<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 21, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BOLT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7373 13-3905544
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
304 HUDSON STREET -- 7TH FLOOR
NEW YORK, NY 10013
(212) 620-5900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DANIEL A. PELSON
PRESIDENT & CHIEF EXECUTIVE OFFICER
BOLT, INC.
304 HUDSON STREET -- 7TH FLOOR
NEW YORK, NY 10013
(212) 620-5900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
JOHN R. POMERANCE, ESQ. WINTHROP B. CONRAD, JR., ESQ.
PETER S. LAWRENCE, ESQ. DAVIS POLK & WARDWELL
MINTZ, LEVIN, COHN, FERRIS, 450 LEXINGTON AVENUE
GLOVSKY AND POPEO, P.C. NEW YORK, NY 10017
ONE FINANCIAL CENTER (212) 450-4000
BOSTON, MA 02111
(617) 542-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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 registration statement for the same
offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value per share.............. $46,000,000 $12,144
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of registration
fee pursuant to Rule 457(o) under the Securities Act, as amended.
(2) Calculated pursuant to Rule 457(a) based on an estimate of the proposed
maximum aggregate offering price.
------------------------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND WE
ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued December 21, 1999
Shares
BOLT.COM LOGO
COMMON STOCK
------------------------
Bolt, Inc. is offering shares of its common stock. This is our initial public
offering and no public market currently exists for our shares. We anticipate
that the initial public offering price will be between $ and
$ per share.
------------------------
We have applied to list our common stock on the Nasdaq National Market under the
symbol "BOLT."
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS TO BOLT
-------- ------------- --------
<S> <C> <C> <C>
Per Share................................................... $ $ $
Total....................................................... $ $ $
</TABLE>
Bolt has granted the underwriters the right to purchase up to an additional
shares of common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 2000.
------------------------
MORGAN STANLEY DEAN WITTER
THOMAS WEISEL PARTNERS LLC
J. P. MORGAN & CO.
, 2000
<PAGE> 3
[DESCRIPTION OF GRAPHICS]
The inside front cover displays a large text box in the lower right-hand
corner with the language "2000:" followed by the Bolt logo. Above the logo
appears a series of text boxes, which read from top to bottom: "1969:
Woodstock", "1978: the roller rink", "1983: MTV", and "1991: the mall".
The graphics consist of a two-page fold-out containing a sample of our
website homepage, quotes from several registered users, or members, samples of
click-through pages and applications available on our website and other
statistics concerning our website.
The left column of the fold-out has three quotes from members of our site
which state: "I have met a lotta people here. It's da bomb diggity shish boom
snap"; "On Bolt, we can be open and honest with each other, give advice, and
learn more about people all over" and "I would much rather come to Bolt than
watch TV". The left column also contains a sample of a user profile page which
is accessed from our homepage containing certain information regarding a member.
Additionally, the left column contains a sample of the homepage for our
e-commerce store, which can be accessed from our homepage.
The graphic to the right of the left column at the top of the fold-out
contains our logo as well as the phrase "Bolt empowers teens to express their
opinions, meet new friends, and find the products and services they're
interested in." It also contains the following phrases: "Metrics: 1.5 million
registered members, 141 million page views per month", 6.1 million users
sessions per month".
The lower left corner of the fold-out contains a sample view of the Bolt
homepage, which features links to the various components of the site ("members",
"notes", "email", and "homepages" among others), as well as the "Quote of the
Day", "Hot Stuff from the Store!", "Daily Poll", "About Face", and "New
Features" from the sample view displayed homepage.
To the right of the view of the homepage is a sample of our "About Face"
page, which is accessed from our homepage containing question and answer series
presented by Neutrogena, a sample of the "integrated sponsorships" section of
the site. Above the graphic of the "About Face" page an example of "member-
created content" appears, featuring a link from the "Style & Looks" page. Above
the "Style & Looks" page appears a quote from a member; "The first day I was on
Bolt I made three friends in about an hour. That normally doesn't happen for me
because I'm a shy person."
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Special Note Regarding Forward-Looking
Statements.......................... 16
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Pro Forma Statement of Operations
Data................................ 20
Selected Financial Data............... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................. 32
Management............................ 46
Certain Transactions.................. 52
Principal Stockholders................ 54
Description of Capital Stock.......... 56
Shares Eligible for Future Sale....... 59
Underwriters.......................... 61
Legal Matters......................... 63
Experts............................... 63
Where You Can Find Additional
Information......................... 63
Index to Financial Statements......... F-1
</TABLE>
------------------------
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 common stock.
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS THAT BUY, SELL OR TRADE BOLT'S COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
"Bolt," our logo, "Bolt Notes" and other trademarks of Bolt, Inc. mentioned
in this prospectus are the property of Bolt, Inc. All other trademarks or trade
names referred to in this prospectus are the property of their respective
owners.
i
<PAGE> 5
(This page has been left blank intentionally.)
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights the most important features of this offering and
the information contained elsewhere in this prospectus. This summary is not
complete and does not contain all of the information that you should consider
before investing in our common stock. You should read the entire prospectus
carefully, especially the risks of investing in our common stock discussed under
"Risk Factors."
BOLT, INC.
Our Web site, Bolt.com, is a leading online destination that targets 15-20
year old teens. We feature teen-focused content generated primarily by our
members, a platform for teens to interact with other teens and tools that allow
our members to personalize their user experience. Our site enables members to
create and actively participate in what we believe is one of the most
teen-relevant environments found anywhere.
We have designed Bolt.com to facilitate communication among teens, to
empower them to express their opinions and ideas as a community and to shop in
an online store that our members help create. While the growth of our site to
date has been driven largely by word-of-mouth, we are also building brand
awareness through relationships with America Online, MSN Hotmail, Yahoo! and
Lycos. As a result, our member base has grown to more than 1.5 million as of
December 1, 1999 from about 340,000 as of December 1, 1998. According to Media
Metrix, in October 1999, Bolt.com was the seventh "stickiest" site of all the
sites on the Internet, as measured by minutes per user per month. According to
Nielsen I/PRO, we had over 141 million page views and over 6 million user
sessions in October 1999 as compared to 28 million page views and 1.4 million
user sessions in December 1998. Bolt.com generates revenues through advertising
and sponsorship fees, product sales and transactional fees and we expect to
generate revenues from market research fees in the future.
Advertisers and retailers have increasingly sought access to a rapidly
growing teen audience. The growth in the number of 10 to 24 year olds is
expected to outpace the growth in the general population by nearly 10% over the
next ten years. Advertisers have turned to the Internet to reach teens because
teens have adopted this medium as a primary form of entertainment, communication
and information gathering. We believe there is a significant opportunity to
advertise and sell products and services to teens online because teens possess
substantial disposable income. eMarketer, a market research firm, estimates that
online commerce sales to 13 to 17 year olds will increase to $1.4 billion in
2002 from $161 million in 1999.
Bolt.com is a site that empowers our teen audience to express opinions and
ideas regarding the ever-changing issues and trends that impact their lives. Our
members communicate on our site and provide content for our site using their
chosen Bolt Member IDs. This ensures anonymity and encourages frank and open
discussion. Our members provide most of the content of Bolt.com, unlike other
sites where the non-teen staff or third parties generate most of the content.
Because our teen audience determines significant portions of Bolt.com's content,
we believe we deliver a continually relevant experience. Our more than 1.5
million members can also use our personalized tools, such as email, instant
messaging, personal diaries and personal calendars, to help them manage their
lives, making the site more valuable to them the more they use it. In addition,
in September 1999, we launched the online Bolt Store, which offers more than
1,000 products based on what our members have told us they want to buy. We
expect this to be an increasingly important aspect of our business.
We have developed a site that we believe is highly desirable to advertisers
for the following reasons:
- Audience. We provide a highly-targeted, growing, and
demographically-focused audience.
- Size. We have a large and active user base, as demonstrated by the over
141 million page views and over 6 million user sessions in October 1999.
- Contextual Relevance and Targeting. Marketers can target their messages
in a way that is particularly relevant to the interests of our members.
1
<PAGE> 7
- Member Loyalty. According to Media Metrix, in October 1999, Bolt.com
was the seventh stickiest site of all the sites on the Internet, as
measured by minutes per user per month.
Our goal is to be the leading media company focusing on teens. We intend to
achieve this goal by continuing to build brand awareness, continuing to develop
and extend our relationships with strategic partners and advertisers, enhancing
our online features, expanding our e-commerce offerings and expanding our
international presence.
We currently have strategic relationships that are designed to increase our
brand awareness and drive significant new teen traffic to our site. Our partners
include:
- America Online. We are the only teen community partner for the AOL
branded service's teen message boards and teen chat rooms. We will
provide management of AOL's teen community tools, including its teen
message boards and teen chat rooms. In return, we will receive brand
exposure because we are entitled to establish and maintain a linked,
customized, user-generated content environment at aol.bolt.com, and all
teen-focused message boards, chat rooms, and teen community areas within
the AOL service, including aol.bolt.com, will be Bolt branded.
- MSN Hotmail. We provide teen content for the MSN Hotmail WebCourier
Newsletter Program. The Bolt newsletter is delivered twice per week to
over 1.9 million Hotmail users who elected to receive our content when
they registered with Hotmail. We also advertise on the MSN Shopping
Channel, MSN Hotmail and the MSN service targeted to teens.
- Ford Motor Company. On November 17, 1999, we entered into a partnership
with Ford Motor Company to develop Cars.bolt.com, a co-branded
destination on our site, which will feature auto-related content geared
towards teens. Cars.bolt.com will provide features like personalized
classified ads, an automotive dictionary, teen-focused buyer guides,
information on how to buy or lease a car and an interactive driver's
education seminar.
------------------------
We were incorporated in Delaware on August 15, 1996 as Concrete Media, Inc.
On February 16, 1999, we changed our name to Bolt Media, Inc., and on November
17, 1999, we changed our name to Bolt, Inc. Our principal executive offices are
located at 304 Hudson Street, 7th Floor, New York, New York 10013 and our
telephone number at that address is (212) 620-5900. Our World Wide Web site
address is www.bolt.com. The information on our Web site is not incorporated by
reference into this prospectus.
2
<PAGE> 8
THE OFFERING
Common stock offered in this
offering.................... shares
Common stock to be outstanding
after this offering........... shares
Use of proceeds............... To expand our marketing and promotion
activities, to launch international operations,
to expand and upgrade our technology
infrastructure, to expand our staff and for
working capital and other general corporate
purposes, including possible acquisitions of or
investments in complementary businesses,
products or technologies. See "Use of
Proceeds."
Proposed Nasdaq National
Market symbol................. BOLT
The information above does not include:
- 2,593,600 shares of common stock issuable upon the exercise of stock
options outstanding as of December 6, 1999 at a weighted average
exercise price of $.82 per share; and
- 47,900 shares of common stock issuable upon the exercise of warrants
outstanding as of December 6, 1999 at a weighted average exercise price
of $1.27 per share.
------------------------
Unless otherwise indicated, all information contained in this prospectus:
- Assumes that the underwriters do not exercise their over-allotment
option;
- Reflects a 4-for-1 split of our common stock on November 17, 1999; and
- Reflects the automatic conversion of all of our outstanding shares of
preferred stock into a total of 11,956,621 shares of common stock upon
completion of this offering.
3
<PAGE> 9
SUMMARY FINANCIAL DATA
The following table summarizes our financial data for the period from
August 15, 1996 (date of inception) through December 31, 1996, for the years
ended December 31, 1997 and 1998 and for the nine months ended September 30,
1998 and 1999, which have been derived from our financial statements and the
notes to those financial statements. The summary balance sheet data as of
September 30, 1999 are presented (1) on an actual basis, (2) on a pro forma
basis to give effect to:
- our sale of a total of 3,787,801 shares of our Series C Convertible
Preferred Stock for $10.25 per share on November 17, 1999, November 23,
1999 and December 6, 1999, and
- the conversion of all of our outstanding preferred stock into a total of
11,956,621 shares of common stock upon the completion of this offering
and (3) on a pro forma basis as adjusted to give effect to the receipt of the
estimated proceeds from our sale of shares of common stock in this offering
at an assumed initial public offering price of $ per share, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by us.
We were originally incorporated as Concrete Media, Inc. in August 1996. Our
original business consisted of three divisions:
- our Bolt subsidiary, which provided online content and community created
by and focused toward teens;
- our "Girls On" division, which provided online entertainment and related
content written by and focused toward young women; and
- our custom publishing division, which provided Web site development
services to third party non-advertising customers.
We also provided, and continue to provide, custom publishing and production
services to our advertising customers in connection with advertising and product
presentation on Bolt.com.
In late 1998 and early 1999, Concrete Media was reorganized. On December
30, 1998, we sold our custom publishing division and on January 29, 1999, we
sold our Girls On division. Accordingly, the statement of operations data for
the periods presented reflect the business of Bolt together with the business of
the custom publishing division and the Girls On division until they were sold.
The pro forma statement of operations data for the year ended December 31, 1998
and for the nine months ended September 30, 1998 have been prepared as though
the sales of the custom publishing division and Girls On division occurred on
January 1, 1998. Our results of operations for the nine months ended September
30, 1999 include the results of operations of Girls On for the month of January
1999, which include revenues of $38,000 and direct expenses of $25,000.
For a more detailed explanation of these financial data, see "Selected
Financial Data," our financial statements and the notes to those financial
statements located elsewhere in this prospectus.
4
<PAGE> 10
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 15,
1996
(DATE OF
INCEPTION) YEAR ENDED PRO FORMA
THROUGH DECEMBER 31, YEAR ENDED
DECEMBER 31, ------------------------ DECEMBER 31,
1996 1997 1998 1998
------------ ----------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Bolt revenues................ $ -- $ 32 $ 404 $ 404
Revenues related to the Girls
On and custom publishing
divisions.................. 19 446 2,281 --
---------- ----------- ---------- ----------
Total revenues....... 19 478 2,685 404
---------- ----------- ---------- ----------
Costs and expenses:
Production and
technology............... 15 810 1,138 336
E-commerce................. -- -- -- --
Sales and marketing........ 1 287 630 332
General and
administrative........... 51 549 1,327 289
Depreciation and
amortization............. 4 25 75 15
Stock-based compensation... -- -- -- --
---------- ----------- ---------- ----------
Total costs and
expenses........... 71 1,671 3,170 972
---------- ----------- ---------- ----------
Loss from operations......... (52) (1,193) (485) (568)
Other income (expense):
Interest income (expense),
net...................... -- 42 (53) --
Gain on sale of Girls On... -- -- -- --
---------- ----------- ---------- ----------
Net loss..................... $ (52) $ (1,151) $ (538) $ (568)
========== =========== ========== ==========
Basic loss per share......... $ (.01) $ (.26) $ (.12) $ (.13)
========== =========== ========== ==========
Weighted average number of
shares of common stock
outstanding................ 4,400,000 4,400,000 4,368,850 4,368,850
========== =========== ========== ==========
<CAPTION>
PRO FORMA
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1998 1999
------------- ------------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Bolt revenues................ $ 184 $ 184 $ 1,885
Revenues related to the Girls
On and custom publishing
divisions.................. 1,606 -- 38
---------- ---------- -----------
Total revenues....... 1,790 184 1,923
---------- ---------- -----------
Costs and expenses:
Production and
technology............... 813 223 2,389
E-commerce................. -- -- 235
Sales and marketing........ 393 161 2,782
General and
administrative........... 967 221 999
Depreciation and
amortization............. 50 8 211
Stock-based compensation... -- -- 1,256
---------- ---------- -----------
Total costs and
expenses........... 2,223 613 7,872
---------- ---------- -----------
Loss from operations......... (433) (429) (5,949)
Other income (expense):
Interest income (expense),
net...................... (30) -- 115
Gain on sale of Girls On... -- -- 1,436
---------- ---------- -----------
Net loss..................... $ (463) $ (429) $ (4,398)
========== ========== ===========
Basic loss per share......... $ (.11) $ (.10) $ (1.46)
========== ========== ===========
Weighted average number of
shares of common stock
outstanding................ 4,400,000 4,400,000 3,009,720
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $3,637 $42,335
Working capital............................................. 2,131 40,829
Total assets................................................ 8,752 47,450
Capital lease obligations, less current portion............. 578 578
Redeemable convertible preferred stock...................... 8,019 --
Stockholders' equity (deficiency)........................... (3,117) 43,600
</TABLE>
We calculate loss per common share by dividing the loss attributable to
common shares by the weighted average number of shares outstanding. We do not
include outstanding common stock options, outstanding warrants or the conversion
of our outstanding convertible preferred stock in the loss per common share
calculation as their effect is anti-dilutive. The Series B preferred stock has
been recorded at its redemption value and classified as redeemable convertible
preferred stock on our balance sheet as of September 30, 1999.
5
<PAGE> 11
RISK FACTORS
This offering and an investment in our common stock involve a high degree
of risk. You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. This could cause the trading price of our common stock to
decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED HISTORY OPERATING OUR TEEN-FOCUSED WEB SITE, AND WE MAY FACE
DIFFICULTIES ENCOUNTERED BY NEW COMPANIES IN NEW AND RAPIDLY EVOLVING INDUSTRIES
We were founded in August 1996. Accordingly, you should consider the risks
and uncertainties frequently encountered by companies with limited operating
histories in new and rapidly evolving industries, such as the Internet and
e-commerce. Some of these risks and uncertainties relate to our ability to:
- implement and successfully execute our business strategy and sales and
marketing initiatives;
- increase traffic to our Web site;
- increase our brand recognition among our targeted teen audience and
advertisers;
- increase sales in the Bolt Store;
- anticipate and adapt to our evolving market;
- enhance and expand our products and services;
- respond effectively to competitive developments;
- attract, retain and motivate qualified personnel; and
- effectively manage our anticipated growth.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our limited operating
history.
YOU SHOULD NOT RELY ON OUR HISTORICAL AND PRO FORMA FINANCIAL INFORMATION IN
DECIDING WHETHER TO INVEST IN OUR COMMON STOCK, BECAUSE THIS INFORMATION WILL
LIKELY NOT BE REPRESENTATIVE OF OUR RESULTS IN THE FUTURE
The financial information included in this prospectus through December 1998
combines the operating results of our then-existing custom publishing division
and "Girls On" division, which were sold in December 1998 and January 1999,
respectively. This information does not reflect what our results of operations,
financial position and cash flows would have been if we were only operating our
teen-focused Web site during the periods presented, or what our results of
operations, financial position and cash flows will be in the future. In
addition, while we have also presented our financial information on a pro forma
basis in an effort to reflect our results as if we were only operating our
teen-focused Web site, this pro forma information does not reflect many
significant changes that have occurred or may occur in our operations.
Accordingly, you should not rely on our historical and pro forma information as
an indication of our future operating results or financial performance.
WE HAD AN ACCUMULATED DEFICIT OF $6.1 MILLION AS OF SEPTEMBER 30, 1999; WE
EXPECT OUR LOSSES TO CONTINUE AND WE MAY NEVER BECOME PROFITABLE
We have had substantial losses since our inception and our operating and
net losses may increase in the future. Accordingly, we may never become or
remain profitable. If our revenues fail to grow at anticipated rates, our
operating expenses increase without an equal increase in our revenues or we fail
to adjust operating expense levels accordingly, our business, results of
operations and financial condition will suffer. As of September 30, 1999, we had
an accumulated deficit of $6.1 million. Although we have experienced growth in
6
<PAGE> 12
revenues, members and customers in recent periods, our growth in revenues may
not continue at its current rate or increase in the future.
We have not yet become profitable on a quarterly or annual basis, and we
anticipate that we will continue to incur operating and net losses. The extent
of these losses will depend, in part, on the amount of growth in our advertising
revenues, e-commerce revenues and market research revenues. We expect that our
operating expenses will increase significantly, especially in the areas of Web
site development, sales and marketing and brand promotion, and, as a result, we
will need to substantially increase our revenues to become profitable.
WE EXPECT OUR RESULTS OF OPERATIONS TO FLUCTUATE AND THE PRICE OF OUR COMMON
STOCK COULD FALL IF QUARTERLY RESULTS ARE LOWER THAN THE EXPECTATIONS OF
SECURITIES ANALYSTS
Our revenues and results of operations have fluctuated in the past and may
vary from quarter to quarter in the future. If our quarterly results fall below
the expectations of securities analysts, the price of our common stock could
fall. A number of factors, many of which are outside our control, may cause
variations in our results of operations, including:
- fluctuations in the demand for Internet advertising or e-commerce;
- changes in the level of traffic on our site; and
- fluctuations in sales and marketing expenses and technology
infrastructure costs.
A substantial portion of our operating expenses is related to sales and
marketing, product development, technology and infrastructure, which expenses
cannot be adjusted quickly and are therefore relatively fixed in the short term.
Our operating expense levels are based, in significant part, on our expectations
of future revenues on a quarterly basis. As a result, if revenues for a
particular quarter are below our expectations, we may not be able to reduce
operating expenses proportionately for that quarter; this revenue shortfall
would have a negative effect on our operating results and cash flow for that
quarter, which would likely have a negative impact on the price of our common
stock.
WE MAY BE UNABLE TO SELL ADDITIONAL ADVERTISING OR MAINTAIN OUR CURRENT LEVEL
OF ADVERTISING SALES, IN WHICH CASE OUR REVENUES WOULD BE ADVERSELY AFFECTED
We currently derive substantially all of our revenues from the sale of
advertisements on our Web site. We may be unable to sell additional advertising
on our site or maintain our current level of advertising sales. Most of our
advertisers have limited experience with the Internet as an advertising medium.
Our ability to generate significant advertising revenues depends upon several
factors, including:
- the acceptance and effectiveness of the Internet as an advertising
medium;
- the development of a large base of teen members on our Web site;
- the desirability of our member base to potential advertisers;
- our ability to continue to develop and update effective advertising
delivery and measurement systems; and
- our ability to maintain and increase our advertising rates given the
growing number of outlets for advertisers on the Internet.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT A SUFFICIENT NUMBER OF TEEN
INTERNET USERS TO OUR WEB SITE; WE MAY NOT BE ABLE TO DO SO
We must deliver original and compelling Internet content, community,
shopping and personalized tools that attract a sufficient number of teen
Internet users to our Web site. We may be unable, however, to anticipate,
monitor or successfully respond to the rapidly changing consumer tastes and
preferences of our targeted teen audience so as to attract enough users to our
site. If we are unable to deliver content, community and services that attract,
retain and expand a loyal member base, we will be unable to generate substantial
advertising revenues or commerce revenues.
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WE HAVE ONLY RECENTLY LAUNCHED THE BOLT STORE; WE HAVE NO PRIOR EXPERIENCE IN
CONDUCTING A DIRECT E-COMMERCE OPERATION AND OUR BUSINESS COULD BE HARMED IF THE
BOLT STORE IS NOT SUCCESSFUL
Prior to our launch of the Bolt Store in September 1999, we had no
experience in conducting a direct e-commerce business. We may be unable to
achieve or maintain any or all of the necessary components of a successful
e-commerce operation, such as timely and efficient order processing and
fulfillment and efficient customer support services. Our failure to successfully
operate the Bolt Store could seriously harm our brand and our business.
BECAUSE WE DEPEND ON THIRD PARTIES TO SUPPLY PRODUCTS AND SHIP ORDERS TO
CUSTOMERS OF THE BOLT STORE AND FOR CUSTOMER SUPPORT, ANY FAILURE OF THESE
PARTIES TO PROVIDE QUALITY SERVICES MAY SERIOUSLY HARM OUR BRAND AND BUSINESS
We depend on third parties to provide services to customers of the Bolt
Store, and the failure of these third parties to provide quality services could
seriously harm our brand and business. Although we choose which products to
offer in the Bolt Store based on input from our members, we have selected a
number of third-party sources to supply the products from their warehouses and
drop-ship orders to our customers after receiving order confirmation from us. In
addition, we have outsourced the customer support function of the Bolt Store to
a third party. Accordingly, we are dependent on these third-party warehouses for
timely and accurate order fulfillment and upon our third-party customer support
service for efficient and informative customer support services. Because these
services are provided by third parties, we have limited control over the quality
of these services.
WE DEPEND ON THE SERVICES OF A NUMBER OF KEY PERSONNEL, AND A LOSS OF ANY OF
THOSE PERSONNEL COULD DISRUPT OUR OPERATIONS AND RESULT IN REDUCED REVENUES
Our success depends on the continued services and on the performance of our
senior management and other key employees, in particular the services of Daniel
A. Pelson, our President and Chief Executive Officer. The loss of the services
of Mr. Pelson or any of our other senior management or key employees could
seriously impair our ability to operate and improve our products and services,
which could reduce our revenues.
In order to achieve our business objectives, we must hire additional
personnel to fill certain key managerial positions. Our future success will
depend upon the ability of our current executive officers to establish clear
lines of responsibility and authority, to work effectively as a team, and to
gain the trust and confidence of our other employees. We must also identify,
attract, train, motivate and retain other highly skilled technical, managerial,
marketing and sales personnel. We compete intensely for these personnel and we
may be unable to achieve our personnel goals. Our failure to achieve any of
these goals could seriously limit our ability to improve our operations and
financial results.
WE PLAN TO EXPAND OUR ADVERTISING SALES FORCE TO INCREASE THE EFFECTIVENESS OF
OUR INTERNAL SALES ORGANIZATION, AND IF WE FAIL TO DO SO WE MAY FAIL TO ATTRACT
SPONSORSHIP AND ADVERTISING REVENUES
We believe we will need to substantially increase our sales force in the
coming year in order to execute our business plan, but we may not be able to do
so. We hired our Vice President of Ad Sales in May 1999, and our internal sales
team currently has only nine members. We believe that the growth of our
sponsorship and advertising revenues will depend on our ability to expand our
sales force in order to establish an aggressive and effective internal sales
organization. Our ability to increase our sales force involves a number of risks
and uncertainties, including competition for these personnel and the length of
time for new sales employees to become productive. If we do not develop an
effective internal sales force, we may be unable to attract sponsorship and
advertising revenues.
GROWTH IN OUR OPERATION HAS AND WILL CONTINUE TO STRAIN OUR RESOURCES; OUR
FAILURE TO MANAGE GROWTH EFFECTIVELY COULD HARM OUR BUSINESS
If we are unable to successfully manage our growth, our business could be
seriously harmed. We have recently experienced significant growth and are
planning to further expand our business and operations. As of
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December 6, 1999, we had 88 employees, compared to 16 employees as of January 1,
1999. This growth has placed, and our planned future growth is expected to
place, a significant strain on our management and other resources. As part of
this growth, we expect to implement new operational and financial systems,
procedures and controls. Any problems in implementing these systems or controls
could harm our operations. In addition, several members of our senior management
joined us during the last year, including our:
- Chief Financial Officer;
- Vice President of Commerce;
- Chief Technology Officer;
- Vice President of Business Development;
- Vice President of Ad Sales; and
- Director of Business Intelligence.
As a result, our management team may have difficulty working together to
successfully manage our anticipated growth.
WE INTEND TO EXPAND OUR BUSINESS; IF WE ARE NOT SUCCESSFUL, OUR BUSINESS COULD
BE SERIOUSLY HARMED
If we are not successful in expanding our business, our brand and business
could be seriously harmed. We may choose to expand our operations by promoting
new or complementary products and services, increasing the breadth and depth of
products and services offered or expanding our market presence through
relationships with third parties or developing new Web sites. In addition, we
may pursue the acquisition of new or complementary businesses or technologies,
although we have no present understandings, commitments or agreements with
respect to any material acquisitions or investments. However, we may not be able
to successfully expand our business and operations in a cost-effective or timely
manner, and we cannot be certain that any of these efforts would increase
overall market acceptance. Furthermore, any new product, service or Web site
that we launch that is not favorably received could damage our reputation or our
brand recognition. Expansion of our operations in this manner could also require
significant additional expenditures and would strain our management, financial
and operating resources.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY
We may not be able to compete successfully in our targeted market. We
expect to encounter intense competition primarily from:
- other companies or Web sites that are primarily focused, or that have
areas primarily focused, on targeting teens online;
- e-commerce companies and traditional retailers of the products we sell
through our Bolt Store;
- traditional media companies that have made or may in the future make
significant acquisitions of or investments in Internet companies; and
- traditional forms of media, like newspapers, magazines, radio and
television.
The market for Internet traffic, registered users and Internet advertising
is new and rapidly evolving, and competition is intense. With no substantial
barriers to entry, we expect that competition will continue to intensify as new
companies and traditional media companies enter this market. In addition,
because the Internet and e-commerce are new and evolving, we also face intense
competition for advertising revenues from traditional sources of advertising
like print, radio, television and other more established media and competition
for direct sales revenues from traditional retailers of products geared towards
teens.
Many of our existing and potential competitors have longer operating
histories, greater name recognition, larger user and customer bases and
significantly greater financial, technical and marketing resources than we do.
This may enable them to respond more quickly to competitive developments, or to
devote greater resources
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than we can to the development, promotion and sale of their products and
services. Our competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to potential employees, members, customers and partners. Our competitors
may develop products and services that are equal or superior to the products and
services offered by us or that achieve greater market acceptance than our
products and services. In addition, current and potential competitors may
establish cooperative relationships among themselves or with third parties to
improve their ability to address the needs of our customers and members. As a
result, it is possible that new competitors may emerge and rapidly acquire
significant market share. Increased competition may result in price reductions,
reduced revenues, loss of customers and reduced traffic to our Web site.
WE MUST CONTINUE TO ESTABLISH AND MAINTAIN STRATEGIC ALLIANCES TO GENERATE
TRAFFIC TO OUR SITE, WHICH WE MAY NOT BE ABLE TO DO
If we do not continue to establish and maintain strategic alliances that
drive traffic to our site, our business could be seriously harmed. We believe
that strategic alliances with high-traffic Internet sites and leading Internet
portals to ensure the visibility of our Web site and to generate additional
traffic to our site are important to our future growth. We currently have
relationships with America Online, Yahoo!, MSN Hotmail and Lycos. Our business
could be seriously harmed if we do not establish and maintain additional
relationships on commercially reasonable terms or if any of our relationships do
not result in increased traffic and visibility. Many of our current alliances
are based on short-term agreements. There is intense competition among Internet
sites for online strategic relationships. We may not be able to enter into new
or renewed relationships on commercially reasonable terms or at all. In
addition, our existing online strategic relationships or any relationships that
we enter into in the future may not generate enough additional traffic from teen
users to our Web site or create sufficient brand visibility to justify the costs
we incur for these relationships.
OUR SYSTEMS ARE MANAGED BY A THIRD PARTY AND ANY SYSTEMS FAILURE MAY CAUSE
INTERRUPTIONS OF OUR SERVICES, WHICH COULD IMPAIR OUR ADVERTISING REVENUES, OUR
REPUTATION AND THE ATTRACTIVENESS OF OUR BRAND
The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation and our ability to
attract Internet users and advertisers to our site. Substantially all of our
computer and communications hardware and software required for Internet access
is currently housed at Exodus Communications, Inc. in New Jersey. We are
dependent on the services of this provider, and its systems and operations are
vulnerable to damage or interruption from computer viruses, fire, power loss,
telecommunications failures, vandalism and other malicious acts, and similar
unexpected adverse events. We do not presently have a formal disaster recovery
plan and may not carry sufficient business interruption insurance to compensate
us for losses that may occur. If systems failures were sustained or repeated,
our revenues, our reputation and the attractiveness of our brand could be
impaired. In addition, because we have incorporated third-party software into
our systems and we depend upon a third party provider to afford members access
to our products and services, we are limited in our ability to prevent systems
failures.
WE MAY NOT BE ABLE TO SUCCESSFULLY EXPAND INTO INTERNATIONAL MARKETS
If our revenues associated with our planned expansion into international
markets are not adequate to offset investments in international activities, our
business could be seriously harmed. Although we currently operate primarily in
the United States, we plan to expand globally. However, we may experience
difficulty in managing international operations because of distance, as well as
language and cultural differences, and we may not be able to successfully market
and operate our site in foreign markets. There are also risks that are inherent
in transacting business internationally, including:
- unexpected changes in regulatory requirements;
- export restrictions;
- trade barriers;
- difficulties in staffing and managing foreign operations;
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- political instability;
- fluctuations in currency exchange; and
- potential adverse tax consequences.
WE MAY BE LIABLE FOR LEGAL CLAIMS BASED ON THE NATURE AND CONTENT OF OUR
SERVICES AND MEMBER-GENERATED INFORMATION
The features that we offer on Bolt.com that enable our teen members to
exchange information, buy products and services, and engage in various online
activities may expose us to liability. Claims could be made against us for
negligence, defamation, libel, copyright or trademark infringement, personal
injury or other legal claims based on the nature and content of information that
may be posted online by our members. The laws relating to the liability of
providers of online services for the activities of their users are currently
unsettled. In addition, we could be exposed to liability with respect to the
selection of listings that may be accessible through our Web site, or through
content and materials that may be posted by members on message boards or in
clubs, chat rooms or other interactive community-building services. It is also
possible that if any information provided through our services, including
financial information, contains errors, third parties could make claims against
us for losses incurred in reliance on this information. We offer Internet-based
email services, which expose us to potential risks, including liabilities or
claims resulting from unsolicited email, lost or misdirected messages, illegal
or fraudulent use of email, or interruptions or delays in email service.
Investigating and defending these claims is expensive, even to the extent these
claims do not result in liability. Our insurance may not cover certain claims
or, if coverage is available, it may be insufficient.
In addition, we could be exposed to liability arising from the activities
of users of our content or services or with respect to the unauthorized
duplication or insertion of illegal or inappropriate material accessed directly
or indirectly through our services. Several private lawsuits seeking to impose
such liability upon content providers, online services companies and Internet
access providers are currently pending. In addition, laws currently impose
liability for, and in some cases prohibit, the transmission over the Internet of
some types of information. These laws or similar laws enacted in the future
could expose us to significant liabilities associated with our content or
services.
The imposition of potential liability for our content or services could
require us to implement measures to reduce our exposure to this liability, which
may require us to expend substantial resources, or to discontinue some content
or service offerings. In addition, the increased attention focused upon
liability issues as a result of these lawsuits and legislative proposals could
affect the growth of Internet use. We may not have adequate insurance to
compensate us in the event we become liable for our content or services. Any
liability in excess of our insurance could seriously harm our business and
results of operations.
PRIVACY CONCERNS AND GOVERNMENT REGULATIONS COULD IMPAIR OUR ABILITY TO OBTAIN
INFORMATION ABOUT OUR MEMBERS, WHICH WOULD AFFECT OUR ABILITY TO TAILOR OUR
ONLINE OFFERINGS TO OUR MEMBERS AND THE ABILITY OF ADVERTISERS TO CREATE
TARGETED ADVERTISING CAMPAIGNS
Our Web site captures information regarding our members in order to allow
us to tailor our online offerings to them and assist advertisers in targeting
their advertising campaigns. However, privacy concerns may cause members to
resist providing the personal data necessary to support this tailoring
capability. Even the perception of security and privacy issues, whether or not
valid, may indirectly inhibit our ability to collect information regarding our
members. In addition, the Federal Trade Commission has recently issued its final
regulations under the Children's Online Privacy Protection Act of 1998, which
will become effective on April 21, 2000. This Act contains provisions limiting
and regulating the collection, use and/or disclosure of personal information
obtained from children under the age of 13. Although we do not collect and use
information from children under the age of 13, if we discover that members from
whom we have collected information have misrepresented their age or that a child
under 13 has posted personal information on our bulletin board or in any other
public forum on our site, we will have to comply with the provisions of this
Act. Further legislation or regulations regarding Internet privacy that affect
the way we conduct our business may be adopted in the U.S. Other countries and
political entities, like the European Union, have also adopted
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legislation or regulatory requirements regarding the collection and use of
personal data. If consumer privacy concerns are not adequately addressed or if
we fail to comply with current or future regulatory requirements regarding
privacy, our business and results of operations could be seriously harmed.
WE MAY EXPEND SIGNIFICANT RESOURCES TO PROTECT OUR INTELLECTUAL PROPERTY
RIGHTS OR TO DEFEND CLAIMS OF INFRINGEMENT BY THIRD PARTIES, AND IF WE ARE NOT
SUCCESSFUL WE MAY LOSE RIGHTS TO USE SIGNIFICANT MATERIAL OR BE REQUIRED TO PAY
SIGNIFICANT FEES
Our success depends on the protection of our original interactive content
and on the goodwill associated with our trademarks and other proprietary
intellectual property rights. A substantial amount of uncertainty exists
concerning the application of copyright and trademark laws to the Internet and
other digital media, and existing laws may not provide adequate protection of
our content or our Internet addresses, commonly referred to as domain names. We
have filed applications in the United States and other countries to register a
number of our trademarks; however, we do not know whether or not registration
will be granted.
We have also invested resources in acquiring domain names in the United
States and other countries for existing and potential future use. We may not,
however, be entitled to use these names under applicable trademarks and similar
laws and other desired domain names may not be available. Furthermore, enforcing
our intellectual property rights could entail significant expense and could
prove difficult or impossible. In addition, in the future third parties might
bring claims of copyright or trademark infringement, patent violation or
misappropriation of creative ideas or formats against us with respect to our
content or any third-party content carried by us. Any such claims, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using important technologies, ideas or
formats.
WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CLIENT DEMANDS
CONTINUE TO EVOLVE
To be successful, we must adapt to rapidly changing Internet technologies
and continually enhance the features and services provided on our Web site,
which we may not be able to do. We could incur substantial and unanticipated
costs if we need to modify our Web site, software and infrastructure to
incorporate new technologies demanded by our teen members and customers. We may
use new technologies ineffectively or we may fail to adapt our Web site and
network infrastructure to user requirements or emerging industry standards. If
we fail to keep pace with the technological demands of our members and customers
for new teen-focused services, products and enhancements, our business may be
seriously harmed.
WE MAY NEED ADDITIONAL FINANCING FOR OUR FUTURE CAPITAL NEEDS, WHICH WE MAY
NOT BE ABLE TO OBTAIN
Because of our expected negative cash flow, we may need to raise additional
funds in the future, which we may not be able to do. Based on our current
operating plans, we anticipate that the net proceeds from this offering,
together with available funds, will be sufficient to meet our anticipated needs
for at least the next 12 months. We may need additional financing sooner if we:
- decide to expand faster than planned;
- develop new or enhanced services or products ahead of schedule;
- need to respond more quickly than anticipated to competitive pressures;
or
- decide to acquire complementary products, businesses or technologies.
We may not be able to raise additional funds on terms favorable to us, or at
all. If future financing is not available or is not available on acceptable
terms, we may not be able to fund our future needs, which would seriously harm
our business and results of operations. In addition, if we raise additional
funds through the sale of equity or convertible debt securities, your percentage
ownership will be reduced. These transactions may dilute the value of the stock
outstanding. We may also have to issue securities that have rights, preferences
and privileges senior to our common stock.
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PROBLEMS RELATED TO THE YEAR 2000 ISSUE COULD CAUSE SYSTEMS FAILURES THAT
IMPAIR OUR OPERATIONS OR COULD BE EXPENSIVE TO CORRECT
Systems failures related to the problem of computer systems and software
products only accepting two digits to identify the year in any date may impair
our operations. Systems or products with this problem may, for example,
interpret the year 2000 as 1900. This could result in system failures, delays or
miscalculations. Computer systems and software that have not been developed or
enhanced recently may need to be upgraded or replaced to comply with Year 2000
requirements. Based on our Year 2000 assessment program, we believe that the
portions of our computer systems that we developed are Year 2000 compliant.
However, our computer system also uses licensed third-party equipment and
software that may not be Year 2000 compliant. We are currently assessing the
third-party equipment and software for Year 2000 compliance. The failure of our
computer system or the computer systems of Internet service providers could
cause us to incur significant expenses to remedy problems and could reduce our
revenues. We have not incurred material costs to date complying with Year 2000
requirements. However, if we discover significant Year 2000 errors or defects,
we could incur substantial costs and our operations could be seriously
disrupted.
RISKS RELATED TO THE INTERNET INDUSTRY
WE ARE DEPENDENT ON THE CONTINUED GROWTH AND DEVELOPMENT OF THE INTERNET AND
ITS INFRASTRUCTURE, WHICH IS NOT CERTAIN
We cannot be certain that growth in the Internet will continue or that a
sufficient number of consumers will adopt and continue to use the Internet and
other online services. Our future success depends on the continued growth in,
and increased use of, the Internet. Internet usage may be inhibited for a number
of reasons, including:
- inadequate Internet infrastructure;
- security concerns;
- inconsistent quality of service; or
- unavailability of cost-effective, high-speed service.
We cannot be certain that the Internet infrastructure will be able to
support the expected growth or that the performance and reliability of the
Internet will not decline as result of this growth. In addition, Web sites,
including ours, have experienced a variety of interruptions in their service as
a result of outages and other delays occurring throughout the Internet network
infrastructure. If these outages or delays occur frequently in the future, Web
usage, including usage of our Web site, could grow more slowly than anticipated
or decline.
OUR FUTURE SUCCESS DEPENDS SIGNIFICANTLY ON THE ACCEPTANCE AND EFFECTIVENESS
OF THE INTERNET AS AN ADVERTISING MEDIUM, WHICH IS UNCERTAIN
Our future success depends significantly on increasing our online
advertising revenues. We cannot be certain that the Internet advertising market
will continue to emerge or will ever become sustainable, and if it does not, our
advertising revenues may decline. Online advertising is new and rapidly
evolving. It cannot yet be compared with traditional advertising media, like
television and print, to gauge its effectiveness. As a result, there is
significant uncertainty about the demand and market acceptance for online
advertising. Many of our current or prospective clients have little experience
using the Internet for advertising purposes. The adoption of online advertising,
particularly by entities that have historically relied on traditional media for
advertising, requires the acceptance of a new way of conducting business. These
businesses may find online advertising to be less effective for promoting their
products and services as compared to traditional advertising.
THE SUCCESS OF THE BOLT STORE DEPENDS ON THE DEVELOPMENT OF THE E-COMMERCE
MARKET, WHICH IS UNCERTAIN
The success of the Bolt Store depends upon the widespread acceptance and
use of the Internet as an effective medium of commerce by consumers, which
cannot be assured. Rapid growth in the use of the Internet and commercial online
services is a recent phenomenon. Demand for recently introduced services and
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products over the Internet and online services is subject to a high level of
uncertainty. The development of the Internet and e-commerce as a viable
commercial marketplace is subject to a number of factors, including the
following:
- e-commerce is at an early stage and buyers may be unwilling to shift
their purchasing habits from traditional retailers to e-commerce
retailers;
- insufficient availability of telecommunications services or changes in
telecommunications services could result in slower response times; and
- adverse publicity and consumer concern about the security of e-commerce
transactions could discourage its acceptance and growth.
BREACHES OF SECURITY ON THE INTERNET MAY ADVERSELY AFFECT OUR BUSINESS BY
SLOWING THE GROWTH OF SALES IN THE BOLT STORE AND ONLINE ADVERTISING AND EXPOSE
US TO LIABILITY
The need to securely transmit confidential information, including credit
card and other personal information, over the Internet has been a significant
barrier to e-commerce and communications over the Internet. Any well-publicized
compromise of security could deter more people from using the Internet or from
using it to conduct transactions that involve transmitting confidential
information, like purchasing goods or services. Furthermore, decreased traffic
and e-commerce sales as a result of general security concerns could cause
advertisers to reduce their amount of online spending. To the extent that our
activities involve the storage and transmission of proprietary information, like
credit card information, security breaches could disrupt our business, damage
our reputation and expose us to a risk of loss or litigation and possible
liability. We could also be liable for claims based on the misuse of personal
information, such as for unauthorized marketing purposes. We may need to spend a
great deal of money and use other resources to protect against the threat of
security breaches or to alleviate problems caused by these breaches.
WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION OF AND LEGAL UNCERTAINTIES
SURROUNDING THE INTERNET
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could increase our cost of doing business or
otherwise adversely affect our business. Laws and regulations directly
applicable to Internet communications, commerce and advertising are becoming
more prevalent. The law governing the Internet, however, remains largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws governing intellectual
property, copyright, privacy, obscenity, libel and taxation apply to the
Internet. In addition, the growth and development of e-commerce may prompt calls
for more stringent consumer protection laws, both in the United States and
abroad. See "Business--Government Regulation" for a more detailed discussion on
government regulation of the Internet.
RISKS ASSOCIATED WITH THIS OFFERING
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO FALL
Sales of a substantial number of shares of our common stock after this
offering could cause our stock price to fall. Our current stockholders hold a
substantial number of shares, which they will be able to sell in the public
market in the near future. All of the shares sold in this offering will
be freely tradable. The remaining 14,973,965 shares outstanding are restricted
securities as defined in Rule 144 of the Securities Act of 1933. Of these shares
about shares will become freely tradable at various times within
180 days of the date of this prospectus, shares will become
freely tradable on the date that is 180 days after the date of this prospectus
and shares will become freely tradable at various times
thereafter. For a more detailed description of the eligibility of shares for
sale into the public market following this offering, see "Shares Eligible for
Future Sale."
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FUTURE ISSUANCES OF PREFERRED STOCK MAY DILUTE THE RIGHTS OF OUR COMMON
STOCKHOLDERS
Our board of directors will have the authority to issue up to 5,000,000
shares of preferred stock and to determine the price, rights, privileges and
other terms of these shares. The board of directors may exercise this authority
without the approval of the stockholders. The rights of the holders of common
stock may be adversely affected by the rights of the holders of any preferred
stock that may be issued in the future.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW AND OUR CHARTER COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT
Because we are a Delaware corporation, the anti-takeover provisions of
Delaware law could make it more difficult for a third party to acquire control
of us, even if the change in control would be beneficial to stockholders. We are
subject to the provisions of Section 203 of the General Corporation Law of
Delaware. Section 203 will prohibit us from engaging in certain business
combinations, unless the business combination is approved in a prescribed
manner. Accordingly, Section 203 may discourage, delay or prevent someone from
acquiring or merging with us. In addition, upon completion of this offering, our
certificate of incorporation and bylaws will contain certain provisions that may
make a third party acquisition of us difficult, including:
- a classified board of directors, with three classes of directors each
serving a staggered three-year term;
- the ability of the board of directors to issue preferred stock; and
- the inability of our stockholders to call a special meeting or act by
written consent.
OUR STOCK PRICE MAY BE VOLATILE
An active public market for our common stock may not develop or be
sustained after this offering, and the market price might fall below the initial
public offering price. Prior to this offering, you could not buy or sell our
common stock publicly. The initial public offering price may bear no
relationship to the price at which the common stock will trade upon completion
of this offering. The initial public offering price will be determined based on
negotiations between us and the representatives of the underwriters, based on
factors that may not be indicative of future market performance. The market
price of the common stock may fluctuate significantly in response to a number of
factors, some of which are beyond our control, including:
- quarterly variations in results;
- changes in financial estimates by securities analysts;
- changes in market valuation of Internet companies;
- announcements by us of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
- additions or departures of key personnel;
- any shortfall in revenues or net income or any increase in losses from
levels expected by securities analysts;
- future sales of common stock; and
- stock market price and volume fluctuations, which are particularly
common among securities of Internet companies.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION AS TO THE USE OF PROCEEDS FROM THIS
OFFERING
Our management will have broad discretion as to the use of proceeds from
this offering. While we currently intend to use the net proceeds of this
offering as described in "Use of Proceeds," management may allocate the net
proceeds among these purposes as it determines is necessary. In addition, market
factors may require management to allocate all or portions of the net proceeds
for other purposes. Accordingly, you will be
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relying on the judgment of our management with regard to the use of proceeds
from this offering. See "Use of Proceeds" for a more detailed discussion of the
use of proceeds from this offering.
YOU WILL EXPERIENCE IMMEDIATE DILUTION IN THE BOOK VALUE PER SHARE OF THE
COMMON STOCK YOU PURCHASE
Because the price per share of our common stock being offered is
substantially higher than the book value per share of our common stock, you will
suffer substantial dilution in the net tangible book value of the common stock
you purchase in this offering. Based on an assumed initial public offering price
of $ per share, if you purchase shares of common stock in this offering, you
will suffer immediate and substantial dilution of $ per share in the net
tangible book value of the common stock. See "Dilution" for a more detailed
discussion of the dilution you will incur in this offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. In some
cases, you can identify forward-looking statements by terminology like "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue" or the negative of these terms or other
comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. 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.
16
<PAGE> 22
USE OF PROCEEDS
The net proceeds that we will receive from our sale of shares of common
stock in this offering are estimated to be $ million, after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by us and assuming an initial public offering price of $ per share.
If the underwriters exercise their over-allotment option in full, we estimate
the net proceeds from this offering will be $ million.
Our management will have broad discretion as to the use of proceeds from
this offering. We currently intend to use the net proceeds of this offering as
follows:
- to expand our marketing and promotion activities to increase our brand
awareness;
- to launch international operations;
- to expand and upgrade our technology infrastructure;
- to expand our staff, particularly our sales and business development
force; and
- for working capital and general corporate purposes, including possible
acquisitions of or investments in complementary businesses, products or
technologies.
At the present time, we have no understandings, commitments or agreements with
respect to any material acquisition. Our management may allocate the net
proceeds among these purposes as they determine is necessary. Pending the use of
the net proceeds of this offering for the purposes described above, we intend to
invest these proceeds in short-term, interest-bearing, investment-grade
securities.
The foregoing discussion is based on our current business plans and we may
allocate the net proceeds among these purposes as we determine is necessary.
This determination will be based upon factors not yet known, including the time
actually required to reach profitability, the availability of qualified
personnel and the increase, if any, of the traffic to our Web site. In addition,
these and other market factors may require us to allocate portions of the net
proceeds for purposes other than those described above. See "Risk Factors--Risks
Associated with This Offering -- Our management will have broad discretion as to
the use of proceeds from this offering."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
intend to retain any earnings to fund our future growth and the operation of our
business. Therefore, we do not anticipate paying any cash dividends in the
foreseeable future.
17
<PAGE> 23
CAPITALIZATION
The following table shows our cash and cash equivalents, debt, capital
lease obligations, stockholders' equity and capitalization as of September 30,
1999 (1) on an actual basis, (2) on a pro forma basis to give effect to:
- our sale of a total of 3,787,801 shares of our Series C Convertible
Preferred Stock for $10.25 per share on November 17, 1999, November 23,
1999 and December 6, 1999, and
- the conversion of all of our outstanding preferred stock into a total of
11,956,621 shares of common stock upon the completion of this offering
and (3) on a pro forma basis as adjusted to give effect to the receipt of the
estimated proceeds from our sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share, after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by us. This information should be read in conjunction with our
financial statements and the notes to those financial statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 3,637 $42,335 $
======= ======= =======
Long-term debt:
Note payable.............................................. $ 297 $ 297 $
Capital lease obligations................................. 578 578
------- ------- -------
Total long-term debt.................................... 875 875
------- ------- -------
Redeemable convertible preferred stock:
Series B-1, $.001 par value; 1,048,387 shares authorized,
issued and outstanding actual; 1,048,347 shares
authorized, no shares issued and outstanding pro forma;
no shares authorized, issued and outstanding pro forma
as adjusted............................................. 6,132 --
Series B-2, $.001 par value; 268,818 shares authorized,
issued and outstanding actual; 268,818 shares
authorized, no shares issued and outstanding pro forma;
no shares authorized, issued and outstanding pro forma
as adjusted............................................. 1,887 --
Series B-3, $.001 par value; no shares authorized, issued
and outstanding actual; 1,975 shares authorized, no
shares issued and outstanding pro forma; no shares
authorized, issued and outstanding pro forma as
adjusted................................................ -- --
Series C, $.001 par value; no shares authorized, issued
and outstanding actual; 4,400,000 shares authorized, no
shares issued and outstanding pro forma; no shares
authorized, issued and outstanding pro forma as
adjusted................................................ -- --
------- ------- -------
Total redeemable convertible preferred stock............ 8,019
------- ------- -------
Stockholders' equity (deficiency):
Common Stock, $.001 par value; 16,000,000 shares
authorized, 4,438,544 shares issued and 3,017,344 shares
outstanding, actual; 30,000,000 shares authorized,
16,395,165 shares issued and 14,973,965 shares
outstanding, pro forma; 50,000,000 shares authorized,
shares issued and shares outstanding pro
forma as adjusted....................................... 4 16
Series A-1 Convertible Preferred Stock, $.001 par value;
600,000 shares authorized, issued and outstanding
actual; 600,000 shares authorized, no shares issued and
outstanding pro forma; no shares authorized, issued and
outstanding pro forma as adjusted....................... 1 --
Series A-2 Convertible Preferred Stock, $.001 par value;
125,000 shares authorized, issued and outstanding
actual; 125,000 shares authorized, no shares issued and
outstanding pro forma; no shares authorized, issued and
outstanding pro forma as adjusted....................... -- --
Additional paid-in capital.................................. 7,781 54,487
Warrants.................................................... 1,521 1,521
Deferred financing costs.................................... (633) (633)
Accumulated deficit......................................... (6,139) (6,139)
Deferred compensation....................................... (4,876) (4,876)
Note receivable from related party.......................... (315) (315)
Treasury stock.............................................. (461) (461)
------- ------- -------
Total stockholders' equity (deficiency)................. (3,117) 43,600
------- ------- -------
Total capitalization............................... $ 5,777 $44,475 $
======= ======= =======
</TABLE>
The outstanding share information is based on our shares outstanding as of
September 30, 1999. This information excludes:
- 2,593,600 shares of common stock issuable upon the exercise of stock
options outstanding as of December 6, 1999 at a weighted average
exercise price of $.82 per share; and
- 47,900 shares of common stock issuable upon the exercise of warrants
outstanding as of December 6, 1999 at a weighted average exercise price
of $1.27 per share.
18
<PAGE> 24
DILUTION
The pro forma net tangible book value of Bolt as of September 30, 1999,
after giving effect to:
- the sale of a total of 3,787,801 shares of our Series C Convertible
Preferred Stock for $10.25 per share on November 17, 1999, November 23,
1999 and December 6, 1999, and
- the conversion of all of our outstanding preferred stock into a total of
11,956,621 shares of common stock
was $43.6 million or $2.91 per share of common stock. Pro forma net tangible
book value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding.
Assuming the sale by us of shares of common stock in this offering at an
assumed initial public offering price of $ per share, our pro forma net
tangible book value as of September 30, 1999 would have been $ million, or
$ per share of common stock. This represents an immediate increase in pro
forma net tangible book value of $ per share to our existing stockholders
and an immediate dilution in pro forma net tangible book value of $ per
share to new investors purchasing shares in this offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of September
30, 1999.................................................... $2.91
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after this
offering..................................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, as of September 30, 1999 on a pro forma
basis, the number of shares of stock purchased from us, the total consideration
paid to us and the average price per share paid by existing stockholders and by
new investors, based upon an assumed initial public offering price of $
per share for shares purchased in this offering, before deducting the estimated
underwriting discounts and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... % $ % $
New investors.................
------ --- ------ ---
Total............... 100% $ 100%
====== === ====== ===
</TABLE>
These tables assume no exercise of any outstanding stock options or
warrants to purchase common stock. As of December 6, 1999, there were:
- 2,593,600 shares of common stock issuable upon the exercise of stock
options outstanding at a weighted average exercise price of $.82 per
share; and
- 47,900 shares of common stock issuable upon the exercise of warrants
outstanding at a weighted average exercise price of $1.27 per share.
To the extent these options or warrants are exercised, there will be further
dilution to the new investors.
19
<PAGE> 25
PRO FORMA STATEMENT OF OPERATIONS DATA
The statement of operations data for the nine months ended September 30,
1998 and the year ended December 31, 1998 reflect the business of Bolt, together
with the business of the custom publishing division, which provided Web site
development services to third party non-advertising customers, and the Girls On
division, which provided online entertainment and related content written by and
focused toward young women. The custom publishing division was sold in December
1998 and the Girls On division was sold in January 1999. The pro forma statement
of operations data for the nine months ended September 30, 1998 and the year
ended December 31, 1998 reflect our results of operations as if the sales of the
custom publishing division and the Girls On division occurred on January 1,
1998. The pro forma adjustments represent the operating results of the custom
publishing division and the Girls On division for the year ended December 31,
1998. The pro forma statement of operations data are presented for informational
purposes only and may not be indicative of the operating results that would have
been achieved had the transactions been in effect as of the beginning of the
periods presented and should not be construed as being representative of future
operating results.
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
1998 ADJUSTMENTS 1998
-------------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues................................. $ 1,790 $1,606 $ 184
---------- ------ ----------
Costs and expenses:
Production and technology.................... 813 590 223
Sales and marketing.......................... 393 232 161
General and administrative................... 967 746 221
Depreciation and amortization................ 50 42 8
---------- ------ ----------
Total costs and expenses............. 2,223 1,610 613
---------- ------ ----------
Loss from operations........................... (433) (4) (429)
Interest expense, net.......................... (30) (30) --
---------- ------ ----------
Net loss....................................... $ (463) $ (34) $ (429)
========== ====== ==========
Basic loss per share........................... $ (.11) $ (.10)
========== ==========
Weighted average number of shares of common
stock outstanding............................ 4,400,000 4,400,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED YEAR ENDED
DECEMBER 31, PRO FORMA DECEMBER 31,
1998 ADJUSTMENTS 1998
-------------- ------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.................................. $ 2,685 $2,281 $ 404
---------- ------ ----------
Costs and expenses:
Production and technology..................... 1,138 802 336
Sales and marketing........................... 630 298 332
General and administrative.................... 1,327 1,038 289
Depreciation and amortization................. 75 60 15
---------- ------ ----------
Total costs and expenses.............. 3,170 2,198 972
---------- ------ ----------
Income (loss) from operations................... (485) 83 (568)
Interest expense, net........................... (53) (53) --
---------- ------ ----------
Net income (loss)............................... $ (538) $ 30 $ (568)
========== ====== ==========
Basic loss per share............................ $ (.12) $ (.13)
========== ==========
Weighted average number of shares of common
stock outstanding............................. 4,368,850 4,368,850
========== ==========
</TABLE>
We calculate loss per common share by dividing the loss attributable to
common shares by the weighted average number of shares outstanding. We do not
include outstanding common stock options, outstanding warrants or the conversion
of our outstanding convertible preferred stock in the loss per common share
calculation as their effect is anti-dilutive.
20
<PAGE> 26
SELECTED FINANCIAL DATA
The statement of operations data for the period from August 15, 1996 (date
of inception) through December 31, 1996, for the years ended December 31, 1997
and 1998 and for the nine months ended September 30, 1999 and the balance sheet
data as of December 31, 1997 and 1998 and September 30, 1999 have been derived
from, and qualified by reference to, our audited financial statements included
elsewhere in this prospectus which have been audited by Deloitte & Touche LLP.
The statement of operations data for the nine months ended September 30, 1998 is
derived from unaudited financial statements included elsewhere in this
prospectus. In the opinion of management, the unaudited financial statements
have been prepared on a basis consistent with the audited financial statements
which appear elsewhere in this prospectus and include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and results of operations for the unaudited period. The
historical results are not necessarily indicative of the operating results to be
expected in the future. The selected financial data shown below should be read
in conjunction with our financial statements and the notes to those financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 15, 1996
(DATE OF INCEPTION) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ----------------------- -----------------------
1996 1997 1998 1998 1999
------------------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Bolt revenues....................................... $ -- $ 32 $ 404 $ 184 $ 1,885
Revenues related to the Girls On and custom
publishing divisions.............................. 19 446 2,281 1,606 38
---------- ---------- ---------- ---------- ----------
Total revenues............................. 19 478 2,685 1,790 1,923
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Production and technology......................... 15 810 1,138 813 2,389
E-commerce........................................ -- -- -- -- 235
Sales and marketing............................... 1 287 630 393 2,782
General and administrative........................ 51 549 1,327 967 999
Depreciation and amortization..................... 4 25 75 50 211
Stock-based compensation.......................... -- -- -- -- 1,256
---------- ---------- ---------- ---------- ----------
Total costs and expenses................... 71 1,671 3,170 2,223 7,872
---------- ---------- ---------- ---------- ----------
Loss from operations................................ (52) (1,193) (485) (433) (5,949)
Other income (expense):
Interest income (expense), net.................... -- 42 (53) (30) 115
Gain on sale of Girls On.......................... -- -- -- -- 1,436
---------- ---------- ---------- ---------- ----------
Net loss............................................ $ (52) $ (1,151) $ (538) $ (463) $ (4,398)
========== ========== ========== ========== ==========
Basic loss per share................................ $ (.01) $ (.26) $ (.12) $ (.11) $ (1.46)
========== ========== ========== ========== ==========
Weighted average number of shares of common stock
outstanding....................................... 4,400,000 4,400,000 4,368,850 4,400,000 3,009,720
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
-------------- AS OF SEPTEMBER 30,
1997 1998 1999
---- ------ -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $184 $ 194 $ 3,637
Working capital (deficiency)................................ 128 (130) 2,131
Total assets................................................ 662 1,033 8,752
Capital lease obligations, less current portion............. -- 178 578
Redeemable convertible preferred stock...................... -- -- 8,019
Stockholders' equity (deficiency)........................... 395 (630) (3,117)
</TABLE>
We calculate loss per common share by dividing the loss attributable to
common shares by the weighted average number of shares outstanding. We do not
include outstanding common stock options, outstanding warrants or the conversion
of our outstanding convertible preferred stock in the loss per common share
calculation as their effect is anti-dilutive. The Series B preferred stock has
been recorded at its redemption value and classified as redeemable convertible
preferred stock on our balance sheet as of September 30, 1999.
21
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of Bolt should be read in conjunction with "Selected
Financial Data" and our financial statements and related notes appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
Our Web site, Bolt.com, is a leading online destination that targets 15-20
year old teens. We feature teen-focused content generated primarily by our
members, a platform for teens to interact with other teens and tools that allow
our members to personalize their user experience. Our site enables members to
create and actively participate in what we believe is one of the most
teen-relevant environments found anywhere. We have designed Bolt.com to
facilitate communication among teens, to empower them to express their opinions
and ideas as a community and to shop in an online store our members help create.
We were originally incorporated as Concrete Media, Inc. in August 1996. Our
original business consisted of three divisions:
- our Bolt subsidiary, which provided online content and community created
by and focused toward teens;
- our "Girls On" division, which provided online entertainment and related
content written by and focused toward young women; and
- our custom publishing division, which provided Web site development
services to third party non-advertising customers.
We also provided, and continue to provide, custom publishing and production
services to our advertising customers in connection with advertising and product
presentation on Bolt.com.
In late 1998 and early 1999, Concrete Media was reorganized. On December
30, 1998, we sold our custom publishing division and on January 29, 1999, we
sold our Girls On division. Our results of operations set forth below have been
presented to reflect both the combined business of Bolt and the custom
publishing and Girls On divisions and the business of Bolt excluding our former
custom publishing and Girls On divisions. Included in our results of operations
for the nine months ended September 30, 1999 were Girls On revenues and direct
expenses of $38,000 and $25,000, respectively, representing its results for the
month of January just prior to its sale. As a result of the reorganization, we
believe that our historical results of operations are not indicative of our
business and prospects in the future. In addition, the results of operations of
the business of Bolt excluding our former custom publishing and Girls On
divisions is not indicative of our business and prospects going forward.
We have a limited operating history and our prospects are subject to the
risks, expenses and uncertainties frequently encountered by companies in the new
and rapidly evolving markets for Internet products and services. These risks
include the failure to further develop brand awareness, the rejection of
services provided to advertisers, strategic partners and vendors, as well as the
inability to increase the levels of traffic to our Web site.
We have continued to incur losses and negative cash flows from operations
since our inception. These losses have been funded primarily through the
issuance and sale of preferred equity securities. As of September 30, 1999, we
had an accumulated deficit of $6.1 million. We plan to continue to make
significant investments in marketing and technology to continue to build brand
awareness, drive traffic to our site and build our member base. In addition, we
plan to continue to incur costs in building new strategic alliances in an effort
to increase our brand recognition. As a result, we expect to incur significant
operating losses and negative cash flows from operations for the foreseeable
future.
22
<PAGE> 28
REVENUES
We currently derive revenues from two sources: (1) advertising and
sponsorships and (2) e-commerce. We also intend to derive revenues in the near
future from the sale of market research data.
Advertising and sponsorships. Advertising revenues consist primarily of
sales of banner advertisements and sponsorships. Advertising agreements are
generally short-term and provide that we will guarantee a minimum number of
impressions or page views to be delivered over a specified period of time for a
fixed fee. Advertising revenues are generally recognized ratably based on
impressions delivered over the period in which the advertisement is displayed.
To the extent that the minimum number of impressions or page views is not met
within the specified period of time, we defer recognition of revenue until the
impressions or page views are achieved. Through September 30, 1999, we had not
entered into any barter agreements that provided for an exchange of advertising
space between our Web site and advertising space on a third party's Web site. In
November 1999, however, we entered into an agreement with AOL that provides for
our receipt of non-cash revenues for maintenance of the AOL branded teen
channel.
Sponsorship revenues are derived from contracts that generally range from
three-to-12 months in length. Sponsorship agreements typically provide for the
delivery of impressions and market research, as well as strategic placement of
advertisements in contextually relevant areas of our site and the design and
development of sites branded by both Bolt and the sponsor intended to enhance
the promotional objective of the advertiser. Sponsorship revenues are recognized
by us in the same manner that advertising revenues are recognized. Revenues from
production services provided to customers that advertise on our site are
recognized as earned over the life of the advertisement period.
E-commerce. E-commerce revenues are derived from three sources: the sale
of products directly to consumers from the Bolt Store, flat fees from companies
who sell their products through our site and transaction fees received from
companies who pay us based on products they sell from promotions and advertising
on our site. Our members tell us what items they would like to see offered in
the Bolt Store, in effect shifting the model of traditional retailing from
promotion-based sales (a "push" model) to one where our members choose the
products they want to buy (a "pull" model). Currently, the Bolt Store offers
over 1,000 products, including apparel, games, technology, sporting gear and
other items, and we expect to significantly increase the number of products we
offer over the next year. Our users purchase products online and third-party
fulfillment sources drop-ship the product directly to the consumer. We take
title to inventory from the shipper; however, products generally are shipped the
same day the order is fulfilled resulting in our having little, if any,
inventory. We are responsible for the risk of cash collection and product
returns from our customers. As of September 30, 1999, we had no inventory. To
date, e-commerce product returns have been insignificant. E-commerce revenues
represent the gross sales price of the product sold from the Bolt Store and is
recognized at the time product is shipped. We expect that future e-commerce
revenues will fluctuate from quarter to quarter due to seasonal fluctuations in
consumer purchasing patterns. We expect that our e-commerce revenues, especially
relating to the sale of products, in the third and fourth quarter of a given
year will generally be higher than the first two quarters of the year due to the
key back-to-school and holiday selling seasons.
