to, coupons and other discounts (the "CSI Member Programs");
WHEREAS, FDMS has informed CSI that it has developed and owns a proprietary
system (the "FDMS System") through which FDMS provides Fulfillment Services;
WHEREAS, CSI and FDMS desire to cooperate to develop and launch various
Joint Programs as defined in Section 1 herein;
WHEREAS, the parties have already developed one Joint Program that will
initially only be offered to FDMS Merchants in the restaurant industry (the
"CoolDining Program"); and
WHEREAS, the parties desire to document the terms under which the parties
will provide the CoolDining Program and other Joint Programs, all as set forth
herein.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree
as follows:
1. Definitions. The following terms shall have the following meanings when
capitalized in this Agreement:
a. "Affiliate" shall mean: (i) any entity which, directly or indirectly,
owns or controls, is owned or is controlled by or is under common
ownership or control with FDMS; and (ii) Alliances.
b. "Alliance" shall mean any venture (in any form, including in
corporate, partnership or limited liability company form) or
contractual alliance now or hereafter entered into between FDMS (or
any of its Affiliates) and one or more third parties for the provision
of Payment Processing Services pursuant to an arrangement whereby FDMS
or its Affiliate shares the economic benefit of ownership of merchant
contracts through profit sharing, revenue sharing, a royalty interest,
or otherwise.
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c. "Auditor" shall mean any of the "Big Five" public accounting firms.
d. "Channel" shall mean: (i) an Alliance; (ii) a FDMS Bank; and (iii)
such other third parties as FDMS and CSI may agree to in writing.
e. "Channel Participation Agreement" shall mean an agreement between FDMS
and a Channel pursuant to which such Channel agrees to market and sell
a Joint Program or Programs to FDMS Merchants pursuant to a Merchant
Participation Agreement. The parties acknowledge and agree that a
Channel Participation Agreement may be in the form of an addendum to
the extent FDMS or its Affiliate already has a master services or
alliance agreement with such Channel.
f. "CSI Member Information" shall mean: (i) Program Member Registration
Data and Program Member Offer Selection Data as described in Exhibit
6(h); and (ii) CSI Member profile data obtained from "cookies";
provided by CSI to FDMS, a Channel, or their agents, but specifically
excluding any information that FDMS can prove was obtained
independently from CSI.
g. "CSI Web Site Interface" shall mean the software and related systems
that allow the CSI Web Site and related CSI systems and servers to
interface with FDMS or its agents to enable the transmission of
Transmitted Data.
h. "Exclusivity Exception" shall mean the following exception to the
specific exclusivity rights of FDMS set forth in this Agreement to
provide Fulfillment Services for Joint Programs (including the
CoolDining Program): the right of CSI to enter into an agreement with
American Express, Discover, a private label card for which FDMS
provides less than 50% of all settlement services, and/or Alliance
Data Systems, Inc. pursuant to which such party will provide
Fulfillment Services for a Joint Program or for another program that
provides for the issuance of a discount directly to a CSI Member's
American Express, Discover, or private label card, upon such CSI
Member "clicking" or otherwise enabling a coupon or other similar
offer and redeeming such coupon or offer at a merchant's web site,
business premises, or through a catalogue, provided that CSI may only
enter into an arrangement with Discover so long as FDMS provides less
than 50% of all settlement services for Discover.
i. "FDMS Bank" shall mean a bank with whom FDMS and/or an Affiliate have
entered into an agreement to provide certain Payment Processing
Services.
j. "FDMS Merchant" shall mean a merchant that has entered into an
agreement with FDMS and/or a Channel under which FDMS or such Channel
provides the Payment Processing Services or other services to such
merchant.
k. "Fulfillment Services" shall mean the provision of all of the
following services: (i) the matching of a Merchant Offer against the
redemption of that Merchant Offer by a CSI Member; (ii) the
performance of all processing services necessary to prepare the
appropriate credit arising out of such redemption for submission to
the entity responsible for the posting said credit to the CSI Member's
card account (e.g. the Visa or MasterCard Association), for posting to
the CSI Member's card account; (iii) the submission of the appropriate
credit arising out of such
2
<PAGE>
redemption to the entity responsible for the posting said credit to
the CSI Member's card account ; and (iv) the performance of reasonable
services to resolve problems with the entity responsible for posting
the appropriate credit to the CSI Member's card account to effectuate
the posting of the appropriate credit to the CSI Member's card
account.
l. "Joint Programs" shall mean: (i) CoolDining Program; and (ii) other
CSI Member Programs that satisfy all of the following requirements:
(1) the program requires Fulfillment Services; (2) FDMS agrees to
provide the Fulfillment Services; (3) CSI agrees to provide access to
such program to CSI Members; and (4) the terms and conditions of the
program (including but not limited to, revenue and expense splits)
have been agreed upon by the parties in a written addendum to this
Agreement.
m. "Marks" shall mean the logos, trademarks, trade names, domain names
and/or service marks owned or licensed by a party and used in carrying
out the services and obligations contemplated under this Agreement.
n. "Merchant Offer" shall mean the Joint Program offer that a merchant
makes to CSI Members through the CSI Web Site or a Joint Program web
site from time to time.
o. "Merchant Participation Agreement" shall mean an agreement between
FDMS, an Affiliate, or CSI, as applicable, and an FDMS Merchant
pursuant to which such FDMS Merchant agrees to participate in a Joint
Program.
p. "Payment Processing Services" shall mean the services FDMS and/or its
Affiliates provide to FDMS Merchants, including but not limited to
authorization, data capture, processing, settlement and reconciliation
of credit and debit card transactions.
q. "Program Terms" shall mean those certain on-line terms and conditions
located on the CSI Web Site that a CSI Member must access and agree to
prior to participating in a Joint Program. CSI shall be a party to all
Program Terms.
r. "Termination Date" shall mean (a) the date on which this Agreement
expires by its terms; or (b) the date on which a party gives written
notice to the other of termination under this Agreement.
s. "Transaction Data" shall mean the data that: (i) FDMS or a Channel
captures in the ordinary course of business as a result of providing
the Payment Processing Services when a consumer pays by credit card,
(by way of example but not limitation, the credit card number, amount
of purchase, date of purchase, and other information related to a
specific transaction); and (ii) FDMS or a Channel provides to CSI as
Transmitted Data, but specifically excluding any information which CSI
can prove was obtained independently from FDMS or its Affiliates.
t. "Transmitted Data" shall mean, as to each party, the data fields that
such party maintains, captures and transmits to the other in order to
effect the CoolDining Program, as set forth in Exhibit 6(h).
3
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u. "Yclip" shall mean Yclip, Inc., a party with whom FDMS has entered
into a separate agreement under which Yclip and FDMS have (i)
established interfaces between Yclip and FDMS that allow for the
transmission of Transmitted Data between the parties for purposes of
allowing FDMS to provide the Fulfillment Services; and (ii) authorize
Yclip, on behalf of FDMS, to establish interfaces between Yclip and
third parties that allow Yclip to facilitate the transmission of
Transmitted Data between FDMS and such third parties.
2. Term. The term of this Agreement shall be three (3) years commencing on
the Effective Date, unless earlier terminated as provided herein.
3. Joint Programs. The parties will use commercially reasonable efforts to
implement and launch Joint Programs. In addition to the CoolDining Program
(which the parties shall launch and operate as described in Section 6), the
parties currently contemplate the following programs will become Joint
Programs under this Agreement, as follows:
a. Other Targeted Programs. The parties will use good faith, diligent
efforts to roll out other Targeted Programs for non-restaurant
merchants, in accordance with the terms of the executed Addendum
covering each such program, within one year of the Effective Date so
long as the CoolDining Program is reasonably successful at such time.
For purposes of clarification only, a Targeted Program is a Joint
Program requiring payment of a membership fee by CSI Members for
Merchant Offers in a specific industry. The CoolDining Program is a
Targeted Program.
b. CSI Web Site Program. The parties will use good faith, diligent
efforts to roll out a program, in accordance with the terms of the
executed Addendum covering such program, under which FDMS will provide
Fulfillment Services for Merchant Offers presented at the CSI Web Site
(the "CSI Web Site Program"), no later than September 30, 2000.
c. Other Programs. The parties will use good faith, diligent efforts to
roll out other programs requiring Fulfillment Services, in accordance
with the terms of the executed Addendum covering each such program,
within the time frame set forth in said Addendum.
