<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 2000
REGISTRATION NO. 333-93235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 2
TO
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 7375 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> <C>
JOHN R. POMERANCE, ESQ. STEVEN R. KAMEN, ESQ. WINTHROP B. CONRAD, JR., ESQ.
PETER S. LAWRENCE, ESQ. VICE PRESIDENT AND GENERAL COUNSEL DAVIS POLK & WARDWELL
MINTZ, LEVIN, COHN, FERRIS, BOLT, INC. 450 LEXINGTON AVENUE
GLOVSKY AND POPEO, P.C. 304 HUDSON STREET -- 7TH FLOOR NEW YORK, NY 10017
ONE FINANCIAL CENTER NEW YORK, NY 10013 (212) 450-4000
BOSTON, MA 02111 (212) 620-5900
(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>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value...... 4,255,000 $12.00 $51,060,000 $13,480
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 555,000 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act.
(3) $12,144 of this fee was previously paid.
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 March 2, 2000
3,700,000 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 $10 and $12 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
555,000 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
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 March 2, 2000
3,700,000 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 $10 and $12 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
555,000 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> 5
[INSIDE FRONT COVER AND GATEFOLD]
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Special Note Regarding Forward-Looking
Statements.......................... 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 19
Selected Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 29
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................ 44
Certain Transactions.................. 51
Principal Stockholders................ 53
Description of Capital Stock.......... 55
Shares Eligible for Future Sale....... 58
Underwriters.......................... 60
Legal Matters......................... 62
Experts............................... 62
Where You Can Find Additional
Information......................... 62
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," "BoltEverywhere" 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> 7
(This page has been left blank intentionally.)
<PAGE> 8
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" beginning on page 6.
BOLT, INC.
Our Web site, Bolt.com, is a leading online destination that targets 15 to
20 year old teens. We feature teen-focused content generated primarily by our
members, a platform for teens to interact with other teens and proprietary 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 and MSN Hotmail that drive
traffic to our site and with Ford Motor Company and AT&T that expand the
services we provide; these relationships are described in further detail below.
As a result, according to our database, our member base has grown to more than
1.9 million as of February 29, 2000 from about 340,000 as of December 1, 1998.
According to Media Metrix, in December 1999, Bolt.com was the "stickiest" site
for 12 to 17 year old Internet users of all the sites on the Internet, as
measured by minutes per user per month. According to Nielsen I/PRO, we had over
196 million page views and over 6.6 million user sessions in January 2000 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
including fees paid for our expertise in managing other companies' relationships
with teens, 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. Based on third-party market research data, we
believe 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 1.9
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 450
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
196 million page views and over 6.6 million user sessions in January
2000.
1
<PAGE> 9
- Contextual Relevance and Targeting. Marketers can target their messages
in a way that is particularly relevant to the interests of our members.
- Member Loyalty. According to Media Metrix, in December 1999, Bolt.com
was the stickiest site for 12 to 17 year old Internet users 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 provide
management of AOL's teen community tools, including its teen message
boards and teen chat rooms. In return, we receive brand exposure because
we have established and we 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, are 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 2.2 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 an agreement
with Ford Motor Company to develop Cars.bolt.com, a co-branded
destination on our site, which we launched in January 2000.
Cars.bolt.com features auto-related content geared towards teens.
Cars.bolt.com provides 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.
- AT&T Wireless Initiative. On January 28, 2000, we entered into an
agreement with AT&T Wireless Services, Inc. Under the agreement, we will
promote AT&T's wireless services on Bolt.com and solicit and refer
subscribers of these services to AT&T. Using these services, members
will be able to access "BoltEverywhere" -- the wireless version of
several of Bolt's proprietary applications such as Bolt Notes and
Tagbooks. Also, members that purchase AT&T wireless services through
Bolt.com will have BoltEverywhere as a default mobile channel on their
wireless phones.
See "Business -- Bolt.com Strategic Relationships" on page 38 for a more
complete description of these agreements.
------------------------
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> 10
THE OFFERING
Common stock offered in this
offering.................... 3,700,000 shares
Common stock to be outstanding
after this offering........... 24,881,985 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 general corporate purposes,
including possible acquisitions of or
investments in complementary businesses,
products or technologies. See "Use of Proceeds"
on page 16 for a more detailed discussion of
our anticipated use of the proceeds from this
offering.
Proposed Nasdaq National
Market symbol................. BOLT
The information above includes 1,442,803 shares to be issued pursuant to
anti-dilution rights upon the conversion of the Series C preferred stock based
on an assumed initial public offering price of $11.00 per share. These shares
are in addition to the shares to be issued on a 1.25-for-1 basis upon conversion
of the Series C preferred stock without regard to these anti-dilution rights. If
the initial public offering price exceeds $11.00 per share, fewer shares will be
issued pursuant to these anti-dilution rights upon the conversion of the Series
C preferred stock. If the initial public offering price exceeds $14.35 per
share, none of these additional shares will be issued. The information above
does not include:
- 3,508,077 shares of common stock issuable upon the exercise of stock
options outstanding as of February 28, 2000 at a weighted average
exercise price of $1.75 per share; and
- 150,709 shares of common stock issuable upon the exercise of warrants
outstanding as of February 28, 2000 at a weighted average exercise price
of $8.20 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;
- Reflects a 1.25-for-1 split of our common stock on February 29, 2000;
and
- Reflects the mandatory conversion of all of our outstanding shares of
preferred stock into a total of 16,911,142 shares of common stock upon
completion of this offering, including the 1,442,803 additional shares
to be issued pursuant to anti-dilution rights upon the conversion of the
Series C preferred stock based on an assumed initial public offering
price of $11.00 per share.
3
<PAGE> 11
SUMMARY FINANCIAL DATA
The following table summarizes our financial data for the period from
August 15, 1996 (date of inception) through December 31, 1996 and for the years
ended December 31, 1997, 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 December 31, 1999 are presented (1) on an actual basis,
(2) on a pro forma basis to give effect to:
- our sale of 418,060 shares of our Series D Redeemable Convertible
Preferred Stock for $17.94 per share on February 29, 2000, and
- the mandatory conversion of all of our outstanding preferred stock into
a total of 16,911,142 shares of common stock upon the completion of this
offering, including the 1,442,803 additional shares to be issued
pursuant to anti-dilution rights upon the conversion of the Series C
preferred stock based on an assumed initial public offering price of
$11.00 per share,
and (3) on a pro forma basis as adjusted to give effect to the receipt of the
estimated proceeds from our sale of 3,700,000 shares of common stock in this
offering at an assumed initial public offering price of $11.00 per share, after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by us. For a more detailed explanation of these financial data,
see "Selected Financial Data" on page 20, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" beginning on page 21 and our
financial statements and the notes to those financial statements beginning on
page F-1 of this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 15, 1996
(DATE OF INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------
1996 1997 1998 1999
------------------- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Bolt revenues....................................... $ -- $ 32 $ 404 $ 4,362
Revenues related to the Girls On and custom
publishing divisions.............................. 19 446 2,281 38
---------- ---------- ---------- ----------
Total revenues............................. 19 478 2,685 4,400
---------- ---------- ---------- ----------
Costs and expenses:
Production and technology......................... 15 810 1,138 3,526
E-commerce........................................ -- -- -- 1,119
Sales and marketing............................... 1 287 630 9,084
General and administrative........................ 51 549 1,327 1,766
Depreciation and amortization..................... 4 25 75 536
Stock-based compensation.......................... -- -- -- 3,007
---------- ---------- ---------- ----------
Total costs and expenses................... 71 1,671 3,170 19,038
---------- ---------- ---------- ----------
Loss from operations................................ (52) (1,193) (485) (14,638)
Other income (expense):
Interest income................................... -- 42 7 418
Interest expense.................................. -- -- (60) (133)
Gain on sale of Girls On.......................... -- -- -- 1,436
---------- ---------- ---------- ----------
Net loss............................................ $ (52) $ (1,151) $ (538) $ (12,917)
========== ========== ========== ==========
Basic loss per share................................ $ (.01) $ (.21) $ (.10) $ (3.43)
========== ========== ========== ==========
Weighted average number of shares of common stock
outstanding used in computing basic loss per
share............................................. 5,500,000 5,500,000 5,461,063 3,765,080
========== ========== ========== ==========
</TABLE>
4
<PAGE> 12
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $37,148 $44,648 $ 81,499
Working capital............................................. 32,606 40,106 76,957
Total assets................................................ 44,534 52,034 88,885
Capital lease obligations, less current portion............. 514 514 514
Redeemable convertible preferred stock...................... 46,712 -- --
Stockholders' equity (deficiency)........................... (9,850) 44,362 81,213
</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 and Series C
preferred stock have been recorded at their redemption values, net of offering
costs, and have been classified as redeemable convertible preferred stock on our
balance sheet as of December 31, 1999.
5
<PAGE> 13
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. In addition to our teen-focused Web site,
Bolt.com, we also operated until the end of 1998 a custom publishing division,
which provided Web site development services to third-party non-advertising
customers, and the Girls On division, which provided online content and
community written by and focused toward young women. We sold the custom
publishing division in December 1998 and the Girls On division in January 1999.
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. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" beginning on page 21 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 the 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.
Accordingly, you should not rely on our historical information as an indication
of our future operating results or financial performance.
WE HAD AN ACCUMULATED DEFICIT OF $14.7 MILLION AS OF DECEMBER 31, 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 December 31, 1999, we had
an accumulated deficit of $14.7 million. Although we have experienced growth in
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.
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IF WE DO NOT INCREASE CASH GENERATED BY OUR BUSINESS OPERATIONS, WE MAY IN THE
FUTURE BE REQUIRED TO FINANCE OPERATIONS BY SELLING ADDITIONAL SECURITIES, WHICH
WOULD REDUCE THE PERCENTAGE OWNERSHIP OF EXISTING STOCKHOLDERS AND MAY AFFECT
THE RIGHTS OF EXISTING STOCKHOLDERS
To date, we have not generated sufficient cash from operations and have
funded our operations primarily from the sale of equity securities. We must
significantly increase our cash revenues in order to fund our operations in the
future. If our cash flows are insufficient to fund our operations, we may in the
future need to generate cash through the sale of additional equity or
convertible debt securities. If we do this, it would reduce the percentage
ownership of existing stockholders. Furthermore, it may be necessary for us to
issue securities that have rights, preferences and privileges senior to our
common stock.
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 most 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 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 26 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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February 29, 2000, we had 170 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;
- Executive Vice President;
- Vice President and General Counsel;
- Vice President of Commerce;
- Chief Technology Officer;
- Vice President of Business Development;
- Vice President of Ad Sales; and
- Vice President 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 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
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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 PLAN TO EXPAND INTERNATIONALLY, BUT BECAUSE OF THE RISKS INVOLVED WITH
OPERATING A BUSINESS IN FOREIGN COUNTRIES, WE MAY NOT BE SUCCESSFUL AND OUR
BUSINESS COULD BE SERIOUSLY HARMED
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 and trade barriers, which may make it difficult or
impossible to sell products to overseas customers;
- difficulties in staffing and managing foreign operations, which may make
it difficult or impossible to operate in some countries;
- fluctuations in currency exchange, which may decrease the value of
foreign currency in relation to the U.S. dollar, making the products we
sell more expensive overseas or decreasing our foreign derived revenues
when converted to U.S. dollars; and
- potential adverse tax consequences, which may decrease our revenues from
foreign sales.
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 and could seriously harm our business.
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. We
also 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. 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 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. 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.
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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 and government regulation
may make it difficult to collect 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 U.S. government has recently adopted
regulations limiting and regulating the collection, use and disclosure of
personal information obtained from children under the age of 13. 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 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. For a more detailed discussion
of how government regulations may affect our business, see "Business --
Government Regulation" beginning on page 40.
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. Enforcing our intellectual property rights could
entail significant expense and could prove difficult or impossible. 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 and acquire
domain names; however, we cannot assure you that registration will be granted or
we will be able to use these domain names.
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.
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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 affect
our ability to conduct our business as planned.
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
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.
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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" beginning on page 40 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 3,700,000 shares sold in this offering
will be freely tradable. The remaining 21,181,985 shares outstanding are
restricted securities as defined in Rule 144 of the Securities Act of 1933. Of
these shares, about 296,145 shares will become freely tradable at various times
within 180 days of the date of this prospectus, 14,185,723 shares will become
freely tradable on the date that is 180 days after the date of this prospectus
and 6,700,117 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"
beginning on page 58.
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
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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.
WE MAY EXPERIENCE VOLATILITY IN OUR STOCK PRICE THAT COULD NEGATIVELY IMPACT
YOUR INVESTMENT
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after this offering. The market price of our common stock, like the
market for Internet-related and technology companies in general, may be highly
volatile and this could impact the value of your investment. In addition, 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 our 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 anticipate that we may 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 relying on the judgment of our
management with regard to the use of proceeds from this offering. See "Use of
Proceeds" on page 16 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 $11.00 per share, if you purchase shares of common stock in this offering,
you will suffer immediate and substantial dilution of $7.74 per share in the net
tangible book value of the common stock. See "Dilution" on page 19 for a more
detailed discussion of the dilution you will incur in this offering.
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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.
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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 $36.9 million, after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by us and assuming an initial public offering price of $11.00 per share. If the
underwriters exercise their over-allotment option in full, we estimate the net
proceeds from this offering will be $42.5 million. We estimate our offering
expenses to be about $1.0 million.
Our management will have broad discretion as to the use of proceeds from
this offering. We currently anticipate that we may use the net proceeds of this
offering for the following purposes; however, we have not determined the amounts
we may spend on any of these areas or the timing of any expenditures:
- 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. The foregoing discussion is based on our
current expectations, and we may allocate the net proceeds among these purposes
as we deem necessary or appropriate. These determinations will be based upon
various factors, a number of which are 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. Pending the use of the
net proceeds of this offering, we intend to invest these proceeds in short-term,
interest-bearing, investment-grade securities. See "Risk Factors--Risks
Associated with This Offering--Our management will have broad discretion as to
the use of proceeds from this offering" on page 14.
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. In addition, our loan and security agreement with Lighthouse
Capital Partners III, L.P. currently prohibits the payment of dividends.
16
<PAGE> 24
CAPITALIZATION
The following table shows our cash and cash equivalents, long-term debt,
stockholders' equity and capitalization as of December 31, 1999 (1) on an actual
basis, (2) on a pro forma basis to give effect to:
- our sale of 418,060 shares of our Series D Redeemable Convertible
Preferred Stock for $17.94 per share on February 29, 2000, and
- the mandatory conversion of all of our outstanding preferred stock into
a total of 16,911,142 shares of common stock upon the completion of this
offering, including the 1,442,803 additional shares to be issued
pursuant to anti-dilution rights upon the conversion of the Series C
preferred stock based on an assumed initial public offering price of
$11.00 per share,
and (3) on a pro forma basis as adjusted to give effect to the receipt of the
estimated proceeds from our sale of 3,700,000 shares of common stock in this
offering at an assumed initial public offering price of $11.00 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 beginning on
page F-1 of this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents............................. $ 37,148 $ 44,648 $81,499
======== ======== =======
Long-term debt:
Total long-term debt................................ $ 514 $ 514 $ 514
-------- -------- -------
Redeemable convertible preferred stock:
Series B-1, $.001 par value; 1,048,387 shares
authorized, issued and outstanding actual;
1,048,387 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; 1,975 shares
authorized, no shares issued and outstanding
actual and pro forma; no shares authorized,
issued and outstanding pro forma as adjusted..... -- -- --
Series C, $.001 par value; 4,400,000 shares
authorized, 3,787,801 shares 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................................ 38,693 -- --
Series D, $.001 par value; no shares authorized,
issued and outstanding actual; 418,060 shares
authorized, no shares issued and outstanding pro
forma; no shares authorized, issued and
outstanding pro forma as adjusted................ -- -- --
-------- -------- -------
Total redeemable convertible preferred stock..... 46,712 -- --
-------- -------- -------
</TABLE>
17
<PAGE> 25
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Stockholders' equity (deficiency):
Common Stock, $.001 par value; 30,000,000 shares
authorized, 5,548,180 shares issued and 3,771,680
shares outstanding, actual; 50,000,000 shares
authorized, 22,958,485 shares issued and
21,181,985 shares outstanding, pro forma;
50,000,000 shares authorized, 26,658,485 shares
issued and 24,881,985 shares outstanding pro
forma as adjusted................................ 6 23 27
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............................ 8,987 63,183 100,030
Warrants.............................................. 995 995 995
Deferred financing costs.............................. (71) (71) (71)
Accumulated deficit................................... (14,658) (14,658) (14,658)
Deferred compensation................................. (4,334) (4,334) (4,334)
Note receivable from related party.................... (315) (315) (315)
Treasury stock........................................ (461) (461) (461)
-------- -------- -------
Total stockholders' equity (deficiency).......... (9,850) 44,362 81,213
-------- -------- -------
Total capitalization........................ $ 37,376 $ 44,876 $81,727
======== ======== =======
</TABLE>
The outstanding share information is based on our shares outstanding as of
December 31, 1999. This information excludes:
- 3,508,077 shares of common stock issuable upon the exercise of stock
options outstanding as of February 28, 2000 at a weighted average
exercise price of $1.75 per share; and
- 150,709 shares of common stock issuable upon the exercise of warrants
outstanding as of February 28, 2000 at a weighted average exercise price
of $8.20 per share.
18
<PAGE> 26
DILUTION
The pro forma net tangible book value of Bolt as of December 31, 1999,
after giving effect to (1) our sale of 418,060 shares of our Series D
Convertible Preferred Stock for $17.94 per share on February 29, 2000, and (2)
the mandatory conversion of all of our outstanding preferred stock into a total
of 16,911,142 shares of common stock was $36.9 million or $1.74 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 3,700,000 shares of
common stock in this offering at an assumed initial public offering price of
$11.00 per share, our pro forma net tangible book value as of December 31, 1999
would have been $81.2 million, or $3.26 per share of common stock. This
represents an immediate increase in pro forma net tangible book value of $1.52
per share to our existing stockholders and an immediate dilution in pro forma
net tangible book value of $7.74 per share to new investors purchasing shares in
this offering. After this offering, the per share value of our tangible assets
after subtracting our liabilities will be $3.26, which is substantially lower
than the assumed price investors will pay 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............. $11.00
Pro forma net tangible book value per share as of December
31, 1999............................................... $1.74
Increase per share attributable to new investors.......... 1.52
-------
Pro forma net tangible book value per share after this
offering.................................................. 3.26
------
Dilution per share to new investors......................... $ 7.74
======
</TABLE>
The following table summarizes, as of December 31, 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 $11.00 per
share for shares purchased in this offering, before deducting the estimated
underwriting discounts and commissions and estimated offering expenses. This
table illustrates that although investors purchasing common stock in this
offering will have contributed about 41.6% of the total consideration paid to us
for our outstanding common stock, they will only own about 14.9% of our
outstanding common stock.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 21,181,985 85.1% $57,039,208 58.4% $ 2.69
New investors............ 3,700,000 14.9 40,700,000 41.6 11.00
---------- ----- ----------- -----
Total.......... 24,881,985 100.0% $97,739,208 100.0%
========== ===== =========== =====
</TABLE>
These tables assume no exercise of any outstanding stock options or
warrants to purchase common stock. As of February 28, 2000, there were:
- 3,508,077 shares of common stock issuable upon the exercise of stock
options outstanding at a weighted average exercise price of $1.75 per
share; and
- 150,709 shares of common stock issuable upon the exercise of warrants
outstanding at a weighted average exercise price of $8.20 per share.
To the extent these options or warrants are exercised, there will be further
dilution to the new investors.
19
<PAGE> 27
SELECTED FINANCIAL DATA
The statement of operations data for the years ended December 31, 1997,
1998 and 1999 and the balance sheet data as of December 31, 1998 and 1999 have
been derived from our audited financial statements beginning on page F-1 of this
prospectus which have been audited by Deloitte & Touche LLP. The statement of
operations data for the period from August 15, 1996 (date of inception) through
December 31, 1996 and the balance sheet data as of December 31, 1996 and 1997
have been derived from our audited financial statements not included in this
prospectus. 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 beginning on page F-1 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 21 of this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 15, 1996
(DATE OF INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------
1996 1997 1998 1999
------------------- ---- ---- ----
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Bolt revenues....................................... $ -- $ 32 $ 404 $ 4,362
Revenues related to the Girls On and custom
publishing divisions.............................. 19 446 2,281 38
---------- ---------- ---------- ----------
Total revenues............................. 19 478 2,685 4,400
---------- ---------- ---------- ----------
Costs and expenses:
Production and technology......................... 15 810 1,138 3,526
E-commerce........................................ -- -- -- 1,119
Sales and marketing............................... 1 287 630 9,084
General and administrative........................ 51 549 1,327 1,766
Depreciation and amortization..................... 4 25 75 536
Stock-based compensation.......................... -- -- -- 3,007
---------- ---------- ---------- ----------
Total costs and expenses................... 71 1,671 3,170 19,038
---------- ---------- ---------- ----------
Loss from operations................................ (52) (1,193) (485) (14,638)
Other income (expense):
Interest income................................... -- 42 7 418
Interest expense.................................. -- -- (60) (133)
Gain on sale of Girls On.......................... -- -- -- 1,436
---------- ---------- ---------- ----------
Net loss............................................ $ (52) $ (1,151) $ (538) $ (12,917)
========== ========== ========== ==========
Basic loss per share................................ $ (.01) $ (.21) $ (.10) $ (3.43)
========== ========== ========== ==========
Weighted average number of shares of common stock
outstanding....................................... 5,500,000 5,500,000 5,461,063 3,765,080
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------
1996 1997 1998 1999
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 10 $184 $ 194 $37,148
Working capital (deficiency)................................ (18) 128 (130) 32,606
Total assets................................................ 69 662 1,033 44,534
Capital lease obligations, less current portion............. -- -- 178 514
Redeemable convertible preferred stock...................... -- -- -- 46,712
Stockholders' equity (deficiency)........................... 20 395 (630) (9,850)
</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. The Series B and Series C
preferred stock have been recorded at their redemption values, net of offering
costs, and have been classified as redeemable convertible preferred stock on our
balance sheet as of December 31, 1999.
20
<PAGE> 28
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" on page 20 and our financial statements and related notes
beginning on page F-1 of 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" beginning on page 6 and
elsewhere in this prospectus.
OVERVIEW
Our Web site, Bolt.com, is a leading online destination that targets 15 to
20 year old teens. Bolt, Inc. was 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.
Included in our results of operations for the years ended December 31, 1997,
1998 and 1999 are the following revenues and expenses:
- $446,000 in revenues and $1,308,000 in expenses for the year ended
December 31, 1997, representing the results of our Girls On and custom
publishing divisions;
- $2,281,000 in revenues and $2,198,000 in expenses for the year ended
December 31, 1998, representing the results of our Girls On and custom
publishing divisions; and
- $38,000 of revenues and $25,000 of expenses for the year ended December
31, 1999, representing the results of our Girls On division prior to its
sale in January 1999.
As a result of this 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 December 31, 1999, we
had an accumulated deficit of $14.7 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.
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.
21
<PAGE> 29
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 of the advertising contract. If a contract
guarantees a minimum number of impressions, we constantly monitor the number of
impressions delivered and adjust our revenue recognition model. If we determine
that the minimum number of impressions will not be met within the period of time
specified in the contract, we continue to run the advertisement on our site
until the guaranteed number of impressions is achieved. The amount of revenue
recognized is adjusted ratably as the impressions are delivered over the time
necessary for delivery of the remaining impressions. To date, we have not
entered into any agreements requiring us to refund to advertisers amounts paid
if the minimum number of impressions is not delivered in the contract period.
We recognize revenues from our teen expertise and relationship management
services. In November 1999, we entered into a 26-month agreement with AOL. Under
this agreement, AOL will pay the Company to manage AOL's branded teen message
boards and teen chat rooms and to develop and maintain the Bolt branded Web site
resident on the AOL service called aol.bolt.com.
Under this agreement, AOL is also providing marketing value to us. AOL
provides us brand exposure because we have established and we maintain a linked,
customized, user-generated content environment at aol.bolt.com. All teen-focused
message boards, chat rooms, and teen community areas within the AOL services are
Bolt branded -- "Powered by Bolt." AOL will also deliver to us a guaranteed
minimum number of impressions and key commerce placements throughout AOL and its
various sites (including ICQ, Spinner, WinAmp, CompuServe and Netscape).
In consideration for the marketing value, including the guaranteed minimum
number of impressions we will receive from AOL, we must pay AOL a fixed fee; 40%
of this fee is paid in cash and the remaining balance is offset against the
revenue we earn from AOL for the above services. Revenue is recognized based on
the level of the monthly management, development and maintenance services
provided in relation to the total services estimated to be provided over the
26-month term of the agreement. Non-cash barter revenue of approximately
$118,000 has been recognized for the year ended December 31, 1999. The total
cost of the guaranteed minimum number of impressions received will be amortized
ratably as the impressions are delivered.
We have the right to all revenues from any advertisements that we sell on
aol.bolt.com.
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 450 products, including apparel, 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 December 31, 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
22
<PAGE> 30
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 from store-in-store placements, or
slotting fees, where a vendor pays us a fee to place its branded "store" within
the Bolt Store. This fee is generally recognized over the term of the agreement.
If up-front production time to design and develop the store-in-store is
significant and separately contracted for, this portion is recognized upon the
completion of the work. The actual products we sell through the store-in-store
are generally recognized as product sales as above. We also generate transaction
fees based on the placements and sales of merchandise or services through either
a link on our site or where the transaction is processed and fulfilled by a
third party vendor. In these instances, Bolt does not bear any risk of delivery,
collection or returns. Generally, these fees are earned as products are sold,
customers are referred or certain milestones are met.
Market research. We collect 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 demographic group and provide it
to companies without compromising the actual identities of our members and
otherwise in a manner consistent with our privacy policy. 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 11% of our total
revenues for the year ended December 31, 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. No other
single customer accounted for more than 10% of our total revenues during these
periods.
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.
23
<PAGE> 31
Stock-based compensation. We have recorded total deferred stock-based
compensation of $4.3 million as of December 31, 1999 in connection with stock
options granted during 1999. 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 $3.0 million for the year
ended December 31, 1999. The amortization expense relates to options awarded to
employees in all operating expense categories. Deferred stock-based compensation
that will be subsequently amortized as expense for each of the next four fiscal
years, including options granted through February 28, 2000, is estimated to be
as follows:
<TABLE>
<CAPTION>
PERIOD AMOUNT
- ------ --------------
(IN THOUSANDS)
<S> <C>
Year ending December 31, 2000............................... $ 5,405
Year ending December 31, 2001............................... 2,409
Year ending December 31, 2002............................... 1,095
Year ending December 31, 2003............................... 253
-------
Total............................................. $ 9,162
=======
</TABLE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total revenues. Total revenues increased to $4.4 million for the year
ended December 31, 1999 from $2.7 million for the year ended December 31, 1998.
For the year ended December 31, 1999, revenues of about $3.5 million were
related to advertising and sponsorship and revenues of about $860,000 were
related to e-commerce resulting from the launch of the Bolt Store in September
1999. During the year ended December 31, 1998, we recognized $2.0 million of
revenues related to the custom publishing division, which was sold on December
30, 1998, of which 71% came from one customer. Excluding the revenues from the
custom publishing and Girls On divisions, our revenues increased to $4.4 million
for the year ended December 31, 1999 from $404,000 for 1998. This increase was
due to advertising and sponsorship revenues primarily due to a larger customer
base and from e-commerce revenues. In 1999, one customer accounted for 11% of
our total revenues.
Production and technology expenses. Production and technology expenses
increased to $3.5 million for the year ended December 31, 1999 from $1.1 million
for the year ended December 31, 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 $794,000 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 $3.5 million for the year ended December 31, 1999 from
$336,000 for the year ended December 31, 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 $1.1 million related to the
launch of the Bolt Store were incurred in the year ended December 31, 1999. We
did not operate an e-commerce business in 1998.
Sales and marketing expenses. Sales and marketing expenses increased to
$9.1 million for the year ended December 31, 1999 from $630,000 for the year
ended December 31, 1998. Included in this increase was about $2.3 million
related to online advertisements placed with various Web sites, about $813,000
of television and print advertising expenses, and about $3.7 million of
personnel and other miscellaneous costs, including marketing costs related to
the launch of the Bolt Store. In addition, during 1999, we incurred $1.7 million
of costs related to 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. Excluding expenses from the custom
publishing and Girls On divisions, our sales and marketing expenses increased to
$9.1 million from $332,000 for the year ended December 31, 1998. This increase
was primarily the result of the same increases in personnel, online, television
and print advertising expenses described above and marketing expenses related to
the launch of the Bolt Store.
General and administrative expenses. General and administrative expenses
increased to $1.8 million for the year ended December 31, 1999 from $1.3 million
for the year ended December 31, 1998. This increase was
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<PAGE> 32
due to increased administrative staffing to support our growth. Prior to the
sale of the 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 $1.7 million from $289,000 for the year ended December 31,
1998. This increase was directly related to the growth of the Bolt business.
Depreciation and amortization expenses. Depreciation and amortization
expenses increased to $536,000 for the year ended December 31, 1999 from $75,000
for the year ended December 31, 1998. This increase was primarily the result of
the addition of $3.0 million of equipment and software necessary for the launch
of the Bolt Store and the expansion of our infrastructure.
Stock-based compensation expenses. Stock-based compensation expenses of
$3.0 million for the year ended December 31, 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 December
31, 1999, we had recorded $4.3 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 of about $418,000 earned on cash equivalents and notes receivable, offset
by interest expense of about $133,000 on capital leases, short-term debt and
notes payable. For the year ended December 31, 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. We recorded interest income of $7,000 for the
year ended December 31, 1998 related to interest on short-term investments,
compared to $42,000 for the year ended December 31, 1997. Interest expense for
the year ended December 31, 1998 was $60,000 related to a short-term convertible
note payable and capital lease obligations.
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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, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bolt revenues (advertising,
sponsorships and
e-commerce)................... $5 $39 $141 $219 $272 $692 $921 $2,477
</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. The
significant increase for the three months ended December 31, 1999 was also due
to an overall increase in the number of advertising customers as well as about
$845,000 of e-commerce revenues from the Bolt Store which was launched in
September 1999.
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;
- 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 $48.7 million from
our inception through December 31, 1999. We had about $37.1 million of cash and
cash equivalents as of December 31, 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, $38.7 million raised through
the sale of our Series C preferred stock and an increase in other financing
activities of $500,000, offset by cash used in operating and investing
activities of $7.7 million and $2.6 million, respectively.
Net cash used in operating activities for the year ended December 31, 1999
increased to $7.7 million from $348,000 in 1998. This increase was primarily the
result of the $13.0 million net loss for the year ended December 31, 1999.
Included in the net loss for the year ended December 31, 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
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expenses totaling $3.6 million. In addition, we recorded a net increase in cash
resulting from the net changes in operating assets and liabilities of about $2.9
million for the year ended December 31, 1999 compared to 1998. 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 $2.6 million for the
year ended December 31, 1999 from $65,000 in 1998. This increase was the result
of $3.0 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 were $229,000, $65,000 and $3.0 million for the years
ended 1997, 1998 and 1999, respectively.
Net cash provided by financing activities for the year ended December 31,
1999 increased to $47.3 million from $423,000 in 1998. Of this increase, about
$38.7 million of net proceeds were received through the sale of Series C
preferred stock, $8.0 million of net proceeds were received through the sale of
Series B preferred stock, $651,022 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. In December 1999, we
paid this loan in full. Net cash provided by 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.
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. On February 29, 2000, we completed the sale of 418,060
shares of Series D preferred stock, resulting in proceeds of about $7.5 million.
We expect to use these proceeds 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 December 31, 1999, we had outstanding
borrowings under the line of $598,529, 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 at an interest rate of prime plus 1%. As of December 31, 1999, we
had no outstanding borrowings under this agreement. 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 the Series C and Series D 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
The "Year 2000" issue arose because many computer programs use only the
last two digits to refer to a year. Therefore, these computer programs may
recognize a year that ends in "00" as 1900 rather than 2000. As a result,
computer systems and software used by many companies and governmental agencies
needed to be upgraded to comply with Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
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In the fourth quarter of 1999, we 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 included the backup of all mission critical systems immediately
prior to the New Year.
Prior to January 1, 2000, we replaced systems or modified code where
necessary. Our vendors of material hardware and software components,
infrastructure, and systems indicated that the products we use are Year 2000
compliant. We have not experienced any significant problems related to the Year
2000 issue. We therefore believe that our principal information systems
correctly define the Year 2000.
To date, our costs associated with Year 2000 compliance have not exceeded
$50,000, and we do not anticipate that Year 2000 expenses will be material going
forward.
RECENT ACCOUNTING PRONOUNCEMENTS
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 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 December 31,
1999, all of our cash equivalent investments will mature in three months or less
(see note 2 to the notes to our financial statements). Bolt did not hold any
derivative financial instruments as of December 31, 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 to
20 year old teens. According to our database, our member base has grown to more
than 1.9 million as of February 29, 2000 from about 340,000 as of December 1,
1998. According to Media Metrix, in December 1999, Bolt.com was the "stickiest"
site for 12 to 17 years old Internet users of all the sites on the Internet, as
measured by minutes per user per month. According to Nielsen I/PRO, we had over
196 million page views and over 6.6 million user sessions in January 2000 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,
including fees paid for our expertise in managing other companies'
relationships with teens;
- 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;
- 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
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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. Based on third-party
market research data, we believe 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. Based on third-party market research data, we
believe that about 57% of 13 to 17 year olds use the Internet regularly, as
compared to about 36% of 18 to 34 year olds, 31% of 35 to 54 year olds and 17%
of individuals over the age of 55. Based on this data, we also believe 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% and 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. Most online commerce
transactions, including all cash transactions currently completed through the
Bolt Store, are credit card transactions. Based on third-party market research
data and other publicly available information, Bolt estimates that about 10% of
12 to 19 year olds have access to a parent's credit card and that more than 30%
of 18 to 19 year olds have their own credit card. This creates a significant
opportunity to both sell products and advertise to teens online. Based on
third-party market research data, we estimate 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 1.9 million members can use
our personalized proprietary 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, consistent with our privacy policy, we gather
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. 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 1.9 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, 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 150 new advertisers over the past
year. 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 196 million page views and over 6.6 million user sessions in
January 2000.
- 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 December 1999, Bolt.com
was the "stickiest" site for 12 to 17 year old Internet users of all
sites 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.
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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 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 450 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.
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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.
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
communica tions 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.
BoltEverywhere................ Allows our members to access, free of charge,
proprietary Bolt applications, including Bolt
Notes, Tagbooks, Bolt Polls and other
personalized content via wireless services.
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 and Voicemail
Service....................... Provides every member with access to Internet
email through the Bolt.com address and also
provides a free, private voicemail number.
Currently, over 870,000 of our more than 1.9
million members have elected to subscribe to
this service.
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Bolt Homepages................ Allows members to categorize and create their
own Web pages that we host free of charge.
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 February 29, 2000, we had a direct advertising sales force comprised
of 26 sales and support 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
entered into contracts with over 150 advertising customers. The following is a
list of selected customers from various industries that have advertised on or
sponsored content of Bolt.com within the last 12 months:
<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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This list is indicative of the type of companies that have advertised on or
sponsored content of Bolt.com in an attempt to target our teen member base.
Revenues from these companies for the year ended December 31, 1999 range from
about $8,000 to $131,000. We cannot assure you that these companies will
continue to advertise on or sponsor content of Bolt.com.
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 5.7 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
1.9 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 450
products that our members help select, including apparel, 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
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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, 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
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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 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. Under this
agreement, 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 will
receive prominent placements in the AOL shopping service and on teen
targeted sites on the AOL network, including Spinner, WinAmp, Netscape,
Compuserve and MovieFone. We receive a fee from AOL for providing teen
expertise and management services in connection with managing AOL's teen
community areas. This fee is offset by the value of the marketing
services we receive from AOL.
- 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 2.2 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.
- 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 fixed 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 expires on January 1, 2002. This program allows us to deliver
HTML-based email to over 350,000 teens who have specifically expressed
interest
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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. We also receive featured placement on teen targeted
sites in the Lycos network, including Lycos Shop, Tripod, Angel Fire and
other Lycos sites focused on 12 to 24 year olds.
- 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 launched 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 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.
- AT&T Wireless Initiative. On January 28, 2000, we entered into an
agreement with AT&T Wireless Services, Inc. Under the agreement, we will
promote AT&T's wireless services on Bolt.com and solicit and refer
subscribers of these services to AT&T. Using these services, members
will be able to access "BoltEverywhere" -- the wireless version of
several of Bolt's proprietary applications such as Bolt Notes and
Tagbooks. Also, members that purchase the AT&T wireless services through
Bolt.com will have BoltEverywhere as a default mobile channel. In
consideration, AT&T must pay us a fixed fee and will also pay us a
commission for each subscriber to the AT&T wireless services that was
referred by Bolt. This agreement has a term of one year, but is
automatically renewed for successive one-year terms unless written
notice is given by us or AT&T prior to the end of the term.
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:
- brand recognition;
- an existing critical mass of users that demonstrate affinity and
loyalty;
- the ability to target a specific demographic;
- variety of value-added services, including unique and relevant tools and
applications;
- reliability and quality of service; and
- the overall cost-effectiveness of the advertising medium.
We believe we compete favorably on these factors particularly due to: (1)
our commitment to build our brand awareness through traditional and Internet
advertising and strategic relationships; (2) our commitment to continue to
develop our technology and expand the depth and relevance of the online products
and services we offer; (3) our ability to target a demographically-focused
audience; (4) our large and active registered teen member base; and (5) our
member loyalty as demonstrated by the "stickiness" of our site.
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:
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- 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. Our agreement with Exodus may be terminated by either party with 90
days' notice. If this agreement were terminated, we believe that we could find
another facility to house our servers on commercially reasonable terms and there
would be no interruption in our operations.
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
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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 target teens 15 to 20 years old. Prior to the effective date of the Act,
we will cease collecting information from children under age 13, and we will
remove all registration and profile information for members known to us to be
under the age of 13. We will also take affirmative steps to discourage children
under the age of 13 from attempting to register as members. 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 remove that person as a Bolt member
and remove all registration and profile information for this person.
It is important to our members that we protect their privacy. We have
formed a privacy task force comprised of senior level employees to further
evaluate our privacy policy. We discourage our members from disclosing their
identities. At registration, we ask that new members make up user names instead
of using their real names. We use passwords and user IDs to ensure anonymity
among our members. In addition, we do not sell or distribute 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 aggregate information obtained from 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.
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
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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.
EMPLOYEES
As of February 29, 2000, we employed a total of 170 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.
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<PAGE> 50
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. On February 18, 2000, we entered into a lease for
about 92,000 square feet of office space in New York, New York. We expect to
occupy this space within six months, and the lease expires ten years from our
date of occupation. 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 on a month-to-month basis.
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:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Daniel A. Pelson(2)(3).................... 33 President, Chief Executive Officer and Director
Jane Mount................................ 28 Executive Vice President
Richard Glosser........................... 39 Executive Vice President
Albert G. Pastino......................... 57 Chief Financial Officer
Frank Harrison............................ 38 Senior Vice President of Corporate Development
Mark Stutzman............................. 30 Chief Technology Officer
Steven R. Kamen........................... 36 Vice President and General Counsel
Jeanne Sachs.............................. 34 Vice President of Ad Sales
Justin Nesci.............................. 31 Vice President of Business Development
Alexa Tobin............................... 31 Vice President of Commerce
David Titus, Ph.D......................... 46 Vice President of Business Intelligence
Alan Colner(1)............................ 44 Director
Robert Dove(1)(2)......................... 45 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
(3) Member of our Option 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 Executive Vice President 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.
Richard Glosser has served as Executive Vice President since January 2000.
From November 1997 to October 1999, Mr. Glosser served jointly as Executive Vice
President of Sony Online Entertainment and President of Columbia TriStar
Interactive where he managed business operations for [email protected], a
leading online game destination, and where he also supervised Columbia TriStar
Interactive's online and interactive television efforts. From February 1994 to
November 1997, Mr. Glosser was Founder and Senior Vice President of Columbia
TriStar Interactive where he launched Sony Pictures Entertainment's film,
television and online game efforts. From August 1988 to February 1994, Mr.
Glosser served in business development and operations positions in various
television divisions of Sony Pictures Entertainment. Mr. Glosser started his
career at NBC where he worked from September 1982 to May 1986. He holds a B.S.
in Entrepreneurial Management/Marketing from The Wharton School of the
University of Pennsylvania and an M.B.A. from Columbia Business School.
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<PAGE> 52
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.
Frank Harrison has been our Senior Vice President of Corporate Development
since October 1999 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.
Steven R. Kamen has served as our Vice President and General Counsel since
January 2000. From May 1995 to January 2000, Mr. Kamen practiced at the law firm
of Sills Cummis Radin Tischman Epstein & Gross P.C. in Newark, New Jersey where
he became a partner in 1997 in the Corporate Department. From October 1990 to
May 1995, Mr. Kamen worked as an Associate in the Corporate Department at
Morgan, Lewis & Bockius LLP in New York City. Mr. Kamen serves on the Counsel of
Trustees for the Healthcare Foundation of New Jersey in Roseland, New Jersey. He
holds a B.A. from the University of Michigan (Ann Arbor), where he double
majored in Japanese language and literature and political science, and a J.D.
from Columbia Law School in New York City.
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
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<PAGE> 53
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 been our Vice President of Business Intelligence since
December 1999 and served as our Director of Business Intelligence from August
1999 to December 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.
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.
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.
From February 1998 until February 2000, he 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
five members 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. Upon
completion of this offering, Robert Dove and Samantha McCuen will serve in the
class whose term expires in 2001; 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,
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<PAGE> 54
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. Upon completion of this offering, our board of directors will also
have an option committee, which will operate under the authority of the
compensation committee and will have the authority to issue small numbers of
options to employees who are not executive officers.
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 60,500
shares of our common stock at an exercise price of $.46 per share. One fourth of
this option becomes exercisable after one year and the remaining portion becomes
exercisable in 36 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, Robert Dove and Samantha McCuen.
Neither Mr. Dove nor Ms. McCuen 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, 1999 to our Chief Executive Officer and our
other most highly compensated executive officers as of December 31, 1999 whose
total salary and bonus for 1999 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Daniel A. Pelson............................. $153,583 $-- -- $--
President and Chief Executive Officer
Jane Mount................................... 111,083 -- 444,125 --
Executive Vice President of Product
Development
Frank Harrison............................... 135,682 -- -- --
Senior Vice President of Corporate
Development
Jeanne Sachs................................. 110,444 -- 150,000 --
Vice President of Ad Sales
</TABLE>
OPTION GRANTS IN 1999
The following table presents each grant of stock options during the fiscal
year ended December 31, 1999 to each of the individuals listed in the Summary
Compensation Table.
All of the options granted to Ms. Mount in 1999 were exercisable
immediately upon grant. The options granted to Ms. Sachs vest as to 25% on April
27, 2000 and the remaining options vest equally each month over a 36 month
period.