We also generate e-commerce revenues by charging transaction fees to
retailers and e-commerce companies that wish to use our site to promote their
products and services as well as to purchase premium positioning on our site. We
facilitate contact between our members and many of these companies by providing
a link from Bolt.com to their Web sites. Generally, these companies pay us
either a flat fee, a fee based on retail sales to our members or a combination
of the two. We recognize transaction fee revenues from these companies upon
achievement of specified milestones or, in cases where we receive a flat fee,
over the life of the contract.
Market research. We have collected a tremendous amount of data about our
members' preferences both directly, through member-generated profiles, poll
responses and survey results, as well as implicitly, through click-stream
analysis, purchasing history, and other site activity. We believe our ability to
collect data and extract insights about teens' preferences, in the form of
market research reports, will be an increasingly important source of revenues in
the future. We are able to collect this valuable information relating to the
teen
23
<PAGE> 29
demographic group and provide it to companies without compromising the actual
identities of our members. Our members know and appreciate this fact, and
because of it they tend to be very forthcoming about their likes, dislikes and
opinions. To date, we have not recorded any market research revenues; however,
reports have been prepared and provided to advertisers as a value-added service
in connection with larger advertising contracts.
Significant customers. Lids Corporation accounted for 25% of our total
revenues for the nine months ended September 30, 1999. Our custom publishing
division, which provided Web site development services to third party
non-advertising customers, accounted for a large portion of our total revenues
prior to the sale of this division in December 1998. Each of the following
customers were custom publishing customers. Bertlesmann Buch, AG accounted for
52% of our total revenues in 1998. Overly Publishing Co. accounted for 15% of
our total revenues and Tripod, Inc. accounted for 10% of our total revenues in
1997. Time, Inc. accounted for 81% of our total revenues and Winstar Media
Company, Inc. accounted for 19% of our total revenues for the period August 15,
1996 (date of inception) through December 31, 1996.
COSTS AND EXPENSES
Costs and expenses consist of production and technology expenses,
e-commerce expenses, sales and marketing expenses, general and administrative
expenses, depreciation and amortization expenses and stock-based compensation.
Production and technology. Production and technology expenses primarily
include personnel costs related to technical operations, design activities,
productions of the various channels and member-tools incorporated in our site,
and the ongoing development and maintenance of our Web site.
E-commerce. E-commerce expenses primarily include merchandising personnel
costs and the actual costs of product purchased by us from our vendors.
Sales and marketing. Sales and marketing expenses consist primarily of the
costs of online distribution agreements, the costs of offline promotions and
advertising, personnel-related costs and public relations costs. Online
distribution agreements generally require a fixed monthly or quarterly fee paid
by us in exchange for a guaranteed minimum number of impressions. The fixed fee
is amortized as the guaranteed number of impressions is achieved. We expect to
incur significant costs over the next twelve months in an effort to generate
user traffic through the Bolt Store, including the issuance of store coupons and
other marketing strategies.
General and administrative. General and administrative costs primarily
relate to personnel related costs, professional fees and facility costs.
Depreciation and amortization. Depreciation and amortization expenses
relate to computer equipment and fixtures owned by us and the related
amortization of assets acquired through capital leases.
Stock-based compensation. We have recorded total deferred stock-based
compensation of $4.9 million as of September 30, 1999 in connection with stock
options granted during that period. The deferred stock-based compensation amount
represents the difference between the exercise price of stock option grants and
the deemed fair value of our common stock on the date of grant. These amounts
are amortized over the vesting periods of the applicable agreements, resulting
in amortization of stock-based compensation totaling $1.3 million for the nine
months ended September 30, 1999. The amortization expense relates to options
awarded to employees in all operating expense categories. Deferred stock-based
compensation that will be
24
<PAGE> 30
subsequently amortized as expense for the remainder of 1999 and for each of the
next four fiscal years is estimated to be as follows:
<TABLE>
<CAPTION>
PERIOD AMOUNT
- ------ --------------
(IN THOUSANDS)
<S> <C>
Three months ending December 31, 1999....................... $1,835
Year ending December 31, 2000............................... 4,066
Year ending December 31, 2001............................... 1,854
Year ending December 31, 2002............................... 824
Year ending December 31, 2003............................... 147
------
Total............................................. $8,726
======
</TABLE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1998
Total revenues. Total revenues increased to $1.9 million for the nine
months ended September 30, 1999 from $1.8 million for the nine months ended
September 30, 1998. During the nine-month period ended September 30, 1998 we
recognized $1.4 million of revenues related to the custom publishing division,
which was sold on December 30, 1998, of which 80% came from one customer.
Excluding the revenues from the custom publishing and Girls On divisions, our
revenues increased to $1.9 million for the nine months ended September 30, 1999
from $184,000 for the same period in 1998. This increase was due to advertising
and sponsorship revenues primarily due to a larger customer base. In the nine
months ended September 30, 1999, one customer accounted for 25% of our total
revenues.
Production and technology expenses. Production and technology expenses
increased to $2.4 million for the nine months ended September 30, 1999 from
$813,000 for the nine months ended September 30, 1998. This increase was
primarily due to significant increases in staff and the related personnel costs
associated therewith. In addition, we incurred expenses of about $438,000 in
external production and technology costs related to consultants. Excluding
expenses from the custom publishing and Girls On divisions, our production and
technology expenses increased to $2.4 million for the nine months ended
September 30, 1999 from $223,000 for the nine months ended September 30, 1998.
This increase was the result of the growth of the Bolt business, specifically
related to salary and other personnel costs and the external consulting costs
noted above.
E-commerce expenses. E-commerce expenses of $235,000 related to the launch
of the Bolt Store were incurred in the nine months ended September 30, 1999. To
date, the expenses have consisted primarily of personnel expenses; however, we
expect an increase in e-commerce expenses from the cost of products sold through
the Bolt Store. Our custom publishing and Girls On divisions did not operate an
e-commerce business.
Sales and marketing expenses. Sales and marketing expenses increased to
$2.8 million for the nine months ended September 30, 1999 from $393,000 for the
nine months ended September 30, 1998. This increase was due in part to an
increase in our sales and marketing staff and the related personnel costs. In
addition, during 1999, we entered into online distribution agreements with major
Internet companies, pursuant to which we pay flat fees, transaction fees or fees
for a number of impressions over a period of time. For the nine months ended
September 30, 1999, we recognized about $601,000 in expenses related to the
costs of these agreements. Excluding expenses from the custom publishing and
Girls On divisions, our sales and marketing expenses increased to $2.8 million
from $161,000 for the nine months ended September 30, 1998. This increase was
primarily the result of the growth in the Bolt advertising and sponsorship
business. Approximately $2.0 million of this increase is attributable to the
hiring of additional personnel and $601,000 is attributable to costs associated
with online distribution agreements with major Internet companies.
General and administrative expenses. General and administrative expenses
increased to $1.0 million for the nine months ended September 30, 1999 from
$967,000 for the nine months ended September 30, 1998. This increase was due to
increased administrative staffing to support our growth. Prior to the sale of
the
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custom publishing division and Girls On division, salary expenses related to
general and administrative departments such as executive, finance and human
resources were combined and not captured as direct expenses related to any one
division. These costs have been allocated between Bolt and the custom publishing
and Girls On divisions based on the overall headcount by department where direct
expenses were identifiable by division. Excluding expenses from the custom
publishing and Girls On divisions, our general and administrative expenses
increased to $1.0 million from $221,000 for the nine months ended September 30,
1998. This increase was directly related to the growth of the Bolt business.
Depreciation and amortization expenses. Depreciation and amortization
expenses increased to $211,000 for the nine months ended September 30, 1999 from
$50,000 for the nine months ended September 30, 1998. This increase was
primarily the result of the addition of $2.2 million of equipment and software
necessary for the launch of the Bolt Store and the expansion of our
infrastructure. Excluding expenses from the custom publishing and Girls On
divisions, our depreciation and amortization expenses increased to $211,000 from
$8,000 for the nine months ended September 30, 1998. This increase was directly
related to the growth of the Bolt business.
Stock-based compensation expenses. Stock-based compensation expenses of
$1.3 million for the nine months ended September 30, 1999 represent the
difference between employee stock option grant prices and the deemed fair market
values on the date of grant amortized over the vesting period of the options. At
September 30, 1999, we had recorded $4.9 million of deferred stock-based
compensation, which will be amortized over the vesting periods of the options,
generally four years.
Other income and expense. Other income and expense consists of interest
income on cash equivalents and notes receivable, offset by interest expense on
capital leases, short-term debt and notes payable. For the nine months ended
September 30, 1999, we recorded a $1.4 million gain on the sale of Girls On,
representing our contractual portion of the net proceeds from the acquirer of
the Girls On property.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total revenues. Total revenues increased to $2.7 million for the year
ended December 31, 1998 from $478,000 for the year ended December 31, 1997. The
increase was primarily related to revenues of $2.0 million from our custom
publishing division, which was sold on December 30, 1998. For the year ended
December 31, 1998, 52% of our total revenues came from one customer. Excluding
the revenues from the custom publishing and Girls On divisions, our revenues
increased to $404,000 for the year ended December 31, 1998 from $32,000 for the
same period in 1997. This increase was the result of a larger advertising and
sponsorship customer base.
Production and technology expenses. Production and technology expenses
increased to $1.1 million for the year ended December 31, 1998 from $810,000 for
the year ended December 31, 1997. The increase was primarily due to the addition
of production and technology staff and related personnel costs.
Sales and marketing expenses. Sales and marketing expenses increased to
$630,000 for the year ended December 31, 1998 from $287,000 for the year ended
December 31, 1997. This increase was due to an increase in staff and the related
personnel costs as well as an increase in online distribution costs in 1998.
General and administrative expenses. General and administrative expenses
increased to $1.3 million for the year ended December 31, 1998 from $549,000 for
the year ended December 31, 1997. The increase was due to increased
administrative staffing to support our growth.
Depreciation and amortization expenses. Depreciation and amortization
expenses increased to $75,000 for the year ended December 31, 1998 from $25,000
for the year ended December 31, 1997. The increase was primarily due to the
expansion of our infrastructure to support increases in personnel and the growth
of the business.
Other income and expense. For the year ended December 31, 1998, there was
an increase in net interest expense of $95,000 as a result of interest paid on a
convertible note payable and capital leases.
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<PAGE> 32
YEAR ENDED DECEMBER 1997 COMPARED TO THE PERIOD FROM AUGUST 15, 1996 (DATE OF
INCEPTION) THROUGH DECEMBER 31, 1996
Total revenues. Total revenues increased to $478,000 for the year ended
December 31, 1997 from $19,000 for the period from August 15, 1996 through
December 31, 1996. In 1996, we were recently formed and had only two custom
publishing clients. In the following year we increased our custom publishing
customer base and began generating advertising sponsorship revenues. Excluding
the revenues from the custom publishing and Girls On divisions, our revenues
were $32,000 for the year ended December 31, 1997, and we did not have any
revenues in 1996.
Production and technology expenses. Production and technology expenses
increased to $810,000 for the year ended December 31, 1997 from $15,000 for the
period from August 15, 1996 through December 31, 1996. In 1996, only one
employee resided in the production department. The increase in 1997 was due to
additions to the production and technology staff.
Sales and marketing expenses. Sales and marketing expenses increased to
$287,000 for the year ended December 31, 1997 from $1,000 for the period August
15, 1996 through December 31, 1996. This increase was related to new staff and
marketing initiatives.
General and administrative expenses. General and administrative expenses
increased to $549,000 for the year ended December 31, 1997 from $51,000 for the
period August 15, 1996 through December 31, 1996. The increase was due to
increased administrative staffing to support our growth.
Depreciation and amortization expenses. Depreciation and amortization
expense increased to $25,000 for the year ended December 31, 1997 from $4,000
for the period August 15, 1996 through December 31, 1996. This increase reflects
the growth in capital expenditures.
Other income and expense. For the year ended December 31, 1997, there was
an increase in net interest income of $42,000 as a result of interest earned on
cash balances throughout the year.
SELECTED UNAUDITED QUARTERLY REVENUES
The following summary sets forth our quarterly revenues for Bolt, which
include advertising, sponsorship and e-commerce revenues. The information for
each of these quarters has been prepared on substantially the same basis as the
audited financial statements included elsewhere in this prospectus, and in the
opinion of management, includes all adjustments necessary for a fair
presentation of the results of operations for such periods. These results are
not necessarily indicative of the results to be expected in the future, and the
results of interim periods are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
QUARTERLY REVENUES
FOR THE QUARTER ENDED
----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
-------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Bolt revenues (advertising,
sponsorships and
e-commerce).................. $5 $39 $141 $219 $272 $692 $921
</TABLE>
The significant increase in revenues for the three months ended June 30,
1999 and for the three months ended September 30, 1999 was in part due to an
increase in revenues from two new advertisers during these periods as well as to
a general increase in our advertiser base as we increased our sales force.
Our revenues and operating results are likely to vary significantly from
quarter to quarter in the future due to a number of factors, many of which are
beyond our control. These factors include:
- the ability to attract and retain new members, customers and
advertisers;
- new sites, services or products introduced by us or our competitors;
- the timing and uncertainty of sales cycles;
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- the mix of online advertisements sold;
- seasonal weakness in advertising sales, which typically occurs in the
first and third quarters;
- the level of Web and online services usage;
- the ability to attract, integrate and retain qualified personnel;
- technical difficulties or system downtime affecting the Internet
generally or the operation of our business; and
- general economic conditions as well as economic conditions specific to
Internet companies.
Our revenues for the foreseeable future will be substantially dependent on
advertising and sponsorships, many of which are short term and subject to
cancellation without penalty until shortly before publication. In addition, we
derive a significant portion of our revenues from sales of advertising to a
limited number of customers. Accordingly, the loss of any advertising
relationship, or the cancellation or deferral of advertising orders could harm
our results in any one quarter. As a result of these and other factors,
quarter-to-quarter comparisons of our operating results should not be relied
upon as an indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations to date primarily through private sales of
securities, which resulted in aggregate net proceeds of about $10.0 million from
our inception through September 30, 1999. We had about $3.6 million of cash and
cash equivalents as of September 30, 1999 as compared to $194,326 as of December
31, 1998. The increase in cash is primarily due to the $8.0 million raised
through the sale of our Series B preferred stock and an increase in other
financing activities of $1.2 million, offset by cash used in operating and
investing activities of $3.9 million and $1.8 million, respectively.
Net cash used in operating activities for the nine months ended September
30, 1999 increased to $3.9 million from $386,000 for the same period in 1998.
This increase was primarily the result of the $4.4 million net loss for the nine
months ended September 30, 1999. Included in the net loss for the nine months
ended September 30, 1999 was a $1.4 million gain on the sale of Girls On and an
increase in non-cash depreciation, amortization and stock-based compensation
expenses totaling $1.5 million. In addition, we recorded a net increase in cash
resulting from the net changes in operating assets and liabilities of about
$411,000 for the nine months ended September 30, 1999 compared to the same
period in the prior year. Net cash used in operating activities decreased to
$348,000 in 1998 from $1.1 million in 1997, primarily due to the reduction in
the net loss from $1.2 million in 1997 to $538,220 in 1998.
Net cash used in investing activities increased to $1.8 million for the
nine months ended September 30, 1999 from $55,000 for the same period in 1998.
This increase was the result of $2.2 million of capital expenditures, primarily
equipment and software, partially offset by $386,000 in cash proceeds received
from the sale of Girls On. Capital expenditures since inception have been
$43,000 for the period August 15, 1996 (date of inception) through December 31,
1996, $229,000 and $65,000 for the years ended 1997 and 1998, respectively, and
$2.2 million for the nine months ended September 30, 1999.
Net cash provided by financing activities for the nine months ended
September 30, 1999 increased to $9.2 million from $500,000 for the same period
in 1998. Of this increase, $8.0 million of net proceeds were received through
the sale of Series B preferred stock, about $651,000 was received from
Lighthouse Capital Partners III, L.P. as proceeds from the sale of equipment
previously purchased by us, which is now being leased pursuant to a lease
financing and revolving loan security agreement that we entered into with
Lighthouse on August 23, 1999, and $500,000 of short-term borrowings was
received under a loan and security agreement we entered into with Lighthouse in
August 1999. Net cash provided from financing activities decreased to $423,000
in 1998 from $1.5 million in 1997 due to the $1.5 million of proceeds received
from the sale of Series A preferred stock in 1997, partially offset by the
proceeds received in 1998 from a convertible note of $500,000.
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During November and December 1999, we completed the sale of 3,787,801
shares of Series C preferred stock, resulting in net proceeds of about $38.7
million, after expenses. These proceeds will be used over the next twelve months
to help fund our expected investment in strategically targeted online and
offline marketing, to build brand awareness and drive additional traffic to our
Web site. In addition, we plan to increase capital expenditures, primarily
technical equipment and software, to significantly increase our marketing
expenses and to increase our staff and infrastructure over the next several
months.
Our lease financing agreement with Lighthouse provides a lease line not to
exceed $1,000,000 to fund eligible equipment purchases with an option to
increase the line by $500,000. As of September 30, 1999, we had outstanding
borrowings under the line of $651,023, bearing interest at 8%. In addition to
the lease line, we entered into a loan and security agreement with Lighthouse.
The agreement allows us to borrow up to $500,000 against certain eligible
receivables. As of September 30, 1999, we had outstanding borrowings of the
entire $500,000 under this agreement bearing interest at prime plus 1%. As
additional consideration for these agreements, we have issued to Lighthouse a
warrant to purchase 1,975 shares of Series B-3 preferred stock at an exercise
price of $30.37 per share.
We expect that the net proceeds from this offering and the proceeds
received from the sale of Series C preferred stock, together with our available
funds, will be sufficient to meet our operating and capital needs for the next
12 months, although there can be no assurance that we will not have additional
capital needs prior to that time. If cash generated from our operations is
insufficient to satisfy our business requirements, we may seek additional
funding through public or private financings or other arrangements. Adequate
funds may not be available when needed or may not be available on favorable
terms. If additional funds are raised through the issuance of equity securities,
dilution to existing stockholders may result. If insufficient funds are
available, we may be unable to enhance brand awareness or to make capital
expenditures necessary to support our business, either of which could seriously
harm our business.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies and governmental agencies may need
to be upgraded to comply with such Year 2000 requirements or risk system failure
or miscalculations causing disruptions of normal business activities.
STATE OF READINESS
We have completed an assessment of the Year 2000 readiness of our
operating, financial and administrative systems, including the hardware and
software that support our systems. Our assessment plan consisted of the
following steps:
- quality assurance testing of our internally developed proprietary
software;
- contacting or researching readiness statements of our third-party
vendors and licensors of material hardware, software and services that
are both directly and indirectly related to the delivery of our services
to our users;
- contacting or researching readiness statements of our vendors of
third-party systems;
- contacting or researching readiness statements of our Infrastructure
vendors;
- assessing repair or replacement requirements;
- repair and replacement;
- implementation of the plan; and
- creation of contingency plans in the event of Year 2000 failures. This
plan includes the backup of all mission critical systems immediately
prior to the New Year.
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Over the last number of months, we have completed an audit of all of our
systems and software. We have replaced systems or modified code where necessary.
Our vendors of material hardware and software components, infrastructure, and
systems have indicated that the products we use are currently Year 2000
compliant. We can not guarantee the compliance of our vendors and for this
reason can not accurately predict costs associated with our vendors not being
Year 2000 ready. These costs could be substantial and could have a serious
adverse effect on our business and results of operations.
COSTS TO DATE
Most of our expenses have related to, and are expected to continue to
relate to, the operating costs associated with time spent by employees in the
evaluation process and Year 2000 compliance matters generally. To date, our
costs have not exceeded $50,000. After the New Year, we do not anticipate that
such expenses will be material. Such expenses, if higher than anticipated, could
have a serious adverse effect on our business, results of operations and
financial condition.
RISKS
We are not currently aware of any Year 2000 readiness problems related to
our internally developed systems that would have a material adverse effect on
our business, results of operations and financial condition. We can not
guarantee that third-party software, hardware, or services that our systems rely
on are Year 2000 ready. If at the turn of the New Year, these systems prove to
not be Year 2000 ready, this could have a serious adverse effect on our business
and results of operations.
Since we are dependent on third party vendors to provide significant
network services and equipment, a Year 2000 disruption of these services could
cause our customers and users to consider seeking alternative providers or cause
an immense burden on our technical support staff. Either of these reactions
could have a serious adverse effect on our business, results of operations and
financial condition.
In addition, governmental agencies, utility companies, Internet access
companies, third party service providers and others outside our control may not
be Year 2000 ready. The failure by such entities to be Year 2000 ready could
result in systemic failure, which could also prevent us from delivering our
services to our customers, decrease the use of the Internet, or prevent users
from accessing our Web site, which could have a serious adverse effect on our
business, results of operations and financial condition.
CONTINGENCY PLAN
We have developed a Year 2000 contingency plan. This plan includes backups
of all mission critical hardware and software, as well as a team that will
monitor our hardware, software and third party services during the transition
between 1999 and the Year 2000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components. We have no elements of
comprehensive income and the net loss reported in the statements of operations
is equivalent to the total comprehensive loss.
Effective January 1, 1998, we adopted SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
standards for the way business enterprises report information about operating
segments, as well as enterprise-wide disclosures about products and services,
geographic areas and major customers. We operate in one segment in the United
States.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires than an entity recognize all derivatives as either an asset or
liability and measure those instruments at fair value, as well as identify the
conditions for which a derivative may be
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specifically designed as a hedge. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. We do not currently engage or plan to engage in
any derivative or hedging activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. We adopted the requirements of SOP 98-1 as of January 1,
1999.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We maintain our cash equivalents in a money market fund. As of September
30, 1999, all of our cash equivalent investments will mature in one year or less
(see note 2 to the notes to our financial statements). Bolt did not hold any
derivative financial instruments as of September 30, 1999, and has never held
such investments. Due to the short term nature of our investments, we believe we
have no material exposure to interest rate risk arising from our investments.
Therefore, no quantitative tabular disclosure is required.
Currently, all of our revenues and expenses are denominated in U.S. dollars
and as a result, we have not had any exposure to foreign currency rate
fluctuations.
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BUSINESS
OUR BUSINESS
Our Web site, Bolt.com, is a leading online destination that targets 15-20
year old teens. We feature teen-focused content generated primarily by our
members, a platform for teens to interact with other teens and tools that allow
our members to personalize their user experience. Our site enables members to
create and actively participate in what we believe is one of the most
teen-relevant environments found anywhere. We have designed Bolt.com to
facilitate communication among teens, to empower them to express their opinions
and ideas as a community, and to shop in an online store that our members help
create. While the growth of our site to date has been driven largely by
word-of-mouth, we are also building brand awareness through relationships with
America Online, MSN Hotmail, Yahoo! and Lycos. As a result, our member base has
grown to more than 1.5 million as of December 1, 1999 from about 340,000 as of
December 1, 1998. According to Media Metrix, in October 1999, Bolt.com was the
seventh "stickiest" site of all the sites on the Internet, as measured by
minutes per user per month. According to Nielsen I/PRO, we had over 141 million
page views and over 6 million user sessions in October 1999 as compared to 28
million page views and 1.4 million user sessions in December 1998. By
comparison, Seventeen magazine, a leading teen-focused magazine which has been
in existence since 1944, has a circulation of about 2.4 million.
Based on the following factors, we believe that we will be able to grow our
business in a rapid and cost efficient manner:
- Global demographic: globally, teens share many interests and needs,
which should allow us to readily expand on an international basis.
- Member-generated content: substantially all of our content is generated
by our members, minimizing the need for us to hire additional staff or
pay third parties to generate additional content.
- Critical mass: as one of the first entrants in this market, we have
developed a large and loyal member base, which we believe is an
important asset to continue our growth.
We believe we have created a leading online teen destination and generated
one of the largest databases of teen opinions and preferences in the world. With
Bolt.com, we generate revenues through:
- fees from the sale of advertising and sponsorships on our site;
- e-commerce sales through our recently opened online Bolt Store; and
- transactional fees paid by other retailers and e-commerce companies that
promote their products and services on our site.
In the future, we expect to generate revenues through market research fees from
companies that are interested in learning more about our highly-targeted teen
audience.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET, E-COMMERCE AND ONLINE ADVERTISING
The Internet has emerged as a significant global communications medium,
enabling millions of people to share information, communicate and conduct
business electronically. Both the number of Internet users and the amount of
time they spend online are growing. This growth is the result of a number of
factors, including:
- an increase in the number of computers in the home, schools and
workplace;
- improvements in computer network infrastructure;
- more convenient, faster and less expensive Internet access;
- advances in computer and modem technology;
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- an increase in public awareness of the benefits of using the Internet;
and
- the development of easy-to-use interfaces.
The rapid adoption of the Internet represents a significant opportunity for
businesses to market and sell products and services online and for advertisers
and businesses to capitalize on the Internet's interactive nature by marketing
their products to highly targeted audiences. The success of Internet advertising
can be attributed to the following factors:
- Internet advertising offers advertisers a flexible way to target their
messages and measure their results;
- Internet advertisers can tailor their messages to specific groups of
consumers;
- Internet advertisers can change advertising content frequently in
response to market factors, current events and consumer feedback; and
- Advertisers can more accurately track the effectiveness of their
advertising messages based on the rate at which consumers directly
respond to their advertisements through "click-throughs" that their
advertisements receive.
GROWTH OF TARGETED ONLINE CONTENT AND COMMUNITY SITES
As the Internet has grown, users and advertisers have started seeking more
targeted and compelling content, information, expression and interaction. Just
as cable television channels, such as MTV and ESPN, have become more popular by
aggregating content targeted towards a specific audience, online content and
community sites that provide a demographically targeted environment have
emerged. Like the major television networks that provide programming across many
demographic segments, the major online portals typically provide a broad range
of content and services without a specific demographic focus.
Targeted online communities provide users with the ability to access
relevant content and to interact directly with other people with similar
interests. Registered users, or members, are often eligible for additional
services from a site, such as customization options or access to premium
content. As a site learns more about its members as they register and spend more
time online, it can tailor its features to meet the needs and preferences of its
users and members. This information also provides advertisers and merchants with
more focused demographic and psychographic information that can be used to
maximize direct marketing opportunities.
TEENS ARE BECOMING AN INCREASINGLY IMPORTANT AUDIENCE TO ONLINE ADVERTISERS
AND MERCHANTS
Significant advertising opportunities exist on a teen-focused Web site.
Teens are more difficult than adults to reach with targeted advertising because
teens generally do not subscribe to magazines in large numbers, and they tend to
watch less television and lead more active lifestyles than adults. While teens
are flooded with literally thousands of broad-based marketing messages every day
from other traditional sources, such as billboard and radio advertising, we
believe they are largely unreceptive to advertising messages that are not
personally relevant. We believe that marketing products and services to teens
online through a site with contextual, editorial information focused on them is
more effective than using traditional marketing methods.
The United States Census Bureau projects that the number of individuals
between the ages of 10 and 24 will grow to 63.1 million in 2010. This growth
rate is estimated to outpace growth of the general population by nearly 10%. In
addition, teens also possess substantial disposable income. eMarketer, a market
research firm, estimates that over $109 billion is spent annually by teens in
the United States alone.
Teens are often early adopters of new technologies and are significantly
involved with the Internet. According to eMarketer, about 57% of 13 to 17 year
olds use the Internet regularly, as compared to about 36% of 18-34 year olds,
31% of 35-54 year olds and 17% of individuals over the age of 55. eMarketer also
estimates that the number of 13 to 17 year olds who regularly access the
Internet will rise to 12.4 million by 2000 from 9.1 million in 1998, an increase
of over 36%. eMarketer estimates that 13 to 17 year olds currently spend an
average of 8.5 hours online per week as compared to 6.7 hours for individuals
over the age of 18. This creates a significant opportunity to both sell products
and advertise to teens online. eMarketer also estimates that online commerce
sales to 13 to 17 year olds will increase to $1.4 billion in 2002 from $161
million in 1999.
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THE NEED FOR A RELEVANT INTERACTIVE FORUM FOR TEENS
We believe that teens have a desire to express themselves when dealing with
issues and problems affecting their lives, but they are often unable or
unwilling to talk about these issues with adults or discuss them face to face
with their friends. Accordingly, they require an interactive forum that will
fill the need that teens have to anonymously express their ideas and opinions
about teen-related issues to their peers. While traditional media is not suited
to meet this need because it is not interactive, the Internet is particularly
appropriate because it is currently the only mass medium that allows for
real-time interactive communication. Accordingly, there appear to be substantial
market opportunities for an online forum that combines content and community
that is relevant to the lives of teens. The major Internet portals, however,
have not seized this opportunity for the following reasons:
- Most portals are generally not contextually relevant. These sites are
designed to appeal to a broad audience, and therefore, we believe they
have not created an environment that is contextually relevant to teens'
needs and buying habits;
- Major portals do not effectively address teen issues. We believe they
do not effectively address the issues that are relevant to teens, such
as peer, parental and school-related pressures, and issues revolving
around friendship, relationships, sexuality and development; and
- Major portals do not provide teen-relevant interactive services. We
believe the major portals do not provide the kind of targeted
interactivity and services that teens seek.
THE BOLT SOLUTION
Bolt.com is one of the most well-known and widely visited Web sites for
teens on the Internet. We provide a site where teens can congregate in an
environment that caters exclusively to their interests and promotes their
participation and recognition. With Bolt.com, we generate revenues from
advertising and sponsorship sales and e-commerce transactions, and we expect to
generate revenues from market research fees in the future.
WHY TEENS USE BOLT
We empower our members. Bolt.com is a site that empowers our teen-focused
audience to express opinions and ideas regarding the ever-changing issues and
trends that impact their lives. Our members communicate on our site and provide
content for our site using their chosen Bolt Member IDs. This ensures anonymity
and encourages frank and open discussion. Our members provide most of the
content of Bolt.com, unlike other sites where the non-teen staff or third
parties generate most of the content. We have created a process where our
members are, in effect, a collection of hundreds of thousands of
"freelance-writers" from around the world who continually contribute content
such as news reports, music and movie reviews, product reviews and survey
questions and answers. Our producers then gather, edit and filter these
submissions and feature items that ultimately provide Bolt.com with its content.
Accordingly, we do not generate content based on what we believe our audience is
interested in; rather, we let our teen audience direct our content. Our members
provide the content, and we provide the processes, framework, tools, utilities,
and applications that empower teens around the world to have a voice regarding
what is important in their lives.
We provide personalized tools. Our more than 1.5 million members can use
our personalized tools to help them manage their lives, making the site more
valuable to them the more they use it. Through tools such as our Bolt Notes and
Diaries, User Profiles and a Personal Calendar our members can personalize our
site. In addition, through our member program, we gather a significant amount of
data concerning the preferences and dislikes of our members, which should allow
our site to be continually relevant to them. This data can be used to target
content as well as advertising information toward particular members, while
maintaining the confidentiality of our members (Bolt does not give out
information about members without a member's consent). We believe our registered
member base creates member loyalty and leads to repeat site visits, referrals
and higher quality member-generated content.
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We offer member-directed online shopping. In September 1999, we launched
the online Bolt Store, which offers products that our members have told us they
want to buy. We allow our more than 1.5 million members to help create the Bolt
Store by asking them, through surveys, polls and other interactive tools, which
products they would like to buy. We then offer these items for sale and use
third-party fulfillment sources to drop-ship products that are purchased at the
Bolt Store. Currently, the Bolt Store offers over 1,000 products, including
apparel, games, technology, sporting gear and other items.
WHY MARKETERS ADVERTISE ON BOLT.COM
We have developed a site that we believe is highly desirable to advertisers
and have established relationships with over 100 new advertisers over the past
nine months. We believe we have developed an attractive platform for advertisers
for the following reasons:
- Audience. We provide a highly-targeted, growing and
demographically-focused audience.
- Size. We have a large and active teen member base, as demonstrated by
the over 141 million page views and over 6 million user sessions in
October 1999.
- Contextual Relevance and Targeting. Marketers can target their messages
in a way that is particularly relevant to our members' interests.
- Member Loyalty. According to Media Metrix, in October 1999, Bolt.com
was the seventh "stickiest" site on the Internet, as measured by minutes
per user per month.
We offer advertisers a variety of advertising and sponsorship opportunities
to allow them to take advantage of these factors, including:
- Banner advertisements;
- Integrated content sponsorships;
- Pop-up advertisements;
- Section sponsorships;
- A rotating "viewer window";
- HTML-based and text-based advertisements in targeted emails; and
- Opt-in registration boxes, that allow members to request information
from selected advertisers.
Because of the substantial amount of data we collect on individual members,
advertisers are able to purchase highly-targeted advertisements that
specifically address their marketing needs. For example, if an advertiser wishes
to reach only 18 year-old men in urban areas who have indicated that they like
snowboarding, we can deliver a marketing message specifically to those members.
While this is efficient for our advertisers, it is also relevant to our members,
who are seeking messages or advertising that specifically address their needs
and do not want to be inundated with advertising messages not relevant to their
particular interests. We plan to continue this advertising methodology in an
effort to become a leader in one-to-one marketing. During the past year, we have
also focused on offering our members the ability to select specific advertisers
from whom they wish to receive more information.
In addition, while banner advertisements are the accepted advertising
method for many advertising agencies, advertisers are realizing that the
Internet provides an excellent opportunity to add more value to the user
experience through integrated sponsorships. For example, Neutrogena sponsors an
interactive question and answer section on Bolt.com where content focused on
health and beauty tips is integrated with Neutrogena's advertisements.
PROVIDING VALUABLE DATA ON THE TEEN DEMOGRAPHIC
The data and information we gather about our highly-focused audience can be
extremely valuable to companies that wish to target this demographic group. We
have created a proprietary environment that not
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only provides a compelling online experience for teens, but also generates a
tremendous amount of data about our members. We collect this data both
explicitly, through member-generated profiles, poll responses and survey
results, and implicitly, through click-stream analysis, purchasing history and
other site activity. We are able to provide valuable information relating to our
specific demographic group to advertisers without compromising the actual
identities of our members. Our members know and appreciate this fact, and
because of it they are very forthcoming about their likes, dislikes and
opinions.
We believe our ability to collect data and extract insights about teens'
preferences in the form of market research reports to companies will generate
additional revenues in the future. We also are currently selling the ability to
survey our audience through a member "opt-in" program on the site, and we are
significantly ramping-up our data-mining capabilities to provide a unique
service to those wishing to collect market research on this unique and elusive
demographic.
THE BOLT STRATEGY
Our goal is to be the leading media company focusing on teens. We intend to
achieve this goal by pursuing the following strategies:
CONTINUE TO BUILD BRAND AWARENESS. We believe that continuing to build
brand awareness for our site is critical to attracting and expanding our global
member base and customer loyalty. Our strategy is to enhance the recognition of
the Bolt brand among our members, other users, customers and strategic partners
through:
- Traditional and Internet Advertising. We will continue to use
traditional advertising, which may include print, television and radio,
not only to continue to reach more advertising customers but also to
publicize our brand to potential users. Also, we will use targeted
online advertising on other Web sites, like Yahoo! or MSN, to promote
our brand name to existing and potential members.
- Non-Traditional Events. We will continue to promote our brand at events
such as rock concerts, sporting events, and other events where teens
gather. For example, in the summer of 1999, we conducted the "Power
Trip," in which a Bolt-branded trailer traveled to over 50 events to
encourage teens to discuss teen empowerment in their own communities.
Tens of thousands of teens registered for our site through this event.
CONTINUE TO DEVELOP AND EXTEND OUR RELATIONSHIPS WITH STRATEGIC PARTNERS
AND ADVERTISERS. We intend to enhance our brand name and increase our customer
base by expanding the number and type of strategic alliances and advertising
relationships we have with online service providers and portals like America
Online, MSN Hotmail, Yahoo! and Lycos, as well as traditional media outlets and
retailers. In addition, we intend to strengthen our relationships with
advertisers by providing more targeted advertising and sponsorship opportunities
to our partners. We also intend to invest in additional reporting tools to
provide unparalleled service in tracking results of promotional and advertising
campaigns on the site.
ENHANCE OUR ONLINE FEATURES. We will continue to develop our content,
community and e-commerce product offerings to drive teen traffic to our Web
site. We are always looking for innovative and exciting interactive tools and
new technologies to enhance our users' experience. For instance, we intend to
develop the ability to access many of the features and functionality found on
Bolt.com by as many electronic means as possible, including wireless phones and
pagers.
EXPAND OUR E-COMMERCE OFFERINGS. We intend to continue to make e-commerce
an integrated and valuable part of our Web site. The Bolt Store currently offers
over 1,000 products for both men and women, and we intend to significantly
increase the number of products we offer over the next year. In addition, we
plan to integrate global shopping opportunities into the Bolt Store for our
users outside of the United States who seek access to American products.
DEVELOP A CO-BRANDED DEBIT CARD. We are planning to develop, with a
strategic partner, the Bolt Card, a co-branded financial resource for teens that
will not only provide them with a non-credit based means of conducting
transactions at the Bolt Store but will also allow them to make purchases
outside of the Bolt Store.
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EXPAND OUR INTERNATIONAL PRESENCE. We believe teens throughout the world
share similar interests and face similar issues and problems. Therefore, we plan
to launch localized versions of our Web site in strategic locations throughout
the world, focusing on countries that have large teen populations with a
significant Internet presence. Initially, we intend to target countries such as
the United Kingdom, France, Germany, Japan, Italy, and Mexico. We plan to
develop local sales staffs and create hosting operations, but intend to leverage
our domestic production facility to maintain economies of scale as we focus on
additional countries.
OUR WEB SITE
The following table details some of the functions and tools we currently
offer on Bolt.com:
SERVICE/FUNCTION DESCRIPTION
Member ID/Profile............. Each member chooses a Bolt member name and all
communications on our site are accomplished
using that name to ensure anonymity among our
members. Our members are encouraged not to give
their real names to other members. The member
profile contains a member's basic information
including age, sex, birthday, state, country if
outside the U.S., and preferences. This is the
basis for our database profile of each member,
and provides members, as well as our
advertising, commerce, and market research
clients, with core data about the likes and
interests of each member without disclosing any
confidential personal information about the
member.
Tagbooks...................... Allows individual members to create personal
questions and polls within their Member
Profiles. In order to access the Tagbooks of a
member and answer questions or leave messages,
you must access that member's profile. This has
become one of the most popular features of
Bolt.com. In addition, because only members can
create Tagbooks, we have found that this
feature drives member registration.
Bolt Notes.................... Allows members to leave a message for any Bolt
member using a proprietary application that
combines instant messaging capabilities with
email.
Bolt Boards................... Provides members with a forum to discuss almost
any topic with each other on the Boards,
ranging from Pro Wrestling to Alternative
Religions. Bolt Boards are the main message
boards on Bolt.com.
Bolt Store Product Reviews.... Allows our members to comment on products for
sale in or that they have purchased in the Bolt
Store. This provides teens with peer-generated
information to support their decision making
for product purchasing.
Bolt Email Service............ Provides every member with access to Internet
email through the Bolt.com address. Currently,
over 600,000 of our more than 1.5 million
members have elected to subscribe to this
service.
Bolt Homepages................ Allows members to categorize and create their
own Web pages that we host free of charge.
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Polls......................... Allows our members to suggest poll topics.
These poll topics are reviewed by our producers
and highlighted in relevant channels where
other members can respond to the poll
questions. A member who responds to a poll
question gets immediate feedback on how other
members have responded.
Friends....................... Enables members to generate listings of other
Bolt members that the member chooses. When
members access our site, they are told which of
their Friends are also on the site. This
facilitates online communication for our
members.
Member Search................. Provides members with the capability to find
and contact other members with similar likes
and/or dislikes.
Personal Calendar............. This Web-based calendar allows members to set
up reminders and appointments, including times
to meet with friends online.
Chat.......................... Provides real-time communication in "rooms"
with specific topics, such as movies, music,
style and religion. Also includes rooms for
French, German, Dutch and Spanish speakers.
Bolt Zap...................... Allows members to send instant messages to
other online members and Friends, as well as to
anyone else on the Internet.
Cards......................... Allows our members to email "virtual cards" to
other members with personalized messages.
Horoscopes.................... Provides proprietary horoscopes targeted to our
teen members and provides interactive feedback
on the horoscopes from members.
Diaries....................... Allows our members to create a digital diary
that does not run the risk of being found by
mom, dad or a sibling. Members have the option
of allowing others to see certain entries if
they desire.
ADVERTISING SALES
As of October 31, 1999, we had a direct advertising sales force comprised
of nine sales people, in addition to our Director of Advertising and our Vice
President of Ad Sales. This group is located primarily in New York, and we have
sales offices in Chicago and Los Angeles and plan to open offices in Detroit and
San Francisco in 2000. Our sales force has been successful in attracting a
diverse group of advertisers by promoting the value of our teen audience and
teen-focused Web site environment. During 1999, our sales force has entered into
contracts with over 100 advertising customers. These are some of our customers
who advertise on or sponsor some of the content of Bolt.com:
<TABLE>
<S> <C> <C>
COMMUNICATIONS AND TECHNOLOGY ENTERTAINMENT AND MEDIA HEALTH AND BEAUTY
BellSouth Bertelsmann/BMG Music Clinique
Hewlett Packard MGM Pictures Coty
Intel MTV Gillette
Microsoft Showtime Johnson & Johnson
Sprint Sony Pictures Entertainment Smith Kline Beecham
FASHION AND RETAIL FOOD AND BEVERAGE AUTOMOTIVE
Artcarved Coca Cola Ford Motor Company
Converse Dr. Pepper/7Up Toyota
J.C. Penney
</TABLE>
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We currently derive, and expect to continue to derive, a substantial
portion of our revenues from advertising sales. We offer advertisers the
following advertising options:
- Banner advertisements. An advertiser may purchase banners, which are
graphical advertisements with the advertiser's logo, for placement
throughout our site or in a specific area within our site.
- Integrated content sponsorships. Advertisers may also sponsor a
specific area or feature of our site. For example, Gillette currently
sponsors a feature called "Lookin' Good" that features ways that teens
deal with their personal appearance.
- Pop-up advertisements. Advertisers may choose to have an advertising
window "pop-up" following certain actions by members on Bolt.com. For
instance, after a member responds to a poll question about a pop star, a
window may pop-up advertising a new artist or musician.
- Section sponsorships. Advertisers may also pay to own a premiere
position within a particular section or sections of Bolt.com. For
example, Emusic.com is currently a section sponsor of the Bolt.com music
section.
- A rotating "viewer window." Our front page contains a rotating viewer
window that displays advertisements and promotes new content on the
site. Because this window is constantly changing and is always visible
to members, it provides our advertisers with an excellent way to catch
the attention of our members.
- HTML-based and text-based advertisements in targeted email. We send
over 4.0 million targeted HTML-based emails every week. We provide
advertisers the opportunity to place a graphic advertisement within
these emails. In addition, we also send over 1.0 million text-based
targeted emails every week. Advertisers can choose to include a textual
advertisement in these messages. Because of our ability to target these
emails, the advertisements tend to be more relevant to the recipient.
- Opt-in registration boxes. When new members register, they have the
opportunity to "opt-in" or request information about products or
services from certain advertisers. These advertisers, such as BMG Music,
pay a fee for each new member that opts-in for information about their
products or services during registration. Thousands of new members
register for our site every day.
E-COMMERCE AND THE BOLT STORE
In September 1999, we launched the Bolt Store, which we believe is one of
the largest collections of teen-focused product offerings on the Internet. In
creating the Bolt Store, we have utilized our relationships with our more than
1.5 million members by asking them, through surveys, polls and other interactive
tools which products they would like to buy through our Web site. We allow our
members to help create the Bolt Store by telling us what brands and products
they like and do not like, and how their lifestyles are impacted by those
products. We listen to their requests and attempt to facilitate their needs, by
offering a number of these products through the Bolt Store. By using member
input to create the Bolt Store, we shift the model of traditional retailing from
promotion-based sales (a "push" model) to one where our members choose the
products they want (a "pull" model). The Bolt Store currently contains over
1,000 products that our members help select, including apparel, games,
technology, sporting gear and other items. We expect to significantly increase
the number of products we offer over the next year.
Because we have a valuable database of aggregate and individual product
preferences from the millions of teens that visit Bolt.com on a monthly basis,
we expect that the Bolt Store will become an effective example of one-to-one
marketing on the Internet. Because of this, we believe we will be able to sell
more effectively than traditional retailers and other online retail sites that
are solely focused on commerce because our members are telling us and each other
what brands and products they like and do not like, and how their lifestyles are
impacted by those products.
Within the Bolt Store, we manage all ordering, returns, and product
selection. We have carefully selected several fulfillment partners to supply the
products from their warehouses and drop-ship orders to our customers after
receiving an order confirmation from us. We take title of inventory from the
shipper; however,
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products generally are shipped the same day the order is fulfilled, resulting in
our having little, if any, inventory. Our customers are given a number of
shipping options, all of which are handled by standard shipping franchises such
as UPS and Federal Express.
We also generate e-commerce revenues by charging transaction fees to
retailers and e-commerce companies that wish to use our site to promote their
products and services as well as to purchase premium positioning on our site. We
facilitate contact between our members and many of these companies by providing
a link from Bolt.com to their Web sites. Generally these companies pay us either
a flat fee, a fee based on retail sales to our members or a combination of the
two. We currently have e-commerce transaction fee arrangements with companies
including CDNow, Lids and InfoBeat.
MARKET RESEARCH
We intend to utilize the valuable data and information we collect from our
teen members in order to make market research an important part of our business.
We intend to offer to teen-focused marketers a variety of products ranging from
online surveys to complete trend reports within the scope of our Web site. These
products will be sold as components of our advertising business.
We have begun to provide market research to a number of our advertising
customers, including a major apparel manufacturer researching the latest trends
in the jeans market and Artcarved, a leading manufacturer of class rings.
Through surveys and polls on Bolt.com, Artcarved was able to collect research
information on how teens perceived class rings, the growth potential of the
industry, and how teens intend to purchase rings (i.e., through in-school
representatives or at jewelry stores).
CUSTOMER CARE
Site support. Users who are unfamiliar with our site can click on the
"help" button on Bolt.com. This feature describes all of our Bolt.com features
and services and explains to the user how to use them. In addition, our members
can post messages on our help boards and our Bolt staff will respond. Finally,
users can also send emails to Bolt Support, and our staff generally responds
within one day.
Bolt Store customer support. We provide live customer support to our Bolt
Store customers 24 hours per day, seven days per week. We currently outsource
this service to a third-party provider but we expect to provide this service
in-house in the future. Our Bolt Store customers can obtain live customer
support at any time simply by clicking through to a customer service
representative and "chatting" online. In addition, our customers can obtain
order processing, shipping status and other account information online at
Bolt.com.
MARKETING AND PROMOTION
We employ a variety of online, offline and non-traditional marketing
methods designed to:
- build our brand awareness;
- drive traffic to our site;
- build our registered member base; and
- minimize our member and customer acquisition costs.
To increase our brand recognition online, we maintain strategic
relationships with leading Internet portals and Web sites, including America
Online, MSN Hotmail, Yahoo! and Lycos. We also use traditional advertising such
as print, television and radio promotions. We believe that promotion in
publications such as the New York Times and Advertising Age is particularly
effective in reaching potential sponsors. We also intend to launch an
advertising campaign in print, radio and television that will promote Bolt.com
as a place for teens to be empowered through having a collective voice. We
intend to choose media that will allow us to reach a significant portion of the
teen market, including alternative and top 40 radio formats, teen magazines and
television programming focused on the teen market.
In addition, we promote our brand with non-traditional marketing promotions
at events such as rock concerts, sporting events, and other gatherings of
interest to teens. For example, in the third quarter of 1999, we conducted the
"Power Trip," during which a Bolt-branded Airstream trailer traveled to over 50
events to encourage teens to discuss teen empowerment in their own communities.
Tens of thousands of teens registered
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for our site through this event. We are also a sponsor of the Gravity Games in
Providence, Rhode Island and Mammoth Mountain, California which are produced by
NBC and Petersen Action Sports Publications. We receive a sponsorship placement
at the Gravity Games and ad placement in designated Petersen magazines, in
return for a Gravity Games featured placement on Bolt.com. A Gravity Games page
is contained within the Sports Section of Bolt.com and is promoted by banners
and buttons as well as direct mail newsletters to Bolt.com members.
BOLT.COM STRATEGIC RELATIONSHIPS
We believe that forming strategic alliances with major online portals and
service providers can increase our brand awareness and be a source of
significant new Web site traffic. We currently have strategic relationships with
the following:
- America Online. We are the only teen community partner for the AOL
branded service's teen message boards and teen chat rooms. We entered
into a 26 month agreement with AOL on November 16, 1999. We will provide
management of AOL's teen community tools, including the teen message
boards and chat rooms. In return, we will receive brand exposure because
we are entitled to establish and maintain a linked, customized,
user-generated content environment at aol.bolt.com, and all teen-focused
message boards, chat rooms, and teen community areas within the AOL
service, including aol.bolt.com, will be Bolt branded. We will also have
the exclusive ability to sell advertising on aol.bolt.com. In addition,
we pay a fee for placement in the AOL shopping service and on teen
targeted sites on the AOL network, including Spinner, WinAmp, Netscape,
Compuserve and MovieFone.
- MSN Hotmail. We provide teen content for the MSN Hotmail WebCourier
Newsletter Program. We have an agreement with Hotmail which expires on
August 27, 2000. This relationship has been a key traffic driver for us
and an important service for Hotmail's teen user base. The Bolt
newsletter is delivered twice per week to over 1.9 million Hotmail users
who elected to receive our content when they registered with Hotmail.
Bolt pays Hotmail a slotting fee and a minimal mail postage per mailing
fee after the first 1.5 million newsletters have been mailed. In
addition to the WebCourier Program, we also advertise on the MSN
Shopping Channel, MSN Hotmail and the MSN service targeted to teens. We
can include advertising in the newsletter and are entitled to all
revenues generated from the sale of these advertisements. Our current
agreement with Hotmail runs through August 27, 2000.
- Yahoo!. We are a co-branding sponsor of the Yahoo! Teen Chat Channel, a
popular area on Yahoo! for teens. This agreement, which was entered into
in September 1999, has a nine month term. As a co-branding sponsor of
the Yahoo! Teen Chat Channel, we are the only teen-focused site that has
a fixed banner placement on the top of the entrance page to Yahoo! Teen
Chat. We also receive a content placement on the left side of this page
that changes continually with new Bolt content. In addition, we receive
shopping related promotions and receive a number of teen targeted banner
advertisements on the Yahoo! network. We pay Yahoo! a one-time fee and
are guaranteed a certain number of impressions.
- Lycos. We provide teen-generated content for Lycos' MailCity email
Newsletter. We entered into an agreement with Lycos in August 1999. This
agreement has a one year term that automatically renews unless either
party gives 30 days written notice of its decision not to renew. This
program allows us to deliver HTML-based email to over 350,000 teens who
have specifically expressed interest in receiving our mailing. This
mailing is delivered once per week every Tuesday. We include advertising
and sponsorships in the newsletter and are entitled to all revenues
generated from the sale of these advertisements.
- Ford Motor Company. On November 17, 1999, we entered into a partnership
with Ford Motor Company to develop Cars.bolt.com, a co-branded
destination on our site, that we expect to launch in January 2000.
Cars.bolt.com will feature auto-related content geared towards teens,
including personalized classified advertisements, an automotive
dictionary, teen-focused buyer guides, information on how to buy and
lease cars and an interactive drivers education seminar called "Behind
the Wheel" that will help our teen members prepare for their driving
license tests. In addition, Cars.bolt.com will feature an interactive
Ford-branded design studio called "Design Your Own
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Dream Car." With this feature, our members will use a drag and drop
graphical interface to design cars and submit their designs to Ford.
Under this agreement, we will also provide quarterly market research
studies to Ford. This agreement continues through December 31, 2002, but
may be terminated on December 31, 2000 or 2001 by either party.
COMPETITION
The market for Internet traffic, registered users and Internet advertising
is new and rapidly evolving, and competition is intense. With no substantial
barriers to entry, we expect that competition will continue to intensify.
We believe that the primary competitive factors in creating community on
the Internet and attracting advertisers are:
- functionality;
- brand recognition;
- user affinity and loyalty;
- the ability to target a specific demographic;
- variety of value-added services;
- ease-of-use;
- quality of service;
- reliability and critical mass; and
- the overall cost-effectiveness of the advertising medium.
We compete with sites, and sites with areas, that are primarily focused on
targeting teens online. These sites include MTV Online and the Yahoo! Teen Chat
area. We also compete with retailers that have moved to the Web such as Alloy
Clothing and Delia's. We will likely also face online competition in the future
from:
- search engine providers;
- content sites;
- commercial online services;
- sites maintained by Internet service providers;
- traditional media companies such as MTV, Disney and NBC, many of which
have recently made significant acquisitions or investments in Internet
companies; and
- other entities that attempt to establish communities on the Internet by
developing their own or purchasing one of our competitors.
We also compete with traditional forms of media, such as newspapers,
magazines, radio and television, for advertisers and advertising revenues.
TECHNOLOGY AND SYSTEMS
We rely almost exclusively on a variety of third-party products for our
hardware and software. We operate our network to ensure maximum uptime, to
obtain, preserve and analyze customer data, and to enhance our members'
experience.
Our goal is to maintain the technological infrastructure required to handle
heavy traffic, e-commerce and complex graphics on our site. We currently house
our servers at Exodus Communications in New Jersey. Exodus maintains an
environmentally controlled data center with multiple communication lines and
uninterrupted power. We believe that our infrastructure conforms to the latest
industry standards. We are also in the process of installing additional servers.
If a server fails, we believe that we have enough back-up servers to ensure that
our service interruption would be minimized. Our infrastructure is scalable in
that as additional capacity is needed, additional servers can be easily added.
We are also planning to expand our server system to multiple data centers.
Currently, a complete failure at our data center would prevent us from
delivering our services to our customers and prevent users from accessing our
Web site.
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We also run weekly full backups of all of our servers, as well as daily
incremental backups of these same machines. These tape backups are stored off of
the premises.
TRADEMARKS AND INTELLECTUAL PROPERTY
We use the following trademarks for which applications in the United States
Patent and Trademark Office are pending: "Bolt," our logo, "Banned On," "Bolt
Notes" and "Bolt Reporter." We also have trademark and domain name applications
pending in other countries.
GOVERNMENT REGULATION
We are subject to various laws and governmental regulations relating to our
business. Although there are currently few laws or regulations directly
applicable to online services or the Internet, the increasing popularity and use
of the Internet might cause additional laws and regulations to be adopted. These
laws and regulations currently cover or may cover in the future issues including
the following:
INTERNET PRIVACY
The Children's Online Privacy Protection Act of 1998, which was enacted by
the United States Congress on October 21, 1998 and for which the Federal Trade
Commission issued its final regulations on October 20, 1999, regulates the
collection, use, and/or disclosure of personal information obtained from
children under the age of 13. Under the provisions of this Act, which becomes
effective on April 21, 2000, Web sites catering to children will be required to:
- provide notice on their Web site and to parents of children under the
age of 13 with notice of what information is being collected, how the
site uses the information, and the Web site's practices regarding
disclosures of information;
- obtain verifiable parental consent for the collection, use and/or
disclosure of their children's information, and allow parents to
terminate their consent at any time;
- provide parents an opportunity to review the information collected from
their children; and
- refrain from conditioning a child's participation in a game on the child
revealing more information than reasonably necessary to participate.
We do not collect information from children under age 13 and therefore do
not need to take any specific actions in order to comply with these regulations.
However, if we discover that a Bolt member about whom we have collected
information has misrepresented his or her age and is in fact under age 13, or
that a child under 13 has disclosed personal information on our bulletin boards
or in any other public forum on our site, we will have to either (1) remove that
person as a Bolt member, or (2) comply with the Federal Trade Commission
regulations under the Act.
It is important to our members that we protect their privacy. We use
password protection and member IDs to ensure anonymity among our members. In
addition, we do not sell or distribute information about the identities,
preferences or page views of individual members without their permission. We do
disclose certain information to third parties, with our members' permission, in
connection with product promotions and special programs in which members elect
to participate. The market research data that we sell to third parties consists
of trend information about various segments of our members; for example, what
certain types of users like to do in their spare time or which of two products
our members prefer. While we believe that we currently adequately provide for
our members' privacy, our current programs may not conform to legislation or
regulations adopted in the future by the Federal Trade Commission or other
governmental entities. In addition, if unauthorized persons were able to
penetrate our security and gain access to, or otherwise misappropriate, our
members' personal information, we could be subject to liability. Such liability
could include claims for misuses of personal information, such as for
unauthorized marketing purposes or unauthorized use of credit cards. These
claims could result in litigation which could require us to expend significant
financial resources and divert management's attention from operations.
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The European Union adopted a Directive which became effective in October
1998 that imposes restrictions on the collection and use of personal data. Under
the Directive, European Union citizens are guaranteed the right of access to
their data, the right to know where the data originated, the right to have
inaccurate data corrected, the right to recourse in the event of unlawful
processing of information and the right to withhold permission to use their data
for direct marketing. The Directive could affect U.S. companies that collect
information over the Internet from individuals in European Union member
countries and may impose restrictions that are more stringent than current
Internet privacy standards in the United States or our own privacy policies. The
Directive does not, however, define what standards of privacy are adequate. As a
result, the Directive might adversely affect the activities of entities,
including Bolt, that engage in data collection from members in European Union
member countries.
INTERNET TAXATION
A number of legislative proposals have been made by federal, state, local
and foreign governments that would impose additional taxes on the sale of goods
and services over the Internet, and some states have taken measures to tax
Internet-related activities. Although in October 1998 Congress placed a
three-year moratorium on state and local taxes on Internet access or on
discriminatory taxes on electronic commerce, existing state or local laws were
excluded from this moratorium. Further, once this moratorium is lifted, some
type of federal or state taxes may be imposed upon Internet commerce. Such
legislation or other attempts at regulating commerce over the Internet may cause
sales at the Bolt Store to decrease, which would affect our business.
DOMAIN NAMES
Our domain names are our Internet "addresses." Domain names have been the
subject of significant trademark litigation in the United States. We have
applied for registration of certain domain names in the United States and
foreign countries. Third parties might bring claims for infringement against us
for the use of these domain names. Moreover, because domain names derive value
from the individual's ability to remember such names, it is possible that our
domain names could lose their value if, for example, members begin to rely on
mechanisms other than domain names to access online resources.
The current system for registering, allocating and managing domain names
has been the subject of litigation and of proposed regulatory reform. Our domain
names might lose their value, and we might have to obtain entirely new domain
names in addition to or instead of our current domain names if such litigation
or reform efforts result in a restructuring of the current system.
JURISDICTION
Due to the global reach of the Internet, it is possible that the
governments of other states and foreign countries might attempt to regulate our
activities or prosecute us for violations of their laws. This could seriously
affect our business.
In addition, because our products and services are available over the
Internet anywhere in the world, multiple jurisdictions may claim that we are
required to qualify to do business as a foreign corporation in each of those
jurisdictions. Our failure to qualify as a foreign corporation in a jurisdiction
where we are required to do so could subject us to taxes and penalties for the
failure to qualify. It is possible that state and foreign governments might also
attempt to regulate our transmissions of content on our Web sites or prosecute
us for violations of their laws. State or foreign governments might allege or
charge us with violations of local laws, we might unintentionally violate these
laws, and these laws might be modified, or new laws might be enacted, in the
future.
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<PAGE> 50
EMPLOYEES
As of December 6, 1999, we employed a total of 88 full-time employees in
the following areas:
- product development;
- technology;
- sales and business development;
- e-commerce;
- marketing;
- market research; and
- finance and administration.
In addition, about 11 persons provide services to us pursuant to consulting
and/or freelance agreements. To support our anticipated future growth, we expect
to hire additional employees, particularly in the areas of sales and marketing.
None of our employees is represented by unions, and we believe our relations
with our employees are good.
FACILITIES
Our principal offices are located in about 11,500 square feet of leased
space at 304 Hudson Street, New York, New York 10013. The lease for this space
expires February 27, 2007. As we expand, we expect that suitable additional
space will be available on commercially reasonable terms, although no assurance
can be made in this regard. We also currently lease a small office in Chicago,
Illinois pursuant to a lease that expires on December 31, 2000 and a small
office in Los Angeles, California pursuant to a lease that expires on January
31, 2000.
LEGAL
We are not currently involved in any material legal proceedings, nor, to
our knowledge, are any threatened.
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<PAGE> 51
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning our
directors, executive officers and key employees as of December 6, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel A. Pelson(2)....................... 33 President, Chief Executive Officer and Director
Jane Mount................................ 28 Executive Vice President of Product Development
Albert G. Pastino......................... 57 Chief Financial Officer
Frank Harrison............................ 38 Senior Vice President of Finance
Mark Stutzman............................. 30 Chief Technology Officer
Jeanne Sachs.............................. 34 Vice President of Ad Sales
Justin Nesci.............................. 30 Vice President of Business Development
Alexa Tobin............................... 31 Vice President of Commerce
David Titus, Ph.D......................... 45 Director of Business Intelligence
Alan Colner(1)............................ 44 Director
Robert Dove(1)............................ 45 Director
Stephen Harrick(2)........................ 29 Director
Samantha McCuen(1)(2)..................... 31 Director
William S. Peabody........................ 28 Director
</TABLE>
- ------------
(1) Member of our Audit Committee
(2) Member of our Compensation Committee
Daniel A. Pelson co-founded Bolt and has served as our President and Chief
Executive Officer and as a director since our inception. Mr. Pelson also serves
as Chairman of the Board of Directors for Concrete Media Construction, a custom
publishing and Web site development company that was spun off from Bolt in
December 1998. Prior to founding Bolt, in 1994 Mr. Pelson created Word, an
online magazine that was acquired by Icon CMT Corporation in 1994. From 1988 to
1993, he served as a marketing, sales and product development executive for Sun
Microsystems where he marketed and sold products and services to the media
industry. Mr. Pelson holds a B.A. in political science and economics from
Colgate University and an M.B.A. from New York University's Stern School of
Business.
Jane Mount co-founded Bolt and has served as our Executive Vice President
of Product Development since October 1998 and also served as our Creative
Director from September 1996 to September 1998. Ms. Mount is responsible for
continually driving the usage statistics of Bolt, and responding to the
constantly evolving needs of the teen marketplace. From November 1995 to August
1996, she served as Design Director of Word, an online magazine which was
acquired by Icon CMT Corporation in 1994. Ms. Mount holds a B.A. from Davidson
College.
Albert G. Pastino has served as our Chief Financial Officer since November
1999. From June 1997 to June 1999, Mr. Pastino served as Senior Vice President
and Treasurer of AmTec, Inc., a telecommunications company. From July 1993 to
March 1997, Mr. Pastino was with Kohlberg and Company, a private equity
investment company, where he served in a variety of positions, including as the
President of Kisco Capital Company, Inc., an affiliate of Kohlberg and Company,
and also served on the boards of directors of a number of Kohlberg & Company's
portfolio companies. From 1989 through 1992, Mr. Pastino served as Senior Vice
President and Chief Operating Officer of Fortis Private Capital, Inc., a private
equity investment company specializing in expansion financings and management
buyouts. Mr. Pastino began his business career at Deloitte & Touche LLP where he
served as a partner. Mr. Pastino also gained investment banking experience while
working at Alex. Brown & Sons, Incorporated and at various times throughout his
career served as the interim chief financial officer of a number of privately
and publicly held companies.
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<PAGE> 52
Frank Harrison has been our Senior Vice President of Finance since
September 1998 and served as our acting Chief Financial Officer from September
1998 to October 1999. From 1991 to 1998, Mr. Harrison was the principal of
Harrison & Company, LLC, a firm he founded in 1991 that provided finance and
accounting services to middle-market advertising, new media, and high-technology
companies, as well as to large, multi-national public companies. From 1987 to
1991, he was a manager in the Stamford, CT office of Coopers & Lybrand in the
Emerging Business Services division. He holds a B.S. in Business Administration
from the University of Dayton.
Mark Stutzman has served as our Chief Technology Officer since July 1999.
From July 1998 to June 1999, Mr. Stutzman served as Executive Director,
Technology at Cyberian Outpost, a leading e-commerce retailer, where he managed
the development, data, system operations and warehouse teams. From 1995 to 1998,
he was employed at IBM where, he oversaw the design and implementation of an
infrastructure that was designed to scale to support over 1,000
business-to-business Web sites for IBM's corporate customers. While at IBM, Mr.
Stutzman also managed all technical facets of ShopIBM, IBM's premiere commerce
site, and served as the technical team leader for IBM Global Service's Web
hosting department. Mr. Stutzman holds a B.A. in English from S.U.N.Y. New Paltz
in New York.
Jeanne Sachs has served as our Vice President of Ad Sales since May 1,
1999. From November 1994 to May 1999, Ms. Sachs served as Advertising Director
of YM, a leading teen-focused magazine. Prior to joining YM, Ms. Sachs held
national advertising sales positions at a number of teen and woman-focused
magazines, including Seventeen, Vogue and Woman's Day. Ms. Sachs holds a B.S. in
International Business and Economics from New York University.
Justin Nesci has been our Vice President of Business Development since
December 1999 and served as our Director of Business Development from April 1999
to December 1999. From March 1997 to March 1999, Mr. Nesci served as an
advertising director for E! Online. From February 1996 to March 1997, Mr. Nesci
managed brand marketing and media sales for 2d Interactive, Inc., a start-up,
interactive media company. From August 1994 to January 1996, Mr. Nesci was a
management consultant at Lochridge & Company. From September 1991 to August
1994, Mr. Nesci was an industry analyst for Dataquest, Inc. Mr. Nesci holds a
B.A. in Organizational Behavior & Management and Political Science from Brown
University.
Alexa Tobin has served as our Vice President of Commerce since May 1999.
From February 1998 to April 1999, Ms. Tobin served as Director of Merchandising
for Music Boulevard/N2K, Inc., a leading e-commerce company. From June 1996 to
July 1997, Ms. Tobin was the Music Director at WXRK-FM in New York City. From
May 1994 to February 1995, Ms. Tobin was the Program Director at WEQX-FM in
Albany, NY. From February 1995 to June 1996, she served as Program Director at
WBRU-FM, in Providence, Rhode Island. From October 1989 to April 1994, Ms. Tobin
worked for Newbury Comics, a leading retailer of music and lifestyle
merchandise, where her duties included store management, buying, and ultimately
managing the entire distribution facility. Ms. Tobin holds a B.A. in political
science from Brown University.