Subject to the Exclusivity Exception, FDMS shall be the exclusive provider
of Fulfillment Services for (x) each program offered by CSI that requires
Fulfillment Services (a "New Program"), and (y) the Joint Programs, for one
(1) year from the date of launch of such New Program or Joint Program,
except for New Programs for which CSI requires technology or capabilities
that FDMS does not possess. FDMS shall have sixty (60) days from the date
it receives written notice from CSI setting forth the technology and
capabilities that CSI requires for the New Program that CSI seeks to
launch, to obtain such technology and capabilities and to so inform CSI in
writing that it possesses the same. In the event FDMS fails to so obtain
the required technology and capabilities and so inform CSI in writing that
it possesses the same within said 60 day period, then CSI shall be entitled
to enter into an agreement with a third party to provide the Fulfillment
Services for that New Program, as long as such third party agrees to
provide the technology and capabilities that CSI required of FDMS for such
New Program.
4
<PAGE>
Merchants who enroll to participate in any Joint Program shall be referred
to as "Participating Merchants".
4. Channel Participation. As soon as practicable after the Effective Date,
FDMS shall solicit Channels to participate in the Joint Programs. CSI shall
provide reasonable assistance to FDMS in its effort to sign up Channels.
Each Channel electing to participate in Joint Programs (the "Participating
Channels") shall be required to enter into a Channel Participation
Agreement, which shall, at a minimum, provide express authorization from
such Channel allowing FDMS and CSI to use Transaction Data for the purposes
of providing the Joint Programs and charging FDMS Merchants applicable fees
on behalf of the Participating Channel.
5. Merchant Processing Agreement. Within thirty (30) days of the Effective
Date CSI shall enter into FDMS' standard Merchant Processing Agreement with
FDMS and its designated sponsoring bank pursuant to which FDMS will process
CSI's bankcard transactions for the Joint Programs, including but not
limited to the processing of Program Member Fees for the Joint Programs
(the "MPA")
6. The CoolDining Program.
a. CoolDining Program Web Site. CSI shall establish a separate URL
address(es) known as www.CoolDining.com dedicated to the CoolDining
Program ("CoolDining Program Web Site") that may be accessed through a
link on the CSI Web Site, which shall be prominently displayed "above
the fold" for no less than one hundred twenty (120) days after the
CoolDining Launch (as defined below). Within ninety (90) days of the
Effective Date: CSI will complete development of the CoolDining
Program Web Site to the reasonable satisfaction of FDMS; and FDMS will
incorporate the CoolDining Program into its proprietary online
incentive management site (the "yourwebvalues Site") to the reasonable
satisfaction of CSI.
i. The CoolDining Program Web Site shall display Merchant Offers
that may be selected by CoolDining Program Members (as defined in
Section 6(c) below). In addition, the CoolDining Program Web Site
shall allow CSI Members to enroll in the CoolDining Program, as
set forth in Section 6(c).
ii. FDMS shall prominently display "above the fold" on the
yourwebvalues Site a linking image (to be supplied by CSI)
linking to the CoolDining Program Web Site. The Channels may, at
their option, also include the same linking image on their
respective web sites linking to the CoolDining Program Web Site.
b. Implementation Plan. Within thirty (30) days of the Effective Date
the parties will use their best efforts to develop and agree upon an
implementation plan setting forth the process through which the
CoolDining Program will be launched. Each party will identify one
representative to act as such party's contact for day-to-day
implementation of the CoolDining Program. Each party will provide such
cooperation and assistance to the other as may be reasonably required
or requested in order to develop the implementation plan and to
implement the CoolDining
5
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Program. The parties shall launch the CoolDining Program by July 15,
2000 (the "CoolDining Launch") in accordance with the implementation
plan. In the event the CoolDining Launch is not achieved by July 15,
2000 due solely to FDMS' acts and/or omissions, then FDMS shall pay to
CSI a late fee in the amount of $25,000. In the event the CoolDining
Launch is not achieved by September 1, 2000 due solely to FDMS' acts
and/or omissions, then all exclusivity rights to provide Fulfillment
Services granted FDMS under this Agreement shall be immediately and
automatically terminated.
c. CSI Member Enrollment. In order to enroll in the CoolDining Program,
CSI Members will be required to go to the CoolDining Program Web Site
and: (i) provide the number(s) and expiration date(s) of a valid VISA
and/or MasterCard credit card (or other credit cards covered under the
Exclusivity Exception), and such other information as CSI and FDMS may
otherwise agree upon in writing for said VISA and MasterCard credit
cards; (ii) agree to pay an annual fee for participation in the
CoolDining Program in an amount to be determined by CSI after
consultation with FDMS (the "CoolDining Program Fee"); and (iii) agree
to other terms and conditions of the CoolDining Program as FDMS and
CSI mutually agree upon and which will be attached hereto as Exhibit
6(c) within ninety days of the Effective Date, including but not
limited to the items currently set forth in Exhibit 6(c). CSI Members
who satisfy (i), (ii) and (iii) above shall be known as CoolDining
Program Members. FDMS shall process the CoolDining Program Fees
pursuant to the MPA, as set forth in Section 5.
i. From time to time during the term of this Agreement, CSI shall
design and conduct CoolDining Program Member satisfaction surveys
and share the results of the same promptly with FDMS.
ii. CSI shall promptly respond to e-mail questions about the
CoolDining Program received from CoolDining Program Members. Such
response shall be by e-mail and may include directing CoolDining
Program Members to FDMS for handling of credit card related
issues. CSI shall copy a designated FDMS representative on all
responses referencing FDMS.
iii.
d. FDMS Merchant Enrollment. FDMS Merchants may be enrolled to
participate in the CoolDining Program by either CSI or a Participating
Channel. FDMS Merchants that enroll through CSI shall be considered
CSI-Sourced Merchants and FDMS Merchants that enroll through a
Participating Channel shall be considered FDMS-Sourced Merchants.
i. FDMS Merchants who desire to participate in the CoolDining
Program will be required to enter into a Merchant Participation
Agreement, which will set forth the terms of the CoolDining
Program (to be determined jointly by CSI and FDMS within thirty
(30) days of the Effective Date) (the "FDMS Merchant
Participation Agreement"). All FDMS Merchants (both CSI-Sourced
Merchants and FDMS-Sourced Merchants) with Internet access who
desire to participate in the CoolDining Program shall be directed
to an Internet site(s) to be agreed upon by the parties within
thirty (30) days of the Effective Date, to enroll. All web pages
accessible by said
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FDMS Merchants at such Internet Site shall display the CSI name
and logo in a prominent place. Furthermore, in recognition of the
fact that certain FDMS Merchants who desire to participate in the
CoolDining Program may not have access to the Internet, CSI and
FDMS shall develop within 30 days of the Effective Date an off-
line enrollment process for such FDMS Merchants. The applicable
Participating Channel shall be party to the FDMS Merchant
Participation Agreement for all FDMS-Sourced Merchants, and CSI
shall be party to the FDMS Merchant Participation Agreement for
all CSI-Sourced Merchants.
ii. Each party shall provide reasonable information to the other upon
request regarding what FDMS Merchants it (or in the case of the
FDMS, the Channels) has signed up.
iii. CSI will provide in-store promotional materials reasonably
requested by FDMS for Participating Merchants to post on their
premises during the term of the Agreement.
e. CSI Restriction. CSI shall not solicit or sell the CoolDining
Program to a Channel without the prior approval of FDMS.
f. CoolDining Program Participation. The Channel Participation Agreement
will require Participating Channels to use commercially reasonable
efforts to target the CoolDining Program to FDMS Merchants. Likewise,
CSI shall target the CoolDining Program to FDMS Merchants located in
cities wherein a reasonable number of FDMS Merchants have contracted
to participate in the Program.
g. Merchant Offers. CSI-Sourced Merchants will be directed to a CSI
branded web site for creating Merchant Offers. Yclip will build and
host this site. FDMS-Sourced Merchants will be directed to the
yourwebvalues Site or a Channel-branded web site for creating Merchant
Offers, provided that such Channel-branded web site will include
reference to the CoolDining Program specifically, and such reference
shall prominently display CSI's name and logo.