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<PAGE> 55
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange Commission
and does not represent our prediction of our stock price performance. The
potential realizable values at 5% and 10% appreciation are calculated by:
- multiplying the number of shares of common stock under the option by the
assumed initial public offering price of $11.00 per share;
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options; and
- subtracting from that result the aggregate option exercise price.
Percentages shown under "Percentage of Total Options Granted in 1999" are
based on an aggregate of 3,147,500 options granted to our employees, consultants
and directors under our stock option plans during 1999.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING PERCENTAGE OF TOTAL EXERCISE OPTION TERM
OPTIONS OPTIONS PRICE PER EXPIRATION ------------------------
GRANTED GRANTED IN 1999 SHARE DATE 5% 10%
---------- ------------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel A. Pelson.......... -- -- -- -- -- --
Jane Mount................ 444,125 14.1% $.46 2/19/09 $7,753,461 $12,467,106
Frank Harrison............ -- -- -- -- -- --
Jeanne Sachs.............. 150,000 4.8 .46 4/27/09 2,618,675 4,210,675
</TABLE>
OPTION VALUES AT DECEMBER 31, 1999
The following table presents the number and value of securities underlying
unexercised options that are held by each of the individuals listed in the
Summary Compensation Table as of December 31, 1999. No shares were acquired on
the exercise of stock options by these individuals during 1999.
Amounts shown under the column "Value of Unexercised In-the-Money Options
at December 31, 1999" are based on the assumed initial public offering price of
$11.00, multiplied by the number of shares underlying the option, less the
exercise price payable for these shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Daniel A. Pelson.......................... -- -- -- --
Jane Mount................................ 623,290 35,835 $6,562,310 $ 376,268
Frank Harrison............................ 100,000 -- 1,050,000 --
Jeanne Sachs.............................. -- 150,000 -- 1,581,000
</TABLE>
EMPLOYMENT AGREEMENTS
In December 1999, we entered into an employment agreement with Richard
Glosser to serve as our Executive Vice President starting on January 17, 2000.
The term of this agreement is two years. Mr. Glosser will be paid a base salary
of $180,000 during the first year and $195,000 during the second year of this
agreement. Mr. Glosser is also entitled to (1) a yearly bonus of $50,000, (2) a
performance bonus of up to $100,000 based on Bolt's attainment of mutually
agreed upon revenue performance targets and (3) an additional bonus based upon
the amount by which our revenues exceed these targets. Pursuant to this
agreement, Mr. Glosser received a non-qualified option to purchase 300,865
shares of our common stock at an exercise price of $2.66 per share. This option
vests as to 25% of the shares on the first anniversary of the date of grant and
the remaining portion becomes exercisable in 36 equal monthly installments
thereafter. In
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<PAGE> 56
addition, in any year in which the revenue performance target of Bolt is
reached, Mr. Glosser is entitled to an option for 44,240 shares of our common
stock. Each such option would vest immediately upon grant and would have an
exercise price equal to the fair market value on the date of grant. Mr. Glosser
is also entitled to reimbursement of up to $160,000 in relocation expenses. If
we terminate Mr. Glosser without cause or he terminates his employment for good
reason, we are obligated to pay Mr. Glosser his salary for the entire term of
this agreement and pay him any bonus earned as of the termination date. If we
terminate Mr. Glosser for cause, we have no obligation to Mr. Glosser other than
for salary and expenses earned or accrued and unpaid prior to the date of
termination. This agreement also contains a one year post-employment
non-competition and non-solicitation clause.
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
February 28, 2000, a total of 4,767,500 shares of common stock had been reserved
for issuance under this plan. As of February 29, 2000, 215,517 shares had been
issued pursuant to options granted under this plan, 3,309,223 shares were
subject to outstanding options and 1,242,760 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 exercise price and the number of shares subject to each option;
- the vesting schedule for options;
- 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 EMPLOYEE STOCK OPTION PLAN
Our 1997 Employee 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 February 28, 2000, a total of 530,680 shares of common stock have been
reserved for issuance under this plan. Of these shares, 331,826 shares have been
issued pursuant to options granted under this plan, 198,854 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.
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<PAGE> 57
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 $10,500 in calendar year 2000. 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 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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<PAGE> 58
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 five shares
of our common stock. Each share of our Series C preferred stock is convertible
into 1.25 shares of our common stock. In addition, if the initial public
offering price is below $14.35 per share, the Series C preferred stockholders
are entitled to anti-dilution rights which increase the number of shares of
common stock into which each share of Series C preferred stock is convertible.
If the initial public offering price is below $14.35 per share, each share of
Series C preferred stock is convertible into a number of shares of common stock
equal to 1.25 multiplied by a fraction the numerator of which is $14.35 and the
denominator of which is the initial public offering price. Based on an assumed
initial public offering price of $11.00 per share, each share of Series C
preferred stock is convertible into 1.63 shares of 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.......... 3,355,000 -- -- -- -- 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................ -- -- -- 483,871 -- 341,463
Oak Investment Partners
VIII, Limited
Partnership............. -- -- -- -- 268,818 195,122
Moore Capital Management,
Inc.(5)................. -- -- -- -- -- 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, Frank Harrison, our Senior Vice President of
Corporate Development, and Bechtel Enterprises Holdings, Inc., a five
percent stockholder, own a total of 52% 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) 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" on page 55 for a more detailed description of the terms of this
agreement.
51
<PAGE> 59
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, Frank Harrison, our Senior
Vice President of Corporate Development, 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. We believe the amounts paid by Concrete Media Construction to us
and the amounts paid by us to Concrete Media Construction represent the fair
value of the services provided by each party. The amount paid to us for rent was
based on the percentage of the rented space allocated to Concrete Media
Construction multiplied by the base rent. The amount paid for services received
by each company was based upon the market rate for these services at the time
they were delivered. In addition, in 1999 we paid Concrete Media Construction
about $403,000 to develop Web sites for two of our advertising customers.
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 currently hold about 52% of the equity of
Concrete Media, Inc. We are currently providing only minimal administrative
services to Concrete Media, Inc.
Sale of Girls On division. On January 29, 1999, we sold all of the assets
(about $52,000) of 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 current liabilities of about $107,000 and all 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, in exchange for a
$500,000 loan we received from Bechtel, we issued a convertible 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.
The per share prices of our preferred stock were based on negotiations
between Bolt and unaffiliated third parties. In addition, based on prevailing
market conditions at the time of the other transactions described above, we
believe that all of these transactions were made on terms no less favorable to
Bolt than could have been obtained from unaffiliated third parties. All future
transactions between Bolt and its officers, directors, principal stockholders
and their affiliates will be approved by a majority of the board of directors,
including a majority of the independent and disinterested directors, and will
continue to be on terms no less favorable to Bolt than could be obtained from
unaffiliated third parties.
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<PAGE> 60
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of February 29, 2000, and as adjusted to
reflect the sale of our common stock offered by this prospectus by:
- the current and former executive officers 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
February 29, 2000, 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 21,181,985 shares of common stock
outstanding on February 29, 2000, which assumes the conversion of all
outstanding shares of preferred stock into common stock, and 24,881,985 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).......................... 3,747,366 17.7% 15.1%
Jane Mount(2)................................ 641,210 3.0 2.6
Frank Harrison............................... 118,117 * *
Jeanne Sachs(3).............................. 37,500 * *
Robert Dove(4)............................... 4,460,342 21.1 17.9
Samantha McCuen(5)........................... 2,839,694 13.4 11.4
Alan Colner(6)............................... 1,591,130 7.5 6.4
William S. Peabody(7)........................ 195,755 * *
All current executive officers and directors
as a group (14 persons)(8)................. 13,724,722 63.6 54.3
FIVE PERCENT STOCKHOLDERS
Bechtel Enterprises Holdings, Inc.(4)........ 4,460,342 21.1 17.9
Highland Capital Partners(9)................. 2,976,249 14.1 12.0
Sandler Capital Management(5)................ 2,815,499 13.3 11.3
Oak Associates VIII, LLC(10)................. 1,662,315 7.8 6.7
Moore Capital Management, Inc.(6)............ 1,591,130 7.5 6.4
</TABLE>
- ------------
* Represents beneficial ownership of less than 1% of the shares of Common
Stock.
(1) Includes 7,955 shares held by Concrete Media, Inc. Mr. Pelson owns 24% 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) Includes 242,047 shares issuable pursuant to options exercisable within 60
days of February 29, 2000.
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<PAGE> 61
(3) Consists of 37,500 shares issuable pursuant to options exercisable within
60 days of February 29, 2000.
(4) Consists of 4,452,387 shares held by Bechtel Enterprises Holdings, Inc. and
7,955 shares held by Concrete Media, Inc. Bechtel owns 24% of the equity
securities of Concrete Media. Bechtel disclaims beneficial ownership of
these shares except to the extent of its 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.
(5) Includes 1,870,765 shares held by Sandler Capital Partners IV, L.P.,
765,752 shares held by Sandler Capital Partners IV FTE, L.P. and 179,000
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.
(6) Includes 1,272,904 shares held by Moore Global Investments, Ltd and 318,226
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.
(7) Includes 92,303 shares held by Peabody Family Ventures of which Mr. Peabody
is the Managing General Partner, 66,572 shares held by Peabody Sabot
Ventures of which Mr. Peabody is the Managing General Partner and 1,590
shares held by Caribou Ventures of which Mr. Peabody is the Managing
General Partner. Also includes 15,125 shares issuable pursuant to options
exercisable within 60 days of February 29, 2000.
(8) Includes 9,027,436 shares held by entities affiliated with our directors
and executive officers. Also includes 396,235 shares issuable upon options
exercisable within 60 days of February 29, 2000. See footnotes 1 through 7
above.
(9) Consists of 2,857,198 shares held by Highland Capital Partners IV Limited
Partnership and 119,051 shares held by Highland Entrepreneurs Fund IV
Limited Partnership. Highland Capital Partners manages these two entities.
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.
(10) Consists of 1,630,730 shares held by Oak Investment Partners VIII, Limited
Partnership and 31,585 shares held by Oak VIII Affiliates Fund, Limited
Partnership. Oak Associates VIII, LLC is the managing partner of each of
these entities. The managing members of Oak Associates VIII, LLC are Ann H.
Lamont, Edward Glassmayer, Gerard Gallagher, Bandel Carano and Fred Harman.
Each of these individuals disclaims beneficial ownership of these shares
except to the extent of his or her proportional pecuniary interest in these
shares. Oak Associates VIII, LLC is located at One Gorham Island, Westport,
Connecticut 06880.
54
<PAGE> 62
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 24,881,985 shares
of common stock and no shares of preferred stock outstanding. Assuming the
conversion of our preferred stock, as of February 29, 2000, we had 21,181,985
shares of common stock outstanding held of record by 50 stockholders. As of
February 28, 2000, there were outstanding options to purchase 3,508,077 shares
of common stock and outstanding warrants to purchase 150,709 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 February 28, 2000, the following warrants were outstanding.
- A warrant to purchase 50,000 shares of our common stock at an exercise
price of $0.02 per share. This warrant expires on April 22, 2009.
- A warrant to purchase 1,975 shares of our Series B-3 Convertible
Preferred Stock at an exercise price of $30.37 per share. Upon
completion of this offering, this warrant will automatically convert
into a warrant to purchase 9,875 shares of our common stock at an
exercise price of $6.07 per share. This warrant expires on August 31,
2006.
- A warrant to purchase 20,834 shares of our common stock at an exercise
price of $8.20 per share. This warrant expires on January 28, 2010.
- A warrant to purchase 70,000 shares of our common stock at an exercise
price of $14.35 per share. The warrant expires on February 16, 2010.
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> 63
Demand Rights. Beginning 180 days after completion of this offering:
- The holders of 14,333,688 shares of common stock and 867,962 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 6,700,117 shares of common stock and 70,000 shares of
common stock issuable upon the exercise of outstanding warrants, will
have 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 21,033,805 shares of common stock and 937,962 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 21,033,805 shares
of common stock and 937,962 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 to fill vacancies on the board of directors occurring for any reason
for the remainder of the term of the class of
56
<PAGE> 64
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
be delivered not earlier than 90 days and not later than 60 days prior to the
special meeting or within 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> 65
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 24,881,985 shares of common
stock outstanding, assuming no exercise of options and warrants outstanding as
of February 28, 2000, and the conversion of all outstanding shares of preferred
stock. Of these shares, the 3,700,000 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
21,181,985 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>
0............................... On the date of this prospectus.
296,145................................ After 90 days from the date of this
prospectus.
14,185,723................................ After 180 days from the date of this
prospectus (subject, in some cases, to volume
limitations).
6,700,117................................ 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 248,820 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> 66
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 21,033,805 shares of
common stock and 937,962 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" on page 55 for a more complete description
of these registration rights.
STOCK OPTIONS
As of February 28, 2000, options to purchase a total of 3,508,077 shares of
common stock under our stock option plans were outstanding and 816,066 were
exercisable. All of the shares subject to options are subject to lock-up
agreements. An additional 1,242,760 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> 67
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............................................. 3,700,000
========
</TABLE>
Morgan Stanley Dean Witter Online, Inc., an affiliate of Morgan Stanley &
Co. Incorporated and facilitator of Internet distribution, is acting as a
selected dealer in connection with the offering.
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 555,000
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 222,000 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.
60
<PAGE> 68
Bolt has applied to list the common stock on the Nasdaq National Market
under the symbol "BOLT."
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 131 filed
public offerings of equity securities, of which 97 have been completed, and has
acted as a syndicate member in an additional 64 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.
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.
61
<PAGE> 69
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 15,916 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 December 31, 1999 and 1998 and for
the years ended December 31, 1999, 1998 and 1997, included in this prospectus,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing in this prospectus and are included in reliance upon the
report 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.
62
<PAGE> 70
BOLT, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-4
Statements of Stockholders' Equity (Deficiency) for the
years ended December 31, 1997, 1998 and 1999.............. F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 71
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, 1998 and 1999, and the related statements of
operations, stockholders' equity (deficiency) and cash flows for each of the
three years in the period ended December 31, 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, 1998 and 1999,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
New York, New York
January 28, 2000 (February 29, 2000 as to Note 16)
F-2
<PAGE> 72
BOLT, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, STOCKHOLDERS' EQUITY
1998 1999 AT DECEMBER 31, 1999
------------ ------------ --------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 194 $ 37,148
Accounts receivable, net of allowance for doubtful
accounts of $11 and $84 as of December 31, 1998 and
1999, respectively...................................... 338 1,896
Prepaid expenses and other current assets................. -- 692
------- --------
Total current assets............................... 532 39,736
Property and equipment, net................................. 454 2,821
Investments................................................. -- 1,050
Other assets................................................ 47 927
------- --------
Total assets................................................ $ 1,033 $ 44,534
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 246 $ 3,553
Accrued expenses.......................................... 234 3,000
Current portion of note payable and capital lease
obligations............................................. 182 577
------- --------
Total current liabilities.......................... 662 7,130
Deferred revenues........................................... 53 28
Convertible promissory note................................. 450 --
Note payable, less current portion.......................... 320 --
Capital lease obligations, less current portion............. 178 514
------- --------
Total liabilities........................................... 1,663 7,672
------- --------
Commitments
Redeemable convertible preferred stock:
Series B-1 convertible preferred stock, $.001 par value;
no shares authorized, issued and outstanding, 1998;
1,048,387 shares authorized, issued and outstanding,
1999; and no shares authorized, issued or outstanding,
1999 pro forma.......................................... -- 6,132
Series B-2 convertible preferred stock, $.001 par value;
no shares authorized, issued and outstanding, 1998;
268,818 shares authorized, issued and outstanding, 1999;
and no shares authorized, issued or outstanding, 1999
pro forma............................................... -- 1,887
Series C convertible preferred stock, $.001 par value; no
shares authorized, issued and outstanding, 1998;
4,400,000 shares authorized, 3,787,801 issued and
outstanding, 1999; and no shares authorized, issued or
outstanding, 1999 pro forma............................. -- 38,693
------- --------
Total redeemable convertible preferred stock ............... -- 46,712
------- --------
Stockholders' equity (deficiency):
Common stock, $.001 par value; 16,000,000 shares
authorized, 5,500,000 shares issued and 3,723,500 shares
outstanding, 1998; 30,000,000 shares authorized,
5,548,180 shares issued and 3,771,680 shares
outstanding, 1999; and 30,000,000 shares authorized,
21,936,747 shares issued, and 20,160,247 shares
outstanding, 1999 pro forma ............................ 6 6 22
Series A-1 convertible preferred stock, $.001 par value;
600,000 shares authorized, issued and outstanding, 1998
and 1999 and no shares authorized, issued or
outstanding, 1999 pro forma............................. 1 1 --
Series A-2 convertible preferred stock, $.001 par value;
no shares authorized, issued and outstanding, 1998;
125,000 shares authorized, issued and outstanding, 1999
and no shares authorized, issued or outstanding, 1999
pro forma............................................... -- -- --
Additional paid-in capital................................ 1,985 8,987 55,684
Warrants.................................................. -- 995 995
Deferred financing costs.................................. -- (71) (71)
Accumulated deficit....................................... (1,741) (14,658) (14,658)
Deferred compensation..................................... -- (4,334) (4,334)
Note receivable from related party........................ (420) (315) (315)
Treasury stock............................................ (461) (461) (461)
------- -------- --------
Total stockholders' equity (deficiency)................... (630) (9,850) $ 36,862
------- -------- ========
Total liabilities and stockholders' equity
(deficiency)..................................... $ 1,033 $ 44,534
======= ========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 73
BOLT, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Bolt revenues........................................ $ 32 $ 404 $ 4,362
Revenues related to the Girls On and custom
publishing divisions............................... 446 2,281 38
---------- ---------- -----------
Total revenues............................. 478 2,685 4,400
---------- ---------- -----------
Costs and expenses:
Production and technology.......................... 810 1,138 3,526
E-commerce......................................... -- -- 1,119
Sales and marketing................................ 287 630 9,084
General and administrative......................... 549 1,327 1,766
Depreciation and amortization...................... 25 75 536
Stock-based compensation........................... -- -- 3,007
---------- ---------- -----------
Total costs and expenses................... 1,671 3,170 19,038
---------- ---------- -----------
Loss from operations................................. (1,193) (485) (14,638)
Other income (expense):
Interest income.................................... 42 7 418
Interest expense................................... -- (60) (133)
Gain on sale of Girls On........................... -- -- 1,436
---------- ---------- -----------
Net loss............................................. $ (1,151) $ (538) $ (12,917)
========== ========== ===========
Basic loss per share................................. $ (.21) $ (.10) $ (3.43)
========== ========== ===========
Weighted average number of shares of common stock
outstanding........................................ 5,500,000 5,461,063 3,765,080
========== ========== ===========
Pro forma basic loss per share (unaudited)........... $ (.95)
===========
Pro forma weighted average number of shares of common
stock outstanding (unaudited)...................... 13,618,008
===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 74
BOLT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
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.............. 5,500,000 6 -- -- -- -- 92
Net loss.......................................... -- -- -- -- -- -- --
--------- -- ------- -- ------- -- ------
Balance at December 31, 1996...................... 5,500,000 6 -- -- -- -- 92
Issuance of Series A-1 convertible preferred
stock............................................ -- -- 600,000 1 -- -- 1,499
Net loss.......................................... -- -- -- -- -- -- --
--------- -- ------- -- ------- -- ------
Balance at December 31, 1997...................... 5,500,000 6 600,000 1 -- -- 1,591
Purchase of founders common stock................. -- -- -- -- -- -- --
Sale of custom publishing division to related
party............................................ -- -- -- -- -- -- 394
Net loss.......................................... -- -- -- -- -- -- --
--------- -- ------- -- ------- -- ------
Balance at December 31, 1998...................... 5,500,000 6 600,000 1 -- -- 1,985
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.......................... 48,180 -- -- -- -- -- 24
Proceeds on payment of note receivable............ -- -- -- -- -- -- --
Issuance of warrants to placement agent to
purchase common stock............................ -- -- -- -- -- -- (868)
Deferred compensation on stock options............ -- -- -- -- -- -- 7,341
Amortization of deferred compensation............. -- -- -- -- -- -- --
Issuance of warrants to purchase Series B-2
preferred stock in connection with credit
facility......................................... -- -- -- -- -- -- --
Amortization of deferred financing costs.......... -- -- -- -- -- -- --
Net loss.......................................... -- -- -- -- -- -- --
--------- -- ------- -- ------- -- ------
Balance at December 31, 1999...................... 5,548,180 $6 600,000 $1 125,000 $-- $8,987
========= == ======= == ======= == ======
<CAPTION>
NOTE
RECEIVABLE
DEFERRED FROM
FINANCING ACCUMULATED DEFERRED RELATED
WARRANTS COSTS DEFICIT COMPENSATION PARTY
-------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at August 15, 1996 (date of inception).... $ -- $ -- $ -- $ -- $ --
Issuance of common stock to founders.............. -- -- -- -- --
Net loss.......................................... -- -- (52) -- --
---- ---- -------- ------- -----
Balance at December 31, 1996...................... -- -- (52) -- --
Issuance of Series A-1 convertible preferred
stock............................................ -- -- -- -- --
Net loss.......................................... -- -- (1,151) -- --
---- ---- -------- ------- -----
Balance at December 31, 1997...................... -- -- (1,203) -- --
Purchase of founders common stock................. -- -- -- -- --
Sale of custom publishing division to related
party............................................ -- -- -- -- (420)
Net loss.......................................... -- -- (538) -- --
---- ---- -------- ------- -----
Balance at December 31, 1998...................... -- -- (1,741) -- (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 warrants to placement agent to
purchase common stock............................ 868 -- -- -- --
Deferred compensation on stock options............ -- -- -- (6,537) --
Amortization of deferred compensation............. -- -- -- 2,203 --
Issuance of warrants to purchase Series B-2
preferred stock in connection with credit
facility......................................... 127 (127) -- -- --
Amortization of deferred financing costs.......... -- 56 -- -- --
Net loss.......................................... -- -- (12,917) -- --
---- ---- -------- ------- -----
Balance at December 31, 1999...................... $995 $(71) $(14,658) $(4,334) $(315)
==== ==== ======== ======= =====
<CAPTION>
TREASURY STOCK
------------------
SHARES AMOUNT TOTAL
------ ------ -----
<S> <C> <C> <C>
Balance at August 15, 1996 (date of inception).... -- $ -- $ --
Issuance of common stock to founders.............. -- -- 98
Net loss.......................................... -- -- (52)
--------- ----- -------
Balance at December 31, 1996...................... -- -- 46
Issuance of Series A-1 convertible preferred
stock............................................ -- -- 1,500
Net loss.......................................... -- -- (1,151)
--------- ----- -------
Balance at December 31, 1997...................... -- -- 395
Purchase of founders common stock................. 1,776,500 (461) (461)
Sale of custom publishing division to related
party............................................ -- -- (26)
Net loss.......................................... -- -- (538)
--------- ----- -------
Balance at December 31, 1998...................... 1,776,500 (461) (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 warrants to placement agent to
purchase common stock............................ -- -- --
Deferred compensation on stock options............ -- -- 804
Amortization of deferred compensation............. -- -- 2,203
Issuance of warrants to purchase Series B-2
preferred stock in connection with credit
facility......................................... -- -- --
Amortization of deferred financing costs.......... -- -- 56
Net loss.......................................... -- -- (12,917)
--------- ----- -------
Balance at December 31, 1999...................... 1,776,500 $(461) $(9,850)
========= ===== =======
</TABLE>
See notes to financial statements.
F-5
<PAGE> 75
BOLT, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ----- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(1,151) $(538) $(12,917)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 25 75 536
Amortization of deferred financing costs.................. -- -- 56
Deferred stock based compensation......................... -- -- 3,007
Gain on sale of Girls On.................................. -- -- (1,436)
Changes in operating assets and liabilities:
Increase in accounts receivable........................ (136) (188) (1,558)
(Increase) decrease in prepaid expenses and other
current assets........................................ (61) 61 (692)
Increase in other assets............................... (17) (23) (852)
Increase in accounts payable........................... 153 74 3,380
Increase in accrued expenses........................... 73 138 2,801
Increase (decrease) in deferred revenues............... (8) 53 (25)
------- ----- --------
Net cash used in operating activities.................. (1,122) (348) (7,700)
------- ----- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (229) (65) (2,983)
Proceeds from the sale of Girls On........................ -- -- 386
------- ----- --------
Net cash used in investing activities.................. (229) (65) (2,597)
------- ----- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of convertible preferred stock,
net.................................................... 1,500 -- 46,712
Proceeds from equipment lease financing................... -- -- 651
Proceeds from the payment of note receivable.............. -- -- 105
Proceeds from the issuance of common stock................ 25 -- 24
Proceeds from convertible note............................ -- 500 --
Payments of capital lease obligations..................... -- (20) (108)
Payment of convertible note payable....................... -- -- (50)
Payments made for treasury stock.......................... -- (57) (83)
------- ----- --------
Net cash provided by financing activities.............. 1,525 423 47,251
------- ----- --------
Increase in cash and cash equivalents....................... 174 10 36,954
Cash and cash equivalents, beginning of period.............. 10 184 194
------- ----- --------
Cash and cash equivalents, end of period.................... $ 184 $ 194 $ 37,148
======= ===== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes................................ $ 1 $ 1 $ 6
Cash paid for interest.................................... $ -- $ 13 $ 79
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 into Series A-2 preferred
stock.................................................. $ -- $ -- $ 450
Warrant issued for Series B-3 convertible preferred stock
in connection with credit facility..................... $ -- $ -- $ 127
Warrant issued for common stock to placement agent........ $ -- $ -- $ 868
</TABLE>
See notes to financial statements.
F-6
<PAGE> 76
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997,
1998 AND 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.
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 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
F-7
<PAGE> 77
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 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 three years. During 1999, 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 and sponsorship, 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. The Company's obligations
relating to the minimum impressions guaranteed result in the Company constantly
monitoring the number of impressions delivered and adjusting our revenue
recognition model, which takes into account the number of impressions needed to
deliver the guaranteed minimum. In the event the Company determines that the
minimum number of impressions will not be met within the specified period of
time, the Company will continue to run the advertisement on our Web site until
the minimum number of impressions guaranteed is achieved. The amount of revenue
recognized is adjusted ratably as the number of impressions are delivered over
the revised time estimated for delivery of the remaining impressions. None of
our agreements to date have required us to refund to advertisers amounts paid.
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 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.
The Company has also recognized revenue from America Online, Inc. ("AOL")
from the management of AOL's branded teen message boards and teen chat rooms,
and for the development and maintenance of the Bolt branded Web site resident on
the AOL service called aol.bolt.com. Revenue is recognized based on the level of
these monthly services provided in relation to the total services estimated to
be provided over the 26-month term of the agreement. Non-cash barter revenue of
approximately $118,000 has been recognized for the year ended December 31, 1999.
Additionally, the Company will pay AOL a cash amount and will receive a minimum
number of impressions over the term of this agreement, which will be amortized
ratably as the impressions are delivered.
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
F-8
<PAGE> 78
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
presented since the impact for options and warrants, and conversion of preferred
shares would have been anti-dilutive (see notes 11 & 13).
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.
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.
UNAUDITED PRO FORMA NET LOSS PER SHARE AND UNAUDITED PRO FORMA
STOCKHOLDERS' EQUITY--Unaudited Pro forma net loss per share has been computed
in the same manner as net loss per common share as described above and also
gives effect to the conversion of all convertible preferred stock that will
automatically convert upon the completion of the Company's initial public
offering using the if-converted method (see notes 10 and 11). If the offering
contemplated by this prospectus is consummated, all of the convertible preferred
stock outstanding as of December 31, 1999 will automatically be converted into
an aggregate of 16,388,567 shares of common stock, including 1,442,803 shares to
be issued pursuant to anti-dilution rights upon the conversion of the Series C
Preferred Stock (see Note 10), based on the shares of convertible preferred
stock outstanding at December 31, 1999. Unaudited pro forma stockholders equity
at December 31, 1999, as adjusted for the conversion of all convertible
preferred stock is disclosed on the Balance Sheet. Pro forma basic net loss per
share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
Net loss.................................................... $12,917,000
===========
Shares used in computing basic net loss per share........... 3,765,080
Adjusted to reflect the effect of the assumed conversion of
all convertible preferred stock from the date of
issuance.................................................. 9,852,928
-----------
Weighted average shares used in computing pro forma basic
net loss per share........................................ 13,618,008
===========
Pro forma basic net loss per share.......................... $ 0.95
===========
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS-- 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 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 and
recognized advertising and sponsorship revenues of approximately $32,000,
$404,000 and $3,502,000 for the years ended December 31, 1997, 1998 and 1999,
respectively; e-commerce revenues of approximately $0, $0, and $860,000 for the
years ended December 31, 1997, 1998 and 1999, respectively, and revenues related
to the Girls On and custom publishing divisions of approximately $446,000,
$2,281,000 and $38,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
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."
F-9
<PAGE> 79
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
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 (total assets of
approximately $116,000) and all related liabilities of the division (totalling
approximately $90,000) 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 of
approximately $394,000 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 (approximately
$52,000) 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 (totalling approximately $107,000).
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 equity
securities in Oxygen Media are accounted for under the cost method since they
are not traded on a public market and have no readily determinable fair value.
The gain of $1,436,000 was recognized in the third quarter of 1999.
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.
F-10
<PAGE> 80
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. PROPERTY AND EQUIPMENT
At December 31, 1998 and 1999, property and equipment consisted of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
DESCRIPTION 1998 1999
- ------------------------------------------------------------ ---- ------
<S> <C> <C>
Computer equipment, including assets under capital leases... $365 $3,058
Furniture and fixtures...................................... 193 390
---- ------
558 3,448
Less accumulated depreciation and amortization.............. 104 627
---- ------
Property and equipment, net................................. $454 $2,821
==== ======
</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 December
31, 1999, the Company had net operating loss carryforwards ("NOLs") of
approximately $14,450,000, 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........................................................ 12,730
-------
$14,450
=======
</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,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets................................... $ 771 $ 6,792
Less valuation allowance.............................. (771) (6,792)
----- -------
Net deferred taxes.................................... $ -- $ --
===== =======
</TABLE>
The Company's NOLs primarily generated the deferred tax assets. At December 31,
1998 and 1999, a valuation allowance was provided as the realization of the
deferred tax benefits is not likely.
The effective tax rate varies from the U.S. Federal Statutory tax rate for
the years ended December 31 principally due to the following:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
U.S. Federal Statutory tax rate............................. 35% 35% 35%
State and local taxes....................................... 12% 12% 12%
Valuation allowance......................................... (47)% (47)% (47)%
--- --- ---
Effective tax rate.......................................... --% --% --%
=== === ===
</TABLE>
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,
F-11
<PAGE> 81
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 (8.5% as of December 31, 1999) plus one percent. As of December 31, 1999,
there were no outstanding borrowings 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 $52,523, $111,859 and $231,818 for the years ended
December 31, 1997, 1998 and 1999, respectively.
Future minimum payments under the operating lease are as follows (in
thousands):
<TABLE>
<S> <C>
Year ending December 31, 2000............................... 297
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...................... $1,931
======
</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 December 31, 1999, $598,529 was outstanding under the
line. In addition, the Company issued the financing company a warrant to
purchase preferred stock (see note 11).
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 December 31, 1999, are as follows (in thousands):
<TABLE>
<S> <C>
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...................... $893
----
Less: amounts representing interest......................... 123
----
Present value of minimum capital lease payments............. 770
Less: current portion....................................... 256
----
Long-term capitalized lease obligations..................... $514
====
</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.
F-12
<PAGE> 82
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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 five shares of Common Stock. Each share of Series
B Preferred Stock also converts automatically into five shares of Common Stock
upon the closing of a firm commitment underwritten public offering with (1)
gross proceeds to Bolt of at least $20,000,000 and (2) a public offering price
per share that reflects a pre-offering value of Bolt, on a fully-diluted basis,
of at least $31,250,000.
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.
Currently, each share of Series C Preferred Stock is convertible, at any time,
at the option of the holder, into 1.25 shares of Common Stock. Each share of
Series C Preferred Stock also converts automatically into 1.25 shares of Common
Stock upon the closing of a firm commitment underwritten public offering with
(1) net proceeds to the Company of at least $25,000,000 and (2) a public
offering price of at least $14.35 per share. In addition, if the initial public
offering price is below $14.35 per share and the Series C Preferred Stockholders
waive or amend the preceding provision the Series C preferred stockholders are
entitled to anti-dilution rights which increase the number of shares of common
stock into which each share of Series C preferred stock is convertible. If the
initial public offering price is below $14.35 per share, each share of Series C
preferred stock is convertible into a number of shares of common stock equal to
1.25 multiplied by a fraction the numerator of which is $14.35 and the
denominator of which is the initial public offering price.
The Company will be required to redeem all outstanding shares of Series B
and Series C Preferred Stock on November 17, 2004. The Series B-1 Preferred
Stock is redeemable for $6.20 per share plus all declared and unpaid dividends,
if any. The Series B-2 Preferred Stock is redeemable for $7.44 per share plus
all declared and unpaid dividends, if any. The Series C Preferred Stock is
redeemable at $10.25 per share plus all declared and unpaid dividends, if any.
The carrying values of the Series B and Series C Preferred Stock are their
redemption values, net of offering costs, as no dividends have been declared or
paid on these shares.
The Series B and Series C Preferred stockholders have senior preference and
priority as to the dividends of the Company. If declared, dividends shall accrue
at 8% of the $6.20 stated value of the Series B-1 Preferred Stock, at 8% of the
$7.44 stated value of the Series B-2 Preferred Stock and at 8% of the $10.25
stated value of the Series C Preferred Stock. Series B and Series C Preferred
Stock dividends are not cumulative.
Series A and Series B and Series C 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 five 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 $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 five 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
F-13
<PAGE> 83
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of Directors. Series A Preferred Stock Dividends are not cumulative. Each share
of Series A Preferred Stock converts automatically into five shares of Common
Stock upon the closing of a firm commitment underwritten public offering with
(1) a public offering price of at least $8.00 per share and (2) net proceeds to
Bolt that exceed $10,000,000.
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
888,250 shares for approximately $.01 per share. The balance of the founder's
shares, 888,250 shares, were repurchased at a price of $.50 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 50,000 shares of
Common Stock at $.02 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. This warrant is 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, and is valued at approximately $127,000 using the Black Scholes option
pricing model. Each share of Series B-3 Preferred Stock is convertible into five
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 9,875 shares of Common Stock at an exercise price of
$6.07 per share. 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.
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 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, 1998 and 1999.
13. STOCK OPTION PLANS
The Company has established the 1997 Employee 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. As of December 31, 1999, the 1997 Plan and the 1999 Plan
provided for awards of up to 530,680 and 4,767,500 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
F-14
<PAGE> 84
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
equally each month over a thirty-six month period. A total of 4,060,000 options
had been granted under these plans as of December 31, 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
OF OPTIONS PRICE
---------- --------
<S> <C> <C>
Granted..................................................... 712,500 $.50
Exercised................................................... -- $.50
Canceled.................................................... -- $.50
----------
Outstanding, December 31, 1997.............................. 712,500 $.50
Granted..................................................... 200,000 $.50
Exercised................................................... -- $.50
Canceled.................................................... (127,500) $.50
----------
Outstanding, December 31, 1998.............................. 785,000 $.50
Granted..................................................... 3,147,500 $.72
Exercised................................................... (48,180) $.46
Canceled.................................................... (614,820) $.46
----------
Outstanding, December 31, 1999.............................. 3,269,500 $.72
==========
</TABLE>
Weighted average fair value of options granted during the fiscal year:
<TABLE>
<S> <C>
1997........................................................ $ .50
1998........................................................ $ .50
1999........................................................ $3.36
</TABLE>
The following table summarizes information about stock options outstanding
as of December 31, 1999.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------ ---------------------------------------
NUMBER WEIGHTED AVERAGE NUMBER
OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICE DECEMBER 31, 1999 LIFE (YEARS) EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
- -------------- ----------------- ---------------- ---------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.46 2,480,750.... 9.3 $0.46 888,250 $0.46
$ 0.50 482,500...... 7.0 $0.50 392,291 $0.50
$ 2.66 273,750...... 9.8 $2.66 -- $2.66
$ 7.38 32,500....... 9.9 $7.38 -- $7.38
--------- ----- --------- -----
3,269,500.... $0.72 1,280,541 $0.47
</TABLE>
There were 46,303, 74,219 and 1,280,541 options exercisable as of December
31, 1997, December 31, 1998 and December 31, 1999, respectively.
These plans also provide for stock appreciation rights ("SAR's"). As of
December 31, 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
F-15
<PAGE> 85
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
During the year ended December 31, 1999, the Company granted 444,125 fully
vested stock options to non-employees. Additionally in 1999, the Company granted
75,000 stock options to non-employees that will vest over a four-year period.
There were no option grants to non-employees for the years ended December 31,
1997 or 1998. The Company has recorded total compensation expense of $458,592
for the year ended December 31, 1999 related to the issuance of options to
non-employees. The fair value of each stock option was estimated using the
Black-Scholes option pricing model with the following assumptions: a risk free
interest rate of 6.0%, a weighted-average expected life of 3.25 years, no
dividend yield and a 50% volatility.
In connection with the issuance of certain options at prices below the fair
market value, the Company had recorded deferred compensation expense of $4.3
million as of December 31, 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 approximately $2.2 million for the year
ended December 31, 1999. On February 19, 1999, the Company granted 444,125 stock
options to one of the Company's founders at an exercise price of $.46. Such
options vested immediately. The Company has recorded a charge of $344,641,
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>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net loss applicable to common shares--as reported.... $1,151 $538 $12,917
Net loss applicable to common shares--pro forma...... $1,163 $552 $15,522
Loss per common share--as reported................... $.21 $.10 $3.43
Loss per common share--pro forma..................... $.21 $.10 $4.12
</TABLE>
The Company used the Black-Scholes option pricing model to estimate fair
value utilizing the following assumptions for the respective years (all numbers
shown are weighted averages):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- ----------------- ------------------
<S> <C> <C> <C>
Risk-free interest rate................. 4.62% 4.62% 6.00-6.50%
Expected life of options................ 3.25 years 3.25 years 3.25-4.25 years
Expected annual volatility.............. .001% .001% 50%
Expected dividend yield................. none none none
</TABLE>
14. MAJOR CUSTOMERS
One customer accounted for 11% of our total revenues for the year ended
December 31, 1999. Revenues from one customer represented 52% of total revenues
in 1998. Revenues from two customers represented 15% and 10%, respectively, of
total revenues in 1997.
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. In
F-16
<PAGE> 86
BOLT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
addition, in 1999 the Company paid Concrete Media Construction about $403,000 to
develop Web sites for two of our advertising customers.
16. SUBSEQUENT EVENTS
SERIES D FINANCING--On February 29, 2000, the Company sold 418,060 shares
of Series D Convertible Preferred Stock ("Series D Preferred Stock") to an
investor for $17.94 per share. The Company received gross proceeds from this
sale of approximately $7.5 million. The Series D Preferred stockholders have
senior preference and priority, along with the Series B and Series C Preferred
stockholders, as to dividends declared by the Company. If declared, dividends
shall accrue at 8% of the $17.94 stated value of the Series D Preferred Stock.
Currently, each share of Series D Preferred Stock is convertible at any time, at
the option of the holder, into 1.25 shares of Common Stock. Each share of Series
D Preferred Stock also converts automatically into 1.25 shares of Common Stock
upon the closing of a firm commitment underwritten public offering with (1) net
proceeds to the Company of at least $25,000,000 and (2) a public offering price
of at least $14.35 per share.
The Company will be required to redeem all outstanding shares of Series D
Preferred Stock on February 29, 2005. The Series D Preferred Stock is redeemable
for $17.94 per share plus all declared and unpaid dividends, if any. The
carrying value of the Series D Preferred Stock is its' redemption value, net of
offering costs, as no dividends have been declared or paid.
In connection with this financing, the Company increased its total
authorized capital stock to 57,500,000 shares, divided as follows: (i) fifty
million (50,000,000) shares of common stock, par value $0.001 per share and (ii)
seven million five hundred thousand (7,500,000) shares of preferred stock, par
value $0.001 per share.
EMPLOYMENT AGREEMENT--The Company entered into an employment agreement with
an individual to serve as our Executive Vice President starting on January 17,
2000. The term of this agreement is two years. He will be paid a base salary of
$180,000 during the first year and $195,000 during the second year of this
agreement. He is also entitled to (1) a yearly bonus of $50,000, (2) a
performance bonus of up to $100,000 based on Bolt's attainment of mutually
agreed upon revenue performance targets and (3) an additional bonus based upon
the amount by which our revenues exceed these targets. Pursuant to this
agreement, he received a non-qualified option to purchase 300,865 shares of our
common stock at an exercise price of $2.66 per share. This options vests as to
25% of the shares on the first anniversary of the date of grant and the
remaining portion becomes exercisable in 36 equal monthly installments
thereafter.
LEASE AGREEMENT--On February 18, 2000, the Company entered into a lease for
approximately 92,000 square feet of office space in New York, New York. The
Company expects to occupy this space within six months. The lease will expire
ten years from the occupancy date. In connection with the lease, the Company has
given an initial $4.0 million security deposit that will be subject to an annual
reduction of approximately $400,000 over the term of the lease.
STOCK SPLIT-- On February 29, 2000, the Company effected a 1.25-for-1 stock
split of each share of its Common Stock. The 1.25-for-1 stock split has been
applied retrospectively for all periods presented.
F-17
<PAGE> 87
[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> 88
BOLT.COM LOGO
<PAGE> 89
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........................................ $ 13,480
Nasdaq National Market Listing Fee.......................... 90,000
NASD Filing Fee............................................. 5,606
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............................................... 20,914
----------
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.
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.
II-1
<PAGE> 90
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 and a 1.25-for-1 split of our common stock
effected on February 29, 2000.
(a) ISSUANCES OF CAPITAL STOCK AND WARRANTS
The sale and issuance of the securities described in paragraphs (1) through
(10) 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 5,500,000 shares of
common stock to two of our founders for $.00002 per share. We repurchased
1,776,500 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 five 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 five 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 five 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 five 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
1.25 shares of our common stock.
(7) On February 29, 2000, we sold and issued 418,060 shares of Series
D Convertible Preferred Stock for $17.94 per share to one investor in a
private placement. Each share of our Series D Preferred Stock is
Convertible into 1.25 shares of common stock.
(8) On April 22, 1999, we issued a warrant to purchase 50,000 shares
of our common stock at an exercise price of $.02 per share to one investor.
(9) 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 five shares of our common stock.
(10) On January 28, 2000, we issued a warrant to purchase 20,834
shares of our common stock at an exercise price of $8.20 per share to one
investor.
(11) On February 16, 2000, we issued a warrant to purchase 70,000
shares of our common stock at an exercise price of $14.35 per share to one
investor.
(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.