Dr. David Titus has served as our Director of Business Intelligence since
August 1999. From June 1997 to July 1999, Dr. Titus managed consumer research at
Philip Morris. From June 1994 to May 1997, he served as a Client Service
Executive at Eric Marder Associates, a market research consulting company, where
his accounts included Fortune 100 companies in the telecommunications, high tech
and consumer package goods industries. Dr. Titus holds a Ph.D. and M.S. in
Social Psychology from Rutgers University and B.A in psychology from Montclair
State College.
Alan Colner has been a director since November 1998. Since August 1996, he
has served as Managing Director, Private Equity Investments at Moore Capital
Management, Inc. Before Joining Moore Capital, Mr. Colner was a Managing
Director of Corporate Advisors, L.P., the general partner of Corporate Partners,
a private equity fund affiliated with Lazard Freres & Co. LLC. He also serves on
the board of directors of iVillage Inc. and NextCard, Inc. as well as several
private companies. Mr. Colner holds a B.A. from Yale University and an M.B.A.
from the Stanford University Graduate School of Business.
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<PAGE> 53
Robert Dove has been a director since January 1997. Since May 1996, Mr.
Dove has been an Executive Vice President and Managing Director of Bechtel
Enterprises Holdings, Inc., a wholly-owned subsidiary of Bechtel Group, Inc. Mr.
Dove is also a Senior Vice President of Bechtel Group, Inc. From 1985 until
1996, Mr. Dove worked for UBS Securities, an investment banking firm, where he
served as, among other things, a Managing Director. Mr. Dove also serves as a
director of several private companies. Mr. Dove is a graduate of the Forest
School and is a past member of the Institute of bankers in London.
Stephen J. Harrick has been a director since February 1999. Mr. Harrick has
been a Principal at Highland Capital Partners, a venture capital firm focused on
Internet and e-commerce companies, since 1997. Mr. Harrick attended Harvard
Business School from 1995 to 1997. From 1993 to 1995, he worked at Morgan
Stanley & Co. Incorporated as a Financial Analyst specializing in mergers and
acquisitions. Mr. Harrick also serves as a director of several private
companies. He holds a B.A. in History from Yale University and an M.B.A. from
Harvard Business School.
Samantha McCuen has been a director since February 1999. Ms. McCuen is a
Managing Director of Sandler Capital Management, an investment management firm.
Ms. McCuen joined Sandler in 1996 and is currently responsible for analyzing,
structuring and managing Sandler's investments in Internet and technology
companies in the public and private sectors. She is also a Principal of Sandler
Internet Partners, L.P. From 1990 to 1996, Ms. McCuen held both equity research
and investment banking positions at Morgan Stanley & Co. Incorporated where she
specialized in Internet and PC software companies, and was a co-author of The
Internet Report. Ms. McCuen also serves as a director of several private
Internet companies. Ms. McCuen holds a B.A. in Economics from Lehigh University.
William S. Peabody has been a director since February 1999. In September
1992, Mr. Peabody founded Tripod.com, a successful Web site community that had
over four million registered users. He served as the President and Chief
Executive Officer of Tripod until it was sold to Lycos, Inc. in February 1998.
Since February 1998, he has served as the Vice President of Network Strategy for
Lycos. Mr. Peabody is an observer to the Lycos board of directors, and sits on
the board of directors of several private companies, including Streetmail.com
and eZiba.com. Mr. Peabody holds a bachelor's degree in political philosophy and
sociology from Williams College.
BOARD COMPOSITION
Upon completion of this offering, our board of directors will consist of
six members divided into three classes with two members in each class. Each year
the stockholders will elect the members of one of the three classes to a
three-year term of office. Upon completion of this offering, Robert Dove and
Samantha McCuen will serve in the class whose term expires in 2001; Stephen
Harrick and Alan Colner will serve in the class whose term expires in 2002; and
Daniel Pelson and William Peabody will serve in the class whose term expires in
2003.
COMMITTEES OF THE BOARD OF DIRECTORS
Upon completion of this offering, our board of directors will have a
compensation committee, which will make recommendations concerning salaries and
incentive compensation for our employees and consultants, establish and approve
salaries and incentive compensation for our executive officers and administer
our stock plans. Upon completion of this offering, our board of directors will
also have an audit committee, which will review the result and scope of audits
and other services provided by our independent public accountants.
COMPENSATION OF DIRECTORS
Our directors who are also our employees receive no compensation for
serving on the board of directors. We reimburse our non-employee directors for
all travel and other reasonable expenses incurred in attending board of director
and committee meetings. Our non-employee directors are eligible to receive
nonqualified stock option grants under our stock option plans. In April 1999, we
granted William S. Peabody, one of our directors, an option to purchase 48,400
shares of our common stock at an exercise price of $.58 per share. One fourth of
this option becomes exercisable after one year and the remaining portion becomes
exercisable in 36
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<PAGE> 54
equal monthly installments thereafter. We may in the future grant additional
nonqualified stock options to non-employee directors as an incentive to join or
remain on the board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Upon completion of this offering, the compensation committee of our board
of directors will consist of Daniel Pelson, Samantha McCuen and Stephen Harrick.
Neither Ms. McCuen nor Mr. Harrick has been an officer or employee of Bolt at
any time since our inception. No executive officer of Bolt serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of our board of directors or
compensation committee. Prior to the formation of the compensation committee,
the board of directors as a whole made decisions relating to the compensation of
our executive officers.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued
during the year ended December 31, 1998 to our Chief Executive Officer. No other
executive officer earned greater than $100,000 in the year ended December 31,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ---------------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Daniel A. Pelson.................. $80,000 -- -- --
President and Chief Executive
Officer
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted by Bolt to the executive officer named in the
Summary Compensation Table above during our fiscal year ended December 31, 1998.
FISCAL YEAR-END OPTION VALUES
The executive officer named in the Summary Compensation Table above did not
exercise any options during our fiscal year ended December 31, 1998 and did not
hold any stock options as of December 31, 1998.
STOCK PLANS
1999 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
Our 1999 Employee, Director and Consultant Stock Option Plan was approved
by our board of directors and by our stockholders in February 1999. Under this
plan, we may grant incentive stock options and nonqualified stock options. As of
December 6, 1999, a total of 3,077,948 shares of common stock had been reserved
for issuance under this plan. As of December 6, 1999, no shares had been issued
pursuant to options granted under this plan, 2,207,600 shares were subject to
outstanding options and 870,348 shares were available for future grant. On
December 15, 1999, our board of directors voted to increase the number of shares
issuable under this plan to 3,814,000.
Upon completion of this offering, this plan is to be administered by our
Compensation Committee. The Compensation Committee will determine the terms of
options granted pursuant to this plan, including:
- the exercise price and the number of shares subject to each option;
- the vesting schedule for options;
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<PAGE> 55
- the termination or cancellation provisions applicable to options; and
- the conditions relating to our right to reacquire shares subject to
options.
The maximum term of options granted under this plan is ten years.
If we are acquired, the Compensation Committee will provide that
outstanding options under this plan shall be: (1) assumed by the successor or
acquiring company; (2) exercised within a specified number of days or the
options will terminate; or (3) terminated in exchange for a cash payment equal
to the value of the option at the time we are acquired. If we are acquired, the
Compensation Committee may also provide that all outstanding options fully vest.
1997 STOCK OPTION PLAN
Our 1997 Stock Option Plan was approved by our board of directors and by
our stockholders in February 1997. Under this plan we may grant incentive stock
options, nonqualified stock options and stock appreciation rights (SARs). As of
December 6, 1999, a total of 424,544 shares of common stock have been reserved
for issuance under this plan. Of these shares, 38,544 shares have been issued
pursuant to options granted under this plan, 386,000 shares were subject to
outstanding options and no shares were available for future grant.
Upon completion of this offering, this plan is to be administered by our
Compensation Committee. The Compensation Committee will determine the terms of
options granted pursuant to this plan, including:
- the term, exercise price and the number of shares subject to each option
or SAR;
- the form of consideration to be paid upon exercise of options and SARs;
- the vesting schedule for options and SARs; and
- the termination or cancellation provisions applicable to options and
SARs.
The maximum term of options granted under this plan is ten years.
If we are acquired or in the event of a change of control, the Compensation
Committee may provide that certain options or SARs then outstanding for at least
one year shall receive upon exercise an amount equal to the fair market value of
the consideration to be received per share upon acquisition or change of control
minus the applicable exercise price multiplied by the number of shares subject
to such option or SAR. The Compensation Committee may provide that this amount
may be paid in cash, in the kind of property payable in such merger or change of
control or by a combination of cash and property.
401(k) PLAN
We maintain a retirement and deferred savings plan for our employees that
is intended to qualify as a tax-qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to 15% of their
salary up to a statutory limit, which is $10,000 in calendar year 1999. Under
this Plan we may match up to 25% of employee contributions, up to a maximum of
4% of an employee's compensation.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
The Delaware General Corporation Law authorizes corporations to limit or
eliminate, subject to certain conditions, the personal liability of directors to
corporations and their stockholders for monetary damages for breach of their
fiduciary duties. Our certificate of incorporation limits the liability of our
directors to the fullest extent permitted by Delaware law.
Our certificate of incorporation and bylaws also provide that we will
indemnify any of our directors and officers who, by reason of the fact that he
or she is one of our officers or directors, is involved in a legal proceeding of
any nature. We will repay certain expenses incurred by a director or officer in
connection with any civil or criminal action or proceeding, specifically
including actions by us or in our name (derivative suits). Such indemnifiable
expenses include, to the maximum extent permitted by law, attorney's fees,
judgments, civil or criminal fines, settlement amounts and other expenses
customarily incurred in connection with legal
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<PAGE> 56
proceedings. A director or officer will not receive indemnification if he or she
is found not to have acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, our best interest.
Such limitation of liability and indemnification does not affect the
availability of equitable remedies. In addition, we have been advised that in
the opinion of the SEC, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act and
is therefore unenforceable.
There is no pending litigation or proceeding involving any of our
directors, officers, employees or agents in which indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
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CERTAIN TRANSACTIONS
Stock Purchases. The following executive officers, directors or holders of
more than five percent of our voting securities purchased securities in the
amounts as of the dates set forth below. Each share of our Series A-1, Series
A-2, Series B-1, and Series B-2 preferred stock is convertible into four shares
of our common stock. Each share of our Series C preferred stock is convertible
into one share of our common stock.
<TABLE>
<CAPTION>
PREFERRED STOCK
COMMON ---------------------------------------------------------------
STOCK SERIES A-1 SERIES A-2 SERIES B-1 SERIES B-2 SERIES C
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Daniel A. Pelson.......... 2,684,000 -- -- -- -- 9,756
Albert G. Pastino......... -- -- -- -- -- 7,317
Frank Harrison............ -- -- -- 2,828 -- 2,439
William S. Peabody(1)..... -- -- -- 24,193 -- 36,585
Samantha McCuen........... -- -- -- 4,839 -- --
Concrete Media, Inc.(2)... -- -- -- -- -- 4,878
5% STOCKHOLDERS
Bechtel Enterprises
Holdings, Inc.(3)....... -- 600,000 125,000 -- -- 507,317
Sandler Capital
Management(4)........... -- -- -- 459,677 -- 317,072
Highland Capital
Partners(5)............. -- -- -- 483,871 -- 341,463
Oak Investment Partners
VIII, Limited
Partnership............. -- -- -- -- 268,818 195,122
Moore Capital Management,
Inc.(6)................. -- -- -- -- -- 975,610
Price Per Share........... $.00002 $2.50 $3.60 $6.20 $7.44 $10.25
Date(s) of Purchase....... 9/1/96 1/10/97 2/22/99 2/23/99 3/1/99 11/17/99,
11/23/99
and 12/6/99
</TABLE>
- ------------
(1) The 36,585 shares of Series C preferred stock purchased by Mr. Peabody
consist of 16,097 shares purchased by Peabody Sabot Ventures, 19,513 shares
purchased by Peabody Family Ventures and 975 shares purchased by Caribou
Ventures. Mr. Peabody, one of our directors, is the Managing General Partner
of each of these entities.
(2) Dan Pelson, our President and Chief Executive Officer, Jane Mount, our
Executive Vice President of Product Development, Frank Harrison, our Senior
Vice President of Finance, and Bechtel Enterprises Holdings, Inc., a five
percent stockholder, own a total of 87% of the stock of this company.
(3) Robert Dove, one of our directors, is an Executive Vice President and
Managing Director of Bechtel Enterprises Holdings, Inc.
(4) Samantha McCuen, one of our directors, is a Managing Director of Sandler
Capital Management.
(5) Stephen J. Harrick, one of our directors, is a Principal of Highland Capital
Partners.
(6) Alan Colner, one of our directors, is Managing Director, Private Equity
Investments of Moore Capital Management, Inc.
We have entered into the following agreements and transactions with our
executive officers, directors and holders of more than five percent of our
voting securities:
Amended and Restated Registration Rights Agreement. Bolt, Daniel A.
Pelson, our President and Chief Executive Officer, the preferred stockholders
listed above and other stockholders have entered into an agreement, pursuant to
which they will have registration rights with respect to their shares of common
stock following this offering. See "Description of Capital Stock -- Registration
Rights" for a more detailed description of the terms of this agreement.
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<PAGE> 58
Sale of custom publishing division. On December 30, 1998, we sold our
custom publishing division that provided Web site development services to third
parties to Concrete Media Construction, LLC. In consideration we received:
- A promissory note in the amount of $315,000, bearing interest at a rate
equal to the Federal Rate, as defined by the Internal Revenue Code. This
note is due and payable in full on December 31, 2001.
- A promissory note in the amount of $105,000, bearing interest at the
Federal Rate. This note was guaranteed by the individuals and entity
listed below and was due and payable in full on January 15, 1999. It was
paid in full on January 29, 1999.
At the time of this transaction, Dan Pelson, our President and Chief Executive
Officer, Jane Mount, our Executive Vice President of Product Development, Frank
Harrison, our Senior Vice President of Finance, and Bechtel Enterprises
Holdings, Inc., a five percent stockholder, held a total of 87% of the equity
interest in Concrete Media Construction.
After this transaction, we rented space and provided financial,
administrative and accounting services to Concrete Media Construction. Concrete
Media Construction also provided the services of an information services
employee to us. Concrete Media Construction has paid us about $103,000 for rent
and the financial, administrative and accounting services we have provided. We
have paid Concrete Media Construction about $25,000 for the services they have
provided to us. On October 1, 1999, Concrete Media Construction, LLC was
reorganized as a Delaware corporation and renamed Concrete Media, Inc. The
officers and five percent stockholder mentioned above hold the same total
percentage of the equity of Concrete Media, Inc. as they held in Concrete Media
Construction, LLC. We are currently providing only minimal administrative
services to Concrete Media, Inc.
Sale of Girls On division. On January 29, 1999, we sold our Girls On
division to Girls On, Inc., a wholly-owned subsidiary of Concrete Media
Construction, in exchange for the assumption by Girls On, Inc. of all current
and future liabilities of this division. The agreement for this sale also
included a provision entitling us to receive additional contingent consideration
if Girls On, Inc. was sold by Concrete Media Construction to a third party. On
August 5, 1999, Concrete Media Construction sold Girls On, Inc. to Oxygen Media,
LLC. Pursuant to the contingent consideration provision of the agreement, we
received $386,000 in cash as well as equity securities in Oxygen Media valued at
$1,050,000.
Bechtel Enterprises Holding, Inc. On January 22, 1998, we issued a
promissory note to Bechtel in the principal amount of $500,000 with an interest
rate of ten percent per year. This note was due and payable in full upon the
demand of Bechtel at any time after July 22, 1998. In February 1999, this note
was converted in exchange for:
- $52,466 in cash as full and final consideration for the payment of the
interest on this note;
- $50,000 in cash as a payment of a portion of the principal of this note;
and
- 125,000 shares of our Series A-2 Convertible Preferred Stock.
Bechtel is a five percent stockholder and Robert Dove, one of our directors, is
an Executive Vice President and Managing Director of Bechtel.
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<PAGE> 59
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 6, 1999, and as adjusted to reflect
the sale of our common stock offered by this prospectus by:
- the executive officer named in the Summary Compensation Table;
- each of our directors;
- all of our current directors and executive officers as a group; and
- each stockholder known by us to own beneficially more than five percent
of our common stock.
Beneficial ownership is determined in accordance with the rules of the SEC
and includes voting or investment power with respect to the securities. Shares
of common stock that may be acquired by an individual or group within 60 days of
December 6, 1999, pursuant to the exercise of options or warrants are deemed to
be outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the table.
Percentage of ownership is based on 14,973,965 shares of common stock
outstanding on December 6, 1999, which assumes the conversion of all outstanding
shares of preferred stock into common stock, and shares of common
stock outstanding after the completion of this offering.
Except as indicated in footnotes to this table, we believe that the
stockholders named in this table have sole voting and investment power with
respect to all shares of common stock shown to be beneficially owned by them
based on information provided to us by such stockholders. Unless otherwise
indicated, the address for each director and executive officer listed is: c/o
Bolt, Inc., 304 Hudson Street, 7th Floor, New York, NY 10013.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
BENEFICIALLY OWNED
---------------------------
NUMBER OF SHARES BEFORE AFTER
BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- --------------------------------------------- ------------------ --------------- --------
<S> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Daniel A. Pelson(1).......................... 2,993,434 20.0%
Robert Dove(2)............................... 3,412,195 22.8
Samantha McCuen(3)........................... 2,175,136 14.5
Stephen J. Harrick(4)........................ 2,276,947 12.9
Alan Colner(5)............................... 975,610 6.5
William S. Peabody(6)........................ 133,357 *
All current executive officers and directors
as a group (14 persons)(7)................. 12,579,681 84.0
FIVE PERCENT STOCKHOLDERS
Bechtel Enterprises Holdings, Inc.(2)........ 3,412,195 22.8
Highland Capital Partners(4)................. 2,276,947 15.2
Sandler Capital Management(3)................ 2,155,780 14.4
Oak Investment Partners VIII, Limited
Partnership(8)............................. 1,270,394 8.5
Moore Capital Management, Inc.(5)............ 975,610 6.5
</TABLE>
- ------------
* Represents beneficial ownership of less than 1% of the shares of Common
Stock.
(1) Includes 4,878 shares held by Concrete Media, Inc. Mr. Pelson owns 38% of
the equity securities of Concrete Media. He disclaims beneficial ownership
of these shares except to the extent of his proportional pecuniary interest
in these shares.
(2) Consists of 3,407,317 shares held by Bechtel Enterprises Holdings, Inc. and
4,878 shares held by Concrete Media, Inc. Bechtel owns 37% of the equity
securities of Concrete Media. Bechtel disclaims beneficial ownership of
these shares except to the extent of its
54
<PAGE> 60
proportional pecuniary interest in these shares. Mr. Dove is an Executive
Vice President and Managing Director of Bechtel and disclaims beneficial
ownership of these shares. Bechtel is located at 50 California Street--Suite
2200, San Francisco, California 94111.
(3) Includes 1,451,736 shares held by Sandler Capital Partners IV, L.P., 594,289
shares held by Sandler Capital Partners IV FTE, L.P. and 109,755 shares held
by Sandler Internet Partners, L.P. Ms. McCuen is a Managing Director of
Sandler Capital Management and disclaims beneficial ownership of these
shares except to the extent of her proportional pecuniary interest in these
shares. Sandler Capital Management is located at 767 Fifth Avenue--45th
Floor, New York, New York 10153.
(4) Consists of 2,185,868 shares held by Highland Capital Partners IV Limited
Partnership and 91,079 shares held by Highland Entrepreneurs Fund IV Limited
Partnership. Highland Capital Partners manages these two entities. Mr.
Harrick is a Principal of Highland Capital Partners and disclaims beneficial
ownership of these shares. Highland Capital Partners IV Limited Partnership
and Highland Entrepreneurs Fund IV Limited Partnership each disclaim
beneficial ownership of the shares owned by the other entity. Highland
Capital Partners is located at 2 International Place--22nd Floor, Boston,
Massachusetts 02110.
(5) Includes 780,488 shares held by Moore Global Investments, Ltd and 195,122
shares held by Remington Investments Strategies, L.P. Moore Capital
Management, Inc., a Connecticut corporation, is vested with investment
discretion with respect to portfolio assets held for the account of Moore
Global Investments. Moore Capital Advisors, L.L.C., a New York limited
liability company, is the sole general partner of Remington Investment
Strategies. Mr. Louis M. Bacon is the majority shareholder of Moore Capital
Management, Inc., and is the majority equity holder of Moore Capital
Advisors, L.L.C. As a result, Mr. Bacon, though he disclaims beneficial
ownership of the shares, may be deemed to be the beneficial owner of the
aggregate shares held by Moore Global Investments and Remington Investment
Strategies. Alan Colner is Managing Director, Private Equity Investments of
Moore Capital Management, Inc., which is the trading advisor of Moore Global
Investments. He is also a director of Bolt. Mr. Colner does not have voting
or investment power with respect to the shares of securities owned by Moore
Global Investments or Remington Investment Strategies, and disclaims
beneficial ownership of the shares. Moore Capital Management, Inc. is
located at 1251 Avenue of the Americas, New York, New York 10020.
(6) Includes 67,897 shares held by Peabody Family Ventures of which Mr. Peabody
is the Managing General Partner, 48,353 shares held by Peabody Sabot
Ventures of which Mr. Peabody is the Managing General Partner and 975 shares
held by Caribou Ventures of which Mr. Peabody is the Managing General
Partner.
(7) Includes 8,937,757 shares held by entities affiliated with our directors and
executive officers. See footnotes 1 through 6 above. Also includes 585,800
shares issuable upon options exercisable within 60 days of December 6, 1999.
(8) Includes 24,139 shares held by Oak VIII Affiliates Fund, Limited
Partnership. Oak Investment Partners VIII, Limited Partnership is located at
One Gorham Island, Westport, Connecticut 06880.
55
<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering, we will be authorized to issue 50,000,000
shares of common stock, $.001 par value per share, and 5,000,000 shares of
preferred stock, $.001 par value per share, and there will be
shares of common stock and no shares of preferred stock outstanding. Assuming
the conversion of our preferred stock, as of December 6, 1999, we had 14,973,965
shares of common stock outstanding held of record by 49 stockholders, and there
were outstanding options to purchase 2,593,600 shares of common stock and
outstanding warrants to purchase 47,900 shares of common stock.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders, and do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
our board of directors out of funds legally available for dividend payments. All
outstanding shares of common stock are fully paid and nonassessable, and the
holders of common stock have no preferences or rights of conversion, exchange or
pre-emption. In the event of any liquidation, dissolution or winding-up of our
affairs, holders of common stock will be entitled to share ratably in our assets
that are remaining after payment or provision for payment of all of our debts
and obligations and after liquidation payments to holders of outstanding shares
of preferred stock, if any.
PREFERRED STOCK
The preferred stock, if issued, would have priority over the common stock
with respect to dividends and other distributions, including the distribution of
assets upon liquidation. Our board of directors has the authority, without
further stockholder authorization, to issue from time to time shares of
preferred stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. Although we have
no present plans to issue any shares of preferred stock, the issuance of shares
of preferred stock, or the issuance of rights to purchase such shares, could
decrease the amount of earnings and assets available for distribution to the
holders of common stock, could adversely affect the rights and powers, including
voting rights, of the common stock, and could have the effect of delaying,
deterring or preventing a change in control of Bolt or an unsolicited
acquisition proposal.
WARRANTS
As of December 6, 1999, the following warrants were outstanding.
- A warrant to purchase 40,000 shares of our common stock was outstanding
at an exercise price of $.025 per share. This warrant expires on April
22, 2009.
- A warrant to purchase 1,975 shares of our Series B-3 Convertible
Preferred Stock was outstanding at an exercise price of $30.37 per
share. Upon completion of this offering, this warrant will automatically
convert into a warrant to purchase 7,900 shares of our common stock at
an exercise price of $7.59 per share. This warrant expires on August 31,
2006.
Each of these warrants contains provisions for the adjustment of the exercise
price and the aggregate number of shares issuable upon the exercise of the
warrant in the event of stock dividends, stock splits, reorganizations, and
reclassifications and consolidations.
REGISTRATION RIGHTS
The holders of the following shares of our common stock are entitled to
certain registration rights with respect to those shares. These registration
rights are subject to certain conditions and limitations, including the right of
the underwriters of an offering to limit the number of shares included in any
such registration under certain circumstances. All expenses incurred in
connection with registrations effected in connection with the following rights
will be borne by us.
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<PAGE> 62
Demand Rights. Beginning 180 days after completion of this offering:
- The holders of 11,147,620 shares of common stock and 890,500 shares of
common stock issuable upon the exercise of outstanding options and
warrants will have certain rights to cause us to register those shares
under the Securities Act. We may be required to effect up to three such
registrations.
- The holders of 3,787,801 shares of common stock will the right, on one
occasion, to cause us to register those shares under the Securities Act.
Stockholders with these registration rights who are not part of an initial
registration demand are entitled to notice and are entitled to include their
shares of common stock in the registration.
Piggyback Rights. If at any time after this offering we propose to
register any of our equity securities under the Securities Act, other than in
connection with
- a registration relating solely to our stock option plans or other
employee benefit plans, or
- a registration relating solely to a business combination or merger
involving us,
the holders of 14,935,421 shares of common stock and 890,500 shares of common
stock issuable upon the exercise of outstanding options and warrants are
entitled to notice of such registration and are entitled to include their common
stock in the registration.
Shelf Registration Rights. In addition, the holders of 14,935,421 shares
of common stock and 890,500 shares of common stock issuable upon the exercise of
outstanding options and warrants will have the right to cause us to register
these shares on a Form S-3, provided that we are eligible to use this form.
There is no limit to the number of registrations on Form S-3 that we may be
required to effect, except that we will not be required to effect such a
registration unless the aggregate offering price of the shares to be registered,
based on the then current market price, is at least $1.0 million. Stockholders
with these registration rights who are not part of an initial registration
demand are entitled to notice and are entitled to include their shares of common
stock in the registration.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The provisions of Delaware law and of our certificate of incorporation and
by-laws discussed below could discourage or make it more difficult to accomplish
a proxy contest or other change in our management or the acquisition of control
by a holder of a substantial amount of our voting stock. It is possible that
these provisions could make it more difficult to accomplish, or could deter,
transactions that stockholders may otherwise consider to be in their best
interests or the best interests of Bolt.
Delaware Statutory Business Combinations Provision. We are subject to the
anti-takeover provisions of Section 203 of the Delaware General Corporations
Law. In general, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is, or the
transaction in which the person became an interested stockholder was, approved
in a prescribed manner or another prescribed exception applies. For purposes of
Section 203, a "business combination" is defined broadly to include a merger,
asset sale or other transaction resulting in a financial benefit to the
interested stockholder, and, subject to certain exceptions, an "interested
stockholder" is a person who, together with his or her affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
Classified Board of Directors. Upon completion of this offering, our board
of directors will be divided into three classes. Each year the stockholders will
elect the members of one of the three classes to a three-year term of office.
All directors elected to our classified board of directors will serve until the
election and qualification of their respective successors or their earlier
resignation or removal. The board of directors is authorized to create new
directorships and to fill such positions so created and is permitted to specify
the class to which any such new position is assigned. The person filling such
position would serve for the term applicable to that class. The board of
directors (or its remaining members, even if less than a quorum) is also
empowered
57
<PAGE> 63
to fill vacancies on the board of directors occurring for any reason for the
remainder of the term of the class of directors in which the vacancy occurred.
Members of the board of directors may only be removed for cause. These
provisions are likely to increase the time required for stockholders to change
the composition of the board of directors. For example, in general, at least two
annual meetings will be necessary for stockholders to effect a change in a
majority of the members of the board of directors.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. Our by-laws provide that, for nominations to the
board of directors or for other business to be properly brought by a stockholder
before a meeting of stockholders, the stockholder must first have given timely
notice of the proposal in writing to our Secretary. For an annual meeting, a
stockholder's notice generally must be delivered not less than 45 days nor more
than 75 days prior to the anniversary of the mailing date of the proxy statement
for the previous year's annual meeting. For a special meeting, the notice must
generally be delivered by the later of 90 days prior to the special meeting or
ten days following the day on which public announcement of the meeting is first
made. Detailed requirements as to the form of the notice and information
required in the notice are specified in the by-laws. If it is determined that
business was not properly brought before a meeting in accordance with our by-law
provisions, such business will not be conducted at the meeting.
Special Meetings of Stockholders. Special meetings of the stockholders may
be called only by our board of directors pursuant to a resolution adopted by a
majority of the total number of directors.
No Stockholder Action by Written Consent. Our certificate of incorporation
does not permit our stockholders to act by written consent. As a result, any
action to be effected by our stockholders must be effected at a duly called
annual or special meeting of the stockholders.
Super-Majority Stockholder Vote required for Certain Actions. The Delaware
General Corporation Law provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless the corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Our certificate of incorporation requires the affirmative vote of
the holders of at least 80% of our outstanding voting stock to amend or repeal
any of the provisions discussed in this section of this prospectus entitled
"Delaware Law and Certain Charter and By-law Provisions". This 80% stockholder
vote would be in addition to any separate class vote that might in the future be
required pursuant to the terms of any preferred stock that might then be
outstanding. A 80% vote is also required for any amendment to, or repeal of, our
by-laws by the stockholders. Our by-laws may be amended or repealed by a simple
majority vote of the board of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be American
Stock Transfer and Trust Company.
LISTING
We will complete an application for listing our common stock on the Nasdaq
National Market under the symbol "BOLT."
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<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect market prices prevailing from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering due to existing contractual and legal restrictions on resale as
described below, there may be sales of substantial amounts of our common stock
in the public market after the restrictions lapse. This may adversely affect the
prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have shares of common
stock outstanding, assuming no exercise of options and warrants outstanding as
of December 6, 1999, and the conversion of all outstanding shares of preferred
stock. Of these shares, the shares sold in this offering will be
freely transferable without restriction or registration under the Securities
Act, except for any shares purchased by one of our existing "affiliates," as
that term is defined in Rule 144 under the Securities Act. The remaining
14,973,965 shares of common stock existing are "restricted shares" as defined in
Rule 144. Restricted shares may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144 or 701 of
the Securities Act. As a result of the contractual 180-day lock-up period
described below and the provisions of Rules 144 and 701, these shares will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ------------------------------------------ ----------------------------------------------
<S> <C>
.......................................... On the date of this prospectus.
................................ After 90 days from the date of this
prospectus.
................................ After 180 days from the date of this
prospectus (subject, in some cases, to volume
limitations).
................................ At various times after 180 days from the date
of this prospectus (subject, in some cases, to
volume limitations).
</TABLE>
LOCK-UP AGREEMENTS
Bolt, our directors and executive officers and certain of our stockholders
and option holders have each agreed not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common stock,
for a period of 180 days after the date of this prospectus, without the prior
written consent of Morgan Stanley & Co. Incorporated, subject to limited
exceptions. Morgan Stanley & Co. Incorporated, however, may in its sole
discretion, at any time without notice, release all or any portion of the shares
subject to lock-up agreements.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
this offering, a person, or persons whose shares are aggregated, who owns shares
that were purchased from us, or any affiliate, at least one year previously, is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of our then-outstanding shares of common stock, which
will equal about 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 of the sale on Form
144. Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us. Any
person, or persons whose shares are aggregated who is not deemed to have been
one of our affiliates at any time during the three months preceding a sale, and
who owns shares within the definition of "restricted securities" under Rule 144
that were purchased from us, or any affiliate, at least two years previously,
would be entitled to sell shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.
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<PAGE> 65
RULE 701
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally purchased from us by our employees, directors, officers or
consultants prior to the date we become subject to the reporting requirements of
the Securities Exchange Act of 1934, or the Exchange Act, under written
compensatory benefit plans or written contracts relating to the compensation of
these persons. In addition, the Securities and Exchange Commission has indicated
that Rule 701 will apply to typical stock options granted by an issuer before it
becomes subject to the reporting requirements of the Exchange Act, along with
the shares acquired upon exercise of the options, including exercises after the
date of this prospectus. Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its minimum
holding period requirements.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of about 14,935,421 shares of
common stock and 890,500 shares of common stock issuable upon the exercise of
outstanding options and warrants shares of common stock or their transferees,
will be entitled to various rights with respect to the registration of these
shares under the Securities Act. Registration of these shares under the
Securities Act would result in these shares becoming freely tradable without
restriction under the Securities Act immediately upon the effectiveness of the
registration, except for shares purchased by affiliates. See "Description of
Capital Stock--Registration Rights" for a more complete description of these
registration rights.
STOCK OPTIONS
As of December 6, 1999, options to purchase a total of 2,593,600 shares of
common stock under our stock option plans were outstanding and 1,017,183 were
exercisable. of the shares subject to options are subject to
lock-up agreements. An additional 870,348 shares of common stock were available
for future option grants under our stock plans.
Upon completion of this offering, we intend to file a registration
statement under the Securities Act covering all shares of common stock subject
to outstanding options or issuable pursuant to our stock option plans. Subject
to Rule 144 volume limitations applicable to affiliates, shares registered under
any registration statements will be available for sale in the open market,
beginning 90 days after the date of the prospectus, except to the extent that
the shares are subject to vesting restrictions with us or the contractual
restrictions described above.
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<PAGE> 66
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Thomas Weisel Partners LLC and J.P.
Morgan Securities Inc. are acting as representatives, have severally agreed to
purchase and we have agreed to sell to them, the respective number of shares of
common stock set forth opposite the names of these underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Thomas Weisel Partners LLC..................................
J.P. Morgan Securities Inc..................................
Total.............................................
========
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are
subject to the approval of specified legal matters by their counsel and to other
conditions. The underwriters are obligated to take and pay for all of the shares
of common stock offered by this prospectus, except those shares covered by the
over-allotment option described below, if any shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus and a portion to some dealers at a price that represents
a concession not in excess of $ per share under the public offering price.
Any underwriter may allow, and these dealers may reallow, a concession not in
excess of $ per share to other underwriters or to other dealers. After the
initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares at the public offering price set forth on the cover page of this
prospectus, less underwriting discounts and commissions. The underwriters may
exercise this option solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the shares offered by this prospectus.
To the extent this option is exercised, each underwriter will become obligated,
subject to specified conditions, to purchase about the same percentage of
additional shares as the number set forth next to the underwriter's name in the
preceding table bears to the total number of shares set forth next to the names
of all underwriters in the preceding table. If the underwriters exercise the
over-allotment option in full, the total price to the public for this offering
would be $ , the total underwriting discounts and commissions would be
$ and the total proceeds to Bolt would be $ .
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
At our request, the underwriters have reserved up to shares of
common stock offered by this prospectus for sale at the initial public offering
price to some of our directors, officers, employees, business associates and
related persons of Bolt. The number of shares available for sale to the general
public will be reduced to the extent that these persons purchase these reserved
shares. 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.
Bolt has applied to list the common stock on the Nasdaq National Market
under the symbol "BOLT."
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<PAGE> 67
Bolt, our directors and executive officers and certain of our stockholders
and option holders have each agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the underwriters, he, she or it
will not, during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other agreement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
The restrictions described in the immediately preceding paragraph do not
apply to:
- the issuance by us of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing; or
- transactions by any person other than Bolt relating to shares of common
stock or other securities acquired in open market transactions after the
completion of this offering.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed shares of common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
Bolt and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
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 has been named as a lead or co-manager on 98 filed
public offerings of equity securities, of which 78 have been completed, and has
acted as a syndicate member in an additional 53 public offerings of equity
securities. Thomas Weisel Partners 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 pursuant to the underwriting
agreement entered into in connection with this offering.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price will be determined by
negotiations between us and the representatives of the underwriters. Among the
factors to be considered in determining the initial public offering price will
be:
- the future prospects of Bolt and its industry in general;
- sales, earnings and certain other financial and operating information of
Bolt in recent periods; and
- the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of Bolt.
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<PAGE> 68
The estimated initial public offering price range set forth on the cover
page of this prospectus is subject to change as a result of market conditions
and other factors.
LEGAL MATTERS
The validity of the issuance of the common stock offered by us in this
offering will be passed upon for us by Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., Boston, Massachusetts. As of the date of this prospectus, persons
and entities affiliated with Mintz Levin own an aggregate of 9,759 shares of our
common stock. The underwriters are being represented by Davis Polk & Wardwell,
New York, New York.
EXPERTS
The financial statements of Bolt as of and for the nine months ended
September 30, 1999 and for the years ended December 31, 1998 and December 31,
1997 and for the period of August 15, 1996 through December 31, 1996, included
in this prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing in this prospectus and are
included in reliance upon the reports of that firm given upon their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act, with respect to the common stock offered by this prospectus.
This prospectus, which is part of the registration statement, omits certain
information, exhibits, schedules and undertakings set forth in the registration
statement. For further information pertaining to us and our common stock,
reference is made to the registration statement and the exhibits and schedules
to the registration statement. Statements contained in this prospectus as to the
contents or provisions of any documents referred to in this prospectus are not
necessarily complete, and in each instance where a copy of the document has been
filed as an exhibit to the registration statement, reference is made to the
exhibit for a more complete description of the matters involved.
You may read and copy all or any portion of the registration statement
without charge at the office of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of the registration statement may be obtained from the SEC at
prescribed rates from the Public Reference Section of the SEC at such address,
and at the SEC's regional offices located at 7 World Trade Center, 13th Floor,
New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. In addition, registration statements and certain
other filings made with the SEC electronically are publicly available through
the SEC's Web site at http://www.sec.gov. The registration statement, including
all exhibits and amendments to the registration statement, has been filed
electronically with the SEC.
63
<PAGE> 69
BOLT, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998 and
September 30, 1999.......................................... F-3
Statements of Operations for the period August 15, 1996
(date of inception) to December 31, 1996, for the years
ended December 31, 1997 and 1998 and for the nine months
ended September 30, 1998 (unaudited) and 1999............. F-4
Statements of Stockholders' Equity (Deficiency) for the
period August 15, 1996 (date of inception) to December 31,
1996, for the years ended December 31, 1997 and 1998 and
for the nine months ended September 30, 1999.............. F-5
Statements of Cash Flows for the period August 15, 1996
(date of inception) to December 31, 1996, for the years
ended December 31, 1997 and 1998 and for the nine months
ended September 30, 1998 (unaudited) and 1999............. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 70
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Bolt, Inc.
We have audited the accompanying balance sheets of Bolt, Inc. (the
"Company") as of December 31, 1997 and 1998 and September 30, 1999, and the
related statements of operations, stockholders' equity (deficiency) and cash
flows for the period August 15, 1996 (date of inception) to December 31, 1996,
for each of the two years in the period ended December 31, 1998 and for the nine
months ended September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1997, 1998 and
September 30, 1999, and the results of its operations and its cash flows for the
period August 15, 1996 (date of inception) to December 31, 1996, for each of the
two years in the period ended December 31, 1998 and for the nine months ended
September 30, 1999, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
New York, New York
December 6, 1999
F-2
<PAGE> 71
BOLT, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 184 $ 194 $ 3,637
Accounts receivable, net of allowance for doubtful
accounts of $0, $11 and $101 as of December 31, 1997,
1998 and September 30, 1999, respectively............ 150 338 1,062
Prepaid expenses and other current assets............... 61 -- 356
------- ------- -------
Total current assets............................ 395 532 5,055
Property and equipment, net............................... 242 454 2,377
Investments............................................... -- -- 1,050
Other assets.............................................. 25 47 270
------- ------- -------
Total assets.............................................. $ 662 $ 1,033 $ 8,752
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable........................................ $ 172 $ 246 $ 1,757
Accrued expenses........................................ 95 234 329
Short-term debt......................................... -- -- 500
Current portion of note payable and capital lease
obligations.......................................... -- 182 338
------- ------- -------
Total current liabilities....................... 267 662 2,924
Deferred revenues......................................... -- 53 51
Convertible promissory note............................... -- 450 --
Note payable.............................................. -- 320 297
Capital lease obligations, less current portion........... -- 178 578
------- ------- -------
Total liabilities......................................... 267 1,663 3,850
------- ------- -------
Commitments
Redeemable convertible preferred stock:
Series B-1 convertible preferred stock, $.001 par value;
no shares authorized, issued and outstanding, 1997
and 1998; 1,048,387 shares authorized, issued and
outstanding, 1999 ................................... -- -- 6,132
Series B-2 convertible preferred stock, $.001 par value;
no shares authorized, issued and outstanding, 1997
and 1998; 268,818 shares authorized, issued and
outstanding, 1999 ................................... -- -- 1,887
------- ------- -------
Total redeemable convertible preferred stock ............. -- -- 8,019
------- ------- -------
Stockholders' equity (deficiency):
Common stock, $.001 par value; 16,000,000 shares
authorized; 4,400,000 shares issued and outstanding,
1997; 4,400,000 shares issued and 2,978,800 shares
outstanding, 1998; and 4,438,544 shares issued and
3,017,344 shares outstanding, 1999 .................. 4 4 4
Series A-1 convertible preferred stock, $.001 par value;
600,000 shares authorized, issued and outstanding,
1997, 1998 and 1999 ................................. 1 1 1
Series A-2 convertible preferred stock, $.001 par value;
no shares authorized, issued and outstanding, 1997
and 1998; 125,000 shares authorized, issued and
outstanding, 1999 ................................... -- -- --
Additional paid-in capital.............................. 1,593 1,987 7,781
Warrants................................................ -- -- 1,521
Deferred financing costs................................ -- -- (633)
Accumulated deficit..................................... (1,203) (1,741) (6,139)
Deferred compensation................................... -- -- (4,876)
Note receivable from related party...................... -- (420) (315)
Treasury stock.......................................... -- (461) (461)
------- ------- -------
Total stockholders' equity (deficiency)................. 395 (630) (3,117)
------- ------- -------
Total liabilities and stockholders' equity
(deficiency).................................. $ 662 $ 1,033 $ 8,752
======= ======= =======
</TABLE>
See notes to financial statements.
F-3
<PAGE> 72
BOLT, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 15, 1996 YEAR ENDED NINE MONTHS ENDED
(DATE OF INCEPTION) DECEMBER 31, SEPTEMBER 30,
THROUGH --------------------- -----------------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------- --------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Bolt revenues................. $ -- $ 32 $ 404 $ 184 $ 1,885
Revenues related to the Girls
On and custom publishing
divisions................... 19 446 2,281 1,606 38
--------- --------- --------- --------- ---------
Total revenues...... 19 478 2,685 1,790 1,923
--------- --------- --------- --------- ---------
Costs and expenses:
Production and technology... 15 810 1,138 813 2,389
E-commerce.................. -- -- -- -- 235
Sales and marketing......... 1 287 630 393 2,782
General and
administrative........... 51 549 1,327 967 999
Depreciation and
amortization............. 4 25 75 50 211
Stock-based compensation.... -- -- -- -- 1,256
--------- --------- --------- --------- ---------
Total costs and
expenses.......... 71 1,671 3,170 2,223 7,872
--------- --------- --------- --------- ---------
Loss from operations.......... (52) (1,193) (485) (433) (5,949)
Other income (expense):
Interest income (expense),
net...................... -- 42 (53) (30) 115
Gain on sale of Girls On.... -- -- -- -- 1,436
--------- --------- --------- --------- ---------
Net loss...................... $ (52) $ (1,151) $ (538) $ (463) $ (4,398)
========= ========= ========= ========= =========
Basic loss per share.......... $ (.01) $ (.26) $ (.12) $ (.11) $ (1.46)
========= ========= ========= ========= =========
Weighted average number of
shares of common stock
outstanding................. 4,400,000 4,400,000 4,368,850 4,400,000 3,009,720
========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 73
BOLT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-----------------------------------
COMMON STOCK SERIES A-1 SERIES A-2 ADDITIONAL
------------------ ---------------- ---------------- PAID IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ------ ------- ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at August 15, 1996 (date of inception)....... -- $-- -- $-- -- $-- $ --
Issuance of common stock to founders................. 4,400,000 4 -- -- -- -- 94
Net loss............................................. -- -- -- -- -- -- --
--------- -- ------- -- ------- -- -------
Balance at December 31, 1996......................... 4,400,000 4 -- -- -- -- 94
Issuance of Series A-1 convertible preferred stock... -- -- 600,000 1 -- -- 1,499
Net loss............................................. -- -- -- -- -- -- --
--------- -- ------- -- ------- -- -------
Balance at December 31, 1997......................... 4,400,000 4 600,000 1 -- -- 1,593
Purchase of founders common stock.................... -- -- -- -- -- -- --
Sale of custom publishing division to related
party............................................... -- -- -- -- -- -- 394
Net loss............................................. -- -- -- -- -- -- --
--------- -- ------- -- ------- -- -------
Balance at December 31, 1998......................... 4,400,000 4 600,000 1 -- -- 1,987
Issuance of Series A-2 convertible preferred stock in
exchange for convertible note....................... -- -- -- -- 125,000 -- 450
Sale of Girls On division............................ -- -- -- -- -- -- 55
Issuance of common stock............................. 38,544 -- -- -- -- -- 24
Proceeds on payment of note receivable............... -- -- -- -- -- -- --
Issuance of warrant to purchase common stock to
placement agent..................................... -- -- -- -- -- -- (868)
Deferred compensation on stock options............... -- -- -- -- -- -- 6,133
Amortization of deferred compensation................ -- -- -- -- -- -- --
Issuance of warrant to purchase
Series B-3 convertible preferred stock in
connection with credit facility..................... -- -- -- -- -- -- --
Deferred financing costs on warrants................. -- -- -- -- -- -- --
Net loss............................................. -- -- -- -- -- -- --
--------- -- ------- -- ------- -- -------
Balance at September 30, 1999........................ 4,438,544 $4 600,000 $1 125,000 $-- $ 7,781
========= == ======= == ======= == =======
<CAPTION>
NOTES
RECEIVABLE
TREASURY STOCK DEFERRED FROM
------------------ DEFERRED FINANCING RELATED
SHARES AMOUNT COMPENSATION WARRANTS COSTS PARTY
--------- ------ ------------ -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 15, 1996 (date of inception)....... -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock to founders................. -- -- -- -- -- --
Net loss............................................. -- -- -- -- -- --
--------- ----- ------- ------ ----- -----
Balance at December 31, 1996......................... -- -- -- -- --
Issuance of Series A-1 convertible preferred stock... -- -- -- -- -- --
Net loss............................................. -- -- -- -- -- --
--------- ----- ------- ------ ----- -----
Balance at December 31, 1997......................... -- -- -- -- -- --
Purchase of founders common stock.................... 1,421,200 (461) -- -- -- --
Sale of custom publishing division to related
party............................................... -- -- -- -- -- (420)
Net loss............................................. -- -- -- -- -- --
--------- ----- ------- ------ ----- -----
Balance at December 31, 1998......................... 1,421,200 (461) -- -- -- (420)
Issuance of Series A-2 convertible preferred stock in
exchange for convertible note....................... -- -- -- -- -- --
Sale of Girls On division............................ -- -- -- -- -- --
Issuance of common stock............................. -- -- -- -- -- --
Proceeds on payment of note receivable............... -- -- -- -- -- 105
Issuance of warrant to purchase common stock to
placement agent..................................... -- -- -- 868 -- --
Deferred compensation on stock options............... -- -- (5,553) -- -- --
Amortization of deferred compensation................ -- -- 677 -- -- --
Issuance of warrant to purchase
Series B-3 convertible preferred stock in
connection with credit facility..................... -- -- -- 653 -- --
Deferred financing costs on warrants................. -- -- -- -- (633) --
Net loss............................................. -- -- -- -- -- --
--------- ----- ------- ------ ----- -----
Balance at September 30, 1999........................ 1,421,200 $(461) $(4,876) $1,521 $(633) $(315)
========= ===== ======= ====== ===== =====
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
----------- -------
<S> <C> <C>
Balance at August 15, 1996 (date of inception)....... $ -- $ --
Issuance of common stock to founders................. -- 98
Net loss............................................. (52) (52)
------- -------
Balance at December 31, 1996......................... (52) 46
Issuance of Series A-1 convertible preferred stock... -- 1,500
Net loss............................................. (1,151) (1,151)
------- -------
Balance at December 31, 1997......................... (1,203) 395
Purchase of founders common stock.................... -- (461)
Sale of custom publishing division to related
party............................................... -- (26)
Net loss............................................. (538) (538)
------- -------
Balance at December 31, 1998......................... (1,741) (630)
Issuance of Series A-2 convertible preferred stock in
exchange for convertible note....................... -- 450
Sale of Girls On division............................ -- 55
Issuance of common stock............................. -- 24
Proceeds on payment of note receivable............... -- 105
Issuance of warrant to purchase common stock to
placement agent..................................... -- --
Deferred compensation on stock options............... -- 580
Amortization of deferred compensation................ -- 677
Issuance of warrant to purchase
Series B-3 convertible preferred stock in
connection with credit facility..................... -- 653
Deferred financing costs on warrants................. -- (633)
Net loss............................................. (4,398) (4,398)
------- -------
Balance at September 30, 1999........................ $(6,139) $(3,117)
======= =======
</TABLE>
See notes to financial statements.
F-5
<PAGE> 74
BOLT, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD
AUGUST 15, 1996 YEAR ENDED NINE MONTHS ENDED
(DATE OF INCEPTION) DECEMBER 31, SEPTEMBER 30,
THROUGH --------------- ---------------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------- ------- ----- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $(52) $(1,151) $(538) $(463) $(4,398)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 4 25 75 50 231
Deferred stock based compensation.................... -- -- -- -- 1,256
Gain on sale of Girls On............................. -- -- -- -- (1,436)
Changes in operating assets and liabilities:
Increase in accounts receivable.................... (13) (136) (188) (237) (724)
(Increase) decrease in prepaid expenses and other
current assets................................... -- (61) 61 17 (356)
(Decrease) increase in other assets................ (7) (17) (23) 1 (195)
Increase in accounts payable....................... 19 153 74 129 1,585
Increase in accrued expenses....................... 22 73 138 85 130
Increase (decrease) in deferred revenues........... 8 (8) 53 32 (2)
---- ------- ----- ----- -------
Net cash used in operating activities.............. (19) (1,122) (348) (386) (3,909)
---- ------- ----- ----- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................... (43) (229) (65) (55) (2,214)
Proceeds from the sale of Girls On................... -- -- -- -- 386
---- ------- ----- ----- -------
Net cash used in investing activities.............. (43) (229) (65) (55) (1,828)
---- ------- ----- ----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of convertible preferred
stock, net......................................... -- 1,500 -- -- 8,019
Proceeds from equipment lease financing.............. -- -- -- -- 651
Proceeds from credit facility........................ -- -- -- -- 500
Proceeds from the payment of note receivable......... -- -- -- -- 105
Proceeds from the issuance of common stock........... 72 25 -- -- 24
Proceeds from convertible note....................... -- -- 500 500 --
Payments of capital lease obligations................ -- -- (20) -- (45)
Payment of convertible note payable.................. -- -- -- -- (50)
Payments made for treasury stock..................... -- -- (57) -- (24)
---- ------- ----- ----- -------
Net cash provided by financing activities.......... 72 1,525 423 500 9,180
---- ------- ----- ----- -------
Increase in cash and cash equivalents.................. 10 174 10 59 3,443
Cash and cash equivalents, beginning of period......... -- 10 184 184 194
---- ------- ----- ----- -------
Cash and cash equivalents, end of period............... $ 10 $ 184 $ 194 $ 243 $ 3,637
==== ======= ===== ===== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes........................... $ -- $ 1 $ 1 $ -- $ 6
Cash paid for interest............................... $ -- $ -- $ 13 $ -- $ 57
SUPPLEMENTAL DISCLOSURE OF NON-CASH FLOW TRANSACTIONS:
Fixed assets acquired under capital leases........... $ -- $ -- $ 247 $ -- $ 651
Note issued to founders for treasury stock........... $ -- $ -- $ 404 $ -- $ --
Note received for net assets of custom publishing
division from related party........................ $ -- $ -- $ 420 $ -- $ --
Transfer of Girls On liabilities, net................ $ -- $ -- $ -- $ -- $ 55
Conversion of promissory note........................ $ -- $ -- $ -- $ -- $ 450
Warrant issued for Series B-3 convertible preferred
stock in connection with credit facility........... $ -- $ -- $ -- $ -- $ 653
Warrant issued for common stock to placement agent... $ -- $ -- $ -- $ -- $ 868
</TABLE>
See notes to financial statements.
F-6
<PAGE> 75
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD AUGUST 15, 1996 (DATE OF INCEPTION) TO
DECEMBER 31, 1996, FOR THE YEARS ENDED DECEMBER 31, 1997
AND 1998 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
1. THE COMPANY
ORGANIZATION--Bolt, Inc., was incorporated in the State of Delaware on
August 15, 1996 under the name Concrete Media, Inc. ("Concrete"). Concrete
amended and restated its certificate of incorporation on January 10, 1997. As
part of a reorganization, the Company sold its custom publishing business
division, effective December 30, 1998, and sold its Girls On Web content site
("Girls On") effective January 29, 1999. Effective February 1999, Bolt Media,
Inc. was merged into Concrete and Concrete changed its name to Bolt Media, Inc.
(the "Company"). On November 17, 1999, Bolt Media, Inc. changed its name to
Bolt, Inc. ("Bolt").
Prior to December 30, 1998, the Company operated through three divisions
and/or subsidiaries:
Bolt, a leading provider of member generated, teen focused content on
the Internet through its portal site, Bolt. com;
Custom Publishing, which provided Web site development and related
services to third parties; and
Girls On, a leading provider of entertainment-related content, written
by and focused toward young women.
2. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
BASIS OF PRESENTATION--The financial statements include the accounts of
Bolt, Inc., and its wholly-owned subsidiary from the date of inception through
the period December 31, 1998. The subsidiary was merged with and into the
Company on February 16, 1999 (see note 1). All significant intercompany accounts
and transactions have been eliminated in consolidation through December 31,
1998.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION AND AMORTIZATION--Property
and equipment are stated at cost, and in the case of equipment under capital
leases, the present value of the future minimum lease payments, less accumulated
depreciation and amortization. Depreciation and amortization is calculated using
the straight-line method over the estimated useful lives of the depreciable
assets, which range from three to seven years, or the lease term. Improvements
are capitalized, while repair and maintenance costs are charged to operations as
incurred. Depreciation and amortization expense was $4,310, $24,844, $75,000,
$50,000, and $211,000 for the period August 15, 1996 to December 31, 1996, for
years ended December 31, 1997 and 1998, and for the nine month periods ended
September 30, 1998 (unaudited) and 1999, respectively.
INVESTMENTS--Investments in less than 20% of the share capital of other
companies are presented at cost. In the event that management identifies a
decline of an other than temporary nature in the estimated fair value of an
investment to an amount below cost, such investment will be written down to fair
market value.
IMPAIRMENT OF ASSETS--The Company's long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the net
carrying amount may not be recoverable. When such events occur, the Company
measures impairment by comparing the carrying value of the long-lived asset to
the
F-7
<PAGE> 76
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. If the sum of the expected undiscounted
future cash flows were less than the carrying amount of the assets, the Company
would recognize an impairment loss. The impairment loss, if determined to be
necessary, would be measured as the amount by which the carrying amount of the
asset exceeds the fair value of the asset. The Company determined that, as of
December 31, 1997, 1998 and September 30, 1999, there had been no impairment in
the carrying value of its long-lived assets.
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE--As of
January 1, 1999, costs of computer software developed or obtained for internal
use are capitalized while in the application development stage and are expensed
while in the preliminary stage and post-implementation stage. The Company
amortizes these capitalized costs over the life of the systems, which is
estimated to be four years. The Company capitalized approximately $1.4 million
of internal development and software purchase costs relating to its Web site
incurred during the application development stage. Prior to January 1, 1999 the
Company expensed all internal costs related to software development.
DEFERRED REVENUES--Deferred revenues represents amounts billed in excess of
revenues recognized. Included in accounts receivable are amounts due (under
contract) relating to deferred revenues.
REVENUE RECOGNITION--Income is derived from a variety of sources, including
advertising, custom publishing and syndication and E-commerce. Revenues from
advertising are derived from the sale of advertising space on the Company's
different online services, typically include the guarantee of a minimum number
of impressions (times that an advertisement is viewed by members of the
Company's online service) and are recognized ratably as impressions are
delivered over the period of the advertising contract. Revenues from custom
publishing projects and production services from customers that advertise on our
site are recognized as earned, over the term of each project. Substantially all
projects were completed by December 31, 1997, 1998 and September 30, 1999.
E-commerce revenues are recognized when the products are shipped. We also
generate e-commerce revenues by charging transaction fees to retailers and
e-commerce companies that wish to use our site to promote their products and
services as well as to purchase premiere positioning on our site. Generally
these companies pay us either a flat fee, a fee based on retail sales to our
members or a combination of the two. We recognize transaction fee revenues when
earned from our third party partners or, in cases where we receive a flat fee,
based on the term of the contract.
INCOME TAXES--The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes," pursuant to which deferred income tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities, using enacted tax rates currently in effect. State
and local taxes are based on factors other than income.
NET LOSS PER COMMON SHARE--Basic loss per common share was computed by
dividing net loss by the weighted average number of shares of common stock
outstanding. Diluted loss per share has not been presented since the impact for
options and warrants, and conversion of preferred shares would have been anti-
dilutive (see notes 11 & 13).
RECENT ACCOUNTING PRONOUNCEMENTS--In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components. The Company has no elements of
comprehensive income and the net loss reported in the statements of operations
is equivalent to the total comprehensive loss.
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the way business enterprises
F-8
<PAGE> 77
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
report information about operating segments, as well as enterprise-wide
disclosures about products and services, geographic areas and major customers.
The Company operates in one segment in the United States.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires than an entity recognize all derivatives as either an asset or
liability and measure those instruments at fair value, as well as identify the
conditions for which a derivative may be specifically designed as a hedge. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000. The Company
does not currently engage or plan to engage in any derivative or hedging
activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The Company adopted the requirements of SOP 98-1 as of
January 1, 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable, and
notes payable are carried at cost, which approximates their fair value because
of the short-term maturity of these instruments and the relatively stable
interest rate environment.
UNAUDITED FINANCIAL INFORMATION--The interim financial information for the
nine months ended September 30, 1998, and the related notes, are unaudited. The
unaudited interim financial information has been prepared on the same basis as
the annual financial statements and, in the opinion of management, reflects all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the results of operations and cash flows for the nine months
period ended September 30, 1998.
3. SALE OF CERTAIN PORTIONS OF THE BUSINESS
CUSTOM PUBLISHING--On December 30, 1998, the Company sold its custom
publishing division, primarily comprised of the name "Concrete Media," the
division's customer list, certain computer equipment and all related liabilities
of the division to a related party, Concrete Media Construction, LLC (the
"LLC"). The selling price was $420,000, payable in the form of two promissory
notes, one for $105,000 and one for $315,000. At December 31, 1998, the notes
receivable were reflected as a reduction of stockholders' equity. The first note
was paid on January 29, 1999 and the other note is due on December 30, 2001. The
amount in excess of the carrying value of net assets transferred to the LLC was
recorded as additional paid-in capital.
The Company continues to provide customers with content production services
related to advertising or product presentation on the Company's Web site.
GIRLS ON--On January 29, 1999, the Company sold all assets of the business
of Girls On (primarily the name "Girls On," related trademarks and the software
code necessary to operate the site) to a subsidiary of the LLC, Girls On, Inc.
in exchange for Girls On, Inc.'s assumption of all current and future
liabilities of Girls On.
The Girls On sale agreement included a provision entitling the Company to
additional contingent consideration based on a formula set forth in the
agreement. On August 5, 1999, the LLC sold Girls On to Oxygen Media, LLC. In
connection with this sale, pursuant to the contingent consideration provision of
the agreement, the Company received $386,000 in cash as well as equity
securities in Oxygen Media with a fair value of $1,050,000. The gain of
$1,436,000 was recognized in the third quarter of 1999.
F-9
<PAGE> 78
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. CONCENTRATION OF CREDIT RISK
Financial instruments, which subject the Company to concentrations of
credit risk, consist primarily of cash and cash equivalents, and trade accounts
receivable. The Company maintains cash and cash equivalents with various
domestic financial institutions. The Company performs periodic evaluations of
the relative credit standing of these institutions. From time to time, the
Company's cash balances with any one financial institution may exceed Federal
Deposit Insurance corporation insurance limits.
The Company's customers are concentrated in the United States. The Company
performs ongoing credit evaluations, generally does not require collateral and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of customers, historical trends and other information; to date
such losses have been within management's expectations.
5. PROPERTY AND EQUIPMENT
At December 31, 1997 and 1998 and September 30, 1999, property and
equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------ SEPTEMBER 30,
DESCRIPTION 1997 1998 1999
- ------------------------------------------------------ ---- ---- -------------
<S> <C> <C> <C>
Computer equipment, including assets under capital
leases.............................................. $222 $365 $2,316
Furniture and fixtures................................ 49 193 363
---- ---- ------
271 558 2,679
Less accumulated depreciation and amortization........ 29 104 302
---- ---- ------
Property, plant and equipment, net.................... $242 $454 $2,377
==== ==== ======
</TABLE>
6. INCOME TAXES
No provision for income taxes has been made because the Company has
sustained cumulative losses since the commencement of operations. At September
30, 1999, the Company had net operating loss carryforwards ("NOLs") of
approximately $6,209,000, which will be available to reduce future taxable
income. The NOLs are expected to expire in the following years (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------------------------------------------
<S> <C>
2012........................................................ $1,166
2013........................................................ 554
2014........................................................ 4,489
------
$6,209
======
</TABLE>
In accordance with SFAS No. 109, the Company has computed the components of
deferred income taxes as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Deferred tax assets................... $ 670 $ 771 $ 2,918
Less valuation allowance.............. (670) (771) (2,918)
----- ----- -------
Net deferred taxes.................... $ 0 $ 0 $ 0
===== ===== =======
</TABLE>
F-10
<PAGE> 79
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company's NOLs primarily generated the deferred tax assets. At December 31,
1997 and 1998 and September 30, 1999, a valuation allowance was provided as the
realization of the deferred tax benefits is not likely.
7. CONVERTIBLE PROMISSORY NOTE
On January 22, 1998, the Company entered into a convertible promissory note
with the Series A preferred stockholder whereby the Company received a $500,000
loan, due July 22, 1998, or thereafter on demand. The note bears interest at 10%
per annum. On February 17, 1999, a portion of the note was paid, along with
accrued interest. The balance of this note was then converted into 125,000
shares of Series A-2 preferred stock (see note 11).
8. SHORT TERM DEBT
In August 1999, the Company entered into a short-term revolving line of
credit of up to $500,000 with a financing company, maturing on September 1,
2000. Borrowings under this line are made available to the Company against
certain eligible receivables as defined in the agreement and bear interest at
prime (8 1/4 percent as of September 30, 1999) plus one percent. As of September
30, 1999, $500,000 was outstanding under the line. The loan is collateralized by
the Company's cash and cash equivalents and accounts receivable.
9. COMMITMENTS
OFFICE LEASES--In August 1998, the Company entered into a sublease
agreement to rent office space through February 27, 2007.
Rent expense was $8,675, $52,523, $111,859, $89,699 and $148,508 for the
period August 15, 1996 to December 31, 1996, for the years ended December 31,
1997 and 1998, and for the nine month period ended September 30, 1998
(unaudited) and 1999, respectively.
Future minimum payments under the operating lease are as follows (in
thousands):
<TABLE>
<S> <C>
Three months ending December 31, 1999....................... $ 66
Year ending December 31, 2000............................... 265
Year ending December 31, 2001............................... 265
Year ending December 31, 2002............................... 265
Year ending December 31, 2003............................... 265
Year ending December 31, 2004............................... 265
Thereafter.................................................. 574
------
Total minimum lease payments...................... $1,965
======
</TABLE>
EQUIPMENT LEASES--In August 1999, the Company entered into an equipment
lease financing agreement with a financing company. The agreement provides for
borrowings not to exceed $1,000,000 which are secured by the Company's equipment
and fixtures, and expires at the end of each lease term. The Company has an
option to increase this lease line by an additional $500,000 by providing
written notice. As of September 30, 1999, $651,023 was outstanding under the
line. In addition, the Company issued the financing company a warrant to
purchase preferred stock (see note 10).
F-11
<PAGE> 80
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company is a lessee under several capital lease agreements with third
parties for certain equipment. Future minimum lease payments under noncancelable
capital leases, together with the present value of the net minimum payments as
of September 30, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
Three months ending December 31, 1999....................... $ 78
Year ending December 31, 2000............................... 311
Year ending December 31, 2001............................... 282
Year ending December 31, 2002............................... 205
Year ending December 31, 2003............................... 23
Year ending December 31, 2004............................... 23
Thereafter.................................................. 49
----
Total minimum lease payments...................... $971
----
Less: amounts representing interest......................... 138
----
Present value of minimum capital lease payments............. 833
Less: current portion....................................... 255
----
Long-term capitalized lease obligations..................... $578
====
</TABLE>
The assets and liabilities under capital leases are recorded at the present
value of the minimum lease payments using effective interest rates ranging from
8 percent to 21 percent per annum.
10. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In February 1999, the Company sold 1,317,205 shares of Series B-1 and B-2
Convertible Preferred Stock (the "Series B Preferred Stock") to a group of
investors. The net proceeds to the Company were approximately $8,019,000.
Currently each share of Series B Preferred Stock is convertible, at any time, at
the option of the holder, into four shares of common stock.
The Company will be required to redeem all outstanding shares of Series B
Preferred Stock on February 23, 2004. The Series B-1 Preferred Stock will be
redeemed for $6.20 per share plus all declared and unpaid dividends, if any. The
Series B-2 Preferred Stock will be redeemed for $7.44 per share plus all
declared and unpaid dividends, if any. The carrying value of the Series B
Preferred Stock is its redemption value, as no dividends have been declared or
paid on these shares.
The Series B Preferred stockholders have senior preference and priority as
to the dividends of the Company. If declared, dividends on the Series B shares
shall accrue at 8% of the $6.20 stated value of the Series B-1 Preferred Stock
and at 8% of the $7.44 stated value of the Series B-2 Preferred Stock. Series B
Preferred Stock dividends are not cumulative.
Series B and Series A Preferred stockholders are entitled to voting rights
equal to the number of shares of Common Stock into which the preferred stock is
convertible. These holders have additional voting rights regarding matters that
affect their series of preferred stock and certain other matters.