i. Each site used to create Merchant Offers will be embedded with
the Yclip Offer Making Tool, which will be enhanced prior to the
CoolDining Launch if necessary in order to deliver Merchant
Offers to CSI in a mutually agreed upon format that satisfies the
criteria mutually agreed upon between the parties as soon as
practicable (but no later than thirty (30) days after the
Effective Date) to be attached to this Agreement as Exhibit
6(g)(i), and as mutually amended thereafter (the "Offer
Standards"). All Merchant Offers submitted to CSI shall comply
with the Offer Standards. FDMS shall proof and edit all Merchant
Offers prior to the submission of each such Merchant Offer to CSI
(and the cost of such service shall be a Deduction as more fully
set forth on Exhibit 6l). From time to time, CSI may conduct
quality assurance testing on samples of proposed Merchant Offers
submitted for posting to ensure such proposed Merchant Offers
comply with the Offer Standards then in effect. The first time
more than ten percent (10%) offers in a particular month, fail to
pass such testing, CSI shall notify FDMS in writing, and FDMS
shall take reasonable efforts to ensure that proposed Merchant
Offers submitted to CSI thereafter comply with the Offer
Standards then in effect. The second time more than ten percent
(10%) offers fail to pass such testing in a particular month, OR
the first time more than
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twenty-five percent (25%) offers fail to pass such testing in a
particular month, then: (i) CSI may elect to perform all proofing
and editing of all Merchant Offers in place of FDMS and the cost
of such of such service shall be a Deduction under Exhibit 6l; or
(ii) CSI shall be entitled to immediately terminate this
Agreement pursuant to Section 14f. FDMS, at its sole cost and
expense, shall obtain a license enabling CSI to use Yclip's Offer
Making Tool during the term of this Agreement, and for that
period thereafter necessary to wrap up the parties obligations
under this Agreement under Section 17, provided that CSI's use
may be subject to standard terms and conditions.
ii. Notwithstanding anything contained in this Agreement to the
contrary, all Merchant Offers are at all times subject to CSI's
reasonable approval. CSI reserves the right at all times to
refuse, reject, censor, or withdraw, without notice, any Merchant
Offer that CSI deems to be improper for any reason. CSI will
immediately notify FDMS of any rejected Merchant Offer and will
cooperate with FDMS and the applicable FDMS Merchant in order to
educate such FDMS Merchant on the Offer Standards and ways to
resubmit a Merchant Offer that will not result in rejection.
iii. Merchant Offers for the CoolDining Program may be posted on web
sites other than the CoolDining Program Site.
h. Data Transmission. Each party shall capture and maintain its
respective Transmitted Data, as set forth in Exhibit 6(h), and
transmit the Transmitted Data to the other party through the Program
Interface (as defined in Section 7 below).
i. Fulfillment Services. FDMS shall provide Fulfillment Services for the
CoolDining Program in accordance with the performance standards set
forth on Exhibit 11, except with respect to those credit cards covered
under the Exclusivity Exception. For each credit card registered in
the CoolDining Program for which FDMS is required to provide
Fulfillment Services, each fulfilled Merchant Offer shall appear on
the applicable CoolDining Program Member's credit card statement as a
separate transaction item clearly denoted as a "CoolDining" credit,
pursuant to the terms of the MPA.
j. Customer Service. FDMS will provide customer service to the
Participating Merchants through toll free lines or e-mail. Program
Members seeking customer service will first be directed to e-mail CSI
for assistance. CSI shall provide such assistance via e-mail to the
extent it can reasonably do so. In the event CSI is unable to
reasonably provide the necessary assistance, then CSI shall refer the
Program Member to FDMS for assistance, and FDMS shall provide such
assistance to the extent it can reasonably do so. FDMS shall provide
such assistance through e-mail. Provided however, upon the first to
occur of: (i) FDMS receiving more than 5000 e-mails in any one month
during the first six (6) months after the CoolDining Launch; or (ii)
six (6) months after the CoolDining Launch; (the "Trigger Date") FDMS
and CSI will review the costs incurred by FDMS in providing such
Program Member customer service. In the event FDMS is unwilling to
continue providing such services without any reimbursement for doing
so, and the parties are unable to agree in writing upon such a
mutually acceptable level of reimbursement within thirty (30) days
after the Trigger Date,
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then for a period ending on the sixty-first (61st) day after the
Trigger Date, FDMS shall be entitled to terminate this Agreement
effective upon written notice to CSI. Upon any such termination
hereunder, the terms of Section 17 shall apply.
k. CoolDining Fees. FDMS shall collect all CoolDining program fees from
CSI-Sourced Merchants and FDMS-Sourced Merchants and shall remit to
CSI the amounts set forth in Exhibit 6(k) within forty-five (45) days
of the end of each month. Provided however, in the event that fees
collected from Participating Merchants in any 90 day period is less
than fifty percent (50%) of the amount owing, then either CSI or FDMS
may terminate this Agreement pursuant to Section 14f. CSI shall
collect CoolDining Program Fees from CoolDining Program Members and
remit to FDMS the amounts set forth in Exhibit 6(l) within forty-five
(45) days of the end of each month. FDMS may charge a Participating
Channel any fees FDMS deems appropriate for participation in the
CoolDining Program. Likewise, the Participating Channels and CSI, as
applicable, may charge the FDMS Merchants any fees such party deems
appropriate for participation in the CoolDining Program.
Notwithstanding the foregoing, the parties may elect to market the
CoolDining Program to the Channels with a suggested retail price.
i. FDMS shall use commercially reasonable efforts to collect all
fees from FDMS Merchants related to the CoolDining Program.
l. Revenue Sharing. The parties shall share revenue from CoolDining
Program Fees pursuant to the calculation set forth in Exhibit 6(l).
m. Exclusivity. Subject to the Exclusivity Exception, FDMS shall be the
exclusive provider of Fulfillment Services with respect to the
CoolDining Program.
n. Termination of CoolDining Program. Either party may terminate the
CoolDining Program at any time after six (6) months after the
CoolDining Launch in the event either party is dissatisfied with the
results of the CoolDining Program. In the event a party elects to
terminate the CoolDining Program under this Section, such party shall
provide the other party with not less than sixty (60) days prior
written notice. In the event of termination of the CoolDining Program,
the parties shall comply with the terms of Section 17 (Effect of
Termination) as it relates to their obligations with respect to the
CoolDining Program only. Termination of the CoolDining Program shall
not relieve either party of other obligations under this Agreement not
related to the CoolDining Program.
7. Interface Development. Yclip will develop an interface and/or a web site
between CSI's server and Yclip by June 1, 2000 that will allow: (i) each
party to transmit the Transmitted Data to one another (through Yclip); and
(ii) FDMS to provide the Fulfillment Services (the "Program Interface").
The parties will provide reasonable cooperation, information and assistance
in order to achieve development of the Program Interface. FDMS and/or Yclip
shall own all rights in or to the Program Interface, subject to CSI's
rights under Section 23 (Ownership). If Yclip fails to "develop" the
Program Interface by June 1, 2000, then FDMS shall pay to CSI a late fee in
the amount of $25,000. As used herein, "develop" shall mean having the
Program Interface in a state of
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operation wherein it is capable of being reasonably tested but not
necessarily of being able to function in a production mode.
8. Authorization to Place Cookies. CSI hereby authorizes and will provide
access to Yclip to place a cookie on the browser of each Joint Program
Member solely for the purpose of providing any Joint Program or any
component of such Joint Program hereunder. All information obtained
therefrom shall be CSI Member Information and shall be owned exclusively by
CSI.
9. CSI Nonsolicitation Obligation. CSI shall not (i) knowingly solicit any
FDMS Merchants for services similar to or competitive with the Payment
Processing Services; or (ii) engage or retain a third party to solicit the
FDMS Merchants for services similar to or competitive with the Payment
Processing Services (the "Non-Solicitation Obligation").
10. FDMS Nonsolicitation Obligation. FDMS shall not use CSI Member Information
under this Agreement to knowingly solicit, or engage or retain any third
party to solicit, such CSI Members for any reason other than with respect
to the Joint Programs unless otherwise agreed to in writing by CSI. Nothing
in this Section shall preclude FDMS or its Affiliates (or third parties on
their behalf) that solicit consumers for various products and services in
the ordinary course of business from continuing to do so, provided that
they obtain the names of the consumers from a source other than the CSI
Member Information (also, the "Non-Solicitation Obligation").