II-2
<PAGE> 91
Pursuant to our 1999 Employee, Director and Consultant Stock Option Plan
and our 1997 Employee Stock Option Plan, as of February 28, 2000, we have issued
options to purchase an aggregate of 4,809,615 shares of common stock. Of these
options:
- options to purchase 754,195 shares of common stock have been canceled or
lapsed without being exercised;
- options to purchase 547,343 shares of common stock have been exercised;
and
- options to purchase a total of 3,508,077 shares of common stock are
currently outstanding, at a weighted average exercise price of $1.75 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 Amended and Restated 1999 Employee,
Director and Consultant Stock Option Plan.
+10.2 The Registrant's 1997 Employee Stock Option Plan.
+10.3 Second Amended and Restated Registration Rights Agreement,
dated November 17, 1999 by and between the Registrant and
Certain Stockholders.
10.3.1 First Amendment to the Second Amended and Restated
Registration Rights Agreement, dated February 29, 2000, 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.
</TABLE>
II-3
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<C> <S>
10.14 Employment Agreement, dated December 29, 1999, by and
between the Registrant and Richard Glosser.
**10.15 Mobile Channel Agreement, dated January 28, 2000, by and
between the Registrant and AT&T Wireless Services, Inc.
10.16 Lease, dated February 18, 2000, by and between 195 Property
Company and the Registrant.
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (see Exhibit 5.1)
23.3 Consent of Nielsen I/Pro
+24.1 Powers of Attorney (See page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------
* To be filed by amendment.
+ Previously filed.
@ Replaces previously filed exhibit.
** Confidential treatment has been requested for a portion of this exhibit.
(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> 93
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in New York, New York, on March 2, 2000.
BOLT, INC.
By: /s/ DANIEL A. PELSON
------------------------------------
Daniel A. Pelson
President & Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the 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 March 2, 2000
- --------------------------------------------------- Officer and Director
Daniel A. Pelson (principal executive officer)
/s/ ALBERT G. PASTINO Chief Financial Officer March 2, 2000
- --------------------------------------------------- (principal financial and
Albert G. Pastino accounting officer)
ROBERT DOVE* Director March 2, 2000
- ---------------------------------------------------
Robert Dove
WILLIAM PEABODY* Director March 2, 2000
- ---------------------------------------------------
William Peabody
SAMANTHA MCCUEN* Director March 2, 2000
- ---------------------------------------------------
Samantha McCuen
ALAN COLNER* Director March 2, 2000
- ---------------------------------------------------
Alan Colner
</TABLE>
* By executing his name hereto, Daniel A. Pelson is signing this document on
behalf of the persons indicated above pursuant to the powers of attorney duly
executed by such persons and filed with the Securities and Exchange Commission.
<TABLE>
<C> <S> <C>
By: /s/ DANIEL A. PELSON
----------------------------------------------
Daniel A. Pelson
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 94
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 Amended and Restated 1999 Employee,
Director and Consultant Stock Option Plan.
+10.2 The Registrant's 1997 Employee Stock Option Plan.
+10.3 Second Amended and Restated Registration Rights Agreement,
dated November 17, 1999 by and between the Registrant and
Certain Stockholders.
10.3.1 First Amendment to the Second Amended and Restated
Registration Rights Agreement, dated February 29, 2000, 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.
10.14 Employment Agreement, dated December 29, 1999, by and
between the Registrant and Richard Glosser.
**10.15 Mobile Channel Agreement, dated January 28, 2000, by and
between the Registrant and AT&T Wireless Services, Inc.
10.16 Lease, dated February 18, 2000, by and between 195 Property
Company and the Registrant.
23.1 Consent of Deloitte & Touche LLP
*23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (see Exhibit 5.1)
23.3 Consent of Nielsen I/Pro
+24.1 Powers of Attorney (See page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
+ Previously filed.
@ Replaces previously filed exhibit.
** Confidential treatment has been requested for a portion of this exhibit.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF BOLT, INC.
Bolt, 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, 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, (iv) an
Amendment to the Restated Certificate of Incorporation of the Corporation on
September 9, 1999, (v) a Restated Certificate of Incorporation of the
Corporation on November 17, 1999.
4. This 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 Restated Certificate of Incorporation, with written notice being provided
to all stockholders in accordance with Section 228(d) of such law. This 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
<PAGE> 2
Delaware upon corporations formed under the General Corporation Law of the State
of Delaware.
FOURTH. The amount of the total authorized capital stock of this
Corporation shall be fifty-seven million five hundred thousand (57,500,000)
shares, divided as follows: (i) fifty million (50,000,000) 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"). The seventh series shall consist of four hundred
eighteen thousand sixty (418,060) shares which shall be designated as Series D
Convertible Preferred Stock (the "Series D Preferred Stock"). Six hundred thirty
seven thousand seven hundred sixty (637,760) 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 fifty million (50,000,000) 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 Restated
Certificate of Incorporation may be divided and issued from time to time in
series. Except as otherwise provided in this Restated Certificate of
Incorporation, or as may be provided in that certain Second 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, as amended, (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
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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.
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, the Series C Preferred Stock and the Series D
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, the Series C
Preferred Stock and the Series D 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 D
Preferred Stock, 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
D Preferred Stock, Series C Preferred Stock and Series B Preferred Stock shall
be declared, set aside and paid on all the then outstanding shares of Series D
Preferred Stock, 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 D Preferred Stock, 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 (j) hereof. In the event that any
such dividends or distributions are declared and paid on the Series D Preferred
Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock,
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 D Preferred Stock, 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
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Preferred Stock without the declaration or payment of such dividends to the
Series C Preferred Stock and Series D Preferred Stock.
(b) In the event that funds legally available for distribution on any
Series D 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 D
Dividend Payment Date, to all holders of outstanding Series D Preferred Stock
entitled to receive such dividend, then all funds legally available for
distribution shall be paid in cash to holders of Series D Preferred Stock
entitled to receive such dividend in accordance with the number of shares of
Series D Preferred Stock for which dividend has been declared held by each such
holder. Any remaining dividend amount owed to holders of the Series D Preferred
Stock shall be accrued in accordance with paragraph (f) of this Section 1. The
holders of the Series D 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 and Series B Preferred Stock to the dividends of the
Corporation.
(c) In the event that funds legally available for distribution on any
Series C 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 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 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 (g) 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 D Preferred Stock and Series B Preferred Stock to the dividends of the
Corporation.
(d) In the event that funds legally available for distribution on any
Series B Dividend Payment Date (as defined in paragraph (h) 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 (h) 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 D Preferred Stock and Series C Preferred Stock to the dividends of the
Corporation.
(e) In the event that funds legally available for distribution on any
Series A Dividend Payment Date (as defined in paragraph (i) 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
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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 (i)
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 D Preferred Stock
and Series C Preferred Stock and Series B Preferred Stock to the dividends of
the Corporation.
(f) Series D Preferred Stock Dividend Rate; Series D Dividend Payment
Dates. Each holder of the Series D 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 D Preferred Stock (as
defined in Section 2(a)) of each share of the Series D 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 D Original Issue Date") to and including the
date on which the Series D 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 D Preferred Stock. Accrued dividends
on the Series D Preferred Stock shall be payable out of funds legally available
therefor when, as, and if declared by the Board (a "Series D Dividend Payment
Date"), to the holders of record of Series D 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 D Preferred Stock
shall, upon conversion of such share to Common Stock (except in the case of a
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 D
Preferred Stock as of the first Series D Dividend Payment Date with respect to
such share after the applicable Series D Original Issue Date with respect to
such share, or as of any other date after the applicable Series D Original Issue
Date with respect to such share that is not a Series D 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 D Original Issue
Date with respect to such share, in the case of the first Series D Dividend
Payment Date with respect to such share and any date of determination prior to
the first Series D Dividend Payment Date with respect to such share, or from and
including the last preceding Series D 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 D Dividend Payment Date shall be given. As used
herein, a "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.
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(g) 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 "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
Qualified Public Offering) 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.
(h) 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
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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
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.
(i) 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
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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 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).
(j) Pro Rata Declaration and Payment of Dividends. All dividends paid
with respect to shares of Series D Preferred Stock, 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 D Preferred
Stock, 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.
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(k) 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.
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
and Series D 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
and the Series D Preferred Stock, respectively, (each such event, a
"Liquidation"), except as provided in paragraph (b) of this Section 2, the
holders of shares of Series D Preferred Stock, 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 D Preferred Stock,
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 D Preferred Stock (1) $17.94 per share (subject to appropriate
adjustments for any Recapitalization Events) (the "Stated Value for the Series D
Preferred Stock"), plus (2) an amount equal to all declared and unpaid dividends
on such shares since the Series D Original Issue Date thereof as of such time of
determination (the "Series D Liquidation Price"); (ii) 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"); (iii) 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"); (iv) 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"); (v) 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"); (vi) 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 (vii) in the case of the Series A-2
Convertible Preferred Stock, (l) $3.60 per share (subject to appropriate
adjustment for any Recapitalization Events),
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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, the Series C Stock
and Series D Stock, voting 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 D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, Series C Preferred Stock, 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
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stockholders' meeting in accordance with the Bylaws of the Corporation. Except
as otherwise provided herein or required by law, holders of shares of Series D
Preferred Stock, 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 D
Preferred Stock, 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.
(b) Without the written consent or affirmative vote of the holders of
sixty percent (60%) of the then outstanding shares of Series D 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 D Preferred Stock remain outstanding, the Corporation shall not 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 D Preferred Stock, in each case so as to affect adversely the Series D
Preferred Stock. 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 D 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 D Preferred
Stock remain outstanding. The holders of the Series D Preferred Stock shall have
the right to vote as a class for purposes of this paragraph (b) of this Section
3.
(c) 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.
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<PAGE> 12
(d) 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 have the right to vote
together as a single class for purposes of this paragraph (c) of this Section 3.
(e) 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 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
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<PAGE> 13
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.
(f) 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 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 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.
(g) Subject to the provisions of paragraphs (b), (c), (d), (e) and
(f) of this Section 3, for so long as any shares of Series D Preferred Stock,
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 D Preferred
Stock, 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
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<PAGE> 14
representing at least a majority of the then outstanding shares of Series D
Preferred Stock, Series C Preferred, Stock Series B Preferred Stock and Series A
Preferred Stock, voting as a single class.
(h) Subject to the provisions of paragraphs (b), (c), (d), (e) and
(f) of this Section 3, for so long as any shares of Series D Preferred Stock,
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 D Preferred Stock, 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.
The holders of the Series D Preferred Stock, 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 D 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 D Conversion Value (as defined) by the Series D Conversion
Price (as defined) then in effect (as appropriately adjusted in accordance with
this Section 4) (the "Series D Conversion Rate"). No additional consideration
shall be paid by a holder of Series D Preferred Stock upon exercise of its
respective Conversion Rights pursuant to this paragraph 4(a).
(i) Series D Conversion Value. The conversion value for each
share of Series D Preferred Stock shall be the Stated Value for the Series D
Preferred Stock.
(ii) Series D Conversion Price. The conversion price at which
shares of Common Stock shall be deliverable upon conversion of Series D
Preferred Stock without the payment of additional consideration by the holder
thereof shall initially be the Stated Value for the Series D Preferred Stock
(the "Series D Conversion Price"). Such initial Series D
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<PAGE> 15
Conversion Price, and the corresponding rate at which shares of Series D
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 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(b).
(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.
(c) 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 4(c). 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 4(c).
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
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Conversion Price, and the corresponding rate at which shares of Series B-1
Preferred Stock may 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.
(d) 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 4(d).
(e) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Series D Preferred Stock, 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 D Preferred, 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 D Preferred Stock, the then effective Series D
Conversion Price; (ii) in the case of the Series C Preferred Stock, the then
effective Series C Conversion Price; (iii) in the case of the Series B-1
Preferred Stock, the then effective Series B-1 Conversion Price; (iv) in the
case of the Series B-2 Preferred Stock, the then effective Series B-2 Conversion
Price; (v) in the case of the Series B-3 Preferred Stock, the then effective
Series B-3 Conversion Price; (vi) in the case of the Series A-1 Convertible
Preferred Stock, $2.50; and (vii) in the case of the Series A-2 Convertible
Preferred Stock, $3.60.
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(f) Mechanics of Conversion.
(i) In order for a holder of Series D Preferred Stock, Series C
Preferred Stock, Series B Preferred Stock or Series A Preferred Stock to convert
shares of Series C Preferred Stock, Series B Preferred 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 D
Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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 D
Preferred Stock, 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 D
Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, Series C
Preferred Stock, Series B Preferred Stock and Series A Preferred Stock.
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<PAGE> 18
(iv) All shares of Series D Preferred Stock, 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 D Preferred Stock, 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 such
appropriate action as may be necessary to reduce the authorized Series D
Preferred Stock, Series C Preferred Stock, Series B Preferred Stock or Series A
Preferred Stock, as the case may be, accordingly.
(g) 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(g), 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 3,482,280 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:
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(I) upon the conversion of shares of Series D
Preferred Stock; Series C Preferred Stock, Series B Preferred Stock and Series A
Preferred Stock outstanding;
(II) as a dividend or distribution on the Series D
Preferred Stock, 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;
(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 each 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 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
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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 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,
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<PAGE> 21
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
(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 (i) below or upon a stock split or
combination as provided in paragraph (h) 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 D Preferred Stock, 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 D
Preferred Stock, 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
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<PAGE> 22
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 (i) below or upon a stock split or
combination as provided in paragraph (h) 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 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 D Preferred Stock, 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 D
Preferred Stock, 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 (i) below or upon a stock split or
combination as provided in paragraph (h) 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 D
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<PAGE> 23
Preferred Stock, 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 D Preferred Stock, 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 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 (i) below or upon a stock split or
combination as provided in paragraph (h) 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 D Preferred Stock, 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 D
Preferred Stock, 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
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<PAGE> 24
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(g), 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
(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.
(h) Adjustment for Stock Splits and Combinations.
(i) If the Corporation shall at any time or from time to time after
the Series D Original Issue Date for the Series D Preferred Stock effect a
subdivision of the outstanding Common Stock, the Series D 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 D Original Issue Date for the Series D Preferred Stock combine the
outstanding shares
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<PAGE> 25
of Common Stock, the Series D 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 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.
(iii) 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.
(iv) 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.
(v) 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.
(vi) 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
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<PAGE> 26
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.
(i) Adjustment for Certain Dividends and Distributions.
(i) In the event the Corporation at any time after the Series D
Original Issue Date for the Series D 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 D Conversion Price for the Series
D 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 D Conversion
Price for the Series D 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 D Conversion Price for the Series D Preferred Stock shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series D Conversion Price for the Series D 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 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
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<PAGE> 27
(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 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.
(iii) 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.
(iv) 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
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<PAGE> 28
(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-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.
(v) In the event the Corporation at any 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.
(vi) In the event the Corporation at any 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
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<PAGE> 29
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
(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.
(j) Adjustments for Other Dividends and Distributions. In the event
the Corporation at any time or from time to time after (i) the Series D Original
Issue Date for the Series D Preferred Stock, (ii) the Series C Original Issue
Date for the Series C Preferred Stock (iii) the Series B-1 Original Issue Date
for the Series B-1 Preferred Stock (iv) the Series B-2 Original Issue Date for
the Series B-2 Preferred Stock (v) the Series B-3 Original Issue Date for the
Series B-3 Preferred Stock, or (vi) 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 D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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.
(k) Adjustment for Reclassification, Exchange, or Substitution. If
the Common Stock issuable upon the conversion of Series D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock,
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.
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<PAGE> 30
(l) Adjustment for Merger or Reorganization. In case of any
consolidation or merger of the Corporation with or into another corporation,
each share of Series D Preferred Stock, 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 D Preferred Stock,
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 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 D Preferred
Stock, 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 D Conversion Price, 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 D Preferred
Stock, Series C Preferred Stock, Series B Preferred Stock or Series A Preferred
Stock, as the case may be.
(m) 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 "Qualified Public Offering" set forth in paragraph (f)
of Section 1 or waive the Public Offering requirement for mandatory conversion
of the 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.
(n) 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 D Preferred Stock, Series C Preferred Stock, Series B Preferred
Stock and Series A Preferred Stock against impairment.
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(o) 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 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 D
Preferred Stock, 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 D Preferred Stock, 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.
(p) 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 D Preferred Stock,
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 D Preferred Stock, 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) the Series D Conversion Price, Series C
Conversion Price, the Series B-1 Conversion Price, the Series B-2 Conversion
Price, Series B-3 Conversion Price,
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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 D Preferred Stock, 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.
(q) 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 D Preferred Stock, 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 D Preferred Stock, 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 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 D Conversion Price, 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 D Conversion Price, 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 D Preferred Stock, 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.
(r) Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of the Series D Preferred Stock, 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 D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock or
Series A Preferred Stock which is being converted.
Section 5A. Conversion at a Qualified Public Offering.
(a) Upon the Closing of a Qualified Public Offering, all of the
Series D Preferred Stock and the Series C Preferred Stock then outstanding shall
automatically be converted into shares of Common Stock in accordance with
Section 4.
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(b) On the date fixed for conversion in accordance with paragraph (a)
of this Section 5A, all rights with respect to the Series D Preferred Stock and
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 D Preferred Stock and 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 D Preferred Stock and Series C Preferred Stock converted.
(c) All certificates evidencing shares of Series D Preferred Stock
and 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 retired
and canceled and the shares of Series D Preferred Stock and 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 D Preferred
Stock outstanding on the Series D Original Issue Date remains outstanding at a
subsequent date, then upon such subsequent date, each share of Series D
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 D Preferred Stock so converted shall
terminate.
(b) 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.
(c) 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.
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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.
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 D Preferred Stock, 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, the shares of Series C Preferred Stock and the shares of
Series D Preferred Stock shall be pari passu and the Series B-1 Preferred Stock,
Series B-2 Preferred Stock, Series B-3 Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall be equal in priority.
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(b) At any time on or after the fifth anniversary of the Series D
Original Issue Date, the Corporation shall be required to redeem all of the
shares of Series D Preferred Stock out of funds legally available therefor upon
the request of the majority of the holders of the Series D Preferred Stock.
(c) The redemption price shall be paid by the Corporation in cash and
shall be in an amount equal to (i) $17.94 per share of Series D 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 D 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 D Preferred
Stock").
(d) The Corporation shall provide each holder of Series D 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 D Preferred Stock; and (iv) the place the
holders of Series D Preferred Stock may obtain payment of the Redemption Price
for the Series D 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 D 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 D 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.
(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 D 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 D Preferred Stock held by each holder subject to the redemption (a
"Partial Redemption for the Series D Preferred Stock"). The Corporation shall
make additional Partial Redemptions for the Series D 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 D Preferred Stock have been redeemed.
(f) 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.
(g) 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
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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").
(h) 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.
(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 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.
(j) 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.
(k) 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").
(l) 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
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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.
(m) 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.
(n) 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").
(o) 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.
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(p) 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.
(q) 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").
(r) 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 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.
(s) 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.
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Section 7B. Pro Rata Redemption of Series D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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 D Preferred Stock, 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.
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.
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 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 Restated Certificate of Incorporation. The objects,
purposes and powers in each of the clauses and paragraphs of this Restated
Certificate of Incorporation shall be regarded as independent objects, purposes
and powers. The objects, purposes and powers specified in this 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
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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 Restated
Certificate of Incorporation (including provisions as may hereafter be added or
inserted in this 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 whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
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.
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THIRTEENTH. The 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 29th day of February, 2000.
BOLT, INC.
By: /s/ Daniel Pelson
----------------------------------
Name: Daniel Pelson
Title: President
<PAGE> 1
EXHIBIT 3.2
RESTATED
CERTIFICATE OF INCORPORATION
OF
BOLT, INC.
Bolt, 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, 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. This 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. This Restated Certificate of
Incorporation restates, integrates, amends and supersedes the provisions of the
Certificate of Incorporation of this Corporation as heretofore amended.
4. 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. (the "Corporation").
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 of the Corporation is to engage in any lawful act
or activity or carry on any business for which corporations may be organized
under the Delaware General Corporation Law or any successor statue.
FOURTH:
A. Designation and Number of Shares.
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 55,000,000 shares, consisting
of 50,000,000 shares of common stock, par value $0.001 per share (the "Common
Stock") and 5,000,000 shares of Preferred Stock, par value $0.001 per share
(the "Preferred Stock").
A statement of the designations of the different classes of stock of
the Corporation and of the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, and of the authority
conferred upon the Board of Directors to fix by resolution or resolutions any
of
<PAGE> 2
the foregoing in connection with the creation of one or more series of
Preferred Stock and the limitation of variations between or among such series,
is set forth below in this Article FOURTH.
B. Preferred Stock
1. Shares of Preferred Stock may be issued in one or
more series at such time or times and for such consideration as the Board of
Directors may determine.
2. Authority is hereby expressly granted to the Board of
Directors to fix from time to time, by resolution or resolutions providing for
the establishment and/or issuance of any series of Preferred Stock, the
designation and number of the shares of such series and the powers, preferences
and rights of such series, and the qualifications, limitations or restrictions
thereof, to the fullest extent such authority may be conferred upon the Board
of Directors under the Delaware General Corporation Law.
The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the terms of any Preferred
Stock designation.
C. Common Stock.
The relative powers, preferences, rights, qualifications, limitations
and restrictions of the shares of the Common Stock are as follows:
1. Dividends. Subject to the preferential rights, if
any, of the Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive, when and if declared by the Board of Directors, out of the
assets of the Corporation which are by law available therefor, dividends
payable either in cash, in property, or in shares of Common Stock.
2. Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of the debts and other liabilities of
the Corporation and the amounts to which the holders of any Preferred Stock
shall be entitled, the holders of Common Stock shall be entitled to share
ratably in the remaining assets of the Corporation.
3. Voting. The holders of the Common Stock are entitled
to one vote for each share held; provided, however, that, except as otherwise
required by law or set forth in any Preferred Stock designation, holders of
Common Stock shall not be entitled to vote on any amendment to this Restated
Certificate of Incorporation (including any certificate of designation relating
to Preferred Stock) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected series are entitled,
either separately or together as a class with the holders of one or more other
such series, to vote thereon by law or pursuant to
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<PAGE> 3
this Restated Certificate of Incorporation (including any certificate of
designation relating to Preferred Stock). There shall be no cumulative voting.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. In addition to the powers
and authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the By-Laws of the Corporation as in effect
from time to time, the directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the By-Laws so provide.
C. Any action required or permitted to be taken by the
stockholders of the Corporation may be effected only at a duly called annual or
special meeting of stockholders of the Corporation and not by written consent.
D. Special meetings of the stockholders may only be called by the
Board of Directors.
SEVENTH: A. Subject to the rights of the holders of shares of any
series of Preferred Stock then outstanding to elect additional directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively by the Board of Directors pursuant to a resolution adopted by
a majority of the Board of Directors.
B. Subject to the rights of the holders of shares of any series
of Preferred Stock then outstanding to elect additional directors under
specified circumstances, the Board of Directors of the Corporation shall be
divided into three classes, with the term of office of the first class to
expire at the 2001 annual meeting of stockholders or any special meeting in
lieu thereof, the term of office of the second class to expire at the 2002
annual meeting of stockholders or any special meeting in lieu thereof, and the
term of office of the third class to expire at the 2003 annual meeting of
stockholders or any special meeting in lieu thereof. At each annual meeting of
stockholders or special meeting in lieu thereof, directors elected to succeed
those directors whose terms expire, other than directors elected by the holders
of any series of Preferred Stock, shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders or special
meeting in lieu thereof after their election and until their successors are
duly elected and qualified.
C. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, 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,
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disqualification, removal from office or other cause shall be filled only by a
majority vote of the directors then in office even though less than a quorum,
or by a sole remaining director and not by stockholders.
D. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in
the By-Laws of the Corporation.
E. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time only for cause and only by
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the outstanding shares of capital stock then entitled to
vote at an election of the directors. A director may be removed for cause only
after a reasonable notice and opportunity to be heard by the stockholders.
EIGHTH: The Board of Directors is expressly empowered to adopt, amend
or repeal By-Laws of the Corporation. Any adoption, amendment or repeal of the
By-Laws of the Corporation by the Board of Directors shall require the approval
of a majority of the Board of Directors. The stockholders shall also have
power to adopt, amend or repeal the By-Laws of the Corporation; provided, that
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the stockholders to adopt,
amend or repeal any provision of the By-Laws of the Corporation.
NINTH: A. To the fullest extent permitted by the Delaware General
Corporation Law as the same now exists or may hereafter be amended, the
Corporation shall indemnify, and advance expenses to, its directors and
officers and to any person who is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise, if
such person was or is made a party to or is threatened to be made a party to or
is otherwise involved (including, without limitation, as a witness) in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan; provided, that
except with respect to proceedings to enforce rights to indemnification or as
is otherwise required by law, the Corporation shall not be required to
indemnify, and advance expenses to, any director, officer or other person in
connection with a proceeding (or part thereof) initiated by such director,
officer or other person, unless such proceeding (or part thereof) was
authorized by the Board of Directors.
B. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article NINTH shall not be deemed exclusive of any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under any By-Law,
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agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding such office.
C. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability under this Article NINTH.
D. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article NINTH shall, unless otherwise specified
when authorized or ratified, 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 person. No repeal or amendment of
this Article NINTH shall adversely affect any rights of any person pursuant to
this Article NINTH which existed at the time of such repeal or amendment with
respect to acts or omissions occurring prior to such repeal or amendment.
TENTH: No director shall be personally liable to the Corporation or
its stockholders for any monetary damages for breaches of fiduciary duty as a
director, notwithstanding any provision of law imposing such liability;
provided that this provision shall not eliminate or limit the liability of a
director, to the extent that such liability is imposed by applicable law, (i)
for any breach of the director's duty of 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
or successor provisions of the Delaware General Corporation Law; or (iv) for
any transaction from which the director derived an improper personal benefit.
This provision shall not eliminate or limit the liability of a director for any
act or omission if such elimination or limitation is prohibited by the Delaware
General Corporation Law. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal. If the Delaware General
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. All
references in this Article TENTH to a director shall also be deemed to refer to
any such director acting in his or her capacity as a Continuing Director (as
defined in Article THIRTEENTH).
ELEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Restated Certificate of Incorporation in the manner
prescribed by the Delaware General Corporation Law and all rights conferred
upon stockholders are granted subject to this reservation; provided that in
addition to the vote of the holders of any class or series of stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of shares of voting stock of the
Corporation representing at least eighty percent (80%) of the voting power of
all of the then outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single
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class, shall be required to amend, alter or repeal, or adopt any provision
inconsistent with, Articles SIXTH, SEVENTH, EIGHTH, NINTH, TENTH, and this
Article ELEVENTH of this Restated Certificate of Incorporation.
TWELFTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the Delaware General Corporation Law or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of the
Delaware General Corporation Law, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths (3/4) in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation.
THIRTEENTH: The Board of Directors is expressly authorized to cause
the Corporation to issue rights pursuant to Section 157 of the DGCL and, in
that connection, to enter into any agreements necessary or convenient for such
issuance, and to enter into other agreements necessary and convenient to the
conduct of the business of the Corporation. Any such agreement may include
provisions limiting, in certain circumstances, the ability of the Board of
Directors of the Corporation to redeem the securities issued pursuant thereto
or to take other action thereunder or in connection therewith unless there is a
specified number or percentage of Continuing Directors then in office.
Pursuant to Section 141(a) of the DGCL, the Continuing Directors shall have the
power and authority to make all decisions and determinations, and exercise or
perform such other acts, that any such agreement provides that such Continuing
Directors shall make, exercise or perform. For purposes of this Article
THIRTEENTH and any such agreement, the term, "Continuing Directors," shall mean
(1) those directors who were members of the Board of Directors of the
Corporation at the time the Corporation entered into such agreement and any
director who subsequently becomes a member of the Board of Directors, if such
director's nomination for election to the Board of Directors is recommended or
approved by the majority vote of the Continuing Directors then in office or (2)
such members of the Board of Directors designated in, or in the manner provided
in, such agreement as Continuing Directors.
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IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President and Chief Executive Officer this ____ day of
__________, 2000.
BOLT, INC.
By:
Daniel A. Pelson
Its President and Chief Executive Officer
7
<PAGE> 1
EXHIBIT 3.4
BOLT, INC.
RESTATED BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall fix each year.
Section 2. Special Meetings.
Subject to the rights of the holders of any series of preferred stock of
the Corporation, special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors authorized. Special meetings of the
stockholders may be held at such place within or without the State of Delaware
as may be stated in such resolution.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the Delaware General Corporation Law or the Certificate of Incorporation of
the Corporation, as amended and restated from time to time).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
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Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
Section 5. Organization and Conduct of Business.
The Chairman of the Board of Directors or, in his or her absence, the
Chief Executive Officer of the Corporation or, in his or her absence, the
President or, in his or her absence, such person as the Board of Directors may
have designated, shall call to order any meeting of the stockholders and shall
preside at and act as chairman of the meeting. In the absence of the Secretary
of the Corporation, the secretary of the meeting shall be such person as the
chairman of the meeting appoints. The chairman of any meeting of stockholders
shall determine the order of business and the procedures at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as he or she deems to be appropriate. The chairman of any meeting of
stockholders shall have the power to adjourn the meeting to another place and
time.
Section 6. Intentionally Omitted.
Section 7. Notice of Stockholder Business and Nominations.
A. Annual Meetings of Stockholders.
Nominations of persons for election to the Board of Directors
and the proposal of business to be considered by the stockholders may be made
at an annual meeting of stockholders (a) pursuant to the Corporation's notice
of meeting, (b) by or at the direction of the Board of Directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section.
B. Special Meetings of Stockholders.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
notice of meeting given pursuant to Section 2
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<PAGE> 3
above. Nominations of persons for election to the Board of Directors may be
made at a special meeting of stockholders at which directors are to be elected
(a) by or at the direction of the Board of Directors or (b) provided that the
Board of Directors has determined that directors shall be elected at such
meeting, by any stockholder of the Corporation who is a stockholder of record
at the time of giving of notice of the special meeting, who shall be entitled
to vote at the meeting and who complies with the notice procedures set forth in
this Section.
C. Certain Matters Pertaining to Stockholder Business and
Nominations.
(1) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (c) of
paragraph A of this Section or a special meeting pursuant to paragraph B of
this Section, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
pertaining to an annual meeting shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than forty-five (45) or
more than seventy-five (75) days prior to the first anniversary (the
"Anniversary") of the date on which the Corporation first mailed its proxy
materials for the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than thirty (30) days
before or more than thirty (30) days after the anniversary date of the
preceding year's annual meeting, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the ninetieth (90) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Corporation. Such
stockholder's notice for an annual meeting or a special meeting shall set
forth: (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case, pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, (ii) the class and number of
shares of the Corporation that are owned beneficially and held of record by
such stockholder and such beneficial owner, and (iii) whether either such
stockholder or beneficial owner intends to deliver a proxy statement and form
of proxy to holders of, in the case of a proposal, at least the percentage of
the Corporation's voting shares required under applicable law to carry the
proposal or, in the case of a nomination or nominations, a sufficient number of
holders of the
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Corporation's voting shares to elect such nominee or nominees. A stockholder
shall also comply with all applicable requirements of the Exchange Act (or any
successor provision), and the rules and regulations thereunder with respect to
the matters set forth in these By-Laws.
(2) Notwithstanding anything in the second sentence of
paragraph C (1) of this Section to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least fifty-five (55) days prior to the Anniversary (or, if the
annual meeting is held more than thirty (30) days before or sixty (60) days
after the first anniversary of the preceding year's annual meeting, at least
seventy (70) days prior to such annual meeting), a stockholder's notice
required by this Section shall also be considered timely, but only with respect
to nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive office of the Corporation
not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the Corporation.
(3) In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in the Corporation's
notice of meeting, if the stockholder's notice required by paragraph C(1) of
this Section shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting nor later than the close of business on the later of the
sixtieth (60th) day prior to such special meeting, or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
D. General.
(1) Only such persons who are nominated in accordance with
the procedures set forth in this Section shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section. Except as otherwise provided by law
or these By-Laws, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before
the meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section and, if any proposed nomination or
business is not in compliance herewith, to declare that such defective proposal
or nomination shall be disregarded.
(2) For purposes of this Section, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable
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national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section,
a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section shall be deemed to affect
any rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
Section 8. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled
to vote may vote in person or by proxy authorized by an instrument in writing
or by a transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by voice vote. Any vote not taken by voice
shall be taken by ballots, each of which shall state the name of the
stockholder or proxy voting and such other information as may be required under
the procedure established for the meeting. The Corporation may, and to the
extent required by law, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting may, and to the extent required by law, shall, appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
Except as otherwise provided in the terms of any class or series of
Preferred Stock of the Corporation, all elections at any meeting of
stockholders shall be determined by a plurality of the votes cast, and except
as otherwise required by law or as provided herein, all other matters
determined by stockholders at a meeting shall be determined by a majority of
the votes cast affirmatively or negatively.
Section 9. Action Without Meeting.
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Any action required or permitted to be taken by the stockholders of the
Corporation may be effected only at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by written consent.
Section 10. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be made in the manner specified by law.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. Such list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number, Election, Tenure and
Qualification.
A. The business and affairs of the Corporation shall be managed
by or under the direction of its Board of Directions.
B. Subject to the rights of the holders of any series of
Preferred Stock then outstanding to elect additional directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Board.
C. Subject to the rights of the holders of any series of
Preferred Stock then outstanding to elect additional directors under specified
circumstances, the Board of Directors of the Corporation shall be divided into
three classes, with the term of office of the first class to expire at the
annual meeting of stockholders or any special meeting in lieu thereof in 2001,
the term of office of the second class to expire at the annual meeting of
stockholders or any special meeting in lieu thereof in 2002, and the term of
office of the third class to expire at the annual meeting of stockholders or
any special meeting in lieu thereof in 2003. At each annual meeting of
stockholders or special meeting in lieu thereof, directors elected to succeed
those directors whose terms expire, other than directors elected by the holders
of any series of Preferred Stock, shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders or special
meeting in lieu thereof after their election and until their successors are
duly elected and qualified.
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Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, 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 shall be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director
and not by stockholders. In the event of a vacancy in the Board of Directors,
the remaining directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
Section 3. Resignation and Removal.
Any director may resign at any time upon written notice to the
Corporation at its principal place of business or to the Chairman of the Board,
Chief Executive Officer, President or Secretary. Such resignation shall be
effective upon receipt unless it is specified to be effective at some other
time or upon the happening of some other event. Subject to the rights of the
holders of any series of Preferred Stock then outstanding, any director, or the
entire Board of Directors, may be removed from office at any time only for
cause. A director may be removed for cause by the holders of at least eighty
percent (80%) of the voting power of all of the then outstanding shares of the
Corporation then entitled to vote at an election of a director and only after a
reasonable notice and opportunity to be heard before the stockholders.
Section 4. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
written notice of each regular meeting shall not be required.
Section 5. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman
of the Board of Directors or the Chief Executive Officer, and shall be called
by the Secretary if requested by a majority of the Board of Directors, and
shall be held at such place, on such date, and at such time as he or she or
they shall fix. Notice of the place, date, and time of each such special
meeting shall be given to each director by whom it is not waived by mailing
written notice not less than three (3) days before the meeting or orally, by
telegraph, telex, cable or telecopy given not less than twenty-four (24) hours
before the meeting. Unless otherwise indicated in the notice thereof, any and
all business may be transacted at a special meeting.
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Section 6. Quorum.
At any meeting of the Board of Directors, a majority of the total number
of members of the Board of Directors shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof.
Section 7. Action by Consent.
Unless otherwise restricted by the Certificate of Incorporation or these
By-Laws, 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 of
proceedings of the Board or committee.
Section 8. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, 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 such participation shall
constitute presence in person at such meeting.
Section 9. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
Section 10. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance
with law;
(2) To purchase or otherwise acquire any property, rights
or privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of
every kind, negotiable or
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non-negotiable, secured or unsecured, to borrow funds
and guarantee obligations, and to do all things
necessary in connection therewith;
(4) To remove any officer of the Corporation with or
without cause, and from time to time to devolve the
powers and duties of any officer upon any other person
for the time being;
(5) To confer upon any officer of the Corporation the power
to appoint, remove and suspend subordinate officers,
employees and agents;
(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for
directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement,
and other benefit plans for directors, officers,
employees and agents of the Corporation and its
subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not
inconsistent with these By-Laws, for the management of
the Corporation's business and affairs.
Section 11. Compensation of Directors.
Directors, as such, may receive, pursuant to a resolution of the Board
of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, their services as members of
committees of the Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate 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 to the fullest extent authorized by law. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members
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of the committee present at the meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may by unanimous vote
appoint another member of the Board of Directors to act at the meeting in the
place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members of any
committee shall constitute a quorum unless the committee shall consist of one
(1) or two (2) members, in which event one (1) member shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
Section 1. Enumeration.
The officers of the Corporation shall consist of a Chairman of the
Board, Chief Executive Officer, President, Chief Financial Officer, Treasurer,
Secretary and such other officers as the Board of Directors or the Chief
Executive Officer may determine, including, but not limited to, a Chief
Technology Officer, and one or more Vice Presidents, Assistant Treasurers and
Assistant Secretaries.
Section 2. Election.
The Chairman of the Board, Chief Executive Officer, President, Chief
Financial Officer, Treasurer and the Secretary shall be elected annually by the
Board of Directors at their first meeting following the annual meeting of the
stockholders. The Board of Directors or the Chief Executive Officer, may, from
time to time, elect or appoint such other officers as it or he or she may
determine, including, but not limited to, a Chief Technology Officer, and one
or more Vice Presidents, Assistant Treasurers and Assistant Secretaries.
Section 3. Qualification.
The Chairman of the Board, if any, and any Vice Chairman appointed to
act in the absence of the Chairman, if any, shall be elected by and from the
Board of Directors, but no other officer need be a director. Two or more
offices may be held by any one person. If required by vote of the Board of
Directors, an officer shall give bond to the Corporation for the faithful
performance
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of his or her duties, in such form and amount and with such sureties as the
Board of Directors may determine. The premiums for such bonds shall be paid by
the Corporation.
Section 4. Tenure and Removal.
Each officer elected or appointed by the Board of Directors shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of the stockholders and until his or her successor is elected or
appointed and qualified, or until he or she dies, resigns, is removed or
becomes disqualified, unless a shorter term is specified in the vote electing
or appointing said officer. Each officer appointed by the Chief Executive
Officer shall hold office until his or her successor is elected or appointed
and qualified, or until he or she dies, resigns, is removed or becomes
disqualified, unless a shorter term is specified by any agreement or other
instrument appointing such officer. Any officer may resign by giving written
notice of his or her resignation to the Chief Executive Officer, the President,
or the Secretary, or to the Board of Directors at a meeting of the Board, and
such resignation shall become effective at the time specified therein. Any
officer elected or appointed by the Board of Directors may be removed from
office with or without cause only by vote of a majority of the directors. Any
officer appointed by the Chief Executive Officer may be removed with or without
cause by the Chief Executive Officer or by vote of a majority of the directors.
Section 5. Chairman of the Board.
The Chairman of the Board, if any, shall preside at all meetings of the
Board of Directors and stockholders at which he or she is present and shall
have such authority and perform such duties as may be prescribed by these
By-Laws or from time to time be determined by the Board of Directors.
Section 6. Chief Executive Officer.
The Chief Executive Officer shall be the chief executive officer of the
Corporation and shall, subject to the direction of the Board of Directors, have
general supervision and control of its business. Unless otherwise provided by
resolution of the Board of Directors, in the absence of the Chairman of the
Board, the Chief Executive Officer shall preside at all meetings of the
stockholders and, if a director, meetings of the Board of Directors. The Chief
Executive Officer shall have general supervision and direction of all of the
officers, employees and agents of the Corporation. The Chief Executive Officer
shall also have the power and authority to determine the duties of all
officers, employees and agents of the Corporation, shall determine the
compensation of any officers whose compensation is not established by the Board
of Directors and shall have the power and authority to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized.
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Section 7. President.
Except for meetings at which the Chief Executive Officer or the Chairman
of the Board, if any, presides, the President shall, if present, preside at all
meetings of stockholders, and if a director, at all meetings of the Board of
Directors. The President shall, subject to the control and direction of the
Chief Executive Officer and the Board of Directors, have and perform such
powers and duties as may be prescribed by these By-Laws or from time to time be
determined by the Chief Executive Officer or the Board of Directors. The
President shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized. In the absence of a Chief
Executive Officer, the President shall be the chief executive officer of the
Corporation and shall, subject to the direction of the Board of Directors, have
general supervision and control of its business and shall have general
supervision and direction of all of the officers, employees and agents of the
Corporation.
Section 8. Vice Presidents.
The Vice Presidents, if any, in the order of their election, or in such
other order as the Board of Directors or the Chief Executive Officer may
determine, shall have and perform the powers and duties of the President (or
such of the powers and duties as the Board of Directors or the Chief Executive
Officer may determine) whenever the President is absent or unable to act. The
Vice Presidents, if any, shall also have such other powers and duties as may
from time to time be determined by the Board of Directors or the Chief
Executive Officer.
Section 9. Chief Financial Officer, Treasurer and Assistant
Treasurers.
The Chief Financial Officer shall also be the Treasurer. The Chief
Financial Officer and/or Treasurer shall, subject to the control and direction
of the Board of Directors and the Chief Executive Officer, have and perform
such powers and duties as may be prescribed in these By-Laws or be determined
from time to time by the Board of Directors and the Chief Executive Officer.
All property of the Corporation in the custody of the Chief Financial Officer
and/or Treasurer shall be subject at all times to the inspection and control of
the Board of Directors and the Chief Executive Officer. The Chief Financial
Officer and/or Treasurer shall have the responsibility for maintaining the
financial records of the Corporation. The Chief Financial Officer and/or
Treasurer shall make such disbursements of the funds of the Corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the Corporation. Unless
otherwise voted by the Board of Directors or by the Chief Executive Officer,
each Assistant Treasurer, if any, shall have and perform the powers and duties
of the Chief Financial Officer and/or Treasurer whenever the Chief Financial
Officer and/or Treasurer is absent or unable to act, and may at any time
exercise such of the powers of the Chief Financial Officer and/or Treasurer,
and such other powers and duties, as may from time to time be determined by the
Board of Directors or the Chief Executive Officer.
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Section 10. Secretary and Assistant Secretaries.
The Board of Directors or the Chief Executive Officer shall appoint a
Secretary and, in his or her absence, an Assistant Secretary. Unless otherwise
directed by the Board of Directors, the Secretary or, in his or her absence,
any Assistant Secretary, shall attend all meetings of the directors and
stockholders and shall record all votes of the Board of Directors and
stockholders and minutes of the proceedings at such meetings. The Secretary
or, in his or her absence, any Assistant Secretary, shall notify the directors
of their meetings, and shall have and perform such other powers and duties as
may from time to time be determined by the Board of Directors. If the
Secretary or an Assistant Secretary is elected but is not present at any
meeting of directors or stockholders, a temporary Secretary may be appointed by
the directors or the Chief Executive Officer at the meeting
Section 11. Bond.