11. STOCKHOLDERS' EQUITY (DEFICIENCY)
PREFERRED STOCK--In January 1997, the Company sold 600,000 shares of Series
A-1 Convertible Preferred Stock to an investor in a private placement. The
Company received net proceeds of $1,500,000. Currently, each share of Series A-1
Preferred Stock is convertible, at the option of the holder, into four shares of
Common Stock.
In February 1999, the holder of the convertible promissory note (see note
7) exercised its option to convert the convertible promissory note after the
Company made payments of $50,000 of principal and
F-12
<PAGE> 81
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$52,479 of interest. The remaining $450,000 under this note was converted into
125,000 shares of Series A-2 Preferred Stock. Each share of Series A-2 Preferred
Stock is convertible into four shares of Common Stock.
The Series A-1 and Series A-2 (the "Series A Preferred Stock") Preferred
Stockholders have senior preference and priority to the Common Stock to the
dividends of the Company. Dividends payable on the Series A Preferred Stock, if
declared, will be payable at a rate per annum determined by the Company's Board
of Directors. Series A Preferred Stock Dividends are not cumulative.
After dividends are paid on the Company's Series B Preferred Stock and
Series A Preferred Stock, holders of such shares shall participate with the
holders of the Company's Common Stock in the issuance of any further dividends
ratably in proportion to the number of shares of Common Stock that would be held
by each such holder if all outstanding shares of the Company's Series B
Preferred Stock and Series A Preferred Stock were converted into common stock.
TREASURY STOCK--In July 1998, a founder left the Company. Under the terms
of a Shareholders' Agreement, on December 22, 1998, the Company repurchased
710,600 shares for approximately $.0125 per share. The balance of the founder's
shares, 710,600 shares, were repurchased at a price of $.625 per share.
The total purchase price of $453,750 was paid as follows: $50,000 upon
closing, and the balance in the form of a promissory note. The note requires
twenty-two monthly payments of $2,750 each, and a payment of $50,000 due
December 22, 1999, and the balance of $293,250 with interest, is due November
2000. In addition, the Company incurred $7,203 of expenses related to this
transaction.
WARRANTS--The Company has issued a warrant to purchase 40,000 shares of
Common Stock at $.025 per share to a placement agent in connection with the
Series B Preferred Stock financing. This warrant may be exercised in the event
of any of the following: (a) a sale of assets of the Company for which
stockholder approval is required, (b) a sale of shares of Common Stock of the
Company pursuant to an effective registration Statement, (c) the purchase of
more than 66 2/3% of the Company's Common Stock by any person or entity and (d)
a merger or consolidation of the Company which existing shareholders do not own
a majority of the shares of the surviving entity. The Company has recorded this
warrant at $868,000 using the Black Scholes option pricing method and has
reduced additional paid in capital for a like amount.
In connection with an equipment lease line of credit, the Company has
granted a warrant to purchase Series B-3 Preferred Stock. This warrant expires
on August 31, 2006. Initially the warrant was for 8,065 Shares of Series B-3
Preferred Stock and was valued at $652,484 using the Black Scholes option
pricing model. However, this warrant is adjustable and the final number of
shares issuable and the exercise price per share will be based on a future
financing event. An offset in the stockholders' equity section has been recorded
as deferred financing costs and will be amortized over the three-year life of
the financing agreement (see note 16 for the final terms of this warrant).
12. RETIREMENT PLAN
The Company has a 401(k) Retirement/Savings Plan (the "401(k) Plan") for
all eligible employees. Employees are eligible to participate on the first
semi-annual enrollment date after their date of hire. The Company is not
required to, but may make discretionary contributions to the 401(k) Plan. The
Company did not make any voluntary contributions to the 401(k) Plan for the
years ended December 31, 1997, and 1998 or for the nine month period ended
September 30, 1999.
13. STOCK OPTION PLANS
The Company has established the 1997 Stock Option Plan (the "1997 Plan")
and the 1999 Employee, Director and Consultant Stock Option Plan (the "1999
Plan") to reward employees, consultants and directors for service to the Company
and to provide incentives for future service and enhancement of shareholder
value.
F-13
<PAGE> 82
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As of September 30, 1999, the 1997 Plan and the 1999 Plan provided for awards of
up to 424,544 and 2,537,948 shares of common stock of the Company, respectively.
Options granted under these plans typically vest over a four-year period with
25% vesting in the first year of grant and the remainder vesting equally each
month over a thirty-six month period. A total of 2,659,000 options had been
granted under these plans as of September 30, 1999.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options.
Transactions involving the incentive stock options granted to employees are
summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE EXERCISE
OF OPTIONS PRICE PRICE
---------- -------- --------
<S> <C> <C> <C>
Granted.......................................... 570,000 $ .625 $ .625
Exercised........................................ -- $ .625 $ .625
Canceled......................................... -- $ .625 $ .625
---------
Outstanding, December 31, 1997................... 570,000
Granted.......................................... 160,000 $ .625 $ .625
Exercised........................................ -- $ .625 $ .625
Canceled......................................... (102,000) $ .625 $ .625
---------
Outstanding, December 31, 1998................... 628,000
Granted.......................................... 2,273,000 $ .58 $ .58
Exercised........................................ (38,544) $ .58 $ .58
Canceled......................................... (203,456) $ .58 $ .58
---------
Outstanding, September 30, 1999.................. 2,659,000
=========
</TABLE>
There were 37,042, 59,375 and 1,004,433 options exercisable as of December
31, 1997, December 31, 1998 and September 30, 1999, respectively.
These plans also provide for stock appreciation rights ("SAR's"). As of
September 30, 1999, no SAR's had been granted.
SFAS No. 123, Accounting for Stock-Based Compensation, provides for a fair
value based method of accounting for employee options and options granted to
non-employees and measures compensation expense using an option valuation model
that takes into account, as of the grant date, the exercise price and expected
life of the option, the current price of the underlying stock and its expected
volatility, expected dividends on the stock, and the risk-free interest rate for
the expected term of the options. For each of the years ended December 31, 1997
and 1998 and for the nine months ended September 30, 1999, no options were
granted to non-employees.
F-14
<PAGE> 83
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In connection with the issuance of certain options at prices below the fair
market value, the Company had recorded deferred compensation expense of $4.9
million as of September 30, 1999, representing the difference between the
exercise price and the deemed fair market value of the Company's common stock at
such date. Such amount is included as a reduction of stockholders' equity and is
being amortized by charges to operations over the vesting period. Amortization
of deferred compensation amounted to $677,250 for the nine months ended
September 30, 1999. On February 19, 1999, the Company granted 710,600 stock
options to two of the Company's founders at an exercise price of $.58. Such
options vested immediately. The Company has recorded a charge of $579,139,
representing the difference between the exercise price and the deemed fair
market value of the Company's common stock at such date.
Pro forma disclosure as if the Company adopted the cost recognition
requirement under SFAS 123 is presented below (in thousands).
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net loss applicable to common shares--as
reported.............................. $1,151 $538 $4,398
Net loss applicable to common
shares--pro forma..................... $1,163 $552 $5,107
Loss per common share--as reported...... $.26 $.12 $1.46
Loss per common share--pro forma........ $.26 $.13 $1.70
</TABLE>
The Company used the Black-Scholes option pricing model to estimate fair
value utilizing the following assumtions for the respective years (all numbers
shown are weighted averages):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
----------------- ----------------- ------------------
<S> <C> <C> <C>
Risk-free interest rate................. 4.62% 4.62% 6.00%
Expected life of options................ 3.25 years 3.25 years 3.25 years
Expected annual volatility.............. .001% .001% 50%
Expected dividend yield................. none none none
</TABLE>
14. MAJOR CUSTOMERS
Revenues from one customer represented 25% of total revenues for the nine
months ended September 30, 1999. Revenues from one customer represented 52% of
total revenues in 1998. Revenues from two customers represented 15% and 10% of
total revenues in 1997 and 81% and 19% for the period August 15, 1996 (date of
inception) through December 31, 1996.
15. RELATED PARTY TRANSACTIONS
On December 30, 1998, the Company entered into an agreement whereby the
Company and the LLC have been providing and will continue to provide certain
services to each other as defined in the agreement. These amounts are determined
based on the actual costs incurred related to such services provided.
F-15
<PAGE> 84
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
16. SUBSEQUENT EVENTS
STOCK SPLIT--On November 17, 1999, the Company effected a four-for-one
stock split of each outstanding share of common stock. The four-for-one stock
split described above has been applied retrospectively for all periods
presented.
SERIES C FINANCING--On November 17, 1999, November 23, 1999 and December 6,
1999, the Company sold an aggregate of 3,787,801 shares of Series C Convertible
Preferred Stock ("Series C Preferred Stock") to a group of investors for $10.25
per share. The Company received gross proceeds from this sale of approximately
$38.8 million. The Company will be required to redeem all of the shares of
Series C Preferred Stock and Series B Preferred Stock on November 17, 2004. The
Series C Preferred Stock is redeemable at an amount equal to $10.25 per share
(subject to appropriate adjustment for any recapitalization events), plus an
amount equal to all declared and unpaid dividends, if any. Currently, each share
of Series C Preferred Stock is convertible, at any time, at the option of the
holder, into one share of common stock.
INCREASE IN AUTHORIZED STOCK--In connection with the Series C financing,
the Company amended and restated its certificate of incorporation to increase
the number of authorized shares of common stock and preferred stock to an
aggregate of 30,000,000 and 7,500,000, respectively.
ADJUSTMENT OF SERIES B-3 PREFERRED STOCK WARRANT--The terms of the warrant
issued by the Company in connection with the equipment lease line of credit (see
note 11) have been finalized. This warrant is now exercisable for up to 1,975
shares of Series B-3 Preferred Stock at an exercise price of $30.37 per share
and has a redemption value of $30.37 per share plus all declared and unpaid
dividends, if any. Each share of Series B-3 Preferred Stock is convertible into
four shares of the Company's Common Stock. Upon the completion of an initial
public offering of the Company's Common Stock, this warrant will automatically
convert into a warrant to purchase 7,900 shares of Common Stock at an exercise
price of $7.59 per share.
INCREASE IN SHARES UNDER STOCK PLAN--On November 17, 1999, the board of
directors and the stockholders of the Company approved an amendment to the 1999
Plan to increase the number of shares of Common Stock issuable thereunder to
3,077,948.
AGREEMENT WITH AMERICA ONLINE, INC.--In the fourth quarter of 1999, the
Company entered into an agreement with America Online, Inc. ("AOL"). The
agreement requires the Company to manage and monitor AOL's teen channel as well
as to develop a version of Bolt's primary web site that adheres to AOL teen
content policies. In return, the Company will receive a minimum number of
impressions during the term of the agreement based on branded content and
promotional placements that will appear on a variety of AOL properties. The
Company will pay AOL a cash amount over the course of 18 months and will provide
AOL with certain programming content. The Company will amortize the cost of this
agreement ratably as the impressions are delivered. The value of the services
the Company will provide to AOL will be recognized as barter revenues as the
Company's services are delivered to AOL.
AGREEMENT WITH FORD MOTOR COMPANY, INC.--In the fourth quarter of 1999, the
Company entered into an agreement with Ford Motor Company, Inc. ("Ford") under
which the Company will create, manage and provide certain content for a
co-branded area of the Company's site. The Company will also provide market
research information to Ford. The agreement is to run from January 1, 2000
through December 31, 2002, but may be terminated by either party on December 31,
2000 or 2001. Ford has agreed to pay the Company a cash amount over the course
of the contract life in exchange for the above services and for a scheduled
minimum number of guaranteed impressions as defined in the agreement. The
Company will recognize the revenue derived from this agreement ratably as such
impressions are delivered in accordance with the terms of the agreement.
F-16
<PAGE> 85
[DESCRIPTION OF GRAPHICS]
The graphic at the top of the page contains the following phrases: "Bolt
Profiles give members the chance to find out more about each other (Info about
Me, My Homepage, My Board Posts, and Diary), contact each other [Notes], and
respond to each other's personal polls [Tagbook]"; and "Stats: 40k notes sent
per day, 45k board posts per day, 75k poll responses per day and 600K email
accounts."
The remainder of the page contains a graphic which is a sample profile
application, "SupaFlyGuy", which includes "stats" regarding the age, sex,
birthday, zodiac sign, country of, and membership information for the member.
Click-throughs from various links from the profile are displayed around the
profile, such as samples of various applications for "info about me", "diary",
"tagbook", "my board posts", "send notes", and "my homepage". Directly below the
profile application page is a quote from a member, which states: "Bolt cuts out
the fluff. It's about the people who use it, what we want to see, our lives."
<PAGE> 86
BOLT.COM LOGO
<PAGE> 87
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 12,144
Nasdaq National Market Listing Fee.......................... 90,000
NASD Filing Fee............................................. 5,100
Printing and Engraving Fees................................. 150,000
Legal Fees and Expenses..................................... 375,000
Accounting Fees and Expenses................................ 325,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent and Registrar Fees........................... 10,000
Miscellaneous............................................... 22,756
----------
Total............................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation provides that we shall indemnify, to the
fullest extent authorized by the Delaware General Corporation Law, each person
who is involved in any litigation or other proceeding because such person is or
was a director or officer of Bolt, Inc. or is or was serving as an officer or
director of another entity at our request, against all expense, loss or
liability reasonably incurred or suffered in connection therewith. Our
certificate of incorporation provides that the right to indemnification includes
the right to be paid expenses incurred in defending any proceeding in advance of
its final disposition, provided, however, that such advance payment will only be
made upon delivery to us of an undertaking, by or on behalf of the director or
officer, to repay all amounts so advanced if it is ultimately determined that
such director is not entitled to indemnification. If we do not pay a proper
claim for indemnification in full within 60 days after we receive a written
claim for such indemnification, our bylaws authorize the claimant to bring an
action against us and prescribes what constitutes a defense to such action.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any director or officer of the corporation against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or was a director
or officer of the corporation, if such person acted in good faith and in a
manner that 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, if he or she had no reason to believe his or her conduct was
unlawful. In a derivative action, (i.e., one brought by or on behalf of the
corporation), indemnification may be provided only for expenses actually and
reasonably incurred by any director or officer in connection with the defense or
settlement of such an action or suit if such person acted in good faith and in a
manner that he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be provided
if such person shall have been adjudged to be liable to the corporation, unless
and only to the extent that the court in which the action or suit was brought
shall determine that the defendant is fairly and reasonably entitled to
indemnity for such expenses despite such adjudication of liability.
II-1
<PAGE> 88
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
Article Tenth of our certificate of incorporation eliminates the liability of a
director to us or our stockholders for monetary damages for such a breach of
fiduciary duty as a director, except for liabilities arising:
- from any breach of the director's duty of loyalty to us or our
stockholders;
- from acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; and
- from any transaction from which the director derived an improper
personal benefit.
We carry insurance policies insuring our directors and officers against
certain liabilities that they may incur in their capacity as directors and
officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 hereto, which provides for indemnification by the underwriters of
Bolt, our directors and officers who sign the Registration Statement and persons
who control Bolt, under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this Registration Statement, we
have sold the following securities that were not registered under the Securities
Act. The following information gives effect to a 4-for-1 split of our common
stock effected on November 17, 1999.
(a) ISSUANCES OF CAPITAL STOCK AND WARRANTS
The sale and issuance of the securities described in paragraphs (1) through
(8) below were deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2) or Regulation D promulgated thereunder.
(1) On September 1, 1996, we issued a total of 4,400,000 shares of
common stock to two of our founders for $.00002 per share. We repurchased
1,421,200 of these shares in December 1998.
(2) On January 10, 1997, we sold and issued a total of 600,000 shares
of Series A-1 Convertible Preferred Stock for $2.50 per share to one
investor in a private placement. Each share of our Series A-1 preferred
stock is convertible into four shares of our common stock.
(3) On February 22, 1999, we issued 125,000 shares of Series A-2
Convertible Preferred Stock to one investor in exchange for $450,000 of
principal of a note payable by Bolt. Each share of our Series A-2 preferred
stock is convertible into four shares of our common stock.
(4) On February 23, 1999, we sold and issued a total of 1,048,387
shares of Series B-1 Convertible Preferred Stock for $6.20 per share to 18
investors in a private placement. Each share of our Series B-1 preferred
stock is convertible into four shares of our common stock.
(5) On March 1, 1999, we sold and issued a total of 268,818 shares of
Series B-2 Convertible Preferred Stock for $7.44 per share to two investors
in a private placement. Each share of our Series B-2 preferred stock is
convertible into four shares of our common stock.
(6) On November 17, 1999, November 23, 1999 and December 6, 1999, we
sold and issued a total of 3,787,801 shares of Series C Convertible
Preferred Stock for $10.25 per share to 32 investors in a private
placement. Each share of our Series C preferred stock is convertible into
one share of our common stock.
(7) On April 22, 1999, we issued a warrant to purchase 40,000 shares
of our common stock at an exercise price of $.025 per share to one
investor.
II-2
<PAGE> 89
(8) On August 23, 1999, we issued a warrant to purchase 1,975 shares
of our Series B-3 Convertible Preferred Stock at an exercise price of
$30.37 per share to one investor. Each share of our Series B-3 preferred
stock is convertible into four shares of our common stock.
(b) CERTAIN GRANTS AND EXERCISES OF STOCK OPTIONS
The sale and issuance of the securities described below were deemed to be
exempt from registration under the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act, as transactions by an
issuer not involving a public offering or transactions pursuant to compensatory
benefit plans and contracts relating to compensation as provided under Rule 701.
Pursuant to our 1999 Employee, Director and Consultant Stock Option Plan
and our 1997 Stock Option Plan, we have issued options to purchase an aggregate
of 3,222,000 shares of common stock. Of these options:
- options to purchase 589,856 shares of common stock have been canceled or
lapsed without being exercised;
- options to purchase 38,544 shares of common stock have been exercised;
and
- options to purchase a total of 2,593,600 shares of common stock are
currently outstanding, at a weighted average exercise price of $.82 per
share.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
*3.2 Restated Certificate of Incorporation of the Registrant to
be filed upon completion of this offering.
3.3 Amended and Restated Bylaws of the Registrant.
*3.4 Restated Bylaws of the Registrant to be effective upon
completion of this offering.
*4.1 Form of Common Stock Certificate.
*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. with respect to the legality of securities being
registered.
10.1 The Registrant's 1999 Employee, Director and Consultant
Stock Option Plan.
10.2 The Registrant's 1997 Stock Option Plan.
10.3 Second Amended and Restated Registration Rights Agreement,
dated November 17, 1999 by and between the Registrant and
Certain Stockholders.
10.4 Agreement of Sublease, dated August 15, 1998, by and between
Avalanche Solutions, Inc. and the Registrant.
10.5 Office Service Agreement, dated October 29, 1999, by and
between Vantas West Wacker, Inc., dba VANTAS, and the
Registrant.
10.6 Office Service Agreement, dated June 30, 1999, by and
between Vantas and the Registrant.
*10.7 Anchor Tenant Agreement, dated November 16, 1999, by and
between America Online, Inc. and the Registrant.
*10.8 Special Delivery/Special Offer Agreement, dated August 15,
1999, by and between Lycos, Inc. and the Registrant.
*10.9 Agreement, dated November 17, 1999, by and between Ford
Motor Co. and the Registrant.
*10.10 Anchor Provider Agreement, dated August 27, 1999, by and
between Microsoft Corporation and the Registrant.
*10.11 Advertising Insertion Order, dated September 1, 1999, by and
between Yahoo! Inc. and the Registrant.
</TABLE>
II-3
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.12 Asset Purchase and Assumption of Liabilities Agreement,
dated December 30, 1998, by and between the Registrant and
Concrete Media Construction, LLC.
10.13 Asset Purchase and Assumption of Liabilities Agreement,
dated January 29, 1999, by and between the Registrant and
Girls On, Inc.
23.1 Consent of Deloitte & Touche LLP
* 23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (see Exhibit 5.1)
24.1 Powers of Attorney (See page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules are omitted because the information is
included in our financial statements or notes to those financial statements.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in New York, New York,
on December 21, 1999.
BOLT, INC.
By: /s/ DANIEL A. PELSON
------------------------------------
Daniel A. Pelson
President & Chief Executive Officer
POWER OF ATTORNEY
We the undersigned officers and directors of Bolt, Inc., hereby severally
constitute and appoint Daniel A. Pelson and Al Pastino, and each of them singly
(with full power to each of them to act alone), our true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement (or any other Registration Statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or their or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities held on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DANIEL A. PELSON President, Chief Executive December 21, 1999
- --------------------------------------------------- Officer and Director
Daniel A. Pelson (principal executive
officer)
/s/ ALBERT G. PASTINO Chief Financial Officer December 21, 1999
- --------------------------------------------------- (principal financial and
Albert G. Pastino accounting officer)
/s/ ROBERT DOVE Director December 21, 1999
- ---------------------------------------------------
Robert Dove
/s/ WILLIAM PEABODY Director December 21, 1999
- ---------------------------------------------------
William Peabody
/s/ SAMANTHA MCCUEN Director December 21, 1999
- ---------------------------------------------------
Samantha McCuen
/s/ STEPHEN J. HARRICK Director December 21, 1999
- ---------------------------------------------------
Stephen J. Harrick
/s/ ALAN COLNER Director December 21, 1999
- ---------------------------------------------------
Alan Colner
</TABLE>
II-5
<PAGE> 92
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Registrant.
*3.2 Restated Certificate of Incorporation of the Registrant to
be filed upon completion of this offering.
3.3 Amended and Restated Bylaws of the Registrant.
*3.4 Restated Bylaws of the Registrant to be effective upon
completion of this offering.
*4.1 Form of Common Stock Certificate.
*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. with respect to the legality of securities being
registered.
10.1 The Registrant's 1999 Employee, Director and Consultant
Stock Option Plan.
10.2 The Registrant's 1997 Stock Option Plan.
10.3 Second Amended and Restated Registration Rights Agreement,
dated November 17, 1999 by and between the Registrant and
Certain Stockholders.
10.4 Agreement of Sublease, dated August 15, 1998, by and between
Avalanche Solutions, Inc. and the Registrant.
10.5 Office Service Agreement, dated October 29, 1999, by and
between Vantas West Wacker, Inc., dba VANTAS, and the
Registrant.
10.6 Office Service Agreement, dated June 30, 1999, by and
between Vantas and the Registrant.
*10.7 Anchor Tenant Agreement, dated November 16, 1999, by and
between America Online, Inc. and the Registrant.
*10.8 Special Delivery/Special Offer Agreement, dated August 15,
1999, by and between Lycos, Inc. and the Registrant.
*10.9 Agreement, dated November 17, 1999, by and between Ford
Motor Co. and the Registrant.
*10.10 Anchor Provider Agreement, dated August 27, 1999, by and
between Microsoft Corporation and the Registrant.
*10.11 Advertising Insertion Order, dated September 1, 1999, by and
between Yahoo! Inc. and the Registrant.
10.12 Asset Purchase and Assumption of Liabilities Agreement,
dated December 30, 1998, by and between the Registrant and
Concrete Media Construction, LLC.
10.13 Asset Purchase and Assumption of Liabilities Agreement,
dated January 29, 1999, by and between the Registrant and
Girls On, Inc.
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (see Exhibit 5.1)
24.1 Powers of Attorney (See page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF BOLT MEDIA, INC.
Bolt Media, Inc., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Bolt Media, Inc.
2. The Corporation was originally incorporated under the name "Concrete
Media, Inc.", and the original Certificate of Incorporation of the Corporation
was filed with the Secretary of the State of Delaware on August 15, 1996.
3. The Corporation filed a Restated Certificate of Incorporation of the
Corporation with the Secretary of the State of Delaware on January 10, 1997 and
further amended such Restated Certificate of Incorporation by filing with the
Secretary of the State of Delaware (i) a Certificate of Ownership and Merger to
change the name of the Corporation from "Concrete Media, Inc." to "Bolt Media,
Inc." on February 16, 1999, (ii) an Amendment to Restated Certificate of
Incorporation of the Corporation on February 22, 1999, (iii) a Restated
Certificate of Incorporation of the Corporation on March 1, 1999 and (iv) an
Amendment to the Restated Certificate of Incorporation of the Corporation on
March 9, 1999.
4. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Sections 141(f), 242, 245 and 228
of the General Corporation Law of the State of Delaware by the unanimous written
consent of the Corporation's Board of Directors and by the Corporation's
stockholders having not less than the minimum number of votes required to adopt
this Amended and Restated Certificate of Incorporation, with written notice
being provided to all stockholders in accordance with Section 228(d) of such
law. This Amended and Restated Certificate of Incorporation restates,
integrates, amends and supersedes the provisions of the Certificate of
Incorporation of this Corporation as heretofore amended.
5. The text of the Certificate of Incorporation as heretofore amended
is hereby restated and further amended to read in its entirety as follows:
FIRST. The name of the Corporation is Bolt, Inc.
SECOND. The name and address of the Corporation's registered agent in
the State of Delaware is National Registered Agents, Inc., 9 East Lockerman
Street in the City of Dover, County of Kent.
THIRD. The purpose or purposes of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, and to have and exercise all the
powers conferred by the laws of the State of Delaware upon corporations formed
under the General Corporation Law of the State of Delaware.
<PAGE> 2
FOURTH. The amount of the total authorized capital stock of this
Corporation shall be thirty-seven million five hundred thousand (37,500,000)
shares, divided as follows: (i) thirty million (30,000,000) shares of Common
Stock, par value $0.001 per share (the "Common Stock"), and (ii) seven million
five hundred thousand (7,500,000) shares of preferred stock, par value $0.001
per share (the "Preferred Stock"). The Preferred Stock shall be divided into
series. The first series shall consist of six hundred thousand (600,000) shares
which shall be designated as "Series A-1 Convertible Preferred Stock" (the
"Series A-1 Preferred Stock"). The second series shall consist of one hundred
twenty-five thousand (125,000) shares which shall be designated as "Series A-2
Convertible Preferred Stock" (the "Series A-2 Preferred Stock), (the Series A-1
Preferred Stock and the Series A-2 Preferred Stock, collectively, the "Series A
Preferred Stock"). The third series shall consist of one million forty-eight
thousand three hundred eighty-seven (1,048,387) shares which shall be designated
as "Series B-1 Convertible Preferred Stock" (the "Series B-1 Preferred Stock").
The fourth series shall consist of two hundred sixty-eight thousand eight
hundred eighteen (268,818) shares which shall be designated as "Series B-2
Convertible Preferred Stock", (the "Series B-2 Preferred Stock"). The fifth
Series shall consist of One thousand nine hundred seventy five (1,975) shares
which shall be designated as "Series B-3 Convertible Preferred Stock" (the
"Series B-3 Preferred Stock" and together with the Series B-1 Preferred and the
Series B-2 Preferred Stock, collectively, (the "Series B Preferred Stock"). The
sixth series shall consist of four million four hundred thousand (4,400,000)
shares which shall be designated as Series C Convertible Preferred Stock (the
"Series C Preferred Stock"). One million fifty-five thousand eight hundred
twenty (1,055,820) shares of the Preferred Stock shall be undesignated
("Undesignated Preferred Stock"), subject to the provisions of paragraph (b) of
this Article Fourth.
(a) Common Stock. The Common Stock authorized for issuance by
the Corporation shall be thirty million (30,000,000) shares, at a par value of
$0.001 per share. Each share shall be entitled to one vote.
(b) Preferred Stock. The Preferred Stock authorized by this
Amended and Restated Certificate of Incorporation may be divided and issued from
time to time in series. Except as otherwise provided in this Amended and
Restated Certificate of Incorporation, or as may be provided in that certain
Second Amended and Restated Stockholders Agreement by and among the Corporation,
Sandler Capital Partners IV, L.P., Sandler Capital Partners IV FTE, L.P.,
Bechtel Enterprises Holdings, Inc., Highland Capital Partners IV Limited
Partnership, Highland Entrepreneurs Fund IV Limited Partnership, Oak Investment
Partners VIII, Limited Partnership, Oak VIII Affiliates Fund, Limited
Partnership, Moore Global Investments, Ltd., Remington Investments Strategies,
L.P. and the parties listed on Schedules 1 and 2 thereto (the "Stockholders
Agreement"), and subject to limitations and requirements prescribed by law, the
Board of Directors of the Corporation (the "Board") is expressly authorized, by
a vote or written consent of at least a majority of the Board then in office, to
provide for the issuance of the Undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or no voting
powers), relative, participating, optional or other special rights and
privileges and such qualifications, limitations or restrictions thereof as shall
be stated in the resolution or resolutions adopted by the Board to create such
series, and a Certificate of Designations of said resolution or resolutions
shall be filed in accordance with the General Corporation Law of the State of
Delaware.
2
<PAGE> 3
The Board is also authorized to decrease the number of shares of any
series, including the Series A-1 Preferred Stock, the Series A-2 Preferred
Stock, the Series B-1 Preferred Stock, the Series B-2 Preferred Stock, the
Series B-3 Preferred Stock and the Series C Preferred Stock, subsequent to the
issuance of such series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
The powers, rights, preferences, restrictions, and other matters
relating to the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock are as follows (section references below are to the
corresponding sections of paragraph (b) of this Article Fourth):
Section 1. Dividends.
(a) Priority of Dividends. No dividends shall be declared or
set aside for the Common Stock, the Series A Preferred Stock or any other
classes or series of the Corporation's capital stock which ranks junior to the
Series C Preferred Stock and Series B Preferred Stock (collectively, the "Junior
Stock") (other than dividends of Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of the Common Stock of the Corporation) unless
prior thereto all accrued and unpaid dividends on the Series C Preferred Stock
and Series B Preferred Stock shall be declared, set aside and paid on all the
then outstanding shares of Series C Preferred Stock and Series B Preferred
Stock. In the event that any such dividends or distributions are declared and
paid on the Series C Preferred Stock and Series B Preferred Stock, dividends or
distributions may be declared and paid to holders of the Series A Preferred
Stock in accordance with paragraph (h) hereof. In the event that any such
dividends or distributions are declared and paid on the Series C Preferred
Stock, Series B Preferred Stock and the Series A Preferred Stock, dividends or
distributions may be declared and paid to holders of the Common Stock equal to
such holder's pro rata share (as determined on a fully-converted basis) of the
aggregate "grossed up" amount of such dividends or distributions paid on the
Series C Preferred Stock, Series B Preferred Stock and the Series A Preferred
Stock. After the payment of all accrued and unpaid dividends on the Series C
Preferred Stock, the Series B Preferred Stock and the Series A Preferred Stock
in accordance with this Section 1, the holders of Series C Preferred Stock,
Series B Preferred Stock and the Series A Preferred Stock shall be entitled to
participate with the Common Stock in the issuance of any further dividends on
the Common Stock ratably in proportion to the number of shares of Common Stock
that would be held by each such holder if all outstanding shares of Series C
Preferred Stock, Series B Preferred Stock and Series A Preferred Stock were
converted into Common Stock. Notwithstanding the provisions contained in this
Section 1(a), no dividends may be declared or paid to the Series B Preferred
Stock without the declaration or payment of such dividends to the Series C
Preferred Stock.
(b) In the event that funds legally available for distribution
on any Series C Dividend Payment Date (as defined in paragraph (d) of this
Section 1) are insufficient to fully pay the cash dividend due and payable on
such Series C Dividend Payment Date to all holders of outstanding Series C
Preferred Stock entitled to receive such dividend, then all funds legally
available for distribution shall be paid in cash to holders of Series C
Preferred Stock entitled to
3
<PAGE> 4
receive such dividend in accordance with the number of shares of Series C
Preferred Stock for which dividend has been declared held by each such holder.
Any remaining dividend amount owed to holders of the Series C Preferred Stock
shall be accrued in accordance with paragraph (e) of this Section 1. The holders
of the Series C Preferred Stock shall have senior preference and priority to the
Series A Preferred Stock and Common Stock with respect to the dividends of the
Corporation and pari passu preference and priority to the Series B Preferred
Stock to the dividends of the Corporation.
(c) In the event that funds legally available for distribution
on any Series B Dividend Payment Date (as defined in paragraph (f) of this
Section 1) are insufficient to fully pay the cash dividend due and payable on
such Series B Dividend Payment Date to all holders of outstanding Series B
Preferred Stock entitled to receive such dividend, then all funds legally
available for distribution shall be paid in cash to holders of Series B
Preferred Stock entitled to receive such dividend in accordance with the number
of shares of Series B Preferred Stock for which dividend has been declared held
by each such holder. Any remaining dividend amount owed to holders of the Series
B Preferred Stock shall be accrued in accordance with paragraph (f) of this
Section 1. The holders of the Series B Preferred Stock shall have senior
preference and priority to the Series A Preferred Stock and Common Stock with
respect to the dividends of the Corporation and pari passu preference and
priority to the Series C Preferred Stock to the dividends of the Corporation.
(d) In the event that funds legally available for distribution
on any Series A Dividend Payment Date (as defined in paragraph (g) of this
Section 1) are insufficient to fully pay the cash dividend due and payable on
such Series A Dividend Payment Date to all holders of outstanding Series A
Preferred Stock entitled to receive such dividend, then all funds legally
available for distribution shall be paid in cash to holders of Series A
Preferred Stock entitled to receive such dividend in accordance with the number
of shares of Series A Preferred Stock for which a dividend has been declared
held by each such holder. Any remaining dividend amount owed to holders of the
Series A Preferred Stock entitled to receive dividends shall be accrued in
accordance with paragraph (g) of this Section 1. The holders of the Series A
Preferred Stock shall have senior preference and priority to the Common Stock
with respect to the dividends of the Corporation and junior preference and
priority to the Series C Preferred Stock and Series B Preferred Stock to the
dividends of the Corporation.
(e) Series C Preferred Stock Dividend Rate; Series C Dividend
Payment Dates. Each holder of the Series C Preferred Stock shall be entitled to
receive when, as and if declared by the Board, out of funds legally available
therefor, cash dividends, in preference and priority to dividends on any Junior
Stock, that shall accrue on the Stated Value for the Series C Preferred Stock
(as defined in Section 2(a)) of each share of the Series C Preferred Stock at
the rate of eight percent (8%) per annum, from and including the date on which
such stock was first issued (the "Series C Original Issue Date") to and
including the date on which the Series C Liquidation Price (as defined) of such
share is paid in full to the holder of such share pursuant to Section 2. The
accrued dividends will be appropriately adjusted for stock splits, stock
dividends, combinations, recapitalizations, reclassifications, mergers,
consolidations and other similar events (together referred to as
"Recapitalization Events") which affect the number of outstanding shares of the
Series C Preferred Stock. Accrued dividends on the Series C Preferred Stock
shall be payable out of funds legally available therefor when, as, and if
declared by the Board (a
4
<PAGE> 5
"Series C Dividend Payment Date"), to the holders of record of Series C
Preferred Stock for which such dividend has been declared as of the close of
business on the applicable record date. Dividends shall not be cumulative.
Previously declared but unpaid dividends with respect to an outstanding share of
Series C Preferred Stock shall, upon conversion of such share to Common Stock
(except in the case of a Series C Qualified Public Offering (as defined below))
be paid out of assets legally available therefor, in cash or in shares of Common
Stock, as the Board may elect, and in the case of assets or shares of Common
Stock, valued at the fair market value on the date of payment as determined by
the Board in good faith. The amount of dividends "accrued" with respect to any
share of Series C Preferred Stock as of the first Series C Dividend Payment Date
with respect to such share after the applicable Series C Original Issue Date
with respect to such share, or as of any other date after the applicable Series
C Original Issue Date with respect to such share that is not a Series C Dividend
Payment Date with respect to such share, shall be calculated on the basis of the
actual number of days elapsed from and including the applicable Series C
Original Issue Date with respect to such share, in the case of the first Series
C Dividend Payment Date with respect to such share and any date of determination
prior to the first Series C Dividend Payment Date with respect to such share, or
from and including the last preceding Series C Dividend Payment Date with
respect to such share, in the case of any other date of determination, to and
including such date of determination which is to be made with respect to such
share, in each case based on a year of 365 or 366 days, as the case may be.
Whenever the Board declares any dividend pursuant to this Section 1, notice of
the applicable record date and related Series C Dividend Payment Date shall be
given. As used herein, a "Series C Qualified Public Offering" shall mean the
closing of a firm commitment underwritten public offering, pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), covering the offer and sale of Common Stock to the
public that raises proceeds for the Company of at least $25,000,000 after
underwriters' discounts and expenses and at an offering price to the public of
at least $17.94, subject to Recapitalization Events.
(f) Series B Preferred Stock Dividend Rate; Series B Dividend
Payment Dates. Each holder of the Series B Preferred Stock shall be entitled to
receive when, as and if declared by the Board, out of funds legally available
therefor, cash dividends, in preference and priority to dividends on any Junior
Stock, that shall accrue on the Stated Value for the Series B-1 Preferred Stock,
the Stated Value for the Series B-2 Preferred Stock and the Stated Value for the
Series B-3 Preferred Stock (as defined in Section 2(a)) of each share of the
Series B-1 Preferred Stock, Series B-2 Preferred Stock and Series B-3 Preferred
Stock, respectively, at the rate of eight percent (8%) per annum, from and
including the date on which such stock was first issued (each, a "Series B
Original Issue Date") to and including the date on which the Series B-1
Liquidation Price (as defined), or the Series B-2 Liquidation Price (as defined)
or the Series B-3 Liquidation Price (as defined), as the case may be, of such
share is paid in full to the holder of such share pursuant to Section 2. The
accrued dividends will be appropriately adjusted for Recapitalization Events
which affect the number of outstanding shares of the Series B Preferred Stock.
Accrued dividends on the Series B-1 Preferred Stock, the Series B-2 Preferred
Stock and Series B-3 Preferred Stock shall be payable out of funds legally
available therefor when, as, and if declared by the Board (each a "Series B
Dividend Payment Date"), to the holders of record of each Series B Preferred
Stock for which such dividend has been declared as of the close of business on
the applicable record date. Dividends shall not be cumulative. Previously
declared but unpaid dividends with respect to an outstanding share of Series B
Preferred Stock shall, upon conversion of such share to Common Stock (except in
the case of a Series B Qualified Public
5
<PAGE> 6
Offering (as defined below)) be paid out of assets legally available therefor,
in cash or in shares of Common Stock, as the Board may elect, and in the case of
assets or shares of Common Stock, valued at the fair market value on the date of
payment as determined by the Board in good faith. The amount of dividends
"accrued" with respect to any share of Series B Preferred Stock as of the first
Series B Dividend Payment Date with respect to such share after the applicable
Series B Original Issue Date with respect to such share, or as of any other date
after the applicable Series B Original Issue Date with respect to such share
that is not a Series B Dividend Payment Date with respect to such share, shall
be calculated on the basis of the actual number of days elapsed from and
including the applicable Series B Original Issue Date with respect to such
share, in the case of the first Series B Dividend Payment Date with respect to
such share and any date of determination prior to the first Series B Dividend
Payment Date with respect to such share, or from and including the last
preceding Series B Dividend Payment Date with respect to such share, in the case
of any other date of determination, to and including such date of determination
which is to be made with respect to such share, in each case based on a year of
365 or 366 days, as the case may be. Whenever the Board declares any dividend
pursuant to this Section 1, notice of the applicable record date and related
Series B Dividend Payment Date shall be given. As used herein, a "Series B
Qualified Public Offering" shall mean the closing of a firm commitment
underwritten public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), covering
the offer and sale of Common Stock to the public that raises gross proceeds for
the Company of at least $20,000,000 and at an initial aggregate offering price
to the public that reflects a value of the Company, on a Fully-Diluted Basis, of
(i) at least $25,000,000 (on a pre-money equity valuation) if such offering is
commenced on or before the first anniversary of the Series B-1 Original Issue
Date or (ii) at least $31,250,000 (on a pre-money equity valuation) if such
offering is commenced after the first anniversary of the Series B-1 Original
Issue Date. "Fully-Diluted Basis" gives effect, without duplication, to (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
and Series B Preferred Stock or any other convertible securities of the
Corporation or upon the exercise of any option, warrant or similar right
(whether or not presently exercisable) to acquire shares of Common Stock or
shares of Preferred Stock convertible into Common Stock, as if such Series A
Preferred Stock and Series B Preferred Stock or other convertible securities had
been so converted or such option, warrant or similar right had been so
exercised.
(g) Series A Preferred Stock Dividend Rate; Series A Dividend
Payment Dates. Each holder of the Series A Preferred Stock shall be entitled to
receive when, as and if declared by the Board, out of funds legally available
therefor, cash dividends, in preference and priority to dividends on any Common
Stock or any other classes or series of the Corporation's capital stock which
rank junior to the Series A Preferred Stock, that shall accrue on each share of
the Series A Preferred Stock at a rate per annum determined by the Board, from
and including the date on which such stock was first issued (each, a "Series A
Original Issue Date") to and including the date on which the Series A-1
Liquidation Price (as defined) or the Series A-2 Liquidation Price (as defined),
as the case may be, of such share is paid in full to the holder of such share
pursuant to Section 2. The accrued dividends will be adjusted for
Recapitalization Events which affect the number of outstanding shares of the
Series A Preferred Stock. Accrued dividends on the Series A-1 Preferred Stock
and the Series A-2 Preferred Stock shall be payable out of funds legally
available therefor when, as, and if declared by the Board (each a "Series A
Dividend Payment Date"), to the holders of record of such Series A Preferred
Stock for which
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such dividend has been declared as of the close of business on the applicable
record date. Dividends shall not be cumulative. Declared but unpaid dividends
with respect to an outstanding share of Series A Preferred Stock shall, upon
conversion of such share to Common Stock (except in the case of a Series A
Qualified Public Offering (as defined below)) be paid when, as and if declared
by the Board, out of assets legally available therefor, in cash or in shares of
Common Stock as the Board may elect, and in the case of assets or shares of
Common Stock, valued at the fair market value on the date of payment as
determined by the Board in good faith. The amount of dividends "accrued" with
respect to any share of Series A Preferred Stock as of the first Series A
Dividend Payment Date with respect to such share after the applicable Series A
Original Issue Date with respect to such share, or as of any other date after
the applicable Series A Original Issue Date that with respect to such share is
not a Series A Dividend Payment Date with respect to such share, shall be
calculated on the basis of the actual number of days elapsed from and including
the applicable Series A Original Issue Date with respect to such share, in the
case of the first Series A Dividend Payment Date with respect to such share and
any date of determination prior to the first Series A Dividend Payment Date with
respect to such share, or from and including the last preceding Series A
Dividend Payment Date with respect to such share, in the case of any other date
of determination, to and including such date of determination which is to be
made with respect to such share, in each case based on a year of 365 or 366
days, as the case may be. Whenever the Board declares any dividend pursuant to
this Section 1, notice of the applicable record date and related Series A
Dividend Payment Date shall be given. As used herein, a "Series A Qualified
Public Offering" shall mean the closing of the sale of the Corporation's Common
Stock in a firm commitment underwritten public offering registered under the
Securities Act, other than a registration relating solely to a transaction under
Rule 145 promulgated under the Securities Act (or any successor thereto) or to
an employee benefit plan of the Corporation, at a public offering price (prior
to underwriters' discounts and expenses) equal to or exceeding ten dollars
($10.00) per share of Common Stock (as adjusted for Recapitalization Events with
respect to such shares), and the aggregate proceeds to the Corporation and/or
any selling stockholders (after deduction for underwriters' discounts and
expenses relating to the issuance, including, without limitation, fees of
counsel to the Corporation) of which exceed ten million dollars ($10,000,000).
(h) Pro Rata Declaration and Payment of Dividends. All
dividends paid with respect to shares of Series C Preferred Stock, Series B-1
Preferred Stock, Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series
A-1 Preferred Stock, Series A-2 Preferred Stock or Common Stock, as the case may
be, pursuant to this Section 1 shall be declared and paid pro rata within each
class to all the holders of the shares of Series C Preferred Stock, Series B-1
Preferred Stock, Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series
A-1 Preferred Stock, Series A-2 Preferred Stock or Common Stock, as the case may
be, outstanding as of the applicable record date.
(i) Form of Payment of Dividends. In the event that the
Corporation declares and pays dividends to the holders of its capital stock,
each holder shall receive the same form of consideration.
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Section 2. Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
any merger or consolidation of the Corporation with another entity, the sale of
substantially all of its assets or the consummation of an Approved Sale (as
defined below), pursuant to which, the holders of the Series C Preferred Stock
do not receive an amount of consideration per share equal to the Stated Value
(as defined below) for the Series C Preferred Stock (each such event, a
"Liquidation"), except as provided in paragraph (b) of this Section 2, the
holders of shares of Series C Preferred Stock, Series B-1 Preferred Stock,
Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series A-1 Preferred
Stock and Series A-2 Preferred Stock then outstanding shall be entitled, ratably
in proportion to the shares of Series C Preferred Stock, Series B-1 Preferred
Stock, Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series A-1
Preferred Stock, Series A-2 Preferred Stock held by such holders, to be paid out
of the assets of the Corporation available for distribution to its stockholders
before payment to the holders of Junior Stock (excluding in this case, the
Series A Preferred Stock) by reason of their ownership thereof, an amount equal
to: (i) in the case of the Series C Preferred Stock (1) $10.25 per share
(subject to appropriate adjustments for any Recapitalization Events) (the
"Stated Value for the Series C Preferred Stock"), plus (2) an amount equal to
all declared and unpaid dividends on such shares since the Series C Original
Issue Date thereof as of such time of determination (the "Series C Liquidation
Price"); (ii) in the case of the Series B-1 Preferred Stock, (1) $6.20 per share
(subject to appropriate adjustment for any Recapitalization Events) (the "Stated
Value for the Series B-1 Preferred Stock"), plus (2) an amount equal to all
declared and unpaid dividends on such shares since the Series B-1 Original Issue
Date thereof as of such time of determination (the "Series B-1 Liquidation
Price"); (iii) in the case of the Series B-2 Preferred Stock, (1) equal to $7.44
per share (subject to appropriate adjustment for any Recapitalization Events)
(the "Stated Value for the Series B-2 Preferred Stock"), plus (2) an amount
equal to all declared and unpaid dividends on such shares since the Series B-2
Original Issue Date thereof as of such time of determination (the "Series B-2
Liquidation Price"); (iv) in the case of the Series B-3 Preferred Stock (1)
$30.37 per share (subject to appropriate adjustment for any Recapitalization
Events) (the "Stated Value for the Series B-3 Preferred Stock"), plus (2) an
amount equal to all declared and unpaid dividends on such shares since the
Series B-3 Original Issue Date thereof as of such time of determination (the
"Series B-3 Liquidation Price"); (v) in the case of the Series A-1 Convertible
Preferred Stock, (l) $2.50 per share (subject to appropriate adjustment for any
Recapitalization Events), plus (2) an amount equal to all declared and unpaid
dividends on such shares since the Series A-1 Original Issue Date thereof as of
such time of determination (the "Series A-1 Liquidation Price"); and (vi) in the
case of the Series A-2 Convertible Preferred Stock, (l) $3.60 per share (subject
to appropriate adjustment for any Recapitalization Events), plus (2) an amount
equal to all declared and unpaid dividends on such shares since the Series A-2
Original Issue Date thereof as of such time of determination (the "Series A-2
Liquidation Price"). "Approved Sale" means the sale of the Corporation, in a
single transaction or a series of related transactions, to a third party (which
is not an affiliate of any of the Approving Stockholders): (i) pursuant to which
such third party proposes to acquire all or substantially all of the outstanding
capital stock (on a fully-diluted basis) (whether by merger, consolidation,
recapitalization, reorganization, purchase of all of the capital stock or
otherwise) of the Corporation or all or substantially all of the assets of the
Corporation; (ii) which has been approved by the Board of Directors and holders
of a majority of the outstanding shares of Series A Stock, the Series B Stock
and the Series C Stock, voting
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<PAGE> 9
together as a single class (the "Approving Stockholders"); and (iii) pursuant to
which all holders of Common Stock will receive with respect thereto (whether in
such transaction or, with respect to an asset sale, upon a subsequent
liquidation) the same form and amount of consideration per share of Common
Stock, or if any holders are given an option as to the form and amount of
consideration to be received, all holders are given the same option.
(b) If upon any such Liquidation the remaining assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Series C Preferred Stock, Series B Preferred
Stock and Series A Preferred Stock the full amount to which they shall be
entitled, then the entire assets of the Corporation shall be distributed among
the holders of shares of Series C Preferred Stock, Series B Preferred Stock and
Series A Preferred Stock, ratably in proportion to the full amount to which such
holders are entitled.
(c) After the payment of all preferential amounts required to
be paid to the holders of Series C Preferred Stock, Series B Preferred Stock and
Series A Preferred Stock, upon the Liquidation of the Corporation, the holders
of shares of the other Junior Stock (excluding in this case, the Series A
Preferred Stock) then outstanding shall be entitled to receive the remaining
assets and funds of the Corporation available for distribution to its
stockholders.
(d) In the event of a distribution pursuant to this Section 2,
such distribution shall be payable in cash, securities or property. Whenever
such distribution shall be in securities or property other than cash, the value
of such securities or property other than cash shall be the fair market value of
such securities or other property as determined by the Board in good faith.
Section 3. Voting Rights.
(a) Each holder of shares of Series C Preferred Stock, Series
B Preferred Stock or Series A Preferred Stock, as the case may be, shall be
entitled to votes equal in the aggregate to the number of votes to which the
number of whole shares of Common Stock into which such shares of Series B
Preferred Stock or Series A Preferred Stock, as the case may be, held by such
holder are convertible would be entitled (as adjusted from time to time pursuant
to Section 4 hereof), at each meeting of the stockholders of the Corporation
(and for purposes of written actions of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the Corporation
for their action or consideration, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation. Except
as otherwise provided herein or required by law, holders of shares of Series C
Preferred Stock, Series B Preferred Stock or Series A Preferred Stock shall vote
with the holders of shares of Common Stock and any other class of stock entitled
to vote and not as a separate class. Each holder of Common Stock is entitled to
one (1) vote per share of Common Stock held by such holder. Except as otherwise
provided herein, holders of the Series C Preferred Stock, Series B Preferred
Stock and the Series A Preferred Stock shall each have the right to vote as
separate classes on all matters requiring their vote or approval under, and in
the manner set forth in, the General Corporation Law of the State of Delaware.
Except as otherwise provided herein, any class vote pursuant to this Section 3
or required by law shall be determined by the holders of a majority of the
shares of capital stock of such class voting as a class as of the applicable
record date.
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(b) Without the written consent or affirmative vote of the
holders of sixty percent (60%) of the then outstanding shares of Series C
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a class, in person or by proxy for so long as
any shares of Series C Preferred Stock remain outstanding, the Corporation shall
not (i) amend, alter or repeal or otherwise change any provision of this
Restated Certificate of Incorporation, or the preferences, special rights or
other powers of the Series C Preferred Stock, in each case so as to affect
adversely the Series C Preferred Stock or (ii) create, authorize, issue, or
increase the authorized amount of, any preferred stock or any other class or
series of any equity securities, or any warrants, options or other rights
convertible or exchangeable into any class or series of any equity securities of
the Corporation, having a preference or priority over or ranking pari passu with
the Series C Preferred Stock as to redemption rights, the right to receive
dividends or amounts distributable upon Liquidation of the Corporation. In the
event of a proposed amendment to Section 5B(a) of Article Fourth, Section 5B(a)
shall not be amended without first obtaining the written consent or affirmative
vote of the holders of eighty percent (80%) of the then outstanding shares of
Series C Preferred Stock, given in writing or by a vote at a meeting, consenting
or voting (as the case may be) separately as a class, in person or by proxy for
so long as any shares of Series C Preferred Stock remain outstanding. The
holders of the Series C Preferred Stock shall have the right to vote as a class
for purposes of this paragraph (b) of this Section 3.
(c) For so long as any shares of Series B-2 Preferred Stock or
Series B-3 Preferred Stock remain outstanding, the Corporation shall not amend,
alter or repeal or otherwise change any provision of this Restated Certificate
of Incorporation, the resolutions of its Board of Directors authorizing and
creating the Series B-2 Preferred Stock and Series B-3 Preferred Stock, or the
preferences, special rights or other powers of the Series B-2 Preferred Stock
and Series B-3 Preferred Stock, in each case so as to affect adversely the
Series B-2 Preferred Stock or Series B-3 Preferred Stock, without the written
consent or affirmative vote of the holders of sixty-six and two-thirds percent
(66-2/3%) of the then outstanding shares of Series B-2 Preferred Stock and
Series B-3 Preferred Stock, given in writing or by vote at a meeting, consenting
or voting (as the case may be) together as a single class, in person or by
proxy. For this purpose, without limiting the generality of the foregoing,
amendments, alterations, repeals or other changes to any provision of this
Restated Certificate of Incorporation considered to affect adversely the Series
B-2 Preferred Stock and Series B-3 Preferred Stock shall include, but are not
limited to: (i) the creation, authorization, issuance, or increase in the
authorized amount of, any preferred stock or any other class or series of any
equity securities, or any warrants, options or other rights convertible or
exchangeable into any class or series of any equity securities of the
Corporation, having a preference or priority over or ranking pari passu with the
Series B-2 Preferred Stock and Series B-3 Preferred Stock as to the right to
receive dividends or amounts distributable upon Liquidation of the Corporation;
(ii) those that reduce the dividend rates on the Series B-2 Preferred Stock or
Series B-3 Preferred Stock or cancel declared and unpaid dividends; (iii) those
that change the relative seniority rights of the holders of the Series B-2
Preferred Stock or Series B-3 Preferred Stock as to the payment of dividends in
relation to the holders of any other capital stock of the Corporation; or (iv)
those that reduce the amount payable to the holders of the Series B-2 Preferred
Stock or Series B-3 Preferred Stock upon Liquidation or change the relative
seniority of the liquidation preferences of the holders of the Series B-2
Preferred or Series B-3 Preferred Stock to the rights upon Liquidation of the
holders of any other capital stock of the Corporation. The holders of the Series
B-2 Preferred Stock and Series B-3 Preferred Stock shall
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<PAGE> 11
have the right to vote together as a single class for purposes of this paragraph
(c) of this Section 3.
(d) For so long as any shares of Series B-1 Preferred Stock
remain outstanding, the Corporation shall not amend, alter or repeal or
otherwise change any provision of this Amended and Restated Certificate of
Incorporation, the resolutions of its Board authorizing and creating the Series
B-1 Preferred Stock, or the preferences, special rights or other powers of the
Series B-1 Preferred Stock, in each case so as to affect adversely the Series
B-1 Preferred Stock, without the written consent or affirmative vote of the
holders of sixty-six and two-thirds percent (66 2/3%) of the then outstanding
shares of Series B-1 Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, in person or by
proxy. For this purpose, without limiting the generality of the foregoing,
amendments, alterations, repeals or other changes to any provision of this
Restated Certificate of Incorporation considered to affect adversely the Series
B-1 Preferred Stock shall include, but are not limited to: (i) the creation,
authorization, issuance, or increase in the authorized amount of, any preferred
stock or any other class or series of any equity securities, or any warrants,
options or other rights convertible or exchangeable into any class or series of
any equity securities of the Corporation, having a preference or priority over
or ranking pari passu with the Series B-1 Preferred Stock as to the right to
receive dividends or amounts distributable upon Liquidation of the Corporation;
(ii) those that reduce the dividend rates on the Series B-1 Preferred Stock or
cancel declared and unpaid dividends; (iii) those that change the relative
seniority rights of the holders of the Series B-1 Preferred Stock as to the
payment of dividends in relation to the holders of any other capital stock of
the Corporation; or (iv) those that reduce the amount payable to the holders of
the Series B-1 Preferred Stock upon Liquidation or change the relative seniority
of the liquidation preferences of the holders of the Series B-1 Preferred to the
rights upon Liquidation of the holders of any other capital stock of the
Corporation. The holders of the Series B-1 Preferred Stock shall have the right
to vote as a class for purposes of this paragraph (d) of this Section 3.
(e) For so long as any shares of Series A Preferred Stock
remain outstanding, the Corporation shall not amend, alter or repeal or
otherwise change any provision of this Amended and Restated Certificate of
Incorporation, the resolutions of its Board authorizing and creating the Series
A Preferred Stock or the preferences, special rights or other powers of the
Series A Preferred Stock so as to affect adversely the Series A Preferred Stock,
without the written consent or affirmative vote of the holders of sixty-six and
two-thirds percent (66 2/3%) of the then outstanding shares of Series A
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a class, in person or by proxy. For this
purpose, without limiting the generality of the foregoing, amendments,
alterations, repeals or other changes to any provision of this Restated
Certificate of Incorporation considered to affect adversely the Series A
Preferred Stock shall include, but are not limited to: (i) the creation,
authorization, issuance, or increase in the authorized amount of, any preferred
stock or any other class or series of any equity securities, or any warrants,
options or other rights convertible or exchangeable into any class or series of
any equity securities of the Corporation, having a preference or priority over
or ranking pari passu with the Series A Preferred Stock as to the right to
receive dividends or amounts distributable upon Liquidation of the Corporation;
(ii) those that reduce the dividend rates on the Series A Preferred Stock or
cancel declared and unpaid dividends; (iii) those that change the relative
seniority rights of the holders of the Series
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A Preferred Stock as to the payment of dividends in relation to the holders of
any other capital stock of the Corporation; or (iv) those that reduce the amount
payable to the holders of the Series A Preferred Stock upon Liquidation or
change the relative seniority of the liquidation preferences of the holders of
the Series A Preferred to the rights upon Liquidation of the holders of any
other capital stock or the Corporation. The holders of the Series A Preferred
Stock shall have the right to vote as a class for purposes of this paragraph (e)
of this Section 3.
(f) Subject to the provisions of paragraphs (b), (c), (d) and
(e) of this Section 3, for so long as any shares of Series C Preferred Stock,
Series B Preferred Stock or Series A Preferred Stock (in each case, subject to
appropriate adjustment for any Recapitalization Event) remain outstanding, the
Corporation shall not and shall not permit any subsidiary of the Corporation, to
declare or pay dividends or other distributions upon, or redeem, purchase,
retire or otherwise acquire for value of, any shares of the capital stock of the
Corporation (other than shares of capital stock that rank pari passu with or
senior to the Series C Preferred Stock, Series B Preferred Stock or the Series A
Preferred Stock, shares of capital stock repurchased as contemplated by the
Stockholders Agreement or shares of capital stock repurchased pursuant to the
authorization of the Board of Directors of the Corporation in connection with
employee stock option grants or restricted stock grants) or any shares of the
capital stock of any subsidiary of the Corporation (other than the payment of
dividends or distributions, or other payments in redemption, made by such
subsidiary solely to the Corporation) without the written consent or affirmative
vote of stockholders representing at least a majority of the then outstanding
shares of Series C Preferred Stock Series B Preferred Stock and Series A
Preferred Stock, voting as a single class.
(g) Subject to the provisions of paragraphs (b), (c), (d) and
(e) of this Section 3, for so long as any shares of Series C Preferred Stock,
Series B Preferred Stock or Series A Preferred Stock (in each case, subject to
appropriate adjustment for any Recapitalization Event) remain outstanding, the
Corporation shall not take, and shall not permit any subsidiary of the
Corporation to take, any of the following actions without the written consent or
affirmative vote of stockholders representing at least a majority of the then
outstanding shares of Series C Preferred Stock, Series B Preferred Stock and
Series A Preferred Stock, voting as a single class:
(i) increase or decrease the authorized number of shares of
Preferred Stock.
(ii) merge or consolidate the Corporation or any of its
subsidiaries with or into another entity, or enter into any other
business combination, recapitalization, binding share exchange or
similar transaction with any entity, if such would result in, the
stockholders of the Corporation just prior to the date of the event not
owning a majority of the outstanding shares of the capital stock of the
Corporation after such event, or the Corporation not being the
surviving entity; or
(iii) sell, transfer, lease or dispose of all or substantially
all of the assets of the Corporation or of any of its subsidiaries, in
one transaction or a series of related transactions, or effect the
liquidation, dissolution or winding-up of the Corporation or any of its
subsidiaries.
Section 4. Conversion at the Option of a Holder.
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The holders of the Series C Preferred Stock, Series B Preferred Stock
and Series A Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Each share of Series C Preferred Stock shall be convertible at the
option of the holder thereof, at any time and from time to time, into such
number of fully-paid and nonassessable shares of Common Stock as determined by
dividing the Series C Conversion Value (as defined) by the Series C Conversion
Price (as defined) then in effect (as appropriately adjusted in accordance with
this Section 4) (the "Series C Conversion Rate"). No additional consideration
shall be paid by a holder of Series C Preferred Stock upon exercise of its
respective Conversion Rights pursuant to this paragraph 4(a).
(i) Series C Conversion Value. The conversion value
for each share of Series C Preferred Stock shall be the Stated Value for the
Series C Preferred Stock.
(ii) Series C Conversion Price. The conversion price
at which shares of Common Stock shall be deliverable upon conversion of Series C
Preferred Stock without the payment of additional consideration by the holder
thereof shall initially be the Stated Value for the Series C Preferred Stock
(the "Series C Conversion Price"). Such initial Series C Conversion Price, and
the corresponding rate at which shares of Series C Preferred Stock may be
converted into shares of Common Stock, shall be subject to adjustment as
provided in this Section 4.
(b) Each share of Series B-1 Preferred Stock shall be convertible at
the option of the holder thereof, at any time and from time to time, into such
number of fully-paid and nonassessable shares of Common Stock as determined by
dividing the Series B-1 Conversion Value by the Series B-1 Conversion Price then
in effect (as appropriately adjusted in accordance with this Section 4) (the
"Series B-1 Conversion Rate"). No additional consideration shall be paid by a
holder of Series B-1 Preferred Stock upon exercise of its respective Conversion
Rights pursuant to this paragraph (b). Each share of Series B-2 Preferred Stock
shall be convertible at the option of the holder thereof, at any time and from
time to time, into such number of fully-paid and nonassessable shares of Common
Stock as determined by dividing the Series B-2 Conversion Value by the Series
B-2 Conversion Price then in effect (as appropriately adjusted in accordance
with this Section 4) (the "Series B-2 Conversion Rate"). No additional
consideration shall be paid by a holder of Series B-2 Preferred Stock upon
exercise of its respective Conversion Rights pursuant to this paragraph (b).
Each Share of Series B-3 Preferred Stock shall be convertible at the option of
the holder thereof, at any time and from time to time, into such number of
fully-paid and nonassessable shares of Common Stock as determined by dividing
the Series B-3 Conversion Value by the Series B-3 Conversion Price then in
effect (as appropriately adjusted with this Section 4) (the "Series B-3
Conversion Price").
(i) Series B-1 Conversion Value. The conversion value
for each share of Series B-1 Preferred Stock shall be the Stated Value for the
Series B-1 Preferred Stock.
(ii) Series B-1 Conversion Price. The conversion
price at which shares of Common Stock shall be deliverable upon conversion of
Series B-1 Preferred Stock without the payment of additional consideration by
the holder thereof shall initially be the Stated Value for the Series B-1
Preferred Stock (the "Series B-1 Conversion Price"). Such initial Series B-1
Conversion Price, and the corresponding rate at which shares of Series B-1
Preferred Stock may
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be converted into shares of Common Stock, shall be subject to adjustment as
provided in this Section 4.
(iii) Series B-2 Conversion Value. The conversion
value for each share of Series B-2 Preferred Stock shall be the Stated Value for
the Series B-2 Preferred Stock.
(iv) Series B-2 Conversion Price. The conversion
price at which shares of Common Stock shall be deliverable upon conversion of
Series B-2 Preferred Stock without the payment of additional consideration by
the holder thereof shall initially be the Stated Value for the Series B-2
Preferred Stock (the "Series B-2 Conversion Price"). Such initial Series B-2
Conversion Price, and the corresponding rate at which shares of Series B-2
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided in this Section 4.
(v) Series B-3 Conversion Value. The conversion value for each
share of Series B-3 Preferred Stock shall be the Stated Value for the Series B-3
Preferred Stock.
(vi) Series B-3 Conversion Price. The conversion
price at which shares of Common Stock shall be deliverable upon conversion of
Series B-3 Preferred Stock without the payment of additional consideration by
the holder thereof shall initially be the Stated Value for the Series B-3
Preferred Stock (the "Series B-3 Conversion Price"). Such initial Series B-3
Conversion Price, and the corresponding rate at which shares of Series B-3
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided in this Section 4.
(c) Each share of Series A Preferred Stock shall be
convertible at the option of the holder thereof, at any time and from time to
time, into one share of fully-paid and nonassessable shares of Common Stock (the
number of shares of Common Stock into which one share of Series A Preferred
Stock is convertible shall be referred to herein as the "Series A Conversion
Amount"). No additional consideration shall be paid by a holder of Series A
Preferred Stock upon exercise of its Conversion Rights pursuant to this
paragraph (c).
(d) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series C Preferred Stock, Series B
Preferred Stock or the Series A Preferred Stock. In lieu of any fractional
shares to which a holder of Series C Preferred Stock, Series B Preferred Stock
or Series A Preferred Stock would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by: (i) in the case of the Series C
Preferred Stock, the then effective Series C Conversion Price; (ii) in the case
of the Series B-1 Preferred Stock, the then effective Series B-1 Conversion
Price; (iii) in the case of the Series B-2 Preferred Stock, the then effective
Series B-2 Conversion Price; (iv) in the case of the Series B-3 Preferred Stock,
the then effective Series B-3 Conversion Price; (v) in the case of the Series
A-1 Convertible Preferred Stock, $2.50; and (vi) in the case of the Series A-2
Convertible Preferred Stock, $3.60.
(e) Mechanics of Conversion.
(i) In order for a holder of Series C Preferred Stock, Series
B Preferred Stock or Series A Preferred Stock to convert shares of Series C
Preferred Stock, Series B Preferred
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<PAGE> 15
Stock or Series A Preferred Stock, as the case may be, into shares of Common
Stock, such holder shall surrender the certificate or certificates for such
shares of Series C Preferred Stock, Series B Preferred Stock or Series A
Preferred Stock, as the case may be, at the office of the transfer agent for the
Series C Preferred Stock, Series B Preferred Stock or the Series A Preferred
Stock, as the case may be (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of Series C
Preferred Stock, Series B Preferred Stock or Series A Preferred Stock
represented by such certificate or certificates and stating therein the name or
names the holder desires the certificate or certificates for shares of the
Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. Each date of receipt of such certificates and notice by the
transferring agent (or by the Corporation if the Corporation serves as its own
transfer agent) shall be a conversion date (each, a "Conversion Date"). The
Corporation shall, as soon as practicable after each Conversion Date, issue and
deliver at such office to such holder of Series C Preferred Stock, Series B
Preferred Stock or Series A Preferred Stock, as the case may be, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with cash in lieu of any fraction of a
share in accordance with paragraph (d) above. Such conversion shall be deemed to
have been made immediately prior to the close of business on the applicable
Conversion Date, and the person entitled to receive certificates of Common Stock
on such date shall be regarded for all corporate purposes as the holder of the
number of shares of Common Stock to which he or it is entitled upon the
conversion on such Conversion Date.