11. Performance Standards. For all Joint Programs, including the CoolDining
Program, each party shall meet the respective performance standards set
forth in Exhibit 11 (the "Performance Standards"). In the event a party
fails to meet any Performance Standard, the other party shall provide
written notice of the specific failure and the failing party shall promptly
initiate a cure of such failure and complete such cure as soon as
practicable. Three (3) failures of a party to meet all applicable
Performance Standards in any consecutive three (3) month period shall be
considered a material breach of this Agreement (an "Ongoing Performance
Standard Breach") and subject to the other party's right to terminate this
Agreement under Section 14(b) (Termination for Ongoing Performance Standard
Breach).
12. Hyperlink. CSI will prominently post a linking image provided by FDMS at
the CSI and/or CoolDining Web Site that will promote FDMS as a provider of
Payment Processing Services. CSI shall refer any merchants requesting or
seeking Payment Processing Services to FDMS, and CSI shall not make any
referral to or otherwise promote any provider of Payment Processing
Services other than FDMS during the term of this Agreement, except for any
provider of Payment Processing Services covered under the Exclusivity
Exception.
13. License. Each party hereby grants to the other party a nonexclusive,
limited, revocable, nontransferable, nonassignable license to use the Marks
of such party for the sole purposes expressly set forth herein. A party's
use of the other's Mark(s) requires the prior approval of the other party,
which shall not be unreasonably withheld. Furthermore, each party retains
the right to ensure the other party maintains the quality of the Marks of
the other party and to revoke this license in the event such quality is not
upheld. Each party accepts such grant from the other, acknowledges and
admits that it has no right, title or interest in the other's Marks other
than the right to use the Marks as set forth herein,
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and agrees to knowingly do nothing inconsistent with the other party's
ownership rights which would in any material way cause dilution of any of
the other party's Marks.
14. Termination. Either party may at its option immediately terminate this
Agreement by giving written notice thereof to the other party in the event
of the occurrence of any of the following:
a. Failure of the other party to correct or cure any material breach of
this Agreement by such other party within thirty (30) calendar days
after receipt of a written notice from the non-breaching party
specifying such breach, provided that the breaching party promptly
commences and diligently pursues a cure as soon as practicable after
receiving notice thereof.
b. An Ongoing Performance Standard Breach;
c. A material breach by the other party of Section 20 (Use of Data),
Section 21 (Privacy Policy), or Section 22 (Proprietary Information);
d. Failure by a party to pay monies required to be paid under this
Agreement, when due (an "Economic Default"), within twenty (20) days
after written notice to the other party identifying the Economic
Default, provided however, in the event that a party commits more than
two (2) Economic Defaults in any six (6) month period under this
Agreement, then upon the occurrence of the next Economic Default by
such party within that six month period, the non-defaulting party
shall be entitled to immediately terminate this Agreement upon written
notice to the defaulting party and no cure period or right to cure
shall be available to the defaulting party;
e. The other party becomes insolvent, or a petition in bankruptcy is
filed, or any similar relief is filed by or against the other party,
or a receiver is appointed with respect to any of the assets of the
other party, or a liquidation proceeding is commenced by or against
the other party; or
f. As otherwise specifically provided in another Section of this
Agreement.
15. Termination by FDMS in the Event of Change of Control. In the event that
all or a controlling interest in CSI is acquired by an unrelated third
party by merger, acquisition or private or public purchase of securities or
assets, and such third party is a competitor of FDMS as a provider of
Payment Processing Services, then FDMS shall have the right, at its sole
option and discretion, to immediately terminate this Agreement upon written
notice to CSI. CSI shall provide FDMS written notice of such transaction as
soon as such transaction has been consummated.
16. Termination by CSI for FDMS Shortfall. CSI may terminate this Agreement
immediately upon written notice to FDMS in the event an Auditor identifies
a shortfall in payment due CSI of more than 10% two times in any twenty-
four month period pursuant to an audit conducted under Section 19.
17. Effect of Termination. In the event of the expiration of this Agreement
under Section 2 or the termination of this Agreement as specifically
provided in this Agreement, the parties shall perform as follows:
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a. As of the Termination Date, each party shall cease marketing or
promoting all applicable Joint Programs and shall remove all
references to the other party on their respective web sites (except as
may be required to comply with the next sentence). Each party shall
only continue to perform their respective obligations hereunder as may
be necessary to wind down all Joint Programs for up to forty-five (45)
days after the Termination Date.
b. Each party shall post within five (5) business days of the Termination
Date at any and all Joint Program-related web sites a notice of the
termination of the applicable Joint Program(s). Such notice may only
inform Program Members of the end of the Joint Program, the effective
date of the end of the Joint Program, and other essential facts
necessary to wind up the Joint Program. The notice shall not give any
statement regarding the reason for the end of the Program or assess
any blame or fault on the other party. The parties shall consult with
each other as to the contents of such notice.
c. Upon completion of the wind down of all Joint Programs under
subsection a, above: (i) FDMS (or Yclip on behalf of FDMS) shall take
down the applicable Program Interfaces; (ii) CSI shall cease all use
of Transaction Data and shall certify to FDMS in writing within five
(5) business days of the Termination Date that it has destroyed copies
of all files or other media containing Transaction Data and that it no
longer uses or will use the Transaction Data; and (iii) FDMS, the
Channels, the Affiliates and their agents (as applicable) shall cease
all use of CSI Member Information and FDMS shall certify to CSI in
writing within five (5) business days of termination that it, the
applicable Channels, Affiliates, and their agents have destroyed
copies of all files or other media containing CSI Member Information
and that they no longer use or will use the CSI Member Information.
d. Within thirty (30) days after the Termination Date, FDMS shall notify
the FDMS-Sourced Merchants, and CSI shall notify the CSI-Sourced
Merchants and the applicable Program Members (in writing), of the
cancellation of the applicable Joint Program(s). Said notices shall
only state that the Joint Program(s) has been terminated without
stating the reason for such termination and without any disparaging
remarks about the other party. Each party shall provide the other
party with a copy of the communication it intends to send under this
Section at least two (2) weeks prior to sending such communication;
e. As soon as practicable after the Termination Date but in no event
later than sixty (60) days after the Termination Date, CSI shall
initiate a refund to each applicable Program Member via its registered
credit card of a pro rata portion of any Program Fees collected from
such Program Member for its respective membership year, and FDMS shall
process such refund pursuant to the terms of the MPA. In addition,
FDMS shall refund to each Participating Merchant who enrolled during
the calendar year in which the expiration occurs, a prorated portion
of any "set-up" fees collected from such Participating Merchant. The
parties shall be liable for their respective percentage share as set
forth on Exhibit 6(l) of (i) any fees so refunded, and (ii) any
Deductions on Exhibit 6(l) incurred for such feeds refunded, and shall
promptly reconcile and pay any amounts owing.
f. Each party shall promptly pay to the other any amounts then due and
owing
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pursuant to the terms of this Agreement. FDMS shall provide applicable
billing and accounting services as described in this Agreement until
all monies owing under the Joint Programs are collected and allocated
pursuant to the applicable revenue share, and CSI's share is paid to
CSI.
g. Each party shall promptly return to the other any Proprietary
Information (as defined in Section 21 herein) belonging to the other
party and shall cease all use of the other's Marks (except, and only
to the extent, as may otherwise be necessary to wind down all Joint
Programs under subsection a. above).
h. Each party shall continue to comply with its respective
Nonsolicitation Obligation for one (1) year after the Termination
Date.
18. No Limitation of Remedies. Nothing contained in this Agreement shall
be construed to limit or deny either party's rights or remedies provided
under this Agreement or at law or equity. By way of example but not
limitation, a party's election to terminate this Agreement because of the
other party's breach, shall not in any way limit the non-breaching party's
right to pursue damages suffered as a result of such breach (subject to the
terms of Sections 31 and 32).