If required by the Board of Directors, any officer shall give the
Corporation a bond in such sum and with such surety or sureties and upon such
terms and conditions as shall be satisfactory to the Board of Directors,
including without limitation a bond for the faithful performance of the duties
of his office and for the restoration to the Corporation of all books, papers,
vouchers, money and other property of whatever kind in his or her possession or
under his control and belonging to the Corporation.
Section 12. Action with Respect to Securities of Other
Corporations.
Unless otherwise directed by the Board of Directors or the Chief
Executive Officer, the Chief Financial Officer and/or Treasurer shall have
power to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, certifying the number of shares
owned by him or her. Any or all of the signatures on the certificate may be
by facsimile.
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Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of this Article of these
By-Laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of 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.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
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Section 6. Interpretation.
The Board of Directors shall have the power to interpret all of the
terms and provisions of these By-Laws, which interpretation shall be
conclusive.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, or by sending such notice by courier service, prepaid telegram or
mailgram, or telecopy, cable, or telex. Any such notice shall be addressed to
such stockholder, director, officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when
such notice is received, if hand delivered, or dispatched, if delivered through
the mail or by courier, telegram, mailgram, telecopy, cable, or telex shall be
the time of the giving of the notice.
Section 2. Waiver of Notice.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
Attendance of a director or stockholder at a meeting without protesting prior
thereto or at its commencement the lack of notice shall also constitute a
waiver of notice by such director or stockholder.
ARTICLE VII -INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved (including, without limitation, as a witness)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or an officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter
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an "Indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such Indemnitee in
connection therewith; provided, however, that, except as provided in Section 3
of this Article with respect to proceedings to enforce rights to
indemnification or as otherwise required by law, the Corporation shall not be
required to indemnify or advance expenses to any such Indemnitee in connection
with a proceeding (or part thereof) initiated by such Indemnitee unless such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
Section 2. Right to Advancement of Expenses.
The right to indemnification conferred in Section 1 of this Article
shall include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an Indemnitee in his
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such Indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such Indemnitee is
not entitled to be indemnified for such expenses under this Section 2 or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Sections 1 and 2 of this Article shall be contract rights and such
rights shall continue as to an Indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the Indemnitee's
heirs, executors and administrators. Any repeal or modification of any of the
provisions of this Article shall not adversely affect any right or protection
of an Indemnitee existing at the time of such repeal or modification.
Section 3. Right of Indemnitees to Bring Suit.
If a claim under Section 1 or 2 of this Article is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20) days, the
Indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an
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undertaking, the Indemnitee shall also be entitled to be paid the expenses of
prosecuting or defending such suit. In (i) any suit brought by the Indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final
adjudication that, the Indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its board of directors, independent
legal counsel, or its stockholders) that the Indemnitee has not met such
applicable standard of conduct, shall create a presumption that the Indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit. In any suit brought by
the Indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that
the Indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses
conferred in this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation as amended from time to time, these By-Laws, any
agreement, any vote of stockholders or disinterested directors or otherwise.
Section 5. Insurance.
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 any 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 Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the
Corporation.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
-17-
<PAGE> 18
ARTICLE VIII - CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties.
No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or committee thereof which authorizes the contract or transaction or
solely because the votes of such director or officer are counted for such
purpose, if:
(a) The material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the Board or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(b) The material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by
the Board of Directors, a committee thereof, or the stockholders.
Section 2. Quorum.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE IX - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-Laws, facsimile signatures of any officer
or officers of the Corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
-18-
<PAGE> 19
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates
of the seal may be kept and used by the Treasurer or by an Assistant Secretary
or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
Section 4. Fiscal Year.
Except as otherwise determined by the Board of Directors from time to
time, the fiscal year of the Corporation shall end on the last day of December
of each year.
Section 5. Time Periods.
In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
Section 6. Pronouns.
Whenever the context may require, any pronouns used in these By-Laws
shall include the corresponding masculine, feminine or neuter forms.
ARTICLE X - AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the whole Board or by the stockholders by the affirmative vote of
eighty percent (80%) of the outstanding voting power of the then-outstanding
shares of capital stock of the Corporation,
-19-
<PAGE> 20
entitled to vote generally in the election of directors, at any meeting at
which a proposal to amend or repeal these By-Laws is properly presented.
-20-
<PAGE> 1
EXHIBIT 4.1
BOLT [BOLT LOGO]
BOLT, INC. CUSIP 097690 10 1
SEE REVERSE FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
BOLT, INC.
transferable on the books of the Corporation in person by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
and the shares represented hereby are issued under and shall be subject to all
the provisions of the Certificate of Incorporation and the By-Laws of the
Corporation, and all the amendments from time to time made thereto. This
Certificate is not valid unless countersigned and registered by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
---------------
| BOLT, INC. |
| CORPORATE |
| SEAL |
| 1996 |
| DELAWARE |
---------------
/s/ Albert Pastino /s/ Daniel A. Pelson
- -------------------------------------- ------------------------------------
CHIEF FINANCIAL OFFICER AND TREASURER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, N.Y.) TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
BOLT, INC.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS AND SERIES OF
STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, A COPY OF THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS. ANY SUCH REQUESTS MAY BE ADDRESSED TO THE SECRETARY OF THE
CORPORATION.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian ________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants
in common Act ____________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, ______________________ hereby sell, assign and transfer unto
<TABLE>
<S> <C>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________
| |
|________________________|
</TABLE>
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP OR
POSTAL CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________SHARES
of the Common Stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________ATTORNEY
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_________________________
__________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
NOTICE: WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
Signature(s) Guaranteed:
__________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS STOCK. BROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM). PURSUANT TO S.E.C.
RULE 17Ad-15
<PAGE> 1
EXHIBIT 10.3.1
FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT (this "Amendment") is dated February 29, 2000 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, Schedule 2 and Schedule 3 hereto (the "Other
Investors").
WITNESSETH:
WHEREAS, the Company entered into that certain Stock Purchase Agreement
(the "Stock Purchase Agreement"), dated as of November 17, 1999 with the Moore
Parties and the parties listed on Schedule 1 thereto (the "Series C Investors"),
pursuant to which the Company 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 and the parties to the Amended and Restated
Registration Rights Agreement amended and restated in its entirety 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;
WHEREAS, concurrently with the execution and delivery of this Amendment and
pursuant to a Stock Purchase Agreement (the "Ford Stock Purchase Agreement")
dated as of February 29, 2000 by and between the Company and Ford Motor Company
(the "Series D Investor"), the Company has agreed to issue and sell shares of
the Company's
1
<PAGE> 2
Series D Convertible Preferred Stock, $0.001 par value per share (the "Series D
Stock"), subject to the terms and conditions set forth in the Ford Stock
Purchase Agreement;
WHEREAS, concurrently with the execution and delivery of this Amendment,
the Company has agreed to issue and sell a warrant for the purchase of up to
56,000 shares of common stock, par value $0.001 per share, to The Procter &
Gamble Company (the "Procter & Gamble Warrant");
WHEREAS, the Company and the parties to the Second Amended and Restated
Registration Rights Agreement agree to further amend the Second Amended and
Restated Registration Rights Agreement in order to grant the Series D Investor
certain registration rights and The Procter & Gamble Company certain
registration rights;
WHEREAS, the execution and delivery of this Amendment is a condition to the
consummation of the transactions contemplated by the Ford Stock Purchase
Agreement; and
WHEREAS, the provisions of the Second Amended and Restated Registration
Rights Agreement may be waived, amended, modified or terminated by approval of
the holders of a majority of the Series A Stock, Series B Stock and Series C
Stock, and the signatories hereto constitute such requisite percentage necessary
to approve the amendments contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby amend the Second Amended and Restated Registration
Rights Agreement and agree as follows:
1. Section 1.4 of Article 1 is hereby deleted and replaced with the
following:
1.4 "Holders" shall mean and include each of Bechtel, Sandler, Highland,
the Other Investors, Oak, the Series C Investors, the Series D Investor and The
Procter & Gamble Company 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; except that, for purposes of Section 2.1 of
Article 1 and Article 3, Holders shall not include the parties listed on
Schedule 3 hereto.
2. The definition of "Registrable Securities" set forth in Section 1.9 of
Article 1 is hereby deleted and replaced with the following:
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
2
<PAGE> 3
Stock, the Series C Stock and the Series D Stock; (ii) issued or issuable
upon the exercise of the Procter & Gamble Warrant; (iii) issued or issuable
with respect to the Series A Stock, the Series B Stock, the Series C Stock,
the Series D Stock or Procter & Gamble Warrant upon any stock split, stock
dividend, combination, recapitalization, reclassification, merger,
consolidation or other similar event; and (iv) otherwise held or acquired
by any of Bechtel, Sandler, Highland, Oak, or the Series C Investors,
Series D Investor, 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.
2. Article 1 is hereby amended to include the following definition:
1.16 "Series D Investor" shall mean the purchasers of Series D
Convertible Preferred Stock, par value $0.001 per share, of the Company
(the "Series D Stock") set forth on Schedule 2 attached hereto.
3. The first sentence of Section 2.2 of Article 2 is hereby deleted and
replaced with the following:
Request by Series C Investors and Series D Investor 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 November 17, 2001, upon the request of one or more of
the Series C Investors and/or Series D Investor who own in the aggregate
not less than forty percent of the Series C Stock and Series D Stock,
combined (the "Series C and D Initiating Holders"), such Series C and D
Initiating Holders may request registration in accordance with this Article
2; provided that, the Series C and D 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 and D Initiating Holders a written
request that the Company effect any such registration, qualification or
compliance with respect to Registrable Securities, the Company will:
4. Section 2.2(c) of Article 2 is hereby deleted and replaced with the
following:
3
<PAGE> 4
(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 and D Initiating Holders and provide notice to the
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 and
D 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.
5. Section 2.3(a) of Article 2 is hereby deleted and replaced with the
following:
(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 and Series
D Investor, combined, 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.
6. Article 10 is hereby amended to include the following:
10.3 In connection with the grant of registration rights to the
holders of the Series D Stock and to the Procter & Gamble Company pursuant
to this Agreement, each of Sandler, Bechtel, Highland, Oak, the Series C
Investors 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 Second Amended and Restated
Registration Rights Agreement.
7. Section 11.4 of Article 11 is hereby deleted and replaced with the
following:
4
<PAGE> 5
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 and
Series D Stock, combined, 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 and
Series D Stock, combined, 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 and Series D Stock, combined, without any
requirement of a meeting or prior notice to the other holders of such
shares.
8. Section 11.5 of Article 11 is hereby amended to include the following:
if to Ford:
Ford Motor Company
c/o Strategy and New Business Development
Ford World Headquarters
The American Road
Dearborn, MI 48121
Attention: John Kwant
Telephone: (313) 845-3100
Facsimile: (313) 594-0228
with a copy to (which shall not constitute notice):
Ford Motor Company
Office of the General Counsel
The American Road
Dearborn, MI 48121
Attention: Corporate Secretary
Telephone: (313) 322-3000
Facsimile: (313) 337-9591
5
<PAGE> 6
if to The Procter & Gamble Company:
The Procter & Gamble Company
2 P&G Plaza
Cincinnati, OH 45202
9. Exhibit A is hereby amended to include the following:
1. The Procter & Gamble Company
10. Schedule 2 is hereby amended to include the following:
Purchasers of Series D Stock
1. Ford Motor Company
11. To add a Schedule 3 immediately following Schedule 2 which shall
include the following:
1. The Procter & Gamble Company
12. The parties hereby ratify and confirm all of the provisions of the
Second Amended and Restated Registration Rights Agreement, as amended hereby,
and agree and acknowledge that the same as so amended remains in full force and
effect.
13. This Amendment shall be governed by and construed in accordance with
the laws of the State of Delaware, without giving effect to its conflicts of law
provisions.
[Remainder of this page intentionally left blank]
6
<PAGE> 7
This Amendment may be executed in multiple counterparts and shall be
and constitute the valid agreement of all of the parties executing the same
(even if some of the persons or institutions whose names are reflected on
the signature pages attached to this Amendment do not execute this
Amendment) with respect to any one or more of the provisions of this
Amendment set forth above at such time as this Amendment has been executed
by those parties whose execution of this Amendment is required under the
terms of the Second Amended and Restated Registration Rights Agreement to
make such provisions effective.
Executed as of the date above written.
<TABLE>
<S> <C>
SERIES A-1 STOCKHOLDERS: SERIES B-1 STOCKHOLDERS:
Bechtel Enterprises Holdings, Inc. SANDLER CAPITAL PARTNERS IV, L.P.
SANDLER CAPITAL PARTNERS IV,
FTE, L.P.
By: /s/ Robert Dove By: Sandler Investment Partners, L.P., the General Partner
---------------------------- By: Sandler Capital Management, the
General Partner
Robert Dove
SERIES A-2 STOCKHOLDERS: By: MJDM Corp., a General Partner
Bechtel Enterprises Holdings, Inc. By: /s/ Edward G. Grinacoff
-------------------------------
By: /s/ Robert Dove Edward G. Grinacoff
---------------------------- President
Robert Dove
HIGHLAND CAPITAL PARTNERS IV
LIMITED PARTNERSHIP
By: Highland Management Partners IV, LLC,
its General Partner
By: /s/ W. Crousbeck
-------------------------------
Name: W. Crousbeck
-----------------------------
Title: Managing Member, G.P.
-----------------------------
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C>
HIGHLAND ENTREPENEURS FUND IV ---------------------------------
LIMITED PARTNERSHIP Glenn M. Creamer
By: Highland Enterpreneurs Fund IV, LLC
Its General Partner 1998 KORNREICH CHILDREN'S TRUST
By: /s/ W. Crousbeck By: /s/ John Kornreich
----------------------------- -----------------------------
Name: W. Crousbeck Name:
---------------------------- Title:
Title: Managing Member, G.P.
--------------------------- PEABODY FAMILY VENTURES
/s/ Samantha McCuen By: /s/ William "Bo" S. Peabody
- --------------------------------- -----------------------------
Samantha McCuen Name: William "Bo" S. Peabody
Title: Managing Partner
- --------------------------------- PEABODY SABOT VENTURES
Jonathan M. Nelson
By: /s/ William "Bo" S. Peabody
-----------------------------
- --------------------------------- Name: William "Bo" S. Peabody
Paul J. Salem Title: Managing Partner
/s/ William "Bo" S. Peabody
---------------------------------
- --------------------------------- William "Bo" S. Peabody
Mark J. Masiello
SERIES B-2 STOCKHOLDERS:
-----------------------
- --------------------------------- OAK INVESTMENT PARTNERS VIII
Mark A. Pelson Limited Partnership
By: Oak Associates VIII, LLC,
its General Partner
- ---------------------------------
Alexander D. Evans By:
-----------------------------
Name:
- --------------------------------- ----------------------------
Raymond M. Mathieu Title:
---------------------------
- --------------------------------- OAK VIII AFFILIATES FUND
Michael J. Angelakis Limited Partnership
By: Oak VIII Affiliates, LLC
/s/ Frank Harrison its General Partner
- ---------------------------------
Frank Harrison By:
-----------------------------
/s/ Harvey Sandler Name:
- --------------------------------- -----------------------------
Harvey Sandler Title:
---------------------------
MJM ASSOCIATES L.P.
By: /s/ Michael J.Morocco
-----------------------------
Michael J. Marocco
General Partner
/s/ Andrew Sandler
- ---------------------------------
Andrew Sandler
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C>
SERIES C STOCKHOLDERS: Title: Managing Member of Oak
Associates VIII, LLC, The
General Partner of Oak
Investment VIII Limited
Partnership
---------------------------
Bechtel Enterprises Holdings, Inc.
By: /s/ Robert Dove OAK VIII AFFILIATES FUND
----------------------------- Limited Partnership
Name: By: Oak VIII Affiliates, LLC
Title: its General Partner
By: /s/ Ann Lamont
SANDLER CAPITAL PARTNERS IV, L.P. -----------------------------
SANDLER CAPITAL PARTNERS IV, FTE, L.P. Name: Ann Lamont
SANDLER INTERNET PARTNERS, L.P. ----------------------------
By: Sandler Investment Partners, L.P., Title: Managing Member of Oak
the General Partner Associates VIII, LLC, The
By: Sandler Capital Management, General Partner of Oak
the General Partner Investment VIII Limited
Partnership
----------------------------
FORD MOTOR COMPANY
By: MJDM Corp., a General Partner By: /s/ P. Horlock
By: /s/ Edward G. Grinacoff -----------------------------
----------------------------- Name: P. Horlock
Edward G. Grinacoff ----------------------------
President Title: Executive Director
----------------------------
HIGHLAND CAPITAL PARTNERS IV MOORE GLOBAL INVESTMENTS, LTD
LIMITED PARTNERSHIP
By: Highland Management Partners IV, LLC, ------------------------------
its General Partner By: Moore Capital Management, Inc.
Its: Trading Advisor
By: /s/ W. Crousbeck
----------------------------- REMINGTON INVESTMENTS STRATEGIES, L.P.
Name: W. Crousbeck
---------------------------- ------------------------------
Title: Managing Member, G.P. By: Moore Capital Management, Llc
--------------------------- Its: General Partner
ENTERCOM DELAWARE HOLDINGS
HIGHLAND ENTREPENEURS FUND IV COMPANY, LLC
LIMITED PARTNERSHIP
By: Highland Entrepreneurs Fund IV, LLC By:
Its General Partner -----------------------------
Name:
By: /s/ W. Crousbeck -----------------------------
----------------------------- Title:
Name: W. Crousbeck -----------------------------
-----------------------------
Title: Managing Member G.P.
-----------------------------
OAK INVESTMENT PARTNERS VIII
Limited Partnership
By: Oak Associates VIII, LLC,
its General Partner
By: /s/ Ann Lamont
-----------------------------
Name: Ann Lamont
----------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
PEABODY SABOT VENTURES
By: /s/ William Bo S. Peabody
-----------------------------
Name: William Bo S. Peabody
COMCAST INTERACTIVE CAPITAL, L.P. Title: Managing Partner
By: CIC Partners, L.P., CARIBOU VENTURES
Its General Partner
By: /s/ William Bo S. Peabody
By: CIC Venture Management, LLC, -----------------------------
Its General Partner Name: William Bo S. Peabody
Title: Managing Partner
By: /s/ Abram E. Patlove
----------------------------- CONCRETE MEDIA, INC
Name: Abram E. Patlove
Title: Vice President By: /s/ Aaron Cohen
-----------------------------
TIME WARNER, INC. Name: Aaron Cohen
Title: CEO
By:
----------------------------- WILSHIRE BOULEVARD PARTNERS III, LLC
Name:
Title: By:
-----------------------------
WATERVIEW PARTNERS, L.P. Name:
Title:
By: WaterView Advisors LLC
By: /s/ Augustus K. Oliver AMERICA ONLINE, INC.
-----------------------------
Name: Augustus K. Oliver By:
Title: Managing Member -----------------------------
Name:
INVEMED ASSOCIATES, LLC Title:
By: BLUE RIDGE LIMITED PARTNERSHIP
-----------------------------
Name: By:
Title: -----------------------------
By:
ML/BI L.L.C. -----------------------------
Name:
By: Mintz Levin Investments L.L.C. Title:
/s/ Al Pastino
By: /s/ Irwin Heller -------------------------------
----------------------------- Al Pastino
Name: /s/ Justin T. Nesci
Title: -------------------------------
Justin T. Nesci
PEABODY FAMILY VENTURES /s/ Sigurd Kirk
-------------------------------
By: /s/ William Bo S. Peabody Sigurd C. Kirk
-----------------------------
Name: William Bo S. Peabody -------------------------------
Title: Managing Partner Thomas D. Menard
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C>
-------------------------------
/s/ Daniel Pelson Juan Patino
- -------------------------------
Daniel Pelson
/s/ Frank Harrison
- -------------------------------
Frank M. Harrison
- -------------------------------
Lawrence V. Calcano
SERIES D STOCKHOLDER:
FORD MOTOR COMPANY
By: /s/ P. Horlock
-----------------------------
Name: P. Horlock
Title: Executive Director
COMMON STOCKHOLDERS:
/s/ Daniel Pelson
- -------------------------------
Daniel Pelson
WARRANT HOLDER:
PROCTER & GAMBLE, INC.
By: /s/ Mark F. Schar
-----------------------------
Name: Mark F. Schar
Title: V.P. Global Venture
</TABLE>
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<PAGE> 1
EXHBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), is made and entered into
this 29th day of December, 1999, by and between Bolt, Inc. (which, together with
any parent companies, subsidiaries and affiliates shall be referred to as "Bolt"
or the "Company"), a Delaware corporation with its principal offices located at
304 Hudson Street, New York, New York 10013, and Richard Glosser (the
"Executive").
WITNESSETH
WHEREAS, the Company has a need for the Executive's personal services
in an executive capacity; and
WHEREAS, the Executive and the Company desire to enter into a formal
Employment Agreement to fully recognize the contributions of Executive to the
Company and to assure continuous harmonious performance of the affairs of the
Company.
NOW, THEREFORE, in consideration of the mutual promises, terms,
provisions, and conditions contained herein, the parties agree as follows:
1. Position.
The Company hereby agrees to employ the Executive to serve in the role
of Executive Vice President. The following lines of Bolt's business shall report
directly to the Executive: business development, e-commerce operations, business
intelligence and advertising sales. The Executive accepts such employment upon
the terms and conditions hereinafter set forth, and further agrees to perform to
the best of the Executive's ability the duties consistent with the stature of
such position, as may be assigned by the Board of Directors and the President
and Chief Executive Officer ("CEO"). So long as Dan Pelson is the President and
CEO of the Company, the Executive shall report directly to Dan Pelson. In the
event that Dan Pelson is no longer the President and CEO of the Company, the
Executive shall become the Chief Operating Officer of the Company and shall
report directly to either the President or CEO. The principal location of the
Company's business for purposes of Executive's employment shall be New York
City.
2. Term of Employment and Renewal.
The term of Executive's employment under this Agreement will commence
on January 17, 2000, which shall be deemed, the Effective Date of this Agreement
(the "Effective Date"). Subject to the provisions of Sections 10 and 11 of this
Agreement, the term of Executive's employment hereunder shall be for a term of
two (2) years from the Effective Date (the "Term"). The Company shall not
terminate this Agreement during the Term except for death, disability (as
defined in Section 10 of this Agreement), or Cause (as defined in Section 10 of
this Agreement). The last day of the Term shall be referred to as the
"Expiration Date," irrespective of any earlier termination in accordance with
the terms of this Agreement.
<PAGE> 2
3. Compensation and Benefits.
(a) Salary. As compensation for all services to be rendered pursuant to
this Agreement, commencing on the Effective Date, the Company agrees to pay the
Executive a base salary at an annual rate of ONE HUNDRED EIGHTY THOUSAND DOLLARS
($180,000) through January 17, 2001 and at an annual rate of ONE HUNDRED NINETY
FIVE THOUSAND DOLLARS ($195,000) from January 18, 2001 through the Expiration
Date, payable in such installments as is the policy of the Company (the
"Salary"), but no less frequently than monthly.
(b) Bonus. The Executive shall receive an annual bonus in the amount of
FIFTY THOUSAND DOLLARS ($50,000) ("base bonus"). The base bonus shall be paid in
four (4) quarterly installments, each payable on the next regular pay day
following the end of each calendar year quarter throughout calendar years 2000
and 2001.
In addition, the Executive shall be eligible to receive a performance
bonus based on the overall annual financial performance of the Company
("performance bonus"). The award of performance bonus shall be determined based
on the attainment of mutually agreed upon, Company-wide revenue targets on a
calendar year basis. If Company-wide revenues exceed the target for calendar
year 2000, the Executive shall receive a performance bonus in the amount of ONE
HUNDRED THOUSAND DOLLARS ($100,000) within thirty (30) days of the Company's
calculation of its revenues for the year, which shall be determined in
accordance with normal Company procedures, but not later than March 31, 2001. If
Company-wide revenues exceed the target for calendar year 2001, the Executive
shall receive a performance bonus in the amount of ONE HUNDRED THOUSAND DOLLARS
($100,000) within thirty (30) days of the Company's calculation of its revenues
for the year, which shall be determined in accordance with normal Company
procedures, but not later than March 31, 2002.
In addition, if the Company's annual revenues exceed the annual target
for calendar year 2000 by at least five million dollars ($5,000,000), the
Executive shall receive an additional bonus in the amount of ONE HUNDRED
THOUSAND DOLLARS ($100,000) for each five million dollars ($5,000,000) in excess
of the target ("additional bonus"). However, the Executive's "total cash
compensation" (i.e., salary plus bonuses) shall not exceed ONE MILLION DOLLARS
($1,000,000). Any additional bonus shall be paid within thirty (30) days of the
Company's calculation of its revenues for calendar year 2000, which shall be
determined in accordance with normal Company procedures, but not later than
March 31, 2001. The terms of the Executive's additional bonus and the total cash
compensation for calendar year 2001 shall be identical to calendar year 2000 and
shall be paid out no later than March 31, 2002.
(c) Benefits. The Executive shall be entitled to participate in all
employee benefit plans which the Company provides or may establish from time to
time for the benefit of its employees, including without limitation group life,
medical, surgical, dental and other health insurance, disability, deferred
compensation, profit-sharing and similar plans. The Executive shall also be
entitled to paid vacation, in accordance with the Company's vacation policy.
Such
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<PAGE> 3
benefits shall be no less favorable to the Executive than as compared to any
other employee of the Company, excluding Dan Pelson.
(d) Options. Subject to the approval of the Board of Directors, the
Executive shall be granted the number of options specified in, and in accordance
with, the Stock Option Agreement attached hereto as Exhibit A, and in accordance
with, the terms of the 1999 Employee, Director and Consultant Stock Option Plan
(the "Stock Plan") (attached hereto as Exhibit B), at an exercise price of THREE
DOLLARS AND THIRTY-THREE CENTS ($3.33) per share. It is anticipated that said
options shall be granted upon the commencement of employment or shortly
thereafter.
In addition, if the revenue performance target established by the Board
of Directors for the prior fiscal year (which ends on the preceding December 31)
has been achieved, and if the Executive continues to be employed by the Company
on said December 31, then on or before each of March 31, 2001, March 31, 2002,
March 31, 2003 and March 31, 2004, the Company will grant to the Executive an
option to purchase thirty-five thousand three hundred ninety-two (35,392)
shares, subject to adjustment in accordance with the Stock Plan. If granted,
these options shall be fully vested, shall have a term of ten (10) years, shall
have an exercise price equal to the fair market value of the common stock on the
date of grant, and shall be granted in accordance with the terms of the Stock
Plan.
All shares underlying options hereunder shall be registered pursuant to
an S-8 registration concurrently or promptly after the Company's Initial Public
Offering.
(e) Expenses. The Company shall pay or reimburse the Executive for all
reasonable out-of-pocket expenses actually incurred by him during the Term in
performing services hereunder, provided that the Executive properly accounts for
such expenses in accordance with the Company's policies.
(f) Relocation Expenses. The Company will pay directly or reimburse the
Executive for all reasonable, bona fide expenses incurred in relocating in order
to accept and begin or continue employment at Bolt and which are documented by
appropriate receipts, including without categorical limitation, movement of
personal and household goods, pre-move house hunting trips, fees or commissions
relating to the purchase and sale of the Executive's primary residence, taxes
associated with the purchase or sale of the Executive's primary residence,
travel between New York and California in the event that the Executive's family
remains in California following the Effective Date, and federal and state taxes
the Executive is required to pay due to the Company's reimbursement for any such
expenses. Notwithstanding the foregoing sentence, the Executive shall not
receive reimbursement for more than ONE HUNDRED SIXTY THOUSAND DOLLARS
($160,000), and no reimbursements shall be made unless and until the Executive
provides a receipt for any particular expense.
The Executive agrees to repay any money paid by Bolt pursuant to this
Section 3(f) if the Executive voluntarily resigns (other than for Good Reason)
his employment with Bolt before such time as the Executive has been employed by
the Company for two (2) years. Such obligation shall be in addition to any other
remedies the Company may have for breach of
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<PAGE> 4
contract, and shall in no way limit the Executive's contractual obligations to
the Company, as articulated elsewhere in this Agreement. If the Executive
voluntarily resigns his employment in breach of the Agreement, the Company shall
be authorized to withhold up to FIVE THOUSAND DOLLARS ($5,000) from the
Executive's final pay check and the Executive shall remit payment to the Company
for the full amount of the relocation expenses for which the Executive had been
reimbursed, less any amounts to be deducted from the Executive's final pay
check, prior to the Executive's final day of employment with the Company.
4. Confidentiality, Disclosure of Information.
The Executive recognizes and acknowledges that the Executive will have
access to Confidential Information (as defined below) relating to the business
or interests of the Company or of persons with whom the Company may have
business relationships. Except as permitted herein, the Executive will not
during the Term of this Agreement, or at any time following termination of this
Agreement, disclose or permit to be known to any other person or entity (except
as required by applicable law or in connection with the performance of the
Executive's duties and responsibilities hereunder), or use for the Executive's
own improper benefit or gain, any Confidential Information of the Company. The
term "Confidential Information" includes, without limitation, information
relating to the Company's business affairs, proprietary technology, trade
secrets, patented processes, research and development data, know-how, market
studies and forecasts, competitive analyses, pricing policies, employee lists,
employment agreements, personnel policies, the substance of agreements with
customers, commercial contracts, suppliers and others, marketing arrangements,
and customer lists and information relating to business operations and strategic
plans of third parties with which the Company has or may be assessing commercial
arrangements, any of which information is not generally known to the public or
to actual or potential competitors of the Company (other than through a breach
of this Agreement). Therefore, the Executive will not, without the prior written
consent of the Company's Board of Directors, disclose such Confidential
Information or use the same, provided, however, that in the course of the
Executive's services to the Company, the Executive may disclose such
Confidential Information as the Executive deems necessary to carry out the
Executive's duties to the Company. This obligation shall continue until such
Confidential Information becomes publicly available, other than pursuant to a
breach of this Section 4 by the Executive, regardless of whether the Executive
continues to be employed by the Company. It is further agreed and understood by
and between the parties to this Agreement that all information and records
relating to the Company, as hereinabove described, shall be the exclusive
property of the Company and, upon termination of the Executive's employment with
the Company, all documents, records, reports, writings and other similar
documents containing Confidential Information, including copies thereof, then in
the Executive's possession or control shall be returned to and left with the
Company.
5. Inventions Discovered by Executive.
The Executive shall promptly disclose to the Company any invention,
improvement, discovery, process, formula, or method or other intellectual
property, whether or not patentable, whether or not copyrightable (collectively,
"Inventions"), that relates to any line of business in which the Company engages
and is made, conceived or first reduced to practice by the
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<PAGE> 5
Executive, either alone or jointly with others, while performing services
hereunder (or, if based on or related to any Confidential Information, within
two (2) years after the termination of such employment), (a) which pertain to
any line of business activity of the Company, whether then conducted or then
being planned by the Company, (b) which are aided by the use of time, material
or facilities of the Company, whether or not during working hours or on the
Company premises, or (c) which relate to any of the Executive's work during the
period of the Executive's employment with the Company, whether or not during
normal working hours. The Executive hereby assigns to the Company all of the
Executive's right, title and interest in and to any such Inventions. During and
after the Term of this Agreement, the Executive shall execute any documents
necessary to perfect the assignment of such Inventions to the Company and to
enable the Company to apply for, obtain and enforce patents, trademarks and
copyrights in any and all countries on such Inventions, including, without
limitation, the execution of any instruments and the giving of evidence and
testimony, without further compensation beyond the Executive's agreed
compensation during the course of the Executive's employment. Without limiting
the foregoing, the Executive further acknowledges that all original works of
authorship by the Executive, whether alone or jointly with others related to the
Executive's employment with the Company and which are protectable by copyright
are "works made for hire" within the meaning of the United States Copyright Act,
17 U.S.C. Section 101, as amended, the copyright of which shall be owned solely,
completely and exclusively by the Company. If any Invention is considered to be
work not included in the categories of work covered by the United States
Copyright Act, 17 U.S.C. Section 101, as amended, such work shall be owned
solely by, or hereby assigned or transferred completely, and exclusively to the
Company. The Executive hereby irrevocably designates counsel to the Company as
the Executive's agent and attorney-in-fact to execute and file any such document
and to do all lawful acts necessary to apply for and obtain patents and
copyrights and to enforce the Company's rights under this Section. This Section
5 shall survive the termination of this Agreement.
6. Non-Competition and Non-Solicitation.
The Executive acknowledges that the Company has invested substantial
time, money and resources in the development and retention of its Inventions,
Confidential Information (including trade secrets) customers, accounts and
business partners, and further acknowledges that during the course of the
Executive's employment the Executive will have access to Bolt Inventions and
Confidential Information (including trade secrets), and will be introduced to
existing and prospective customers, accounts and business partners of the
Company. The Executive acknowledges and agrees that any and all "goodwill"
associated with any existing or prospective customer, account or business
partner belongs exclusively to the Company including, but not limited to, any
goodwill created as a result of direct or indirect contacts or relationships
between the Executive and any existing or prospective customers, accounts or
business partners. The parties to this Agreement expressly acknowledge and agree
that the Executive possesses skills that are special, unique or extraordinary,
and that the value of the Company depends upon the Executive's use of such
skills on the Company's behalf.
In recognition of this, the Executive covenants and agrees that:
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<PAGE> 6
(a) During the Executive's employment with the Company, the Executive
may not, without the prior written consent of the President and Chief Executive
Officer of the Company, (whether as an employee, agent, servant, owner, partner,
consultant, independent contractor or representative, stockholder or in any
other capacity whatsoever): (i) perform any work other than Bolt work on Company
time, on Company equipment, or at the Company's offices, (ii) conduct any
business with any current or prospective Bolt customer on behalf of any entity
or person (including the Executive) other than Bolt, or (iii) perform any work
relating in any way to the demographic groups or e-commerce markets targeted by
Bolt on behalf of any entity or person (including the Executive) other than
Bolt. Subject to prior approval by Bolt's Board of Directors, the Executive may
serve on corporate or advisory boards of non-competitive entities.
(b) During the Executive's employment with the Company and for a period
of one (1) year commencing on the termination of the Executive's employment from
Bolt, the Executive may not (whether as an employee, agent, servant, owner,
partner, consultant, independent contractor or representative, stockholder or in
any other capacity whatsoever) participate in any activity relating in any
manner to the development and/or sale or attempted sale of any of the products
or services of the type or nature provided and/or sold by Bolt if such activity
is performed on behalf of any Web-based business targeting the same (or
substantially similar) demographic group as that targeted by Bolt (i.e., 15-20
year olds), unless the Executive obtains prior written consent from the
President and Chief Executive Officer of the Company. The parties agree that,
given the global nature of the internet and/or world wide web, any geographical
limitations on this non-competition agreement are inappropriate.
(c) During the Executive's employment with the Company and for a period
of one (1) year commencing on the termination of the Executive's employment from
Bolt, the Executive may not, directly or indirectly, entice, solicit or
encourage any Company employee to leave the employ of the Company or any
independent contractor to sever the independent contractor's engagement with the
Company, nor may the Executive, directly or indirectly, be involved in the
recruitment of any Company employee or any independent contractor who is
then-engaged by Bolt on behalf of the Executive or any person or entity other
than Bolt, absent prior written consent to do so from the President and Chief
Executive Officer of the Company.
(d) During the Executive's employment with the Company and for a period
of one (1) year commencing on the termination of the Executive's employment from
Bolt, the Executive may not, directly or indirectly, entice, solicit or
encourage any customer or prospective customer of Bolt to cease doing business
with Bolt.
7. Non-Disparagement.
The Executive hereby agrees that during the course of the Executive's
employment with Bolt and at all times thereafter, the Executive will not make
any statement that is professionally or personally disparaging about, or adverse
to, the interests of Bolt, any of its officers, directors, shareholders or
employees including, but not limited to, any statement that disparages any
person, product, service, finances, financial condition, capabilities or other
aspect of the business of Bolt or any of its officers, directors, shareholders
or employees. The Executive further agrees that during the course of the
Executive's employment with Bolt and at all times thereafter, the
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Executive will not engage in any conduct that is intended to or has the result
of inflicting harm upon the professional or personal reputation of Bolt or any
of its officers, director, shareholders or employees.
8. Provisions Necessary and Reasonable.
(a) The Executive agrees that (i) the provisions of Sections 4, 5, 6
and 7 of this Agreement are necessary and reasonable to protect the Company's
Confidential Information, Inventions, and goodwill; (ii) the specific temporal,
geographic and substantive provisions set forth in Section 6 of this Agreement
are reasonable and necessary to protect the Company's business interests; and
(iii) in the event of any breach of any of the covenants set forth herein, the
Company would suffer substantial irreparable harm and would not have an adequate
remedy at law for such breach. In recognition of the foregoing, the Executive
agrees that in the event of a breach or threatened breach of any of these
covenants, in addition to such other remedies as the Company may have at law,
without posting any bond or security, the Company shall be entitled to seek and
obtain equitable relief, in the form of specific performance, and/or temporary,
preliminary or permanent injunctive relief, or any other equitable remedy which
then may be available. The seeking of such injunction or order shall not affect
the Company's right to seek and obtain damages or other equitable relief on
account of any such actual or threatened breach.
(b) If any of the covenants contained in Sections 4, 5, 6 and 7 hereof,
or any part thereof, are hereafter construed to be invalid or unenforceable, the
same shall not affect the remainder of the covenant or covenants, which shall be
given full effect without regard to the invalid portions.
(c) If any of the covenants contained in Sections 4, 5, 6 and 7 hereof,
or any part thereof, are held to be unenforceable by a court of competent
jurisdiction because of the temporal or geographic scope of such provision or
the area covered thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or geographic area
of such provision and, in its reduced form, such provision shall be enforceable.
(d) The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 4, 5, 6 and 7 hereof upon the courts
of any state within the geographical scope of such covenants. In the event that
the courts of any one or more of such states shall hold any such covenant wholly
unenforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographic scope of such other covenants, as to breaches
of such covenants in such other respective jurisdictions, the above covenants as
they relate to each state being, for this purpose, severable into diverse and
independent covenants.
9. Representations regarding Prior Work and Legal Obligations.
(a) The Executive represents that the Executive has no agreement or
other legal obligation with any prior employer or any other person or entity
that restricts the Executive's
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ability to engage in employment discussions, to accept employment with, or to
perform any function for Bolt.
(b) The Executive has been advised by Bolt that at no time, either
during any pre-employment discussions or at any time thereafter, should the
Executive divulge to or use for the benefit of the Company any trade secret or
confidential or proprietary information of any previous employer. The Executive
expressly acknowledges that the Executive has not divulged or used any such
information for the benefit of the Company.
(c) The Executive acknowledges that the Executive has not and will not
misappropriate any Invention that the Executive played any part in creating
while working for any former employer.
(d) The Executive acknowledges that Bolt is basing important business
decisions on these representations, and affirms that all of the statements
included herein are true.
10. Termination and Severance.
Notwithstanding the provisions of Section 2 of this Agreement, the
Executive's employment hereunder may terminate under the following
circumstances:
(a) Termination by the Company Without Cause . The Executive's
employment hereunder may be terminated, without Cause (as defined below) by the
Company upon written notice to the Executive, provided, however, that if the
Company terminates the Executive's employment without Cause, the Company shall
continue to pay the Executive's Salary, benefits (or their cash equivalent, at
the Company's discretion), and all accrued reimbursable expenses through the
Expiration Date of the Term. In addition, the Executive shall be entitled to a
pro-rata portion of the base bonus for the portion of the termination year prior
to the termination date, plus any performance bonus and additional bonus if said
performance bonus and/or additional bonus have been earned pursuant to the
applicable measuring criteria as of the termination date. Options shall be
vested in accordance with the terms of the Option Agreement.
(b) Termination by the Executive With Good Reason.
The Executive may resign and terminate this Agreement for Good Reason
(as defined below), provided, however, that upon notice of the Executive's
decision to terminate for Good Reason, the Company shall have thirty (30) days
in which to cure such Good Reason. If the Company fails to cure such Good Reason
within thirty (30) days, the Executive may resign and terminate this Agreement
for Good Reason. If the Executive terminates for Good Reason, the Executive
shall be entitled to the Executive's Salary, benefits (or their cash equivalent,
at the Company's discretion), and all accrued reimbursable expenses through the
Expiration Date of the Term. In addition, the Executive shall be entitled to a
pro-rata portion of the base bonus for the portion of the termination year prior
to the termination date, plus any performance bonus and additional bonus if said
performance bonus and/or additional bonus have been earned pursuant to the
applicable measuring criteria as of the termination date. Options shall be
vested in accordance with the terms of the Option Agreement.
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Good Reason shall mean any of the following which occurs at any time
during Executive's employment with the Company:
(i) any significant diminution, without the Executive's prior
consent, in the Executive's position, duties, responsibilities, power, title, or
office;
(ii) any material change in the Executive's upward reporting
relationship(s), without the Executive's prior consent;
(iii) any reduction in the Executive's salary in effect on the
date hereof or as the same may be increased during the Executive's
employment, without the Executive's prior consent;
(iv) any material breach by the Company of any material
provision of this Agreement;
(v) any failure by the Board of Directors to approve the Stock
Option Agreement as attached as Exhibit A; or
(vi) any change in reporting relationships such that the
Executive does not report directly to Dan Pelson while Dan Pelson
serves as President and/or CEO;
(vii) the appointment of someone other than the Executive as
Chief Operating Officer (or appointment of another position senior to
Executive other than President, CEO or Chief Financial Officer) while
Dan Pelson serves as President and/or CEO, unless the Executive is
elevated to Chief Operating Officer at or before the time of such
appointment.
In no event shall the Executive have Good Reason to terminate
employment hereunder unless the Executive provides the Board of Directors of the
Company with written notice of the reasons for which the Executive seeks to
terminate, and the Company fails to cure such breach within thirty (30) days
after receiving written notice thereof from the Executive.
(c) Termination by the Company for Cause. The Company may terminate
this Agreement for Cause at any time, upon written notice to the Executive
setting forth in reasonable detail the nature of such Cause. For purposes of
this Agreement, Cause is defined as any act or omission that consists of the
Executive's material breach of the terms of this Agreement which is not remedied
within ten (10) business days after receipt of written notice specifying the
details thereof, the Executive's material failure to perform a specific, lawful
and written instruction of the CEO or Board of Directors (which task is within
the sole and reasonable control of the Executive and is not remedied within ten
(10) business days after receipt of written notice specifying the details
thereof), or the Executive's conviction of any felony or crime directly relating
to the Company's business. Upon the giving of written notice of termination for
Cause of the Executive's employment, the Company shall have no further
obligation or liability to the Executive other than for Salary, benefits and
reimbursable expenses earned or accrued under this Agreement to the date of
termination which shall include any accrued but unused vacation.
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Notwithstanding the foregoing, the Executive may not be terminated for Cause,
except by a vote of the Board of Directors.