(ii) If the conversion of the Series A Preferred Stock is in
connection with a Series A Required Conversion Event (as defined in Section 6),
the conversion may, at the option of any holder tendering shares of Series A
Preferred Stock for conversion, be conditioned upon the closing of the Series A
Required Conversion Event, in which event the person or persons entitled to
receive the Common Stock upon such conversion shall not be deemed to have
converted such shares until immediately prior to the closing of the Series A
Required Conversion Event.
(iii) The Corporation shall, at all times when any of Series C
Preferred Stock, the Series B Preferred Stock or Series A Preferred Stock shall
remain outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Series C
Preferred Stock, Series B Preferred Stock or the Series A Preferred Stock, such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding Series B Preferred
Stock and Series A Preferred Stock.
(iv) All shares of Series C Preferred Stock, Series B
Preferred Stock or Series A Preferred Stock which shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding
and all rights with respect to such shares, shall immediately cease and
terminate on the applicable Conversion Date, except only the right of the
holders thereof to receive shares of Common Stock in exchange therefor. Any
shares of Series C Preferred Stock, Series B Preferred Stock or Series A
Preferred Stock so converted shall be retired and canceled and shall not be
reissued, and the Corporation may from time to time take
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<PAGE> 16
such appropriate action as may be necessary to reduce the authorized Series C
Preferred Stock, Series B Preferred Stock or Series A Preferred Stock, as the
case may be, accordingly.
(f) Adjustments to Series C Conversion Price, Series B-1
Conversion Price, Series B-2 Conversion Price and Series B-3 Conversion Price
for Diluting Issues.
(i) Special Definitions. For purposes of this Section 4(f),
the following definitions shall apply:
(A) "Option" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options to purchase up to an aggregate of
870,570 shares of Common Stock, appropriately adjusted for Recapitalization
Events (the "Initial Option Pool Amount") of Common Stock of the Company, or
such greater number of shares as may be approved by the Compensation Committee
of the Board, issued to employees pursuant to stock option or restricted stock
agreements adopted by the Board and approved by the Compensation Committee of
the Board after the Series C Original Issue Date (such options herein referred
to as "Employee Options").
(B) "Series B-1 Original Issue Date" shall
mean the date on which a share of Series B-1 Preferred Stock was first issued.
(C) "Series B-2 Original Issue Date" shall
mean the date on which a share of Series B-2 Preferred Stock was first issued.
(D) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(E) "Series B-3 Original Issue Date" shall mean the date on
which a share of Series B-3 Preferred Stock was first issued.
(F) "Series C Original Issue Date" shall mean the date on
which a share of Series C Preferred Stock was first issued.
(G) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to subparagraph (iii) below, deemed to be
issued) by the Corporation after the Series C Original Issue Date, Series B-1
Original Issue Date, the Series B-2 Original Issue Date or the Series B-3
Original Issue Date, as the case may be, other than shares of Common Stock
issued or issuable:
(I) upon the conversion of shares
of Series C Preferred Stock, Series B Preferred Stock and Series A Preferred
Stock outstanding;
(II) as a dividend or distribution
on the Series C Preferred Stock or Series B Preferred Stock;
(III) by reason of a dividend,
stock split, split-up or other distribution on shares of Common Stock;
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<PAGE> 17
(IV) upon the exercise of Employee
Options or Options granted on or prior to the Series C Original Issue Date,
Series B-1 Original Issue Date, the Series B-2 Original Issue Date or the Series
B-3 Original Issue Date, as the case may be;
(V) pursuant to equity compensation
plans adopted by the Board and approved by the Compensation Committee of the
Board after the applicable Series C Original Issue Date, Series B-1 Original
Issue Date, the Series B-2 Original Issue Date or the Series B-3 Original Issue
Date, as the case may be; or
(VI) in debt financings approved by
the Board of Directors where the Common Stock equivalents of such securities in
the aggregate does not exceed five (5%) of the Company's Common Stock, on a
fully-diluted basis.
(ii) No Adjustment of Conversion Price. No adjustment in the
number of shares of Common Stock into which the Series C Preferred Stock or
Series B Preferred Stock is convertible shall be made, by adjustment in the
applicable Series C Conversion Price, applicable Series B-1 Conversion Price,
the applicable Series B-2 Conversion Price or the applicable Series B-3
Conversion Price thereof: unless the consideration per share (determined
pursuant to subparagraph (v) below) for an Additional Share of Common Stock
issued or deemed to be issued pursuant to subparagraph (iii) below by the
Corporation is less than the applicable Series C Conversion Price, applicable
Series B-1 Conversion Price, the applicable Series B-2 Conversion Price or the
applicable Series B-3 Conversion Price in effect on the date of, and immediately
prior to, the issuance of such Additional Shares, provided, that if prior to
such issuance, the Corporation receives written notice from the holders of at
least sixty percent (60%) of the then outstanding shares of Series C Preferred
Stock, or at least a majority of the Series B-1 Preferred Stock, Series B-2
Preferred Stock or Series B-3 Preferred Stock, as the case may be, agreeing that
no such adjustment shall be made as the result of the issuance of such
Additional Shares of Common Stock, then no such adjustments shall be made to
such series.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. If the Corporation at any time or from time to time after the
applicable Series C Original Issue Date, Series B-1 Original Issue Date, the
Series B-2 Original Issue Date or Series B-3 Original Issue Date, as the case
may be, shall issue any Options or Convertible Securities, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issuance, provided that Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to subparagraph (v) below) of such
Additional Shares of Common Stock would be less than the Series C Conversion
Price, Series B-1 Conversion Price, the Series B-2 Conversion Price or Series
B-3 Conversion Price, as the case may be, in effect on the date of and
immediately prior to such issuance, and provided further that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Series C Conversion Price,
Series B-1 Conversion Price, the Series B-2 Conversion Price or the Series B-3
Conversion
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<PAGE> 18
Price, respectively, shall be made upon the subsequent issuance of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the conversion price computed upon the original issuance
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(C) No readjustment pursuant to clause (B)
above shall have the effect of increasing the Series C Conversion Price, Series
B-1 Conversion Price, the Series B-2 Conversion Price or the Series B-3
Conversion Price, respectively, to an amount which exceeds the Series C
Conversion Price, Series B-1 Conversion Price, the Series B-2 Conversion Price
or the Series B-3 Conversion Price, respectively, on the original adjustment
date; and
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
any Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Series C Conversion
Price, the Series B-1 Conversion Price, the Series B-2 Conversion Price or the
Series B-3 Conversion Price, respectively, then in effect shall forthwith be
readjusted to such Series C Conversion Price, Series B-1 Conversion Price the
Series B-2 Conversion Price or the Series B-3 Conversion Price, respectively, as
would have obtained had the adjustment which was made upon the issuance of such
Option or Convertible Security not exercised or converted prior to such change
been made upon the basis of such change, but no further adjustment shall be made
for the actual issuance of Common Stock upon the exercise or conversion of any
such Option or Convertible Security.
(E) Upon the expiration of any such Options
or any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Series C Conversion Price, the Series B-1
Conversion Price, the Series B-2 Conversion Price or the Series B-3 Conversion
Price computed upon the Series C Original Issue Date, the Series B-1 Original
Issue Date, the Series B-2 Original Issue Date or the Series B-3 Original Issue
Date, respectively (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(1) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Company upon such exercise; or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company upon such
conversion or exchange; and
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<PAGE> 19
(2) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Company for the issue of all such Options, whether or not exercised, plus
the consideration deemed to have been received by the Company upon the issue of
the Convertible Securities with respect to which such Options were actually
exercised.
(iv) Adjustment of Series C Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall at any
time after the Series C Original Issue Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to subparagraph (iii) above, but excluding shares issued as a dividend or
distribution as provided in paragraph (h) below or upon a stock split or
combination as provided in paragraph (g) below), for a consideration per share
(determined pursuant to subparagraph (viii) below) less than the Series C
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in each such case, such Series C Conversion Price shall be
reduced, concurrently with such issuance, to a Series C Conversion Price equal
to the price (calculated to the nearest cent) determined by multiplying such
Series C Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options), plus the number of shares of Common
Stock which the aggregate consideration received by the Corporation (as
determined pursuant to subparagraph (viii) below) for the total number of shares
of Common Stock so issued would purchase at the Series C Conversion Price in
effect immediately prior to such issuance, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options) plus the number of shares so issued.
No adjustment of the Series C Conversion Price,
however, shall be made in an amount less than $.01 per share, and any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.01 per share or more. Any adjustments to
the Series C Conversion Price shall be rounded to the nearest $.01 per share.
(v) Adjustment of Series B-1 Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall at any
time after the Series B-1 Original Issue Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to subparagraph (iii) above, but excluding shares issued as a dividend or
distribution as provided in paragraph (h) below or upon a stock split or
combination as provided in paragraph (g) below), for a consideration per share
(determined pursuant to subparagraph (viii) below) less than the Series B-1
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in each such case, such Series B-1 Conversion Price shall be
reduced, concurrently with such issuance, to a Series B-1 Conversion
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<PAGE> 20
Price equal to the price (calculated to the nearest cent) determined by
multiplying such Series B-1 Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance (together with the number of shares of Common Stock then
issuable upon conversion of the outstanding shares of Series C Preferred Stock,
Series B Preferred Stock and the Series A Preferred Stock and the conversion or
exercise of any Convertible Securities or Options), plus the number of shares of
Common Stock which the aggregate consideration received by the Corporation (as
determined pursuant to subparagraph (viii) below) for the total number of shares
of Common Stock so issued would purchase at the Series B-1 Conversion Price in
effect immediately prior to such issuance, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options) plus the number of shares so issued.
No adjustment of the Series B-1 Conversion Price,
however, shall be made in an amount less than $.01 per share, and any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.01 per share or more. Any adjustments to
the Series B-1 Conversion Price shall be rounded to the nearest $.01 per share.
(vi) Adjustment of Series B-2 Conversion Price Upon Issuance
of Additional Shares of Common Stock. In the event the Corporation shall at any
time after the Series B-2 Original Issue Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to subparagraph (iii) above, but excluding shares issued as a dividend or
distribution as provided in paragraph (h) below or upon a stock split or
combination as provided in paragraph (g) below), for a consideration per share
(determined pursuant to subparagraph (viii) below) less than the Series B-2
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in each such case, such Series B-2 Conversion Price shall be
reduced, concurrently with such issuance, to a Series B-2 Conversion Price equal
to the price (calculated to the nearest cent) determined by multiplying such
Series B-2 Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options), plus the number of shares of Common
Stock which the aggregate consideration received by the Corporation (as
determined pursuant to subparagraph (viii) below) for the total number of shares
of Common Stock so issued would purchase at the Series B-2 Conversion Price in
effect immediately prior to such issuance, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options) plus the number of shares so issued.
No adjustment of the Series B-2 Conversion Price, however, shall be
made in an amount less than $.01 per share, and any such lesser adjustment shall
be carried forward and shall be
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<PAGE> 21
made at the time and together with the next subsequent adjustment which together
with any adjustments so carried forward shall amount to $.01 per share or more.
Any adjustments to the Series B-2 Conversion Price shall be rounded to the
nearest $.01 per share.
(vii) Adjustment of Series B-3 Conversion Price Upon Issuance
of Additional Shares of Common Stock. In the event the Corporation shall at any
time after the Series B-3 Original Issue Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued pursuant
to subparagraph (iii) above, but excluding shares issued as a dividend or
distribution as provided in paragraph (h) below or upon a stock split or
combination as provided in paragraph (g) below), for a consideration per share
(determined pursuant to subparagraph (viii) below) less than the Series B-3
Conversion Price in effect on the date of and immediately prior to such
issuance, then and in each such case, such Series B-3 Conversion Price shall be
reduced, concurrently with such issuance, to a Series B-1 Conversion Price equal
to the price (calculated to the nearest cent) determined by multiplying such
Series B-3 Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
(together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options), plus the number of shares of Common
Stock which the aggregate consideration received by the Corporation (as
determined pursuant to subparagraph (viii) below) for the total number of shares
of Common Stock so issued would purchase at the Series B-3 Conversion Price in
effect immediately prior to such issuance, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (together with the number of shares of Common Stock then issuable upon
conversion of the outstanding shares of Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock and the conversion or exercise
of any Convertible Securities or Options) plus the number of shares so issued.
No adjustment of the Series B-3 Conversion Price,
however, shall be made in an amount less than $.01 per share, and any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.01 per share or more. Any adjustments to
the Series B-3 Conversion Price shall be rounded to the nearest $.01 per share.
(viii) Determination of Consideration. For purposes of this
Section 4(f), the consideration received by the Corporation for the issuance of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash,
be computed at the aggregate of cash received by the Corporation, excluding
amounts paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of
property other than cash, be computed at the fair market value thereof at the
time of such issuance, as is reasonably determined in good faith by the Board;
and
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<PAGE> 22
(III) in the event Additional Shares
of Common Stock are issued together with other shares of securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (I) and (II)
above, as is reasonably determined in good faith by the Board.
(B) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to subparagraph (iii) above,
relating to Options and Convertible Securities, shall be determined by dividing:
(I) the total amount, if any,
received or receivable by the Corporation as consideration for the issuance of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(II) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(g) Adjustment for Stock Splits and Combinations.
(i) If the Corporation shall at any time or from time to time
after the Series C Original Issue Date for the Series C Preferred Stock effect a
subdivision of the outstanding Common Stock, the Series C Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
Series C Original Issue Date for the Series C Preferred Stock combine the
outstanding shares of Common Stock, the Series C Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(ii) If the Corporation shall at any time or from time to time
after the Series B-1 Original Issue Date for the Series B-1 Preferred Stock
effect a subdivision of the outstanding Common Stock, the Series B-1 Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Series B-1 Original Issue Date for the Series B-1 Preferred Stock
combine the outstanding shares of Common Stock, the Series B-1 Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
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(iii) If the Corporation shall at any time or from time to
time after the Series B-2 Original Issue Date for the Series B-2 Preferred Stock
effect a subdivision of the outstanding Common Stock, the Series B-2 Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Series B-2 Original Issue Date for the Series B-2 Preferred Stock
combine the outstanding shares of Common Stock, the Series B-2 Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(iv) If the Corporation shall at any time or from time to time
after the Series B-3 Original Issue Date for the Series B-3 Preferred Stock
effect a subdivision of the outstanding Common Stock, the Series B-3 Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Series B-3 Original Issue Date for the Series B-3 Preferred Stock
combine the outstanding shares of Common Stock, the Series B-3 Conversion Price
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(v) If the Corporation shall at any time or from time to time
after any Series A Original Issue Date for the Series A Preferred Stock effect a
subdivision of the outstanding Common Stock, the Series A Conversion Amount then
in effect immediately before that subdivision shall be proportionately
increased. If the Corporation shall at any time or from time to time after any
Series A Original Issue Date for the Series A Preferred Stock combine the
outstanding shares of Common Stock, the Series A Conversion Amount then in
effect immediately before the combination shall be proportionately decreased.
Any adjustment under this paragraph shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(h) Adjustment for Certain Dividends and Distributions.
(i) In the event the Corporation at any time after the Series
C Original Issue Date for the Series C Preferred Stock, shall make or issue, or
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Series C Conversion Price for the Series
C Preferred Stock then in effect shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Series C Conversion
Price for the Series C Preferred Stock then in effect by a fraction:
(A) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the
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<PAGE> 24
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, if such
record date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series C
Conversion Price for the Series C Preferred Stock shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series C Conversion Price for the Series C Preferred Stock shall be adjusted
pursuant to this paragraph as of the time of actual payment of such dividends or
distributions.
(ii) In the event the Corporation at any time after the Series
B-1 Original Issue Date for the Series B-1 Preferred Stock, shall make or issue,
or fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of
Common Stock, then and in each such event the Series B-1 Conversion Price for
the Series B-1 Preferred Stock then in effect shall be decreased as of the time
of such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date, by multiplying the Series B-1
Conversion Price for the Series B-1 Preferred Stock then in effect by a
fraction:
(A) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series B-1 Conversion Price for the Series B-1
Preferred Stock shall be recomputed accordingly as of the close of business on
such record date and thereafter the Series B-1 Conversion Price for the Series
B-1 Preferred Stock shall be adjusted pursuant to this paragraph as of the time
of actual payment of such dividends or distributions.
(iii) In the event the Corporation at any time after, the
Series B-2 Original Issue Date for the Series B-2 Preferred Stock, shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the Series B-2 Conversion
Price for the Series B-2 Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Series B-2 Conversion Price for the Series B-2 Preferred Stock then in effect by
a fraction:
(A) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in
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payment of such dividend or distribution; provided, however, if such record date
shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Series B-2
Conversion Price for the Series B-2 Preferred Stock shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series B-2 Conversion Price for the Series B-2 Preferred Stock shall be adjusted
pursuant to this paragraph as of the time of actual payment of such dividends or
distributions.
(iv) In the event the Corporation at any time, or from time
after the Series B-3 Original Issue Date for the Series B-3 Preferred Stock,
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series B-3
Conversion Price for the Series B-3 Preferred Stock then in effect shall be
decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Series B-3 Conversion Price for the Series B-3 Preferred Stock
then in effect by a fraction:
(A) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date, and
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series B-3 Conversion Price for the Series B-3
Preferred Stock shall be recomputed accordingly as of the close of business on
such record date and thereafter the Series B-3 Conversion Price for the Series
B-3 Preferred Stock shall be adjusted pursuant to this paragraph as of the time
of actual payment of such dividends or distributions.
(v) In the event the Corporation at any time, or from time
after any Series A Original Issue Date for the Series A Preferred Stock, shall
make or issue, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Series A
Conversion Amount for the Series A Preferred Stock then in effect shall be
increased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, to the
amount equal to the fraction:
(A) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Series A Conversion Amount for the Series A Preferred Stock shall
be recomputed accordingly as of the close of business on such record date and
thereafter the Series A Conversion Amount for the Series A Preferred Stock shall
be adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions, and
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<PAGE> 26
(B) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date.
(i) Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time after (i) the Series C
Original Issue Date for the Series C Preferred Stock (ii) the Series B-1
Original Issue Date for the Series B-1 Preferred Stock (iii) the Series B-2
Original Issue Date for the Series B-2 Preferred Stock (iv) the Series B-3
Original Issue Date for the Series B-3 Preferred Stock, or (v) any Series A
Original Issue Date for the Series A Preferred Stock, shall make or issue, or
fix a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of the Series C Preferred Stock,
Series B-1 Preferred Stock, Series B-2 Preferred Stock, Series B-3 Preferred
Stock, or Series A Preferred Stock, as the case may be, shall receive upon
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Corporation that they
would have received had their Series C Preferred Stock, Series B-1 Preferred
Stock, Series B-2 Preferred Stock, Series B-3 Preferred Stock, or Series A
Preferred Stock, as the case may be, been converted into Common Stock on the
date of such event and had thereafter, during the period from the date of such
event to and including the conversion date, retained such securities receivable
by them as aforesaid during such period giving application to all adjustments
called for during such period, under this paragraph with respect to the rights
of the holders of the Series C Preferred Stock, Series B-1 Preferred Stock,
Series B-2 Preferred Stock, Series B-3 Preferred Stock or Series A Preferred
Stock, as the case may be.
(j) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of the Series C
Preferred Stock, Series B Preferred Stock or Series A Preferred Stock, as the
case may be, shall be changed into the same or a different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
of stock dividend provided for above, or a reorganization, merger,
consolidation, or sale of assets provided for below), then and in each such
event the holder of each such share of Series C Preferred Stock, Series B
Preferred Stock or Series A Preferred Stock, as the case may be, shall have the
right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification, or other change, by holders of the number of shares of Common
Stock into which such shares of Series C Preferred Stock, Series B Preferred
Stock or Series A Preferred Stock, as the case may be, might have been converted
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
(k) Adjustment for Merger or Reorganization. In case of any
consolidation or merger of the Corporation with or into another corporation,
each share of Series C Preferred Stock, Series B Preferred Stock or Series A
Preferred Stock, as the case may be, shall thereafter be convertible into the
kind and amount of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of such Series C Preferred Stock, Series B Preferred Stock or
Series A Preferred Stock, as the case may be, would have been entitled if it had
converted its shares immediately
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<PAGE> 27
prior to such consolidation or merger; and, in such case, appropriate adjustment
(as determined in good faith by the Board) shall be made in the application of
the provisions in this Section 4 set forth with respect to the rights and
interest thereafter of the holders of the Series C Preferred Stock, Series B
Preferred Stock or Series A Preferred Stock, as the case may be, to the end that
the provisions set forth in this Section 4 (including provisions with respect to
changes in and other adjustments of the Series C Conversion Price, Series B
Conversion Price and the Series A Conversion Amount) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of the Series C
Preferred Stock, Series B Preferred Stock or Series A Preferred Stock, as the
case may be.
(l) Adjustment of Common Stock Issuable Upon Conversion of
Series C Preferred Stock Upon Public Offering. In connection with a firm
commitment underwritten public offering of Common Stock pursuant to an effective
registration statement under the Securities Act and in the event that sixty
percent (60%) of the holders of the Series C Preferred Stock vote or consent to
modify the definition of "Series C Qualified Public Offering" set forth in
paragraph (e) of Section 1 or waive the Series C Qualified Public Offering
requirement for mandatory conversion of Series C Preferred Stock set forth in
Section 5A herein and the per share offering price to the public is below
$17.94, subject to Recapitalization Events, then immediately prior to the
conversion required by Section 5A herein, the number of shares of Common Stock
otherwise issuable upon the conversion of the Series C Preferred Stock shall be
increased by multiplying such number of shares of Common Stock by a fraction,
the numerator of which shall be $17.94 and the denominator of which shall be the
per share offering price of the Common Stock sold to the public.
(m) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the respective Conversion Rights of the holders
of the Series C Preferred Stock, Series B Preferred Stock and Series A Preferred
Stock against impairment.
(n) Notice of Record Date. In the event:
(i) that the Corporation shall propose to declare a
dividend (or any other distribution) on its Common Stock, whether payable in
cash, property, Common Stock or other securities of the Corporation, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) that the Corporation shall propose to subdivide
or combine its outstanding shares of Common Stock;
(iii) that the Corporation shall propose to effect
any reclassification or recapitalization of the Common Stock of the Corporation
outstanding (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock
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<PAGE> 28
distribution thereon), or of any consolidation or merger of the Corporation into
or with another corporation; or
(iv) of the Liquidation of the Corporation;
then in connection with each such event, the Corporation shall cause to be filed
at its principal office or at the office of the transfer agent of the Series C
Preferred Stock, Series B Preferred Stock and the Series A Preferred Stock, and
shall cause to be mailed to each of the holders of the Series C Preferred Stock,
Series B Preferred Stock and Series A Preferred Stock at their last addresses as
shown on the records of the Corporation or such transfer agent, at least ten
(10) days prior to the record date specified in (A) below or at least twenty
(20) days before the date specified in (B) below, a notice stating:
(A) the record date of such dividend,
distribution, subdivision or combination, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, or Liquidation is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, or
Liquidation.
(o) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 4, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of Series C Preferred Stock,
Series B Preferred Stock or Series A Preferred Stock, as the case may be, a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series C Preferred
Stock, Series B Preferred Stock or Series A Preferred Stock, as the case may be,
furnish or cause to be furnished to such holder a similar certificate setting
forth (i) such adjustments and readjustments; (ii) Series C Conversion Price,
the Series B-1 Conversion Price, the Series B-2 Conversion Price, Series B-3
Conversion Price, or Series A Conversion Amount, as the case may be, then in
effect; and (iii) the number of shares of Common Stock and the amount, if any,
of other property which then would be received upon the conversion of Series C
Preferred Stock, Series B-1 Preferred Stock, Series B-2 Preferred Stock, Series
B-3 Preferred Stock or Series A Preferred Stock, as the case may be.
(p) Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series C Preferred Stock, Series B
Preferred Stock and Series A Preferred Stock as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Series C Preferred Stock, Series B Preferred Stock and
Series A Preferred Stock. The Corporation covenants that all shares of Common
Stock which shall be so issued shall be duly and validly issued and fully paid
and nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality
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<PAGE> 29
of the foregoing, the Corporation covenants that it will from time to time take
all such action as may be requisite to assure that the par value per share of
the Common Stock is at all times equal to or less than the Series C Conversion
Price, Series B-1 Conversion Price, the Series B-2 Conversion Price or the
Series B-3 Conversion Price, respectively, in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Series C Conversion Price, Series
B-1 Conversion Price, the Series B-2 Conversion Price or the Series B-3
Conversion Price, or the Series A Conversion Amount if the total number of
shares of Common Stock issued and issuable after such action upon conversion of
the Series C Preferred Stock, Series B-1 Preferred Stock, Series B-2 Preferred
Stock, Series B-3 Preferred Stock or Series A Preferred Stock, as the case may
be, would exceed the total number of shares of Common Stock then authorized by
this Restated Certificate of Incorporation.
(q) Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of the Series C Preferred Stock, Series B-1
Preferred Stock, Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series
A Preferred Stock, or Series A-2 Preferred Stock, as the case may be, shall be
made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series C Preferred Stock, Series B Preferred Stock or Series A Preferred Stock
which is being converted.
Section 5A. Conversion at a Series C Qualified Public Offering.
(a) Upon the Closing of a Series C Qualified Public Offering,
all of the Series C Preferred Stock then outstanding shall automatically be
converted into shares of Common Stock in accordance with Section 4.
(b) On the date fixed for conversion in accordance with
paragraph (a) of this Section 5A, all rights with respect to the Series C
Preferred Stock so converted will terminate. If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the date of such
conversion and the surrender of the certificate or certificates for Series C
Preferred Stock, the Corporation shall cause to be issued and delivered to such
holder, or on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in accordance
with the provisions hereof and cash as provided in Section 4(d) in respect of
any fraction of a share of Common Stock otherwise issuable upon such conversion.
Upon any such conversion, no adjustment to the Conversion Price shall be made
for any accrued and unpaid dividends on the Series C Preferred Stock converted.
(c) All certificates evidencing shares of Series C Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been
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<PAGE> 30
retired and canceled and the shares of Series C Preferred Stock represented
thereby converted into Common Stock for all purposes as of the date of
conversion set forth in paragraph (a) above, notwithstanding the failure of the
holder or holders thereof to surrender such certificates.
Section 5B. Conversion Upon Failure to Obtain Certain Share Thresholds.
(a) In the event that less than twenty percent of the Series C
Preferred Stock outstanding on the Series C Original Issue Date remains
outstanding at a subsequent date, then upon such subsequent date, each share of
Series C Preferred Stock outstanding on such subsequent date shall automatically
be converted into shares of Common Stock in accordance with Section 4 and all
rights with respect to the Series C Preferred Stock so converted shall
terminate.
(b) In the event that all of the holders of Series B-2 Preferred Stock
shall elect to convert their shares into shares of Common Stock in accordance
with Section 4 herein, then all shares of Series B-3 Preferred Stock shall
convert into shares of Common Stock in accordance with Section 4 herein and all
rights with respect to the Series B-2 Preferred Stock and Series B-3 Preferred
Stock shall terminate.
Section 5C. Conversion at a Series B Qualified Public Offering.
(a) Upon the Closing of a Series B Qualified Public Offering,
all of the Series B Preferred Stock then outstanding shall automatically be
converted into shares of Common Stock in accordance with Section 4.
(b) On the date fixed for conversion in accordance with
paragraph (a) of this Section 5C, all rights with respect to the Series B
Preferred Stock so converted will terminate. If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the date of such
conversion and the surrender of the certificate or certificates for Series B
Preferred Stock, the Corporation shall cause to be issued and delivered to such
holder, or on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in accordance
with the provisions hereof and cash as provided in Section 4(d) in respect of
any fraction of a share of Common Stock otherwise issuable upon such conversion.
Upon any such conversion, no adjustment to the Conversion Price shall be made
for any accrued and unpaid dividends on the Series B Preferred Stock converted.
(c) All certificates evidencing shares of Series B Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and canceled and the
shares of Series B Preferred Stock represented thereby converted into Common
Stock for all purposes as of the date of conversion set forth in paragraph (a)
above, notwithstanding the failure of the holder or holders thereof to surrender
such certificates.
Section 6. Conversion at a Series A Required Conversion Event.
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Each share of Series A Preferred Stock shall be converted
automatically into one (1) share of Common Stock upon the earlier to occur of
each of the following events (each, a "Series A Required Conversion Event"):
(i) immediately upon the closing of a Series A Qualified
Public Offering; and
(ii) immediately upon the closing of the acquisition of a
majority of the then outstanding shares of the Common Stock by the holders of a
majority of the then outstanding shares of the Series A Preferred Stock.
Section 7A. Mandatory Redemption of Series C Preferred Stock and Series
B Preferred Stock.
(a) The Corporation's redemption of the shares of Series B-1
Preferred Stock, the shares of Series B-2 Preferred Stock, the shares of Series
B-3 Preferred Stock and the shares of Series C Preferred Stock shall be pari
passu and the Series B-1 Preferred Stock, Series B-2 Preferred Stock, Series B-3
Preferred Stock and Series C Preferred Stock shall be equal in priority.
(b) At any time on or after the fifth anniversary of the
Series C Original Issue Date, the Corporation shall be required to redeem all of
the shares of Series C Preferred Stock out of funds legally available therefor
upon the request of the majority of the holders of the Series C Preferred Stock.
(c) The redemption price shall be paid by the Corporation in
cash and shall be in an amount equal to (i) $10.25 per share of Series C
Preferred Stock (subject to appropriate adjustment for any Recapitalization
Events), plus (ii) an amount equal to all declared and unpaid dividends on such
share since the Series C Original Issue Date thereof as of such time of
determination, whether or not there are any unrestricted funds of the
Corporation legally available for the payment of dividends (the "Redemption
Price for the Series C Preferred Stock").
(d) The Corporation shall provide each holder of Series C
Preferred Stock with a written notice of redemption (addressed to the holder at
its address as it appears on the stock transfer books of the Corporation), not
earlier than sixty (60) nor later than twenty (20) days before the date fixed
for redemption. The notice of redemption shall specify (i) the class or part of
the class of shares to be redeemed; (ii) the date fixed for redemption; (iii)
the Redemption Price for the Series C Preferred Stock; and (iv) the place the
holders of Series C Preferred Stock may obtain payment of the Redemption Price
for the Series C Preferred Stock upon surrender of their certificates. If funds
are available on the date fixed for redemption, then whether or not shares are
surrendered for payment of the Redemption Price for the Series C Preferred
Stock, the shares shall no longer be outstanding and the holders thereof shall
cease to be shareholders of the Corporation with respect to the shares redeemed
on and after the date fixed for redemption and shall be entitled to receive the
Redemption Price for the Series C Preferred Stock without interest upon the
surrender of the share certificate. If less than all the shares represented by a
share certificate are to be redeemed, the Corporation shall issue a new share
certificate for the shares not redeemed.
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(e) If on the date fixed for redemption, funds of the
Corporation legally available therefor shall be insufficient to redeem all the
shares of Series C Preferred Stock required to be redeemed as provided herein,
funds to the extent legally available shall be used for such purpose and the
Corporation shall effect such redemption pro rata according to the number of
shares of Series C Preferred Stock held by each holder subject to the redemption
(a "Partial Redemption for the Series C Preferred Stock"). The Corporation shall
make additional Partial Redemptions for the Series C Preferred Stock to the
extent that funds are legally available therefor beginning thirty (30) days
after the Redemption Date and each thirty (30) days thereafter until all
outstanding shares of Series C Preferred Stock have been redeemed.
(f) The Corporation shall be required to redeem all of the
shares of Series B Preferred Stock upon the occurrence of and simultaneously
with the redemption of all outstanding shares of Series C Preferred Stock.
(g) The redemption price for the Series B-1 Preferred Stock
shall be paid by the Corporation in cash and shall be in an amount equal to (i)
$6.20 per share of Series B-1 Preferred Stock (subject to appropriate adjustment
for any Recapitalization Events), plus (ii) an amount equal to all declared and
unpaid dividends on such share since the Series B-1 Original Issue Date thereof
as of such time of determination, whether or not there are any unrestricted
funds of the Corporation legally available for the payment of dividends (the
"Redemption Price for the Series B-1 Preferred Stock").
(h) The Corporation shall provide each holder of Series B-1
Preferred Stock with a written notice of redemption (addressed to the holder at
its address as it appears on the stock transfer books of the Corporation), not
earlier than sixty (60) nor later than twenty (20) days before the date fixed
for redemption. The notice of redemption shall specify (i) the class or part of
the class of shares to be redeemed; (ii) the date fixed for redemption; (iii)
the Redemption Price for the Series B-1 Preferred Stock; and (iv) the place the
holders of Series B-1 Preferred Stock may obtain payment of the Redemption Price
for the Series B-1 Preferred Stock upon surrender of their certificates. If
funds are available on the date fixed for redemption, then whether or not shares
are surrendered for payment of the Redemption Price for the Series B-1 Preferred
Stock, the shares shall no longer be outstanding and the holders thereof shall
cease to be shareholders of the Corporation with respect to the shares redeemed
on and after the date fixed for redemption and shall be entitled to receive the
Redemption Price for the Series B-1 Preferred Stock without interest upon the
surrender of the share certificate. If less than all the shares represented by a
share certificate are to be redeemed, the Corporation shall issue a new share
certificate for the shares not redeemed.
(i) If on the date fixed for redemption funds of the
Corporation legally available therefor shall be insufficient to redeem all the
shares of Series B-1 Preferred Stock required to be redeemed as provided herein,
funds to the extent legally available shall be used for such purpose and the
Corporation shall effect such redemption pro rata according to the number of
shares of Series B-1 Preferred Stock held by each holder subject to the
redemption (a "Partial Redemption for the Series B-1 Preferred Stock"). The
Corporation shall make additional Partial Redemptions for the Series B-1
Preferred Stock to the extent that funds are legally available therefor
beginning thirty (30) days after the Redemption Date and each thirty (30) days
thereafter until all outstanding shares of Series B-1 Preferred Stock have been
redeemed.
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(j) The redemption price for the Series B-2 Preferred Stock
shall be paid by the Corporation in cash and shall be in an amount equal to (i)
$7.44 per share of Series B-2 Preferred Stock (subject to appropriate adjustment
for any Recapitalization Events), plus (ii) an amount equal to all declared and
unpaid dividends on such share since the Series B-2 Original Issue Date thereof
as of such time of determination, whether or not there are any unrestricted
funds of the Corporation legally available for the payment of dividends (the
"Redemption Price for the Series B-2 Preferred Stock for the Series B-2
Preferred Stock").
(k) The Corporation shall provide each holder of Series B-2
Preferred Stock with a written notice of redemption (addressed to the holder at
its address as it appears on the stock transfer books of the Corporation), not
earlier than sixty (60) nor later than twenty (20) days before the date fixed
for redemption. The notice of redemption shall specify (i) the class or part of
the class of shares to be redeemed; (ii) the date fixed for redemption; (iii)
the Redemption Price for the Series B-2 Preferred Stock; and (iv) the place the
holders of Series B-2 Preferred Stock may obtain payment of the Redemption Price
for the Series B-2 Preferred Stock upon surrender of their certificates. If
funds are available on the date fixed for redemption, then whether or not shares
are surrendered for payment of the Redemption Price for the Series B-2 Preferred
Stock, the shares shall no longer be outstanding and the holders thereof shall
cease to be shareholders of the Corporation with respect to the shares redeemed
on and after the date fixed for redemption and shall be entitled to receive the
Redemption Price for the Series B-2 Preferred Stock without interest upon the
surrender of the share certificate. If less than all the shares represented by a
share certificate are to be redeemed, the Corporation shall issue a new share
certificate for the shares not redeemed.
(l) If on the date fixed for redemption funds of the
Corporation legally available therefor shall be insufficient to redeem all the
shares of Series B-2 Preferred Stock required to be redeemed as provided herein,
funds to the extent legally available shall be used for such purpose and the
Corporation shall effect such redemption pro rata according to the number of
shares of Series B-2 Preferred Stock held by each holder subject to the
redemption (a "Partial Redemption for the Series B-2 Preferred Stock"). The
Corporation shall make additional Partial Redemptions for the Series B-2
Preferred Stock to the extent that funds are legally available therefor
beginning thirty (30) days after the Redemption Date and each thirty (30) days
thereafter until all outstanding shares of Series B-2 Preferred Stock have been
redeemed.
(m) The redemption price for the Series B-3 Preferred Stock
shall be paid by the Corporation in cash and shall be in an amount equal to (i)
$30.37 per share of Series B-3 Preferred Stock (subject to appropriate
adjustment for any Recapitalization Events), plus (ii) an amount equal to all
declared and unpaid dividends on such share since the Series B-3 Original Issue
Date thereof as of such time of determination, whether or not there are any
unrestricted funds of the Corporation legally available for the payment of
dividends (the "Redemption Price for the Series B-3 Preferred Stock").
(n) The Corporation shall provide each holder of Series B-3
Preferred Stock with a written notice of redemption (addressed to the holder at
its address as it appears on the stock transfer books of the Corporation), not
earlier than sixty (60) nor later than twenty (20) days before the date fixed
for redemption. The notice of redemption shall specify (i) the class or part of
the class of shares to be redeemed; (ii) the date fixed for redemption; (iii)
the Redemption
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Price for the Series B-3 Preferred Stock; and (iv) the place the holders of
Series B-3 Preferred Stock may obtain payment of the Redemption Price for the
Series B-3 Preferred Stock upon surrender of their certificates. If funds are
available on the date fixed for redemption, then whether or not shares are
surrendered for payment of the Redemption Price for the Series B-3 Preferred
Stock, the shares shall no longer be outstanding and the holders thereof shall
cease to be shareholders of the Corporation with respect to the shares redeemed
on and after the date fixed for redemption and shall be entitled to receive the
Redemption Price for the Series B-3 Preferred Stock without interest upon the
surrender of the share certificate. If less than all the shares represented by a
share certificate are to be redeemed, the Corporation shall issue a new share
certificate for the shares not redeemed.
(o) If on the date fixed for redemption, funds of the
Corporation legally available therefor shall be insufficient to redeem all the
shares of Series B-3 Preferred Stock required to be redeemed as provided herein,
funds to the extent legally available shall be used for such purpose and the
Corporation shall effect such redemption pro rata according to the number of
shares of Series B-3 Preferred Stock held by each holder subject to the
redemption (a "Partial Redemption for the Series B-3 Preferred Stock"). The
Corporation shall make additional Partial Redemptions for the Series B-3
Preferred Stock to the extent that funds are legally available therefor
beginning thirty (30) days after the Redemption Date and each thirty (30) days
thereafter until all outstanding shares of Series B-3 Preferred Stock have been
redeemed.
Section 7B. Pro Rata Redemption of Series C Preferred Stock and Series
B Preferred Stock.
Notwithstanding the provisions contained in Section 7A, if on the date
fixed for redemption, funds of the Corporation legally available therefor shall
be insufficient to redeem all of the Series C Preferred Stock, the Series B-1
Preferred Stock, the Series B-2 Preferred Stock, and the Series B-3 Preferred
Stock, as the case may be, as provided herein, funds to the extent legally
available shall be used for such purpose and the Corporation shall effect such
redemption pro rata according to the aggregate number of shares of Series C
Preferred Stock, Series B-1 Preferred Stock, Series B-2 Preferred Stock and
Series B-3 Preferred Stock, as the case may be, held by such holders. The
Corporation shall make additional redemptions pursuant to this Section 7B to the
extent that funds are legally available therefor beginning thirty (30) days
after the Redemption Date for the Series C Preferred Stock, the Series B-1
Preferred Stock, the Series B-2 Preferred Stock, and the Series B-3 Preferred
Stock, as the case may be, and each thirty (30) days thereafter until all
outstanding shares of Series C Preferred Stock, Series B-1 Preferred Stock,
Series B-2 Preferred Stock, Series B-3 Preferred Stock have been redeemed.
C. Upon the effectiveness of this Restated Certificate of
Incorporation, every share of Common Stock outstanding or held by the
Corporation in its treasury shall be changed and reclassified into four shares
of Common Stock, $0.001 par value per share, which shares shall be fully paid
and nonassessable shares of Common Stock of the Corporation.
FIFTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation shall have the power to
adopt, alter, amend or repeal the Bylaws of the Corporation and to fix the
amount to be reserved as working capital of the Corporation.
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SIXTH. The stockholders and directors shall have the power to hold
their respective meetings and keep the books, documents and papers of the
Corporation within or outside the State of Delaware and at such place or places
as may be from time to time designated by the Bylaws or by resolution of the
stockholders or directors, except as otherwise required by the laws of the State
of Delaware. Elections of directors need not be by written ballot except and to
the extent provided in the Bylaws of the Corporation.
SEVENTH. The objects, purposes and powers specified in any clause or
paragraph of this Amended and Restated Certificate of Incorporation shall be in
no way limited or restricted by reference to or inference from the terms of any
other clause or paragraph of this Amended and Restated Certificate of
Incorporation. The objects, purposes and powers in each of the clauses and
paragraphs of this Amended and Restated Certificate of Incorporation shall be
regarded as independent objects, purposes and powers. The objects, purposes and
powers specified in this Amended and Restated Certificate of Incorporation are
in furtherance and not in limitation of the objects, purposes and powers
conferred by statute.
EIGHTH. The Corporation shall have the power to indemnify its officers,
directors, employees and agents, and such other persons as may be designated as
set forth in the Bylaws (the "Indemnitee"), to the full extent permitted by the
Delaware General Corporation Law ("DGCL") from and against any and all of the
expenses, liabilities or other matters referred to in or covered by the Bylaws
or the DGCL, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation shall pay in advance of the final disposition of such Indemnitee
upon the receipt of an undertaking by or on behalf of such Indemnitee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this ARTICLE EIGHTH. A director
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duties as a director, provided that the
liability of a director (i) for any breach of the director's loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit shall not be eliminated or limited hereby.
Any repeal or modification of this ARTICLE EIGHTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification with respect
to acts or omissions occurring prior to such repeal or modification.
NINTH. The Corporation shall have perpetual existence.
TENTH. The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this Amended
and Restated Certificate of Incorporation (including provisions as may hereafter
be added or inserted in this Amended and Restated Certificate of Incorporation
as authorized by the laws of the State of Delaware) in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
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whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Amended and Restated Certificate of
Incorporation in its present form or as hereafter amended are granted subject to
the right reserved in this ARTICLE TENTH.
ELEVENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or stockholder thereof or on the application of any
receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the DGCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title I of the DGCL order a meeting of the
creditors or class of stockholders of the Corporation, as the case may be, to be
summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all of the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
TWELFTH. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against such expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the DGCL.
THIRTEENTH. The Amended and Restated Certificate of Incorporation of
the Corporation as herein amended shall constitute a restatement of and shall
supersede the Restated Certificate of Incorporation, as amended, of the
Corporation as previously filed.
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IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by its President this 17th day of
November, 1999.
BOLT MEDIA, INC.
By:/s/ Daniel Pelson
-----------------
Name: Daniel Pelson
Title: President
<PAGE> 1
EXHIBIT 3.3
AS OF NOVEMBER 17, 1999
AMENDED AND RESTATED
BY-LAWS
OF
BOLT, INC.
(FORMERLY KNOWN AS BOLT MEDIA, INC.)
ARTICLE I
OFFICES
1.1 Registered Office: The registered office shall be established and
maintained at and shall be the registered agent of the Corporation in charge
hereof.
1.2 Other Offices: The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time appoint or the business of the corporation may
require, provided, however, that the corporation's books and records shall be
maintained at such place within the continental United States as the Board of
Directors shall from time to time designate.
ARTICLE II
STOCKHOLDERS
2.1 Place of Stockholders' Meetings: All meetings of the stockholders
of the corporation shall be held at such place or places, within or outside the
State of Delaware as may be fixed by the Board of Directors from time to time or
as shall be specified in the respective notices thereof.
2.2 Date of Hour of Annual Meetings of Stockholders: An annual meeting
of stockholders shall be held each year within five months after the close of
the fiscal year of the Corporation.
2.3 Purpose of Annual Meetings: At each annual meeting, the
stockholders shall elect the members of the Board of Directors for the
succeeding year. At any such annual meeting any further proper business may be
transacted.
2.4 Special Meetings of Stockholders: Special meetings of the
stockholders or of any class or series thereof entitled to vote may be called
the President or by the Chairman of the Board of Directors, or at the request in
writing by stockholders of record owning at least fifty (50%) percent of the
issued and outstanding voting shares of common stock of the corporation.
2.9 Proxies: Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy. Every proxy shall be in
writing, subscribed by the stockholder or his duly authorized attorney-in-fact,
but need not be dated, sealed, witnessed or acknowledged.
<PAGE> 2
2.10 Inspectors: The election of directors and any other vote by ballot
at any meeting of the stockholders shall be supervised by at least two
inspectors. Such inspectors may be appointed by the presiding officer before or
at the meeting; or if one or both inspectors so appointed shall refuse to serve
or shall not be present, such appointment shall be made by the officer presiding
at the meeting.
2.11 List of Stockholders: (a) At least ten days before every meeting
of stockholders, the Secretary shall prepare and make a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder.
(b) During ordinary business hours, for a period of at least
ten days prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting is
to be held.
(c) The list shall also be produced and kept at the time and
place of the meeting during the whole time of the meeting, and it may be
inspected by any stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are
the stockholders entitled to examine the stock ledger, the list required by this
Section 2.11 or the books of the corporation, or to vote in person or by proxy
at any meeting of stockholders.
2.12 Procedure at Stockholders' Meetings: Except as otherwise provided
by these by-laws or any resolutions adopted by the stockholders or Board of
Directors, the order of business and all other matters of procedure at every
meeting of stockholders shall be determined by the presiding officer.
2.13 Action By Consent Without Meeting: Unless otherwise provided by
the Certificate of Incorporation, any action required to be taken at any annual
or special meeting of stockholders, or any action which may be taken at any
annual or special meeting, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
3.1 Powers of Directors: The property, business and affairs of the
corporation shall be managed by its Board of Directors which may exercise all
the powers of the corporation except such as are by the law of the State of
Delaware of the Certificate of Incorporation of these by-laws required to be
exercised or done by the stockholders.
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3.2 Composition of Board of Directors. The Board of Directors of the
Corporation shall consist of at least five (5) members and no more than seven
(7) members. Directors need not be stockholders.
3.3 Removal. Except as provided for in Section 3.4 below, each director
nominated by any stockholder or group of stockholders and duly nominated and
elected to the Board shall be subject to removal only at the request of the
stockholder or group of stockholders which nominated such director.
3.4 Election of Directors; Vacancies. The directors shall be elected at
the annual meeting or at any special meeting of the stockholders, except as
provided in this Section 3.4 of this Article, and each director elected shall
hold office until his or her successor is elected and qualified, unless sooner
displaced. Subject to the rights of the holders of any class or series of
preferred stock of the Corporation to elect directors, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors then in office, though less than a
quorum, or the sole remaining director. No decrease in the number of authorized
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
3.5 Committees. The Board of Directors shall, by resolution, establish
a Compensation Committee and an Audit Committee with such lawfully delegable
powers and duties as it thereby confers, to serve at the pleasure of the Board
and shall, for those committees and any others provided for herein, elect a
director or directors to serve as the member or members, designating, if it
desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committees.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate other committees of the Board, with
such lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it, but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending these By-laws.
Along with the customary duties and powers afforded a compensation
committee, the Compensation Committee shall have the sole authority to: (i)
approve all grants or awards under the Corporation's equity compensation
plan(s); (ii) approve the hiring or dismissal of Chairman of the Board of
Directors, the Chief Executive Officer and Chief Financial Officer of the
Corporation; (iii) determine the terms and compensation and other terms of
employment of the
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executive officers of the Corporation; and (iv) approve the adoption or
amendment of any equity compensation plan.
Along with the customary duties and powers afforded an audit committee,
the Audit Committee shall have the sole authority to approve the engagement or
change of the Corporation's auditors or the selection of any appraiser for any
of the assets or securities of the Corporation.
3.6 Resignation: Any director may resign his or her office at any time
by delivering his resignation in writing to the Chairman of the Board or to the
President. It will take effect at the time specified therein or, if no time is
specified, it will be effective at the time of its receipt by the corporation.
The acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation.
3.7 Meetings of the Board of Directors: (a) The Board of Directors may
hold their meetings, both regular and special, either within or outside the
State of Delaware.
(b) Regular meetings of the Board of Directors may be held at
such time and place as shall from time to time be determined by resolution of
the Board of Directors. No notice of such regular meetings shall be required. If
the date designated for any regular meeting be a legal holiday, then the meeting
shall be held on the next day which is not a legal holiday.
(c) The first meeting of each newly elected Board of Directors
shall be held immediately following the annual meeting of the stockholders for
the election of officers and the transaction of such other business as may come
before it. If such meeting is held at the place of the stockholders' meeting, no
notice thereof shall be required.
(d) Special meetings of the Board of Directors shall be held
whenever called by direction of the Chairman of the Board or the President or at
the written request of any one director.
(e) The Secretary shall give notice to each director of any
special meeting of the Board of Directors by mailing the same at least three
days before the meeting or by telegraphing, telexing, or delivering the same not
later than the date before the meeting.
Unless required by law, such notice need not include a
statement of the business to be transacted at, or the purpose of, any such
meeting. Any and all business may be transacted at any meeting of the Board of
Directors. No notice of any adjourned meeting need by given. No notice to or
waiver by any director shall be required with respect to any meeting at which
the director is present.
3.8 Quorum and Action: Unless provided otherwise by law or by the
Certificate of Incorporation or these by-laws, a majority of the Directors shall
constitute a quorum for the transaction of business; but if there shall be less
than a quorum at any meeting of the Board, a majority of those present may
adjourn the meeting from time to time. The vote of a majority of the Directors
of the Directors present at any meeting at which a quorum is present shall be
necessary to constitute the act of the Board of Directors.
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3.9 Presiding Office and Secretary of the Meeting: The President, or,
in his absence a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act as
secretary of the meeting, but in his absence the presiding officer may appoint a
secretary of the meeting.
3.10 Action by Consent Without Meeting: Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes or proceedings of the Board or committee.
3.11 Action by Telephonic Conference: Members of the Board of
Directors, or any committee designated by such board, may participate in a
meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting.
3.12 Compensation of Directors: Directors shall receive such reasonable
compensation for their service on the Board of Directors or any committees
thereof, whether in the form of salary or a fixed fee for attendance at
meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
ARTICLE IV
OFFICERS
4.1 Officers, Title, Elections, Terms: (a) The elected officers of the
corporation shall be a President, a Treasurer and a Secretary, and such other
officers as the Board of Directors shall deem advisable. The officers shall be
elected by the Board of Directors as its annual meeting following the annual
meeting of the stockholders, to serve at the pleasure of the Board of otherwise
as shall be specified by the Board at the time of such election and until their
successors are elected and qualified.
(b) The Board of Directors may elect or appoint at any time,
and from time to time, additional officers or agents with such duties as it may
deem necessary or desirable. Such additional officers shall serve at the
pleasure of the Board or otherwise as shall be specified by the Board at the
time of such election or appointment. Two or more offices may be held by the
same person.
(c) Any vacancy in any office may be filled for the unexpired
portion of the term by the Board of Directors.
(d) Any officer may resign his office at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein or, if no time has been specified, at the time of its receipt of by the
corporation. The acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
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(e) The salaries of all officers of the corporation shall be
fixed by the Board of Directors.
4.2 Removal of Elected Officers: Any elected officer may be removed at
any time, either with or without cause, by resolution adopted at any regular or
special meeting of the Board of Directors by a majority of the Directors then in
office.
4.3 Duties: (a) President: The President shall be the principal
executive officer of the corporation and, subject to the control of the Board of
Directors, shall supervise and control all the business and affairs of the
corporation. He shall, when present, preside at all meetings of the stockholders
and of the Board of Directors. He shall see that all orders and resolutions of
the Board of Directors are carried into effect (unless any such order or
resolution shall provide otherwise), and in general shall perform all duties
incident to the office of the president and such other duties as may be
prescribed by the Board of Directors from time to time.
(b) Treasurer: The Treasurer shall (1) have charge and custody
of and be responsible for all funds and securities of the Corporation; (2)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever; (3) deposit all such moneys in the name of the corporation in
such banks, trust companies, or other depositories as shall be selected by
resolution of the Board of Directors; and (4) in general perform all duties
incident to the office of treasurer and such other duties as from time to time
may be assigned to him by the President or by the Board of Directors. He shall,
if required by the Board of Directors, give a bond for the faithful discharge of
his duties in such sum and with such surety or sureties as the Board of
Directors shall determine.
(c) Secretary: The Secretary shall (1) keep the minutes of the
meetings of the stockholders, the Board of Directors, and all committees, if
any, of which a secretary shall not have been appointed, in one or more books
provided for that purpose; (2) see that all notices are duly given in accordance
with the provisions of these by-laws and as required by law; (3) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all documents, the execution of which on behalf
of the corporation under its seal, duly authorized; (4) keep a register of the
post office address of each stockholder which shall be furnished to the
Secretary by such stockholder; (5) have general charge of stock transfer books
of the Corporation; and (6) in general perform all duties incident to the office
of secretary and such other duties as from time to time may be assigned to him
by the President or by the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 Stock Certificates: (a) Every holder of stock in the corporation
shall be entitled to have a certificate signed by, or in the name of, the
corporation by the President and by the Treasurer or the Secretary, certifying
the number of shares owned by him.
(b) If such certificate is countersigned by a transfer agent
other than the corporation or its employee, or by a registrar other than the
corporation or its employee, the signatures of the officers of the corporation
may be facsimiles, and, if permitted by law, any other signature may be a
facsimile.
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(c) In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall be ceased to be such officer
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not
inconsistent with the Certificate of Incorporated as shall be approved by the
Board of Directors, and shall be numbered and registered in the order in which
they were issued.
(e) All certificates surrendered to the corporation shall be
canceled with the date of cancellation, and shall be retained by the Secretary,
together with the powers of attorney to transfer and the assignments of the
shares represented by such certificates, for such period of time as shall be
prescribed from time to time by resolution of the Board of Directors.
5.2 Record Ownership: A record of the name and address of the holder of
such certificate, the number of shares represented thereby and the date of issue
thereof shall be made on the corporation's books. The corporation shall be
entitled to treat the holder of any share of stock as the holder in fact
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, thereof, except as required
by law.
5.3 Transfer of Record Ownership: Transfers of stock shall be made on
the books of the corporation only by direction of the person named in the
certificate or his attorney, lawfully constituted in writing, and only upon the
surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the corporation for
transfer, both the transferor and the transferee request the corporation to do
so.
5.4 Lost, Stolen or Destroyed Certificates: Certificates representing
shares of the stock of the corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed in such manner and on
such terms and conditions as the Board of Directors from time to time may
authorize.
5.5 Transfer Agent, Registrar, Rules Respecting Certificates: The
corporation may maintain one or more transfer offices or agencies where stock of
the corporation shall be transferable. The corporation may also maintain one or
more registry offices where such stock shall be registered. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
5.6 Fixing Record Date for Determination of Stockholders of Record: The
Board of Directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at, any
meeting of the stockholders or any adjournment thereof, or the stockholders
entitled to receive payment of any dividend or other distribution or the
allotment of any rights, or entitled to exercise any rights in respect of an
change, conversion or exchange of stock, or to express consent to corporate
action in writing without a meeting, or in order to make a determination of the
stockholders for the purpose of any other lawful action. Such record date in any
case shall be not more than sixty days nor less than ten days before the date of
a meeting of the stockholders, nor more than sixty days prior to any
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other action requiring such determination of the stockholders. A determination
of stockholders of record entitled to notice or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
5.7 Dividends: Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the Board of Directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the corporation.
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
6.1 Voting: Unless the Board of Directors shall otherwise order, the
President, the Secretary or the Treasurer shall have full power and authority,
on behalf of the corporation, to attend, act and vote at any meeting of the
stockholders of any corporation in which the corporation may hold stock, and at
such meeting to exercise any or all rights and powers incident to the ownership
of such stock, and to execute on behalf of the corporation a proxy or proxies
empowering another or others to act as aforesaid. The Board of Directors from
time to time may confer like powers upon any other person or persons.
6.2 General Authorization to Transfer Securities Held by the
Corporation
(a) Any of the following officers, to wit: the President and
the Treasurer shall be, and they hereby are, authorized and empowered to
transfer, convert, endorse, sell, assign, set over and deliver any and all
shares of stock, bonds, debentures, notes, subscription warrants, stock purchase
warrants, evidence of indebtedness, or other securities now or hereafter
standing in the name of or owned by the corporation, and to make, execute and
deliver, under the seal of the corporation, any and all written instruments of
assignment and transfer necessary or proper to effectuate the authority hereby
conferred.
(b) Whenever there shall be annexed to any instrument of
assignment and transfer executed pursuant to and in accordance with the
foregoing paragraph (a), a certificate of the Secretary of the corporation in
office at the date of such certificate setting forth the provisions of this
Section 6.2 and stating that they are in full force and effect and setting forth
the names of persons who are then officers of the corporation, then all persons
to whom such instrument and annexed certificate shall thereafter come, shall be
entitled, without further inquiry or investigation and regardless of the date of
such certificate, to assume and to act in reliance upon the assumption that the
shares of stock or other securities named in such instrument were theretofore
duly and properly transferred, endorsed, sold, assigned, set over and delivered
by the corporation, and that with respect to such securities the authority of
these provisions of the by-laws and of such officers is still in full force and
effect.
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ARTICLE VII
MISCELLANEOUS
7.1 Signatories: All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
7.2 Seal: The seal of the corporation shall be in such form and shall
have such content as the Board of Directors shall from time to time determine.
7.3 Notice and Waiver of Notice: Whenever any notice of the time, place
or purpose of any meeting of the stockholders, directors or a committee is
required to be given under the law of the State of Delaware, the Certificate of
Incorporation or these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the holding
thereof, or actual attendance at the meeting in person or, in the case of any
stockholder, by his attorney-in-fact, shall be deemed equivalent to the giving
of such notice to such persons.
7.4 Indemnity: The Corporation shall indemnify its directors, officers
and employees (the "Indemnitee") to the fullest extent permitted by the Delaware
General Corporation Law (the "DGCL"), from and against any and all of the
expenses, liabilities or other matters referred to in or covered by these Bylaws
or the DGCL, and such indemnification shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any these Bylaws, any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The Corporation shall pay in advance of the final disposition of such
Indemnitee upon the receipt of an undertaking by or on behalf of such Indemnitee
to repay such amount if it shall ultimately be determined that he or she is no
not entitled to be indemnified by the Corporation. A director shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, provided that the liability of a
director (i) for any breach of the director's loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit shall not be eliminated or limited hereby. Any repeal
or modification of these Bylaws shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
7.5 Fiscal Year: Except as from time to time otherwise determined by
the Board of Directors, the fiscal year of the corporation shall end on December
31.
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EXHIBIT 10.1
AMENDED AS OF NOVEMBER 17, 1999
BOLT, INC.
1999 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
1. DEFINITIONS.
Unless otherwise specified or unless the context otherwise requires,
the following terms, as used in this BOLT, INC. 1999 EMPLOYEE, DIRECTOR
AND CONSULTANT STOCK OPTION PLAN, have the following meanings:
Administrator means the Board of Directors, unless it has
delegated power to act on its behalf to the Committee, in
which case the Administrator means the Committee.
Affiliate means a corporation which, for purposes of Section
424 of the Code, is a parent or subsidiary of the Company,
direct or indirect.
Board of Directors means the Board of Directors of the
Company.
Change in Control means (i) any consolidation or merger of the
Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the
Company's common stock would be converted into cash,
securities or other property, other than a merger or
consolidation of the Company in which the holders of the
Company's common stock immediately prior to the merger or
consolidation hold more than fifty percent (50%) of the common
stock of the surviving company immediately after the merger,
or (ii) any sale, lease, exchange or other transfer (in one or
more transaction or series of related transactions) of all, or
substantially all, the assets of the Company to a nonaffiliate
of the Company, or (iii) the stockholders of the Company shall
approve any plan or proposal for liquidation or dissolution of
the Company.
Code means the United States Internal Revenue Code of 1986, as
amended.
Committee means the committee of the Board of Directors to
which the Board of Directors has delegated power to act under
or pursuant to the provisions of the Plan, or in the absence
of such delegation, the full Board of Directors.
Common Stock means shares of the Company's common stock, $.01
par value per share.
<PAGE> 2
Company means Bolt, Inc., a Delaware corporation formerly
known as Concrete Media Inc.
Disability or Disabled means permanent and total disability as
defined in Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
(1) If the Common Stock is listed on a national securities
exchange or traded in the over-the-counter market and sales
prices are regularly reported for the Common Stock, the
closing or last price of the Common Stock on the Composite
Tape or other comparable reporting system for the trading day
immediately preceding the applicable date;
(2) If the Common Stock is not traded on a national securities
exchange but is traded on the over-the-counter market, if
sales prices are not regularly reported for the Common Stock
for the trading day referred to in clause (1), and if bid and
asked prices for the Common Stock are regularly reported, the
mean between the bid and the asked price for the Common Stock
at the close of trading in the over-the-counter market for the
trading day on which Common Stock was traded immediately
preceding the applicable date; and
(3) If the Common Stock is neither listed on a national
securities exchange nor traded in the over-the-counter market,
such value as the Administrator, in good faith, shall
determine.
ISO means an option meant to qualify as an incentive stock
option under Section 422 of the Code.
Key Employee means an employee of the Company or of an
Affiliate (including, without limitation, an employee who is
also serving as an officer or director of the Company or of an
Affiliate), designated by the Administrator to be eligible to
be granted one or more Options under the Plan.
Non-Qualified Option means an option which is not intended to
qualify as an ISO.
Option means an ISO or Non-Qualified Option granted under the
Plan.
Option Agreement means an agreement between the Company and a
Participant delivered pursuant to the Plan, in such form as
the Administrator shall approve.
Participant means a Key Employee, director or consultant to
whom one or more Options are granted under the Plan. As used
herein, "Participant" shall include "Participant's Survivors"
where the context requires.
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<PAGE> 3
Plan means this Bolt, Inc. 1999 Employee, Director and
Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which Options
have been or may be granted under the Plan or any shares of
capital stock into which the Shares are changed or for which
they are exchanged within the provisions of Paragraph 3 of the
Plan. The Shares issued upon exercise of Options granted under
the Plan may be authorized and unissued shares or shares held
by the Company in its treasury, or both.
Survivors means a deceased Participant's legal representatives
and/or any person or persons who acquired the Participant's
rights to an Option by will or by the laws of descent and
distribution.
2. PURPOSES OF THE PLAN.
The Plan is intended to encourage ownership of Shares by Key Employees
and directors of and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate. The Plan provides for the granting of ISOs and
Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
The number of Shares which may be issued from time to time pursuant to
this Plan shall be 3,077,948, or the equivalent of such number of Shares after
the Administrator, in its sole discretion, has interpreted the effect of any
stock split, stock dividend, combination, recapitalization or similar
transaction in accordance with Paragraph 16 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, the
Shares which were subject to such Option shall be available for the granting of
other Options under the Plan. Any Option shall be treated as "outstanding" until
such Option is exercised in full, or terminates or expires under the provisions
of the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
The Administrator of the Plan will be the Board of Directors, except to
the extent the Board of Directors delegates its authority to the Committee, in
which case the Committee shall be the Administrator. Subject to the provisions
of the Plan, the Administrator is authorized to:
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<PAGE> 4
a. Interpret the provisions of the Plan or of any Option or
Option Agreement and to make all rules and determinations
which it deems necessary or advisable for the administration
of the Plan;
b. Determine which employees of the Company or of an Affiliate
shall be designated as Key Employees and which of the Key
Employees, directors and consultants shall be granted Options;
c. Determine the number of shares for which an Option or Options
shall be granted; and
d. Specify the terms and conditions upon which an Option or
Options may be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.
5. ELIGIBILITY FOR PARTICIPATION.
The Administrator will, in its sole discretion, name the Participants
in the Plan, provided, however, that each Participant must be a Key Employee,
director or consultant of the Company or of an Affiliate at the time an Option
is granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of an Option to a person not then an employee, director or consultant of
the Company or of an Affiliate; provided, however, that the actual grant of such
Option shall be conditioned upon such person becoming eligible to become a
Participant at or prior to the time of the delivery of the Option Agreement
evidencing such Option. ISOs may be granted only to Key Employees. Non-Qualified
Options may be granted to any Key Employee, director or consultant of the
Company or an Affiliate. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him or her from,
participation in any other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such terms and conditions, consistent with the terms and
conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.
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<PAGE> 5
A. Non-Qualified Options: Each Option intended to be a
Non-Qualified Option shall be subject to the terms and
conditions which the Administrator determines to be
appropriate and in the best interest of the Company, subject
to the following minimum standards for any such Non-Qualified
Option:
a. Option Price: Each Option Agreement shall state the
option price (per share) of the Shares covered by
each Option, which option price shall be determined
by the Administrator but shall not be less than the
par value per share of Common Stock.
b. Each Option Agreement shall state the number of
Shares to which it pertains;
c. Each Option Agreement shall state the date or dates
on which it first is exercisable and the date after
which it may no longer be exercised, and may provide
that the Option rights accrue or become exercisable
in installments over a period of months or years, or
upon the occurrence of certain conditions or the
attainment of stated goals or events; and
d. Exercise of any Option may be conditioned upon the
Participant's execution of a Share purchase agreement
in form satisfactory to the Administrator providing
for certain protections for the Company and its other
shareholders, including requirements that:
i. The Participant's or the Participant's
Survivors' right to sell or transfer the
Shares may be restricted; and
ii. The Participant or the Participant's
Survivors may be required to execute letters
of investment intent and must also
acknowledge that the Shares will bear
legends noting any applicable restrictions.