19. Audit Rights. No more than two (2) times in any twelve month period either
party shall have the right, at its expense, upon five (5) business days
advance written notice to the other party, to retain an Auditor to audit
copies of all relevant books and records of the other party necessary to
confirm any calculations made hereunder. In the event any such audit
reveals a shortfall or overpayment in any payment made to CSI or FDMS, then
the party owing monies to the other shall pay the amount owing within two
weeks of the date the amount of such shortfall or overpayment is finally
determined and notice of the same is provided to the other party. Further,
should any such shortfall or overpayment exceed ten percent (10%) of the
actual amount due for the period audited, then in addition to paying the
amount of the shortfall or overpayment, the party obligated to pay shall
promptly (i) pay the other party interest on the amount of the shortfall or
overpayment at the rate of Two Percent over the Prime Rate of Bank One (as
announced by Bank One) from the date of the underlying shortfall or
overpayment until the amount is paid; and (ii) reimburse the other party
for all reasonable, direct costs of the audit, in the event the other party
initiated the audit. Should any audit hereunder reveal a party's second
underpayment of the amount properly owing to the other party exceeding ten
percent (10%) of the actual amount due for the period audited, then in
addition to the remedies provided herein, the other party may immediately
terminate this Agreement.
20. Use of Data. Notwithstanding anything to the contrary herein:
a. Transaction Data. As between the parties, FDMS and/or the applicable
Channel own all Transaction Data. CSI may only have access to and use
of the Transaction Data for the purposes of fulfilling its obligations
hereunder with respect to the Joint Programs (including the CoolDining
Program). Except as expressly provided herein, CSI will not use,
disclose or sell any Transaction Data without FDMS' prior written
consent, which consent FDMS may elect not to give in its sole
discretion. As between the parties, Transaction Data shall be
considered Proprietary Information of FDMS. CSI's use, sale or
disclosure of the Transaction Data for any program or purpose other
than those expressly set forth
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herein, or for other than any Joint Program, shall be considered a
material breach of this Agreement. CSI expressly represents that it
will not merge the Transaction Data with any other data or database
used by CSI except for data or databases relative to other Joint
Programs, and any such merger shall be solely for purposes of carrying
out the Joint Programs.
b. CSI Member Information. CSI owns all CSI Member Information. FDMS,
the Channels, the Affiliates, and their agents may only have access to
and use of the CSI Member Information for the purposes of carrying out
the Joint Programs (including the CoolDining Program). Except as
expressly provided herein, FDMS, the Channels, the Affiliates, and
their agents will not use, disclose or sell any CSI Member Information
without CSI's prior written consent, which consent CSI may elect not
to give in its sole discretion. As between the parties, CSI Member
Information shall be considered Proprietary Information of CSI. The
use, sale or disclosure of the CSI Member Information by FDMS, the
Channels, the Affiliates, or their agents for any program or purpose
other than those expressly set forth herein, or for other than any
Joint Program, shall be considered a material breach of this
Agreement. FDMS expressly represents that it, the Channels, the
Affiliates and their agents will not merge the CSI Member Information
with any other data or database except for data or databases relative
to other Joint Programs, and any such merger shall be solely for
purposes of carrying out the Joint Programs.
21. Privacy Policy. Within forty-five (45) days of the Effective Date the
parties shall cooperate to draft a privacy policy related to the Joint
Programs and the use of CSI Member Information (the "Program Privacy
Policy"), which shall be posted prominently at the applicable Joint Program
and/or CSI Web Site(s). The Program Terms shall include clear, prominent
authorization by the Program Member allowing the applicable Joint Program
provider the right to use and/or disclose CSI Member Information for the
purposes of providing the Joint Program to such Program Member, targeting
more specific Merchant Offers to such Program Member, and providing the
Fulfillment Services. The Program Member terms and conditions shall also
include a means by which a Program Member may cease participation in each
applicable Joint Program and remove its information from the CSI and/or
FDMS systems. The parties acknowledge and agree that each Joint Program,
including but not limited to the CoolDining Program, shall be expressly
designed to comply with all applicable laws and regulations related to
privacy and each party shall take all steps necessary to comply with such
laws and abide by the terms of the Program Privacy Policy. In no event
shall either party violate the Program Privacy Policy, and such breach
shall be considered a material breach of this Agreement. Each party agrees
that any violation of the Program Privacy Policy by a party (the
"Defaulting Party") may cause the other party (the "Non-Defaulting party")
immediate and irreparable harm for which money damages may not constitute
an adequate remedy. In such event, each party agrees that injunctive relief
may be warranted in addition to any other remedies the Non-Defaulting Party
may have.
22. Proprietary Information. The terms of that certain Information Exchange
and Non-Disclosure Agreement between the parties dated August 5, 1999 shall
apply to any "Proprietary Information" (as defined therein) accessed or
disclosed during the term of this Agreement. Each party agrees that any
unauthorized use or disclosure by a party (the "Defaulting Party") of the
Proprietary Information of the other (the "Non-Defaulting
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party") may cause immediate and irreparable harm to the Non-Defaulting
Party for which money damages may not constitute an adequate remedy. In
such event, each party agrees that injunctive relief may be warranted in
addition to any other remedies the Non-Defaulting Party may have. In
addition, the Defaulting Party agrees promptly to advise the Non-Defaulting
Party in writing of any unauthorized misappropriation, disclosure or use by
any person of such party's Proprietary Information which may come to its
attention and to take all steps at its own expense reasonably requested by
the Non-Defaulting Party to limit, stop or otherwise remedy any
misappropriation, disclosure or use by its own representatives, agents or
employees. The obligations of this Section shall survive the termination of
this Agreement for the longest period of time permitted by law.
23. Ownership. FDMS hereby acknowledges and agrees that CSI owns all right,
title and interest in and to: (i) the CSI Web Site, the CoolDining Program
Web Site, and all other Joint Program web sites unless specifically
otherwise agreed to in writing by the parties; (ii) the CSI Member
Information; (iii) the CSI Marks; and (iv) all other technology, systems,
software or development to the extent provided by CSI (collectively, the
"CSI Property"). CSI hereby acknowledges and agrees that FDMS owns and or
licenses all right, title and interest in and to (a) the FDMS System; (b)
the FDMS Marks; (c) the Program Interface (except as provided in subsection
(iv) above); (d) all Transaction Data; and (e) all other technology,
systems, software or development to the extent provided by FDMS
(collectively, the "FDMS Property").
24. Compliance with Laws. Each party shall comply with all applicable laws and
regulations, including but not limited to, all laws related to consumers
and consumer privacy ("Laws").
25. Representations and Warranties.
a. By CSI. CSI hereby represents and warrants that:
i. it has all requisite corporate power and authority to enter into
this Agreement and carry out the transactions contemplated
hereby;
ii. the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action and does not
violate any agreement which CSI is bound by or any law, rule or
regulation to which CSI is subject;
b. By FDMS. FDMS hereby represents and warrants that:
i. it has all requisite corporate power and authority to enter into
this Agreement and carry out the transactions contemplated
hereby; and
ii. the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action and does not
violate any agreement which FDMS is bound by or any law, rule or
regulation to which FDMS is subject.
c. Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT: (i),
NEITHER PARTY WARRANTS THAT THE COOLDINING PROGRAM
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WEB SITE, THE CSI WEB SITE, ANY OTHER JOINT PROGRAM WEB SITE, THE
PROGRAM INTERFACE, OR THE FDMS SYSTEM, AS APPLICABLE, WILL PERFORM IN
THE MANNER EXPECTED OR WITHOUT INTERRUPTION, ERROR OR DEFECT; AND (ii)
NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR WARRANTIES AGAINST INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY RIGHTS NOT SPECIFICALLY ENUMERATED.
26. Agents. Neither party may use an agent to perform any of its obligations
hereunder without the prior written consent of the other. In the event an
agent is used to perform hereunder, such agent: (i) may in no event access
or use the Transaction Data for any reason unless FDMS provides its prior
written consent and such use is allowed by applicable law or regulation;
(ii) may in no event access or use the CSI Member Information for any
reason unless CSI provides its prior written consent and such use is
allowed by applicable law or regulation; and (iii) shall be required to
enter into a written agreement under which such agent shall be subject to
obligations of confidentiality no less restrictive than those set forth in
this Agreement and the terms of Section 20. In addition, the party using an
agent shall at all times remain fully and primarily liable and responsible
for the performance of its obligations under this Agreement, as well as the
manner in which any delegated obligations are performed. FDMS hereby
notifies CSI that Yclip shall be considered an agent of FDMS under this
Agreement, and upon receipt of a written agreement satisfying subsection
(iii) herein, CSI hereby agrees to consent to such agency.