(d) Death. In the event of the Executive's death during the Term of
this Agreement, the Executive's employment hereunder shall immediately and
automatically terminate, and the Company shall have no further obligation or
duty to the Executive other than the Salary, pro-rated base bonus for the
portion of the calendar year prior to the termination date, any performance
bonus and additional bonus if said performance and/or additional bonus have been
earned pursuant to the applicable measuring criteria as of the termination date,
and benefits and reimbursable expenses earned or accrued through the date of
termination. Options shall vest and be exercisable in accordance with the Option
Agreement.
(e) Disability. The Company may terminate the Executive's employment
hereunder, upon written notice to the Executive, in the event that the Executive
becomes disabled during the Executive's employment under this Agreement through
any illness, injury, accident, or condition of either a physical or
psychological nature and, as a result, is, with or without reasonable
accommodation, unable to perform the essential functions of the services
contemplated hereunder for (a) a period of sixty (60) consecutive days, or (b)
for shorter periods aggregating one hundred twenty (120) days during any twelve
(12) month period during the Term. Any such termination shall become effective
upon mailing or hand delivery of notice that the Company has elected its right
to terminate under this subsection 10(e), and the Company shall have no further
obligation or duty to the Executive other than for Salary, pro-rated base bonus
for the portion of the calendar year prior to the termination date, any
performance bonus and additional bonus if said performance and/or additional
bonus have been earned pursuant to the applicable measuring criteria as of the
termination date, benefits, and reimbursable expenses earned or accrued under
this Agreement to the date of termination. Options shall vest and be exercisable
in accordance with the Option Agreement.
11. Choice of Law; Enforceability; Waiver of Jury Trial.
The Executive acknowledges that a substantial portion of the Company's
business is based out of and directed from the State of New York. The Executive
also acknowledges that during the course of the Executive's employment with the
Company the Executive will have substantial contacts with New York.
This Agreement shall be deemed to have been made in the State of New
York, shall take effect as an instrument under seal within New York, and the
validity, interpretation and performance of this Agreement shall be governed by,
and construed in accordance with, the internal law of New York, without giving
effect to conflict of law principles. Both parties further acknowledge that the
last act necessary to render this Agreement enforceable is its execution by the
Company in New York, and that the Agreement thereafter shall be maintained in
New York. Both parties agree that any action, demand, claim or counterclaim
relating to the terms and provisions of Sections 4, 5, 6 and 7 of this
Agreement, or to their breach, shall be commenced in New York in a court of
competent jurisdiction. Both parties further acknowledge that venue for such
action, demand or counterclaim shall lie exclusively in New York and that
material witnesses and documents would be located in New York. Both parties
further agree that any
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such action, demand, claim or counterclaim shall be resolved by a judge alone,
and both parties hereby waive and forever renounce the right to a trial before a
civil jury.
12. Miscellaneous.
(a) Assignment. The Executive acknowledges and agrees that the rights
and obligations of Bolt under this Agreement may be assigned by the Company to
any successors in interest. The Executive further acknowledges and agrees that
this Agreement is personal to the Executive and that the Executive may not
assign any rights or obligations hereunder.
(b) Withholding. All payments required to be made by the Company to the
Executive under this Agreement shall be subject to withholding taxes, social
security and other payroll deductions in accordance with the Company's policies
applicable to employees of the Company at the Executive's level.
(c) Entire Agreement. This Agreement sets forth the entire agreement
between the parties and supersedes any prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment.
(d) Seal and Governing Law. This Agreement shall take effect as an
instrument under seal and shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflict of laws
principles thereof.
(e) Amendments. Any attempted modification of this Agreement will not
be effective unless signed by a specifically authorized officer of the Company
and the Executive.
(f) Waiver of Breach. The Executive understands that a breach of any
provision of this Agreement may only be waived by a specifically authorized
officer of the Company. The waiver by the Company of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
(g) Severability. If any provision of this Agreement should, for any
reason, be held invalid or unenforceable in any respect by a court of competent
jurisdiction, then the remainder of this Agreement, and the application of such
provision in circumstances other than those as to which it is so declared
invalid or unenforceable, shall not be affected thereby, and each such provision
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
(h) Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered by private messenger, private overnight mail service, or facsimile as
follows (or to such other address as either party shall designate by notice in
writing to the other in accordance herewith):
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If to the Company:
Bolt, Inc.
304 Hudson Street
New York, NY 10013
Attn: Dan Pelson
Telephone: (212) 620-5900
Fax: (212) 463-0248
With a copy to:
Sam Feigin, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 348-1736
Fax: (617) 542-2241
If to Executive:
Richard Glosser
955 Kirkside Road
Los Angeles, CA 90035
With a copy to:
Marc Chamlin, Esq.
Loeb & Loeb
345 Park Avenue
New York, NY 10154
Telephone: (212) 407-4855
Fax: (617) 407-4990
(i) Survival. The Executive and the Company agree that certain
provisions of this Agreement shall survive the expiration or termination of this
Agreement and the termination of the Executive's employment with the Company.
Such provisions shall be limited to those within this Agreement which, by their
express and implied terms, obligate either party to perform beyond the
termination of the Executive's employment or termination of this Agreement.
(j) Disclosure and Confidentiality. The Executive agrees to provide,
and agrees that the Company similarly may provide in its discretion, a copy of
the covenants contained in this Agreement to any business or enterprise which
the Company may directly or indirectly own, manage, operate, finance, join,
control or in which the Company participates in the ownership, management,
operation, financing or control, or with which the Company may be connected or
may become connected as an officer, director, executive, partner, principal,
agent, representative, consultant or otherwise. The Executive also agrees that
the Company may disclose a copy of this Agreement if legally required to do so,
and in connection with a partnering transaction, financing, or public offering,
assuming that an appropriate confidentiality agreement is in place. The
Executive further agrees not to disclose the existence or terms of this
Agreement to any person other than the Executive's immediate family and legal,
financial or accounting consultant.
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<PAGE> 13
(k) Reassignment. The Executive acknowledges and agrees that should the
Executive transfer between or among any affiliates of the Company, wherever
situated, or otherwise become employed by any Company affiliate, or be promoted
or reassigned to functions other than the Executive's present functions, all
terms of this Agreement shall continue to apply with full force.
(l) Conflicting Agreements. The Executive hereby represents and
warrants that the execution of this Agreement and the performance of the
Executive's obligations hereunder will not breach or be in conflict with any
other agreement, whether written or oral, to which the Executive is a party or
is bound, and that the Executive is not now subject to any covenants against
competition or similar covenants which would prevent the performance of the
Executive's obligations hereunder.
(m) Arbitration of Disputes. Any controversy or claim arising out of
this Agreement or any aspect of the Executive's relationship with the Company
(other than disputes with respect to alleged violations of the covenants
contained in Sections 4, 5, 6 or 7 hereof, and the Company's pursuit of the
remedies described in Section 8 hereof in connection therewith) shall be
adjusted by arbitration in New York City in accordance with the then existing
Commercial Dispute Resolution Rules of the American Arbitration Association, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. The parties shall split equally the costs of arbitration unless the
arbitrator orders otherwise, or unless the parties agree to allocate the costs
differently. The parties agree that the award of the arbitrator shall be final
and binding.
(n) Rights of Other Individuals. This Agreement confers rights solely
on the Executive and the Company. This Agreement is not a benefit plan and
confers no rights on any individual or entity other than the undersigned.
(o) Headings. The parties acknowledge that the headings in this
Agreement are for convenience of reference only and shall not control or affect
the meaning or construction of this Agreement.
(remainder of this page left intentionally blank)
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<PAGE> 14
(p) Representation by Counsel. The Executive and the Company hereby
acknowledge that each party has been represented by counsel in the negotiation
of this Agreement and that each party has had adequate opportunity to review
these terms and conditions and to reflect upon and consider the terms and
conditions of this Agreement. The parties further acknowledge that each party
fully understands the terms of this Agreement and has voluntarily executed this
Agreement.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year set forth below.
EXECUTIVE BOLT, INC.
/s/ Richard Glosser By: /s/ Daniel A. Pelson
- ------------------------- ---------------------------------------
Richard Glosser Daniel A. Pelson, President and CEO
Dated: December 29, 1999 Dated: December 29, 1999
<PAGE> 1
EXHIBIT 10.15
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS WITH ASTERISKS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED.
MOBILE CHANNEL AGREEMENT
THIS AGREEMENT, dated as of January 28, 2000 (the "Effective Date"), is made by
and between Bolt, Inc., a Delaware corporation ("Bolt"), with offices at 304
Hudson Street, New York, NY 10013, and AT&T Wireless Services, Inc., a Delaware
corporation ("ATTWS"), with offices at 7277 - 164th Avenue NE, Redmond,
Washington 98052.
A. Bolt desires to offer Bolt internet teen communications content and
applications to ATTWS for inclusion on ATTWS' wireless subscription service to
be known as PocketNet(R) Service and on ATTWS' DMN Service.
B. Bolt desires to extend its reach to users of ATTWS data addressable
microbrowser PocketNet(R) Equipment and users of DMN Service.
C. ATTWS desires to offer branded Bolt content and applications on the
PocketNet(R) and DMN Service to increase the robustness and attractiveness of
this data offering.
D. ATTWS also desires to have the PocketNet(R) Service and DMN Service
promoted on Bolt's online website (www.Bolt.com) to attract additional customers
to its voice and data services.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree
as follows:
1. DEFINITIONS. As used herein, the following terms have the following
meanings:
"AFFILIATE" means, when capitalized, a Person in which a party or the parent of
a party owns directly or indirectly at least a 50% equity interest and, with
respect to ATTWS, a wireless carrier in which ATTWS owns at least a 10% equity
interest.
"ATTWS DELIVERABLES" means the deliverables described on Exhibit A hereto which
are to be delivered to Bolt in accordance with the terms of this Agreement.
"ATTWS MARKS" means those Marks of ATTWS identified on any list of Marks as
provided from time to time by ATTWS to Bolt and such other Marks (if any) as
ATTWS may from time to time notify Bolt to be "ATTWS Marks" within the meaning
of this Agreement.
"ATTWS MATERIALS" means ATTWS Marks and any other graphical or other content or
materials supplied by ATTWS to Bolt for inclusion on the Bolt Mobile Channel or
any other web site.
"BOLT MARKS" means those Marks of Bolt identified on any list of Marks as
provided from time to time by Bolt to ATTWS and such other Marks (if any) as
Bolt may from time to time notify ATTWS in writing to be "Bolt Marks" within the
meaning of this Agreement.
PRIVATE/PROPRIETARY
CONTAINS PRIVATE AND/OR PROPRIETARY INFORMATION. MAY NOT BE USED OR DISCLOSED
OUTSIDE AT&T WIRELESS AND BOLT EXCEPT PURSUANT TO A WRITTEN AGREEMENT.
<PAGE> 2
"BOLT MOBILE CHANNEL" means the service containing Bolt content applications
made available by Bolt as described in Exhibit B, subject to third party
content provider arrangements and display constraints (e.g.,* required
formatting for display on an information appliance) and accessible through
PocketNet(R) Service.
"BOLT WEB SITES" means, collectively: (a) the Web Site the primary home page
of which is located at http://www.Bolt.com; and (b) other Web Sites maintained
by Bolt and its affiliates.
"DMN SERVICE" means the service offered by ATTWS that includes digital
multi-net service.
"HDML" means the most current version of the Handheld Device Markup Language,
as that version may be updated from time to time, and the most current version
of any language which evolves in the marketplace for application rendering on
mobile devices, such as WML, as that language may be updated from time to time.
"HDML PAGES" means those pages of the Bolt Mobile Channel that are prepared
using HDML and intended for presentation to Users using mobile/wireless devices
as their terminal/display device.
"HOMEDECK" means the first HDML or WML Page of content viewable by a User on
the screen of any PocketNet(R) Equipment, regardless of the configuration of
such PocketNet(R) Equipment to display such pages. Depending upon the
PocketNet(R) Equipment used by a User, parts of the Homedeck may require the
User to scroll beyond the initial display for viewing.
"INTELLECTUAL PROPERTY RIGHTS" means any patent, copyright, rights in Marks,
trade secret rights, moral rights and other intellectual property or
proprietary rights arising under the laws of any jurisdiction.
"MARKS" means any trademarks, service marks, trade dress, trade names,
corporate names, proprietary logos or indicia and other source or business
identifiers.
"PERSON" means any natural person, corporation, partnership, limited liability
company, or any other entity.
"POCKETNET(R) EQUIPMENT" means any device that supports PocketNet(R) Service,
including without limitation, HDML or WML microbrowser handsets.
"POCKETNET(R) SERVICE" means any or all items included in the voice and data
package of products and services offered by ATTWS to customers that allow users
to access the Internet through PocketNet(R) Equipment.
"POCKETNET(R) SUBSCRIBER" means any Subscriber of Pocket(R) Service.
"SERVICE" means any of the products and services offered by ATTWS to customers
that allows users to access Commercial Mobile Radio Service, including without
limitation, PocketNet(R) Service and DMN Service.
"SUBSCRIBER" means any Person who has an agreement with ATTWS for Service.
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"USAGE REPORTS" means the reports as described in Section 2.3 below.
"USER" means a subscriber of ATTWS Services.
"USER DATA" means any and all User profile data including, but not limited to,
name, telephone number, email address and other similar data that may be
collected by in connection with use of the Bolt Mobile Channel.
"WEB SITE" means any point of presence maintained on the Internet or on any
other public data network. With respect to any Web Site maintained on the World
Wide Web, such Web Site includes all HTML pages (or similar unit of information
presented in any relevant data protocol) that either (a) are identified by the
same second-level domain (such as Bolt.com) or by the same equivalent level
identifier in any relevant address scheme, or (b) contain branding, graphics,
navigation or other characteristics such that a User reasonably would conclude
that the pages are part of the Bolt Mobile Channel.
"WML" means the most current version of the Wireless Markup Language as may be
developed or updated from time to time by the WAP Forum and any language which
evolves from the Wireless Markup Language.
2. BOLT MOBILE CHANNEL.
2.1 DELIVERABLES. ATTWS will provide to Bolt the ATTWS Deliverables
in accordance with the terms of this Agreement, including Exhibit A
hereto. Bolt will provide to ATTWS the Bolt Deliverables in accordance
with the terms of this Agreement, including Exhibit B hereto. Further,
Bolt will implement, on the terms contained in Exhibit B, the
user-perceptible elements of the graphical user interface for the Bolt
Mobile Channel, with the goals of maximizing the commercial
effectiveness of the Bolt Mobile Channel and optimizing the
presentation of the relevant content for access from mobile devices.
2.2 BOLT AND ATTWS WEB SITES. To promote the PocketNet(R) Services,
the Bolt Mobile Channel and the relationship between ATTWS and Bolt,
ATTWS and Bolt shall each integrate the other's Marks into their
respective Web Sites in a manner mutually agreeable to both parties.
2.3 USAGE REPORTS AND OTHER USER INFORMATION. Bolt and ATTWS will
share User Data with each other in an effort to avoid User duplication
of data entry. Bolt shall track and allow ATTWS to remotely access in
electronic form information concerning customer usage of the Bolt
Mobile Channel . The type of information and the format for access will
be agreed by the parties. Bolt and ATTWS will share all User Data and
such User Data shall be subject to the privacy and confidentiality
provisions of this Agreement. Any User generated or configured content
or data will not be shared by the parties hereto, except pursuant to an
agreement that contains privacy provisions and is signed by the parties
prior to sharing of such data. Each party will deliver Usage Reports to
the other via email, or other mutually agreed method. The Usage Reports
shall be jointly owned by the parties.
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2.4 PUBLICITY. The parties shall work together to issue publicity and
general marketing communications concerning the Bolt Mobile Channel
and other mutually agreed-upon matters. Neither party shall issue any
such publicity and general marketing communications concerning their
relationship without the prior written consent of the other party (not
to be unreasonably withheld).
2.5 FINANCIAL TERMS. The respective obligations of the parties with
respect to financial undertakings related to this Agreement are as set
forth on Exhibit D hereto.
2.6 STANDARDS FOR BOLT MOBILE CHANNEL. Bolt and ATTWS agree that the
Bolt Mobile Channel will conform to industry standards for protection
of privacy and security such as the Better Business Bureau BBBOnline
Code of Online Business Practices issued in draft form on November 22,
1999. Bolt will also include access restriction options approved by
ATTWS in the Bolt Mobile Channel.
2.7 REMUNERATION; COLLECTION. Each party will pay to the other party
all amounts due hereunder when due or when invoiced, as the case may
be. Any amounts not paid when due, or as invoiced, will be subject to
a finance charge equal to one and one-half percent (1.5%) per month or
the highest rate allowable by law, whichever is less. Each party may
accept any check or payment without prejudice to its rights to recover
the balance due or to pursue any other right or remedy. No endorsement
or statement on any check or payment or letter accompanying any check
or payment or elsewhere will be construed as an accord or
satisfaction. Commission payments will be reconciled and paid within
thirty (30) days following the calendar quarter in which the
applicable revenues are received. The receiving party will provide
with each such payment a report setting forth revenues received by it
for such quarter and the percentage thereof payable to the other
party.
2.8 RECORDS AND AUDIT. During the Term, each party shall maintain
accurate records of revenues received and calculations of the fees
payable to the other party pursuant to this Agreement. Either party,
at its expense, and upon ten (10) days' advance notice to the other
party, shall have the right once during each calendar year during the
Term to examine or audit such records in order to verify the figures
reported in any quarterly report and the amounts owned to such party
under this Agreement. Any such audit shall be conducted, to the extent
possible, in a manner that does not interfere with the ordinary
business operations of the audited party.
2.9 OTHER REQUIREMENTS. Bolt and ATTWS shall fulfill the obligations
set forth in Exhibit C with respect to the Bolt Mobile Channel.
3. CERTAIN RIGHTS GRANTED.
3.1 BOLT GRANT. Subject to the terms and conditions of this Agreement,
Bolt hereby grants to ATTWS the right to enable Users who are
authorized by ATTWS to access the Bolt Mobile Channel through mobile
phones or other mobile devices via wireless network access.
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<PAGE> 5
3.2 ATTWS GRANT. Subject to the terms and conditions of this
Agreement and subject to restrictions required by ATTWS, ATTWS hereby
grants Bolt the right to include the ATTWS Materials on the Bolt
Mobile Channel
3.3 LIMITATIONS.
(a) ATTWS and its Affiliates shall have no right to reproduce or
sub-license, re-sell or otherwise distribute all or any
portion of the Bolt Mobile Channel or any other Intellectual
Property Rights of Bolt to any Person by any means including,
via the Internet (including the World Wide Web) or any
successor public or private data network, other than providing
access for Users or to ATTWS Affiliates for providing access
to the Bolt Mobile Channel by their customers. Neither party
shall have any right to remove, obscure or alter any notices
of Intellectual Property Rights appearing in or on any
materials provided by the other party.
(b) Bolt and its affiliates shall have no right to reproduce or
sub-license, re-sell or otherwise distribute all or any portion
of ATTWS Materials or other ATTWS Confidential Information (as
defined in Section 10.1 below) to any Person, other than to
provide access to the ATTWS Materials.
3.4 ATTWS MARKS LICENSE. Subject to Section 3.6, ATTWS hereby grants
Bolt the right to use, reproduce, publish, perform and display the
ATTWS Marks: (a) with the prior written approval of ATTWS and subject
to Section 2.4 of this Agreement and (b) subject to the terms and
conditions of this Agreement, in connection with the sale of
PocketNet(R) Services to subscribers by Bolt or the referral by Bolt
to ATTWS of potential PocketNet(R) Service subscribers.
3.5 BOLT MARKS LICENSE. Subject to Section 3.6, Bolt hereby grants
the right to use, reproduce, publish, perform and display the Bolt
Marks: (a) with the prior written approval of Bolt and subject to
Section 2.4 of this Agreement and (b) subject to the terms and
conditions of this Agreement, in connection with the sale of
PocketNet(R) Services.
3.6 USE OF MARKS. Prior to the first use of any of the other party's
Marks in the manner permitted herein, the party using such Marks
shall submit a sample of such proposed use to the other party for its
prior written approval, which shall not be unreasonably withheld or
delayed. Without limiting the generality of the foregoing, each party
shall strictly comply with all standards with respect to the other
party's Marks which may be furnished by such party from time to time,
and all uses of the other party's Marks in proximity to the trade
name, trademark, service name or service mark of any other person
shall be consistent with the standards furnished by the other party
from time to time. Further, neither party shall create a combination
mark consisting of one or more Marks of each party. All uses of the
other party's Marks shall inure to the benefit of the party owning
such Mark. Each party hereby acknowledges and agrees that, as between
the parties hereto, the other party is the owner of the Marks
identified as its Marks on the applicable attachment to the
Agreement.
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3.7 AGREEMENTS WITH OTHER PARTIES. Each party acknowledges and agrees
that the rights granted to the other party in this Agreement are
non-exclusive, and that, without limiting the generality of the
foregoing, nothing in this Agreement shall be deemed or construed to
prohibit either party from participating in similar business
arrangements as those described herein.
4. POCKETNET(R) SERVICE AND DMN SERVICE SUBSCRIBERS.
4.1 GENERAL. ATTWS has regulatory authority to operate as a
facilities-based provider of Commercial Mobile Radio Service,
including without limitation PocketNet(R) Service and DMN Service,
within various markets in the United States of America ("Area"). ATTWS
hereby authorizes Bolt and Bolt hereby agrees to solicit and refer to
ATTWS potential subscribers for PocketNet(R) Service and DMN Service,
for activation solely through the Internet, under the terms set forth
herein, and any policies and procedures concerning the conduct of
Bolt's business relating to the solicitation or referral of potential
subscribers prescribed from time to time by ATTWS, which policies and
procedures are incorporated by reference in this Agreement .
4.2 SUBSCRIBER REFERRALS. Bolt is not authorized to accept money from
potential Subscribers referred to ATTWS pursuant to this Agreement.
Bolt may only refer potential PocketNet(R) and DMN Service Subscribers
to the Internet site designated by ATTWS. ATTWS, at its sole
discretion, may reject any potential PocketNet(R) or DMN Service
Subscribers referred by Bolt based on ATTWS' credit criteria,
geographic location of potential subscribers, or other lawful reasons
that ATTWS will not be required to reveal to Bolt. It shall be the
obligation of Bolt to verify the zip code of any potential
PocketNet(R) or DMN Service Subscriber prior to referring such
potential PocketNet(R) or DMN Service Subscriber to ATTWS.
4.3 BUSINESS CONDUCT. Each party hereto must faithfully, honestly and
diligently perform its obligations under this Agreement. The parties
must be governed in all dealings with members of the public and with
each other by the highest standards of honesty, integrity, ethical
conduct and fair dealing. Each party hereto must refrain from any
business practice, promotion or advertising that may be injurious to
the business or goodwill of the other. Neither Bolt nor any affiliate
may be a reseller of ATTWS' PocketNet(R) Service or DMN Service.
4.4 NON-SOLICITATION/NON-DIVERSION. Bolt agrees, during the Term and
for one year thereafter, neither Bolt nor any of its Affiliates will
contact PocketNet(R) or DMN Service Subscribers as a target group (as
opposed to a general solicitations of all Persons that may use similar
services) for the purpose of soliciting or giving incentive to those
PocketNet(R) or DMN Service Subscribers to encourage them to terminate
their agreement with ATTWS or to convert to a competitive provider of
services similar to PocketNet(R) or DMN Services within the Area, nor
will such entities offer any incentive or compensation to encourage
PocketNet(R) or DMN Service Subscribers as a target group (as opposed
to a general solicitations of all Persons that may use similar
services) to terminate their agreement with ATTWS; provided, that
nothing in this Section 4.7 shall (a) modify or diminish the
provisions of Section 3.7. During this period, any potential
PocketNet(R) or
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<PAGE> 7
DMN Service Subscribers who contact Bolt with respect to inquiries
relating to PocketNet(R) or DMN Services must be referred directly to
ATTWS. Bolt is responsible for ensuring compliance with this paragraph
by its personnel. At all times during the Term and afterwards, Bolt
and any successor entity to Bolt shall not use any ATTWS Confidential
Information, including but not limited to information regarding the
identity of ATTWS' customers or the usage or habits of Users of the
Bolt Mobile Channel, to solicit, divert or attempt to divert any such
customer or User from patronizing ATTWS.
4.5 SOLICITATION AND ENROLLMENT. Bolt may only market PocketNet(R)
Service and DMN Service to potential Subscribers under PocketNet(R)
Service or DMN Service rate plans authorized by ATTWS at prices and on
terms established by ATTWS. Bolt has no authority to offer any other
rates, rate plans, terms, or conditions to potential subscribers for
PocketNet(R) Service or DMN Service.
4.6 RESTRICTIONS. ATTWS specifically reserves the right to restrict
Bolt from referring PocketNet(R) Service and DMN Service: (a) on
certain "non-authorized" rate plans; (b) to certain specifically
enumerated Subscribers or potential Subscribers; (c) to certain
classes of Subscribers or potential Subscribers, such as those that
generated revenues above a specific level or governmental entities;
and (d) by certain methods. All of these restrictions will be defined
in the policies and procedures issued by ATTWS from time to time. In
the event any such restriction has a material adverse impact on Bolt's
ability to meet the performance requirements set forth in Exhibit D,
in the reasonable expectations of the parties, the parties will, in
good faith, discuss potential changes to Exhibit D. Nothing in this
section will require either party to agree to any such changes.
5. ADVERTISING BY BOLT. Bolt will provide [ * ] impressions for ATTWS
Materials relating to the Bolt Mobile Channel over the Term of this Agreement
on the Bolt Web Site.
6. WARRANTIES, INDEMNIFICATION AND LIMITATION OF DIRECT LIABILITY.
6.1 WARRANTIES.
Each party to this Agreement represents and warrants to the other
party that, to the best of its knowledge and belief:
(a) it has the full corporate right, power and authority to
enter into this Agreement and to perform the acts required of
it hereunder;
(b) its execution of this Agreement by such party and
performance of its obligations hereunder, do not and will
not violate any agreement to which it is a party or by which
it is bound;
(c) when executed and delivered, this Agreement will
constitute the legal, valid and binding obligation of such
party, enforceable against it in accordance with its terms;
and
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(d) all content or other materials created by Persons under
the control of the party and used in connection with the
Bolt Mobile Channel or Bolt Web Site will not contain any
material that is obscene, libelous or defamatory, or
infringing of any Intellectual Property Rights or other
rights of any third party.
6.2 INTELLECTUAL PROPERTY WARRANTY. Bolt warrants and represents that
the technology and any information used by Bolt and provided by
Persons under the control of Bolt in the creation, operation or
maintenance of the Bolt Mobile Channel does not infringe on the
Intellectual Property Rights of any Person.
6.3 SERVICE WARRANTY. Bolt warrants and represents that it will
create, operate and maintain the Bolt Mobile Channel in a manner using
the reasonable care and skill of a competent internet portal provider.
6.4 INDEMNIFICATION. Each party (the "Indemnifying Party") will
defend, indemnify and hold harmless the other party (the "Indemnified
Party"), and the respective directors, officers, employees and agent
of the Indemnified Party, from and against any and all claims, costs,
losses, damages, judgments and expenses (including reasonable
attorneys' fees) arising out of or in connection with any third-party
claim alleging any breach of such party's representations or
warranties or covenants set forth in this Agreement or alleging that
any advertisements or other content or materials served or submitted
by such party to or through the Bolt Mobile Channel, as the case may
be, contains any material that is obscene, libelous or defamatory, or
infringing of any Intellectual Property Rights or other rights of any
third party. The obligations of the Indemnifying Party are subject to
the requirements that (a) the Indemnified Party notify the
Indemnifying Party in writing within a reasonable time after the
Indemnified Party is notified of a claim, (b) the Indemnifying Party
have sole control of the defense of the claim (except that, if an
Indemnified Party elects to do so, it may participate in the defense
at its own expense) and all related monetary settlement negotiations
(it being agreed that any non-monetary terms, including any licensing
terms, of any settlement of a claim that directly affects the
Indemnified Party shall require the prior written approval of the
Indemnified Party), and (c) the Indemnified Party provides the
Indemnifying Party with assistance, information and authority
necessary for the Indemnifying Party to perform its obligations under
this section; provided always that the Indemnified Party shall not be
required to admit liability under any circumstances. Reasonable
out-of-pocket expenses incurred by an Indemnified Party in providing
such assistance shall be reimbursed by the Indemnifying Party promptly
upon receipt of an account of such expenses. The obligations of the
parties as set forth in this Section survive expiration or termination
of this Agreement.
6.5 LIMITATION OF LIABILITY; DISCLAIMER.
(a) LIABILITY. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL,
PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM ANY
PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF
REVENUE OR
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ANTICIPATED PROFITS OR LOST BUSINESS. EXCEPT FOR LIABILITIES TO
PAY AMOUNTS DUE, EITHER PARTY'S LIABILITY (WHETHER ARISING IN
TORT, CONTRACT OR OTHERWISE AND NOTWITHSTANDING ANY FAULT,
NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED), PRODUCT
LIABILITY OR STRICT LIABILITY OF SUCH PARTY) UNDER THIS AGREEMENT
OR WITH REGARD TO ANY OF THE PRODUCTS OR SERVICES RENDERED BY
EITHER PARTY UNDER THIS AGREEMENT, THE CONTENT AND ANY OTHER
ITEMS OR SERVICES FURNISHED UNDER THIS AGREEMENT WILL IN NO EVENT
EXCEED THE COMPENSATION PAID BY ATTWS TO BOLT UNDER THIS
AGREEMENT.
(b) NO ADDITIONAL WARRANTIES. THE EXPRESS WARRANTIES SET FORTH IN
THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES, IMPLIED OR
STATUTORY, INCLUDING, BUT NOT LIMITED TO ANY: (A) IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE;
(B) IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE
OF DEALING OR USAGE OF TRADE; OR (C) ANY OBLIGATION, LIABILITY,
RIGHT, REMEDY OR CLAIM IN TORT, NOTWITHSTANDING ANY FAULT,
NEGLIGENCE, STRICT LIABILITY OR PRODUCT LIABILITY OF BOLT
(WHETHER ACTIVE, PASSIVE OR IMPUTED) WITH RESPECT TO ANY BUG,
DEFECT, DEFICIENCY OR ERROR IN ANY OF THE FOREGOING.
(c) DAMAGES CAP. Except for claims based on the gross negligence,
willful misconduct, bad faith or fraud of a party and except for
indemnification claims made under Section 6.4 above or for
amounts due under this Agreement, the liability of either party
to the other party for any losses or damages for claims relating
to this Agreement, in the aggregate, will not exceed the total
amount paid or payable by the parties to each other under this
Agreement as of the date the claim at issue arose.
7. TERM AND TERMINATION.
7.1 TERM. The term of this Agreement shall commence on the Effective
Date and, unless earlier terminated as provided below, shall end
one year after the Effective Date; provided that the term shall
automatically be renewed for successive one-year periods, unless
either party provides written notice of termination to the other
party no less than sixty (60) days prior to the end of the then
current term.
7.2 TERMINATION. Either party may terminate this Agreement upon not
less than ninety (90) days' prior written notice to the other party of
any material breach hereof by such other party, provided that such
other party has not cured such material breach within such ninety (90)
day period.
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<PAGE> 10
7.3 EFFECT OF TERMINATION. Upon termination of this Agreement or
expiration of the Term for any reason, all rights and obligations of
the parties under this Agreement shall be extinguished, except that:
(a) all accrued payment obligations hereunder shall survive such
termination or expiration; and (b) the rights and obligations of the
parties under Sections 5, 6, 7, 8 and 9 shall survive such termination
or expiration.
7.4 OBLIGATIONS UPON TERMINATION. In addition to any other obligations
that may survive termination or expiration of this Agreement, Bolt
will provide all reasonable assistance in (a) transferring all
customer and usage information and records to ATTWS or any other
Person designated by ATTWS, and (b) transitioning customers to ATTWS.
8. INTELLECTUAL PROPERTY.
8.1 ATTWS. As between the parties, ATTWS retains all right, title and
interest in and to the ATTWS Deliverables and related ATTWS technology
worldwide and the ATTWS Marks, subject to the license granted herein,
along with all Intellectual Property Rights associated with any of the
foregoing.
8.2 BOLT. As between ATTWS and Bolt, Bolt reserves and retains all
right, title and interest (including but not limited to all
Intellectual Property Rights) in and to the Bolt Deliverables, the
technology provided by Bolt under this Agreement, and all Intellectual
Property Rights associated with any of the foregoing and no title to
or ownership of any of foregoing is transferred to ATTWS or any other
Person under this Agreement. As between the parties, Bolt retains all
right, title and interest in and to the Bolt Mobile Channel and the
Bolt Web Sites (including, without limitation, any and all content,
data, URLs, domain names, technology, software, code, user interfaces,
"look and feel", marks and other items posted thereon or used in
connection or associated therewith; but excluding any items supplied
by ATTWS) and the Bolt Marks, along with all Intellectual Property
Rights associated with any of the foregoing. ATTWS obtains no right to
use Bolt Intellectual Property Rights beyond the Term.
8.3 OWNERSHIP OF IMPROVEMENTS. ATTWS and Bolt agree that any all
right, title and interest in and to contributions made by either party
which improve the PocketNet(R) Service or the Bolt Mobile Channel will
remain in the party making such contribution.
8.4 COPYRIGHT NOTICES. Bolt and ATTWS acknowledge that the Bolt Mobile
Channel pages may also contain copyright and patent notices of
copyrighted or copyrightable works, including those of Bolt content
providers and of ATTWS.
8.5 OTHER MARKS. Bolt shall not register or attempt to register any of
the ATTWS Marks or any marks which ATTWS reasonably deems to be
confusingly similar to any of the ATTWS Marks. ATTWS shall not
register or attempt to register any of the Bolt Marks or any Marks
which Bolt reasonably deems to be confusingly similar to any of the
Bolt Marks.
8.6 FURTHER ASSURANCES. Each party shall take, at the other party's
expense, such action (including, without limitation, execution of
affidavits or other documents) as the
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<PAGE> 11
other party may reasonably request to effect, perfect or confirm such
other party's ownership interests and other rights as set forth above
in this Section 8.
9. DISPUTES.
9.1 ARBITRATION CLAUSE. All claims (including counterclaims and
cross-claims) and disputes between Bolt and ATTWS must be resolved by
submission to binding arbitration. The parties must submit any such
disputes to the office of the American Arbitration Association ("AAA")
in New York, New York (if initiated by ATTWS) or in Seattle,
Washington (if initiated by Bolt)to be decided under the then current
AAA commercial arbitration rules.
9.2 LIMITATIONS OF ACTIONS. All claims and disputes covered by this
Section 9 must be submitted to arbitration by initiating the
arbitration not later than 180 days after the act or omission giving
rise to the claim or dispute occurred. The failure to initiate
arbitration within the period constitutes an absolute bar to the
institution of any proceedings based on such act or omission. The
aggrieved party must initiate arbitration under this Section 9 by
sending written notice of an intention to arbitrate to all parties.
The notice must contain a description of the dispute, the amount
involved, and the remedy sought.
9.3 RIGHT TO SEEK INJUNCTION. Notwithstanding anything in this
Section 9, either party may bring court proceedings to seek an
injunction or other equitable relief to enforce any right, duty or
obligation under this Agreement. To obtain injunctive or other
equitable relief, neither party shall be required to post a bond or,
if required by law or by the court, the each party hereby consents to
a bond in the lowest amount permitted by law.
9.4 ENFORCEMENT OF AWARD. Neither party has the right to appeal the
decision of the arbitrator. The award of the arbitrator may be
confirmed or enforced in any court having jurisdiction.
9.5 ATTORNEY'S FEES. If any arbitration or court action is commenced
by either party, the substantially prevailing party in that action is
entitled to recover its out-of-pocket and court costs and reasonable
attorneys' fee incurred therein.
9.6 CHOICE OF LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware without
reference to its choice of law rules. ATTWS and Bolt hereby
irrevocably consents to personal jurisdiction and venue in the state
and federal courts located in the borough of Manhattan in New York
City, New York and in King County in the State of Washington with
respect to any actions, claims or proceedings arising out of or in
connection with this Agreement.
10. GENERAL PROVISIONS.
10.1 CONFIDENTIAL INFORMATION; CUSTOMER INFORMATION. Each party
acknowledges that it may be in receipt of certain confidential
proprietary information relating to the other party, including without
limitation, lists of subscribers, financial and business information
not generally known to the public relating to such other party,
including the
-11-
<PAGE> 12
terms of this Agreement (collectively, "Confidential Information").
Each party agrees that all Confidential Information of the other party
is the exclusive property of the other party and except as required by
law will not disclose any Confidential Information of such other
party. Information relating to the Users of the Bolt Mobile Channel
(including but not limited to Impression, click stream, usage and
session data), as customers or prospective customers or otherwise,
shall belong solely to ATTWS.
10.2 RESERVED.
10.3 INDEPENDENT CONTRACTORS. ATTWS and Bolt are independent
contractors under this Agreement, and nothing herein shall be
construed to create a partnership, joint venture, franchise or agency
relationship between ATTWS and Bolt. Neither party has any authority
to enter into agreements of any kind on behalf of the other party.
10.4 ASSIGNMENT. Neither party may assign this Agreement or any of its
rights or delegate any of its duties (other than to an Affiliate)
under this Agreement without the prior written consent of the other
party, not to be unreasonably withheld; except that either party may,
without the other party's consent, assign this Agreement or any of its
rights or delegate any of its duties under this Agreement: (a) to any
Affiliate of such party; or (b) to any purchaser of all or
substantially all of such party's assets or to any successor by way of
merger, consolidation or similar transaction. Subject to the
foregoing, this Agreement will be binding upon, enforceable by, and
inure to the benefit of the parties and their respective successors
and assigns.
10.5 NONWAIVER. No waiver of any breach of any provision of this
Agreement shall constitute a waiver of any prior, concurrent or
subsequent breach of the same or any other provisions hereof, and no
waiver shall be effective unless made in writing and signed by an
authorized representative of the waiving party.
10.6 FORCE MAJEURE. Neither party shall be deemed to be in default of
or to have breached any provision of this Agreement as a result of any
delay, failure in performance or interruption of service, resulting
directly or indirectly from acts of God, acts of civil or military
authorities, civil disturbances, wars, strikes or other labor
disputes, fires, transportation contingencies, interruptions in
telecommunications or Internet services or network provider services,
failure of equipment and/or software, other catastrophes or any other
occurrences which are beyond such party's reasonable control.
10.7 NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be given in writing and delivered in
person, mailed via confirmed facsimile or e-mail, or delivered by
recognized courier service, properly addressed and stamped with the
required postage, to the applicable party at its address specified
below and shall be deemed effective upon receipt. Either party may
from time to time change the individual to receive notices or its
address by giving the other party notice of the change in accordance
with this section.
To ATTWS: To Bolt:
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<PAGE> 13
(if by regular mail) Bolt, Inc.
AT&T Wireless Services, Inc. 304 Hudson Street, 7th Floor
PO Box 97061 New York, NY 10013
Redmond, WA 98073
Attn: Andy Willett Attn: Justin Nesci
(if by overnight mail)
AT&T Wireless Services, Inc.
7277 - 164th Avenue NE
Redmond, WA 98052
Attn: Andy Willett
In addition, a copy of any notice of change of address, or of
termination or any alleged breach of this Agreement, shall be thus
sent to the applicable party at the following address:
To ATTWS: To Bolt:
AT&T Wireless Services, Inc. Bolt, Inc.
at the above addresses At the above address
Attn: Legal Department Attn: General Counsel
Fax: 212-620-4315
Attn: General Counsel
10.8 SAVINGS. In the event any provision of this Agreement shall for
any reason be held to be invalid, illegal or unenforceable in any
respect, the remaining provisions shall remain in full force and
effect. If any provision of this Agreement shall, for any reason, be
determined by a court of competent jurisdiction to be excessively
broad or unreasonable as to scope or subject, such provision shall be
enforced to the extent necessary to be reasonable under the
circumstances and consistent with applicable law while reflecting as
closely as possible the intent of the parties as expressed herein.
10.9 INTEGRATION. This Agreement contains the entire understanding of
the parties hereto with respect to the transactions and matters
contemplated hereby, supersedes all previous agreements or
negotiations between Bolt and ATTWS concerning the subject matter
hereof (other than the Nondisclosure Agreement entered into between
the parties, which shall remain in force in accordance with its
terms), and cannot be amended except by a writing signed by both
parties.
10.10 COUNTERPARTS; ELECTRONIC SIGNATURE. This Agreement may be
executed in counterparts, each of which will be deemed an original,
and all of which together constitute one and the same instrument. To
expedite the process of entering into this Agreement, the parties
acknowledge that Transmitted Copies of the Agreement will be
equivalent to original documents until such time as original documents
are completely
-13-
<PAGE> 14
executed and delivered. "Transmitted Copies" will mean copies that are
reproduced or transmitted via photocopy, facsimile or other process of
complete and accurate reproduction and transmission.
10.11 IN WITNESS WHEREOF, the parties have duly executed and delivered
this Agreement as of the Effective Date.
AT&T WIRELESS SERVICES, INC. BOLT, INC.
("ATTWS") ("BOLT")
<TABLE>
<S> <C>
By /s/ Kendra VanderMeulen By /s/ Daniel A. Pelson
- ----------------------------------------- -----------------------------------
Name Kendra VanderMeulen Name Daniel A. Pelson
- ----------------------------------------- -----------------------------------
Title Sr. Vice President Title Chairman & CEO
- ----------------------------------------- -----------------------------------
</TABLE>
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<PAGE> 15
EXHIBIT A
ATTWS DELIVERABLES
1. ATTWS will provide demo PocketNet(R) handsets (in a quantity
to be determined by ATTWS), necessary documentation, and
engineering and technical resources necessary to support
development by Bolt of content and applications for the Bolt
Mobile Channel included in PocketNet(R) Service.
2. ATTWS, in its sole discretion, will decide which, if any, Bolt
branded content and applications to include in the channels it
defines in each of its PocketNet(R) packages and where to place
this content or applications in the menus. ATTWS will program
the overall PocketNet(R) menu and will seek to provide
efficient and consistent user navigation. Bolt will assist
ATTWS in determining such navigation with ATTWS retaining final
approval on all such "look and feel" and navigation.
3. All PocketNet(R) Service Subscribers that are sourced from
distribution or promotion, to be defined by the Parties, by
Bolt or from the Bolt Web Site shall receive the "Bolt Mobile"
channel pre-configured as the default mobile channel.
4. ATTWS will provide technical support information,
documentation, and engineering and technical support for the
connection between the ATTWS on line store and the Bolt Web
Site.
5. ATTWS will provide access to marketing and media team for the
planning and implementation of the co-branded marketing and
media programs.
A-1
<PAGE> 16
EXHIBIT B
BOLT DELIVERABLES
1. Bolt shall provide mobile format (WML) applications on
PocketNet(R)'s Bolt Wireless Portal. Bolt will also provide HTML
applications for use on non-mobile devices to assist Users in
connection with the PocketNet(R) Services. These applications
will, at a minimum, consist of those listed in Item 8 below. Bolt
agrees to use commercially reasonable efforts to continue to add
additional content and applications as these become available
from Bolt. These Bolt applications will be branded the Bolt
Mobile Channel or an equivalent, as mutually agreed by ATTWS and
Bolt, within the Bolt mobile channel.