B. ISOs: Each Option intended to be an ISO shall be issued only
to a Key Employee and be subject to the following terms and
conditions, with such additional restrictions or changes as
the Administrator determines are appropriate but not in
conflict with Section 422 of the Code and relevant regulations
and rulings of the Internal Revenue Service:
a. Minimum standards: The ISO shall meet the minimum
standards required of Non-Qualified Options, as
described in Paragraph 6(A) above, except clause (a)
thereunder.
b. Option Price: Immediately before the Option is
granted, if the Participant owns, directly or by
reason of the applicable attribution rules in Section
424(d) of the Code:
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<PAGE> 6
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, the Option price per share of the
Shares covered by each Option shall not be
less than one hundred percent (100%) of the
Fair Market Value per share of the Shares on
the date of the grant of the Option.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
stock of the Company or an Affiliate, the
Option price per share of the Shares covered
by each Option shall not be less than one
hundred ten percent (110%) of the said Fair
Market Value on the date of grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total
combined voting power of all classes of
share capital of the Company or an
Affiliate, each Option shall terminate not
more than ten (10) years from the date of
the grant or at such earlier time as the
Option Agreement may provide.
ii. More than ten percent (10%) of the total
combined voting power of all classes of
stock of the Company or an Affiliate, each
Option shall terminate not more than five
(5) years from the date of the grant or at
such earlier time as the Option Agreement
may provide.
d. Limitation on Yearly Exercise: The Option Agreements
shall restrict the amount of Options which may be
exercisable in any calendar year (under this or any
other ISO plan of the Company or an Affiliate) so
that the aggregate Fair Market Value (determined at
the time each ISO is granted) of the stock with
respect to which ISOs are exercisable for the first
time by the Participant in any calendar year does not
exceed one hundred thousand dollars ($100,000),
provided that this subparagraph (d) shall have no
force or effect if its inclusion in the Plan is not
necessary for Options issued as ISOs to qualify as
ISOs pursuant to Section 422(d) of the Code.
7. EXERCISE OF OPTIONS AND ISSUE OF SHARES.
An Option (or any part or installment thereof) shall be exercised by
giving written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is being exercised,
and upon compliance with any other condition(s) set forth in the Option
Agreement. Such written notice shall be signed by the person exercising the
Option, shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the Plan or the
Option Agreement. Payment of the purchase price for the Shares as to which such
Option is being exercised shall be made (a) in United States dollars
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<PAGE> 7
in cash or by check, or (b) at the discretion of the Administrator, through
delivery of shares of Common Stock having a Fair Market Value equal as of the
date of the exercise to the cash exercise price of the Option, or (c) at the
discretion of the Administrator, by having the Company retain from the shares
otherwise issuable upon exercise of the Option, a number of shares having a Fair
Market Value equal as of the date of exercise to the exercise price of the
Option, or (d) at the discretion of the Administrator, by delivery of the
grantee's personal recourse note bearing interest payable not less than annually
at no less than 100% of the applicable Federal rate, as defined in Section
1274(d) of the Code, or (e) at the discretion of the Administrator, in
accordance with a cashless exercise program established with a securities
brokerage firm, and approved by the Administrator, or (f) at the discretion of
the Administrator, by any combination of (a), (b), (c), (d) and (e) above.
Notwithstanding the foregoing, the Administrator shall accept only such payment
on exercise of an ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to
which such Option was exercised to the Participant (or to the Participant's
Survivors, as the case may be). In determining what constitutes "reasonably
promptly," it is expressly understood that the delivery of the Shares may be
delayed by the Company in order to comply with any law or regulation (including,
without limitation, state securities or "blue sky" laws) which requires the
Company to take any action with respect to the Shares prior to their issuance.
The Shares shall, upon delivery, be evidenced by an appropriate certificate or
certificates for fully paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Administrator shall
not accelerate the exercise date of any installment of any Option granted to any
Key Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.
The Administrator may, in its discretion, amend any term or condition
of an outstanding Option provided (i) such term or condition as amended is
permitted by the Plan, (ii) any such amendment shall be made only with the
consent of the Participant to whom the Option was granted, or in the event of
the death of the Participant, the Participant's Survivors, if the amendment is
adverse to the Participant, and (iii) any such amendment of any ISO shall be
made only after the Administrator, after consulting the counsel for the Company,
determines whether such amendment would constitute a "modification" of any
Option which is an ISO (as that term is defined in Section 424(h) of the Code)
or would cause any adverse tax consequences for the holder of such ISO.
8. RIGHTS AS A SHAREHOLDER.
No Participant to whom an Option has been granted shall have rights as
a shareholder with respect to any Shares covered by such Option, except after
due exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
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<PAGE> 8
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
By its terms, an Option granted to a Participant shall not be
transferable by the Participant other than (i) by will or by the laws of descent
and distribution, or (ii) as otherwise determined by the Administrator and set
forth in the applicable Option Agreement. The designation of a beneficiary of an
Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided above, an Option shall be exercisable, during the
Participant's lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon an Option, shall be null and void.
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH OR
DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or
consultant of the Company or of an Affiliate (for any reason
other than termination "for cause", Disability, or death for
which events there are special rules in Paragraphs 11, 12, and
13, respectively), may exercise any Option granted to him or
her to the extent that the Option is exercisable on the date
of such termination of service, but only within such term as
the Administrator has designated in the pertinent Option
Agreement.
b. Except as provided in Subparagraph (c) below, or Paragraph 12
or 13, in no event may an Option Agreement provide, if the
Option is intended to be an ISO, that the time for exercise be
later than three (3) months after the Participant's
termination of employment.
c. The provisions of this Paragraph, and not the provisions of
Paragraph 12 or 13, shall apply to a Participant who
subsequently becomes Disabled or dies after the termination of
employment, director status or consultancy, provided, however,
in the case of a Participant's Disability or death within
three (3) months after the termination of employment, director
status or consultancy, the Participant or the Participant's
Survivors may exercise the Option within one (1) year after
the date of the Participant's termination of employment, but
in no event after the date of expiration of the term of the
Option.
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<PAGE> 9
d. Notwithstanding anything herein to the contrary, if subsequent
to a Participant's termination of employment, termination of
director status or termination of consultancy, but prior to
the exercise of an Option, the Board of Directors determines
that, either prior or subsequent to the Participant's
termination, the Participant engaged in conduct which would
constitute "cause", then such Participant shall forthwith
cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the
Plan who is absent from work with the Company or with an
Affiliate because of temporary disability (any disability
other than a permanent and total Disability as defined in
Paragraph 1 hereof), or who is on leave of absence for any
purpose, shall not, during the period of any such absence, be
deemed, by virtue of such absence alone, to have terminated
such Participant's employment, director status or consultancy
with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
f. Except as required by law or as set forth in the pertinent
Option Agreement, Options granted under the Plan shall not be
affected by any change of a Participant's status within or
among the Company and any Affiliates, so long as the
Participant continues to be an employee, director or
consultant of the Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the time the
Participant is notified his or her service is terminated "for
cause" will immediately be forfeited.
b. For purposes of this Plan, "cause" shall include (and is not
limited to) dishonesty with respect to the Company or any
Affiliate, insubordination, substantial malfeasance or
non-feasance of duty, unauthorized and intentional disclosure
of confidential information, and conduct substantially
prejudicial to the business of the Company or any Affiliate.
The determination of the Administrator as to the existence of
"cause" will be conclusive on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to
a Participant's termination of service, nor is it necessary
that the Administrator's finding of "cause" occur prior to
termination. If the Administrator determines, subsequent to a
Participant's termination of service but prior to the exercise
of an Option, that either prior or subsequent to the
Participant's termination the Participant engaged in conduct
which would constitute "cause," then the right to exercise any
Option is forfeited.
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<PAGE> 10
d. Any definition in an agreement between the Participant and the
Company or an Affiliate, which contains a conflicting
definition of "cause" for termination and which is in effect
at the time of such termination, shall supersede the
definition in this Plan with respect to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent exercisable but not exercised on the date of
Disability; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights as would have accrued had the Participant
not become Disabled prior to the end of the accrual period
which next ends following the date of Disability. The
proration shall be based upon the number of days of such
accrual period prior to the date of Disability.
A Disabled Participant may exercise such rights only within the period
ending one (1) year after the date of the Participant's termination of
employment, directorship or consultancy, as the case may be, notwithstanding
that the Participant might have been able to exercise the Option as to some or
all of the Shares on a later date if the Participant had not become disabled and
had continued to be an employee, director or consultant or, if earlier, within
the originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant while the Participant is an employee,
director or consultant of the Company or of an Affiliate, such Option may be
exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of
death; and
b. In the event rights to exercise the Option accrue
periodically, to the extent of a pro rata portion of any
additional rights which would have accrued had the Participant
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<PAGE> 11
not died prior to the end of the accrual period which next
ends following the date of death. The proration shall be based
upon the number of days of such accrual period prior to the
Participant's death.
If the Participant's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within one (1) year after the
date of death of such Participant, notwithstanding that the decedent might have
been able to exercise the Option as to some or all of the Shares on a later date
if he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
Unless the offering and sale of the Shares to be issued upon the
particular exercise of an Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the "1933
Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:
a. The person(s) who exercise(s) such Option shall warrant to the
Company, prior to the receipt of such Shares, that such
person(s) are acquiring such Shares for their own respective
accounts, for investment, and not with a view to, or for sale
in connection with, the distribution of any such Shares, in
which event the person(s) acquiring such Shares shall be bound
by the provisions of the following legend which shall be
endorsed upon the certificate(s) evidencing their Shares
issued pursuant to such exercise or such grant:
"The shares represented by this certificate have been
taken for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be
effective under the Securities Act of 1933, as
amended, or (b) the Company shall have received an
opinion of counsel satisfactory to it that an
exemption from registration under such Act is then
available, and (2) there shall have been compliance
with all applicable state securities laws."
b. At the discretion of the Administrator, the Company shall have
received an opinion of its counsel that the Shares may be
issued upon such particular exercise in compliance with the
1933 Act without registration thereunder.
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15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the Option is exercisable as of the date immediately prior to
such dissolution or liquidation.
16. ADJUSTMENTS.
Upon the occurrence of any of the following events, a Participant's
rights with respect to any Option granted to him or her hereunder which has not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the pertinent Option Agreement:
A. Stock Dividends and Stock Splits. If (i) the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock, the number of shares of Common Stock
deliverable upon the exercise of such Option may be appropriately increased or
decreased proportionately, and appropriate adjustments may be made in the
purchase price per share to reflect such events.
B. Change of Control. If there shall be a Change of Control (as defined
in Section 1 hereof), the Administrator or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
Shares then subject to such Options either the consideration payable with
respect to the outstanding shares of Common Stock in connection with the Change
of Control or securities of any successor or acquiring entity; or (ii) upon
written notice to the Participants, provide that all Options must be exercised
(either to the extent then exercisable or, at the discretion of the
Administrator, all Options being made fully exercisable for purposes of this
Subparagraph), within a specified number of days of the date of such notice, at
the end of which period the Options shall terminate; or (iii) terminate all
Options in exchange for a cash payment equal to the excess of the Fair Market
Value of the shares subject to such Options (either to the extent then
exercisable or, at the discretion of the Administrator, all Options being made
fully exercisable for purposes of this Subparagraph) over the exercise price
thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in Subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, a Participant upon exercising an Option shall be
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entitled to receive for the purchase price paid upon such exercise the
securities which would have been received if such Option had been exercised
prior to such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to Subparagraph A, B or C with respect to ISOs shall be made only
after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.
17. ISSUANCES OF SECURITIES.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. Except as
expressly provided herein, no adjustments shall be made for dividends paid in
cash or in property (including without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
The Administrator, at the written request of any Participant, may in
its discretion take such actions as may be necessary to convert such
Participant's ISOs (or any portions thereof) that have not been exercised on the
date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the Participant is an employee of
the Company or an Affiliate at the time of such conversion. Such actions may
include, but not be limited to, extending the exercise period or reducing the
exercise price of the appropriate installments of such Options. At the time of
such conversion, the Administrator (with the consent of the Participant) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action.
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The Administrator, with the consent of the Participant, may also terminate any
portion of any ISO that has not been exercised at the time of such conversion.
20. WITHHOLDING.
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Participant's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 21), the Company may withhold from the Participant's compensation, if
any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the
amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock or a promissory note,
is authorized by the Administrator (and permitted by law). For purposes hereof,
the fair market value of the shares withheld for purposes of payroll withholding
shall be determined in the manner provided in Paragraph 1 above, as of the most
recent practicable date prior to the date of exercise. If the fair market value
of the shares withheld is less than the amount of payroll withholdings required,
the Participant may be required to advance the difference in cash to the Company
or the Affiliate employer. The Administrator in its discretion may condition the
exercise of an Option for less than the then Fair Market Value on the
Participant's payment of such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
Each Key Employee who receives an ISO must agree to notify the Company
in writing immediately after the Key Employee makes a Disqualifying Disposition
of any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
22. TERMINATION OF THE PLAN.
The Plan will terminate on February 15, 2010, the date which is ten
(10) years from the earlier of the date of its adoption and the date of its
approval by the shareholders of the Company. The Plan may be terminated at an
earlier date by vote of the shareholders of the Company; provided, however, that
any such earlier termination shall not affect any Option Agreements executed
prior to the effective date of such termination.
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23. AMENDMENT OF THE PLAN AND AGREEMENTS.
The Plan may be amended by the shareholders of the Company. The Plan
may also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers. Any amendment approved by the Administrator which
the Administrator determines is of a scope that requires shareholder approval
shall be subject to obtaining such shareholder approval. Any modification or
amendment of the Plan shall not, without the consent of a Participant, adversely
affect his or her rights under an Option previously granted to him or her. With
the consent of the Participant affected, the Administrator may amend outstanding
Option Agreements in a manner which may be adverse to the Participant but which
is not inconsistent with the Plan. In the discretion of the Administrator,
outstanding Option Agreements may be amended by the Administrator in a manner
which is not adverse to the Participant.
24. EMPLOYMENT OR OTHER RELATIONSHIP.
Nothing in this Plan or any Option Agreement shall be deemed to prevent
the Company or an Affiliate from terminating the employment, consultancy or
director status of a Participant, nor to prevent a Participant from terminating
his or her own employment, consultancy or director status or to give any
Participant a right to be retained in employment or other service by the Company
or any Affiliate for any period of time.
25. GOVERNING LAW.
This Plan shall be construed and enforced in accordance with the law of
the State of Delaware.
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EXHIBIT 10.2
CONCRETE MEDIA, INC.
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE
The purpose of the 1996 Employee Stock Option Plan (the "Plan") is to
provide a method whereby selected key employees of Concrete Media, Inc. (the
"Corporation"), may have the opportunity to invest in shares of Common Stock
(the "Stock") of the Corporation, thereby giving them a proprietary and vested
interest in the growth and performance of the Corporation, and in general,
generating an increased incentive to contribute to the Corporation's future
success and prosperity, thus enhancing the value of the Corporation for the
benefit of shareholders. Further, the Plan is designed to enhance the
Corporation's ability to attract and retain individuals of exceptional
managerial talent upon whom, in large measure, the sustained progress, growth,
and profitability of the Corporation depends.
2. ADMINISTRATION
The Plan shall be administered by the Corporation's Board of Directors
("the Board") or if so designated by resolution of the Board, by a Committee
composed of not less than three individuals ("Committee"). From time to time the
Board, or if so designated the Committee, may grant stock options ("Options") to
such eligible parties and for such number of shares as it in its sole discretion
may determine. A grant in any year to an eligible Employee, (as defined in
Section 3 below) shall neither guarantee nor preclude a grant to such Employee
in subsequent years. Subject to the provisions of the Plan, the Board, or if so
designated the Committee, shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, to
determine the terms and provisions of the Option Agreements described in Section
5(h) thereof to make all other determinations necessary or advisable for the
administration of the Plan. The Board, or if so designated the Committee, may
correct any defect, supply any omissions or reconcile any inconsistency in the
Plan or in any Option in the manner and to the extent it shall deem desirable.
The determinations of the Board, of if so designated the Committee, in the
administration of the Plan, as described herein, shall be final and conclusive.
The validity, construction, and effect of Plan and any rules and regulations
relating to the Plan shall be determined in accordance with the laws of the
State of Delaware.
3. ELIGIBILITY
The employees eligible to participate in the Plan (the "Employees")
shall consist of the Corporation's executive officers who may be hired by the
Corporation in the future, employees, directors, and consultants. Nothing in the
Plan or in any agreement thereunder shall confer any right on an Employee to
continue in the employ of the Corporation or shall interfere in any way with the
right of the Corporation or its subsidiaries, as the case may be, to terminate
his or her employment at any time.
<PAGE> 2
4. SHARES SUBJECT TO THE PLAN
The shares of Stock available for issuance under the Plan are subject
to adjustment as provided in Section 7. The shares of Stock deliverable upon the
exercise of Options may be made available from authorized but unissued shares or
shares reacquired by the Corporation, including shares purchased in the open
market or in private transactions. If any Option granted under the Plan shall
terminate for any reason without having been exercised or settled in stock or in
cash pursuant to related stock appreciation rights, the shares subject to, but
not delivered under, such Option shall be available for other Options.
5. GRANT TERM AND CONDITIONS OF OPTIONS
The Board or if so designated the Committee, may from time to time
after consultation with management select employees to whom Options shall be
granted. The Options granted shall be "Incentive Stock Options" within the
meaning of Section 422 of the Internal Revenue Code, as amended (the "Code"), or
nonstatutory stock options whichever the Board, or if so designated the
Committee, shall determine, subject to the following terms and conditions:
(a) Price. The purchase price per share of Stock deliverable upon
exercise of each Incentive Stock Option shall not be less than 100
percent of the Fair Market Value of the Stock on the date such the
Option is granted. Provided, however, that if an Incentive Stock Option
is issued to an individual who owns, at the time of grant, more than
ten percent (10%) of the total combined voting power of all classes of
the Corporation's Stock, the Exercise price of such Option shall be at
least 110% of the Fair Market Value of the Stock on the date of grant.
The Option price of shares subject to non-statutory Stock Options shall
be determined by the Board of Directors or Committee, in its absolute
discretion at the time of grant of such Option. For purposes of this
plan, Fair Market Value shall be: (i) the average of the closing Bid
and Ask prices for the Stock on the date in question or (ii) if the
stock is not publicly traded in accordance with applicable procedure
set forth in the Code.
(b) Payment. Options may be exercised only upon payment of the purchase
price thereof in full. Such payment shall be made in such form of
consideration as the Board or Committee determines and may vary for
each Option. Payment may consist, subject to approval by the Board, of
cash, check, notes, delivery of shares of common stock having a fair
market value on the date of surrender equal to the aggregate exercise
price, or any combination of such methods or other means of payment
permitted under the Delaware General Corporation Law.
(c) Term of Options. The term during which each Option may be exercised
shall be determined by the Board, or if so designated the Committee,
provided that (i) a nonstatutory Option shall not be exercisable in
whole or in part more than 10 years from the date it is granted except
as provided in paragraph (e), below, with respect to the death of the
Employee, and (ii) an Incentive Stock Option shall not be exercisable
in whole or in part more than 5 years from the date it is granted. All
rights to purchase Stock pursuant to an Option shall, unless sooner
terminated, expire at the date designated by the Board or, if so
designated the Committee.
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The Board, or if so designated the Committee, shall determine
the date on which each Option shall become exercisable and may provide
that an Option shall become exercisable in installments. The shares
comprising each installment may be purchased in whole or in part at any
time after such installment becomes purchasable, except that the
exercise of Incentive Stock Options shall be further restricted as set
forth herein. The Board, or if so designated the Committee, may in its
sole discretion, accelerate the time at which any Option may be
exercised in whole or in part, provided that no Option shall be
exercisable until one year after grant.
(d) Limitations on Grants. For Incentive Stock Options, the aggregate
Fair Market Value (determined at the time the Option is granted) of the
stock with respect to which the Investment Stock Option is exercisable
for the first time by an Optionee during any calendar year (under all
plans of the Corporation and its parent or any subsidiary of the
Corporation) shall not exceed $100,000. The foregoing limitations shall
be modified from time to time to reflect any changes in Section 422 of
the Code and any regulations promulgated thereunder setting forth such
limitations. There shall be no limitations on nonstatutory stock
options.
(e) Termination of Employment. (i) If the employment of an Employee by
the Corporation or a subsidiary corporation of the Corporation shall be
terminated voluntarily by the Employee or for cause by the Corporation,
then his or her Option shall expire forthwith. Except as provided in
subparagraphs (ii) and (iii) of this Paragraph (e), if such employment
shall terminate for any other reason, then such Option may be exercised
at any time within one (1) month after such termination, subject to the
provisions of subparagraph (iv) of this Paragraph (e). For purposes of
this subparagraph, an employee who leaves the employ of the Corporation
to become an employee of a subsidiary corporation of the Corporation or
a corporation (or subsidiary or parent corporation of the corporation)
which has assumed the Option of the Corporation as a result of a
corporate reorganization, etc., shall not be considered to have
terminated his or her employment. The Board may, in its sole
discretion, extend the time period for exercise of any particular
option after termination or allow the employee who terminates their
employment voluntarily the right to exercise their option on terms and
conditions determined by the Board.
(ii) If the holder of an Option under the Plan dies (a) while employed
by, or while serving as a non-employee Director for, the Corporation or
a subsidiary corporation of the Corporation, or (b) within one (1)
month after the termination of his employment or services other than
voluntarily by the Employee, or for cause, then such Option may,
subject to the provisions of subparagraph (iv) of this Paragraph (e),
be exercised by the estate of the Employee or by a person who acquired
the right to exercise such Option by bequest or inheritance or by
reason of the death of such Employee at any time within six (6) months
(iii) If the holder of the Option under the Plan ceases employment
because of permanent or total disability (within the meaning of Section
22 (e) (3) of the Code) while employed by the Corporation or a
subsidiary corporation of the Corporation, then such Option may,
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<PAGE> 4
subject to the provisions of subparagraph (iv) of this paragraph (e),
be exercised at any time within one year after his termination of
employment due to disability.
(iv) An Option may not be exercised pursuant to this Paragraph (e)
except to the extent that the holder was entitled to exercise the
Option at the time of termination of employment, or death, and in any
event may not be exercised after the expiration of the Option. For
purpose of this Paragraph (e), the employment relationship of an
employee of the Corporation or of a subsidiary corporation of the
company will be treated as continuing intact while he or she is on
military or sick leave or other bona fide leave of absence (such as
temporary employment by the Government) if such leave does not exceed
ninety (90) days, or, if longer, so long as his or her right to
reemployment is guaranteed either by statute or by contract.
(f) Nontransferability of Options. No Option shall be transferable by a
Holder otherwise than by will or the laws of descent and distribution,
and during the lifetime of the Employee to whom an Option is granted,
it may be exercised only by the employee, his guardian or legal
representative if permitted by Section 422 and related sections of the
Code and any regulations promulgated thereunder.
(g) Listing and Registration. Each Option shall be subject to the
requirement that if at any time the Board, or if so designated the
Committee, shall determine, in its discretion, the listing,
registration or qualification of the Stock subject to such Option upon
any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the granting of
such Option or the issue or purchase of shares thereunder, no such
Option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Board, or if so designated the Committee.
(h) Option Agreement. Each Employee to whom an Option is granted shall
enter into an agreement with the Corporation which shall contain such
provisions, consistent with the provisions of the Plan, as may be
established by the Board, or if so designated the Committee.
(i) Withholding. Prior to the delivery of certificates for shares of
Stock, the Corporation or a subsidiary shall have the right to require
a payment from an Employee to cover any applicable withholding or other
employment taxes due upon the exercise of an Option.
6. STOCK APPRECIATION RIGHTS
The Board or Committee may grant stock appreciation rights (SARs) in
connection with all or any part of an Option granted under the Plan, either
concurrently with the grant of the Option or at any time thereafter, and may
also grant SARs independently of Options.
(a) SARs Granted in Connection with an Option. An SAR granted in
connection with an Option entitles the Optionee to exercise the SAR by
surrendering to the Corporation, unexercised, the underlying Option. The
Optionee receives in exchange from the Corporation an
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<PAGE> 5
amount equal to the excess of (x) the Fair Market Value on the date of surrender
of the underlying Option over (y) the exercise price of the Common Stock covered
by the surrendered portion of the Option.
When an SAR is exercised, the underlying Option, to the extent
surrendered, ceases to be exercisable, and the number of shares available for
issuance under the Plan is reduced correspondingly.
An SAR is exercisable only when and to the extent the underlying Option
is exercisable and expires no later than the date on which the underlying Option
expires. Notwithstanding the foregoing, neither an SAR nor a related Option may
be exercised during the first six (6) months of its respective term: provided,
however, that this limitation will not apply if the Optionee dies or is disabled
within such six (6) month period.
(b) Independent SARs. The Board or the Committee may grant SARs without
related Options. Such an SAR will entitle the Optionee to receive from the
Corporation on exercise of the SAR an amount equal to the excess of (x) the fair
market value of the Common Stock covered by the exercised portion of the SAR, as
of the date of such exercise, over (y) the fair market value of the Common Stock
covered by the exercised portion of the SAR as of the date on which the SAR was
granted.
SARs shall be exercisable in whole or in part at such times as the
Board or the Committee shall specify in the Optionee's SAR grant or agreement.
Notwithstanding the foregoing, an SAR may not be exercised during the first six
(6) months of its term: provided, however, that this limitation will not apply
if the Optionee dies or is disabled within such six (6) month period.
(c) Payment on Exercise. The Corporation's obligations arising upon the
exercise of an SAR may be paid in cash or Common Stock, or any combination of
the same, as the Board or the Committee may determine. Shares issued on the
exercise of an SAR are valued at their Fair Market Value as of the date of
exercise.
(d) Limitation on Amount paid on SAR Exercise. The Board or the
Committee may in its discretion impose a limit on the amount to be paid on
exercise of an SAR. In the event such a limit is imposed on an SAR granted in
connection with an Option, the limit will not restrict the exercisability of the
underlying Option.
(e) Persons Subject to 16(b). An Optionee subject to Section 16(b) of
the Securities Exchange Act of 1934, as amended, may only exercise an SAR during
the period beginning on the third and ending on the twelfth business day
following the Corporation's public release of quarterly or annual summary
statements of sales and earnings and in accordance with all other provisions of
Section 16(b).
(f) Non-Transferability of SARs. An SAR is non-transferable by the
Optionee other than by will or the laws of descent and distribution, and is
exercisable during the Optionee's lifetime only by the Optionee, or, in the
event of death, by the Optionee's estate or by a person who acquires the right
to exercise the Option by bequest or inheritance.
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<PAGE> 6
(g) Effect on Shares in Plan. When an SAR is exercised, the aggregate
number of shares of Common Stock available for issuance under the Plan will be
reduced by the number of underlying shares of Common Stock as to which the SAR
is exercised.
7. ADJUSTMENT OF AND CHANGES IN STOCK
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, or distribution of
substantially all or all of the assets of the Corporation, the Board, or if so
designated the Committee, shall make such adjustments as it deems appropriate in
the number and kind of shares and SARs authorized by the Plan, in the number and
kind of shares covered by the Options granted and in the exercise price of
outstanding Options and SARs.
8. MERGERS, SALES AND CHANGE OF CONTROL
In the case of (i) any merger, consolidation or combination of the
Corporation with or into another corporation (other than a merger, consolidation
or combination in which the Corporation is the continuing corporation and which
does not result in its outstanding stock being converted into or exchanged for
different securities, cash or other property, or any combination thereof or a
sale of all or substantially all of the business or assets of the Corporation or
(ii) a Change in Control (as defined below) of the Corporation, each Option or
SAR then outstanding for one year or more shall (unless the Board, or if so
designated the Committee, determines otherwise), receive upon exercise of such
Option or SAR an amount equal to the excess of the Fair Market Value on the date
of such exercise of (a) the securities, cash or other property, or combination
thereof, receivable upon such merger, consolidation or combination in respect of
a share of Stock, in the cases covered by clause (i) above, or (b) the final
tender offer price in the case of a tender offer resulting in a Change in
Control or (c) the value of the Stock covered by the Option or SAR as determined
by the Board, or if so designated the Committee, in the case of a Change in
Control by reason of any other event, over the exercise price of such Option,
multiplied by the number of shares of Stock with respect to which such Option or
SAR shall have been exercised provided that, in each event the amount payable in
the case of an incentive stock Option shall be limited to the maximum
permissible amount necessary to preserve the Option incentive stock Option
status. Such amount may be payable fully in cash, fully in one or more of the
kind or kinds or property payable in such merger, consolidation or combination,
or partly in cash and partly in one or more such kind or kinds of property, all
in the discretion of the Board or if so designated the Committee.
Any determination by the Board, or if so designated the Committee, made
pursuant to this Section 7 may be made as to all outstanding Options and SARs or
only as to certain Options and SARs specified by the Board, or if so designated
the Committee and any such determination shall be made (a) in cases covered by
clause (i) above, prior to the occurrence of such event, (b) in the event of a
tender or exchange offer, prior to the purchase of any Stock pursuant thereto by
the offeror and (c) in the case of a Change in Control by reason of any other
event, just prior to or as soon as practicable after such Change in Control.
A "Change in Control" shall be deemed to have occurred if (a) any
person, or any two or more persons acting as a group, and all affiliates of such
person or persons, shall own
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beneficially 40% or more of the Stock outstanding, or (b) if following (i) a
tender or exchange offer for voting securities of the Corporation, or (ii) a
proxy contest for the election of directors of the Corporation, the persons who
were directors of the Corporation immediately before the initiation of such
event cease to constitute a majority of the Board of Directors of the
Corporation upon the completion of such tender or exchange offer or proxy
contest or within one year after such completion. Notwithstanding the provisions
of this Agreement, (i) the Board shall have the right to amend or modify this
definition of a "Change in Control" and (ii) a "Change in Control" shall not be
deemed to occur in the event BEn sells, assigns, transfers, pledges,
hypothecates, or otherwise encumbers or disposes of in any way, all or any part
of or any interest in the its shares now or hereafter owned or held to any
subsidiary or affiliate of BEn or to Freemont Group Inc.
9. NO RIGHTS OF SHAREHOLDERS
Neither an Employee nor the Employee's legal representative shall be,
or have any of the rights and privileges of, a shareholder of the Corporation in
respect of any shares purchasable upon the exercise of any Option, in whole or
in part, unless and until certificates for such shares shall have been issued.
10. PLAN AMENDMENTS
The plan may be amended by the Board, as it shall deem advisable or to
conform, to any change in any law or regulation applicable thereto; provided,
that the Board may not, without the authorization and approval of shareholders:
(i) increase the aggregate number of shares available for Options except as
permitted by Section 7, (ii) change the requirement of Section 5(a) that Option
grants be priced at Fair Market value, (iii) extend the maximum period during
which an Option may be exercised, or (iv) change the Plan's eligibility
requirements.
11. TERM OF PLAN
The Plan shall become effective upon its approval by a majority of the
Corporation's shareholders. No Options or SARs shall be granted under the Plan
after January 10, 2000.
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EXHIBIT 10.3
SECOND
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
by and among
BOLT, INC.,
SANDLER CAPITAL PARTNERS IV, L.P.,
SANDLER CAPITAL PARTNERS IV FTE, L.P.,
BECHTEL ENTERPRISES HOLDINGS, INC.,
HIGHLAND CAPITAL PARTNERS IV LIMITED PARTNERSHIP,
HIGHLAND ENTREPRENEURS FUND IV LIMITED PARTNERSHIP
OAK INVESTMENT PARTNERS VIII, LIMITED PARTNERSHIP
OAK VIII AFFILIATES FUND, LIMITED PARTNERSHIP
MOORE GLOBAL INVESTMENTS, LTD.
REMINGTON INVESTMENTS STRATEGIES, L.P.
AND
THE OTHER INVESTORS
Dated as of November 17, 1999
<PAGE> 2
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is entered into as of November 17, 1999, by and among BOLT, INC.,
a Delaware corporation (the "Company"), SANDLER CAPITAL PARTNERS IV, L.P.; a
Delaware limited partnership ("SCP IV"), SANDLER CAPITAL PARTNERS IV FTE, L.P.,
a Delaware limited partnership ("SCP IV FTE" and, collectively with SCP IV,
"Sandler"), BECHTEL ENTERPRISES HOLDINGS, INC. a Delaware corporation (formerly
known as BECHTEL ENTERPRISES, INC.) ("Bechtel"), HIGHLAND CAPITAL PARTNERS IV
LIMITED PARTNERSHIP, a Delaware limited partnership ("HCP IV") HIGHLAND
ENTREPRENEURS FUND IV LIMITED PARTNERSHIP ("HEF IV" and, collectively with HCP
IV, "Highland"), OAK INVESTMENT PARTNERS VIII, LIMITED PARTNERSHIP, a Delaware
limited partnership ("Oak VIII"), OAK VIII AFFILIATES FUND, LIMITED
PARTNERSHIP, a Delaware limited partnership ("Oak Affiliates" and, collectively
with Oak VIII, "Oak"), MOORE GLOBAL INVESTMENTS, LTD., a Bahamian limited
company ("Moore"), REMINGTON INVESTMENTS STRATEGIES, L.P., a Delaware limited
partnership ("Remington", and together with Moore, the "Moore Parties") and the
parties listed on Schedules 1 and 2 hereto (the "Other Investors").
WITNESSETH:
WHEREAS, the Company has entered into that certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated as of the date hereof with
the Moore Parties and the parties listed on Schedule 1 thereto (the "Series C
Investors"), pursuant to which the Company has agreed to issue and sell to the
Series C Investors shares of the Company's Series C Convertible Preferred
Stock, par value $0.001 per share, (the "Series C Stock");
WHEREAS, the Company has agreed to grant certain registration rights
with respect to shares of the Company's Common Stock, par value $0.001 per
share (the "Common Stock") issuable upon conversion of the Series C Stock
issued to the Series C Investors pursuant to the Stock Purchase Agreement;
WHEREAS, the Company has entered into that certain Stock Purchase
Agreement (the "Oak Stock Purchase Agreement"), dated as of March 1, 1999, with
Oak pursuant to which the Company issued and sold to Oak shares of the
Company's Series B-2 Convertible Preferred Stock, par value $0.001 per share
(the "Series B-2 Stock");
WHEREAS, the Company granted certain registration rights with respect
to the shares of the Company's Common Stock, par value $0.001 per share, (the
"Common Stock") issuable upon conversion of the Series B-2 Stock issued to Oak
pursuant to the Oak Stock Purchase Agreement;
WHEREAS, the Company has entered into that certain Stock Purchase
Agreement (the "Sandler Stock Purchase Agreement"), dated as of February 23,
1999, with Sandler, Highland
<PAGE> 3
and the parties listed on Schedule 2 thereto (the "Sandler Investors") pursuant
to which the Company issued and sold to Sandler, Highland and the Sandler
Investors shares of the Company's Series B-1 Convertible Preferred Stock, par
value $0.001 per share (the "Series B-1 Stock");
WHEREAS, the Company has granted certain registration rights with
respect to the shares of the Company's Common Stock issuable upon conversion of
the Series B-1 Stock issued to Sandler, Highland and the Sandler Investors
pursuant to the Sandler Stock Purchase Agreement;
WHEREAS, the Company has entered into those certain Bolt Media, Inc.
Series B-1 Convertible Preferred Stock Subscription Agreements (the
"Subscription Agreements"), dated as of February 23, 1999, with the Other
Investors which are not the Sandler Investors (the "Providence Investors")
pursuant to which the Company issued and sold to the Providence Investors
shares of the Series B-1 Stock;
WHEREAS, the Company has granted certain registration rights with
respect to the Common Stock issuable upon conversion of the Series B-1 Stock
issued to the Providence Investors;
WHEREAS, as of the date hereof, Bechtel owns (i) 600,000 shares of the
Company's Series A-1 Convertible Preferred Stock, par value $0.001 per share,
and (ii) 125,000 shares of the Company's Series A-2 Convertible Preferred
Stock, par value $0.001 per share (collectively, the "Series A Stock");
WHEREAS, the Company and Bechtel have terminated, among other things,
the registration rights granted to Bechtel pursuant to Section 6 of that
certain Series A Convertible Preferred Stock Purchase Agreement dated as of
January 10, 1997, between the Company and Bechtel;
WHEREAS, the Company has granted Bechtel certain registration rights
with respect to the shares of Common Stock issuable upon conversion of the
Series A Stock as contemplated herein;
WHEREAS, pursuant to the Registration Rights Agreement, dated February
23, 1999 (the "Original Registration Rights Agreement"), by and among the
Company and the stockholders named therein, which included the Sandler
Investors and Bechtel, the Company granted certain registration rights to
stockholders;
WHEREAS, the Original Registration Rights Agreement was amended and
restated as of March 1, 1999 to grant Oak the same registration rights granted
to the parties to the Original Registration Rights Agreement (the "Amended and
Restated Registration Rights Agreement");
WHEREAS, the Company issued a Preferred Stock Purchase Warrant to
Lighthouse Capital Partners III, L.P. ("Lighthouse") on August 23, 1999, which
warrant was amended as of November 17, 1999 (the "Warrant") to provide, among
other things, for the purchase of shares of Series B-3 Convertible Preferred
Stock, par value $.001 per share (the "Series B-3 Stock" and
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<PAGE> 4
collectively with the Series B-1 Stock and Series B-2 Stock, the "Series B
Stock") in lieu of Series B-2 Stock;
WHEREAS, the Company and the parties to the Amended and Restated
Registration Rights Agreement agree to further amend and restate in its
entirely the Amended and Restated Registration Rights Agreement in order to
grant the Series C Investors the same registration rights granted to the other
parties to the Amended and Restated Registration Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and in order to further amend and restate in its entirely the Amended and
Restated Registration Rights Agreement, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following
respective meanings:
1.1 "Commission" shall mean the Securities and Exchange
Commission, or any other successor federal agency at the time administering the
Securities Act.
1.2 "Common Stock" shall mean the Company's common stock, par
value $0.001 per share.
1.3 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.4 "Holders" shall mean and include each of Bechtel, Sandler,
Highland, the Other Investors, Oak, the Series C Investors and any person or
entity that shall have executed this Agreement and whose name appears on the
Schedule of Registration Rights Holders attached hereto as Exhibit A or who
shall, pursuant to Section 11.3 hereof, become a party hereto, and any
permitted transferee under Article 9 hereof which holds Registrable Securities.
1.5 "Initiating Holders" shall mean any Holder or Holders other
than the Series C Investors who in the aggregate own not less than forty
percent (40%) of the Registrable Securities; provided, however, that after the
date on which the Company has closed its Initial Public Offering, "Initiating
Holders" shall mean any Holders who in the aggregate own not less than twenty
percent (20%) of the Registrable Securities.
1.6 "Initial Public Offering" shall mean the closing of the first
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act, covering the offer and sale of
Common Stock to the public that raises gross proceeds for the Company of at
least $20,000,000 and at an aggregate offering price to the public that
reflects a value of the Company, on a Fully-Diluted Basis, of (i) at least
$25,000,000 if such offering is commenced on or before the first anniversary
(on a pre-money equity valuation) of the date
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<PAGE> 5
March 1, 1999 or (ii) at least $31,250,000 (on a pre-money equity valuation) if
such offering is commenced after the first anniversary of March 1, 1999.
1.7 Reserved.
1.8 The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act, and the
declaration or ordering by the Commission of the effectiveness of such
registration statement.
1.9 "Registrable Securities" means any and all shares of Common
Stock: (i) issued or issuable upon conversion of the Series A Stock, the Series
B Stock and the Series C Stock; (ii) issued or issuable with respect to the
Series A Stock, the Series B Stock or the Series C Stock upon any stock split,
stock dividend, combination, recapitalization, reclassification, merger,
consolidation or other similar event; and (iii) otherwise held or acquired by
any of Bechtel, Sandler, Highland, Oak, or the Series C Investors or the Other
Investors excluding in all cases, however, Registrable Securities sold by a
Holder to the public or pursuant to Rule 144 promulgated under the Securities
Act (or any similar or analogous rule promulgated under the Securities Act).
For purposes of this Agreement, a person will be deemed to be a Holder of
Registrable Securities whenever such person has the right to acquire directly
or indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
1.10 "Registration Expenses" shall mean all expenses incurred by
the Company in complying with Articles 2 and 3 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
messenger and delivery expenses, escrow fees, fees and disbursements of legal
counsel for the Company and all independent certified public accountants,
underwriters (excluding discounts and commissions) and persons retained by the
Company (but excluding the compensation of regular employees of the Company,
which shall be paid in any event by the Company), fees and disbursements of one
legal counsel for the selling Holders, blue sky fees and expenses, and the
expenses of any special audits incident to or required by any such registration
by the Company.
1.11 "S-3 Registration Expenses" shall mean all expenses incurred
by the Company in complying with Article 4 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
messenger and delivery expenses, escrow fees, fees and disbursements of legal
counsel for the Company and all independent certified public accountants,
underwriters (excluding discounts and commissions) and persons retained by the
Company (but excluding the compensation of regular employees of the Company,
which shall be paid in any event by the Company), fees and disbursements of one
legal counsel for the selling Holders, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration.
1.12 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
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<PAGE> 6
1.13 "Selling Expenses" shall mean all underwriting fees,
discounts, selling commissions and stock transfer taxes applicable to the
Registrable Securities registered by the Holders.
1.14 "Series C Investors" shall mean the purchasers of Series C
Convertible Preferred Stock, par value $0.001 per share, of the Company (the
"Series C Stock") set forth on Schedule 2 attached hereto.
1.15 "Series C Qualified Public Offering" means the closing of a
firm commitment underwritten public offering pursuant to an effective
registration under the Securities Act covering the offer and sale of Common
Stock to the public that raises proceeds to the Company of at least twenty-five
million dollar ($25,000,000), after underwriters discounts and expenses, at an
offering price of at least seventeen dollars and ninety-four cents, $17.94,
subject to adjustment for dividends, distributions, stock splits, combinations,
recapitalizations, reclassifications, mergers or consolidations and similar
other types of events.
ARTICLE 2
REQUESTED REGISTRATION
2.1 Request by Holders for Registration. Beginning on the earlier
of (i) the date which is 180 days after the effective date of an Initial Public
Offering or (ii) March 1, 2001, Initiating Holders may request registration in
accordance with this Article 2; provided that, Initiating Holders may not
request registration pursuant to this Article 2 prior to the effective date of
an Initial Public Offering unless such requested registration is for a public
offering of shares reasonably anticipated to have an aggregate offering price
to the public of at least $5,000,000. In the event the Company shall receive
from any one or more of the Initiating Holders a written request that the
Company effect any such registration, qualification or compliance with respect
to Registrable Securities, the Company will:
(a) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(b) use its best efforts to effect such registration,
qualification or compliance as soon as practicable (including, without
limitation, undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with applicable regulations issued under the Securities
Act, and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder
or Holders joining in such request as are specified in a written request
received by the Company within 15 days after the receipt of the written notice
from the Company described in Section 2.1(a); provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 2.1:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification
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<PAGE> 7
or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;
(ii) within one hundred and eighty (180) days immediately
following the effective date of any registration statement pertaining
to a firm commitment underwritten offering of securities of the
Company for its own account;
(iii) after the Company has effected three (3) such
requested registrations pursuant to this Section 2.1 (not including
registrations on Form S-3), each such registration has been declared
or ordered effective, and the Registrable Securities offered pursuant
to each such registration have been sold, or if the Company has
effected any requested registration (other than a registration for the
Company's Initial Public Offering) pursuant to this Agreement during
the previous six-month period;
(iv) if the Company then meets the eligibility
requirements applicable to the use of Form S-3 in connection with such
registration and is able to effect such requested registration
pursuant to Article 4 hereof; or
(v) if the Company, within ten (10) days of the receipt
of the request of the Holder or Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the
Commission within forty-five (45) days of receipt of such request
(other than with respect to a registration statement relating to a
Rule 145 transaction or an offering solely to employees).
(c) Subject to the foregoing clauses (i) through (v), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
of the Initiating Holders and provide notice to the other Holders as required
by Section 2.1(a); provided, however, that if the Company shall furnish to such
Holders a certificate signed by the Chairman or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be detrimental to the Company and its stockholders for
such registration statement to be filed, the Company shall have the right to
defer such filing for a period of not more than 180 days after receipt of the
request of the Initiating Holders; provided, further, that the Company shall
not be permitted to exercise such deferral right under this Section 2.1(c) or
Section 4.1(c) hereof more than once in any 365-day period.
2.2 Request by Series C Investors for Registration. Beginning on
the earlier of (i) the date which is 180 days after the effective date of
Series C Qualified Public Offering or (ii) the date which is after the second
anniversary of the date of this Agreement, upon the request of one or more of
the Series C Investors who own in the aggregate not less than forty percent of
the Series C Stock (the "Series C Initiating Holders"), such Series C
Initiating Holders may request registration in accordance with this Article 2;
provided that, the Series C Initiating Holders may not request registration
pursuant to this Article 2 prior to the effective date of Series C Qualified
Public Offering unless such requested registration is for a public offering of
shares reasonably anticipated to have an aggregate offering price to the public
of at least $5,000,000. In the event the Company shall receive from the Series
C Initiating Holders a written request that the
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<PAGE> 8
Company effect any such registration, qualification or compliance with respect
to Registrable Securities, the Company will:
(a) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(b) use its best efforts to effect such registration,
qualification or compliance as soon as practicable (including, without
limitation, undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and
appropriate compliance with applicable regulations issued under the Securities
Act, and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder
or Holders joining in such request as are specified in a written request
received by the Company within 15 days after the receipt of the written notice
from the Company described in Section 2.2(a); provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 2.2:
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act;
(ii) within one hundred and eighty (180) days immediately
following the effective date of any registration statement pertaining
to a firm commitment underwritten offering of securities of the
Company for its own account;
(iii) after the Company has effected one (1) such requested
registration pursuant to this Section 2.2 (not including registrations
on Form S-3), each such registration has been declared or ordered
effective, and the Registrable Securities offered pursuant to each
such registration have been sold, or if the Company has effected any
requested registration (other than a registration for the Company's
Initial Public Offering) pursuant to this Agreement during the
previous six-month period;
(iv) if the Company then meets the eligibility
requirements applicable to the use of Form S-3 in connection with such
registration and is able to effect such requested registration
pursuant to Article 4 hereof; or
(v) if the Company, within ten (10) days of the receipt
of the request of the Holder or Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the
Commission within forty-five (45) days of receipt of such request
(other than with respect to a registration statement relating to a
Rule 145 transaction or an offering solely to employees).
(c) Subject to the foregoing clauses (i) through (v), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
of the Series C Initiating Holders and provide notice to the
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<PAGE> 9
other Holders as required by Section 2.2(a); provided, however, that if the
Company shall furnish to such Holders a certificate signed by the Chairman or
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be detrimental to the
Company and its stockholders for such registration statement to be filed, the
Company shall have the right to defer such filing for a period of not more than
180 days after receipt of the request of such Series C Initiating Holders;
provided, further, that the Company shall not be permitted to exercise such
deferral right under this Section 2.2(c) or Section 4.1(c) hereof more than
once in any 365-day period.
2.3 Underwriting.
(a) With respect to registrations initiated pursuant to Section
2.1 herein, the distribution of the Registrable Securities covered by the
request of the Holders shall be effected by means of the method of distribution
selected by the Holders holding a majority of the Registrable Securities
covered by such registration. With respect to registrations initiated pursuant
to Section 2.2 herein, the distribution of Registrable Securities covered by
such request shall be effected by means of the method selection by the holders
of a majority of the Series C Investors holding Registrable Securities. If
such distribution is effected by means of an underwriting, the right of any
Holder to registration pursuant to this Article 2 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein.
(b) If such distribution is effected by means of an underwriting,
the Company (together with all Holders proposing to distribute their securities
through such underwriting (the "Participating Holders")) shall enter into an
underwriting agreement in customary form with a managing underwriter of
nationally recognized standing selected for such underwriting by the Company
and approved by a majority in interest of the Participating Holders, which
approval shall not be unreasonably withheld. Notwithstanding any other
provision of this Article 2, if the managing underwriter advises the
Participating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the underwriters may exclude
shares requested to be included in such registration. The number of shares of
Registrable Securities to be included in the registration and underwriting
shall be allocated among the Participating Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Participating Holders at the time of filing the registration statement. In
addition, if the managing underwriter further determines that marketing factors
require a further limitation on the number of shares proposed to be registered
by each of Daniel Pelson ("Pelson"), and Jane Mount ("Mount"), then the
underwriters may exclude such shares as may be necessary to effect such
registration in proportion as nearly as practicable, to the respective amounts
of Registrable Securities held by each of Pelson and Mount at the time of
filing the registration statement. No Registrable Securities excluded from the
underwriting by reason of the managing underwriter's marketing limitation shall
be included in such registration.
(c) If any Participating Holder disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the other Participating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration; provided, however, that if by the withdrawal of
such Registrable Securities a greater number of Registrable Securities held by
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<PAGE> 10
other Participating Holders may be included in such registration (up to the
maximum of any limitation imposed by the underwriters), then the Company shall
offer to all Participating Holders who have included Registrable Securities in
the registration the right to include additional Registrable Securities in the
same proportion used in determining the underwriter limitation in this Section
2.3.
2.4 Inclusion of Shares by Company. If the distribution of
Registrable Securities is being effected by means of an underwriting and if the
managing underwriter has not limited the number of Registrable Securities to be
underwritten, the Company may include securities for its own account or for the
account of others in such registration if the managing underwriter so agrees.
The inclusion of such shares shall be on the same terms as the registration of
shares held by the Participating Holders. In the event that the underwriters
exclude some of the securities to be registered, the securities to be sold for
the account of the Company and any other holders shall be excluded in their
entirety prior to the exclusion of any Registrable Securities.
2.5 Cancellation of Registration. A majority in interest of the
Participating Holders shall have the right to cancel a proposed registration of
Registrable Securities pursuant to Article 2 when, in their discretion, market
conditions are so unfavorable as to be seriously detrimental to an offering
pursuant to such registration. Such cancellation of a registration shall not
be counted as one of the three (3) such requested registrations pursuant to
Section 2.1(b)(iii) or the one (1) such requested registration pursuant to
Section 2.2; provided, however, that the Holders canceling such registration
shall pay expenses attributable to such registration.
ARTICLE 3
COMPANY REGISTRATION
3.1 Notice of Registration to Holders. If at any time or from
time to time the Company shall determine to register any of its securities,
either for its own account or the account of a security holder or holders,
other than (i) a registration qualifying as an Initial Public Offering (ii) a
registration relating solely to employee benefit plans on Form S-8 (or any
successor form) or (iii) a registration relating solely to a Commission Rule
145 transaction on Form S-4 (or any successor form or other form not available
for registering the Registrable Securities to the public), the Company will:
(a) promptly give to each Holder written notice thereof, and
(b) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 30 days after receipt of such written notice from the
Company described in Section 3.1(a), by any Holder or Holders.
3.2 Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3.1(a). In such event, the right of any Holder to
registration pursuant to this Article 3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their
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<PAGE> 11
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company.
(a) Notwithstanding any other provision of this Article 3, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may exclude some or
all Registrable Securities from such registration and underwriting. The
Company shall so advise all Holders of Registrable Securities, and the number
of shares of Common Stock to be included in such registration shall be
allocated as follows: first, for the account of the Company, all shares of
Common Stock proposed to be sold by the Company, and second, for the account of
any other stockholders of the Company participating in such registration, the
number of shares of Common Stock requested to be included in the registration
by such other stockholders in proportion, as nearly as practicable, to the
respective amounts of securities that are proposed to be offered and sold by
such other stockholders of such securities at the time of filing the
registration statement. No Registrable Securities excluded from the
underwriting by reason of the underwriters' marketing limitation shall be
included in such registration.
(b) The Company shall so advise all Holders and the other holders
distributing their securities through such underwriting of any such limitation,
and the number of shares of Registrable Securities held by Holders that may be
included in the registration. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, but
the Holder shall continue to be bound by Article 8 hereof.
(c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Article 3 prior to the effectiveness of
such registration, whether or not a Holder has elected to include Registrable
Securities in such registration, without thereby incurring any liability to the
Holders of the Registrable Securities.
ARTICLE 4
REGISTRATION ON FORM S-3
4.1 Request for Registration.
(a) In addition to the rights set forth in Articles 2 and 3
hereof, if a Holder or Holders request that the Company file a registration
statement on Form S-3 (or any successor to Form S-3) for a public offering of
shares of Registrable Securities having an aggregate offering price of at least
$1,000,000 (based on the then current market price) and the Company is a
registrant entitled to use Form S-3 (or any successor form to Form S-3) to
register such shares for such an offering, the Company shall use its best
efforts to cause such shares to be registered for the offering as soon as
practicable on Form S-3 (or any such successor form to Form S-3) and shall
promptly give written notice of the proposed registration to all other Holders.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Article 4:
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<PAGE> 12
(i) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act;
(ii) if the Company, within ten (10) days of the receipt
of the request of the Holder or Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the
Commission within forty-five (45) days of receipt of such request
(other than with respect to a registration statement relating to a
Rule 145 transaction or an offering solely to employees);
(iii) during the period starting with the date of filing
of, and ending on a date which is 180 days following the effective
date of, a registration statement described in (ii) above or filed
pursuant to this Article 4 or Articles 2 or 3 hereof (or such shorter
period as the managing underwriter of the Company's most recent public
offering may agree), provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration
statement to become effective and provided, further, that no other
person or entity could require the Company to file a registration
statement in such period;
(c) Subject to the foregoing clauses (b) (i) through (iii), the
Company shall file a registration statement on Form S-3 covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request of the Holders; provided, however, that if the
Company shall furnish to such Holders a certificate signed by the Chairman or
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be detrimental to the
Company and its stockholders for such registration statement to be filed on or
before the date filing would be required, and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than 90 days after receipt
of the request of the Holders; provided, further, that the Company shall not be
permitted to exercise such deferral right under this Section 4.1(c) or Section
2.1(c) or 2.2(c) hereof more than once in any 365-day period.
4.2 Underwriting.
(a) The distribution of the Registrable Securities covered by the
registration on Form S-3 shall be effected by means of the method of
distribution selected by the Holders holding a majority of the Registrable
Securities covered by such registration. If such distribution is effected by
means of an underwriting, the right of any Holder to registration pursuant to
this Article 4 shall be conditioned upon such Holder's participation in such
underwriting, if any, and the inclusion of such Holder's Registrable Securities
in such underwriting.
(b) If the distribution of the Registrable Securities pursuant to
this Section 4.2 is effected by means of an underwriting, the Company (together
with all Holders proposing to distribute their securities through such
underwriting) shall enter into an underwriting agreement in customary form with
a managing underwriter of nationally recognized standing selected for such
underwriting by the Company and approved by a majority in interest of the
Holders requesting registration on Form S-3, which approval shall not be
unreasonably withheld.
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Notwithstanding any other provision of this Article 4, if the managing
underwriter advises the Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the underwriters
may exclude some or all of the shares requested to be included in such
registration, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing
the registration statement. No Registrable Securities excluded from the
underwriting by reason of the managing underwriter's marketing limitation shall
be included in such registration.
(c) If the distribution of the Registrable Securities pursuant to
this Section 4.2 is effected by means of an underwriting and if any Holder of
Registrable Securities disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Holders. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration; provided,
however, that if by the withdrawal of such Registrable Securities a greater
number of Registrable Securities held by other Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Company shall offer to all Holders who have included Registrable
Securities in the registration the right to include additional Registrable
Securities in the same proportion used in determining the underwriter
limitation in this Section 4.2.
4.3 Inclusion of Shares by Company. If the distribution of the
Registrable Securities pursuant to this Article 4 is effected by means of an
underwriting and if the managing underwriter has not limited the number of
Registrable Securities to be underwritten, the Company may include securities
for its own account or for the account of others in such registration if the
managing underwriter so agrees and if the number of Registrable Securities held
by Holders requesting registration on Form S-3 which would otherwise have been
included in such registration and underwriting will not thereby be limited.
The inclusion of such shares shall be on the same terms as the registration of
shares held by the Holders requesting such registration. In the event that the
underwriters exclude some of the securities to be registered on Form S-3, the
securities to be sold for the account of the Company and any other holders
shall be excluded in their entirety prior to the exclusion of any Registrable
Securities.
ARTICLE 5
EXPENSES OF REGISTRATION
All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Article 2 (but only with
respect to four (4) registrations effected pursuant to such Article) and
Article 3 hereof and all S-3 Registration Expenses shall be borne by the
Company. All Selling Expenses relating to Registrable Securities registered by
the Holders shall be borne by the Holders of such Registrable Securities pro
rata on the basis of the number of shares so registered.
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ARTICLE 6
REGISTRATION PROCEDURES
(a) In the case of each registration effected by the Company
pursuant to this Agreement, the Company will keep each Holder advised in
writing as to the initiation of each registration and as to the completion
thereof. The Company agrees to use its best efforts to effect or cause such
registration to permit the sale of the Registrable Securities covered thereby
by the Holders thereof in accordance with the intended method or methods of
distribution thereof described in such registration statement. In connection
with any registration of any Registrable Securities pursuant to Article 2, 3 or
4 hereof, the Company shall, as soon as reasonably possible:
(i) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement filed to become effective
(provided that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Company comply with
subparagraph (iii) of this paragraph (a)) as soon as reasonably
possible thereafter;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus
included therein as may be necessary to effect and maintain the
effectiveness of such registration statement as may be required by the
applicable rules and regulations of the Commission and the
instructions applicable to the form of such registration statement,
and furnish to the holders of the Registrable Securities covered
thereby copies of any such supplement or amendment prior to this being
used and/or filed with the Commission; and comply with the provisions
of the Securities Act with respect to the disposition of all the
Registrable Securities to be included in such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iii) provide (A) the Holders of the Registrable Securities
to be included in such registration statement, (B) the underwriters
(which term, for purposes of this Agreement, shall include a person
deemed to be an underwriter within the meaning of Section 2(11) of the
Securities Act), if any, thereof, (C) the sales or placement agent, if
any, therefor, (D) one counsel for such underwriters or agent, and (E)
not more than one counsel for all the Holders of such Registrable
Securities, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with
the Commission, and each amendment or supplement thereto;
(iv) for a reasonable period prior to the filing of such
registration statement, and throughout the period specified above,
make available for inspection by the parties referred to in Section
6(a)(iii) above such financial and other information and books and
records of the Company, and cause the officers, directors, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section
6(a)(iii), to conduct a reasonable investigation within the meaning of
the Securities Act; provided, however, that each such party shall be
required to maintain in
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confidence and not disclose to any other person or entity any
information or records reasonably designated by the Company in writing
as being confidential, until such time as (a) such information becomes
a matter of public record (whether by virtue of its inclusion in such
registration statement or otherwise), or (b) such party shall be
required so to disclose such information pursuant to the subpoena or
order of any court or other governmental agency or body having
jurisdiction over the matter, or (c) such information is required to
be set forth in such registration statement or the prospectus included
therein or in an amendment to such registration statement or an
amendment or supplement to such prospectus in order that such
registration statement, prospectus, amendment or supplement, as the
case may be, does not include an untrue statement of a material fact
or omit to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; and
provided, further, that the Company need not make such information
available, nor need it cause any officer, director or employee to
respond to such inquiry, unless each such Holder of Registrable
Securities to be included in a registration statement hereunder and
such counsel, upon the Company's request, execute and deliver to the
Company an undertaking to substantially the same effect contained in
the second preceding proviso;
(v) promptly notify the Holders of Registrable Securities
to be included in a registration statement hereunder, the sales or
placement agent, if any, therefor and the managing underwriter of the
securities being sold and confirm such advice in writing, (A) when
such registration statement or the prospectus included therein or any
prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (B) of
any comments by the Commission and by the blue sky or securities
commissioner or regulator of any state with respect thereto or any
request by the Commission for amendments or supplements to such
registration statement or the prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
initiation of any proceedings for that purpose, (D) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, or (E) if it shall be the case, at any time when a
prospectus is required to be delivered under the Securities Act, that
such registration statement, prospectus, or any document incorporated
by reference, in any of the foregoing contains an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(vi) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or
any post-effective amendment thereto or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such
registration statement for sale in any jurisdiction at the earliest
practicable date;
(vii) if requested by any managing underwriter or
underwriter, any placement or sales agent or any Holder of Registrable
Securities to be included in a registration statement, promptly
incorporate in a prospectus, prospectus supplement or post-effective
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amendment such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Holder may reasonably specify should
be included therein relating to the terms of the sale of the
Registrable Securities included thereunder, including, without
limitation, information with respect to the number of Registrable
Securities being sold by such Holder or agent or to such underwriters,
the name and description of such Holder, the offering price of such
Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of
the offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus; prospectus
supplement or post-effective amendment promptly after notification of
the matters to be incorporated in such prospectus, prospectus
supplement or post-effective amendment;
(viii) furnish to each Holder of Registrable Securities to
be included in such registration statement hereunder, each placement
or sales agent, if any, therefor, each underwriter, if any, thereof
and the counsel referred to in Section 6(a)(iii) an executed copy of
such registration statement, each such amendment and supplement
thereto (in each case excluding all exhibits and documents
incorporated by reference) and such number of copies of the
registration statement (excluding exhibits thereto and documents
incorporated by reference therein unless specifically so requested by
such holder, agent or underwriter, as the case may be) and of the
prospectus included in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with
the requirements of the Securities Act, as such Holder, agent, if any,
and underwriter, if any, may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Holder
sold by such agent or underwritten by such underwriter and to permit
such Holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to
the use of such prospectus and any amendment or supplement thereto by
each such Holder and by any such agent and underwriter, in each case
in the form most recently provided to such party by the Company, in
connection with the offering and sale of the Registrable Securities
covered by the prospectus (including such preliminary and summary
prospectus) or any supplement or amendment thereto or of the issuance
by the Commission of any stop order suspending the effectiveness of
such registration statement or the initiation of any proceedings for
that purpose;
(ix) use its best efforts to (A) register or qualify the
Registrable Securities to be included in such registration statement
under such other securities laws or blue sky laws of such
jurisdictions to be designated by the Holders of a majority of such
Registrable Securities participating in such registration and each
placement or sales agent, if any, therefor and underwriter, if any,
thereof, as any Holder and each underwriter, if any, of the securities
being sold shall reasonably request, (B) keep such registrations or
qualifications in effect and comply with such laws so as to permit the
continuance of offers, sales and dealings therein in such
jurisdictions for so long as may be necessary to enable such Holder,
agent or underwriter to complete its distribution of the Registrable
Securities pursuant to such registration statement and (C) take any
and all such actions as may be reasonably necessary or advisable to
enable such Holder, agent, if
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<PAGE> 17
any, and underwriter to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that
the Company shall not be required for any such purpose to (1) take any
action to effect any such registration, qualification or compliance in
any particular jurisdiction in which it would not otherwise be
required to execute a general consent to service of process in
effectuating such registration, qualification or compliance, but for
the requirements of this Section 6(a)(ix), or (2) subject itself to
taxation in any such jurisdiction;
(x) cooperate with the Holders of the Registrable
Securities to be included in a registration statement hereunder and
the managing underwriters to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates shall be printed, lithographed or engraved,
or produced by any combination of such methods, on steel engraved
borders and which shall not bear any restrictive legends; and enable
such Registrable Securities to be in such denominations and registered
in such names as the managing underwriters may request at least two
business days prior to any sale of the Registrable Securities;
(xi) provide a CUSIP number for all Registrable
Securities, not later than the effective date of the registration
statement;
(xii) enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, and take such other
actions in connection therewith as the Holders of at least a majority
of the Registrable Securities being sold shall reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(xiii) whether or not an agreement of the type referred to
in the preceding subsection if entered into and whether or not any
portion of the offering contemplated by such registration statement is
an underwritten offering or is made though a placement or sales agent
or any other entity, (A) make such representations and warranties to
the Holders of such Registrable Securities and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof in form,
substance and scope as are customarily made in connection with any
offering of equity securities pursuant to any appropriate agreement
and/or to a registration statement filed on the form applicable to
such registration statement; (B) obtain an opinion of counsel to the
Company in customary form and covering such matters, of the type
customarily covered by such an opinion, as the managing underwriters,
if any, and as the Holders of at least a majority of such Registrable
Securities may reasonably request, addressed to such Holders and the
placement or sales agent, if any, therefor and the underwriters, if
any, thereof and dated the effective date of such registration
statement (and if such registration statement contemplates an
underwritten offering of a part of or all of the Registrable
Securities, dated the date of the closing under the underwriting
agreement relating thereto) (it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
organization of the Company, and its subsidiaries, if any; the
qualification of the Company, and its subsidiaries, if any, to
transact business as foreign companies; the due authorization,
execution and delivery of this agreement and of any agreement of the
typed referred to in Section 6(a)(xii) hereof; the due authorization,
valid issuance, and the fully
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paid status of the capital stock of the Company; the absence of
material legal or governmental proceedings involving the Company; the
absence to the knowledge of such counsel of a breach by the Company or
its subsidiaries of, or a default under, agreements binding the
Company or any subsidiary; the absence of governmental approvals
required to be obtained in connection with the registration statement,
the offering and sale of the Registrable Securities, this Agreement or
any agreement of the type referred to in Section 6(a)(xii) hereof; the
compliance as to form of such registration statement and any documents
incorporated by reference therein with the requirements of the
Securities Act; the effectiveness of such registration statement under
the Securities Act; and, as of the date of the opinion and of the
registration statement or most recent post-effective amendment
thereto, as the case may be, the absence, to the knowledge of such
counsel, from such registration statement and the prospectus included
therein, as then amendment or supplemented, and from the documents
incorporated by reference therein of an untrue statement of a material
fact or the omission to state therein a material fact necessary to
make the statements therein not misleading (in case of such documents,
in the light of the circumstances existing at the time that such
documents were filed with the Commission under the Exchange Act)); (C)
obtain a "cold" comfort letter or letters from the independent
certified public accountants of the Company addressed to the Holders
and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof, dated (I) the effective date of such
registration statement and (II) the effective date of any prospectus
supplement to the prospectus included in such registration statement
or post-effective amendment to such registration statement which
includes unaudited or audited financial statements as of a date or for
a period subsequent to that of the latest such statements included in
such prospectus (and, if such registration statement contemplates an
underwritten offering pursuant to any prospectus supplement to the
prospectus included in such registration statement or post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent
to that of the latest such statements included in such prospectus,
dated the date of the closing under the underwriting agreement
relating thereto), such letter or letters to be in customary form and
covering such matters of the type customarily covered by letters of
such type; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by Holders of
at least a majority of the Registrable Securities being sold and the
placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above and
the compliance with or satisfaction of any agreements or conditions
contained in the underwriting agreement or other agreement entered
into by the Company; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are
provided in Sections 5 and 7 hereof;
(xiv) notify in writing each Holder of Registrable
Securities of any proposal by the Company to amend or waive any
provision of this Agreement and of any amendment or waiver effected
pursuant thereto, each of which notices shall contain the text of the
amendment or waiver proposed or effected, as the case may be;
(xv) engage to act on behalf of the Company with respect
to the Registrable Securities to be so registered a registrar and
transfer agent having such duties and
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responsibilities (including, without limitation, registration of
transfers and maintenance of stock registers) as are customarily
discharged by such an agent, and to enter into such agreements and to
offer such indemnities as are customary in respect thereof;
(xvi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its Holders, as soon as practicable, but in any event not later
than 18 months after the effective date of such registration
statement, an earnings statement covering a period of at least twelve
months which shall satisfy the provisions of Section 6(a) of the
Securities Act (including, at the option of the Company, pursuant to
Rule 158 thereunder); and
(xvii) cause all such Registrable Securities to be listed on
each securities exchange or on the Nasdaq National Market ("Nasdaq
Market") on which similar securities issued by the Company are then
listed and, if not so listed, to be listed and, if listed on the
Nasdaq Market, use its best efforts to secure designation of all such
Registrable Securities covered by such registration statement as a
Nasdaq "National Market System Security" within the meaning of Rule
11Aa2-1 of the Commission or, failing that, to secure Nasdaq Market
authorization for such Registrable Securities and, without limiting
the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such Registrable Securities
with the National Association of Securities Dealers.