27. Stored Value Cards. For a period of one (1) year from and after the
CoolDining Launch, CSI shall not enter into an agreement with any third
party for processing of transactions from a CSI branded stored value card
(i.e. bearing the "Coolsavings" name) without providing FDMS with the
opportunity to bid on providing such processing services.
28. Disclaimer/Force Majeure. Neither party shall be liable for any loss or
damage whatsoever suffered by the other party, any Participating Channel,
any Participating Merchant, any CSI Member, or any other third party as a
result of, or arising from, the failure of any Merchant Offers, at any
time, to appear on the applicable Joint Program Web Site unless caused by
the gross negligence or intentional wrongful act of such party. The parties
acknowledge that in the event that any Merchant Offer fails for any reason
to appear on the applicable Joint Program Web Site or is in any way
incorrectly posted, the sole and exclusive remedy shall be the placement
of, or the corrected posting of, such Merchant Offer on the applicable
Joint Program Web Site for an additional period equal to the period in
which it fails to appear or appeared incorrectly. Each FDMS Merchant
Agreement shall contain substantially the same disclaimer. Furthermore,
neither party shall be liable for any delay or failure in performance of
any part of this Agreement, other than for any delay or failure to pay
money owed hereunder, by reason of acts of God, fire, strikes, shortages of
labor or materials, or any change in law that makes performance hereunder
impossible.
29. General Indemnifications.
16
<PAGE>
a. By CSI. CSI shall indemnify FDMS, its Affiliates and Channels, and its
and their directors, officers and employees (the "FDMS Group"), for
any claim, loss, damage, expenses, penalty or liability the FDMS Group
member sustains or incurs, including reasonable attorneys fees and
litigation costs (together, "Loss") as a result of a claim by a third
party (i) that CSI or its agent has breached the Program Privacy
Policy; (ii) arising out of any products and services provided by CSI
or its agents; (iii) related to the CSI Property; and (iv) arising out
of a breach of this Agreement by CSI or its agents. CSI's obligation
to indemnify the FDMS Group pursuant to the foregoing shall not apply
to the extent such claim is due to the breach of this Agreement by any
member of the FDMS Group or its agents, or the gross negligence or
willful misconduct of any member of the FDMS Group, or its agents. In
addition to the foregoing, CSI shall indemnify the FDMS Group for any
Loss arising out of CSI's or its agents' use or disclosure of the
Transaction Data in any manner not permitted under this Agreement,
wherein the information in issue was obtained by the party who
wrongfully used or disclosed it, pursuant to, or as a result of, this
Agreement.
b. By FDMS. FDMS shall indemnify CSI, its affiliates, directors,
officers and employees (the "CSI Group") for any Loss as a result of a
claim by a third party (i) that FDMS, its Affiliates, the Channels, or
their agents has breached the Program Privacy Policy; (ii) related to
the FDMS Property; (iii) arising out of any products and services
provided by FDMS, its Affiliates, the Channels, or their agents; and
(iv) arising out of a breach of this Agreement by FDMS or its agents.
FDMS' obligation to indemnify the CSI Group pursuant to this Section
shall not apply to the extent such claim is due to the breach of this
Agreement by a member of the CSI Group or its agents or the gross
negligence or willful misconduct of any member of the CSI Group, CSI
or its agents. In addition to the foregoing, FDMS shall indemnify the
CSI Group for any Loss arising out of the use or disclosure of the CSI
Member Information in any manner not permitted under this Agreement by
any member of the FDMS Group (as defined in subsection 29a above) or
its agents, wherein the information in issue was obtained by the party
who wrongfully used or disclosed it, pursuant to, or as a result of,
this Agreement.
30. Intellectual Property Indemnification.
a. By CSI. CSI shall indemnify the FDMS Group for any Loss that may
result by reason of any infringement or claim of infringement of any
copyright, patent, trademark, trade secret or other proprietary right
of any third party related to the CSI Property, and all software,
services and systems provided by CSI and its agents in connection with
any Joint Program hereunder.
b. By FDMS. FDMS shall indemnify the CSI Group for any Loss that may
result by reason of any infringement or claim of infringement of any
copyright, patent, trademark, trade secret or other proprietary right
of any third party related to the FDMS Property, and all software,
services and systems provided by FDMS, its Affiliates, the Channels,
and their agents in connection with any Joint Program hereunder.
31. No Consequential or Punitive Damages. NEITHER PARTY WILL BE LIABLE TO THE
OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM
17
<PAGE>
THE OTHER PARTY'S RIGHTS) FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND - INCLUDING LOST REVENUES OR
PROFITS, LOSS OF BUSINESS OR LOSS OF DATA - ARISING OUT OF THIS AGREEMENT
(INCLUDING WITHOUT LIMITATION AS A RESULT OF ANY BREACH OF ANY WARRANTY OR
OTHER TERM OF THIS AGREEMENT), REGARDLESS OF WHETHER THE PARTY LIABLE OR
ALLEGEDLY LIABLE WAS ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF
THE POSSIBILITY THEREOF. PROVIDED HOWEVER, NOTHING CONTAINED HEREIN SHALL
BE CONSTRUED TO DENY OR LIMIT A PARTY'S RIGHT TO BE MADE WHOLE PURSUANT TO
ANY INDEMNIFICATION OBLIGATION SET FORTH IN SECTION 29 OR 30, EVEN IF THE
DAMAGE AMOUNT AWARDED TO THE THIRD PARTY (AND ASSESSED AGAINST THE
INDEMNIFIED PARTY) IN THE CLAIM FOR WHICH INDEMNIFICATION IS REQUIRED UNDER
THIS AGREEMENT INCLUDES INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND - INCLUDING LOST REVENUES OR
PROFITS, LOSS OF BUSINESS OR LOSS OF DATA.
32. Limitation of Liability. Except for a party's liability under Section 22
(Proprietary Information), Section 20 (Use of Data), Section 21 (Privacy
Policy), Sections 29 and 30 (Indemnification), and a party's obligation to
pay fees or other monies required to be paid to the other party under this
Agreement, each party's cumulative liability under this Agreement for
damages suffered by the other party from a breach of this Agreement shall
be limited to $1,000,000.
33. Mutual Nonassert. Neither party shall make a claim against the other for
infringement of such party's intellectual property rights to the extent
such claim relates to a party's performance of its obligations or exercise
of its rights hereunder.
34. Arbitration. In the event of a dispute between the parties with regard to
any of the matters set forth in this Agreement, the parties will first make
reasonable efforts to resolve such dispute among themselves. If the parties
are unable to resolve the dispute within thirty (30) calendar days of the
initiation of such procedure, the dispute will be settled by arbitration as
provided for below, which will be the sole and exclusive procedure for the
resolution of any such dispute except for disputes wherein a party seeks
injunctive relief. The arbitration will be governed by the then existing
rules of the American Arbitration Association. One arbitrator shall be
chosen pursuant to the rules of the American Arbitration Association,
provided however, that the arbitrator so chosen shall not be employee,
consultant, officer or director of any party or of any affiliate of either
party and who has not received any compensation, directly or indirectly,
from any party or any affiliate of any party. The determination of the
arbitrator as to the resolution of any dispute will be binding and
conclusive upon the parties. The fees and expenses of the arbitrator will
be paid 50% by each party. The arbitrator may award the prevailing party
its costs and expenses (including attorneys fees) of the arbitration, as
he/she deems appropriate and just. Any arbitration award may be entered in
and enforced by any court having jurisdiction thereof.
35. Publicity and Marketing. No release shall be made to the news media or to
the general public relating to this Agreement without the prior written
approval of the other party. The parties will use their best efforts to
agree upon and issue a press release announcing
18
<PAGE>
the existence of this Agreement on or after the Effective Date. Any
marketing, web site or other media referencing the other party's
participation in a Joint Program shall be subject to the other party's
prior review and written approval. Notwithstanding the foregoing, either
party may disclose this Agreement as required by law or Securities Exchange
Commission rule or regulation.