2. Bolt will promote the ATTWS' PocketNet(R) and DMN Service in
relevant locations on the Bolt site as mutually agreed by Bolt
and ATTWS.
3. Bolt will develop a promotional media campaign to support
Section 5 of the Agreement and an online tutorial and demo that
allows users to try before you buy. Additionally, this will
include a significant amount of product pre-selling throughout
the Bolt.com user experience to show users the specific ways they
can benefit from these services. The online campaign will use
commercially reasonable efforts to guarantee ATTWS exposure to
all of the visitors to Bolt.com media network including Bolt's
online distribution partners (Yahoo!, MSN/Hotmail, AOL, and
ESPN).
4. Bolt will maintain a channel on the Bolt Mobile Homedeck
branded by ATTWS and to be used by PocketNet(R) subscribers for
customer support and other services to be determined by ATTWS.
This channel will appear no lower than line 8 on the first
customer screen.
5. Bolt will use commercially reasonable efforts to make the Bolt
Mobile Channel feature complete, tested and production-ready for
PocketNet(R) Service launch, forecast for [ * ]. The exact date
will be determined by Bolt and ATTWS.
6. The Bolt Mobile Channel will be comprised of HDML pages
specifically designed for wireless delivery, and will not rely on
automated reformatting of HTML web pages. In addition, SMS may be
used as a delivery mechanism for alerts. In future versions of
the Bolt Mobile Channel, WML may be used instead of HDML. In
addition to the content and services provided by Bolt, Bolt will
aggregate additional content providers to meet all the content
needs of the teen market.
7. Bolt will create a series of research projects and a constant
services evaluation process to determine what customers use and
like. Research will focus on reducing user churn and creating new
products and services to meet users' evolving needs. Research
studies will cover screen for all ATTWS services, customer screen
and an optimization study.
B-1
<PAGE> 17
8. Bolt will use commercially reasonable efforts to include the
following components in the Bolt Mobile Channel:
COMMUNITY:
Bolt notes - simplified email; internal only; no
folders or attachments; same username
- full message (up to 156 characters)
- receiver preferences (sender, subject,
content; urgency; receipt preferences)
- notification - total / new
- control panels to manage ACLs,
squelching as soon as possible
- notification of board responses, sales,
promotions, wish lists as soon as possible
EMail - notification - total / new
- receiver preferences (sender, subject,
content; urgency; receipt preferences)
- control panels to manage ACLs;
squelching
- sender preferences (urgency, format)
- chat alerts
Voicemail - notification - total / new
- receiver preferences (sender, subject,
content, urgency; receipt preferences)
- control panels to manage ACLs;
squelching - sender preferences (urgency,
format)
- chat alerts
Buddy List - Bolt Zap notification as soon as possible
- notification of who is online as soon as
possible
- potential call in for who is on phone as
soon as possible
- potential integration with AT&T "click to
dial" services as soon as possible
Calendar - SMTP based alerts
- alert notification for chats/events/
personal controls
-
CONTENT:
Bolt delivered through SMTP gateway include:
- Horoscopes
- Quote of the Day
B-2
<PAGE> 18
- Slang of the Day
- Joke of the Day
- Bolt Content Tours
- TV/Movie Previews
- Poll Results
9. [*]
B-3
<PAGE> 19
EXHIBIT C
ADDITIONAL OBLIGATIONS
SERVICE LEVEL REQUIREMENTS: Bolt will perform all hosting and related
operational activities in support of the operation of the Bolt Mobile
Channel, and will use commercially reasonable efforts to ensure
accessibility of the Bolt Mobile Channel during the Term of this
Agreement. Bolt shall make the Bolt Mobile Channel available 24 hours
a day, seven days a week for the duration of Term, with the exception
of scheduled service downtimes, which shall not exceed 1 hour per
month, if at all, and shall occur in minimum usage periods. For
content served by Bolt as part of the Bolt Mobile Channel, Bolt shall
ensure that the maximum site shall maintain responsiveness equivalent
or better than comparable services on the Internet.
Bolt and ATTWS shall define a mutually agreeable level of service and
accessibility requirements for the Bolt Mobile Channel ("Service Level
Requirements") that will include, among other things, a disaster
recovery plan. Both parties shall cooperate to define the Service
Level Requirements within thirty (30) days of Effective Date. The
Service Level Requirements will include financial consequences to
Bolt, as agreed by the parties, in the event that Bolt's performance
falls below the minimum levels agreed in the Service Level
Requirements at any time during a month.
NEW SERVICE RELEASE REQUIREMENTS : Bolt and ATTWS shall define a
mutually agreeable method for introducing, testing, and releasing new
services onto the Bolt Mobile Channel ("New Service Release
Requirements"). Both parties shall cooperate to define the New Service
Release Requirements within thirty (30) days of Effective Date.
CONTACT FOR ASSISTANCE. Bolt and ATTWS will be available to provide
assistance to each other in resolving service complaints, technical
problems and all other issues related to the Bolt Mobile Channel
service seven days a week, 24 hours a day. The initial contact person
for each party is set forth below. Any change in the contact
information must be delivered in writing to the other party prior to
such change.
Bolt:
Mark Stutzman
Tel: 212-620-5900, ext. 239
ATTWS:
Chris Boody
Tel: 425-580-8400
C-1
<PAGE> 20
EXHIBIT D
1. BASE FEE. ATTWS will pay [ * ] to Bolt within 60 days of the date hereof in
consideration for the development and initialization of the Bolt Mobile Channel
and other valuable consideration.
2. COMMISSIONS TO BOLT. In addition to the Base Fee, for each
PocketNet(R) Subscriber who was sourced through Bolt (e.g., passed to ATTWS
online store from Bolt.com), ATTWS will pay to Bolt a commission based on the
amount of monthly access charge for ATTWS wireless voice service committed by
such PocketNet Subscriber based on the rate plan chosen by such PocketNet
Subscriber, according to the following table:
Rate Plan Monthly Access Commission
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
In the event Bolt sources [ * ] ATTWS Subscribers within the first
year of this Agreement, ATTWS will pay [ * ] bonus to Bolt.
3. COMMISSIONS TO ATTWS. Bolt will pay to ATTWS [ * ] of gross revenue
of all ecommerce generated through the PocketNet(R) Service and [ * ] for each
new Bolt customer generated by the PocketNet Service for the Term of the
Agreement.
4. ADVERTISING PURCHASE BY ATTWS. ATTWS agrees to purchase
approximately [* ] worth of advertising and/or sales and promotional inventory,
which may include banner ads, text or logo links. All such inventory shall be
used to promote the launch on the Bolt Mobile Channel. Bolt and ATTWS will
prepare and mutually agree to a spending plan allocating the above advertising
purchase to the type and frequency of advertising to be funded by the purchase
hereunder.
5. COOPERATIVE ADVERTISING FUNDS. In accordance with guidelines that
may be issued by ATTWS from time to time, Bolt may qualify to earn cooperative
advertising funds ("Coop Funds") which will accrue in a cooperative advertising
account ("Coop Account") for purposes of reimbursing Bolt for certain
advertising of ATTWS' PocketNet Service.
a. ACCRUAL AMOUNTS. The amount of Coop Funds that
will accrue in the Coop Fund for each PocketNet Subscriber is [ * ].
b. QUALIFIED ADVERTISING. [ * ]
D-1
<PAGE> 21
C. FORFEITURE OF FUNDS. All unused Coop Funds
credited to the Coop Account during any calendar quarter will be permanently
forfeited to ATTWS at the end of the next calendar quarter, unless by the end
of that subsequent calendar quarter Bolt has (i) requested reimbursement for
qualified advertising on the forms and according to the reasonable procedures
established by ATTWS; (ii) has submitted to ATTWS or ATTWS' designee the
appropriate documentation; and (iii) has complied with the terms of this
Agreement and any ATTWS advertising guidelines. No interest will be paid to
Bolt on funds credited to the Coop Account and any amounts remaining in the
Coop Account upon termination or expiration of this Agreement will be forfeited
to ATTWS.
D-2
<PAGE> 1
EXHIBIT 10.16
LEASE
195 PROPERTY COMPANY,
LANDLORD
TO
BOLT, INC.,
TENANT
PREMISES:
THE ENTIRE SEVENTEENTH (17TH) AND NINETEENTH (19TH) FLOORS
AND
A PORTION OF THE EIGHTEENTH (18TH) FLOOR
AT
195 BROADWAY,
NEW YORK, NEW YORK 10007
<PAGE> 2
TABLE OF CONTENTS
CAPTION PAGE
ARTICLE 1 Demise, Premises, Term, Rents....................................1
ARTICLE 2 Use..............................................................6
ARTICLE 3 Failure To Give Possession.......................................8
ARTICLE 4 Preparation of the Demised Premises..............................9
ARTICLE 5 Adjustments of Rent.............................................11
ARTICLE 6 Security Deposit................................................22
ARTICLE 7 Subordination, Notice to Lessors and Mortgagees.................26
ARTICLE 8 Quiet Enjoyment.................................................29
ARTICLE 9 Assignment And Subletting.......................................29
ARTICLE 10 Compliance With Laws And Requirements Of Public Authorities.....38
ARTICLE 11 Insurance.......................................................40
ARTICLE 12 Rules And Regulations...........................................44
ARTICLE 13 Tenant's Changes................................................45
ARTICLE 14 Tenant's Property...............................................48
ARTICLE 15 Repairs And Maintenance.........................................50
ARTICLE 16 Electricity.....................................................51
ARTICLE 17 Heat, Ventilating And Air-Conditioning..........................57
ARTICLE 18 Landlord's Other Services.......................................59
ARTICLE 19 Access, Changes In Building Facilities, Name....................61
ARTICLE 20 Notice Of Accidents.............................................63
ARTICLE 21 Non-Liability And Indemnification...............................64
ARTICLE 22 Destruction Or Damage...........................................65
ARTICLE 23 Eminent Domain..................................................67
ARTICLE 24 Surrender; Holdover.............................................69
ARTICLE 25 Conditions Of Limitation........................................70
ARTICLE 26 Re-Entry By Landlord............................................72
ARTICLE 27 Damages.........................................................73
ARTICLE 28 Waiver..........................................................75
ARTICLE 29 No Other Waivers Or Modifications...............................76
ARTICLE 30 Curing Tenant's Defaults, Additional Rent.......................77
ARTICLE 31 Broker..........................................................78
i
<PAGE> 3
ARTICLE 32 Notices.........................................................78
ARTICLE 33 Estoppel Certificate............................................79
ARTICLE 34 Arbitration.....................................................79
ARTICLE 35 No Other Representations, Construction, Governing Law,
Consents......................................................80
ARTICLE 36 Parties Bound...................................................81
ARTICLE 37 Certain Definitions And Construction............................81
ARTICLE 38 Adjacent Excavation And Construction; Shoring; Vaults...........82
ARTICLE 39 Renewal Option..................................................82
ARTICLE 40 Real Estate Tax Abatement.......................................85
ARTICLE 41 Additional Space Option.........................................88
ARTICLE 42 Antenna.........................................................92
ARTICLE 43 Storage Space...................................................95
EXHIBIT A DESCRIPTION.................................................99
EXHIBIT B FLOOR PLANS................................................100
EXHIBIT C HEATING, VENTILATING AND AIR-CONDITIONING SYSTEM...........101
EXHIBIT D RULES AND REGULATIONS......................................102
EXHIBIT E DEFINITIONS................................................106
EXHIBIT F CLEANING SPECIFICATIONS....................................109
EXHIBIT G CERTIFICATE OF OCCUPANCY...................................111
EXHIBIT H FORM OF LETTER OF CREDIT...................................112
EXHIBIT I OPTION SPACE...............................................114
EXHIBIT J STORAGE SPACE..............................................115
- -------------------------
This Index is included only as a matter of convenience of reference and
shall not be deemed or construed in any way to define or limit the scope of the
following lease or the intent of any provision thereof.
ii
<PAGE> 4
LEASE
LEASE dated as of February 18, 2000, between 195 PROPERTY COMPANY, a
New York partnership, having an office at 101 Park Avenue, New York, New York
10178 (hereinafter referred to as "LANDLORD") and BOLT, INC., a Delaware
corporation having an office at 304 Hudson Street, 7th Floor North, New York,
New York 10013 (hereinafter referred to as "TENANT").
WITNESSETH:
ARTICLE 1
DEMISE, PREMISES, TERM, RENTS
1.01 Landlord hereby leases to Tenant, and Tenant hereby hires
from Landlord, the premises hereinafter described, in the building located at
195 Broadway, in the Borough of Manhattan, City, County and State of New York
(hereinafter referred to as the "BUILDING"), on the parcel of land more
particularly described in EXHIBIT A (hereinafter referred to as the "LAND"), for
the term hereinafter stated, for the rents hereinafter reserved and upon and
subject to the conditions (including limitations, restrictions and reservations)
and covenants hereinafter provided. Each party hereby expressly covenants and
agrees to observe and perform all of the conditions and covenants herein
contained on its part to be observed and performed.
1.02 The premises hereby leased to Tenant are the seventeenth
(17th) floor (hereinafter referred to as the "17TH PREMISES"), the nineteenth
(19th) floor (hereinafter referred to as the "19TH PREMISES") and a portion of
the eighteenth (18th) floor (hereinafter referred to as the "18TH PREMISES") of
the Building, as shown on the floor plans annexed hereto as EXHIBIT B. Said
premises, together with all fixtures and equipment which at the commencement, or
during the term, of this lease are thereto attached (except items not deemed to
be included therein and removable by Tenant as provided in Article 14),
constitute and are hereinafter collectively
1
<PAGE> 5
referred to as the "DEMISED PREMISES".
1.03 The term of this lease, for which the Demised Premises
are hereby leased, shall commence (a) with respect to the 17th Premises, on the
date (hereinafter referred to as the "17TH FLOOR COMMENCEMENT DATE") which shall
be the day on which "Landlord's Work" (other than the "Lavatory Work") (as such
terms are defined in Article 4) in the 17th Premises has been substantially
completed (as set forth in Section 4.04) and vacant, broom clean possession of
the 17th Premises is available to Tenant and Landlord shall have given Tenant at
least five (5) days notice thereof (which notice, notwithstanding anything in
this lease to the contrary, may be hand-delivered), (b) with respect to the 18th
Premises, on the date (hereinafter referred to as the "18TH FLOOR COMMENCEMENT
DATE") which shall be the day on which "Landlord's Work" (other than the
"Lavatory Work") (as such terms are defined in Article 4) in or with respect to
the 18th Premises has been substantially completed (as set forth in Section
4.04) and vacant, broom clean possession of the 18th Premises is available to
Tenant and Landlord shall have given Tenant at least five (5) days notice
thereof (which notice, notwithstanding anything in this lease to the contrary,
may be hand-delivered) and (c) with respect to the 19th Premises, on the date
(hereinafter referred to as the "19TH FLOOR COMMENCEMENT DATE") which shall be
the day on which "Landlord's Work" (other than the "Lavatory Work") (as such
terms are defined in Article 4) in the 19th Premises has been substantially
completed (as set forth in Section 4.04) and vacant, broom clean possession of
the 19th Premises is available to Tenant and Landlord shall have given Tenant at
least five (5) days notice thereof (which notice, notwithstanding anything in
this lease to the contrary, may be hand-delivered), and shall end at noon of the
last day of the calendar month in which occurs the day preceding the tenth
(10th) anniversary of the "19th Floor Rent Commencement Date" (as defined in
Section 1.08), which ending date is hereinafter referred to as the "EXPIRATION
DATE", or shall end on such earlier date upon which said term may expire or be
cancelled or terminated pursuant to any of the conditions or covenants of this
lease or pursuant to law. Promptly following the 17th Floor Commencement Date,
the 18th Floor Commencement Date and the 19th Floor Commencement Date,
respectively, the parties hereto (hereinafter sometimes referred to as the
"PARTIES") shall enter into a recordable supplementary agreement fixing the
dates of the respective Commencement Dates and the Expiration Date and if they
cannot agree thereon within fifteen (15) days after Landlord's request therefor,
such dates shall be determined by arbitration in the manner provided in Article
34. Pending such determination, the dates designated by Landlord shall control
with a retroactive adjustment, if required, if Landlord's designation is
determined to be incorrect. The 17th Floor Commencement Date, the 18th Floor
Commencement Date and the 19th Floor Commencement Date are sometimes hereinafter
individually referred to as a "COMMENCEMENT DATE" and collectively as the
"COMMENCEMENT DATES").
1.04 The "rents" reserved under this lease, for the term
thereof, shall be and consist of:
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(a) "fixed rent" for the 17th Premises as follows:
(i) $1,091,424.00 per annum ($90,952.00 per
month) from the 17TH FLOOR RENT COMMENCEMENT DATE (as hereafter defined) through
the day next preceding the fifth (5th) anniversary of the 17th Floor Rent
Commencement Date, both dates inclusive; and
(ii) $1,227,852.00 per annum ($102,321.00
per month) from the fifth (5th) anniversary of the 17th Floor Rent Commencement
Date and continuing thereafter throughout the remainder of the initial term of
the lease,
all of which shall be payable in equal monthly installments in advance on the
first day of each and every calendar month during the term of this lease, and
(b) "fixed rent" for the 18th Premises as follows:
(iii) $746,208.00 per annum ($62,184.00 per
month) from the 18TH FLOOR RENT COMMENCEMENT DATE (as hereafter defined) through
the day next preceding the fifth (5th) anniversary of the 18th Floor Rent
Commencement Date, both dates inclusive; and
(iv) $839,484.00 per annum ($69,957.00 per
month) from the fifth (5th) anniversary of the 18th Floor Rent Commencement Date
and continuing thereafter throughout the remainder of the initial term of the
lease,
all of which shall be payable in equal monthly installments in advance on the
first day of each and every calendar month during the term of this lease, and
(c) "fixed rent" for the 19th Premises as follows:
(i) $1,116,928.00 per annum ($93,077.33 per
month) from the 19TH FLOOR RENT COMMENCEMENT DATE (as hereafter defined) through
the day next preceding the fifth (5th) anniversary of the 19th Floor Rent
Commencement Date, both dates inclusive; and
(ii) $1,256,544.00 per annum ($104,712.00
per month) from the fifth (5th) anniversary of the 19th Floor Rent Commencement
Date and continuing thereafter throughout the remainder of the initial term of
the lease,
all of which shall be payable in equal monthly installments in advance on the
first day of each and every calendar month during the term of this lease, and
(d) "ADDITIONAL RENT" for the Demised Premises
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consisting of all such other sums of money as shall become due from and payable
by Tenant to Landlord hereunder (for default in payment of which Landlord shall
have the same remedies as for a default in payment of fixed rent),
all to be paid to Landlord at its office, or such other place, or to such agent
and at such place, as Landlord may designate by notice to Tenant, in lawful
money of the United States of America.
1.05 Tenant shall pay the fixed rent and additional rent
herein reserved promptly as and when the same shall become due and payable,
without demand therefor and without any abatement, deduction or setoff
whatsoever except as expressly provided in this lease.
1.06 If the 17th Floor Rent Commencement Date, the 18th Floor
Rent Commencement Date or the 19th Floor Rent Commencement Date occurs on a day
other than the first day of a calendar month or the Expiration Date occurs on a
day other than the last day of a calendar month, the fixed rent for such
calendar month shall be prorated.
1.07 Tenant acknowledges that it has no rights to any
development rights, "air rights" or comparable rights appurtenant to the Land
and Building, and consents, without further consideration, to any utilization of
such rights by Landlord and agrees, at no cost or expense to Tenant (other than
de minimus legal fees or other expenses), to promptly execute and deliver any
instruments which may be requested by Landlord, including instruments merging
zoning lots, evidencing such acknowledgment and consent. The provisions of this
Section l.07 shall be deemed to be and shall be construed as an express waiver
by Tenant of any interest Tenant may have as a "party in interest" (as such
quoted term is defined in Section 12-10 Zoning Lot of the Zoning Resolution of
the City of New York) in the Land and Building.
1.08 For purposes of this lease, (a) the term 17TH FLOOR RENT
COMMENCEMENT DATE shall mean the date which is the four (4) month anniversary of
the 17th Floor Commencement Date, it being agreed and understood that Tenant
shall have no obligation to pay any fixed rent as to the 17th Premises during
the period from the 17th Floor Commencement Date to the 17th Floor Rent
Commencement Date (hereinafter referred to as the "17TH FLOOR ABATEMENT
PERIOD"), (b) the term 18TH FLOOR RENT COMMENCEMENT DATE shall mean the date
which is the four (4) month anniversary of the 18th Floor Commencement Date, it
being agreed and understood that Tenant shall have no obligation to pay any
fixed rent as to the 18th Premises during the period from the 18th Floor
Commencement Date to the 18th Floor Rent Commencement Date (hereinafter referred
to as the "18TH FLOOR ABATEMENT PERIOD"), and (c) the term 19TH FLOOR RENT
COMMENCEMENT DATE shall mean the date which is the four (4) month anniversary of
the 19th Floor Commencement Date, it being agreed and understood that Tenant
shall have no obligation to pay any fixed rent as to the 19th Premises during
the period from the 19th Floor Commencement Date to the 19th Floor Rent
Commencement Date (hereinafter referred to as the "19TH FLOOR ABATEMENT
PERIOD"). The 17th Floor Abatement Period, the 18th Floor
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Abatement Period and the 19th Floor Abatement Period are sometimes hereinafter
individually referred to as an "ABATEMENT PERIOD" and collectively as the
"ABATEMENT PERIODS".
1.09 Notwithstanding anything in this lease to the contrary,
if "Landlord's Work" (other than the "Lavatory Work") (as such terms are defined
in Article 4) as to the 17th Premises is not substantially completed (as set
forth in Section 4.04) within sixty (60) days (hereinafter referred to as the
"17TH PREMISES WORK PERIOD") of the date hereof, then, as Tenant's sole and
exclusive right and remedy, the 17th Floor Abatement Period shall be extended by
one (1) day for each day (up to thirty (30) days) after the end of the 17th
Premises Work Period that said Landlord's Work as to the 17th Premises is not
substantially completed and one and one-half (1-1/2) days for each day after
the thirtieth (30th) day following the end of the 17th Premises Work Period that
said Landlord's Work as to the 17th Premises is not substantially completed.
Such extension of the 17th Floor Abatement Period shall not extend the
Expiration Date.
1.10 Notwithstanding anything in this Lease to the contrary,
if "Landlord's Work" (other than the "Lavatory Work") (as such terms are defined
in Article 4) as to the 18th Premises is not substantially completed (as set
forth in Section 4.04) within sixty (60) days (hereinafter referred to as the
"18TH PREMISES WORK PERIOD") of the date hereof, then, as Tenant's sole and
exclusive right and remedy, the 18th Floor Abatement Period shall be extended by
one (1) day for each day (up to thirty (30) days) after the end of the 18th
Premises Work Period that said Landlord's Work as to the 18th Premises is not
substantially completed and one and one-half (1-1/2) days for each day after
the thirtieth (30th) day following the end of the 18th Premises Work Period that
said Landlord's Work as to the 18th Premises is not substantially completed.
Such extension of the 18th Floor Abatement Period shall not extend the
Expiration Date.
1.11 Notwithstanding anything in this lease to the contrary,
if "Landlord's Work" (other than the "Lavatory Work") (as such terms are defined
in Article 4) as to the 19th Premises is not substantially completed (as set
forth in Section 4.04) within the period from May 1, 2000 to July 1, 2000
(hereinafter referred to as the "19TH PREMISES WORK PERIOD"), then, as Tenant's
sole and exclusive right and remedy, the 19th Floor Abatement Period shall be
extended by one (1) day for each day (up to thirty (30) days) after the end of
the 19th Premises Work Period that said Landlord's Work as to the 19th Premises
is not substantially completed and one and one-half (1-1/2) days for each day
after the thirtieth (30th) day following the end of the 19th Premises Work
Period that said Landlord's Work as to the 19th Premises is not substantially
completed. Such extension of the 19th Floor Abatement Period shall not extend
the Expiration Date. If any existing tenant in any portion of the 19th Premises
holds-over beyond May 15, 2000, Landlord agrees to use reasonable efforts to
remove such hold-over from the 19th Premises and otherwise obtain possession of
the 19th Premises, including, without limitation, the institution and diligent
prosecution of holdover proceedings.
ARTICLE 2
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USE
2.01
(a) Tenant and any permitted occupant, subtenant or
assignee of Tenant shall use and occupy the Demised Premises for executive and
general offices, and incidental related uses, and for no other purpose.
(b) Notwithstanding anything to the contrary
contained above or elsewhere in this Lease, portions of the Demised Premises may
be used for the following: (i) installation and operation of one or more pantry
areas for reheating but not for cooking, including microwave oven, dwyer unit,
one or more refrigerators and other similar equipment and machines for the
preparation and storage of food and beverages for Tenant's officers and
directors, employees and staff; (ii) sale in the Demised Premises for Tenant's
officers and directors, employees, staff and business visitors, by vending
machines of any item the sale of which is not prohibited by law, whether by
Tenant or third parties; (iii) use of an area of the Demised Premises as a
lunchroom for consumption of food and beverages by Tenant's officers and
directors, employees, staff and business visitors; (iv) installation and
operation in the Demised Premises of electronic data and word processing
equipment and business machines and printing and other reproducing equipment;
(v) installation and operation of communication equipment (such as telecopiers,
telex and the like); (vi) exercise area (with showers); and (vii) employee
lounges.
2.02 If any governmental license or permit, other than a
Certificate of Occupancy or any other license or permit required for mere
occupancy of the Demised Premises for the purposes set forth in Section 2.01(a)
shall be required for the proper and lawful conduct of Tenant's business in the
Demised Premises, or any part thereof, and if failure to secure such license or
permit would in any way adversely affect Landlord, Tenant, at its expense, shall
duly procure and thereafter maintain such license or permit and submit the same
for inspection by Landlord. Tenant shall at all times comply with the terms and
conditions of each such license or permit. Upon Tenant's request and at Tenant's
expense, Landlord shall join in the application for any licenses, permits,
approvals and authorizations (except for an application to change the
Certificate of Occupancy) whenever such joining by Landlord shall be required by
any governmental agency having jurisdiction.
2.03 Tenant shall not at any time use or occupy, or suffer or
permit anyone to use or occupy, the Demised Premises, or do or permit anything
to be done in the Demised Premises, in violation of the Certificate of Occupancy
for the Demised Premises or for the Building, a true and complete copy of which
is annexed hereto as EXHIBIT G.
2.04 Landlord shall permit Tenant and its agents to enter upon
the 17th Premises and the 18th Premises prior to the Commencement Dates with
respect thereto (and the 19th
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Premises after any existing tenant vacates, but prior to the Commencement Date
with respect thereto) so that Tenant or its agents or architect may perform
"Tenant's Work" (as defined in Section 4.03) utilizing its own contractors (to
be first approved in writing by Landlord which approval shall not be
unreasonably withheld or delayed as hereinafter set forth) and in accordance
with plans and specifications as approved in writing by Landlord (which approval
shall not be unreasonably withheld or delayed as hereinafter set forth). The
approved contractors performing Tenant's Work may perform Tenant's Work at the
same time that Landlord's contractors are working in such portions of the
Demised Premises, provided, however, that (a) the construction of such portions
of the Demised Premises, and all installations required to be made by Landlord
therein, shall have reached a point at which, in Landlord's reasonable judgment,
the performance of Tenant's Work will not delay or hamper Landlord in the
completion of the same and (b) Tenant and its contractors shall work in harmony
and shall not interfere with Landlord or Landlord's contractors. Landlord may,
at any time, deny access to such portions of the Demised Premises to Tenant
and/or to any of its contractors in the event that Landlord shall, in its
reasonable discretion, determine that the performance or manner of performance
of Tenant's Work interferes with, delays, hampers, or prevents Landlord from
proceeding with the completion of Landlord's Work at the earliest possible time.
In connection with the foregoing sentence, within twenty-four (24) hours after
Landlord's direction (which need not be given in writing and may be given by
Landlord or its agents or contractors to Tenant or its agents or contractors),
Tenant shall, and cause its contractors to, withdraw from the Building and such
portions of the Demised Premises and cease all work being performed by it or on
its behalf by any person, firm, or corporation (other than Landlord). Tenant
shall pay to Landlord, as additional rent, within ten (10) days after submission
to Tenant of a statement therefor, an amount equal to all costs incurred by
Landlord in connection with such early entry by Tenant including, without
limitation, costs for freight elevator service. All requests for any freight
elevator service shall be made by Tenant in writing.
2.05 In the event that Tenant or its contractor shall be
permitted to enter upon the 17th Premises or the 18th Premises (or the 19th
Premises after any existing tenant vacates) prior to the Commencement Dates with
respect thereto pursuant to the terms of Section 2.04 above, such entry shall be
deemed to be upon all of the terms, provisions and conditions of the Lease,
except as to the covenant to pay fixed rent and additional rent. In connection
therewith, Tenant and/or its contractors shall provide to Landlord, and shall
maintain at all times during the performance of any Tenant's Work, Builder's
Risk, worker's compensation, public liability and property damage insurance
policies, all of which shall contain limits, be with companies and be in form as
required pursuant to Article 11 of this lease. Certificates of the same shall be
furnished to Landlord before Tenant or its contractors commence to perform
Tenant's Work. Landlord shall not be liable in any way for any injury, loss or
damage that may occur to any of Tenant's or Tenant's contractors' decorations,
fixtures, installations, supplies, materials, or equipment prior to the
Commencement Date unless due to the negligence of Landlord or its agents or
contractors (it being understood and agreed that Landlord has no obligation to
secure
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same or take any action with respect thereto. Except as set forth in the
preceding sentence, any such entry by Tenant and/or its contractors shall be at
their sole risk.
ARTICLE 3
FAILURE TO GIVE POSSESSION
3.01 If the Demised Premises or any additional space to be
included within the Demised Premises shall not be available for occupancy by
Tenant on the specific date hereinbefore designated for the commencement of the
term of this lease or for the inclusion of such space by reason of the holding
over or retention of possession by any tenant, subtenant or any occupant or for
any reason whatsoever, then this lease shall not be affected thereby but, in
such case, said specific date shall be deemed to be postponed until the date
when the Demised Premises or the additional space, as the case may be, shall be
available for occupancy by Tenant and Tenant shall have been notified thereof by
Landlord, in each case, in the manner required pursuant to the terms of this
lease, and Tenant shall not be entitled to possession of the Demised Premises or
the additional space until the same are so available for occupancy by Tenant;
provided, however, except as otherwise expressly set forth herein, Tenant shall
have no claim against Landlord and, except as otherwise expressly set forth
herein, Landlord shall have no liability to Tenant by reason of any such
postponement of said specific date, and the parties hereto further agree that
any failure to have the Demised Premises or such additional space available for
occupancy by Tenant on said specific date or on the Commencement Date shall in
no way affect the obligations of Tenant hereunder except as otherwise expressly
set forth herein, nor shall the same be construed in any way to extend the term
of this lease. Landlord agrees to use reasonable efforts to obtain possession of
the Demised Premises or such additional space, including, without limitation,
the institution and diligent prosecution of hold-over proceedings, in the event
of a holdover. This Section 3.01 shall be deemed to be an express provision to
the contrary of Section 223-a of the Real Property Law of the State of New York
and any other law of like import now or hereafter in force.
ARTICLE 4
PREPARATION OF THE DEMISED PREMISES
4.01 Tenant has fully inspected the Demised Premises and is
satisfied with the condition thereof and except for Landlord's performance of
"Landlord's Work", as hereinafter defined, Tenant agrees to accept possession of
the Demised Premises in their "as is" condition.
4.02 Landlord agrees that it shall perform the following items
of work, at its expense, as "LANDLORD'S WORK" (all such work to be in accordance
with all applicable laws and code compliant):
(a) demolish all existing installations in the
Demised Premises including, without limitation, (i) removal of any asbestos or
asbestos containing
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material (and performance of fireproofing, if necessary) in accordance with
applicable law and delivery to Tenant of an ACP-5 certificate (sprinkler and
HVAC distribution ducts to be left in place) and (ii) removal of all existing
low voltage cabling and telephone wire from the Demised Premises (including from
existing telephone closets);
(b) scrape existing floors of the Demised Premises of
all previous floor finishes and patch existing floors of the Demised Premises,
where required, and deliver same in broom clean condition;
(c) core walls and base Building partitions of the
Demised Premises to be framed, taped and spackled and, if any free standing
columns are damaged by Landlord during demolition, same will be patched as
necessary;
(d) provide at least two (2) fire alarm points per
floor of the Demised Premises from the Building Class "E" System and a code
compliant remote terminal unit or data gathering panel as to the Demised
Premises with respect to the Building Class "E" System;
(e) repair windows, if necessary;
(f) construct a common corridor on the eighteenth
(18th) floor of the Building so as to make said eighteenth (18th) floor a legal
multi-tenant floor and erect a demising wall(s) as to the 18th Premises; and
(g) renovate existing men's and ladies lavatories on
each floor of the Demised Premises utilizing Building standard finishes,
fixtures and equipment, using all new materials, and place same in compliance
with The Americans With Disabilities Act of 1990, as amended (the work set forth
in this item (g) is hereinafter referred to as the "LAVATORY WORK");
Notwithstanding anything in this lease to the contrary, the Lavatory
Work with respect to each portion of the Demised Premises shall be performed
contemporaneously with the performance of "Tenant's Work" (as hereinafter
defined) in each such portion of the Demised Premises and shall be coordinated
with Tenant's Work and shall be substantially completed on or before the date
that is the later to occur of (i) three (3) days prior to the date that Tenant
has substantially completed Tenant's Work in the 17th Premises, the 18th
Premises, or the 19th Premises, as the case may be, and (ii) eight (8) weeks
after (A) the 17th Floor Commencement Date with respect to the 17th Premises,
(B) the 18th Floor Commencement Date with respect to the 18th Premises, and (C)
the 19th Floor Commencement Date with respect to the 19th Premises. In the event
the Lavatory Work as to any portion of the Demised Premises is not substantially
completed as aforesaid, then, as Tenant's sole and exclusive right and remedy,
the Abatement Period with respect to such portion of the Demised Premises shall
be extended by one (1) day for
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each day (up to thirty (30) days) after the date the respective Lavatory Work
should have been substantially completed and one and one-half (1-1-1/2) days for
each day thereafter until the respective Lavatory Work is substantially
completed. Any such extension of any Abatement Period or Abatement Periods shall
not extend the Expiration Date.
4.03 Any other installations, materials or work which may be
undertaken by or for the account of Tenant to equip, decorate or furnish the
Demised Premises for Tenant's occupancy (hereinafter referred to as "TENANT'S
WORK") shall be performed by Tenant, at its sole cost and expense, in accordance
with all the terms, covenants and conditions of this lease, including without
limitation, Articles 13 and 14 hereof, as if such Tenant's Work was a "Tenant's
Change" as defined in Article 13.
4.04 Landlord's Work shall be deemed substantially complete
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment, or decoration remain to be performed, the noncompletion
of which does not materially interfere with Tenant's use of the Demised Premises
or the performance of Tenant's Work. Within ten (10) days after notice from
Tenant, Landlord shall promptly commence, and thereafter diligently complete,
any incomplete items of Landlord's Work.
4.05 If and when Tenant shall take actual possession of each
portion of the Demised Premises after substantial completion of Landlord's Work
(other than the Lavatory Work) with respect thereto to prepare the same for
Tenant's occupancy, it shall be conclusively presumed that, except for the
performance by Landlord of the Lavatory Work, the same were in satisfactory
condition (except for latent defects) as of the date of such taking of
possession, unless within thirty (30) business days after the respective
Commencement Date as to such portion of the Demised Premises Tenant shall give
Landlord notice specifying the respects in which such portion of the Demised
Premises were not in satisfactory condition. Subject to the rights of existing
tenants in the Building and to the extent permitted under, and in accordance
with, the terms of leases with such existing tenants, Landlord agrees to
cooperate with Tenant with respect to the installation of electrical wiring (or
other similar items of Tenant's Work) for the 17th Premises in the ceiling
between the 17th Premises and the sixteenth (16th) floor below. In connection
with the installation of such electrical wiring (or other similar items of
Tenant's Work), Landlord agrees to exercise its right of access to such ceiling
on behalf of Tenant and Tenant agrees to do any work with respect to such
electrical wiring (or other similar items of Tenant's Work) on an after-hours
basis if necessary and to engage security guard services at Tenant's expense if
required by any of the other tenants in the Building.
ARTICLE 5
ADJUSTMENTS OF RENT
5.01 TAX ESCALATION. For the purpose of Sections 5.01-5.06:
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(a) "TAXES" shall mean the real estate taxes and
assessments and special assessments imposed upon the Building and the Land
including, without limitation, any assessments for public improvement or benefit
to the Building or Land, or the locality in which the Land is situated, such as
Business Improvement District taxes and assessments. If at any time during the
term of this lease the methods of taxation prevailing at the commencement of the
term hereof shall be altered so that in lieu of or as an addition to or as a
substitute for the whole or any part of the taxes, assessments, levies,
impositions or charges now levied, assessed or imposed on real estate and the
improvements thereon, there shall be levied, assessed or imposed (i) a tax,
assessment, levy, imposition or charge wholly or partially as capital levy or
otherwise on the rents received therefrom, or (ii) a tax, assessment, levy,
imposition or charge measured by or based in whole or in part upon the Demised
Premises and imposed upon Landlord, or (iii) a license fee measured by the rents
payable by Tenant to Landlord, then all such taxes, assessments, levies,
impositions or charges, or the part thereof so measured or based, shall be
deemed to be included within the term "Taxes" for the purposes hereof;
The term "Taxes" shall not include any income, franchise, transfer, inheritance,
capital stock or other similar tax imposed on Landlord unless, due to a future
change in the method of taxation, an income, franchise, transfer, inheritance,
capital stock or other tax shall be levied against Landlord in substitution for
any tax or increase therein which would otherwise constitute "Taxes", as defined
in the first sentence of paragraph (a), in which event such income, franchise,
transfer, inheritance, capital stock or other tax shall be deemed to be included
in the term "Taxes" but any such income or similar tax shall be computed as if
the Building and the Land were the only property of Landlord. The term "Taxes"
shall not include late charges or penalties.
Notwithstanding the provisions of Article 40 of this lease, the Taxes for the
"Base Tax Year" and any subsequent "Tax Year" (as such terms are hereafter
defined) shall not be deemed to be reduced as a result of any Abatement (as
defined in Article 40).
If, by law, any assessment may be paid in installments, then, for the purposes
hereof (i) such assessment shall be deemed to have been payable in the maximum
number of installments permitted by law and (ii) there shall be included in
Taxes, for each Tax year in which such installments may be paid, the
installments of such assessment so becoming payable during such Tax Year,
together with any interest thereon payable during such Tax Year.
Anything herein contained to the contrary notwithstanding, Taxes shall not
include any assessment or real estate taxes on any expansion of the Building
which is constructed or completed after the 17th Floor Commencement Date of this
lease.
(b) "BASE TAX YEAR" shall mean fiscal years July 1,
1999 to June 30, 2000 and July 1, 2000 to June 30, 2001, inclusive;
(c) "BASE TAX RATE" shall mean the average Taxes, as
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finally determined, for the two fiscal years comprising the Base Tax Year;
(d) "TAX YEAR" shall mean the fiscal year for which
Taxes are levied by the governmental authority;
(e) "TENANT'S PROPORTIONATE SHARE" shall mean for
purposes of this lease and all calculations in connection herewith an aggregate
10.552% (3.898% as to the 17th Premises, 2.665% as to the 18th Premises and
3.989% as to the 19th Premises), which has been computed on the basis of a
fraction, the numerator of which is the agreed rentable square foot area of each
portion of the Demised Premises as set forth below (which rentable square foot
area as to each portion of the Demised Premises is hereinafter sometimes
referred to as the "MULTIPLICATION FACTOR") and the denominator of which is the
agreed rentable square foot area of the Building as set forth below. The parties
agree that the rentable square foot area of the Demised Premises shall be deemed
to be an aggregate 92,330 rentable square feet comprised of 34,107 rentable
square feet as to the 17th Premises, 23,319 rentable square feet as to the 18th
Premises and 34,904 rentable square feet as to the 19th Premises, and that the
agreed rentable square foot area of the Building shall be deemed to be 875,000
square feet (hereinafter referred to as the "BUILDING AREA"). Notwithstanding
the foregoing, Tenant's Proportionate Share shall be based only on those
portions of the Demised Premises as to which this lease has commenced.
(f) "TENANT'S PROJECTED SHARE OF TAXES" shall mean
the Tax Payment (as hereinafter defined), if any, payable by Tenant for the
immediately prior Tax Year divided by twelve (12) and payable monthly by Tenant
to Landlord as additional rent.
5.02 If the Taxes for any Tax Year shall be more than the Base
Tax Rate, Tenant shall pay, as additional rent for such Tax Year, an amount
equal to Tenant's Proportionate Share of the amount by which the Taxes for such
Tax Year are greater than the Base Tax Rate. (The amount payable by Tenant is
hereinafter referred to as the "TAX PAYMENT"). The Tax Payment and the Base Tax
Rate shall be appropriately prorated, if necessary, to correspond with that
portion of a Tax Year occurring within the Term of this lease as to each portion
of the Demised Premises. After Landlord has furnished Tenant with written demand
for the Tax Payment, which demand shall be accompanied by a copy of the tax bill
along with Landlord's computation of the Tax Payment, Tenant shall pay Landlord,
with the monthly installments of rent due on June 1 and December 1 of each such
Tax Year, an amount equal to one-half (1/2) of the total sum of the Tax Payment
for such Tax Year, until such time as a new demand (and said accompanying
information) for a subsequent Tax Year shall become effective. If a demand and
accompanying information are furnished to Tenant after the commencement of the
Tax Year in respect of which such demand is made, Tenant shall, within twenty
(20) days after the date of receipt by Tenant of a request by Landlord for such
payment, pay to Landlord an amount equal to those installments of the total Tax
Payment payable as provided in the preceding sentence. If,
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during the term of this lease, Taxes are required to be paid in full or in
quarterly or other installments, on any other date or dates than as presently
required, then Tenant's installments of its Tax Payment shall be correspondingly
modified so that said payments are due twenty (20) days after the date of
receipt by Tenant of a request by Landlord for such payment.
5.03 Notwithstanding the fact that the increase in rent is
measured by an increase in Taxes, such increase is additional rent and shall be
paid by Tenant as provided herein regardless of the fact that Tenant may be
exempt, in whole or in part, from the payment of any taxes by reason of Tenant's
diplomatic or other tax exempt status or for any other reason whatsoever.