(b) In the event that the Company would be required, pursuant to
Section 6(a)(v)(F) above, to notify the Holders of Registrable Securities
included in a registration statement hereunder, the sales or placement agent,
if any, and the managing underwriters, if any, of the securities being sold,
the Company shall prepare and furnish to each such Holder, to each such agent,
if any, and to each underwriter, if any, a reasonable number of copies of a
prospectus supplement or amendment so that, as thereafter delivered to the
purchasers of Registrable Securities, such prospectus shall 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 not misleading
in light of the circumstances then existing. Each Holder agrees that upon
receipt of any notice from the Company pursuant to Section 6(a)(v)(F) hereof,
such Holder shall forthwith discontinue the distribution of Registrable
Securities until such Holder shall have received copies of such amended or
supplemented registration statement or prospectus, and if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such Holder's possession
of the prospectus covering such Registrable Securities at the time of receipt
of such notice.
(c) The Company may require each Holder of Registrable Securities
as to which any registration is being effected to furnish to the Company such
information regarding such Holder and such Holder's method of distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing but only to the extent that such information is required in
order to comply with the Securities Act. Each such Holder agrees to notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such Holder to the Company or of the occurrence of any
event in either case as a result of which any prospectus relating to such
registration contains or would contain an untrue statement of a material fact
regarding such Holder or the distribution of such Registrable
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<PAGE> 20
Securities or omits to state any material fact regarding such Holder or the
distribution of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly to furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with respect
to such Holder or the distribution of such Registrable Securities, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
ARTICLE 7
INDEMNIFICATION
7.1 The Company will indemnify each Holder, each of its officers
and directors and partners, and such Holder's legal counsel and independent
accountants, if any, and each person controlling any such persons within the
meaning of Section 15 of the Securities Act, with respect to which registration
of any of the Registrable Securities under the Securities Act has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls any underwriter within the meaning of Section 15 of the Securities
Act, against all expenses, claims, losses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any such registration of any of
the Registrable Securities under the Securities Act which has been effected
pursuant to this Agreement, or based on any 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 any violation by the Company of
any rule or regulation promulgated under the Securities Act, Exchange Act or
any state securities laws applicable to the Company and relating to action or
inaction by the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers and
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling any such persons, each such
underwriter and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission (or alleged untrue statement) or
omission (or alleged omission), made in reliance upon and in conformity with
written information furnished to the Company by such Holder or underwriter and
expressly intended for use in such registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereof.
7.2 Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration is being
effected, severally and not jointly, indemnify and hold harmless the Company,
each of its directors and officers, its legal counsel and independent
accountants, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers, directors, partners, legal counsel and
independent accountants, if any, and each person controlling such
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<PAGE> 21
Holder within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), to which the Company or such officer, director, underwriter or person
who controls the Company or such underwriter or such legal counsel and
independent accountants, within the meaning of Section 15 of the Securities Act,
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such Holders, such
directors, officers, partners, legal counsel, independent accountants,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, other document or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Holder and expressly intended for use in such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof; provided, however, that the obligations of each Holder
hereunder shall be limited to an amount equal to the proceeds to such Holder of
Registrable Securities sold as contemplated herein.
7.3 Each party entitled to indemnification under this Section 7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
shall bear the expense of such defense of the Indemnified Party if
representation of both parties by the same counsel would be inappropriate due
to actual or potential conflicts of interest. The failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Agreement, unless such failure is
prejudicial to the ability of the Indemnifying Party to defend the action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement 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 in respect of such claim or
litigation.
7.4 If the indemnification provided for in Section 7.1 or 7.2 is
unavailable or insufficient to hold harmless an Indemnified Party, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of the expenses, claims, losses, damages or
liabilities (or actions or proceedings in respect thereof) referred to in
Section 7.1 or 7.2, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the sellers of Registrable
Securities on the other hand in connection with statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions
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or proceedings in respect thereof) or expenses, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the sellers of Registrable
Securities and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Holders agree that it would not be just and equitable if
contributions pursuant to this Section 7.4 were to be determined by pro rata
allocation (even if all Sellers of Registrable Securities were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the first sentence
of this Section 7.4. The amount paid by an Indemnified Party as a result of
the expenses, claims, losses, damages or liabilities (or actions or proceedings
in respect thereof) referred to in the first sentence of this Section 7.4 shall
be deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any claim,
action or proceeding which is the subject of this Section 7.4. 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 obligations of sellers of
Registrable Securities to contribute pursuant to this Section 7.4 shall be
several in proportion to the respective amount of Registrable Securities sold
by them pursuant to a registration statement.
ARTICLE 8
RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration, after such time
as a public market exists for the Common Stock of the Company, the Company
agrees to:
8.1 Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act (or any similar or
analogous rule promulgated under the Securities Act) at all times after the
effective date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public; and
8.2 File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements) and make available the benefits of Rule 144; and
8.3 So long as any Holder owns any Registrable Securities, furnish
to such Holder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 (at any time
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company filed by the Company, and such other
reports and documents of the Company as such Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing it to sell
any such securities without registration.
-21-
<PAGE> 23
ARTICLE 9
TRANSFER OF REGISTRATION RIGHTS
The rights to cause the Company to register Registrable Securities
granted Holders under Articles 2, 3 and 4 hereof may be assigned in connection
with any permitted transfer or assignment of the Holder's Registrable
Securities. All transferees and assignees of the rights to cause the Company
to register Registrable Securities granted Holders under Articles 2, 3 and 4
hereof, as a condition to the transfer of such rights, shall agree in writing
to be bound by the agreements set forth herein.
ARTICLE 10
LIMITATIONS ON REGISTRATION RIGHTS
GRANTED TO OTHER SECURITIES
10.1 The parties hereto agree that additional holders may, with the
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding, be added as parties to this Agreement with respect
to any or all securities of the Company held by them; provided, however, that
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 Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company providing for the grant to
such holder of registration rights superior to, or pari passu with, those
granted herein. Any additional parties shall execute a counterpart of this
Agreement, and upon execution by such additional parties and by the Company,
shall be considered Holders for purposes of this Agreement, and shall be added
to the Schedule of Registration Rights Holders.
10.2 In connection with the grant of registration rights to the
holders of the Series C Stock pursuant to this Agreement, each of Sandler,
Bechtel, Highland, Oak and the Other Investors agree and consent to waive the
provisions of Article 10 relating to limitations on registration rights granted
to other securities holders set forth in the Amended and Restated Registration
Rights Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
11.2 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT
OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
RELATED
-22-
<PAGE> 24
HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY, OR OTHERWISE. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY AGREES AND CONSENTS THAT ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
11.3 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.
11.4 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof. Subject to Sections 11.11, 11.12 and 11.13 herein, any
provision of this Agreement may be amended, waived or modified, and this
Agreement may be terminated, if, but only if, such amendment, waiver or
modification or termination is in writing and is signed by the holders of a
majority of the Series A Stock, Series B Stock and Series C Stock provided,
however, that no amendment, waiver, modification or termination may treat any
holder that does not consent thereto differently than a holder that does
consent thereto; whenever any provision of this Agreement requires action or
approval by the holders of a specified number of Series A Stock, Series B Stock
or Series C Stock, such action or approval may be evidenced by a written
consent executed by the requisite holders of Series A Stock Series B Stock or
Series C Stock, without any requirement of a meeting or prior notice to the
other holders of such shares.
11.5 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed given upon delivery, when delivered
personally or by overnight courier or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, addressed to the party to be notified at such
party's address as set forth below or on Schedules 1 and 2 hereto, or as
subsequently modified by written notice:
if to the Company:
Bolt, Inc.
104 Hudson Street - 7th Floor North
New York, NY 10013
Attention: Daniel A. Pelson
Telephone: (212) 620-5900
Facsimile: (212) 620-4315
-23-
<PAGE> 25
with a copy to (which shall not constitute notice):
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attention: John R. Pomerance, Esq.
Telephone: (617) 542-6000
Facsimile: (617) 542-2241
if to Sandler:
c/o Sandler Capital Management
767 Fifth Avenue - 45th Floor
New York, NY 10153
Attention: Michael J. Marocco
Telephone: (212) 754-8100
Facsimile: (212) 826-0280
with copy to (which shall not constitute notice):
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, DC 20036
Attention: Edward J. O'Connell, Esq.
Telephone: (202) 776-2000
Facsimile: (202) 776-2222
if to Bechtel:
Bechtel Enterprises Holdings, Inc.
50 California Street - Suite 2200
San Francisco, CA 94111
Attention: Kevin Kendrick
Telephone: (415) 768-2312
Facsimile: (415) 951-0847
with copy to (which shall not constitute notice):
Bechtel Enterprises Holdings, Inc.
50 California Street - Suite 2200
San Francisco, CA 94111
Attention: Chief Counsel
Telephone: (415) 768-5721
Facsimile: (415) 951-2233
-24-
<PAGE> 26
if to Highland:
c/o Highland Capital Partners
2 International Place - 22nd Floor
Boston, MA 02110
Attention: Stephen J. Harrick
Telephone: (617) 261-6694
Facsimile: (617) 531-1550
with copy to (which shall not constitute notice):
Hale and Dorr, LLP
60 State Street
Boston, MA 02109
Attention: Peter Tarr, Esq.
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
if to Oak:
Oak Investment Partners
One Gorham Island
Westport, CT 06889
Attention: Ann H. Lamont
Telephone: (203) 226-8346
Facsimile: (203) 226-4203
with copy to (which shall not constitute notice):
Finn Dixon & Herling LLP
1 Landmark Square
Stamford, CT 06901
Attention: Michael Herling, Esq.
Telephone: (203) 964-8000
Facsimile: (203) 348-57777
If to Moore:
c/o Moore Capital Management, Inc.
1251 Avenue of the Americas
New York, NY 10020
Attn: David Lee
Telephone: (212) 782-7033
Facsimile: (212) 782-7550
-25-
<PAGE> 27
With a copy to (which shall not constitute notice):
Akin, Gump, Strauss, Hauer and Feld, LLP
590 Madison Avenue
New York, NY 10022
Attention: Jim Kaye
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
If to Remington:
c/o Moore Capital Management, Inc.
1251 Avenue of the Americas
New York, NY 10020
Attn: David Lee
Telephone: (212) 782-7033
Facsimile: (212) 782-7550
With a copy to (which shall not constitute notice):
Akin, Gump, Strauss, Hauer and Feld, LLP
590 Madison Avenue
New York, NY 10022
Attention: Jim Kaye
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
11.6 Severability. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby.
11.7 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
11.9 "Market Hold-Off" Agreement. Each Holder agrees, if requested
by the Company and underwriter of Common Stock (or other securities) of the
Company in connection with an Initial Public Offering not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Holder during the one hundred eighty (180) day period following
the effective date of a registration statement of the Company filed under the
Securities Act without the prior consent of such underwriter, provided,
however, that all Holders and officers and directors of the Company enter into
similar agreements.
-26-
<PAGE> 28
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day
period.
11.10 Termination. The obligations of the Company to register
Registrable Securities under this Agreement shall terminate on the date upon
which any such Registrable Securities may be freely tradable pursuant to Rule
144 under the Securities Act, but only with respect to such freely tradable
Registrable Securities.
11.11 Warrant Exercise. Upon the exercise of the Warrant, and upon
the execution and delivery of a counterpart signature page hereto, Lighthouse
shall become a party hereto, be deemed an Other Investor and be bound by the
provisions of this Agreement and Exhibit A hereto shall be automatically
amended, accordingly.
11.12 Option Exercise. Upon each exercise of options to purchase
Common Stock held by Mount and Cohen, respectively, and upon the execution and
delivery of a counterpart signature page hereto by Mount or Cohen, as
applicable, each of Mount and Cohen shall become a party hereto with respect to
the shares of Common Stock issued pursuant to such option exercises, as
applicable, each of them shall be deemed an Other Investor, as applicable, and
each of them shall be bound by the provisions of this Agreement, as applicable,
without any further action by the Company or each of Mount and Cohen,
respectively, and Exhibit A hereto shall be automatically amended, accordingly.
11.13 Other Investors. Upon the sale of any Additional Shares (as
defined in the Stock Purchase Agreement) to Additional Purchasers (as defined
in the Stock Purchase Agreement) in accordance with the Stock Purchase
Agreement, each such Additional Purchaser shall become a party hereto, be
deemed an Other Investor for all purposes hereunder and be bound by the
provisions of this Agreement, without any further action by the Company or such
Additional Purchaser and Exhibit A hereto shall be automatically amended,
accordingly. Each Additional Purchaser (as defined in the Stock Purchase
Agreement), shall, if requested by the Company, execute and deliver a
counterpart signature page hereto, to further evidence such agreement.
-27-
<PAGE> 29
IN WITNESS WHEREOF, the parties have executed this Second Amended and
Restated Registration Rights Agreement as of the ___ day of November, 1999.
BOLT, INC.
By: /s/ Daniel Pelson
----------------------------------
Name:
Title:
BECHTEL ENTERPRISES HOLDINGS, INC.
By: /s/ Robert Dove
----------------------------------
Name:
Title:
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners,
L.P., General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Media Corp., a General
Partner
By: /s/ Edward G. Grinacoff
---------------------------------
Edward G. Grinacoff
President
SANDLER CAPITAL PARTNERS IV, FTE, L.P.
By: Sandler Investment Partners,
L.P., General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Media Corp., a General
Partner
By: /s/ Edward G. Grinacoff
----------------------------
Edward G. Grinacoff
President
<PAGE> 30
HIGHLAND CAPITAL PARTNERS IV LIMITED
PARTNERSHIP
By: Highland Management Partners IV LLC,
its General Partner
By: /s/ illegible
----------------------------------------
Name:
Title:
HIGHLAND ENTREPRENEURS FUND IV LIMITED
PARTNERSHIP
By: Highland Entrepreneurs Fund IV LLC,
its General Partner
By: /s/ illegible
----------------------------------------
Name:
Title:
MJM ASSOCIATES L.P.
By: /s/ Michael J. Marocco
----------------------------------------
Name: Michael J. Marocco
Title: General Partner
/s/ Harvey Sandler
-------------------------------------------
HARVEY SANDLER
/s/ John Kornrech
-------------------------------------------
JOHN KORNREICH
/s/ Samantha McCuen
-------------------------------------------
SAMANTHA MCCUEN
<PAGE> 31
/s/ Jonathan M. Nelson
-----------------------------------------
JONATHAN M. NELSON
/s/ Glenn M. Creamer
-----------------------------------------
GLENN M. CREAMER
/s/ Paul J. Salem
-----------------------------------------
PAUL J. SALEM
/s/ Mark J. Masiello
-----------------------------------------
MARK J. MASIELLO
/s/ Mark A. Pelson
-----------------------------------------
MARK A. PELSON
/s/ Alexander D. Evans
-----------------------------------------
ALEXANDER D. EVANS
/s/ Raymond M. Mathieu
-----------------------------------------
RAYMOND M. MATHIEU
/s/ Michael J. Angelakis
-----------------------------------------
MICHAEL J. ANGELAKIS
/s/ Bo Peabody
-----------------------------------------
BO PEABODY
/s/ Frank Harrison
-----------------------------------------
FRANK HARRISON
/s/ Daniel Pelson
-----------------------------------------
DANIEL PELSON
<PAGE> 32
OAK INVESTMENT PARTNERS VIII, LIMITED
PARTNERSHIP
By: Oak Associates VIII, LLC, its General Partner
By: /s/ Anne H. Lamont
-----------------------------------------------
Name:
Title:
OAK VIII AFFILAITES FUND, LIMITED
PARTNERSHIP
By: Oak VIII Affiliates, LLC, its General Partner
By: /s/ Anne H. Lamont
-----------------------------------------------
Name:
Title:
MOORE GLOBAL INVESTMENTS, LTD.
/s/ illegible
--------------------------------------------------
By: Moore Capital Management, Inc.
Its: Trading Advisor
REMINGTON INVESTMENTS STRATEGIES, L.P.
/s/ illegible
--------------------------------------------------
By: Moore Capital Advisors, L.L.C.
Its: General Partner
<PAGE> 33
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
- ------------------------------------
Printed Name FORD MOTOR COMPANY
- ------------------------------------ By: /s/ Phil Horlock
Signature ---------------------------
Name: Phil Horlock
Title: Executive Director
Strategy & New Business
Development
<PAGE> 34
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Comcast Interactive Capital, L.P.
- ------------------------------------ ------------------------------------
Printed Name By: c/c Partners
Name By: c/c Venture Management, L.L.C.
By: /s/ Illegible
- ------------------------------------ ---------------------------------
Signature Name: Illegible
Title: Vice President
<PAGE> 35
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
1998 Kornreich Children's Trust
- ------------------------------------ ---------------------------------------
Printed Name Name
Name
By: /s/ John Konreich
- ------------------------------------ -------------------------------------
Signature Name: John Konreich
Title:
<PAGE> 36
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Andrew Sandler
- ------------------------------------ -------------------------------------
Printed Name Name
Name
/s/ Andrew Sandler By:
- ------------------------------------ ----------------------------------
Signature Name:
Title:
<PAGE> 37
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Waterview Partners, L.P.
- ------------------------------------ ----------------------------------------
Printed Name By: WaterView Advisors, LLC
Name
By: /s/ Augustus K. Oliver
- ------------------------------------ -------------------------------------
Signature Name: Augustus K. Oliver
Title: Senior Managing Director
<PAGE> 38
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Entercom Delaware Holdings Company, LLC
- ------------------------------------ ----------------------------------------
Printed Name Name
Name
By: /s/ Stephen F. Fisher
- ------------------------------------ -------------------------------------
Signature Name: Stephen F. Fisher
Title: Senior VP & CFO
<PAGE> 39
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Time Warner Inc.
- ------------------------------------ ----------------------------------------
Printed Name Name
Name
By: /s/ Robert Marcus
- ------------------------------------ -------------------------------------
Signature Name: Robert Marcus
Title: Vice President
<PAGE> 40
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Sandler Internet Partners, L.P.
- ------------------------------------ ----------------------------------------
Printed Name By Sandler Investment Partners, L.P.,
General Partner
By Sandler Capital Management, General
Partner
By MUDM Corp., a General Partner
By: /s/ Edward Grinacoff
- ------------------------------------ ------------------------------------
Signature Edward Grinacoff, President
<PAGE> 41
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
ML/BI L.L.C.
Mintz Levin Investments L.L.C., its
Manager
- ------------------------------------ ------------------------------------
Printed Name By
By: /s/ Irwin Heller
- ------------------------------------ ---------------------------------
Signature Name: Irwin Heller
Title: Manager
<PAGE> 42
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Invemed Associates, LLC
- ------------------------------------ ------------------------------------
Printed Name By
By: /s/ John Baran
- ------------------------------------ ---------------------------------
Signature Name: John Baran
Title: C.F.O.
<PAGE> 43
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Caribou Ventures
- ------------------------------------ ---------------------------------------
Printed Name By
By: /s/ William "Bo" Peabody
- ------------------------------------ ------------------------------------
Signature Name: William Bo S. Peabody
Title: General Partner
<PAGE> 44
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Peabody Sabot Ventures
- ------------------------------------ ------------------------------------
Printed Name By
By: /s/ William "Bo" Peabody
- ------------------------------------ ---------------------------------
Signature Name: William Bo S. Peabody
Title: General Partner
<PAGE> 45
Counterpart Signature Page For Other Investors
The undersigned hereby agrees to become a party to that certain Second
Amended and Restated Registration Rights Agreement dated as of November 17,
1999 (the "Agreement") among Bolt, Inc. (the "Company") and others. From and
after all the undersigned's execution and delivery of this Counterpart
Signature Page, the undersigned shall be a party to the Agreement.
For Individuals: For entities:
Peabody Family Ventures
- ------------------------------------ ------------------------------------
Printed Name By:
By: /s/ William "Bo" Peabody
- ------------------------------------ ---------------------------------
Signature Name: William Bo S. Peabody
Title: General Partner
<PAGE> 46
Exhibit A
Schedule of Registration Rights Holders
1. Sandler Capital IV Partners, L.P.
2. Sandler Capital IV Partners FTE, L.P.
3. Sandler Internet Partners, L.P.
4. Bechtel Enterprises Holdings, Inc.
5. Highland Capital Partners IV Limited Partnership
6. Highland Entrepreneurs Fund IV Limited Partnership
7. MJM Associates L.P.
8. Harvey Sandler
9. 1998 Kornreich Children's Trust
10. Andrew Sandler
11. Samantha McCuen
12. Jonathan M. Nelson
13. Glenn M. Creamer
14. Paul J. Salem
15. Mark J. Masiello
16. Mark A. Pelson
17. Alexander D. Evans
18. Raymond M. Mathieu
19. Michael J. Angelakis
20. Peabody Family Ventures
21. Peabody Sabot Ventures
22. William "Bo" S. Peabody
23. Frank Harrison
24. Oak Investment Partners VIII, Limited Partnership
25 Oak VIII Affiliates Fund, Limited Partnership
26. Daniel Pelson
<PAGE> 47
27. Moore Global Investments, Ltd.
28. Remington Investments Strategies, L.P.
29. Comcast Interactive Capital, L.P.
30. Ford Motor Company
31. WaterView Partnres, L.P.
32. Entercom Delaware Holdings Company, LLC
33. Time Warner, Inc.
34. Caribou Ventures
35. Al Pastino
36. Justin T. Nesci
37. Juan Patino
38. Endevour
39. ML/BI L.L.C.
40. Lawrence V. Calcano
41. Blue Ridge Capital
42. Invemed Associates, LLC
43. Thomas D. Menard
44. Concrete Media, Inc.
45. America Online, Inc.
<PAGE> 48
Schedule 1
1. MJM Associates L.P.
2. Harvey Sandler
3. 1998 Kornreich Children's Trust
4. Andrew Sandler
5. Samantha McCuen
6. Jonathan M. Nelson
7. Glenn M. Creamer
8. Paul J. Salem
9. Mark J. Masiello
10. Mark A. Pelson
11. Alexander D. Evans
12. Raymond M. Mathieu
13. Michael J. Angelakis
14. Peabody Family Ventures
15. Peabody Sabot Ventures
16. William "Bo" S. Peabody
17. Frank Harrison
<PAGE> 49
Schedule 2
Purchasers of Series C Stock
1. Moore Global Investments, Ltd.
2. Remington Investments Strategies, L.P.
3. Comcast Interactive Capital, L.P.
4. Bechtel Enterprises Holdings, Inc.
5. Oak Investment Partners VIII, Limited Partnership
6. Oak VIII Affiliates Fund, Limited Partnership
7. Form Motor Company
8. WaterView Partners, L.P.
9. Entercom Delaware Holdings Company, LLC
10. Sandler Capital IV Partners, L.P.
11. Sandler Capital IV Partners FTE, L.P.
12. Sandler Internet Partners, L.P.
13. Time Warner, Inc.
14. Peabody Sabot Ventures
15. Peabody Family Ventures
16. Caribou Ventures
17. Al Pastino
18. Justin T. Nesci
19. Frank M. Harrison
20. Daniel Pelson
21. Juan Patino
<PAGE> 50
22. Endevour
23. Thomas D. Menard
24. ML/BI L.L.C.
25. Highland Capital Partners IV, Limited Partnership
26. Highland Entrepreneurs Fund IV, Limited Partnership
27. Lawrence V. Calcano
28. Blue Ridge Capital
29. Invemed Associates, LLC
30. Sigurd C. Kirk
31. Concrete Media, Inc.
32. America Online, Inc.
<PAGE> 1
EXHIBIT 10.4
AGREEMENT OF SUBLEASE, dated as of the 15th day of August, 1998, by and
between AVALANCHE SOLUTIONS, INC., having offices at 304 Hudson Street, New
York, New York ("Sublessor"), and CONCRETE MEDIA, INC., a Delaware corporation,
having offices at 580 Broadway, Suite 500, New York, New York 10012
("Sublessee").
W I T N E S S E T H
WHEREAS, Sublessor is a tenant of the portion of the seventh (7th) floor
in the building known as 304 Hudson Street, New York, New York (the "Building")
as shown cross-hatched on the floor plan annexed hereto as Exhibit A (the
"demised premises"), and Sublessee is desirous of subletting the demised
premises from Sublessor upon the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the rental payments to be made
hereunder by Sublessee to Sublessor and the mutual terms, covenants, conditions,
provisions and agreements hereinafter set forth, Sublessor does hereby sublet to
Sublessee and Sublessee does hereby take and hire from Sublessor, the demised
premises.
This Sublease shall be expressly subject and subordinate to all of the
terms, covenants, conditions, provisions and agreements contained in that
certain Lease, dated January 6, 1998 entered into between The Rector,
Church-Wardens and Vestrymen of Trinity Church in the City of New York, a
religious corporation, as landlord ("Underlying Landlord"), and Avalanche
Solutions, Inc., as tenant therein (which lease, as amended, is hereinafter
referred to as the "Underlying Lease"). A true copy of the Underlying Lease,
with certain of the Excluded Provisions deleted or redacted, has been delivered
to, and reviewed by, Sublessee and is annexed hereto and made a part hereof as
Exhibit B. The provisions of the Underlying Lease are
<PAGE> 2
specifically incorporated herein by reference, except such terms, covenants,
conditions, provisions and agreements as are specifically set forth in Paragraph
20 below (the "Excluded Provisions") and except that all references therein to
"Landlord" shall mean Underlying Landlord, all references therein to "Tenant"
shall mean Sublessee, all references to "Demised/Leased Premises" shall mean
demised premises, and all references to "this Lease" shall mean this Sublease.
All provisions which may, by incorporation herein, be inconsistent with the
express provisions of this Sublease shall govern in all circumstances unless use
of the demised premises or any action or inaction taken in accordance with said
provisions may be the basis of a default under the Underlying Lease, in which
case the inconsistency shall be resolved in favor of the provisions of the
Underlying Lease.
1. Term. The term of this Sublease shall commence (the "Commencement
Date") on the date that the Underlying Landlord shall consent hereto in writing
pursuant to Paragraph 14 below. The term of this Sublease shall terminate at
noon on February 27, 2007 (the "Expiration Date").
2. Fixed Rent. Sublessee shall pay to Sublessor, during the term of
this Sublease, the annual rental rate ("fixed rent"), commencing on the
Commencement Date and continuing through and including February 27, 2007, of TWO
HUNDRED SIXTY-FOUR THOUSAND NINE HUNDRED SIXTY ($264,960.00) DOLLARS per annum,
payable in equal monthly installments of $22,080.00, and continuing through and
including the expiration or sooner termination of this Sublease. Each monthly
installment of fixed rent shall be paid on the first day of each and every
calendar month during the term, except the first full monthly installment of
fixed rent shall be paid upon execution of this Sublease. Provided that
Sublessee is not then in default under this Sublease, it shall be entitled to an
aggregate credit of $22,080.00
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to be applied against the fixed rent due hereunder for the second full month
following the month in which the Commencement Date occurs. The fixed rent for
any month of the term of this Sublease which does not begin or end on the first
or last day of a calendar month shall be prorated on a daily basis in accordance
with the fixed rent due for the calendar month. Since the installment for the
first full month's fixed rent is being paid by Sublessee upon the execution of
this Sublease regardless of whether the term shall have commenced on the first
day of a calendar month, any adjustment to which Sublessee is entitled on
account of the immediately preceding sentence shall be made to the monthly
installment of fixed rent due on the first day of the calendar month next
following the month in which the Commencement Date occurs rent credit has been
fully utilized. All fixed rent, additional rent and other sums and charges due
to Sublessor under this Sublease shall be paid by Sublessee at the office of
Sublessor set forth above, or at such other place as Sublessor may designate,
without any notice, setoff or deduction whatsoever. Sublessee's obligation to
make such payments shall survive the Expiration Date or sooner termination of
this Sublease.
All other costs and expenses which Sublessee assumes or agrees to pay
pursuant to this Sublease shall be deemed additional rent and, in the event of
non-Payment, Sublessor shall have all the rights and remedies herein provided
for in case of non-Payment of fixed rent. If Sublessee shall fail to pay any
installment of fixed rent or additional rent within a period of seven (7) days
after the due date of the installment in question, Sublessee shall also pay to
Sublessor a late charge equal to 2% per month of the overdue amount, such late
charge to be payable as additional rent hereunder. The payment of such late
charge shall be in addition to all other rights and remedies available to
Sublessor in the case of non-payment of fixed rent.
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3. Electricity Charge. Sublessee shall pay to Sublessor all of the
charges incurred by Sublessor for electric service pursuant to the Underlying
Lease, including, but not limited to, any charge in connection with taxes upon
Underlying Landlord's sale or resale of electric energy to Sublessee by any
federal, state or municipal authority. Such charges shall be paid within five
(5) days of Sublessor's billings therefor. Any sums due and payable to Sublessor
under this Paragraph 3 shall be deemed to be, and collectible as, additional
rent.
4. Additional Rent. Sublessee shall pay to Sublessor, as additional
rent, 100% of all amounts payable by Sublessor to Underlying Landlord pursuant
to Articles 37 and 38 of the Underlying Lease, which are applicable to the term
of this Sublease. For purposes of determining the amounts payable by Sublessee
pursuant to this Paragraph 4: the Base Year for Taxes shall be the Tax Year July
1, 1998 - June 30, 1999, the Base Year for Operating Expenses shall be the
calendar year 1999, the date to be inserted in the "Base Index" for the CPI in
Article THIRTY-SEVENTH(b)6 shall be August 1, 1998, and the "Computation Date"
in Article THIRTY-SEVENTH(b)10 shall be the first of March, 1999. The additional
rent payable by Sublessee shall be paid to Sublessor in the manner and five (5)
days before each such date as Sublessor shall be required to pay its
corresponding share of such additional rent pursuant to the underlying Lease.
Payments for the first and last years of the term shall be equitably prorated.
In the event that the demised premises increase or decrease during the term of
this Sublease or the premises demised pursuant to the Underlying Lease increase
or decrease, then Sublessee's proportionate share of amounts payable pursuant to
this Paragraph 4 shall be equitably adjusted.
5. Use. Sublessee shall use the demised premises only for the uses
specified in the Underlying Lease. Sublessee shall use and occupy the demised
premises in a manner not inconsistent with the terms of the Underlying Lease.
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6. Compliance with Underlying Lease. Sublessee covenants and agrees
to observe and perform all of the terms, covenants, conditions, provisions and
agreements to be performed by Sublessor, as tenant pursuant to the Underlying
Lease, except for any Excluded Provisions, and further covenants and agrees not
to do or suffer or permit anything to be done which would result in a default
under or cause the Underlying Lease to be terminated. All of the terms,
covenants, conditions, provisions and agreements of the Underlying Lease,
excepting any Excluded Provisions, are hereby incorporated herein with the same
force and effect as if herein set forth in full and wherever the term "Tenant"
in the Underlying Lease, the same shall be deemed to refer to Sublessee.
However, all grace periods specified in the Underlying Lease shall, for purposes
of determining compliance by Sublessee with the provisions hereof, be each
reduced by five (5) days. In relation to Sublessee performing the obligations of
Sublessor, as tenant pursuant tote Underlying Lease, said obligations shall be
those of Sublessor in relation to the demised premises. Sublessee shall and
hereby does indemnify, defend and hold Sublessor harmless from and against any
and all actions, claims, demands, damages, liabilities and expenses asserted
against, imposed upon or incurred by Sublessor by reason of (a) any violation
caused, suffered or permitted by Sublessee, its agents, contractors, servants,
licensees, employees or invitees, of any of the terms, covenants, conditions,
provisions or agreements of the Underlying Lease, and (b) any damage or injury
to persons or property occurring upon or in connection with the use or occupancy
of the demised premises.
7. Non-Liability, Indemnity. Sublessee shall and hereby does
indemnify, defend and hold Sublessor harmless from and against any and all
actions, claims, demands, damages, liabilities and expenses asserted against,
imposed upon or incurred by Sublessor by reason of (a) any violation caused,
suffered or permitted by Sublessee, its agents, contractors,
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servants, licensees, employees or invitees, of any of the terms, covenants,
conditions, provisions or agreements of the Underlying Lease, and (b) any damage
or injury to persons or property occurring upon or in connection with the use or
occupancy of the demised premises. Neither Sublessor nor any agent, contractor,
servant, licensee, employee or invitee of Sublessor shall be liable to Sublessee
for any death of or injury or damage to Sublessee or any other person or for any
damage to or loss (by theft or otherwise) of any property of Sublessee or any
other person, except to the extent caused by or due to the gross negligence or
willful act of Sublessor. Sublessee shall indemnify and hold harmless Sublessor,
its agents, contractors, servants, licensees, employees or invitees from and
against any and all claims, losses, liabilities, damages, costs and expenses
(including, without limitation, reasonable attorney's fees) arising from (i) the
use, conduct or maintenance of the demised premises or any business therein or
any work or thing whatsoever done, or any condition created in or about the
demised premises during the term (or any time prior to the Commencement Date
that Sublessee may have been given access to the demised premises), (ii) any
negligent or otherwise wrongful act or omission of Sublessee or any of its
agents, contractors, servants, licensees, employees or invitees, (iii) any
failure of Sublessee to perform or comply with all of the provisions of this
Sublease hereof that are applicable to Sublessee, and (iv) any obligation
Sublessor may have to indemnify Underlying Landlord under the Underlying Lease,
to the extent related to the demised premises, other than Sublessor's obligation
to pay rent under the Underlying Lease. In case any action or proceeding be
brought against Sublessor or any agent, contractor, servant, licensee, employee
or invitee of Sublessor by reason of any of the foregoing, Sublessee, upon
notice from Sublessor, shall defend such action or proceeding by counsel chosen
by Sublessee, who shall be reasonably satisfactory
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to Sublessor. Sublessee or its counsel shall keep Sublessor fully apprised at
all times of the status of such defense and shall not settle same without the
written consent of Sublessor.
8. Performance by Underlying Landlord. Sublessor does not assume any
obligation to perform the terms, covenants, conditions, provisions and
agreements contained in the Underlying Lease on the part of Underlying Landlord
to be performed. In the event Underlying Landlord shall fail to perform any of
the terms, covenants, conditions, provisions and agreements contained in the
Underlying Lease on its part to be performed, Sublessor shall be under no
obligation or liability whatsoever to Sublessee. Sublessor shall cooperate with
Sublessee, at no cost to Sublessor, in seeking to obtain the performance of
Underlying Landlord under the Underlying Lease. In any event, Sublessee shall
not be allowed any abatement or diminution of fixed rent or additional rent
under this Sublease because of Underlying Landlord's failure to perform any of
its obligations under the Underlying Lease. Notwithstanding the foregoing, in
the event that Sublessor receives an abatement or diminution of fixed rent or
additional rent from Underlying Landlord that relates to the demised premises,
Sublessee shall be entitled to an equivalent abatement or diminution of fixed
rent or additional rent.
If Underlying Landlord shall default in any of its obligations with
respect to the demised premises, or there shall exist a bona fide dispute with
Underlying Landlord under the terms, covenants, conditions, provisions and
agreements of this Sublease and/or the Underlying Lease and Sublessee notifies
Sublessor in writing that Sublessee has previously notified Underlying Landlord
of such dispute and that such default or notice has been disregarded or not
reasonably satisfactorily acted upon, then Sublessor shall notify Underlying
Landlord of such default or dispute in its name on Sublessee's behalf. Sublessee
shall be entitled to participate with Sublessor in the enforcement of
Sublessor's rights against Underlying Landlord, but
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Sublessor shall have no obligation to bring any action or proceeding nor to take
any steps to enforce Sublessor's rights against Underlying Landlord. If, after
written request from Sublessee, Sublessor shall fail or refuse to take
appropriate action for the enforcement of Sublessor's rights against Underlying
Landlord with respect to the demised premises, Sublessee shall have the right to
take such action in its own name, and for such purpose and only to such extent,
all of the rights of Sublessor under the Underlying Lease (including Sublessor's
arbitration rights) are hereby conferred upon and assigned to Sublessee and
Sublessee hereby is subrogated to such rights to the extent that the same shall
apply to the demised premises. If any such action against Underlying Landlord in
Sublessee's name, shall be barred by reason of lack of privity,
non-assignability or otherwise, Sublessee may take such action in Sublessor's
name provided Sublessee has obtained the prior written consent of Sublessor,
which consent shall not be unreasonably withheld or delayed (and if it is
apparent that Sublessee must act promptly in order to preserve its rights, any
failure on Sublessor's part to respond to Sublessee's request to take action in
Sublessor's name within ten (10) business days after Sublessee's request shall
be automatically deemed Sublessor's consent thereto), and in connection
therewith, Sublessee does hereby agree to indemnify and hold Sublessor harmless
from and against all liability, loss or damage, including, without limiting the
foregoing, reasonable attorneys' fees and disbursements, which Sublessor shall
suffer by reason of such action. In any event, Sublessee shall not be allowed
any abatement or diminution of fixed rent or additional rent under this Sublease
because of Underlying Landlord's failure to perform any of its obligations under
the Underlying Lease. Notwithstanding the foregoing, in the event that Sublessor
receives an abatement or diminution of fixed rent or additional rent from
Underlying Landlord that relates to the demised premises,
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Sublessee shall be entitled to an equivalent or proportionate abatement or
diminution of fixed rent or additional rent.
9. Repairs; cleaning. Sublessee shall take good care of the demised
premises and shall assume the entire responsibility for cleaning and janitorial
services and for repairs which may be necessary during the term of this
Sublease, excepting only those services and repairs, if any, which Underlying
Landlord may be obligated to provide and to make under the terms, covenants,
conditions, provisions and agreements of the Underlying Lease.
10. Alterations. Sublessee shall not make any changes, alterations,
additions or improvements to the demised premises without first obtaining the
written consent of the Underlying Landlord and Sublessor. Sublessor's consent
shall not be unreasonably withheld if the written consent of the Underlying
Landlord is first obtained. Simultaneously with the submission of documents to
the Underlying Landlord, Sublessee shall send copies of all such documents
regarding alterations to Sublessor. Sublessee shall pay all costs and expenses
relating to any changes, alterations, additions or improvements and shall cause
same to be completed in accordance with law and the terms, covenants,
conditions, provisions and agreements of the Underlying Lease. Sublessee hereby
agrees to indemnify, defend and hold Sublessor harmless from any and all loss,
cost, and expense (including, without limitation, reasonable attorneys fees)
incurred by Sublessor as a result of Sublessee's failure to comply with the
aforesaid terms, covenants, conditions, provisions or agreements.
11. Initial Occupancy. Sublessee represents that it has inspected
the demised premises and agrees to take the same in their present condition, and
Sublessee acknowledges that no representations with respect to the condition
thereof have been made. Any work required by Sublessee to prepare the demised
premises for its occupancy shall be paid for by Sublessee and
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shall be subject to all of the terms, covenants, conditions, provisions and
agreements set forth in the Underlying Lease.
12. Assignment and Subletting. Sublessee shall not assign this
Sublease or sublet the demised premises or otherwise transfer, mortgage or
encumber this Sublease, the demised premises or any part thereof or permit the
use thereof without first complying with the provisions of the Underlying Lease
and obtaining Sublessor's consent. Sublessor's consent shall not be unreasonably
withheld if the written consent of the Underlying Landlord is first obtained and
said assignment or subletting of the entire demised premises is to one (1)
assignee or subtenant for its undivided occupancy. Sublessor shall not be
required to consent to any such assignment or further subletting or other event
for which Sublessor's consent is required pursuant to the Underlying Lease if
Sublessee is then in default under the Sublease of if such further subletting or
assignment would cause Sublessor to be in default under the Underlying Lease. No
such consent shall relieve Sublessee from the obligation to seek consent to a
further subletting or assignment or another event for which Sublessor's consent
is required pursuant to the Underlying Lease, and Sublessor may withhold its
consent to same in its sole and absolute discretion. Copies of all materials
required by the Underlying Lease shall be delivered simultaneously to Sublessor,
together with Sublessee's request for consent. If Underlying Landlord and
Sublessor shall give their consent to any assignment of this Sublease or any
subsublease, Sublessee shall, in consideration therefor, pay to Sublessor, as
additional rent:
(i) In the case of an assignment, an amount equal to 50% of all sums
and other consideration paid to Sublessee by the assignee for or by reason
of such assignment.
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(ii) In the case of a subsublease, 50% of any rents, additional
rents or other consideration payable under the subsublease or otherwise to
Sublessee by the subsubtenant which are in excess of the fixed annual rent
and additional rent accruing during the term of this Sublease in respect
of the subsubleased space (at the rate per square foot payable by
Sublessee hereunder) pursuant to the terms hereof.
The sums payable under this Paragraph 12 shall be paid to Sublessor
as and when payable by the subsubtenant.
If this Sublease be assigned, or if the demised premises or any
portion thereof be underlet or occupied by anybody other than Sublessee,
Sublessor may, after default by Sublessee, collect rent from the assignee,
undertenant or occupant, and apply the net amount collected to the rent herein
reserved, but no such assignment, underletting, occupancy or collection shall be
deemed a waiver of this covenant, or the acceptance of the assignee, undertenant
or occupant as tenant, or a release of Sublessee from the further performance by
Sublessee of the covenants on the part of Sublessee herein contained.
Anything to the contrary contained in this Article 12
notwithstanding, Sublessee may assign this Sublease or sublease all or any
portion of the Subleased Premises to an entity which is controlled by, or which
controls, or which is under common control, with Sublessee or in connection with
a restructuring of Sublessee or its business (including by merger or
consolidation), or to any successor entity on or in connection with a sale of
Sublessee 's business (by sale of stock or assets), all with the Sublessor's
approval and consent, not to be unreasonably withheld or delayed, provided that
the character and finances of the assignee or lessee are reasonably satisfactory
to Sublessor and consistent with the first-class nature of the Building, and
Sublessee provides Sublessor with a copy of the assignment or sublease prior to
the effective date
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thereof. Nothing herein contained shall be deemed to release Sublessee from
liability under this Sublease and, in the case of an assignment, the assignee
must assume, in writing, the Sublease and all of Sublessee's obligations
thereunder.
13. Insurance. During the term of this Sublease, Sublessee, at its
sole cost and expense, shall provide and maintain comprehensive public liability
and property damage insurance in conformity with the provisions of the
Underlying Lease which shall include, without limitation, coverage of
replacement value of any and all existing leasehold improvements. Sublessee
shall cause Sublessor and Underlying Landlord to be included as additional
insureds in said policy or policies which shall contain provisions, if and to
the extent available, that it or they will not be cancelable except upon at
least twenty (20) days prior notice to all insureds and that the act or omission
of one insured will not invalidate the policy as to the other insureds.
Sublessee shall furnish to Sublessor reasonably satisfactory evidence that such
insurance is in effect at or before the Commencement Date and, on request, at
reasonable intervals thereafter.
Sublessee agrees to use reasonable efforts to have included in all
of its insurance policies, a waiver of the insurer's right of subrogation
against Underlying Landlord, Sublessor and others required by the Underlying
Lease, if any. If such waiver shall not be, or shall cease to be, obtainable (a)
without additional charge, or (b) at all, then Sublessee shall so notify
Sublessor promptly after learning thereof. In case such waiver can only be
obtained at additional charge, if Sublessor shall so elect and shall pay the
insurer's additional charge therefor, such waiver, agreement or permission shall
be included in the policy. Provided that Sublessee's right of full recovery
under the aforesaid policy or policies are not adversely affected or prejudiced
thereby, Sublessee hereby waives any and all right of recovery it might
otherwise have against Underlying Landlord, Sublessor and others, if any,
required by the Underlying Lease, their
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respective agents, contractors, servants, licensees, employees and invitees, for
loss or damage to Sublessee's property, notwithstanding that such loss or damage
may result from the negligence or fault of Underlying Landlord, Sublessor or
such others as aforementioned, or their respective agents, contractors,
servants, licensees, employees or invitees. If, notwithstanding the recovery of
insurance proceeds by Sublessee for loss, damage or destruction of its property,
Sublessor is liable to Sublessee with respect to such loss, damage or
destruction or is obligated under this Sublease to make replacement, repair or
restoration or payment for such loss, damage or destruction then, provided
Sublessee's right of full recovery under its insurance policies is not thereby
prejudiced or otherwise adversely affected, the amount of the net proceeds of
Sublessee's insurance against such loss, damage or destruction shall be offset
against Sublessor's liability to Sublessee therefor, or shall be made available
to Sublessor to pay for replacement, repair or restoration, as the case maybe.
14. Default. In the event Sublessee defaults in the performance of
any of the terms, covenants, conditions, provisions and agreements of this
Sublease or of the Underlying Lease, Sublessor shall be entitled to exercise any
and all of the rights and remedies to which it is entitled by law and also any
and all of the rights and remedies specifically provided for in the Underlying
Lease, which are hereby incorporated herein and made a part hereof with the same
force and effect as if herein specifically set forth in full, and that wherever
in the Underlying Lease rights and remedies are given to Underlying Landlord,
the same shall be deemed to refer to Sublessor.
15. Sublease Consent. This Sublease shall become effective only if
the written consent hereto of Underlying Landlord is obtained. If such written
consent is not obtained, then this Sublease shall be void and of no force or
effect and Sublessor shall return to
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Sublessee the first month's rent and the security deposit, and thereupon neither
party shall have any further obligation to the other.
16. Notice. Any notice to be given under this Sublease shall be in
writing and shall be sent by registered or certified mail, return receipt
requested, or by nationally-recognized overnight courier, addressed to (i)
Sublessor at its (a) address herein stated prior to the Commencement Date, with
copies to ________________________Attention: Legal Department; and (ii)
Sublessee (a) at its address herein stated prior to the Commencement Date, (b)
at the demised premises subsequent to the Commencement Date, and (c) with a copy
to Silverman, Collura, Chernis & Balzano, 381 Park Avenue South, New York, New
York, Attention : Ronald Balzano, Esq. No notice is effective unless given to
all parties listed hereinabove. Each party shall have the right to designate, by
notice in writing, any other address to which such party's notice is to be sent.
Any notice to be given by Sublessor may be given by the attorneys for Sublessor.
Any notice shall be deemed given three (3) days after being sent by certified or
registered mail, return receipt requested and the next day, if sent by overnight
courier.
17. Quiet Enjoyment. Sublessor covenants that Sublessee, on paying
the fixed rent and additional rent and performing all the terms, covenants,
conditions, provisions and agreements aforesaid, shall and may peacefully and
quietly have, hold and enjoy the demised premises for the term aforesaid, free
from any interference or hindrance by Sublessor, but subject to the exceptions,
reservations and conditions hereof
18. Surrender of Demised Premises. On the date upon which the term
hereof shall expire and come to an end, whether on the Expiration Date, by lapse
of time or otherwise, Sublessee, at Sublessee's sole cost and expense, shall
quit and surrender the demised premises to
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Sublessor in the same good order and condition as Sublessor is delivering them
to Sublessee, subject to the provisions of the Underlying Lease.
19. Brokers. Sublessee represents to Sublessor that Newmark &
Company Real Estate, Inc. and WF Realty LLC (collectively, the "Brokers") are
the only brokers with whom Sublessee dealt in relation to this transaction and
that Sublessee has had no dealings, either direct or indirect, with any other
real estate agent or broker in connection with this transaction. Sublessee
agrees to indemnify, defend and hold Sublessor harmless from any loss, liability
and expense incurred by Sublessor as a result of any claim made against
Sublessor which is based upon a breach of said representation by Sublessee.
Sublessee's indemnification obligation hereunder shall survive the Expiration
Date or sooner termination of this Sublease. Sublessor hereby agrees to pay the
Brokers a commission pursuant to a separate agreement.
20. Excluded Provisions. The following provisions of the Underlying
Lease are deemed to be Excluded Provisions: TERM, RENT, Articles TWENTY-EIGHTH,
FORTY-THIRD and FORTY-FIFTH.
21. Successors and Assigns. This Sublease shall be binding upon and,
except as prohibited by Paragraph 12 hereof, inure to the benefit of the parties
hereto and their respective successors and assigns.
22. No Modifications. This Sublease may not be modified except by
written agreement signed by Sublessor and Sublessee.
23. Security Deposit. A. Subject to Paragraph 23B below, Sublessee
has deposited with Sublessor, the sum of $220,800.00 ("Security Amount") as
security for the faithful performance and observance by Sublessee of the terms,
covenants, conditions, provisions and agreements of this Sublease. The security
shall be deposited in a non-interest bearing
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account in a bank selected by Sublessor. It is agreed that in the event
Sublessee defaults in respect of any of the terms, covenants, conditions,
provisions and agreements of this Sublease, including, but not limited to, the
payment of fixed rent and additional rent, Sublessor may use, apply or retain
the whole or any part of the security so deposited to the extent required for
the payment of any fixed rent and additional rent or any other sum as to which
Sublessee in default or for any sum which Sublessor may expend or may be
required to expend by reason of Sublessee's default in respect of any of the
terms, covenants, conditions, provisions and agreements of this Sublease,
including but not limited to, any damages or deficiency in the reletting of the
demised premises, whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by Sublessor. If Sublessor so applies or
retains any part of the security, Sublessee shall, upon demand, promptly deposit
with Sublessor the amount so applied or retained so that Sublessor shall have
the full deposit on hand at all times during the term of this Sublease. In the
event that Sublessee shall fully and faithfully comply with all of the terms,
covenants, conditions, provisions and agreements of this Sublease, the security
shall be returned to Sublessee after the Expiration Date and after delivery of
entire possession of the demised premises to Sublessor. In the event of an
assignment by Sublessor of its interest under the Underlying Lease, Sublessor
shall have the right to transfer the security and Sublessee agrees to look to
the new Sublessor solely for the return of said security and it is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
security to a new Sublessor. Sublessee further covenants that it shall not
assign or encumber or attempt to assign or encumber the monies deposited herein
as security and that neither Sublessor nor its successors or assigns shall be
bound by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
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B. In lieu of the cash security deposit referred to in Paragraph 23A
above, Sublessee may deliver to Sublessor, and shall maintain in effect at all
times during the term following delivery thereof, a clean, unconditional and
irrevocable letter of credit, in form and substance satisfactory to Sublessor in
the Security Amount, issued by a banking corporation ("Bank") reasonably
satisfactory to Sublessor and having its principal place of business or its duly
licensed branch in the City and County of New York at which the letter of credit
may be presented for payment. Such letter of credit shall have an expiration
date no earlier than the first anniversary of the date of issuance thereof and
shall provide that it shall be automatically renewed from year to year unless
terminated by the Bank by notice to Sublessor given not less than ninety (90)
days prior to every transfer or assignment made of the security to a new
Sublessor, provided the new Sublessor shall assume the obligations of the
Sublessor hereunder. Sublessee shall have the right to substitute one letter of
credit for another, provided that, at all times, the letter of credit shall meet
the requirements of this Paragraph 23B.
C. Provided Sublessee has duly kept and performed all of the terms,
covenants, conditions, provisions and agreements to be kept and performed by
Sublessee under this Sublease, the Security Amount shall be reduced on each of
the first seven one year anniversary dates of the Commencement Date by the
amount of $22,080.00 on each such anniversary date, thus leaving a Security
Amount of $66,240.00 for the balance of the term of the Sublease. In the event
Sublessee is in breach of the foregoing provision on any such anniversary date,
the scheduled reduction shall not be effected, and Sublessee's right to such
reduction and all future reductions shall be permanently and forever waived by
Sublessee.
24. No Modifications. This Sublease may not be modified except by
written agreement signed by Sublessor and Sublessee.
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25. Representations and Covenants. A. Sublessor hereby represents to
Sublessee that (i) the Underlying Lease is in full force and effect and
Sublessor covenants that it will not amend, cancel or surrender the Underlying
Lease during the term of the Sublease (including the exercise of the option
contained in Article FORTY-FIFTH of the Lease) without advising Sublessee and
receiving its consent thereto, which shall not be unreasonably withheld or
delayed with respect to any such amendment, provided such amendment does not
increase Sublessee's obligations or diminish Sublessee's services, rights or
privileges; (ii) Sublessor has received no written notice of default from the
Underlying Landlord which default remains uncured on the date hereof; (iii) to
the best of Sublessor's knowledge, upon due inquiry, Sublessor is not in default
under the Underlying Lease; and (iv) subject to the terms of this Sublease,
Sublessor will continue to perform all of the terms, covenants, conditions,
provisions and agreements of the Underlying Lease.
B. Sublessor agrees that, in the event Sublessor defaults under the
terms, covenants, conditions, provisions and agreements of the Underlying Lease
(provided same was not caused by Sublessee or was the result of Sublessee's
actions or inactions with respect to Sublessee's obligations hereunder),
including, but not limited to actions or inactions occurring prior to the
Commencement Date hereof, then in such event, Sublessor covenants and agrees to
defend, indemnify and hold Sublessee harmless from any and all claims, causes of
action against or damages to Sublessee resulting solely and directly therefrom.
In addition to the foregoing, in the event Sublessor receives a notice of
default from the Underlying Landlord, and Sublessor does not cure such default
within the applicable grace period, Sublessee shall have the right, on behalf of
Sublessor, to cure any such default. Sublessor agrees to give Sublessee written
notice of any default notice received from Underlying Landlord within two (2)
business days of
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Sublessor' s receipt thereof. Upon the curing of such default, Sublessor hereby
agrees to reimburse Sublessee, upon demand, for the amount of such default, and
only in the event such default was a non-monetary default, for any additional
costs or expenses incurred in curing such default, provided same was not caused
by Sublessee or was the result of Sublessee's actions or inactions with respect
to Sublessee's obligations hereunder. In the event Sublessor, within five (5)
business days of demand, accompanied by reasonable proof of payment, shall fail
to so reimburse Sublessee for any reason other than with respect to the payment
of fixed rent under the Underlying Lease and Sublessor raises no reasonable
objection with respect thereto, then, in such event, Sublessee, in addition to
any other rights available to it, shall have the right to offset such costs or
expenses incurred against the next installments of rent due under this Sublease.
26. Signage. Sublessor agrees to request that Underlying Landlord
add Sublessee's name on the entrance doors and floor lobby, as well as on the
Building lobby directory or provide Sublessee with Sublessor's existing
directory lines.
27. Inability to Perform, Delays. If Sublessee shall be delayed in
obtaining possession of the demised premises because of delays in obtaining
consent or in construction or for any other reason beyond the reasonable control
of Sublessor, Sublessor shall not be subject to any liability, the effectiveness
of this Sublease shall not be affected and the term hereof shall not be
extended, but the fixed rent shall be abated (provided Sublessee is not
responsible for the delay in obtaining consent or possession and provided the
delay is not due to delays in obtaining consent to, or in construction of, work
required or permitted to be performed by Sublessee) until possession shall have
been made available to Sublessee. The provisions hereof are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.
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<PAGE> 20
28. Notice of Accidents. Sublessee shall give Sublessor and
Underlying Landlord notice of any fire, casualty or accident in or about the
demised premises promptly after Sublessee becomes aware of such event.
29. Destruction by Fire or Other Cause. If the demised premises
shall be partially or totally damaged or destroyed by fire, casualty or other
cause as a consequence of which Sublessor shall, pursuant to the Underlying
Lease, receive an abatement of rent with respect to the demised premises, there
shall be a corresponding abatement of the fixed rent payable hereunder. This
Sublease shall not be terminated as a consequence of any damage to, or
destruction of the demised premises, unless, as a result thereof, the Underlying
Lease is terminated in accordance with its terms.
30. Bankruptcy. In the event Sublessee becomes the subject of
proceedings involving bankruptcy, insolvency or reorganization of Sublessee, or
if Sublessee makes an assignment for the benefit of creditors, or petitions for,
or enters into an arrangement with creditors, Sublessor shall have the same
rights as to Sublessee as are afforded Underlying Landlord under the Underlying
Lease under similar circumstances involving Sublessor.
31. No Waiver, etc. No agreement to accept a surrender of this
Sublease shall be valid unless in writing and signed by Sublessor. The failure
of Sublessor or Sublessee to enforce any terms, covenants, conditions,
provisions or agreements of this Sublease shall not prevent the later
enforcement thereof or a subsequent act which would have constituted a violation
from having all the force and effect of an original violation. The receipt by
Sublessor or payment by Sublessee of fixed rent or other rent or charges with
knowledge of the breach of any covenant of this Sublease shall not be deemed a
waiver of such breach. The parties hereto, to the fullest extent permitted by
law, waive trial by jury in any action or proceeding relating
20
<PAGE> 21
hereto and consent to the jurisdiction of the New York State Court System.
Sublessee hereby waives any right to interpose any counterclaim in any action
brought by Sublessor in connection herewith. The foregoing shall not be deemed a
waiver by Sublessee of the right to interpose any counterclaim to the extent
That the failure to interpose same would prohibit Sublessee from bringing the
claim, which is the basis thereof, in a separate action.
32. Occupancy Tax. Sublessee shall pay directly to the City of New
York, all occupancy and rent taxes which may be payable by Sublessee to the City
of New York in respect of the rent reserved by this Sublease and will pay all
other taxes, the payment of which shall be imposed directly upon any occupant of
the demised premises.
33. Miscellaneous. A. Paragraph headings are for ease of reference
only and are not part of the agreement of the parties. This Sublease shall be
governed by New York law without giving affect to its conflict of laws rules.
This Sublease may not be changed or terminated, or any provision hereof waived,
orally. The rights and remedies of Sublessor hereunder shall survive the
expiration of the term or sooner termination hereof. The submission of this
Sublease for examination or for signature is not intended to nor shall it create
or evidence an offer to, or any other right by, Sublessee with respect to the
demised premises or otherwise; it being expressly agreed that this Sublease
shall not be effective, and Sublessor shall not be bound hereby, until it is
executed and delivered by each party hereto.
B. Sublessee agrees to assume Sublessor's obligations at Sublessor's
actual cost, under Sublessor's agreement for renting or leasing the T-1 data
transmission line in accordance with such agreement, a copy of which is annexed
hereto as Exhibit C, indemnifying the Sublessor therefrom.
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement of
Sublease as of the day and year first above written.
AVALANCHE SOLUTIONS, INC.
By: /s/ Jeff Dachis
-------------------------------------
Name:
Title:
CONCRETE MEDIA, INC.
13-3905544 By: /s/ D.A. Pelson
- ---------------------- -------------------------------------
Federal Identification Name: D.A. Pelson
Number Title: President
22
<PAGE> 1
EXHIBIT 10.5
OFFICE SERVICE AGREEMENT
This Agreement is made this 29th of October, 1999, by and between Vantas
West Wacker, Inc. d/b/a VANTAS ("Center") having offices known and numbered as
Suite 700 (the "Facility") in the building located at 333 West Wacker Drive,
Chicago, IL 60606 (the "Building") and Bolt Media, Inc. ("Client") a(n)
corporation, with an address of 304 Hudson Street, 7th Floor North, New York, NY
10013 for a term of twelve (12) months, commencing on the 15th day of November,
1999, at 9 a.m. (the "Commencement Date") and ending on the 31st day of
December, 2000, at 5 p.m. (the "Initial Term") unless renewed in accordance with
Paragraph 3.
In consideration of the foregoing, the parties for themselves, their
heirs, legal representatives, successors and assigns, agree as follows:
1. CENTER'S OBLIGATIONS.
a. Subject to the terms and conditions of this Agreement, Center hereby
agrees to provide Client for the Term (as defined below in Paragraph 3): (a) the
exclusive use of Furnished Private Office(s) number(s) 752 & 788 located in the
Facility (the "Premises"); and (b) non-exclusive use of the following services:
- Furnished, Decorated, Reception Room with Professional Receptionist
- Personalized Telephone Answering During Office Hours
- 24-hour Voicemail
- 4 hours of Conference Room per month subject to prior scheduling and
use by other Clients
- Corporate Identity on Lobby Directory where Available
- Receipt of Mail and Packages
- Complete Kitchen Facilities with Coffee Service
- Utilities and Maintenance
- HVAC During Normal Business Hours
- Janitorial Services
- 8 hours per month courtesy of other VANTAS affiliated facilities.
Locations subject to current affiliation and availability.
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b. If, for any reason, Center cannot deliver possession of the Premises to
Client on the Commencement Date, this Agreement will remain in full force and
effect; however, there will be an abatement of the Monthly Office Charge for the
period between the Commencement Date and the date that the Premises are
delivered to Client.
2. USE.
The Premises will be used by Client solely for general office use and such
other normally incident uses and for no other purpose, in strict accordance with
the Operating Standards, which are annexed hereto as Schedule A. Client will not
offer at the Premise any services which Center provides to its Clients,
including, but not limited to those services described in Paragraph 1. Client
will not make nor permit to be made any use of the Premises, Facility or
Building which would violate any of the terms of this Agreement or which,
directly or indirectly, is forbidden by law, rule or regulation, which may be
dangerous to life, limb or property or which could in any way impair, interfere
or tend to impair or interfere with the high quality character, reputation or
appearance of the Building or the Facility or with any services performed by
Center for Client or for others. The foregoing provisions will also apply to
Client's Users (as defined in Paragraph 9).
3. RENEWAL.
Upon expiration of the Initial Term and on any subsequent renewal term
(each, a "Renewal Term" and together with the Initial Term, the "Term") of this
Agreement, the Agreement automatically will be extended for the same period of
time as the Initial Term and upon the same terms and conditions as herein
contained except for the amount of the Monthly Office Charge (as defined in
Paragraph 4) then in effect, which will each be increased by seven percent (7%),
unless either party notifies the other in writing within the period hereinafter
specified that the Agreement will not be extended. If Client has less than three
offices, such notice will be given at least sixty (60) days prior to the
expiration of the Initial Term or the Renewal Term, as the case may be. If
Client has three or more offices, such notice will be given at least ninety (90)
days prior to the expiration of the Initial Term or the Renewal Term, as the
case may be.
4. MONTHLY OFFICE CHARGE.
a. For and during the Term of this Agreement, Client will pay to Center,
on or before the first day of each month after the Commencement Date, the sum of
$2,422.00 as Monthly Office Charge (subject to increase in accordance with
Paragraph 3 above) for the Premises. If any payment of Monthly Office Charge or
other charge due under this Agreement is not received within five (5) calendar
days after its due date, the Client will also pay, in addition to Monthly Office
Charge, a late payment charge which will be an amount equal to ten percent (10%)
of any amount owed to Center or Fifth Dollars ($50.00) whichever is greater. The
financial terms of this Agreement are strictly confidential and Client agrees
not to knowingly or willfully divulge this information to any other Client or
potential Client of Center.
b. The Monthly Office Charge payable during the Term of this Agreement is
subject to increase following notification of any increase in the rent,
operating expenses or taxes which
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the Center might receive under the Main Lease (as defined in Paragraph 20),
including any increase in respect of post periods under the Term. Center will
promptly notify Client in writing of any such increase, and will bill Client for
its pro rata share thereof.
c. The Monthly Office Charge is based on the value of the use of the
Premises and services to be used by three (3) person(s) only. If more than said
number of person(s) regularly use the Premises or services, the Monthly Office
Charge will be increased in an amount equal to One Hundred Fifty Dollars
($150.00) for each such additional person.
d. If a Client check is returned for any reason, Client will pay an
additional charge of One Hundred Dollars ($100.00) per returned check and, for
the purpose of considering default and/or late charges, it will be as if the
payment represented by the returned check had never been made.
5. REFUNDABLE RETAINER.
a. Client will deposit with Center $3,633.00 in good or certified funds,
as a non-interest bearing refundable retainer. Center may use the refundable
retainer to cure any default of Client under this Agreement, to restore the
Premises, including any and all furniture, fixtures and equipment, provided by
Center to its original condition and configuration, reasonable wear and tear
excepted, to pay for repairs to any damage to the Premises, Facility and/or
Building, caused by Client or Client's guests, or to pay any Monthly Office
Charge or other charges that Client owes Center at or prior to the expiration of
the Term of this Agreement.
b. The refundable retainer (less any sums used by Center in accordance
with the terms and conditions of this Agreement) will be returned within sixty
(60) days after the termination of any services rendered or expiration of the
Term. Client may not direct or request that the refundable retainer be applied
in lieu of the final payment(s) of Monthly Office Charge or service charges
under this Agreement.
c. In the event that Center applies any of the refundable retainer
deposited pursuant to this Agreement, Center will have the right to charge the
Client, and Client will pay, in addition to any Monthly Office Charge, such sums
as are necessary to cause the refundable retainer to be returned to its entire
original amount.
6. SERVICES.
a. Provided Client is not in default of this Agreement, Center will make
available certain services to Client as more particularly described in Paragraph
1. Charges for such services will be included as part of the Monthly Office
Charge.
b. Client shall pay a monthly amount equal to One Hundred Twenty Dollars
($120.00) per office in respect of the monthly service package (the "Monthly
Service Package"). Payment of such amount will be on the same terms and
conditions as those governing the payment of the Monthly Office Charge. The
Monthly Service Package will entitle the Client to receive upon request an
aggregate of four hours per month of clerical and/or word processing services
from the center.
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c. In addition to the Monthly Service Package, upon request, Center will
make available to Client additional services as Center may make generally
available, the charges for which will be established as per Center's then
scheduled rates as determined by Center. Payment for these services will be
subject to the same terms and conditions as those governing the payment of the
Monthly Office Charge. Center will have no obligation to provide such services
if Client is in default of this Agreement or if the anticipated charges exceed
the amount of the refundable retainer. When providing services to Client that
involve third panics, Center will have the right to require Client to pay, or to
reimburse Center for, the fees and expenses of such third party in advance.