36. Relationship of the Parties. CSI, FDMS, and the Participating Channels
shall not have any authority to bind any party to this Agreement by
contract or otherwise to make representations as to the policies and
procedures of the other, other than as specifically authorized by this
Agreement. FDMS and CSI acknowledge and agree that the relationship arising
from this Agreement does not constitute or create a general agency, joint
venture, partnership, employee relationship or franchise between them and
that each is an independent contractor with respect to the services
provided by it under this Agreement.
37. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the state of Illinois except as to its principles
of conflicts of laws.
38. Entire Agreement. This Agreement together with the Information Exchange
and Non-Disclosure Agreement constitute the entire agreement between the
parties hereto and contains all of the agreements between said parties with
respect to the subject matter hereof. There is no statement, promise,
agreement, or obligation in existence which may conflict with the terms of
this Agreement or may modify, enlarge, or invalidate this Agreement or any
provision hereof. None of the prior and/or contemporaneous negotiations,
preliminary drafts, or prior versions of this Agreement leading up to its
execution and not set forth herein shall be used by any of the parties to
construe or affect the validity of this Agreement. Each party acknowledges
that no representation, inducement or condition not set forth herein has
been made or relied upon by either party. Further, this Agreement
supersedes any and all other agreements, either oral or in writing, between
the parties hereto with respect to the subject matter hereof.
39. Nonexclusive. Nothing in this Agreement shall prohibit or prevent FDMS
from entering into an arrangement with a third party under which FDMS may
provide similar products and services.
40. Modification/Waiver. No provision of this Agreement may be altered,
amended and/or waived, except by a written document signed by an executive
officer of both parties hereto setting forth such alteration, amendment,
and/or waiver. The parties hereto agree that the failure to enforce any
provision or obligation under this Agreement shall not constitute a waiver
thereof or serve as a bar to the subsequent enforcement of such provision
or obligation or any other provisions or obligation under this Agreement.
41. Joint Drafting. Each of the parties hereto has joined in and contributed
to drafting this Agreement; there shall be no presumption favoring or
burdening any one or more parties hereto based upon draftsmanship.
42. Notices. All notices and other communications required or permitted to be
given under this Agreement shall be in writing and shall be deemed
sufficiently given, served, and received for all purposes upon the first to
occur of actual receipt, or delivery by generally recognized overnight
courier service, or by facsimile transmission (with the original
subsequently
19
<PAGE>
delivered by other means permitted by this Agreement, although the
effective date of such notice shall be the date of such facsimile
transmission provided the original is subsequently delivered as provided
herein), or three (3) days after deposit in the United States Mail,
certified or registered, return receipt requested, with postage prepaid,
addressed as follows:
To FDMS: John Duncan
------- First Data Merchant Services Corporation
Internet Commerce Group
265 Broad Hollow Rd.
Melville, NY 11747
Fax: (631) 843-6736
With a copy to: General Counsel
-------------- First Data Merchant Services Corporation
Internet Commerce Group
6200 S. Quebec, Ste. 330 AN
Englewood, CO 80111
Fax: (303) 967-7877
To CSI: President
------ coolsavings.com inc.
8755 West Higgins Road, Ste. 100
Chicago, IL 60631
Fax: (773) 693-1311____
With a copy to: General Counsel
-------------- coolsavings.com inc.
8755 West Higgins Road, Ste. 100
Chicago, IL 60631
Fax: (773) 693-1311____
Or at such other address(es) set forth in any written notice delivered to the
other party.
43. Survival. The following provisions shall survive termination of this
Agreement: Sections 7, 8, 17, 18, 19 (for a period of 9 months after the
Termination Date), 20, 21, 22, 23, 26, 27, 28, 29, 30, 31, 32, 33, 34.
43. Future Performance. Notwithstanding anything contained in this Agreement
that can be construed to the contrary, wherein any Section of this Agreement
contemplates the parties agreeing upon something within a specific time period
after the Effective Date (e.g. within 30 days after the Effective Date), should
the parties fails to so agree within the specified time period, then the
specified period shall be extended for thirty (30) days. Should the parties
fail to so agree within the extension period, then either party shall be
entitled to terminate this Agreement during the ensuing thirty (30) day period,
effective upon written notice to the other party, provided that each party shall
use good faith efforts to meet all time periods specified herein.
44. Execution. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, and all of which together shall be deemed to
be one and the same instrument. Facsimile signatures shall have the same force
and effect as original signatures.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal on
the date first written above.
FIRST DATA MERCHANT SERVICES coolsavings.com inc.
CORPORATION
/s/ John Duncan /s/ Steven M. Golden
By:_____________________________ By:_______________________________
EVP, Business Development CEO/President
Title:__________________________ Title:____________________________
21
<PAGE>
EXHIBIT 6(C)
CoolDining Program Members
Online Terms and Conditions
Agreement will be between CSI and CoolDining Program Member. Agreement must
include the following terms:
. Express authorization to allow FDMS to charge CoolDining Program Fees
to credit card
. Express authorization to use transaction data in order to effect
coupon fulfillment
. Express description of CoolDining Privacy Policy
. Explanation of how CoolDining Member may opt out of CoolDining Program
and obtain refund of some or all of CoolDining Program Fees
. Limitation of Liability of FDMS and disclaimer of warranties.
Form of Agreement between CSI and CoolDining Program Member to be mutually
agreed upon and attached within 90 days of Effective Date.
22
<PAGE>
EXHIBIT 6(g)(i)
Offer Standards
(to be attached as soon as practicable but in any event
within thirty days of Effective Date)
23
<PAGE>
EXHIBIT 6(h)
Transmitted Data
Transmitted Data from CSI to FDMS
Program Member Registration Data. CSI shall provide Yclip/FDMS with the
following information when a consumer registers to be a Program Member:
1. Program Member CSI I.D. Number
2. Program Member registered VISA or MasterCard credit card number(s) and
expiration date(s)
3. Program Member zip code
4.
Program Member Offer Selection Data. CSI shall provide Yclip/FDMS with the
following information when a Program Member selects a Merchant Offer:
1. Program Member CSI I.D. Number
2. Yclip Offer I.D. Number
Merchant Enrollment Data. CSI shall provide Yclip/FDMS with the following
information when a Merchant enrolls for the Program:
1. Merchant name
2. Merchant contact information
3. Merchant pricing information
4. Merchant preferences (e.g. notifications, etc.)
Merchant Offer Creation Data. CSI shall provide to Yclip/FDMS the
following information when a Merchant submits a valid Merchant Offer:
1. Merchant Name
2. Merchant Id Number
3. Merchant Offer Amount (percentage or fixed dollar amount)
4. Purchase Threshold Amount, if any (i.e., min purchase of $x required)
5. Maximum Purchase Amount allowed for discount, if any
6. Specific rules for offer (validity on 1st purchase or 2nd purchase,
etc.)
7. Offer Start Date
8. Offer Expiration Date
9. Yclip Merchant classification (taxonomy will support cuisine type)
Transmitted Data from FDMS to CSI
Merchant Offer Creation Data. Yclip/FDMS shall provide CSI with the
following information when a Merchant submits a valid Merchant Offer:
1. Merchant Name and zip code (and other location information, if any,
submitted by the Merchant)
2. Yclip Offer ID Number
3. Merchant Offer Amount (percentage or fixed dollar amount)
4. Purchase Threshold Amount, if any (i.e., min purchase of $x required)
5. Maximum Purchase Amount allowed for discount, if any
6. Specific rules for offer (validity on 1st purchase or 2nd purchase,
etc.)
24
<PAGE>
7. Offer Start Date
8. Offer Expiration Date
9. Yclip Merchant classification
10. Presentation data
Program Member Offer Redemption Data. Yclip/FDMS shall provide CSI with
the following information when a Program Member redeems a Merchant Offer:
1. CSI Program Member I.D. Number
2. Program Member redemption data, including but not limited to:
(a) amount of the discount (e.g. percentage savings or dollar savings)
the Program Member was entitled to receive under the terms of the
Merchant Offer clipped;
(b) total amount charged on the Member's credit card statement in the
transaction against which the Merchant Offer is to be applied;
(c) amount credited against (b) above on the Member's credit card
statement (i.e. amount of the savings realized)
(d) name of the Participating Merchant
(e) zip code of the Participating Merchant
(f) Yclip merchant classification
25
<PAGE>
EXHIBIT 6(k)
COOLDINING PROGRAM FEES
A. Program Fees/Fulfillment Fees
For CSI-Sourced Merchants:
FDMS will collect from each CSI-Sourced Merchant the percentage fee the
CSI-Sourced Merchant agreed to pay on each qualifying purchase transaction (e.g.