5.04 Only Landlord shall be eligible to institute tax
reduction or other proceedings to reduce the assessed valuation of the Land and
Building. Should Landlord be successful in any such reduction proceedings and
obtain a rebate or a reduction in assessment for periods during which Tenant has
paid or is obligated to pay Tenant's Proportionate Share of increases in Taxes
then either (a) Landlord shall, in the event a rebate is obtained, return
Tenant's Proportionate Share of such rebate to Tenant after deducting Landlord's
reasonable expenses (unless Tenant has already paid Tenant's Proportionate Share
of the Tax Expenses), including without limitation, reasonable attorneys' fees
and disbursements in connection with such rebate (such expenses incurred with
respect to a rebate or reduction in assessment being hereinafter referred to as
"TAX EXPENSES"), or, (b) if a reduction in assessment is obtained prior to the
date Tenant would be required to pay Tenant's Proportionate Share of such
increase in Taxes, Tenant shall pay to Landlord, within fifteen (15) days after
written request, Tenant's Proportionate Share of such Tax Expenses.
5.05 Commencing with the first Tax Year after Landlord shall
be entitled to receive a Tax Payment, Tenant, at Landlord's option and upon
notice from Landlord, shall pay to Landlord, as additional rent for the then Tax
Year, Tenant's Projected Share of Taxes. Upon each date that a Tax Payment or an
installment on account thereof shall be due from Tenant pursuant to the terms of
Section 5.02 hereof, Landlord shall apply the aggregate of the installments of
Tenant's Projected Share of Taxes then on account with Landlord against the Tax
Payment or installment thereof then due from Tenant. In the event that such
aggregate amount shall be insufficient to discharge such Tax Payment or
installment, Landlord shall so notify Tenant in a demand served upon Tenant
pursuant to the terms of Section 5.02, and the amount of Tenant's payment
obligation with respect to such Tax Payment or installment pursuant to Section
5.02 shall be equal to the amount of the insufficiency. If, however, such
aggregate amount shall be greater than the Tax Payment or installment, Landlord
shall forthwith either (a) pay the amount of excess directly to Tenant
concurrently with the notice or (b) permit Tenant to credit the amount of such
excess against the next payment of Tenant's Projected Share of Taxes due
hereunder and, if the credit of such payment is not sufficient to liquidate the
entire amount of such excess, Landlord shall then pay the amount of any
difference to Tenant.
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5.06
(a) Anything in this Article 5 to the contrary
notwithstanding, in the event that the holder of any superior mortgage or the
lessor of any superior lease (as such terms are defined in Section 7.01 hereof)
shall require advance payments from Landlord on account of Taxes, then Tenant
will pay Tenant's Proportionate Share of any amounts on account of Taxes
required to be paid in advance by Landlord to the holder of the superior
mortgage or the lessor of the superior lease to the extent that such payments
made by Landlord exceed the Base Tax Rate. Any payments to be made by Tenant
under this Section 5.06(a) shall be made ten (10) days prior to the date
Landlord is required to make such payments to the holder of the superior
mortgage or the lessor of the superior lease and Landlord shall give Tenant at
least fifteen (15) days notice of such requirement;
(b) Anything in Sections 5.01 through 5.06 to the
contrary notwithstanding, in no event whatsoever shall the fixed rent be reduced
below the fixed rent initially set forth in Section 1.04(a) hereof as same may
be increased by provisions of this lease other than Sections 5.01 through 5.06.
5.07 EXPENSE ESCALATION. For purposes of this Article:
(a) "OPERATING EXPENSES" shall mean any or all
expenses incurred by Landlord in connection with the operation of the Building
including all expenses incurred as a result of Landlord's compliance with any of
its obligations hereunder other than Landlord's Work and such expenses shall
include: (i) salaries, wages, medical, surgical and general welfare benefits,
(including group life insurance) pension payments and other fringe benefits of
employees of Landlord engaged in the operation and maintenance of the Building
(The salaries and other benefits aforesaid of such employees servicing the
Building shall be comparable to those of employees servicing buildings similar
to the Building, located in the Borough of Manhattan and if such employees shall
service other buildings, only the share of the salaries and benefits
representing compensation for work in the Building shall be included in
Operating Expenses); (ii) payroll taxes, worker's compensation, uniforms and dry
cleaning for the employees referred to in subdivision (i); (iii) the cost of all
charges for steam, heat, ventilation, air conditioning and water (including
sewer rental) furnished to the Building and/or used in the operation of all of
the service facilities of the Building and the cost of all charges for
electricity furnished to the public and service areas of the Building and/or
used in the operation of all of the service facilities of the Building including
any taxes on any of such utilities; (iv) the cost of all charges for rent,
casualty, war risk insurance (if obtainable from the United States government)
and of liability insurance for the Building to the extent that such insurance is
required to be carried by Landlord hereunder or under any superior lease or
superior mortgage or if not required under any superior lease or superior
mortgage then to the extent such insurance is carried by owners of Buildings
comparable to the Building; (v) the cost of all building and cleaning supplies
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for the common areas of the Building and charges for telephone for the Building;
(vi) the cost of all charges for management, security, cleaning and service
contracts for the Building (if no managing agent is employed by Landlord, there
shall be included in Operating Expenses a sum equal to 2.5% of all rents,
additional rents and other charges collected from tenants or other permitted
occupants of the Building) provided, however, that in the event a third-party
managing agent is employed by Landlord, the fee payable to such managing agent
shall be comparable to those paid by owner of buildings located in downtown
Manhattan similar to the Building; (vii) the cost of rentals of capital
equipment designed to result in savings or reductions in Operating Expenses to
the extent of actual savings or reductions only and (viii) the cost incurred,
which are non-capital expenditures, except as set forth in (E) below, in
connection with the maintenance and repair of the Building. Provision in this
lease for an expense item to be Landlord's expense or at Landlord's expense
shall not affect the inclusion thereof, to the extent above provided, in
Operating Expenses. Operating Expenses shall not include or shall have deducted
from them, as the case may be, and as shall be appropriate (A) administrative
wages and salaries; (B) renting commissions; (C) franchise taxes or income taxes
of Landlord and inheritance, personal property or other taxes imposed on
Landlord; (D) Taxes on the Land and Building; (E) expenditures for capital
improvements except (l) those which under generally accepted accounting
principles consistently applied as applied to the real estate industry are
expensed or regarded as deferred expenses and (2) for capital improvements
required by any law and/or requirements of public authority enacted after the
date of this lease or any modifications or amendments of presently existing laws
and/or requirements of public authority enacted after the date of this lease or
required in order to cause the Building to remain in compliance with any
presently existing law and/or requirement (but in no event including costs
incurred in connection with the making of capital improvements in order to
comply with existing laws and/or requirements of public authority to the extent
that the Building is not, as of the date hereof, in compliance with such
existing laws and/or requirements) or (3) for capital improvements which are
designed to result in a saving in the amount of Operating Expenses, in any of
such cases the cost thereof shall be included in Operating Expenses for the
Operational Year in which the costs are incurred and subsequent Operational
Years, amortized on a straight line basis, over the useful life thereof as
determined in accordance with generally accepted accounting principles
consistently applied (except that, with respect to a capital improvement which
is of the type specified in clause (3), such cost shall be amortized on a
straight line basis over such period of time as Landlord reasonably estimates
such savings in Operating Expenses will equal Landlord's cost for such capital
improvement provided that the amount to be included in Operating Expenses in any
Operational Year shall not exceed the savings in Operating Expenses for any such
Operational Year), with an interest factor in any of such cases equal to two
(2%) percent above the prime rate (hereinafter referred to as the "BASE RATE")
of The Chase Manhattan Bank (or Citibank, N.A. if The Chase Manhattan Bank shall
not then have an established prime rate; or the prime rate of any major banking
institution doing business in New York City, as selected by Landlord, if none of
the aforementioned banks shall be in existence or have an established prime
rate) at the time of Landlord's having incurred said expenditure;
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Additionally, Operating Expenses shall not include or shall have
deducted from them, as the case may be, and as shall be appropriate, the
following except to the extent specifically permitted by a specific exception to
the following:
1. depreciation;
2. interest on, and amortization of, mortgages
and any recording or mortgage tax or expense in connection therewith and other
debt service with respect to any other loan, secured or unsecured;
3. leasehold improvements (including painting)
made for tenants of the Building or made in order to prepare for occupancy by a
new tenant or any cash or other consideration paid by Landlord on account of,
with respect to, or in lieu of such leasehold improvements, including any fees
or services incurred in connection with the performance of such work;
4. financing costs in connection with any
financing or refinancing of the Building or of any other loan, secured or
unsecured, including, without limitation, points, commitment fees, broker's
fees, and legal fees and expenses;
5. the cost of repairs or restoration
necessitated by fire or other casualty or any condemnation;
6. the cost of any items from which Landlord is
reimbursed or has the right to be reimbursed by insurance (or would have been
reimbursed had Landlord maintained the insurance required hereunder or under any
superior lease or superior mortgage or, if not required under any superior lease
or superior mortgage, then to the extent such insurance is carried by owners of
buildings comparable to the Building), by other tenants of the Building (except
pursuant to provisions similar to Sections 5.07-5.11 hereof or other escalation
provisions designed to reimburse Landlord for increases in the cost of operating
the Building), by warranty, by award in condemnation or otherwise compensated;
7. the cost of any work or service performed
for or made available to any tenant or other occupant of the Building (other
than Tenant) to a greater extent or in a more favorable manner than that
furnished generally, without additional expense, to the tenants and other
occupants of the Building (including Tenant);
8. Rent and other amounts payable under any
ground, superior leases as defined in Section 7.01;
9. the cost of any electric current furnished
to the Demised Premises or any areas of the Building occupied by tenants for
purposes other than operation of building
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equipment or machinery or the lighting of toilets, shaftways or building
machinery or fan rooms;
10. salaries, compensation or other benefits
paid in respect of officers and executives of Landlord above the level of
building manager;
11. any cost stated in Operating Expenses
representing an amount paid to a Landlord-related corporation or entity which is
in excess of the amount which would be paid in the absence of such relationship;
12. advertising and promotional expenses of the
Building;
13. the cost of installing, operating and
maintaining (to the extent such operating and maintenance costs exceed such
costs for operating and maintaining office space) any specialty use or
installation such as (but not limited to) an observatory, broadcasting
facilities, luncheon club, athletic or recreational club, theater, rehearsal
hall, art gallery or garage including, without limitation, any compensation paid
to clerks, attendants or other persons;
14. auditing fees, other than auditing fees in
connection with the preparation of statements required pursuant to additional
rent or lease escalation provisions;
15. the cost of correcting defects in the
construction of the Building or in the Building equipment, except that
conditions (not occasioned by construction or equipment defects) resulting from
ordinary wear and tear shall not be deemed defects for the purpose of this
category;
16. cost of any repair made by Landlord to
remedy damage caused by, or resulting from, the negligence or willful act or
omission of Landlord, its agents, servants, contractors or employees;
17. any insurance premium to the extent that
Landlord is entitled to be reimbursed therefor by Tenant pursuant to this Lease
or by any other occupant of the Building pursuant to its lease except pursuant
to provisions similar to Sections 5.07-5.11 hereof or other escalation
provisions designed to reimburse Landlord for increases in the cost of operating
the Building;
18. legal, architectural, engineering, space
planner's and other professional fees and expenses incurred in preparing,
negotiating and executing leases, amendments, terminations and extensions or in
resolving any disputes with tenants and other occupants or enforcing lease
obligations, including, without limitation, court costs;
19. expenses incurred by Landlord in connection
with the transfer or disposition of the Land or Building or any ground,
underlying or overriding lease, including,
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without limitation, transfer, deed and gains taxes;
20. cost incurred to correct any
misrepresentation by Landlord to Tenant;
21. bad debt loss, rent loss or reserves for
either;
22. costs for sculpture, paintings or other
objects of art;
23. costs incurred by Landlord arising out of
its failure to perform, or breach of, any of its covenants, agreements,
representations, warranties, guarantees or indemnities made under this Lease;
24. costs, fines, interest or penalties incurred
by Landlord due to violations of any applicable governmental law, requirement or
order;
25. and any late fees, penalties, interest
charges or similar fees incurred by Landlord;
26. costs associated with the operation of the
business of the entity which constitutes Landlord as the same are distinguished
from the costs of operation of the Building, including, without limitation,
accounting and legal expenses, costs of selling, syndicating, financing,
mortgaging or hypothecating Landlord's interest in the Building, costs of any
disputes between Landlord and its employees, or building managers;
27. overtime HVAC costs or electricity costs for
other Building tenants;
28. "takeover expenses" (i.e., expenses incurred
by Landlord with respect to the leaseback by Landlord of space either located in
another building or in the Building in connection with the leasing of space in
the Building);
29. any amounts payable by Landlord by way of
indemnity or for damages or which constitute a fine, interest, or penalty,
including interest or penalties for any late payments of operating costs;
30. except as set forth in Section
5.07(a)(E)(2), any improvement installed or work performed or any other cost or
expense incurred by Landlord in order to comply with the requirements for the
obtaining or renewal of a certificate of occupancy for the Building or any space
therein;
31. the cost of overtime or other expense to
Landlord in curing its
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defaults; and
32. costs incurred in the removal, abatement or
other treatment of asbestos or other materials presently designated as
"hazardous" present in the Building or on the Land as of the date of this lease
and which materials other than asbestos are required to be removed or otherwise
dealt with by Landlord pursuant to applicable laws and/or requirements of
governmental authorities in effect as of the date of this lease.
33. the cost of remedying violations of the New
York City Building Code requirements or other legal requirements existing on the
date hereof or arising by reason of Landlord's (or its predecessors) failure,
prior to the date hereof, to construct, maintain or operate the Building or any
part thereof in compliance with such Building Code requirements on other legal
requirements and regulations.
Additionally, there shall be deducted from Operating Expenses all amounts
received by Landlord through proceeds of insurance or condemnation awards to the
extent they are compensation for, or reimbursement of, sums previously included
in Operating Expenses hereunder.
If during all or part of the Base Operational Year or any other Operational
Year, Landlord shall not furnish any particular item(s) of work or service
(which would otherwise constitute an Operating Expense hereunder) to office
portions of the Building due to the fact that (i) such portions are not occupied
or leased, (ii) such item of work or service is not required or desired by the
tenant of such portion, or (iii) such tenant is itself obtaining and providing
such item of work or service, then, for the purposes of computing Operating
Expenses, the amount for such item and for such period shall be deemed to be
increased by an amount equal to the additional costs and expenses which would
reasonably have been incurred during such period by Landlord if it had at its
own expense furnished such item of work or services to such portion of the
Building or to such tenant.
(b) "OPERATIONAL YEAR" shall mean each calendar year
or part thereof occurring during the Term of this lease;
(c) "BASE OPERATIONAL YEAR" shall mean calendar year
2000;
(d) "BASE OPERATING EXPENSES" shall mean Operating
Expenses for the Base Operational Year;
(e) "TENANT'S PROJECTED SHARE OF OPERATING EXPENSE"
shall mean (i) Tenant's Operating Expense Payment, if any, for the prior
Operating Year divided by (ii) twelve (12), and payable monthly by Tenant to
Landlord as additional rent.
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5.08 After the expiration of the Base Operational Year,
Landlord shall furnish Tenant a statement, in reasonable detail, setting forth
the aggregate amount of the Operating Expenses for the Base Operational Year.
After the expiration of each Operational Year after the Base Operational Year,
Landlord shall furnish Tenant a statement in reasonable detail, setting forth
the aggregate amount of the Operating Expenses for such Operational Year, each
of which statements shall be prepared by an independent certified public
accountant. The statement furnished under this Section 5.08 is hereinafter
referred to as an "Operating Statement". Landlord will use reasonable efforts to
have the Operating Statement furnished within ninety (90) days after the
expiration of the Base Operational Year and every Operational Year, as the case
may be.
5.09 If the Operating Expenses for any Operational Year shall
be more than the Base Operating Expenses, Tenant shall pay, as additional rent
for such Operational Year, an amount equal to Tenant's Proportionate Share of
the amount by which the Operating Expenses for such Operational Year are greater
than the Base Operating Expenses. (The amount payable by Tenant is hereinafter
referred to as the "OPERATING EXPENSE PAYMENT".) The Operating Expense Payment
shall be prorated, if necessary, to correspond with that portion of an
Operational Year occurring within the Term of this lease. The Operating Expense
Payment shall be payable by Tenant within thirty (30) days after receipt of the
Operating Statement.
5.10 Commencing with the first Operational Year after Landlord
shall be entitled to receive an Operating Expense Payment, Tenant shall pay to
Landlord as additional rent for the then Operational Year, Tenant's Projected
Share of Operating Expenses. If the then Operating Statement furnished by
Landlord to Tenant at the end of then Operational Year shall indicate that
Tenant's Projected Share of Operating Expenses exceeded the Operating Expense
Payment, Landlord shall forthwith either (a) pay the amount of excess directly
to Tenant concurrently with the notice or (b) permit Tenant to credit the amount
of such excess against the subsequent payment of rent due hereunder; if such
Operating Statement furnished by Landlord to Tenant hereunder shall indicate
that the Operating Expense Payment exceeded Tenant's Projected Share of
Operating Expenses for the then Operational Year, Tenant shall forthwith pay the
amount of such excess to Landlord within thirty (30) days of receipt of a
request therefor.
5.11
(a) Every Operating Statement given by Landlord
pursuant to Section 5.08 shall be conclusive and binding upon Tenant unless (i)
within one hundred twenty (120) days after the receipt of such Operating
Statement Tenant shall notify Landlord that it disputes the correctness of the
Operating Statement, specifying in reasonable detail either the particular
respects in which, or the basis upon which, the Operating Statement is claimed
to be incorrect, and (ii) if such dispute shall not have been settled by
agreement, shall submit the dispute to arbitration within one hundred eighty
(180) days after receipt of the
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Operating Statement. Pending the determination of such dispute by agreement or
arbitration as aforesaid, Tenant shall within thirty (30) days after receipt of
such Operating Statement, pay additional rent, if due, in accordance with the
Operating Statement and such payment shall be without prejudice to Tenant's
position. If the dispute shall be determined in Tenant's favor, Landlord shall,
on demand, pay Tenant the amount of Tenant's overpayment of rents, if any,
resulting from compliance with the Operating Statement. Landlord agrees to grant
Tenant reasonable access to Landlord's books and records, during the one hundred
eighty (180) day period set forth in Section 5.11(a)(ii) above, for the purpose
of verifying Operating Expenses incurred by Landlord and to have and make copies
of any and all bills and vouchers relating thereto and subject to reimbursement
by Tenant for the cost thereof. Tenant agrees that all information with respect
to Operating Expenses to which Tenant is given access shall be held in
confidence and Tenant shall require that any agent or outside party it may
retain shall agree, in writing, to hold such information in confidence.
(b) Anything in Sections 5.07 through 5.12 to the
contrary notwithstanding, in no event whatsoever shall the fixed rent be reduced
below the fixed rent initially set forth in Section 1.04(a) hereof.
5.12 Subject to the further provisions of this Section 5.12,
Landlord shall be under no obligation to contest the Taxes or the assessed
valuation of the Land and/or the Building for any Tax Year, or to refrain from
contesting the same, and may settle any such contest on such terms as Landlord
in its sole judgment considers proper. Within thirty (30) days after receipt by
Landlord of an inquiry from Tenant, Landlord will advise Tenant whether or not
Landlord intends to contest such Taxes or the assessed valuation of the Land
and/or Building for such Tax Year. If tenants of at least seventy-five (75%)
percent of the total rentable area of the Building shall, by timely notice to
Landlord, request Landlord to do so, Landlord shall institute appropriate
proceedings to reduce the Taxes for any Tax Year and use best efforts to effect
a reduction therein. If tenants of seventy-five (75%) percent of the total
rentable area of the Building request Landlord to do so and Tenant shall be one
of such requesting tenants, then Tenant shall pay its proportionate share
(according to the relation that the rentable area of the Demised Premises bears
to the total rentable area represented by all such requesting tenants) of the
reasonable costs and expenses of such proceedings that shall have been
instituted at the request of such tenants. In the event that such proceedings
shall cover more than one (1) Tax Year, the expenses referred to in this Section
5.12 shall be allocated to each Tax Year involved on the basis of the reduction
effectuated. Landlord shall not compromise, cancel, or withdraw such proceedings
that shall have been instituted at the request of tenants at seventy-five (75%)
percent or more of the total rentable area of the Building, unless it shall have
first notified all such requesting tenants of its proposal to do so and shall
not have received, within thirty (30) days thereafter, objections in writing
from tenants of more than fifty (50%) percent of the total rentable areas
represented by such requesting tenants, accompanied by written agreements to
reimburse Landlord forthwith for all of its costs and expenses in connection
therewith, for which
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such objectors shall be liable ratably according to their respective rentable
areas in relation to the total rentable area represented by all such objectors.
Upon receipt of such objections, agreements and reimbursements, Landlord shall
transfer the responsibility for such proceedings to said objectors, who may
carry on the same in their own names or in Landlord's name, as may be
appropriate, at their own expense and shall be entitled to recoupment for all of
their costs and expenses from any refund obtained, but not otherwise.
5.13 Landlord's failure during the lease term to prepare and
deliver any of the tax bills, statements, notice or bills set forth in this
Article 5, or Landlord's failure to make a demand, shall not in any way cause
Landlord to forfeit or surrender its rights to collect any of the foregoing
items of additional rent which may have become due during the term of this
lease. Landlord's and Tenant's liability for the amounts due to the other under
this Article 5 shall survive the expiration of the term of this lease.
ARTICLE 6
SECURITY DEPOSIT
6.01 Subject to the provisions of Section 6.02, Tenant shall
have deposited with Landlord, on or before the date hereof the sum of
$4,010,000.00. as security for the faithful performance and observance by Tenant
of the terms, provisions and conditions of this lease; it is agreed that in the
event Tenant defaults in respect of any of the terms, provisions and conditions
of this lease, including, but not limited to, the payment of rent and additional
rent, which default continues after any notice required under this lease and the
expiration of any applicable cure period, Landlord may use, apply or retain the
whole or any part of the security so deposited or the proceeds of the Letter of
Credit (as set forth in Section 6.02 hereof) to the extent required for the
payment of any rent and additional rent or any other sum as to which Tenant is
in default or for any sum which Landlord may reasonably expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency accrued before or after summary proceedings or other
re-entry by Landlord. The security shall be deposited in a separate interest
bearing account segregated from Landlord's funds, in a commercial bank which is
a member of the New York Clearing House Association located in the City of New
York selected by Landlord and any interest earned thereon (less any
administrative fee to which Landlord may be entitled pursuant to applicable law)
shall be paid to Tenant annually provided Tenant is not then in default in the
observance or performance of any of its obligations under this lease which
continues after notice and the expiration of any applicable cure period. In the
event that Tenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this lease, the security shall be
returned to Tenant no later than ten (10) days after the Expiration Date and
after delivery of entire possession of the Demised Premises to Landlord. In the
event Landlord applies or retains any portion or all of the security deposited,
Tenant shall forthwith restore the amount so applied or retained so that at all
times the amount deposited shall be $4,010,000.00.
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6.02 In lieu of a cash deposit, Tenant may deliver to Landlord
a clean, irrevocable, unconditional and transferable (without cost to the
beneficiary thereof) Letter of Credit issued by and drawn upon any commercial
bank which is a member of the New York Clearing House Association (hereinafter
referred to as the "ISSUING BANK") with offices for banking purposes in the City
of New York and having a net worth of not less than Five Hundred Million and
00/100 ($500,000,000.00) Dollars, which Letter of Credit shall have a term of
not less than one year, be in the form annexed hereto as EXHIBIT H or in such
other form and content as is reasonably satisfactory to Landlord, be for the
account of Landlord and be in the amount of $4,010,000.00. The Letter of Credit
shall provide that:
(i) The Issuing Bank shall pay to Landlord
an amount up to the face amount of the Letter of Credit upon presentation of the
Letter of Credit and a sight draft in the amount to be drawn;
(ii) The Letter of Credit shall be deemed to
be automatically renewed, without amendment, for consecutive periods of one year
each during the term of this Lease, unless the Issuing Bank sends written notice
(hereinafter referred to as the "NON-RENEWAL NOTICE") to Landlord by certified
or registered mail, return receipt requested, not less than thirty (30) days
next preceding the then expiration date of the Letter of Credit, that it elects
not to have such Letter of Credit renewed;
(iii) In the event that the Issuing Bank
sends a Non-Renewal Notice, Tenant shall have twenty (20) days to provide
Landlord with a substitute Letter of Credit which meets the requirements of this
Section 6.02. In the event that Tenant fails within said twenty (20) day period
to provide Landlord with a substitute Letter of Credit, Landlord, within twenty
(20) days of its receipt of the Non-Renewal Notice, shall have the right,
exercisable by a sight draft, to receive the monies represented by the Letter of
Credit (which moneys shall be held by Landlord as a cash deposit pursuant to the
terms of this Article 6 pending the replacement of such Letter of Credit or
Tenant's default hereunder); and
(iv) Upon Landlord's sale of Landlord's
interest in the land and the Building, the Letter of Credit shall be
transferable by Landlord as provided in Section 6.03 hereof.
6.03 In the event of a sale of Landlord's interest in the Land
and the Building, Landlord shall have the right to transfer the cash security or
Letter of Credit, as the case may be, deposited hereunder to the vendee or
lessee, in accordance with Section 7.105 of the New York General Obligation Law,
and Landlord shall thereupon be released by Tenant from all liability for the
return of such cash security or Letter of Credit provided that (a) Tenant is
given written notice of such sale; (b) the vendee or lessee, as the case may be,
shall, by written agreement, assume all of Landlord's duties and obligations
under this Lease with respect to such security and
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a copy of such assumption agreement shall be delivered to Tenant promptly after
the effective date of such sale; and (c) in the event that Landlord transfers
cash security, Tenant shall be given notice of the name, address and bank
account number where such cash security is deposited. In such event, and subject
to the satisfaction of the foregoing requirements, Tenant agrees to look solely
to the new Landlord for the return of said cash security or Letter of Credit. In
the event that Landlord fails to transfer the cash security or Letter of Credit
to a vendee or lessee, Landlord shall return the cash security or Letter of
Credit, as the case may be, to Tenant no later than the first business day
following the effective date of such sale. It is agreed that the provisions
hereof shall apply to every transfer or assignment made of said cash security or
Letter of Credit to a new Landlord.
6.04 Tenant covenants that it will not assign or encumber, or
attempt to assign or encumber, the monies or Letter of Credit deposited
hereunder as security, and that neither Landlord nor its successors or assigns
shall be bound by any such assignment, encumbrance, attempted assignment, or
attempted encumbrance.
6.05 Landlord agrees that it will not draw down the proceeds
of the Letter of Credit except in the event of a default by Tenant hereunder
after the notice required under this Lease and expiration of the applicable cure
period or the non-renewal of such Letter of Credit by the Issuing Bank after the
expiration of the period provided to Tenant in Section 6.02(iii) to substitute a
new Letter of Credit.
6.06 In the event that at any time during the term of this
lease (a) the net worth of the Issuing Bank shall be less than the minimum
amount specified in Section 6.02 as indicated in any filing with the Securities
and Exchange Commission, the Federal Reserve Board, the Federal Deposit
Insurance Corporation or any other governmental entity, or (b) the Issuing Bank
files for protection under any chapter of the United States Bankruptcy Code or
the bankruptcy code of the state or country of its formation or is seized by the
appropriate regulatory authorities of the State of New York, the United States
or the state or nation of its formation and as a result thereof is incapable of,
unable to, or prohibited from honoring the then existing Letter of Credit
(hereinafter referred to as the "EXISTING L/C") in accordance with the terms
thereof, then, upon the happening of either of the foregoing, Landlord may send
written notice to Tenant (hereinafter referred to as the "REPLACEMENT NOTICE")
requiring Tenant within thirty (30) days to replace the Existing L/C with a new
letter of credit (hereinafter referred to as the "REPLACEMENT L/C") from an
Issuing Bank meeting the qualifications described in Section 6.02. Upon receipt
of a Replacement L/C meeting the qualifications of Section 6.02, Landlord shall
forthwith return the Existing L/C to Tenant. In the event that a Replacement L/C
meeting the qualifications of Section 6.02 is not received by Landlord within
the time specified, the Existing L/C may be presented for payment by Landlord
and the proceeds thereof shall be held by Landlord in accordance with Section
6.01 subject, however, to Tenant's right, at any time thereafter prior to a
Tenant's default hereunder, to replace such cash security with a new letter of
credit meeting the
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qualifications of Section 6.02. Tenant shall have the right from time to time
and at any time to substitute the Existing L/C with a Letter of Credit meeting
the qualifications of Section 6.02.
6.07
(a) Notwithstanding anything set forth in
this Article 6 to the contrary, and provided that Tenant is not then in default
in the observance or performance of Tenant's obligations under this lease which
default continues after any required notice and the expiration of any applicable
cure period and Landlord has not previously applied any such security in
accordance with the provisions of this Article 6 which has not been restored by
Tenant, then, commencing on the first (1st) anniversary of the 19th Floor Rent
Commencement Date and on each anniversary thereafter of the 19th Floor Rent
Commencement Date (hereinafter individually referred to as an "ANNUAL REDUCTION
DATE"), the security deposit (whether in the form of cash or the Letter of
Credit) shall be reduced, after ten (10) days' notice from Tenant to Landlord
given not sooner than ten (10) days prior to each Annual Reduction Date
(hereinafter referred to as a "REDUCTION NOTICE"), by the sum of $401,000.00,
but in no event shall the security deposit be reduced below the amount of
$401,000.00. No failure by Tenant to give Landlord a Reduction Notice prior to
any Annual Reduction Date shall operate to waive or discharge Landlord's
obligation to so reduce the security deposit, but Landlord shall have no
obligation to reduce the security deposit until twenty (20) days after Tenant
shall give the Reduction Notice with respect to such Annual Reduction Date.
(b) If Tenant has deposited the security
deposit in cash, Landlord shall refund to Tenant the amounts by which the
security deposit is reduced pursuant to this Section 6.07, on or after the
applicable Annual Reduction Date within ten (10) days after receipt of the
Reduction Notice. If Tenant has provided a Letter of Credit, then, provided that
Tenant tenders to Landlord a replacement Letter of Credit or an amendment to the
Letter of Credit (which amendment or replacement must meet the applicable
requirements set forth in Section 6.02) for the appropriately reduced amount of
the security deposit, Landlord shall exchange the Letter of Credit then held by
Landlord for the replacement Letter of Credit tendered by Tenant, or execute the
amendment, as applicable.
ARTICLE 7
SUBORDINATION, NOTICE TO LESSORS AND MORTGAGEES
7.01 This lease, and all rights of Tenant hereunder, are and
shall be subject and subordinate in all respects to all ground leases,
overriding leases and underlying leases of the Land and/or the Building now or
hereafter existing and to all mortgages which may now or hereafter affect the
Land and/or the Building and/or any of such leases, whether or not such
mortgages shall also cover other lands and/or buildings, to each and every
advance made or hereafter to be made under such mortgages, and to all renewals,
modifications, replacements and extensions of such leases and such mortgages and
spreaders and consolidations of such
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mortgages. This Section shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall promptly execute and deliver any instrument that Landlord, the lessor of
any such lease or the holder of any such mortgage or any of their respective
successors in interest may reasonably request to evidence such subordination.
The leases to which this lease is, at the time referred to, subject and
subordinate pursuant to this Article are hereinafter sometimes referred to as
"SUPERIOR LEASES" and the mortgages to which this lease is, at the time referred
to, subject and subordinate are hereinafter sometimes referred to as "SUPERIOR
MORTGAGES" and the lessor of a superior lease or its successor in interest at
the time referred to is sometimes hereinafter referred to as a "LESSOR".
7.02 In the event of any act or omission of Landlord which
would give Tenant the right, immediately or after lapse of a period of time, to
cancel or terminate this lease, or to claim a partial or total eviction, Tenant
shall not exercise such right (i) until it has given written notice of such act
or omission to the holder of each superior mortgage and the lessor of each
superior lease whose name and address shall previously have been furnished to
Tenant in writing, and (ii) unless such act or omission shall be one which is
not capable of being remedied by Landlord or such mortgage holder or lessor
within a reasonable period of time, until a reasonable period for remedying such
act or omission shall have elapsed following the giving of such notice and
following the time when such holder or lessor shall have become entitled under
such superior mortgage or superior lease, as the case may be, to remedy the same
(which reasonable period shall in no event be less than the period to which
Landlord would be entitled under this lease or otherwise, after similar notice,
to effect such remedy), provided such holder or lessor shall with due diligence
give Tenant written notice of intention to, and commence and continue to remedy
such act or omission.
7.03 If the lessor of a superior lease or the holder of a
superior mortgage shall succeed to the rights of Landlord under this lease,
whether through possession or foreclosure action or delivery of a new lease or
deed, then at the request of such party so succeeding to Landlord's rights
(herein sometimes referred to as "SUCCESSOR LANDLORD") and upon successor
landlord's written agreement to accept Tenant's attornment, Tenant shall attorn
to and recognize such successor landlord as Tenant's landlord under this lease,
and shall promptly execute and deliver any instrument that such successor
landlord may reasonably request to evidence such attornment. Upon such
attornment this lease shall continue in full force and effect as, or as if it
were, a direct lease between the successor landlord and Tenant upon all of the
terms, conditions and covenants as are set forth in this lease and shall be
applicable after such attornment except that the successor landlord shall not
be:
(a) liable for any previous act or omission
of Landlord (or its predecessor in interest) under this lease, but such
successor shall be obligated to comply with the provisions of this lease from
and after such attornment, subject to the further provisions of this Section
7.03;
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(b) bound by any previous modification of
this lease, not expressly provided for in this lease, or by any previous
prepayment of more than one month's fixed rent, unless such modification or
prepayment shall have been expressly approved in writing by the lessor of the
superior lease or the holder of the superior mortgage through or by reason of
which the successor landlord shall have succeeded to the rights of Landlord
under this lease unless such approval shall not be required pursuant to such
superior mortgage and/or superior lease;
(c) responsible for any monies owing by
Landlord to the credit of Tenant;
(d) subject to any credits, offsets, claims,
counterclaims, demands or defenses which Tenant may have against Landlord (or
its predecessors in interest) except for any abatements and/or offsets expressly
set forth in this lease;
(e) bound by any covenant to undertake or
complete any construction of the Demised Premises or any portion thereof or pay
for or reimburse Tenant for any costs incurred in connection with such
construction, except for Landlord's Work;
(f) required to account for any security
deposit other than any security deposit actually delivered to the successor
landlord;
(g) bound by any obligation to make any
payment to Tenant or grant or be subject to any credits, except for services,
repairs, maintenance and restoration provided for under this lease to be
performed after the date of attornment, it being expressly understood, however,
that the successor landlord shall not be bound by an obligation to make payment
to Tenant with respect to construction performed by or on behalf of Tenant at
the Demised Premises.
7.04 If, in connection with obtaining financing or refinancing
for the Building of which the Demised Premises form a part, or Landlord's estate
and interest therein, a lender shall request reasonable modifications to this
lease as a condition to such financing or refinancing, Tenant will not withhold,
delay or defer its consent thereto, provided that such modifications do not
increase the obligations or decrease the rights of Tenant hereunder (except,
perhaps, to the extent that Tenant may be required to give notices of any
defaults by Landlord to such lender and/or permit the curing of such defaults by
such lender together with the granting of such additional time for such curing
as may be required for such lender to get possession of the Building or
Landlord's interest therein) or materially adversely affect the leasehold
interest hereby created. In no event shall a requirement that the consent of any
such lender be given for any modification of this lease be deemed to materially
adversely affect the leasehold interest hereby created.
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7.05 Notwithstanding anything to the contrary set forth in
Section 7.01 hereof, this lease shall be subject and subordinate to (i) any
superior mortgages now existing or made by Landlord subsequent to the date
hereof and (ii) any superior leases now existing or entered into by Landlord
subsequent to the date hereof, provided that Tenant shall obtain a
Subordination, Non-Disturbance and Attornment Agreement (hereinafter referred to
as an "SNDA") for the benefit of Tenant from the holders of such superior
mortgages or from the lessors under such superior leases which SNDA shall be in
form and content then utilized by such holders or lessors, shall not increase
Tenant's obligations or reduce Tenant's rights under this lease, and which shall
also contain, in substance, the provisions set forth in the subsections (a) and
(b) below:
(a) From the lessor under a superior lease:
An agreement, for the benefit of Tenant, to the effect, inter alia, that as long
as Tenant is not in default in the payment of fixed rent or additional rent or
any other term, covenant or condition of this lease which continues after any
required notice and beyond any applicable cure period set forth in this lease
and provided Tenant attorns to such lessor under the terms and provisions of
this lease, (i) its rights as Tenant hereunder shall not be affected or
terminated, (ii) its possession of the Demised Premises shall not be disturbed,
(iii) no action or proceeding shall be commenced to remove or evict Tenant, and
(iv) this lease shall at all times continue in full force and effect
notwithstanding the termination or expiration of the superior lease, prior to
the expiration or termination of this lease.
(b) From the holders of superior mortgages:
An agreement, for the benefit of Tenant, to the effect, inter alia, that as long
as Tenant is not in default in the payment of fixed rent or additional rent or
any other term, covenant or condition of this lease which continues after any
required notice and beyond any applicable cure period set forth in this lease,
(i) its rights as Tenant hereunder shall not be terminated and (ii) the
possession of Tenant shall not be disturbed by the mortgagee or by any
proceedings on the debt which any such superior mortgage secures or by virtue of
a right or power contained in any such superior mortgage or the bond or note
secured thereby and (iii) that any sale at foreclosure will be subject to this
lease.
7.06 Landlord represents that as of the date of execution
hereof, (i) there are no existing superior mortgages other than that certain
mortgage(s) held by 195 Property Funding Co., LLC (hereinafter referred to as
"195 PROPERTY FUNDING") and (ii) there are no existing superior leases. Tenant
shall receive an SNDA from 195 Property Funding upon the execution and delivery
of this lease.
7.07 Landlord's inability to obtain any subsequent SNDA (after
Tenant receives the SNDA from 195 Property Funding referred to in Section 7.06)
shall not adversely affect this lease or Tenant's obligations hereunder.
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ARTICLE 8
QUIET ENJOYMENT
8.01 So long as this lease is in full force and effect, Tenant
shall peaceably and quietly have, hold and enjoy the Demised Premises subject,
nevertheless, to the obligations, terms, covenants and conditions of this lease
and, as provided in Article 7, to the superior leases and the superior
mortgages.
ARTICLE 9
ASSIGNMENT AND SUBLETTING
9.01 Subject to the further provisions of this Article 9,
Tenant, for itself, its heirs, distributees, executors, administrators, legal
representatives, successors and assigns, expressly covenants that it shall not
assign, mortgage or encumber this agreement, nor underlet, nor suffer, nor
permit the Demised Premises or any part thereof to be used or occupied by
others, without the prior written consent of Landlord in each instance. If this
lease be assigned, or if the Demised Premises or any part thereof be underlet or
occupied by anybody other than Tenant, Landlord may, after default by Tenant,
collect rent from the assignee, undertenant or occupant, and apply the net
amount collected to the rent herein reserved, but no assignment, underletting,
occupancy or collection shall be deemed a waiver of the provisions hereof, the
acceptance of the assignee, undertenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of covenants on the part of Tenant
herein contained. The consent by Landlord to an assignment or underletting shall
not in any wise be construed to relieve Tenant from obtaining the express
consent in writing of Landlord to any further assignment or underletting. In no
event shall any permitted sublessee assign or encumber its sublease or further
sublet all or any portion of its sublet space, or otherwise suffer or permit the
sublet space or any part thereof to be used or occupied by others, without
Landlord's prior written consent in each instance which will be granted or
deemed on the same basis as a similar request by Tenant.
9.02 If Tenant shall at any time or times during the term of
this lease desire to assign this lease or sublet all or part of the Demised
Premises, Tenant shall give notice thereof to Landlord, which notice shall be
accompanied by (a) a term sheet signed by an officer or principal of Tenant
containing all material terms and conditions in connection with the proposed
assignment or sublease, the effective or commencement date of which shall be not
less than thirty (30) nor more than 180 days after the giving of such notice,
(b) a statement setting forth in reasonable detail the identity of the proposed
assignee or subtenant, the nature of its business and its proposed use of the
Demised Premises, and (c) current financial information with respect to the
proposed assignee or subtenant, including, without limitation, its most recent
financial report. Such notice shall be deemed an offer from Tenant to Landlord
whereby Landlord (or Landlord's designee) may, at its option (hereinafter
referred to as "LANDLORD'S OPTION"), (i) sublease such space (hereinafter
referred to as the "LEASEBACK SPACE") from Tenant upon the terms and
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conditions hereinafter set forth (if the proposed transaction is a sublease of
all or part of the Demised Premises), (ii) terminate this lease (if the proposed
transaction is an assignment or a sublease of all or substantially all of the
Demised Premises), or (iii) terminate this lease with respect to the Leaseback
Space (if the proposed transaction is a sublease of part of the Demised Premises
expiring during the last year of the term of this lease). Landlord's Option may
be exercised by Landlord by notice to Tenant at any time within twenty (20) days
after such notice has been given by Tenant to Landlord; and during such twenty
(20) day period Tenant shall not assign this lease nor sublet such space to any
person.
9.03 If Landlord exercises Landlord's Option to terminate this
lease in the case where Tenant desires either to assign this lease or sublet all
or substantially all of the Demised Premises, then, this lease shall end and
expire on the date that such assignment or sublet was to be effective or
commence, as the case may be, and the fixed rent and additional rent shall be
paid and apportioned to such date.
9.04 If Landlord exercises Landlord's Option to terminate this
lease in part in any case where Tenant desires to sublet part of the Demised
Premises, then, (a) this lease shall end and expire with respect to such part of
the Demised Premises on the date that the proposed sublease was to commence; (b)
from and after such date the fixed rent and additional rent shall be adjusted,
based upon the proportion that the rentable area of the Demised Premises
remaining bears to the total rentable area of the Demised Premises; and (c)
Landlord shall physically separate such part of the Demised Premises from the
balance of the Demised Premises and shall comply with any laws and requirements
of any public authorities relating to such separation.