7. TELEPHONE SERVICES.
a. Provided Client is not in default of this Agreement, Center will make
available to Client a telecommunications package, the charges for which will be
established as per Center's then scheduled rates as determined by Center.
Payment for these services will be subject to the same terms and conditions as
those governing the payment of the Monthly Office Charge. All telephone numbers
used by Client will remain at all times the property of Center and Client will
acquire no rights in the components of the telecommunications package
whatsoever.
b. Client hereby agrees to indemnify, hold harmless and to reimburse
Center for all charges associated with (1) any toll fraud traceable to
telecommunications services provided by Center to Client including, but not
limited to, unauthorized use of calling cards or telephone lines, and (2) any
advertising costs of Client involving the telephone number assumed to it,
including, without limitation, yellow pages advertising (it being understood
that Center is under no obligation to procure such advertising and that any such
advertising by Client is subject to the Operating Standards).
c. It is expressly acknowledged and agreed that Center will be the sole
aid exclusive provider of telecommunication services to Client. Client hereby
agrees and covenants that it will not use any other telephone service or
telephone carrier to provide it service in the Premises.
d. Center shall not be liable for any interruption or error in the
performance of its services to Client under this Paragraph "7." Client waives
any recourse against Center arising from the provision of such services,
including, without limitation, any claim of business interruption or for any
indirect, incidental, special, consequential or punitive damages, except for
claims arising out of willful misconduct by Center.
8. LIMITATION OF LIABILITY/INSURANCE
a. Client will indemnify and hold harmless Center from and against any
loss, damage, injury, liability or expense to or of personal property occasioned
by or resulting from any willful misconduct or grossly negligent act on the part
of Client or Client's Users. Center will not be liable to Client or to any other
person on account of loss, damage or theft to any business or personal property
of Client. Center will not be liable for any loss, damage, injury, liability or
expense to or of person or property except as may result from Center's willful
misconduct or grossly negligent acts. Center will indemnify and hold harmless
Client from and against any loss, damage, injury, liability or expense to or of
person or property occasioned by or
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resulting from any willful misconduct or grossly negligent act on the part of
the Center, its agents, employees, or invitees, or persons permitted on the
Premises by Center.
b. Center will not be liable for any claim of business interruption or for
any indirect, incidental, special, consequential exemplary of punitive damages
arising out of any failure to furnish any service or facility, any error or
omission with respect thereto, or any delay or interruption of same. Neither
Center nor any of its agents, employees, officers or directors will be deemed to
be making any representations or warranties, whether express or implied, as to
the ability of any systems, including, without limitation, computer and
electronic based equipment relating to the Building, Facility or Premises or to
any services to be provided hereunder to process date fields relating to the
Year 2000 nor will any of them be liable for the failure of such systems to
process such date fields. Center's liability under this Agreement will in no
event exceed the amount paid by Client for the services for which the claim
arose. The parties agree to the allocation of risk contained herein.
c. Client will, prior to the Commencement Date of this Agreement provide
Center with a certificate of insurance evidencing General/Public Liability
coverage with liability limits of not less than One Million Dollars
($1,000,000.00) per occurrence for Bodily Injury and/or Property Damage
Liability and One Hundred Thousand Dollars ($100,000.00) per occurrence for
Fire/Legal Liability. Said insurance coverage will remain in force during the
Term of this Agreement. VANTAS Incorporated and Vantas West Wacker, Inc., will
be named as an additional named insured on each of these policies. Client's
failure to provide or maintain such insurance will not reduce or otherwise alter
Client's liability or responsibility to pay any judgment rendered against Client
for any liability or damages. All insurance required to be maintained by Client
shall include a waiver of subrogation in favor of Center and the landlord under
the Main Lease. Center will not have any obligation to maintain insurance for
Client's benefit.
d. The provisions of this Paragraph 8 will survive the expiration or
earlier termination of the term of this Agreement.
9. OPERATING STANDARDS.
The Operating Standards attached to this Agreement as Schedule A are
hereby made an integral part of this Agreement. Client, its employees, agents,
guests, invitees, visitors and/or any other persons caused to be present in and
around the Premises by the Client ("Client's Users") will perform and abide by
the Operating Standards then in effect.
10. EMPLOYMENT OR CENTER'S EMPLOYEES.
Client agrees that it will not, during the Term of this Agreement and for
a period of one year thereafter, directly or indirectly, employ or offer to
employ any person who is or has been an employee of Center without prior consent
from Center. If Client hires either an employee of Center or any person who has
been an employee of Center within six months prior to the time such person is
hired by Client, Client will be liable to Center for liquidated damages equal to
six months wages of the employee, at the rate last paid that employee by Center.
The provisions of this paragraph will survive the Term of this Agreement.
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11. ACCESS.
Center and its agents will have the right of access to the Premises at any
time for the purpose of (i) making any repairs, alterations and/or inspections
which it deems necessary in its sole discretion for the preservation, safety or
improvements of the Premises, or (ii) to show the Premises to prospective
Clients, without in any way being deemed or held to have committed an eviction
(constructive or otherwise) of or trespass against Client.
12. RELOCATION.
Client agrees that the Center may, in its sole discretion, relocate the
Client from its present Premises to a like or similar office space within the
same Facility upon ten (10) days' notice to the Client. In the event that the
Center requires the Client to relocate, the Center will bear the reasonable
moving costs of any such relocation. All of terms and conditions of this
Agreement, other than the designation of the Premises provided herein, will
remain unaffected and in full force and effect.
13. ASSIGNMENT AND SUBLETTING.
No assignment or subletting of the Premises, this Agreement or any part
thereof will be made by Client without Center's prior written consent, which
consent may he withheld in Center's sole discretion. Center may assign its
rights and its obligations under Agreement in whole or in part without Client's
consent.
14. TERMINATION.
a. On expiration or earlier termination of the Term, Client will, without
demand, promptly surrender and deliver the Premises, including any furniture,
fixtures and equipment provided by Center, to Center in its original condition
and configuration, reasonable wear and tear excepted. If Client fails to so
surrender and deliver the Premises, Client agrees to pay Center, as liquidated
damages, a sum equal to twice the Monthly Office Charge for each month or
portion thereof that the Client retains possession of the Premises.
b. If Client vacates the Premises and leaves behind any property,
whatsoever, such property will be deemed abandoned by Client and may be disposed
of by Center at Client's expense and without liability to Center.
c. In the event the Premises, the Facility or the Building is damaged,
destroyed or taken by eminent domain, either party may terminate this Agreement
without liability on (30) days' written notice to the other party.
d. Upon early termination of the Main Lease, this Agreement will terminate
without liability to any party unless the Landlord under such Main Lease elects
to have this Agreement assigned to such Landlord or another entity as provided
in such Main Lease.
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15. DEFAULT AND REMEDIES.
a. Client will be deemed to be in default of this Agreement if Client
fails to fulfill any of its terms, conditions, covenants or provisions of this
Agreement, including but not limited to (1) payment of Monthly Office Charge
and/or any other charges hereunder within ten days of the date such charges
become due: or the abandonment and/or vacatur of the Premises by the Client
prior to expiration of the Term, or (2) if Client becomes insolvent, makes an
assignment for the benefit of creditors or files a voluntary petition, or has an
involuntary petition flied against it, under any bankruptcy or insolvency law.
b. In case of such default, the Center may, at its sole discretion,
terminate this Agreement upon five (5) days' notice to the Client. Upon the
expiration the five day period, Client will vacate the Premises. Should Client
fail to vacate the Premises, the Center may:
i. re-enter and remove property therefrom; and
ii. disconnect any telephone lines installed for the benefit of Client;
and
iii. cease supplying Client with the services described in Paragraph 1
hereof.
If Client defaults and Center takes any of the foregoing action, or
changes the locks, removes Client's property, or otherwise denies access to
Client, Center will not be liable for any damages to the Client.
c. In addition to the foregoing, Center may elect to accelerate all of
Client's obligations hereunder, including without limitation, Monthly Office
Charge and other monthly recurring charges, for all or part of the term. Center
is under no obligation, implied or otherwise, to mitigate its damage(s) under a
default by Client.
d. Should Center be unable to enter into another office service agreement
relating to chic Premises, or should Center enter into another office service
agreement relating to the Premises for less than the Monthly Office Charge which
Client is obligated to pay under this Agreement, Client will pay the amount of
such deficiency, plus the expenses of entering into such other service agreement
relating to the Premises, immediately in one lump sum, to Center upon demand
and/or at Center's option as such obligations accrue hereunder.
e. In connection with any default by Client under this Agreement, if
Center incurs attorney's fees and/or costs of collection or of ensuring
performance, Client will pay all such sums with interest, and such sums will be
deemed to be owed by Client in addition to the Monthly Office Charge hereunder,
and if the Term has expired at the time of incurring such sums, such sums will
be recoverable by Center as damages.
16. MAIL & TELEPHONE FORWARDING.
Upon expiration of the Term, Center will, unless otherwise instructed by
Client in writing no later than thirty (30) days prior to the expiration of the
Term, forward mail to Client at its new address and give out Client's new
telephone number via a voice mail message for a period of three (3) months at
the rate of One Hundred Fifty Dollars ($150.00) per month, which sums will be
deducted from any amounts deposited with the Center from the refundable retainer
deposited hereunder or will otherwise be paid to the Center in advance. Unless
the Client pays the Charge
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set forth herein to the Center in advance, Center will have no obligation to
provide the services set forth herein. Except as expressly provided herein,
Center will have no obligation to notify any person or entity of Client's new
telephone number and address.
17. NOTICES.
Any notice under this Agreement will be in writing and will be either
delivered by hand, first-class mail or by overnight courier to the party at the
address set forth below. Center hereby designates its address as:
Vantas West Wacker, Inc.
333 West Wacker Drive, Suite 700
Chicago. II. 60606
Phone: (312) 444-2000
Fax: (312) 641-3096
Attn: Management
Client hereby designates its address (which address must be addressed within the
United States), as:
Bolt Media, Inc.
Attn: Jeanne Sachs
304 Hudson Street, 7th Floor North
New York. NY 10013
Phone: (212) 620-5900 ext. 291
Fax: (212) 620- 4315
If such mail is properly addressed and mailed as above, it will be deemed notice
for all purposes, given when sent or delivered, even if returned as undelivered.
18. SEVERABILITY.
The invalidity of any one or more of the sections, subsections, sentences,
clauses or words contained in this Agreement or the application thereof to any
particular set of circumstances, will not affect the validity of the remaining
portions of this Agreement or of their valid application to any other set of
circumstances. Regardless of whether or not either party has elected to consult
with legal counsel in reviewing this Agreement, it is the intent of the parties
that in no event will the terms, conditions or provisions of this Agreement be
construed against either party as the drafter of this Agreement.
19. EXECUTION BY CLIENT.
The party or parties executing this Agreement on behalf of the Client
warrant(s) and represent(s): (i) that such executing party (or parties) has (or
have) complete and full authority to execute this Agreement on behalf of Client;
and (ii) that Client will fully perform its obligations hereunder.
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20. MISCELLANEOUS.
a. Failure of the Center to insist upon the strict performance of any term
or condition of this Agreement or to exercise any right or remedy available for
a breach thereof, or acceptance of full or partial payment during the
continuance of any such breach, will not constitute a waiver of any such breach
or any such term or condition. No term or condition of this Agreement required
to be performed by Client and no breach thereof, will be waived, altered or
modified, except by a written instrument executed by Center.
b. Time is of the essence as to the performance by Client of all
covenants, terms and provisions of this Agreement.
c. This Agreement embodies the entire understanding between the parties
relative to its subject matter, and will not be modified, changed or altered in
any respect except in writing signed by all parties.
d. This Agreement may be executed in two or more counterparts, each of
which will be deemed to be an original, but all of which together will
constitute one and the same instrument.
e. This Agreement is subject and subordinate to the Building lease
governing the Facility, under which Center is bound as tenant (the "Main Lease")
and the provisions of the Main Lease, other than as to the payment of Monthly
Office Charge or other monies, are incorporated into this Agreement as if
completely herein rewritten. Client will comply with and be bound by all
provisions of the Main Lease except that the payment of Monthly Office Charge
will be governed by the provisions of this Agreement, and Client will indemnify
and hold Center harmless from and against any claim or liability under the Main
Lease arising front Client's breach of the Main Lease or this Agreement.
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IN WITNESS WHEREOF, Center and Client have executed this Agreement as of the
date first above written.
CENTER: VANTAS WEST WACKER, INC.
By:
---------------------------------------------
CLIENT: BOLT MEDIA, INC.
(If a corporation)
By: /s/ Jeanne Sachs
---------------------------------------------
Name: Jeanne Sachs
---------------------------------------------
Title: VP Sales
---------------------------------------------
[Corporate Seal]
CLIENT:
(If an individual or partnership)
By:
---------------------------------------------
By:
---------------------------------------------
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EXHIBIT 10.6
VANTAS
OFFICING SOLUTIONS WORLDWIDE
OFFICE SERVICE AGREEMENT
This Agreement is made this 30th day of June, 1999, by and between
Vantas ("Center") having offices known and numbered as Suite 200 (the
"Facility") in the building located at 11400 W. Olympic Boulevard, Los Angeles,
CA 90064 (the "Building") and Bolt Media, Inc. ("Client") a(n) (corporation,
partnership, individual) with an address of 304 Hudson, 7th Floor, North, New
York, NY 10013 for a term of 6 months, commencing on the 15th day of July, 1999
(the "Commencement Date") and ending on the 31st day of January 2000 (the
"Initial Term" unless renewed in accordance with Paragraph 3.
In consideration of the foregoing, the parties for themselves, their
heirs, legal representatives, successors and assigns, agree as follows:
1. Center's Obligations.
a. Subject to the terms and conditions of this Agreement, Center hereby
agrees to provide Client for the Term (as defined below in Paragraph 3): (a) the
exclusive use of Private Office(s) number(s) 251 located in the Facility (the
"Premises"); and (b) non-exclusive use of the following services:
- Furnished, Decorated Reception Room with Professional
Receptionist
- Personalized Telephone Answering During Office Hours
- 24 hour Voicemail
- 10 hours of Conference Room per month, subject to prior
scheduling and use by other Clients
- Corporate Identity on Lobby Directory where Available
- Receipt of Mail and Packages
- Complete Kitchen Facilities with Coffee Service
- Utilities and Maintenance
- HVAC During Normal Business Hours
- Janitorial Services
- 8 hours per month courtesy use of other VANTAS affiliated
facilities. Locations subject to current affiliation and
availability.
b. If, for any reason, Center cannot deliver possession of the Premises
to Client on the Commencement Date, this Agreement will remain in full force and
effect; however, there will be an abatement of the Monthly Office Charge for the
period between the Commencement Date and the date that the Premises are
delivered to Client.
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2. Use.
The Premises will be used by Client solely for (general offices
purposes) and such other normally incident uses and for no other purpose, in
strict accordance with the Operation Standards, which are annexed hereto as
Schedule A. Client will not offer at the Premises any services which Center
provides to its Clients, including but not limited to those services described
in Paragraph 1. Client will not make nor permit to be made any use of the
Premises, Facility or Building which would violate any of the terms of this
Agreement or which, directly or indirectly, is forbidden by law, rule or
regulation, which may be dangerous to life, limb or property or which could in
any way impair, interfere or tend to impair or interfere with the high quality
character, reputation or appearance of the Building or the Facility or with any
services performed by Center for Client or for others. The foregoing provisions
will also apply to Client's Users (as defined in Paragraph 9).
3. Renewal
Upon expiration of the Initial Term and on any subsequent renewal term
(each, a "Renewal Term" and together with the Initial Term, the "Term") of this
Agreement, the Agreement automatically will be extended for the same period of
time as the Initial Term and upon the same terms and conditions as herein
contained except for the amount of the Monthly Office Charge (as defined in
Paragraph 4) then in effect, which will each be increased by seven percent (7%),
unless either party notifies the other in writing within the period hereinafter
specified that the Agreement will not be extended. If Client has less than three
offices, such notice will be given at least sixty (60) days prior to the
expiration of the Initial Term or Renewal Term, as the case may be. If Client
has three or more offices, such notice will be given at least ninety (90) days
prior to the expiration of the Initial Term or the Renewal Term, as the case may
be.
4. Monthly Office Charge
a. For and during the Term of this Agreement. Client will pay to
Center, on or before the first day of each month after the Commencement Date,
the sum of $800.00 as Monthly Office Charge (subject to increase in accordance
with Paragraph 3 above) for the Premises. If any payment of Monthly Office
Charge or other charge due under this Agreement is not received within five (5)
calendar days after its due date, the Client will also pay, in addition to
Monthly Office Charge, a late payment charge which will be an amount equal to
ten percent (10%) of any amount owed to Center or fifty dollars ($50.00)
whichever is greater. The financial terms of this Agreement are strictly
confidential and Client agrees not to knowingly or willfully divulge this
information to any other Client or potential Client of Center.
b. The Monthly Office Charge payable during the Term of this Agreement
is subject to increase following notification of any increase in the rent,
operating expenses or taxes when the Center might receive under the Main Lease
(an defined in Paragraph 20), including any increase with respect of past
periods under the Term. Center will promptly notify Client in writing of any
such increase, and will bill Client for its pro rata share thereof.
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c. The Monthly Office Charge is based on the value of the use of the
Premises and services can be used by 2 person(s) only. If more then said number
of person(s) regularly use the Premises or services, the Monthly Office Charge
will be increased in an amount equal to One Hundred Fifty Dollars ($150.00) for
each such additional person.
d. If a Client check is returned for any reason, Client will pay an
additional charge of One Hundred Dollars ($100.00) per returned check and, for
the purpose of considering default and/or late charges, it will be as if the
payment represented by the returned check had never been made.
5. Refundable Retainer.
a. Client will deposit with Center $1,600.00 in good or certified
funds, as a non-interest bearing refundable retainer. Center may use the
refundable retainer to cure any default of Client under this Agreement, to
restore the Premises, including any and all furniture, fixtures and equipment,
provided by Center to its original condition and configuration, reasonable wear
and tear excepted, to pay for repairs to any damage to the Premises, facility
and/or Building, caused by Client or Client's guests, or to pay any Monthly
Office Charge or other charges that Client owes Center at or prior to the
expiration of the Term of this Agreement.
b. The refundable retainer (less any sums used by Center in accordance
with the terms and conditions of this Agreement) will be returned within sixty
(60) days after the termination of any services rendered or expiration of the
Term. Client may not direct or request that the refundable retainer be applied
in lieu of the final payment(s) of Monthly Office Charge or service charges
under this Agreement.
c. In the event that Center applies any of the refundable retainer
deposited pursuant to this Agreement, Center will have the right to charge the
Client, and Client will pay, in addition to any Monthly Office Charge, such sums
as are necessary to cause the refundable retainer to be returned to its entire
original amount.
6. Services.
a. Provided Client is not in default of this Agreement, Center will
make available certain services to Client as more particularly described in
Paragraph 1. Charges for such services will be included as part of the Monthly
Office Charge.
c. In addition to the Monthly Service Package, upon request, Center
will make available to Client additional services as Center may make generally
available, the charges for
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which will be established us per Center's then scheduled rates as determined by
Center. Payment for these services will be subject to the same terms amid
conditions as those governing the payment of the Monthly Office Charge. Center
will have no obligation to provide such services if Client is in default of this
Agreement or II' the anticipated charges exceed the amount of the refundable
retainer. When providing services to Client that involve third parties, Center
will have the right to require Client TO pay, or to reimburse Center for, the
fees and expenses of such third petty in advance.
7. Telephone Services.
a. Provided Client is not in default of this Agreement, Center will make
available to Client a telecommunications package, the charges for which will be
established as per Center's then scheduled rates as determined by Center.
Payment for these services will be subject to the same terms and condition as
those governing the payment of the Monthly Office Charge. All telephone numbers
used by Client will remain at all times the property of Center and Client will
acquire no rights in the components of the telecommunications package
whatsoever.
b. Client hereby agrees to indemnify, hold harmless and to reimburse
Center for all charges associated with (1) any toll fraud traceable to
telecommunications services provided by Center to Client including, but not
limited to, unauthorized use of calling cards or telephone lines, and (2) any
advertising costs of Client involving the telephone number assigned to it,
including, without limitation, yellow pages advertising (it being understood
that Center is under on obligation to procure such advertising and that any such
advertising by Client is subject to die Operations Standards).
c. It is expressly acknowledged and agreed that Center will be the sole
and exclusive provider of telecommunication services to Client. Client hereby
agrees and covenants that it will not use any other telephone service or
telephone carrier to provide it service in the Premises.
d. Center shall nor be liable for any interruption or error in the
performance of its services to Client under this Paragraph "7." Client waives
any recourse against Center arising from the provision of such services,
including, without limitation, any claim of business interruption or for any
indirect, incidental, special, consequential or punitive damages, except for
claims arising out of willful misconduct by Center.
8. Indemnity/Limitations of Liability/Insurance
a. Client will indemnify and hold harmless Center from and against any
loss, damage, injury, liability or expense to or of person at property
occasioned by or resulting from any willful misconduct or grossly negligent act
on the part of Client or Client's Users. Center will not be liable to Client or
to any other person on account of loss, damage or theft to any business or
personal property of Client. Center will not be liable for any loss, damage,
injury, liability or expense to or of person or property except as may result
from Center's willful misconduct or grossly negligent acts. Center will
indemnify and hold harmless Client from and against any loss, damage, injury,
liability or expense to or of person or property occasioned by or
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resulting from any willful misconduct or grossly negligent act on the part of
the Center, its agents, employees, or invitees, or persons permitted on the
Premises by Center.
b. Center will not be liable for any claim of business interruption or
for any indirect, incidental, special, consequential exemplary or punitive
damages arising out of any failure to furnish any service or facility, any error
or omission with inspect thereto, or any delay or interruption of same. Neither
Center nor any of its agents, employees, officers or directors will be deemed to
be making any representations or warranties, whether express or implied, as to
the ability of any system, including, without limitation, computer and
electronic based equipment, relating to the Building. Facility or Premises or to
any services to be provided hereunder to process date fields relating to the
Year 2000 nor will any of them be liable for the failure of such systems to
process such date fields. Center's liability under this Agreement will in no
event exceed the amount paid by Client for the services for which the claim
arose. The parties agree to the allocation of risk contained herein.
c. Client will, prior to the Commencement Date of this Agreement
provide Center with a certificate of insurance evidencing General/Public
Liability coverage with liability limits of not less than One Million Dollars
($1,000.000.00) per occurrence for Bodily Injury and/or Property Damage
Liability and One Hundred Thousand Dollars ($100,000.00) per occurrence for
Fire/Legal Liability. Said insurance coverage will remain in force during the
Term of this Agreement. Vantas International Incorporated and Vantas will be
named as an additional named insured on each of these policies. Client's failure
to provide or maintain such insurance will not reduce or otherwise alter
Client's liability or responsibility to pay any judgment rendered against Client
(or any liability or damages. All insurance required to be maintained by Client
include a waiver of subrogation n favor of Center and the landlord under the
Main Lease. Center will not have any obligation to maintain insurance for
Client's benefit.
d. The provisions of this Paragraph 8 will survive the expiration or
earlier termination of the term of this Agreement.
9. Operating Standard.
The Operating Standards attached to this Agreement as Schedule A are
hereby made an integral part of this Agreement. Client, its employees, agents,
guests, invitees, visitors and/or any other persons caused to be present in, and
around the Premises by the Client ("Client's Users") will perform and abide by
the Operating Standards then in effect.
10. Employment of Center's Employees
Client agrees that it will not, during the Term of this Agreement and
for a period of one year thereafter, directly or indirectly, employ or offer to
employ any person who is or has been an employee of Center without prior consent
from Center. If Client hires either an employee of Center or any person who has
been an employee of Center within six months prior to the time such person is
hired by Client, Client will be liable to Center for liquidated damages equal to
months wages of the employee, at the rate last paid that employee by Center. The
provisions of this paragraph will survive the Term of this Agreement.
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11. Access.
Center and its agents will have the right of access to the Premises at
any time for the purpose of (i) making any repairs, alterations and/or
inspections which it deems necessary in its sole discretion for the
preservation, safety or improvements of the Premises, or (ii) to show the
Premises to prospective Clients, without in any way being deemed or held to have
committed an eviction (constructive or otherwise) of or trespass against Client.
12. Relocation.
Client agrees that the Center may, in its sole discretion, relocate the
Client from its present Premises to a like or similar office space within the
same Facility upon ten (10) days notice to the Client. In the event that the
Center requires the Client to relocate, the Center will bear the reasonable
moving costs of any such relocation. All of terms and conditions of this
Agreement, other than the designation of the Premises provided herein, will
remain unaffected and in full force and effect.
13. Assignment and Subletting.
No assignment or subletting of the Premises, this Agreement or any part
thereof will be made by Client without Center's prior written consent, which
consent may be withheld in Center's sole discretion. Center may assign its
rights and its obligations under Agreement in whole or in part without Client's
consent.
14. Termination.
a. On expiration or earlier termination of the Term, Client will,
without demand, promptly surrender and deliver the Premises, including arty
furniture, fixtures and equipment provided by Center, to Center in its original
condition and configuration, reasonable wear and tear excepted. If Client fails
to so surrender and deliver the Premises, Client agrees to pay Center, as
liquidated damages, a sum equal to twice the Monthly Office Charge for each
month or portion thereof that the Client retains possession or the premises.
b. If Client vacates the Premises and leaves behind any property,
whatsoever, such property will be deemed abandoned by Client and may be disposed
of by Center at Client's expense and without liability to Center.
c. In the event the Premises, the Facility or the Building is damaged,
destroyed or taken by eminent domain either party may terminate this Agreement
without liability on (30) days written notice to the other party.
d. Upon early termination of the Main Lease, this Agreement will
terminate without liability to any party unless the Landlord under such Main
Lease elects to have this Agreement assigned to such Landlord or another entity
as provided in such Main Lease,
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15. Default and Remedies.
a. Client will be deemed to be in default of this Agreement if Client
fails to fulfill any of its terms, conditions, covenants or provisions of this
Agreement, including but not limited to (1) payment of Monthly Office Charge
and/or any other charges hereunder within ten day; of the date such charges
become due; or the abandonment and/or vacatur of the Premises by the Client
prior to expiration of the Term, or (2) if Client becomes insolvent, makes an
assignment for the benefit of creditors or files a voluntary petition or has an
involuntary petition filed against it, under any bankruptcy or insolvency law,
b. In case of such default the Center may, at its sole discretion,
terminate this Agreement upon five days notice to the Client. Upon the
expiration the five day period, Client will vacate the Premises.
Should Client fail to vacate the Premises, the Center may:
i. re-enter and take possession of the Premises and remove
from all persons and property therefrom; and
ii. disconnect any telephone lines installed for the benefit
of Client; and
iii. cease supplying Client with the services
described in Paragraph I hereof.
If Client defaults and Center takes any or the foregoing action, or changes the
locks, removes Client's property or otherwise denies access to Client, Center
will not be liable for any damages to the Client.
c. In addition to the foregoing, Center may elect to accelerate all of
Client's obligations hereunder, including without limitation Monthly Office
Charge and other monthly recurring charges, for all or part of the term. Center
is under no obligation, implied or otherwise to initiate its damage(s) under a
default by Client.
d. Should Center be unable to enter into another office service
agreement relating to the Premises, or should Center enter into another office
service agreement relating to the Premises for less than the Monthly Office
Charge which Client is obligated to pay, under this Agreement, Client will pay
the amount of such deficiency, plus the expenses of entering into such other
service agreement relating to the Premises, immediately in one lump sum, to
Center upon demand and/or at Center's option as such obligations accrue
hereunder.
e. In connection with any default by Client under this Agreement, if
Center incurs attorney's fees and/or costs of collection or of ensuring
performance, Client will pay all such sums with interest, and such sums will be
deemed to be owed by Client in addition to the Monthly office Charge hereunder,
and if the Term has expired at the time of incurring such sums, such sums will
be recoverable by Center as damages.
16. Mail and Telephone Forwarding
Upon expiration of the Term, Center will, unless otherwise instructed by
Client, in writing no later than 30 days prior to the expiration of the Term,
forward mail to Client at its new address and give out Client's new telephone
number via a voicemail message from a period of three months at the rate of One
Hundred and Fifty Dollars ($150.00) per month, which sums will
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be deducted from any amounts deposited with the Center from the refundable
retainer deposited hereunder or will otherwise be paid to the Center in advance.
Unless the Client pays the Charge set forth herein to the Center in advance.
Center will have no obligation to provide the services set forth herein. Except
as previously provided herein, Center will have no obligation to notify any
person or entity of Client's new telephone number and address.
17. Notices.
Any notice under this Agreement will be in writing and will be either
delivered by hand, first class mail or by overnight courier to the party at the
address set forth below. Center hereby designated its address as:
Vantas @ Executive Tower
1140 W. Olympic Blvd., Suite 200
Los Angeles, CA 90064
Attn: Management
Client hereby designates its address (which address must be an address within
the United States), as:
Bolt Media, Inc.
304 Hudson, 7th Floor North
New York, NY 10013
Attn: Frank Harrison, CFO or
Jeanne Sachs, VP Sales
If such mail is properly addressed and mailed as above, it will be
deemed notice for all purposes, given when sent or delivered, even if returned
as undelivered.
18. Severability.
The invalidity of any one or more of the sections, subsections, sentences,
clauses or words contained in this Agreement or the application thereof to any
particular set of circumstances; will not affect the validity of the remaining
portions of this Agreement or of their valid application to any other set of
circumstances. Regardless of whether or not either party has elected to consult
with legal counsel in reviewing this Agreement, it is the intent of the parties
that in no event will the terms, conditions or provision of this Agreement be
construed against either party as the drafter of this Agreement.
19. Execution by Client.
The party or parties executing this Agreement on behalf of the Client
warrant(s) and represent(s): (i) that such executing party (or parties) has (or
have) complete and full authority to execute this Agreement on behalf of Client;
and (ii) that Client will fully perform its obligations hereunder.
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20. Miscellaneous.
a. Failure of the Center to insist upon the strict of any terms or condition
of this Agreement or to exercise any right or remedy available for a breach
thereof, or acceptance of full or partial payment during the continuance of any
such breach, will not constitute a waiver of any such breach or any such terms
or condition. No term or condition of this Agreement required to be performed by
Client and no breach thereof, will be waived, altered or modified, except by a
written instrument executed by Center.
b. Time is of the essence as to the performance by Client of all
covenants, terms and provisions of this Agreement.
c. This Agreement embodies the entire understanding between the parties
relative to its subject matter, and will not be modified, changed or altered in
any respect except in writing signed by all parties.
d. This Agreement may bc executed in two or more counterparts, each of
which will be deemed to be an original, but all of which together will
constitute one and the same instrument.
e. This Agreement is subject and subordinate to the Building lease
governing the Facility, under which Center is bound as tenant (the "Main Lease")
and the provisions of the Main Lease, other than as to the payment of Monthly
Office Charge or other monies, are incorporated into this Agreement as if
completely herein rewritten. Client will comply with and be bound by all
provisions of the Main Lease except that the payment of Monthly Office Charge
will be governed by 'be provisions of this Agreement, and Client will indemnify
and hold Center harmless from and against any claim or liability under the Main
Lease arising from Center's breach of the Main Lease or this Agreement.
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IN WITNESS WHEREOF, Center and Client have executed this Agreement as
of the date first above written.
CENTER: Vantas @ Executive Tower
By:
-----------------------------------------
Wendy E. Craggs - Area General Manager
CLIENT: Bolt Media, Inc.
-----------------------------------------
(If a corporation)
BY: /s/ Frank M. Harrison
-----------------------------------------
Name: Frank M. Harrison
-----------------------------------------
Title: CFO & Secretary
-----------------------------------------
[Corporate Seal]
CLIENT:
(If an individual or partnership)
By:
-----------------------------------------
By:
-----------------------------------------
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SCHEDULE A OPERATING STANDARDS
1. Client and their guests will conduct themselves in a businesslike
manner; proper attire will be worn at all times; and the noise level will be
kept to a level so as to not to interfere with or annoy other Clients.
2. Client will not provide or offer to provide any services to Center's
customers if such services are available from Center.
3. Clients not prop open any corridor doors, exit doors connecting
corridors during or after business hours.
4. Clients using public areas may only do so with the consent of the
Center, and those areas must be kept neat and attractive at all times.
5. Client will not conduct any activity, within the Premises, Facility
or Building, which in the sole judgment of the Center will create excessive
traffic or is inappropriate to a shared office environment.
6. Client may not conduct business in the corridors or any other areas
except in its designated offices or conference rooms without the written Consent
of Center.
7. All corridors, halls, elevators and stairways will not be obstructed
by Client or used for any purpose other than normal egress and ingress.
8. No advertisement, identifying signs or other notices will be
inscribed, painted or affixed on any part of the corridors, doors, windows or
public areas.
9. Without Center's prior written consent, Client is not permitted to
place "mass market", direct mail or advertising (i.e. newspaper, classified
advertisements, yellow pages, billboards) using Center's assigned telephone
number or other any such action that would generate an excessive number of
incoming calls.
10. Client will not solicit clients of Center or their employees in the
Building without first obtaining Center's prior written consent
11. Immediately following Client's use of conference room space and/or
audio/visual equipment, Client will clean up and return the space and equipment
to the state and condition it was in prior to Client's use. If not, Center may
charge Client for any other expenses required to restore the conference space
and/or equipment to its original condition.
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12. Center must be notified in writing if Client desires to utilize the
conference room or other common areas of the Facility during evening or weekend
hours. Center may deny the Client access if the desired usage is inappropriate
and may disrupt normal operations.
13. Client will not, without Center's prior written consent, store or
operate any computer (except a desktop/laptop computer or fax machine) or any
other large business machines, copier and postage equipment, heating equipment,
stove, speaker phones, radios, stereo equipment or other mechanical
amplification equipment, refrigerator or coffee equipment, or conduct a
mechanical business, do any cooking, or use or allow to be used on the Premises
oil, burning fluids, gasoline, kerosene for heating, warming or lighting. No
article deemed extra hazardous on account or fire or any explosives will be
brought into said Premises or Facility. No offensive gases, odors or liquids
will be permitted.
14 Client will bring no animals into the Premises or Facility except
for those assisting disabled individuals.
15. Client will not remove furniture fixtures or decorative material
from offices or common areas without the prior written consent of Center.
16. Client will not make any additional copies of any Center Issued
keys. All keys and security cards are the property of Center and must be
returned upon request or by the close of the business on the expiration or
sooner termination of the Agreement term. Any lost or un-returned keys or cards
will incur a Twenty Five Dollar ($25.00) per item charge and the cost to re-key
the office.
17. Client will not smoke nor allow smoking in any area of the
Facility, including the Premises, and will comply with all governmental
regulations and ordinances concerning smoking.
18. Client will not allow more than three visitors in the reception
lobby of the Premises at any one time.
19. Client's parking rights (if any) are defined by the Main Lease.
Landlord reserves the right to modify parking arrangements if required to do so
by Building management.
20. Any alterations to the Premises requested by Client, including
affixing anything to the walls of the Premises, will be done only (1) with the
written permission of Center, which permission may be withheld by the Center for
any reason whatsoever, and (ii) by an agent of the Center's choosing at the
Client's sole cost and expense.
21. Any equipment desired to be used and or installed by the Client,
other than those machines ordinarily used for regular office purposes (i.e.
personal computers. personal printers, calculators, adding machines, etc.) will
be subject to the Centers prior written consent to any such use or installation.
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22. Client will cooperate and be courteous with all other occupants of
the Facility and Center's staff and personnel.
23. Upon request, Client will use a chair mat.
24. Center reserves the right, without prior notice, to modify any of
the foregoing and to make such other reasonable rides and regulations as in its
solo discretion may from time to time be needed for the safety, care,
appropriate operation and cleanliness of the Facility.
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OFFICE SERVICE AGREEMENT
OFFICE CHANGE RIDER
RE: Office Service Agreement (the "Agreement") between Bolt Media. Inc.
("Client") and Vantas Southern California. Inc. @ Executive Tower, West
Las Angeles ("Center")
DATE: September 24, 1999
Paragraph 1 of the Agreement is hereby modified as follows:
In place and instead of facility office space number(s) #251, Client shall now,
from the date of the execution of this Rider, occupy facility office space
number(s) #204. Client hereby agrees and understands that it no longer has a
right to use and occupy facility office space number(s) #251. Effective date is
October 15, 1999.
Paragraph 4 of the Agreement is hereby modified as follows:
The Monthly Office Charge shall be the sum of $1,400.00 (the "Modified Monthly
Office Charge") until the expiration of the Term currently in effect. Should
the Agreement automatically renew pursuant to paragraph 3 of the Agreement the
Monthly Office Charge upon which any such renewal shall be calculated based on
the Modified Monthly Office Charge described herein.
All other terms and conditions of the Agreement shall remain in full force and
effect.
ACCEPTED BY CENTER: ACCEPTED BY CLIENT:
By: By: /s/ Frank M. Harrison
----------------------------------- ---------------------------------
Date: Title:
--------------------------------- ------------------------------
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EXHIBIT 10.12
ASSET PURCHASE AND ASSUMPTION OF LIABILITIES AGREEMENT
BY AND BETWEEN
CONCRETE MEDIA, INC.
AND
CONCRETE MEDIA CONSTRUCTION, LLC
DECEMBER 30, 1998
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This ASSET PURCHASE AND ASSUMPTION OF LIABILITIES AGREEMENT (this
"Agreement") is entered into this 30th day of December, 1998, by and between
CONCRETE MEDIA, INC., a Delaware corporation ("CMI"), and CONCRETE MEDIA
CONSTRUCTION, LLC, a Delaware limited liability company ("Concrete Media
Construction").
WHEREAS, CMI now desires to sell and transfer to Concrete Media
Construction all of the assets as listed on the attached Exhibit 1.01 (the
"Assets"); and
WHEREAS, Concrete Media Construction desires to purchase and acquire the
Assets and desires to become liable for paying, performing and discharging the
liabilities and obligations arising out of or relating to the business of
website development services as previously conducted by CMI or arising out of or
relating to the Assets, of whatever kind or nature, whether contingent or
absolute, whether known or unknown, whether arising prior to or on or after
December 30, 1998, including without limitation, those listed on Exhibit 1.02
and all of the foregoing liabilities and obligations described in this Agreement
(the "Liabilities").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, agree as follows:
ARTICLE I
TRANSFER AND SALE OF ASSETS
SECTION 1.01 Transfer and Sale of the Assets. On the terms and subject to
the conditions of this Agreement, CMI agrees to sell, convey, transfer, assign
and deliver to Concrete Media Construction, and Concrete Media Construction
agrees to receive from CMI on December 30, 1998, the Assets pursuant to a Bill
of Sale in the form of Exhibit 1.03 attached hereto.
SECTION 1.02 Consideration for the Assets. In consideration for the
purchase and sale of the Assets, upon the terms and subject to the conditions
set forth in this Agreement, on December 30, 1998, Concrete Media Construction
shall execute a promissory note dated December 30, 1998, payable to CMI in the
principal amount of $315,000 due December 30, 2001 and also shall execute a
promissory note dated December 30, 1998, payable to CMI in the principal amount
of $105,000 due January 15, 1999. The closing of the transactions contemplated
hereby (the "Closing") shall take place at 10:00 a.m., eastern standard time, on
December 30, 1998 (or if the conditions to the Closing shall not have been
satisfied or waived by such date then as soon as practicable thereafter (the
"Closing Date").
SECTION 1.03 Assumption of Liabilities and Covenant to Satisfy all
Liabilities. As of the close of business on December 30, 1998, Concrete Media
Construction shall assume and satisfy, discharge and be primarily liable for
paying, performing and discharging the Liabilities.
<PAGE> 3
Notwithstanding the provisions of this Agreement or any exhibit hereto,
Concrete Media Construction shall assume any and all liabilities, obligations or
commitments with respect to the Concrete Media Construction business (the
"Website Business") or the Assets, of any nature whatsoever, whether known or
unknown, contingent or otherwise, including, but not limited to, any such
liabilities, obligations or commitments to any affiliate of CMI or any other
third party from the beginning of time to the date hereof.
SECTION 1.04 Concrete Media Construction Indemnification of CMI. Concrete
Media Construction, by its officers and managers, covenants and agrees to
defend, indemnify and hold harmless CMI (and its successors-in-interest), its
stockholders, officers, directors, employees, agents, advisers, representatives
and affiliates (collectively, the "CMI Indemnitees") from and against, and shall
pay or reimburse CMI Indemnitees for, any and all actions, causes of actions,
suits, debts, losses, charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, and expenses (including attorney
fees and costs actually incurred), of any nature whatsoever, in law or equity
(collectively "Claims"), which arise out of or are related to (i) the conduct of
the Website Business or (ii) the Assets, regardless of whether known or unknown
or incurred before or after the date of this Agreement.
SECTION 1.05 Further Assurances. At any time and from time to time after
December 30, 1998, at the request of any party hereto and without further
consideration CMI and Concrete Media Construction shall execute and deliver such
other instruments of sale, transfer, conveyance, assignment and confirmation as
may be reasonably requested in order more effectively to sell, transfer, convey
and assign to Concrete Media Construction and to confirm Concrete Media
Construction's title to the Assets and Concrete Media Construction's obligations
with respect to the Liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CMI
CMI represents and warrants to Concrete Media Construction as follows:
SECTION 2.01 Organization and Qualification. CMI is a corporation duly
organized, validly existing and in good standing under the laws of State of
Delaware and is duly licensed or qualified to transact business as a foreign
corporation in the State of New York and is in good standing in the State of New
York.
SECTION 2.02 Corporate Power and Authority. CMI has the corporate power
and authority to own and hold its properties and to carry on its business. CMI
has the corporate power and authority to execute, deliver and perform this
Agreement and the other documents and instruments contemplated hereby. The
execution, delivery and performance of this Agreement and the documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by CMI. This Agreement and
each of the other agreements, documents and instruments to be executed and
delivered by CMI have
2
<PAGE> 4
been duly executed and delivered by, and constitute the legal, valid and binding
obligation of, CMI enforceable against CMI in accordance with their terms.
SECTION 2.03 Validity, Etc. Neither the execution and delivery of this
Agreement and the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) violate, conflict with or
result in any breach of any trust agreement, certificate of incorporation,
bylaw, judgment, decree, order, statute or regulation applicable to CMI, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority or (iii) violate,
conflict with or result in a breach, default or termination of, or give rise to
any right of termination, cancellation or acceleration of the maturity of any
payment date of, any of the obligations of CMI.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONCRETE MEDIA CONSTRUCTION
Concrete Media Construction represents and warrants to CMI as follows:
SECTION 3.01 Organization. Concrete Media Construction is duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to transact business as a foreign corporation in each
jurisdiction in which the failure to so qualify would have a material adverse
impact on the Concrete Media Construction's ability to purchase the Assets and
Concrete Media Construction's ability to assume the Liabilities herein.
SECTION 3.02 Concrete Media Construction Power and Authority. Concrete
Media Construction has the corporate power and authority to execute, deliver and
perform this Agreement and the other documents and instruments contemplated
hereby. The execution, delivery and performance of this Agreement and the
documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by
Concrete Media Construction. This Agreement and each of the other agreements,
documents and instruments to be executed and delivered by Concrete Media
Construction have been duly executed and delivered by, and constitute the valid
and binding obligation of Concrete Media Construction enforceable against
Concrete Media Construction in accordance with their terms.
SECTION 3.03 Validity, Etc. Neither the execution and delivery of this
Agreement nor the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) conflict with or result in any
breach of any trust agreement, certificate of organization, bylaw, judgment,
decree, order, statute or regulation applicable to Concrete Media Construction
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, (iii) result in a
breach of or default (or give rise to any right of termination, cancellation or
acceleration) under any law, rule or regulation or any judgment,
3
<PAGE> 5
decree, order, governmental permit, license or order or any of the terms,
conditions or provisions of any mortgage, indenture, note, license, agreement or
other instrument to which Concrete Media Construction is a party or (v) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Concrete Media Construction.
SECTION 3.04 No Violation of Laws or Contracts. Neither the execution and
performance of this Agreement, the Note or the other agreements executed by
Concrete Media Construction in accordance with the terms hereof, nor the
consummation of the transactions contemplated hereby and thereby, will violate
any provisions of law, any order of any court or other agency or government, or
any ordinance, indenture or agreement to which Concrete Media Construction is a
party.
ARTICLE IV
FORWARD COMMUNICATIONS
SECTION 4.01. Forward Communications. Any written communication received
at any time by CMI with respect to any of the Assets or Liabilities shall be
transmitted by CMI to Concrete Media Construction within two (2) business days
of receipt.
ARTICLE V
COVENANT OF CMI
SECTION 5.01. Use of Name. CMI hereby covenants and agrees that it shall
use the name "Concrete Media" only for so long and up until such time as it
merges with Bolt Media, Inc. Effective upon the merger, the name of the
surviving corporation will be Bolt Media, Inc.
ARTICLE VI
COVENANT OF CONCRETE MEDIA CONSTRUCTION
SECTION 6.01. Permission to Use Name. Concrete Media Construction hereby
covenants and agrees that it shall allow CMI to continue to use the name
"Concrete Media" only for so long and up until such time as CMI merges with Bolt
Media, Inc. Upon the effective date of the merger, CMI shall cease using the
name "Concrete Media."
[Remainder of Page Intentionally Left Blank]
4
<PAGE> 6
IN WITNESS WHEREOF, Concrete Media, Inc. and Concrete Media Construction
LLC have each executed this Asset Purchase and Assumption of Liabilities
Agreement as of the day and year first above written.
CONCRETE MEDIA, INC.
By: /s/ Daniel A. Pelson
-----------------------------------
Name: Daniel A. Pelson
Title: CEO
CONCRETE MEDIA CONSTRUCTION, LLC
By: /s/ Aaron Cohen
-----------------------------------
Name: Aaron Cohen
Title: President
5
<PAGE> 7
EXHIBITS
1.01 List of Assets
1.02 List of Liabilities
1.03 Bill of Sale
6
<PAGE> 8
EXHIBIT 1.01
LIST OF ASSETS
Twelve (12) Work Stations (i.e. computer hard drive, monitor, modem).
Two (2) Servers (i.e., two mainframe computers).
The Name "Concrete Media".
All agreements, contracts and understandings relating to the services
provided to the following customers:
ABC
Bertelsmann
Hachette Filipacchi New Media
iBalls (Site design and maintenance only)
Isiah International/Isiah Investment, LLC
The Princeton Review (Site design and maintenance only)
Time Warner
Toymax
Tripod (Site design and maintenance only)
Village Voice (Site design and maintenance only)
Employees to be Transferred
Glaucia W. Cappelozza
Christopher Cody
Aaron Cohen
Hanna K. Dunston
Jennifer A. Fixman
David S. Goodman
William H. Hadley
Douglas McLellan
Phuong-Dao T. Nguyen
Liza Pagano
Jorge E. Pedroza
Anh Tuan Pham
Enja H. Schenck
Alvin R. Townsend, Jr.
Yuri Bogdanowsky
Michael Human
Diane J. Goodman
Shannon McGarity
7
<PAGE> 9
EXHIBIT 1.02
LIST OF LIABILITIES
(1) Warranty Liability, in the amount of seventy-five thousands dollars
($75,000.00).
(2) Vacation Accrual, in the amount of fifteen thousand dollars ($15,000).
8
<PAGE> 10
EXHIBIT 1.03
BILL OF SALE
This Bill of Sale dated December 30, 1998 is executed and delivered by
Concrete Media, Inc., a Delaware corporation (the "Seller"), in connection with
the Asset Purchase and Assumption of Liabilities Agreement (the "Asset Purchase
Agreement") dated December 30, 1998, by and between the Seller and Concrete
Media Construction, LLC (the "Buyer").
WHEREAS, pursuant to the Asset Purchase Agreement, the Seller has agreed
to sell, transfer, convey, assign and deliver to the Buyer the assets listed on
the attached Exhibit A.
NOW, THEREFORE, in consideration of the execution and delivery of the
Asset Purchase Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged subject to the terms of
the Asset Purchase Agreement, the Seller hereby agrees as follows:
1. The Seller hereby sells, transfers, conveys, assigns and delivers to
the Buyer and its successors and assigns, all right, title and interest in and
to all of the assets, properties and rights of the Seller as listed on the
attached Exhibit A.
2. The Seller hereby agrees to execute and deliver after December 30, 1998
such other instruments or documents and to take such additional actions as may
be reasonably requested by the other in order to effect or complete the transfer
contemplated hereby.
3. This Bill of Sale is intended to evidence the consummation of the sale
and transfer by the Seller to the Buyer of the Assets as listed on the attached
Exhibit A, all as contemplated by the Asset Purchase Agreement. The Seller, by
its execution of this Bill of Sale, and the Buyer, by its acceptance of this
Bill of Sale, each hereby acknowledge and agree that the remedies of any party
under the Asset Purchase Agreement shall not be deemed to be enlarged, modified
or altered in any way by this Bill of Sale. Any inconsistencies or ambiguities
between this Bill of Sale and the Asset Purchase Agreement shall be resolved in
favor of the Asset Purchase Agreement.
4. This Bill of Sale shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the conflict of law
principles thereof.
[Remainder of Page Intentionally Left Blank]
9
<PAGE> 11
IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument
to be duly executed under seal as of and on the date first above written.
CONCRETE MEDIA, INC., as Seller
By: _________________________________
Name:
Title:
AGREED AND ACCEPTED:
CONCRETE MEDIA CONSTRUCTION, LLC,
as Buyer
By: _______________________________
Name:
Title:
10
<PAGE> 12
EXHIBIT A
LIST OF ASSETS
Twelve (12) Work Stations (i.e. computer hard drive, monitor, modem).
Two (2) Servers (i.e., two mainframe computers)
The Name "Concrete Media".
All agreements, contracts and understandings relating to the services
provided to the following customers:
ABC
Bertelsmann
Hachette Filipacchi New Media
iBalls (Site design and maintenance only)
Isiah International/Isiah Investment, LLC
The Princeton Review (Site design and maintenance only)
Time Warner
Toymax
Tripod (Site design and maintenance only)
Village Voice (Site design and maintenance only)
Employees to be Transferred
Glaucia W. Cappelozza
Christopher Cody
Aaron Cohen
Hanna K. Dunston
Jennifer A. Fixman
David S. Goodman
William H. Hadley
Douglas McLellan
Phuong-Dao T. Nguyen
Liza Pagano
Jorge E. Pedroza
Anh Tuan Pham
Enja H. Schenck
Alvin R. Townsend, Jr.
Yuri Bogdanowsky
Michael Human
Diane J. Goodman
Shannon McGarity
11
<PAGE> 1
EXHIBIT 10.13
ASSET PURCHASE AND ASSUMPTION OF LIABILITIES AGREEMENT
BY AND BETWEEN
CONCRETE MEDIA, INC.
AND
GIRLS ON, INC.
JANUARY 29, 1999
<PAGE> 2
EXHIBIT 10.13
This ASSET PURCHASE AND ASSUMPTION OF LIABILITIES AGREEMENT (this
"Agreement") is entered into this 29th day of January, 1999, by and between
CONCRETE MEDIA, INC., a Delaware corporation ("CMI"), and GIRLS ON, INC., a
Delaware corporation ("Girls On").
WHEREAS, CMI now desires to sell and transfer to Girls On all of the
assets as listed on the attached Exhibit 1.01 (the "Assets"); and
WHEREAS, Girls On desires to purchase and acquire the Assets and
desires to become liable for paying, performing and discharging the liabilities
and obligations arising out of or relating to the Girls On business services
(the "Girls On Business") as previously conducted by CMI or arising out of or
relating to the Assets, of whatever kind or nature, whether contingent or
absolute, whether known or unknown, whether arising prior to or on or after
January 29, 1999, including without limitation, those listed on Exhibit 1.02 and
all of the foregoing liabilities and obligations described in this Agreement
(the "Liabilities").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
ARTICLE I
TRANSFER AND SALE OF ASSETS
SECTION 1.01 Transfer and Sale of the Assets. On the terms and subject
to the conditions of this Agreement, CMI agrees to sell, convey, transfer,
assign and deliver to Girls On, and Girls On agrees to receive from CMI on
January 29, 1999, the Assets pursuant to a Bill of Sale in the form of Exhibit
1.03 attached hereto.
SECTION 1.02 Consideration for the Assets. The aggregate consideration
to be paid by Girls On for the Assets shall be the Purchase Price plus the
assumption of the Liabilities. In the event that the Girls On Business is sold
to a third party during the 12-month period, commencing on the Closing Date (as
defined below) (the "Earnout Period"), Girls On shall pay CMI a percentage of
the net proceeds from such sale (the "Purchase Price") as set forth below. In
the event:
(i) a third party closes the purchase of Girls On on or before three
months after the Closing Date, Girls On shall pay CMI thirty
five (35) percent of the net proceeds that Girls On receives
from such sale;
(ii) a third party closes the purchase of Girls On between three
months and six months after the Closing Date, Girls On shall pay
CMI thirty (30) percent of the net proceeds that Girls On
receives from such sale;
(iii) a third party closes the purchase of Girls On between six months
and nine months after the Closing Date, Girls On shall pay CMI
twenty five (25) percent of the net proceeds that Girls On
receives from such sale; or
<PAGE> 3
(iv) a third party closes the purchase of Girls On between nine months
and twelve months after the Closing Date, Girls On shall pay CMI
twenty (20) percent of the net proceeds that Girls On receives
from such sale;
For any sale after the expiration of the Earnout Period, Girls On's obligation
to pay CMI a percentage of the net proceeds from the sale of Girls On Business
shall terminate and CMI hereby agrees that it shall not be entitled to a
percentage of the net proceeds from the sale of Girls On Business after the
Earnout Period. For purposes hereof, (i) a sale of an interest in Girls On shall
not be considered a sale of Girls On Business; and (ii) in the event that the
proceeds of the sale of Girls On is received in more than one kind of
consideration (such as cash, notes, and/or equity interests in a third party)
the proceeds payable to CMI shall be paid in the same kinds and proportions and
at the same time(s) as are received by Girls On or its shareholders in the
transaction. The closing of the transactions contemplated hereby (the "Closing")
shall take place at 10:00 a.m., eastern standard time, on January 29, 1999 (or
if the conditions to the Closing shall not have been satisfied or waived by such
date then as soon as practicable thereafter (the "Closing Date").
SECTION 1.03 Assumption of Liabilities and Covenant to Satisfy all
liabilities. As of the close of business on January 29, 1999, Girls On shall
assume and satisfy, discharge and be liable for paying, performing and
discharging the Liabilities.
Notwithstanding the provisions of this Agreement or any exhibit hereto,
Girls On shall assume any and all liabilities, obligations or commitments with
respect to the Girls On Business or the Assets, of any nature whatsoever,
whether known or unknown, contingent or otherwise, including, but not limited
to, any such liabilities, obligations or commitments to any affiliate of CMI or
any other third party from the beginning of time to the date hereof.
SECTION 1.04 Girls On Indemnification of CMI. Girls On, by its officers
and directors, covenants and agrees to defend, indemnify and hold harmless CMI,
its stockholders, officers, directors, employees, agents, advisers,
representatives and affiliates of CMI (collectively, the "CMI Indemnitees") from
and against, and shall pay or reimburse CMI Indemnitees for, any and all
actions, causes of actions, suits, debts, losses, charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, and
expenses (including attorney fees and costs actually incurred), of any nature
whatsoever, in law or equity (collectively "Claims"), which arise out of or are
related to (i) the conduct of the Girls On Business or (ii) the Assets,
regardless of whether known or unknown or incurred before or after the date of
this Agreement.
SECTION 1.05 Further Assurances. At any time and from time to time
after January 29, 1999 at the request of any party hereto and without further
consideration CMI and Girls On shall execute and deliver such other instruments
of sale, transfer, conveyance, assignment and confirmation as may be reasonably
requested in order more effectively to sell, transfer, convey and assign to
Girls On and to confirm Girls On's title to the Assets and Girls On's
obligations with respect to the Liabilities.
2
<PAGE> 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CMI
CMI represents and warrants to Girls On as follows:
SECTION 2.01 Organization and Qualification. CMI is a corporation duly
organized, validly existing and in good standing under the laws of State of
Delaware and is duly licensed or qualified to transact business as a foreign
corporation in the State of New York and is in good standing in the State of New
York.
SECTION 2.02 Corporate Power and Authority. CMI has the corporate power
and authority to own and hold its properties and to carry on its business. CMI
has the corporate power and authority to execute, deliver and perform this
Agreement and the other documents and instruments contemplated hereby. The
execution, delivery and performance of this Agreement and the documents
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby have been duly authorized and approved by CMI. This Agreement and
each of the other agreements, documents and instruments to be executed and
delivered by CMI have been duly executed and delivered by, and constitute the
legal, valid and binding obligation of, CMI enforceable against CMI in
accordance with their terms.
SECTION 2.03 Validity, Etc. Neither the execution and delivery of this
Agreement and the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) violate, conflict with or
result in any breach of any trust agreement, certificate of incorporation,
bylaw, judgment, decree, order, statute or regulation applicable to CMI, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority or (iii) violate,
conflict with or result in a breach, default or termination of, or give rise to
any right of termination, cancellation or acceleration of the maturity of any
payment date of, any of the obligations of CMI.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GIRLS ON
Girls On represents and warrants to CMI as follows:
SECTION 3.01 Organization. Girls On is duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified to transact business as a foreign corporation in each jurisdiction in
which the failure to so qualify would have a material adverse impact on the
Girls On's ability to purchase the Assets and Girls On's ability to assume the
Liabilities herein.
SECTION 3.02 Girls On Power and Authority. Girls On has the corporate
power and authority to execute, deliver and perform this Agreement and the other
documents and instruments contemplated hereby. The execution, delivery and
performance of this Agreement and the documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by Girls On. This Agreement and
3
<PAGE> 5
each of the other agreements, documents and instruments to be executed and
delivered by Girls On have been duly executed and delivered by, and constitute
the valid and binding obligation of Girls On enforceable against Girls On in
accordance with their terms.
SECTION 3.03 Validity, Etc. Neither the execution and delivery of this
Agreement nor the other documents and instruments contemplated hereby, the
consummation of the transactions contemplated hereby or thereby, nor the
performance of this Agreement and such other agreements in compliance with the
terms and conditions hereof and thereof will (i) conflict with or result in any
breach of any trust agreement, certificate of organization, bylaw, judgment,
decree, order, statute or regulation applicable to Girls On (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, (iii) result in a breach of or
default (or give rise to any right of termination, cancellation or acceleration)
under any law, rule or regulation or any judgment, decree, order, governmental
permit, license or order or any of the terms, conditions or provisions of any
mortgage, indenture, note, license, agreement or other instrument to which Girls
On is a party or (v) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Girls On.
SECTION 3.04 No Violation of Laws or Contracts. Neither the execution
and performance of this Agreement, the Note or the other agreements executed by
Girls On in accordance with the terms hereof, nor the consummation of the
transactions contemplated hereby and thereby, will violate any provisions of
law, any order of any court or other agency or government, or any ordinance,
indenture or agreement to which Girls On is a party.
ARTICLE IV
FORWARD COMMUNICATIONS
SECTION 4.01. Forward Communications. Any written communication
received at any time by CMI with respect to any of the Assets or Liabilities
shall be transmitted by CMI to Girls On within two (2) business days of receipt.
4
<PAGE> 6
IN WITNESS WHEREOF, Concrete Media, Inc. and Girls On, Inc. have each
executed this Asset Purchase and Assumption of Liabilities Agreement as of the
day and year first above written.
CONCRETE MEDIA, INC.
By: /s/ Daniel A. Pelson
---------------------------------
Name: D. A. Pelson
Title: CEO
GIRLS ON, INC.
By: /s/ Aaron Cohen
----------------------------------
Name: Aaron Cohen
Title: President
5
<PAGE> 7
EXHIBITS
1.01 List of Assets
1.02 List of Liabilities
1.03 Bill of Sale
6
<PAGE> 8
EXHIBIT 1.01
LIST OF ASSETS
<TABLE>
<CAPTION>
A. TANGIBLE ASSETS Lease/Owned
-----------
<S> <C>
i). 1 Web Server - Gateway * Leased
ii) 1 Data base Server - Gateway * Leased
iii) 1 Recommendation Server - Gateway * Leased
iv) 6 Computer workstations (i.e. hard drive, monitor, modem) Various
</TABLE>
* Located in rack at Exodus - $850.00 Monthly charge
B. INTANGIBLE ASSETS
i) "Girls on" Name
ii) Unregistered Trademarks and Domain addresses:
Girlson.com
Girlsonfilm.com
GirlsonTV.com
GirlsonBooks.com
C. TRANSFERRED CONTRACTS
a. Content Agreement between One Zero Media, Inc. and Concrete
Media, Inc. dated as of July 28, 1998.
b. One half of the Concrete Media Hot Mail Web Courier contract
by and between Hot Mail Corporation and Concrete Media, Inc.
dated as of March 3, 1998.
c. Software License Agreement by and between Firefly Network,
Inc. and Concrete Media, Inc. dated December 18, 1997.
d. Memorandum of Understanding between MovieLink, Inc. and
Concrete Media, Inc. dated September 30, 1998.
e. Matrix Movie data License and Service Agreement by and between
Matrix Software, Inc. and Concrete Media, Inc. dated February
24, 1998.
f. Agreement between HarperCollins Publishers Inc. and Concrete
Media Inc. dated June 5, 1998.
7
<PAGE> 9
D. OUTSTANDING ADVERTISING ORDERS TO PLACE ADS ON GIRLS ON SITE IN THE
AMOUNT OF $6,000.
E. EMPLOYEES TO BE TRANSFERRED
Mary Ferguson
Andrea Pyros
8
<PAGE> 10
EXHIBIT 1.02
LIST OF LIABILITIES
<TABLE>
<S> <C>
Hotmail - June 1998 to January 1999 $ 87,652.08
Alta Vista - through January, 1999
per contract 125,000.00
Firefly - Balance of contract 30,000.00
------------
Total $242,652.08
</TABLE>
9
<PAGE> 11
EXHIBIT 1.03
BILL OF SALE
This Bill of Sale dated January 29, 1999 is executed and delivered by
Concrete Media, Inc., a Delaware corporation (the "Seller"), in connection with
the Asset Purchase and Assumption of Liabilities Agreement (the "Asset Purchase
Agreement") dated January 29, 1999, by and between the Seller and Girls On, Inc.
(the "Buyer").
WHEREAS, pursuant to the Asset Purchase Agreement, the Seller has
agreed to sell, transfer, convey, assign and deliver to the Buyer the assets
listed on the attached Exhibit A.
NOW, THEREFORE, in consideration of the execution and delivery of the
Asset Purchase Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged subject to the terms of
the Asset Purchase Agreement, the Seller hereby agrees as follows:
1. The Seller hereby sells, transfers, conveys, assigns and delivers to
the Buyer and its successors and assigns, all right, title and interest in and
to all of the assets, properties and rights of the Seller as listed on the
attached Exhibit A.
2. The Seller hereby agrees to execute and deliver after January 29,
1999 such other instruments or documents and to take such additional actions as
may be reasonably requested by the other in order to effect or complete the
transfer contemplated hereby.
3. This Bill of Sale is intended to evidence the consummation of the
sale and transfer by the Seller to the Buyer of the Assets as listed on the
attached Exhibit A, all as contemplated by the Asset Purchase Agreement. The
Seller, by its execution of this Bill of Sale, and the Buyer, by its acceptance
of this Bill of Sale, each hereby acknowledge and agree that the remedies of any
party under the Asset Purchase Agreement shall not be deemed to be enlarged,
modified or altered in any way by this Bill of Sale. Any inconsistencies or
ambiguities between this Bill of Sale and the Asset Purchase Agreement shall be
resolved in favor of the Asset Purchase Agreement.
4. This Bill of Sale shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflict of
law principles thereof.
[Remainder of Page Intentionally Left Blank]
10
<PAGE> 12
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
instrument to be duly executed under seal as of and on the date first above
written.
CONCRETE MEDIA, INC., as Seller
By:
-----------------------------
Name:
Title:
AGREED AND ACCEPTED:
GIRLS ON, INC.
as Buyer
By:
------------------------------------
Name:
Title:
11
<PAGE> 13
EXHIBIT A
LIST OF ASSETS
<TABLE>
<CAPTION>
A. TANGIBLE ASSETS Lease/Owned
-----------
<S> <C>
i). 1 Web Server - Gateway * Leased
ii) 1 Data base Server - Gateway * Leased
iii) 1 Recommendation Server - Gateway * Leased
iv) 6 Computer workstations (i.e. hard drive, monitor, modem) Various
</TABLE>
* Located in rack at Exodus - $850.00 Monthly charge
B. INTANGIBLE ASSETS
i) "Girls on" Name
ii) Unregistered Trademarks and Domain addresses:
Girlson.com
Girlsonfilm.com
GirlsonTV.com
GirlsonBooks.com
C. TRANSFERRED CONTRACTS
a. Content Agreement between One Zero Media, Inc. and Concrete
Media, Inc. dated as of July 28, 1998.
b. One half of the Concrete Media Hot Mail Web Courier contract
by and between Hot Mail Corporation and Concrete Media, Inc.
dated as of March 3, 1998. One half of the
c. Software License Agreement by and between Firefly Network,
Inc. and Concrete Media, Inc. dated December 18, 1997.
d. Memorandum of Understanding between MovieLink, Inc. and
Concrete Media, Inc. dated September 30, 1998.
e. Matrix Movie data License and Service Agreement by and between
Matrix Software, Inc. and Concrete Media, Inc. dated February
24, 1998.
f. Agreement between HarperCollins Publishers Inc. and Concrete
Media Inc. dated June 5, 1998
12
<PAGE> 14
D. OUTSTANDING ADVERTISING ORDERS TO PLACE ADS ON GIRLS ON SITE IN THE
AMOUNT OF $6,0000.
E. EMPLOYEES TO BE TRANSFERRED
Mary Ferguson
Andrea Pyros
13
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Bolt, Inc. on Form S-1
of our report dated December 6, 1999, appearing in the Prospectus, which is part
of this Registration Statement. We also consent to the reference to us under the
headings "Selected Financial Data" and "Experts" in such Prospectus.
Deloitte & Touche LLP
New York, NY
December 21, 1999
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