4% of the qualifying purchase transaction amount) pursuant to its agreement for
the CoolDining Program (the "Fulfillment Fee"). From each Fulfillment Fee
collected, FDMS shall first retain an amount equal to Two and one-half percent
(2.5%) of the qualifying purchase transaction amount and then pay the entire
balance of such Fulfillment Fee to CSI.
For FDMS-Sourced Merchants:
FDMS will collect from each FDMS-Sourced Merchant the percentage fee the
FDMS-Sourced Merchant agreed to pay on each qualifying purchase transaction
(e.g. 4% of the qualifying purchase transaction amount) pursuant to its
agreement for the CoolDining Program (the "Fulfillment Fee"). From each
Fulfillment Fee collected, FDMS shall first pay to CSI an amount equal to One
percent (1.0%) of the qualifying purchase transaction amount before retaining or
paying any third parties any portion of such Fulfillment Fee.
B. Additional Revenue Sharing
CSI shall earn:
Merchant Set-up Fee 50% of the mutually agreed upon fee
(paid by FDMS Merchants)
Net Program Fee Revenue 60% pursuant to terms of Exhibit 6(l)
FDMS shall earn:
Merchant Set-up Fee 50% of the mutually agreed upon fee
(paid by FDMS Merchants)
Net Program Fee Revenue 40% pursuant to terms of Exhibit 6(l)
Pricing Review
The parties acknowledge that these fees may change as a result of market
response or through additional market research. The parties will review this fee
schedule not less than semi-annually (or more frequently as needed) for the
purpose of determining if any amendments to the foregoing fees are appropriate.
The fees in this Exhibit will not change unless both parties agree
26
<PAGE>
to such amendment and such amendment is documented in writing and signed by both
parties. To the extent new products/services are added to the CoolDining
Program, the parties will mutually agree upon fees and supplement this Exhibit
in writing.
27
<PAGE>
EXHIBIT 6(l)
CoolDining Program Revenue Sharing
In addition to a party's obligation to pay Fees under Exhibit 6(k), the parties
shall also share Net Program Revenues as follows:
Calculation of Net Program Revenues:
Each month CSI shall receive CoolDining Program Fees for Visa or Master Card
credit cards registered for the CoolDining Program (Section 6(c)), which shall
be considered "Gross Revenues". CSI shall deduct from Gross Revenues the direct
costs and expenses set forth below or otherwise agreed upon in writing by CSI
and FDMS ("Deductions"). The remainder shall be deemed "Net Program Revenues".
Deductions:
Unless otherwise agreed in writing, Deductions shall only be for the following
specific categories:
. The cost of proofing and editing Merchant Offers under Section 6g(i)
. Visa and Mastercard Interchange and Assessment fees related to
CoolDining for purposes of Program Member billing
. Transaction processing fees related to CoolDining for purposes of
membership billing
Within fifteen (15) days after the end of each calendar month (a) each party
shall notify the other in writing of the actual amount of its Deductions (by
category) for the immediately preceding calendar month, and, upon request,
provide the other party with reasonable information in support thereof; and (b)
CSI shall notify FDMS of the number of CoolDining Program Members that enrolled
in the CoolDining Program in the immediately preceding calendar month.
Payment to FDMS:
Within forty-five (45) days after the end of each calendar month, CSI shall pay
to FDMS forty (40%) percent of the Net Program Revenues for the applicable
month. CSI shall include a detailed accounting with each payment setting forth
the basis for its calculation of FDMS's share of Net Program Revenues.
Notwithstanding anything contained in this Agreement that can be construed to
the contrary, FDMS shall not be entitled to any portion of any revenues received
by CSI for: (i) the posting of any advertising on the CoolDining Program Web
Site or any other portion of the CSI Web Site, that is not a Merchant Offer
under the CoolDining Program; or (ii) received by CSI for any other services
provided by CSI, even if such monies are paid by a Participating Merchant or a
CoolDining Program Member, provided that CSI may not offer an FDMS Merchant any
services or products other than the CoolDining Program without the prior written
consent of FDMS.
28
<PAGE>
29
<PAGE>
Exhibit 11
Performance Standards
Note: all blanks will be agreed upon and filled in by the parties within
ninety days of the Effective Date.
System Availability Excluding maintenance and other scheduled
outages, the CSI Web Site, the CoolDining
Program Web Site and all related systems
will be operational at least 98% of the
time, and the FDMS System will be
operational at least 98% of the time.
System Response Time The time between a user request to a
CoolSavings System and a CoolSavings System
response will not exceed ___ seconds for
95% of the transactions. The time between a
user request to an FDMS System and a FDMS
System response will not exceed ___ seconds
for ___% of the transactions.
Transmitted Data Turnaround CSI will forward the CSI Transmitted Data
to FDMS within 24 hours of receipt and FDMS
will process such Transmitted Data within
____ of receipt. FDMS will forward the FDMS
Transmitted Data to CSI within ___ hours of
receipt and CSI will post the Merchant
Offers within such Transmitted Data within
____ of receipt.
Notification of Outages Each party will notify the other at least
___ business days in advance for any known
or anticipated down time to such party's
system which may impact the CoolDining
Program or any other Joint Program.
Merchant Enrollment Turnaround FDMS will ensure that the software for
Merchant submission of Merchant Offers for
the CoolDining Program will enable
Merchants to submit Merchant Offers to
Yclip within ___ after Merchant enrollment.
Merchant Offer Preparation Yclip shall prepare, proof, and otherwise
edit all Merchant Offers in accordance with
the Offer Standards and forward each such
Merchant Offer to CSI within ____ hours of
receipt of such Merchant Offer.
Merchant Offer Posting Merchant Offers that comply with the Offer
Standards will be posted on the CoolDining
Program Web Site or other Joint Program web
site within 24 hours of receipt by CSI.
30
<PAGE>
Help Desk Average Speed of Answer The average speed of answer (ASA) for FDMS
help desk calls will not exceed ___
minutes. The average response time for CSI
e-mail responses will not exceed ___.
Help Desk Call Length The average length of an FDMS help desk
call will not exceed ___ minutes.
Help Desk Abandon Rate The abandon rate for FDMS help desk calls
will not exceed __% __% of the time.
Rebate Posting FDMS will submit ___% of rebates related to
valid Merchant Offers to settlement within
___ business days of receipt of the
associated qualifying purchase in a
Channel's merchant transaction file.
31
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated February 18, 2000 relating to the financial statements and
financial statement schedule of coolsavings.com inc., which appears in such
Registration Statement. We also consent to the reference to us under the
headings "Experts" and "Selected Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
Chicago, IL
March 29, 2000
<PAGE>
Exhibit 23.3
Consent of Niro, Scavone, Haller & Niro
---------------------------------------
We hereby consent to the use of our name wherever it appears in this
Registration Statement.
Dated: March 29, 2000
/s/ Niro, Scavone, Haller & Niro
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 17,488,788 4,895,139
<SECURITIES> 0 0
<RECEIVABLES> 4,381,463 281,800
<ALLOWANCES> 118,154 13,500
<INVENTORY> 0 0
<CURRENT-ASSETS> 25,541,170 5,329,542
<PP&E> 4,048,835 1,041,102
<DEPRECIATION> (935,862) (284,568)
<TOTAL-ASSETS> 29,590,005 6,370,644
<CURRENT-LIABILITIES> 9,838,659 1,541,400
<BONDS> 0 0
0 0
0 0
<COMMON> 27,844,658 13,500,865
<OTHER-SE> (8,725,143) (8,907,195)
<TOTAL-LIABILITY-AND-EQUITY> 29,590,005 6,370,644
<SALES> 0 0
<TOTAL-REVENUES> 12,915,732 1,142,819
<CGS> 1,817,444 427,769
<TOTAL-COSTS> 28,231,138 6,061,221
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 228,500 483,411
<INCOME-PRETAX> (16,868,379) (5,741,260)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (16,868,379) (5,741,260)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (16,868,379) (5,741,260)
<EPS-BASIC> (0.57) (0.27)
<EPS-DILUTED> (0.57) (0.27)
</TABLE>