9.05 If Landlord exercises Landlord's Option to sublet the
Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall
be at the rentals set forth in the proposed sublease, and shall be for the same
term as that of the proposed subletting, and such sublease shall:
(a) be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this lease except
such as are irrelevant or inapplicable, and except as otherwise expressly set
forth to the contrary in this Section;
(b) be upon the same terms and conditions as
those contained in the proposed sublease, except such as are irrelevant or
inapplicable and except as otherwise expressly set forth to the contrary in this
Section;
(c) give the sublessee the unqualified and
unrestricted right, without Tenant's permission, to assign such sublease or any
interest therein and/or to sublet the Leaseback Space or any part or parts of
the Leaseback Space and to make any and all changes, alterations, and
improvements in the space covered by such sublease provided such changes,
alterations and improvements are of an "office-type" nature, but Tenant shall
not be
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obligated to restore such changes, alterations and improvements;
(d) provide that any assignee or further
subtenant, of Landlord or its designee, may, at the election of Landlord, be
permitted to make alterations, decorations and installations in the Leaseback
Space or any part thereof of an "office-type" nature and shall also provide in
substance that any such alterations, decorations and installations in the
Leaseback Space therein made by any assignee or subtenant of Landlord or its
designee may be removed, in whole or in part, by such assignee or subtenant, at
its option, prior to or upon the expiration or other termination of such
sublease provided that such assignee or subtenant, at its expense, shall repair
any damage and injury to that portion of the Leaseback Space so sublet caused by
such removal and further provided that Tenant shall have no obligation to remove
such alterations, decorations and installations or otherwise restore the
Leaseback Space at the expiration or sooner termination of this lease; and
(e) also provide that (i) the parties to
such sublease expressly negate any intention that any estate created under such
sublease be merged with any other estate held by either of said parties, (ii)
any assignment or subletting by Landlord or its designee (as the subtenant) may
be for any purpose or purposes that Landlord, in Landlord's uncontrolled
discretion, shall deem suitable or appropriate, (iii) Tenant, at Tenant's
expense, shall and will at all times provide and permit reasonably appropriate
means of ingress to and egress from the Leaseback Space so sublet by Tenant to
Landlord or its designee, (iv) Landlord, at it's sole cost and expense, shall
make such alterations as may be required or deemed necessary by Landlord to
physically separate the Leaseback Space from the balance of the Demised Premises
and shall comply with any laws and requirements of public authorities relating
to such separation, and (v) that at the expiration of the term of such sublease,
Tenant will accept the space covered by such sublease in its then existing
condition, subject to the obligations of the sublessee to make such repairs
thereto as may be necessary to preserve the premises demised by such sublease in
good order and condition, but Tenant shall not be obligated to restore such
changes, alterations and improvements.
9.06
(a) If Landlord exercises Landlord's Option
to sublet the Leaseback Space, Landlord shall indemnify and save Tenant harmless
from all obligations under this lease as to the Leaseback Space during the
period of time it is so sublet to Landlord;
(a) Performance by Landlord, or its
designee, under a sublease of the Leaseback Space shall be deemed performance by
Tenant of any similar obligation under this lease and any default under any such
sublease shall not give rise to a default under a similar obligation contained
in this Lease, nor shall Tenant be liable for any default under this lease or
deemed to be in default hereunder if such default is occasioned by or arises
from any act or omission of the tenant under such sublease or is occasioned by
or arises from any act or
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omission of any occupant holding under or pursuant to any such sublease;
(b) Tenant shall have no obligation, at the expiration or
earlier termination of the term of this lease, to remove any alteration,
installation or improvement made in the Leaseback Space by Landlord or its
designee.
9.07 In the event Landlord does not exercise Landlord's Option pursuant
to Section 9.02 and providing that Tenant is not in default of any of Tenant's
obligations under this lease after notice and the expiration of any applicable
grace period, Landlord's consent (which must be in writing and in form
reasonably satisfactory to Landlord) to the proposed assignment or sublease
shall not be unreasonably withheld, delayed or conditioned and shall be given or
denied within the twenty (20) day period set forth in Section 9.02 (it being
agreed that in the event that Landlord fails to respond to Tenant within such
twenty (20) day period, Tenant shall send to Landlord a notice (hereinafter
referred to as the "SECOND NOTICE") which shall state that unless Landlord
either grants or denies its consent to the proposed assignment or subletting
within ten (10) days after receipt of the Second Notice, Landlord's consent to
such assignment or subletting shall be deemed granted, and, in the event
Landlord fails to respond to such Second Notice within five (5) days of receipt
thereof, Landlord will be deemed to have consented to such assignment or
subletting), provided and upon condition that:
(a) Tenant shall have complied with the provisions of Section
9.02 and Landlord shall not have exercised Landlord's Option under said Section
9.02 within the time permitted therefor;
(b) In Landlord's reasonable judgment the proposed assignee or
subtenant is engaged in a business and the Demised Premises, or the relevant
part thereof, will be used in a manner which (i) is in keeping with the then
standards of the Building, (ii) is limited to the uses permitted hereunder and
(iii) will not violate any negative covenant as to use contained in any other
lease of space in the Building of which Tenant has received prior notice;
(c) The proposed assignee or subtenant is a reputable person
of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof;
(d) Provided Landlord then has space in the Building of
comparable size and for at least a comparable term available, neither (i) the
proposed assignee or sublessee nor (ii) any person which, directly or
indirectly, controls, is controlled by, or is under common control with, the
proposed assignee or sublessee or any person who controls the proposed assignee
or sublessee, is then an occupant of any part of the Building;
(e) Provided Landlord then has space in the Building of
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comparable size and for a comparable term available, the proposed assignee or
sublessee is not a person with whom Landlord is then actively negotiating to
lease space in the Building;
(f) The form of the proposed sublease shall comply with the
applicable provisions of this Article;
(g) There shall not be more than six (6) other separate
entities or persons not affiliated with Tenant on any full floor portion of the
Demised Premises(and not more than four (4) such entities or persons as to the
18th Premises);
(h) The rental and other terms and conditions of the executed
sublease are substantially the same in all material respects as those contained
in the proposed term sheet furnished to Landlord pursuant to Section 9.02;
(i) Tenant shall reimburse Landlord on demand for any
reasonable costs that may be incurred by Landlord in connection with said
assignment or sublease, including, without limitation, the reasonable costs of
making investigations as to the acceptability of the proposed assignee or
subtenant and reasonable legal costs incurred in connection with the review of
any term sheet, proposed assignment or sublease or any documentation in
connection therewith and in the preparation of any documentation in connection
with any request for consent, whether or not granted;
(j) Tenant shall not have (i) advertised (but it may list,
upon notice to Landlord) the availability of the Demised Premises without prior
notice to and approval by Landlord which approval shall not be unreasonably
withheld or delayed, nor shall any advertisement state the proposed rental, (ii)
advertised (but it may list) the Demised Premises for subletting or assignment,
at a rental rate less than the fixed rent and additional rent at which Landlord
is then offering to lease other comparable space in the Building; and
(k) The sublease shall not allow the use of the Demised
Premises or any part thereof for (i) the preparation and/or sale of food for on
or off premises consumption except as otherwise expressly permitted by this
lease or (ii) use by a foreign or domestic government or governmental agency.
Except for any subletting by Tenant to Landlord or its designee pursuant to the
provisions of this Article, each subletting pursuant to this Article shall be
subject to all of the covenants, agreements, terms, provisions and conditions
contained in this lease. Notwithstanding any such subletting to Landlord or any
such subletting to any other subtenant and/or acceptance of rent or additional
rent by Landlord from any subtenant, Tenant shall and will remain fully liable
for the payment of the fixed rent and additional rent due and to become due
hereunder and for the performance of all the covenants, agreements, terms,
provisions and conditions contained in this lease on the part of Tenant to be
performed and all acts and omissions of any licensee or
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subtenant or anyone claiming under or through any subtenant which shall be in
violation of any of the obligations of this lease, and any such violation shall
be deemed to be a violation by Tenant. Tenant further agrees that
notwithstanding any such subletting, no other and further subletting of the
Demised Premises by Tenant or any person claiming through or under Tenant
(except as provided in Section 9.05) shall or will be made except upon
compliance with and subject to the provisions of this Article. If Landlord shall
decline to give its consent to any proposed assignment or sublease, or if
Landlord shall exercise Landlord's Option, Tenant shall indemnify, defend and
hold harmless Landlord against and from any and all loss, liability, damages,
costs and expenses (including reasonable counsel fees) resulting from any claims
that may be made against Landlord by the proposed assignee or sublessee or by
any brokers or other persons claiming a commission or similar compensation in
connection with the proposed assignment or sublease.
9.08 In the event that (a) Landlord fails to exercise Landlord's Option
and consents (or is deemed to have consented in accordance with the provisions
of this Article 9) to a proposed assignment or sublease, and (b) Tenant fails to
execute and deliver the assignment or sublease to which Landlord consented
within one hundred eighty (180) days after the giving of such consent, then,
Tenant shall again comply with all of the provisions and conditions of Section
9.02 before assigning this lease or subletting all or part of the Demised
Premises.
9.09 With respect to each and every sublease or subletting authorized
by Landlord under the provisions of this lease, it is further agreed:
(a) no subletting shall be for a term ending later than one
day prior to the expiration date of this lease or the "Renewal Term Expiration
Date" (as defined in Article 39), provided Tenant has duly exercised the
"Renewal Option" (as defined in Article 39) in accordance with the provisions of
Article 39 hereof;
(b) no sublease shall be valid, and no subtenant shall take
possession of the Demised Premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord;
(c) each sublease shall provide that it is subject and
subordinate to this lease and to the matters to which this lease is or shall be
subordinate, and that in the event of termination, re-entry or dispossess by
Landlord under this lease Landlord may, at its option, take over all of the
right, title and interest of Tenant, as sublessor, under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not (i) be
liable for any previous act or omission of Tenant under such sublease, (ii) be
subject to any offset, not expressly provided in such sublease, which
theretofore accrued to such subtenant against Tenant, or (iii) be bound by any
previous modification of such sublease or by any previous prepayment of more
than one month's rent.
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9.10 If Landlord shall give its consent (or shall be deemed to have
consented in accordance with the provisions of this Article 9) to any assignment
of this lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as additional rent:
(a) in the case of an assignment, an amount equal to 50% of
all sums and other considerations paid to Tenant by the assignee for or by
reason of such assignment (including, but not limited to, sums paid for the sale
of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings
or other personal property, less, in the case of a sale thereof, the then fair
market value thereof) and less the reasonable costs (hereinafter referred to as
the "ASSIGNMENT EXPENSES") paid by Tenant for alteration costs (or contributions
in lieu thereof), advertising, brokerage or consulting fees or commissions and
legal fees in connection with such assignment; and
(b) in the case of a sublease, an amount equal to 50% of any
rents, additional charge or other consideration payable under the sublease to
Tenant by the subtenant which is in excess of the fixed rent and additional rent
accruing during the term of the sublease in respect of the subleased space (at
the rate per square foot payable by Tenant hereunder) pursuant to the terms
hereof (including, but not limited to, sums paid for the sale or rental of
Tenant's fixtures, leasehold improvements, equipment, furniture or other
personal property, less, in the case of the sale thereof, the then fair market
value thereof) and less the reasonable costs (hereinafter referred to as the
"SUBLETTING EXPENSES") paid by Tenant for alteration costs (or contributions in
lieu thereof), advertising, brokerage or consulting fees or commissions and
legal fees in connection with such subletting. The sums payable under Sections
9.10(a) and (b) shall be paid to Landlord as and when paid by the assignee or
subtenant, as the case may be, to Tenant and upon the execution and delivery of
such assignment or sublease, as the case may be, Tenant shall provide to
Landlord a statement of the Assignment Expenses or Subletting Expenses, as the
case may be, certified as correct by an officer or principal of Tenant. In the
event of any dispute with respect to the Assignment Expenses or the Subletting
Expenses, such dispute shall be determined by arbitration in accordance with the
provisions of Article 34 hereof.
9.11
(a) If Tenant is a corporation other than a corporation whose
stock is or becomes listed and traded on a nationally or internationally
recognized stock exchange (which listing is permitted hereunder), the provisions
of 9.01 shall apply to a transfer (however accomplished, whether in a single
transaction or in a series of related or unrelated transactions) of stock (or
any other mechanism such as, by way of example, the issuance of additional
stock, a stock voting agreement or change in class(es) of stock) which results
in a change of control of Tenant but only where the principal purpose of which
is a transfer of this lease as if such transfer of stock (or other mechanism)
which results in a change of control of
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Tenant were an assignment of this lease, and if Tenant is a partnership or joint
venture or other entity, said provisions shall apply with respect to a transfer
(by one or more transfers) of an equity interest in such partnership or joint
venture or other entity (or other mechanism, such as, by way of example, the
creation of additional general partnership or limited partnership interests or
other interest) which results in a change of control of such partnership or
joint venture or other entity but only where the principal purpose of which is a
transfer of this lease, as if such transfer of an equity interest in such
partnership or joint venture or other entity which results in a change of
control of such partnership or joint venture or other entity were an assignment
of this lease. Notwithstanding the foregoing, if the principal purpose of any
such transaction described in this clause is not the assignment of this lease,
no Landlord consent shall be required and the provisions of Sections 9.02, 9.07,
9.08 and 9.10 shall not be applicable thereto.
(b) Notwithstanding anything in this lease to the contrary,
the provisions of the first sentence of Section 9.01, Landlord's Option, Section
9.07(a)-(f), (h) and (j), Section 9.08 and 9.10 hereof shall not apply to
transactions entered into by Tenant with (i) a corporation into or with which
Tenant is merged or consolidated or with an entity to which all or substantially
all of Tenant's assets are transferred, provided (x) such merger, consolidation
or transfer of assets is for a valid business purpose and not principally for
the purpose of transferring the leasehold estate created hereby, and (y) the
assignee or successor entity has a net worth (determined in accordance with
generally accepted accounting principles consistently applied) at least equal to
or in excess of the net worth of Tenant immediately prior to such merger,
consolidation or transfer and Landlord has been provided with reasonable proof
thereof prior to such transaction or (ii) any entity which is controlled by,
under common control with or which controls Tenant (for purposes hereof the term
"control" shall have the meaning ascribed to it in Exhibit E).
9.12 Any assignment or transfer, whether made with Landlord's consent
pursuant to Section 9.01 or without Landlord's consent pursuant to Section 9.11,
shall be made only if, and shall not be effective until, the assignee shall
execute, acknowledge and deliver to Landlord an agreement in form and substance
reasonably satisfactory to Landlord whereby the assignee shall assume the
obligations of this lease on the part of Tenant to be performed or observed from
and after the date of said assignment or transfer and whereby the assignee shall
agree that the provisions in Section 9.01 shall, notwithstanding such assignment
or transfer, continue to be binding upon it in respect of all future assignments
and transfers. The original named Tenant covenants that, notwithstanding any
assignment or transfer, whether or not in violation of the provisions of this
lease, and notwithstanding the acceptance of fixed rent and/or additional rent
by Landlord from an assignee, transferee, or any other party, the originally
named Tenant shall remain fully liable for the payment of the fixed rent and
additional rent and for the other obligations of this lease on the part of
Tenant to be performed or observed; if this lease be modified after any such
assignment so as to increase Tenant's obligations, then the originally named
Tenant, unless it consented to such modification, shall be liable only for the
obligations
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under this lease as same existed prior to such modifications.
9.13 The joint and several liability of Tenant and any immediate or
remote successor in interest of Tenant and the due performance of the
obligations of this lease on Tenant's part to be performed or observed shall not
be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord extending the time of, or modifying any of the
obligations of, this lease, or by any waiver or failure of Landlord to enforce
any of the obligations of this lease.
9.14 The listing of any name other than that of Tenant, whether on the
doors of the Demised Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this lease or in the Demised Premises,
nor shall it be deemed to be the consent of Landlord to any assignment or
transfer of this lease or to any sublease of the Demised Premises or to the use
or occupancy thereof by others.
9.15 Tenant hereby agrees that the elevator lobby and public hallways
on any floor on which Tenant shall have subleased space to a subtenant shall
conform in all respects (including, without limitation, colors schemes) to
either (a) the elevator lobby and hallways (if any) on other floors leased to
Tenant (if Tenant has leased more than one (l) floor from Landlord) or (b)
Landlord's then building standard for elevator lobbies and public hallways on
multi-tenanted floors of the Building, or shall otherwise be approved in writing
by Landlord, prior to the commencement of work thereon, notwithstanding anything
in this lease to the contrary.
9.16 Notwithstanding anything herein contained to the contrary, Tenant
shall have the right to sublet (but only as to one (1) floor), without being
subject to Landlord's Option, either the 17th Premises (or portions thereof),
the (18th) Premises (or portions thereof) or the 19th Premises (or portions
thereof) (but only as to one (1) such floor) during the first three (3) years of
this lease for a term to expire no later than the third (3rd) anniversary of the
17th Floor Commencement Date as to the 17th Premises (or portions thereof), the
third (3rd) anniversary of the 18th Floor Commencement Date as to the 18th
Premises (or portions thereof) or the third (3rd) anniversary of the 19th Floor
Commencement Date as to the 19th Premises (or portions thereof), as the case may
be, subject in all events to all other terms and provisions of this Article 9.
ARTICLE 10
COMPLIANCE WITH LAWS AND REQUIREMENTS
OF
PUBLIC AUTHORITIES
10.01 Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of public authority, and
Tenant, at its expense, shall comply with all laws and requirements of public
authorities which shall, with respect to the Demised
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Premises or the use and occupation thereof, or the abatement of any nuisance,
impose any violation, order or duty on Landlord or Tenant, arising from (i)
Tenant's use of the Demised Premises, (ii) the manner of conduct of Tenant's
business or operation of its installations, equipment or other property therein,
(iii) any cause or condition created by or at the instance of Tenant, other than
by Landlord's performance of any work for or on behalf of Tenant, or (iv) breach
of any of Tenant's obligations hereunder. However, Tenant shall not be so
required to make any structural or other substantial change in the Demised
Premises unless the requirement arises from a cause or condition referred to in
clause (ii), (iii) or (iv) above. Furthermore, Tenant need not comply with any
such law or requirement of public authority so long as Tenant shall be
contesting the validity thereof, or the applicability thereof to the Demised
Premises, in accordance with Section 10.02. Landlord, at its expense, shall
comply with all other such laws and requirements of public authorities as shall
affect the Demised Premises, but may similarly contest the same subject to
conditions reciprocal to Subsections (a), (b) and (d) of Section 10.02.
10.02 Tenant may, at its expense (and if necessary, in the name of but
without expense to Landlord) contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any law or requirement of public authority, and Landlord shall
cooperate with Tenant in such proceedings, provided that:
(a) Landlord shall not be subject to criminal penalty or to
prosecution for a crime nor shall the Demised Premises or any part thereof be
subject to being condemned or vacated, by reason of non-compliance or otherwise
by reason of such contest;
(b) Tenant shall defend, indemnify and hold harmless Landlord
against all liability, loss or damage which Landlord shall suffer by reason of
such non-compliance or contest, including reasonable attorney's fees and other
expenses reasonably incurred by Landlord;
(c) such non-compliance or contest shall not constitute or
result in any violation of any superior lease or superior mortgage, or if such
superior lease and/or superior mortgage shall permit such non-compliance or
contest on condition of the taking of action or furnishing of security by
Landlord, such action shall be taken and such security shall be furnished at the
expense of Tenant; and
(d) Tenant shall keep Landlord advised as to the status of
such proceedings.
Without limiting the application of Subsection (a) above thereto, Landlord shall
be deemed subject to prosecution for a crime within the meaning of said
Subsection, if Landlord, or any officer of Landlord individually, is charged
with a crime of any kind or degree whatever, whether by service of a summons or
otherwise, unless such charge is withdrawn before Landlord or such officer (as
the case may be) is required to plead or answer thereto.
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10.03 Tenant shall not knowingly cause or permit "HAZARDOUS MATERIALS"
(as defined below) to be used, transported, stored, released, handled, produced
or installed in, on or from, the Demised Premises or the Building. The term
"Hazardous Materials" shall, for the purposes hereof, mean any flammable
explosives, radioactive materials, hazardous wastes, hazardous and toxic
substances, or related materials, asbestos or any material containing asbestos,
or any other substance or material, as defined by any federal, state or local
environmental law, ordinance, rule or regulation including, without limitation,
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, and in the regulations adopted and
publications promulgated pursuant to each of the foregoing. The parties agree
that nothing contained in this Section 10.03 shall prohibit, and Landlord
herewith consents to, Tenant's use and maintenance in the Demised Premises of
limited quantities of substances reasonably necessary in the ordinary operation
and maintenance of office equipment, provided such substances are used,
transported, stored, released, handled, and maintained within the Demised
Premises in accordance with all applicable laws and regulations. In the event of
a breach of the provisions of this Section 10.03, Landlord shall, in addition to
all of its rights and remedies under this lease and pursuant to law, require
Tenant to remove any such Hazardous Materials from the Demised Premises in the
manner prescribed for such removal by the applicable law, ordinance, rule or
regulation. The provisions of this Section 10.03 shall survive the termination
of this lease. Landlord hereby agrees to promptly remove or cause the removal of
any Hazardous Materials from the Demised Premises as required by applicable law
except with respect to (a) Hazardous Materials required to be removed by Tenant
pursuant to this lease and (b) Hazardous Materials which would not be required,
by applicable laws, to be removed but for (i) any Tenant's Work or Tenant's
Changes (as defined in Article 13), or (ii) any action of Tenant or any of
Tenant's agents, employees or contractors. Any such removal by Landlord will be
accomplished in such a manner so as to minimize interference with Tenant's use
and occupancy of the Demised Premises.
ARTICLE 11
INSURANCE
11.01 Tenant shall not violate, or permit the violation of, any
condition imposed by the standard fire insurance policy then issued for office
buildings in the Borough of Manhattan, City of New York, and shall not do, or
permit anything to be done, or keep or permit anything to be kept in the Demised
Premises which would subject Landlord to any liability or responsibility for
personal injury or death or property damage, or which would increase the fire or
other casualty insurance rate on the Building or the property therein over the
rate which would otherwise then be in effect (unless Tenant pays the resulting
premium as provided in Section 11.04) or which would result in insurance
companies of good standing refusing to insure the Building or any of such
property in amounts reasonably satisfactory to Landlord.
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11.02 Tenant covenants to provide on or before the earlier to occur of
(i) the Commencement Date and (ii) ten (10) days from the date of this lease and
to keep in force during the term hereof the following insurance coverage which
coverage shall be effective on the Commencement Date:
(a) A comprehensive policy of liability insurance containing
an omnibus named insured provision naming Landlord as an additional insured
protecting Landlord and Tenant against any liability whatsoever occasioned by
accident on or about the Demised Premises or any appurtenances thereto. Such
policy shall have limits of liability of not less than Five Million
($5,000,000.00) Dollars combined single limit coverage on a per occurrence
basis, including property damage. Such policy shall contain a contractual
liability coverage endorsement with respect to Tenant's indemnification
obligations under this lease. Such insurance may be carried under a blanket
policy covering the Demised Premises and other locations of Tenant, if any,
provided such policy contains an endorsement (i) naming Landlord as an
additional insured, (ii) specifically referencing the Demised Premises; and
(iii) guaranteeing a minimum limit available for the Demised Premises equal to
the limits of liability required under this lease;
(b) Fire and Extended coverage in an amount adequate to cover
the cost of replacement of all personal property, fixtures, furnishing and
equipment, including Tenant's Work located in the Demised Premises or with an
agreed amount endorsement providing for full replacement. The provisions of the
last sentence of Section 11.02(a) (except for (i)) shall apply with respect to
such fire and extended coverage.
All such policies shall be issued by companies of recognized responsibility
licensed to do business in New York State and rated by Best's Insurance Reports
or any successor publication of comparable standing and carrying a rating of A
VIII or better or the then equivalent of such rating, and all such policies
shall contain a provision whereby the same cannot be cancelled or modified
unless Landlord and any additional insureds are given at least thirty (30) days
prior written notice of such cancellation or modification.
Prior to the time such insurance is first required to be carried by
Tenant and thereafter, at least fifteen (15) days prior to the expiration of any
such policies, Tenant shall deliver to Landlord either duplicate originals of
the aforesaid policies or certificates evidencing such insurance including a
certified copy of the endorsement naming Landlord as an additional insured,
together with evidence of payment for the policy. If Tenant delivers
certificates as aforesaid, Tenant upon reasonable prior notice from Landlord,
shall make available to Landlord, at the Demised Premises, duplicate originals
of such policies from which Landlord may make copies thereof, at Landlord's
cost. Tenant's failure to provide and keep in force the aforementioned insurance
shall be regarded as a material default hereunder, entitling Landlord to
exercise any or all of the remedies as provided in this lease in the event of
Tenant's default. In
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addition in the event Tenant fails to provide and keep in force the insurance
required by this lease, at the times and for the durations specified in this
lease, Landlord shall have the right, but not the obligation, at any time and
from time to time, and without notice, to procure such insurance and or pay the
premiums for such insurance in which event Tenant shall repay Landlord within
five (5) days after demand by Landlord, as additional rent, all sums so paid by
Landlord and any costs or expenses incurred by Landlord in connection therewith
without prejudice to any other rights and remedies of Landlord under this lease.
11.03 Landlord and Tenant shall each endeavor to secure an appropriate
clause in, or an endorsement upon, each fire or extended coverage policy
obtained by it and covering the Building, the Demised Premises or the personal
property, fixtures and equipment located therein or thereon, pursuant to which
the respective insurance companies waive subrogation or permit the insured,
prior to any loss, to agree with a third party to waive any claim it might have
against said third party. The waiver of subrogation or permission for waiver of
any claim hereinbefore referred to shall extend to the agents of each party and
its employees and, in the case of Tenant, shall also extend to all other persons
and entities occupying or using the Demised Premises in accordance with the
terms of this lease. If and to the extent that such waiver or permission can be
obtained only upon payment of an additional charge then, except as provided in
the following two paragraphs, the party benefiting from the waiver or permission
shall pay such charge within fifteen (15) days after demand, or shall be deemed
to have agreed that the party obtaining the insurance coverage in question shall
be free of any further obligations under the provisions hereof relating to such
waiver or permission.
In the event that Landlord shall be unable at any time to obtain one of
the provisions referred to above in any of its insurance policies, Landlord
shall cause Tenant to be named in such policy or policies as one of the
insureds, but if any additional premium shall be imposed for the inclusion of
Tenant as such as insured, Tenant shall pay such additional premium upon demand
or Landlord shall be excused from its obligations under this paragraph with
respect to the insurance policy or policies for which such additional premiums
would be imposed. In the event that Tenant shall have been named as one of the
insureds in any of Landlord's policies in accordance with the foregoing, Tenant
shall endorse promptly to the order of Landlord, without recourse, any check,
draft or order for the payment of money representing the proceeds of any such
policy or any other payment growing out of or connected with said policy and
Tenant hereby irrevocably waives any and all rights in and to such proceeds and
payments.
In the event that Tenant shall be unable at any time to obtain one of
the provisions referred to above in any of its insurance policies, Tenant shall
cause Landlord to be named in such policy or policies as one of the insureds,
but if any additional premium shall be imposed for the inclusion of Landlord as
such an insured, Landlord shall pay such additional premium upon demand or
Tenant shall be excused from its obligations under this paragraph with respect
to the insurance policy or policies for which such additional premiums would be
imposed. In the event
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that Landlord shall have been named as one of the insureds in any of Tenant's
policies in accordance with the foregoing, Landlord shall endorse promptly to
the order of Tenant, without recourse, any check, draft or order for the payment
of money representing the proceeds of any such policy or any other payment
growing out of or connected with said policy and Landlord hereby irrevocably
waives any and all rights in and to such proceeds and payments.
Subject to the foregoing provisions of this Section 11.03, and insofar
as may be permitted by the terms of the insurance policies carried by it, each
party hereby releases the other with respect to any claim (including a claim for
negligence) which it might otherwise have against the other party for loss,
damages or destruction with respect to its property by fire or other casualty
(including rental value or business interruption, as the case may be) occurring
during the term of this lease. In the event Landlord elects to self-insure with
respect to comprehensive casualty insurance as provided in Section 11.08, Tenant
shall be entitled to the same rights with respect to waiver of subrogation as if
Landlord was maintaining the insurance set forth in Section 11.08(a).
11.04 If, by reason of a failure of Tenant to comply with the
provisions of Section 10.01 or Section 11.01, the rate of fire insurance with
extended coverage on the Building or equipment or other property of Landlord
shall be higher than it otherwise would be, Tenant shall reimburse Landlord, on
demand, for that part of the premiums for fire insurance and extended coverage
paid by Landlord because of such failure on the part of Tenant.
11.05 Landlord may, from time to time, require that the amount of the
insurance to be provided and maintained by Tenant under Section 11.02 hereof be
increased so that the amount thereof adequately protects Landlord's interest but
in no event in excess of the amount that would be required by other office
tenants occupying similarly sized space in first-class office buildings in the
borough of Manhattan.
11.06 If any dispute shall arise between Landlord and Tenant with
respect to the incurrence or amount of any additional insurance premium referred
to in Section 11.03 or the increase in amount of insurance referred to in
Section 11.05, the dispute shall be determined by arbitration.
11.07 A schedule or make up of rates for the Building or the Demised
Premises, as the case may be, issued by the New York Fire Insurance Rating
Organization or other similar body making rates for fire insurance and extended
coverage for the premises concerned, shall be conclusive evidence of the facts
therein stated and of the several items and charges in the fire insurance rate
with extended coverage then applicable to such premises.
11.08 Landlord shall from and after the date of this lease through the
last day of the term hereof, procure and maintain (or cause to be procured or
maintained) (a) comprehensive casualty insurance on an "all risk" basis on the
Building (exclusive of foundations and footings) in an amount equal to the full
replacement value thereof and (b) commercial and general liability
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insurance having limits of liability of not less than Five Million
($5,000,000.00) Dollars combined single limit coverage on a per occurrence
basis, including property damage (One Million ($1,000,000.00) Dollars of which
may be primary coverage and the remainder as umbrella coverage). Such insurance
shall be issued by good and solvent insurance companies authorized to do
business in the State of New York and may be carried under a blanket policy
covering the Building and any other buildings or other properties of Landlord,
provided that the required amount of coverage is expressly reserved and
allocated to the Building, and may contain commercially reasonable deductibles.
Notwithstanding anything contained in this Section 11.08 to the contrary, if at
any time an "institutional owner" (as such term is hereinafter defined) shall
succeed to the rights of Landlord under this lease whether through sale,
exchange, lease, possession, foreclosure action, deed in lieu thereof, or
otherwise, the obligations of Landlord set forth in this Section 11.08 shall not
apply to such institutional owner. For the purposes of this Section 11.08, an
"INSTITUTIONAL OWNER" shall mean any bank, savings and loan association, trust
company, insurance company, pension fund or similar institutional owner, which,
in the ordinary course of its business, owns or operates first-class office
buildings and, in connection with such ownership or operation, is self-insured
with respect to fire and extended and commercial general liability insurance
coverage and which has a "Standard & Poor's" or "Moody's" (or any successor
rating service or substitute rating service (if either of the "Standard &
Poor's" and "Moody's" services are not then available)) "claims paying ability
rating" or "debt rating" of AA or Aa (or better) or a "Best's Insurance" (or any
successor rating service or substitute rating service, if "Best's insurance" is
not then available) rating of A (or better). If the rating scales of any of such
rating services (or their successors or substitutes) are changed, then the
required rating shall be that rating which is most nearly comparable to the
current rating of "AA" (for Standard & Poor's), "Aa" (for Moody's) or "A" (for
Best's Insurance).
ARTICLE 12
RULES AND REGULATIONS
12.01 Tenant and its employees and agents shall faithfully observe and
comply with the Rules and Regulations annexed hereto as EXHIBIT D, and such
reasonable changes therein (whether by modification, elimination or addition) as
Landlord at any time or times hereafter may make and communicate in writing to
Tenant, which do not unreasonably affect the conduct of Tenant's business in the
Demised Premises except as required by any governmental law, rule, regulation,
ordinance or similar decree.
12.02 Nothing in this lease contained shall be construed to impose upon
Landlord any duty or obligation to Tenant to enforce the Rules and Regulations
or the terms, covenants or conditions in any other lease, as against any other
tenant, and Landlord shall not be liable to Tenant for violation of the same by
any other tenant or its employees, agents or visitors. However, Landlord shall
not enforce any of the Rules and Regulations in such manner as to discriminate
against Tenant or anyone claiming under or through Tenant. If there is an
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inconsistency between this lease and any of the Rules and Regulations, the
provisions of this lease shall govern.
ARTICLE 13
TENANT'S CHANGES
13.01 Tenant may from time to time during the term of this lease, at
its expense, make alterations, additions, installations, substitutions,
improvements and decorations (hereinafter collectively referred to as "CHANGES"
and, as applied to changes provided for in this Article, "TENANT'S CHANGES") in
and to the Demised Premises, excluding structural changes, as Tenant may
reasonably consider necessary for the conduct of its business in the Demised
Premises, on the following conditions:
(a) the outside appearance or the strength of the Building or
of any of its structural parts shall not be affected;
(b) no part of the Building outside of the Demised Premises
shall be physically affected;
(c) the proper functioning of any of the mechanical,
electrical, sanitary and other service systems of the Building shall not be
adversely affected or the usage of such systems by Tenant shall not be increased
provided, however, that where particular capacities or usages are expressly
stated in this lease, Tenant may increase its usage of such specific Building
systems but Tenant shall not exceed such stated capacities or usage;
(d) in performing the work involved in making such changes,
Tenant shall be bound by and observe all of the conditions and covenants
contained in the following Sections of this Article;
(e) before proceeding with any Tenant's Changes, Tenant will
advise Landlord thereof and shall submit to Landlord proof reasonably
satisfactory of the cost thereof and shall submit the names of the contractors
or subcontractors who will be performing Tenant's Changes for Landlord's
approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Additionally, before proceeding with any Tenant's Changes (i) for which
plans and specifications must be submitted to any governmental agency; or (ii)
any change to the electrical, sanitary, plumbing or any other Building system,
or (iii) which involves any structural change, Tenant shall submit to Landlord
plans and specifications and all changes and revisions thereto, for the work to
be done for Landlord's approval, which approval, with respect to the plans and
specifications for the work set forth in subdivision (i) above, shall not be
unreasonably withheld, conditioned or delayed. Any objections by Landlord to
such plans and specifications must be in reasonably specific detail. In the
event that Landlord fails to respond to Tenant within ten (10) business days of
Tenant's submission of such plans and specifications,
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Tenant shall send to Landlord a notice (hereinafter referred to as the "SECOND
NOTICE") which shall state that unless Landlord responds to the submission of
such plans and specifications within five (5) business days after receipt of the
Second Notice, Landlord's approval of the work set forth in the plans and
specifications shall be deemed granted, and, in the event Landlord fails to
respond to such Second Notice within five (5) business days of receipt thereof,
Landlord will be deemed to have consented to the work set forth in the plans and
specifications. Tenant shall, within fifteen (15) days of demand by Landlord,
pay to Landlord the reasonable out-of-pocket costs incurred by Landlord for the
review of such plans and specifications and all changes and revisions thereto by
any third-party architect, engineer and other consultants. With respect to any
other changes to be performed by Tenant, Tenant shall submit plans and
specifications for information purposes only prior to proceeding with such
changes. Tenant agrees that any review or approval by Landlord of any plans and
specifications is solely for Landlord's benefit, and without any representation
or warranty whatsoever to Tenant with respect to the adequacy, correctness or
efficiency thereof or otherwise. The granting by Landlord of its approval to
such plans and specifications shall in no manner constitute or be deemed to
constitute a judgment or acknowledgment by Landlord as to their legality or
compliance with laws and/or requirements of public authorities. Landlord may as
a condition of its approval require Tenant to make revisions in and to the plans
and specifications and, with respect to any change (other than Tenant's Work as
defined in Article 4) the estimated cost of which equals or exceeds $150,000.00
as certified by Tenant's licensed architect in writing to Landlord delivered
prior to the commencement of such change, require Tenant to post a bond or other
security reasonably satisfactory to Landlord to insure the completion of such
change.
(f) Notwithstanding anything herein to the contrary, Tenant
shall be permitted to furnish and install (i) an internal interconnecting
staircase between floors of the Demised Premises (hereinafter referred to as the
"STAIRCASE") which shall be furnished and installed in accordance with all of
the applicable provisions of this lease as if a Tenant's Change or, but only if
and to the extent that an existing private stairwell shaft is available, Tenant
may furnish and install a staircase in such shaft between floors of the Demised
Premises and may seal off such stairwell shaft below the 17th Premises and above
the 19th Premises and (ii) a "UPS" system in the Demised Premises, all in
accordance with all of the applicable provisions of this lease as if a Tenant's
Change and in accordance with all applicable laws and rules of all governmental
authorities having jurisdiction.
13.02 Tenant, at its expense, shall obtain all necessary governmental
permits and certificates for the commencement and prosecution of Tenant's
Changes and for final approval thereof upon completion and shall furnish copies
thereof to Landlord, and shall cause Tenant's Changes to be performed in
compliance therewith and with all applicable laws and requirements of public
authorities, and with all applicable requirements of insurance bodies, and in
good and workmanlike manner, using first-class materials and equipment. Upon
Tenant's request and at Tenant's sole cost and expense, Landlord shall join in
the application for any licenses, permits,
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approvals and authorizations whenever such action is necessary provided,
however, that in no event shall Landlord be obligated to join in any application
or otherwise permit a change in the certificate of occupancy for the Building or
the Demised Premises. Tenant's Changes shall be performed in such manner as not
to unreasonably interfere with or delay and (unless Tenant shall indemnify
Landlord therefor to the latter's reasonable satisfaction) as not to impose any
additional expense upon, Landlord in the maintenance or operation of the
Building or any portion thereof. Throughout the performance of Tenant's Changes,
Tenant, at its expense, shall carry, or cause to be carried, worker's
compensation insurance in statutory limits and general liability insurance for
any occurrence in or about the Building as set forth in Section 11.02 hereof, in
which Landlord and its agents shall be named as parties insured. Tenant shall
furnish Landlord with satisfactory evidence that such insurance is in effect at
or before the commencement of Tenant's Changes and, on request, at reasonable
intervals thereafter during the continuance of Tenant's Changes. If any of
Tenant's Changes shall involve the removal of any fixtures, equipment or other
property in the Demised Premises which are not Tenant's Property (as defined in
Article 14), such fixtures, equipment or other property shall be promptly
replaced, at Tenant's expense, with new fixtures, equipment or other property
(as the case may be) of like utility and at least equal value (unless technology
has changed to reduce said value) unless Landlord shall otherwise expressly
consent in writing and Tenant shall, upon Landlord's request, return same to
Landlord. All electrical and plumbing work in connection with Tenant's changes
shall be performed by contractors or subcontractors licensed therefor by all
governmental agencies having or asserting jurisdiction. Upon the completion of
Tenant's Changes, Tenant shall furnish to Landlord a complete set of "as-built"
plans and specifications.
13.03 Tenant, at its expense, and with diligence and dispatch, shall
procure the cancellation or discharge of all notices of violation arising from
or otherwise connected with Tenant's Changes which shall be issued by the
Department of Buildings or any other public or quasi-public authority having or
asserting jurisdiction. Tenant shall defend, indemnify and save harmless
Landlord against any and all mechanic's and other liens filed in connection with
Tenant's Changes, including the liens of any security interest in, conditional
sales of, or chattel mortgages upon, any materials, fixtures or articles so
installed in and constituting part of the Demised Premises and against all
costs, expense and liabilities incurred in connection with any such lien,
security interest, conditional sale or chattel mortgage or any action or
proceeding brought thereon. Tenant, at its expense, shall procure the
satisfaction or discharge of all such liens within thirty (30) days after
Landlord makes written demand therefor. However, nothing herein contained shall
prevent Tenant from contesting, in good faith and at its own expense, any such
notice of violation, provided that Tenant shall comply with the provisions of
Section 10.02.
13.04 Tenant agrees that the exercise of its rights pursuant to the
provisions of this Article 13 or any other provision of this lease shall not be
done in a manner which would create any work stoppage, picketing, labor
disruption or dispute or violate Landlord's union contracts affecting the Land
and/or Building nor interference with the business of Landlord or
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any Tenant or occupant of the Building. In the event of the occurrence of any
condition described above arising from the exercise by Tenant of its right
pursuant to the provisions of this Article 13 or any other provision of this
lease, Tenant shall, immediately upon notice from Landlord, cease the manner of
exercise of such right giving rise to such condition. The parties agree that in
such instance, Landlord will suffer irreparable harm for which money damages
will be an insufficient remedy. For that reason, in the event Tenant fails to
cease such manner of exercise of its rights as aforesaid, Landlord, in addition
to any rights otherwise available to it under this lease and pursuant to law and
equity, shall have the right to a court order granting an injunction against
Tenant's manner of exercise of its rights as aforesaid, application for such
injunction to be made without notice. With respect to Tenant's Changes, Tenant
shall make all arrangements for, and pay all expenses incurred in connection
with, use of the freight elevators servicing the Demised Premises. All
scheduling of the freight elevator shall be done on a non-discriminatory basis.
ARTICLE 14
TENANT'S PROPERTY
14.01 All fixtures, equipment, improvements and appurtenances attached
to or built into the Demised Premises at the commencement of or during the term
of this lease, whether or not by or at the expense of Tenant, shall be and
remain a part of the Demised Premises, shall be deemed the property of Landlord
and shall not be removed by Tenant, except as hereinafter in this Article
expressly provided.
14.02 All paneling, movable partitions, lighting fixtures, special
cabinet work, other business and trade fixtures, machinery and equipment,
communications equipment and office equipment, whether or not attached to or
built into the Demised Premises, which are installed in the Demised Premises by
or for the account of Tenant, without expense to Landlord, and can be removed
without permanent structural damage to the Building, and all furniture,
furnishings and other articles of movable personal property owned by Tenant and
located in the Demised Premises, (all of which are sometimes referred to as
"TENANT'S PROPERTY") shall be and shall remain the property of Tenant and may be
removed by it at any time during the term of this lease; provided that if any of
Tenant's Property is removed, Tenant or any party or person entitled to remove
same shall repair or pay the cost of repairing any damage to the Demised
Premises or to the Building resulting from such removal. Tenant shall not be
required to repair minor damage caused by any removal or to re-sheetrock or
re-paint or perform similar repair work necessitated by any such removal. Any
equipment or other property for which Landlord shall have granted any allowance
or credit to Tenant or which has replaced such items originally provided by
Landlord at Landlord's expense shall not be deemed to have been installed by or
for the account of Tenant, without expense to Landlord, and shall not be
considered Tenant's Property.
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14.03 At or before the Expiration Date, or the date of any earlier
termination of this lease, or as promptly as practicable after such an earlier
termination date, Tenant at its expense, shall remove from the Demised Premises
all of Tenant's Property except such items thereof as Tenant shall have
expressly agreed in writing with Landlord were to remain and to become the
property of Landlord, and, except as otherwise expressly set forth in this
lease, shall fully repair any damage to the Demised Premises or the Building
resulting from such removal. Tenant's obligation herein shall survive the
termination of the lease. Tenant shall not be required to remove or restore any
standard office-type installations and Landlord shall, at the time Landlord's
consent to installations is given with respect to Tenant installations other
than standard office-type alterations, advise Tenant regarding restoration
requirements with respect to same. Notwithstanding the foregoing, the
restoration of Specialty Installations shall in all events be governed by the
provisions of Section 14.05.
14.04 Any other items of Tenant's Property (except money, securities
and other like valuables) which shall remain in the Demised Premises after the
Expiration Date or after a period of fifteen (15) days following an earlier
termination date, may, at the option of Landlord, be deemed to have been
abandoned, and in such case either may be retained by Landlord as its property
or may be disposed of, without accountability, at Tenant's expense in such
manner as Landlord may see fit.
14.05
(a) For purposes of this lease, "SPECIALTY INSTALLATION(S)"
shall mean installations consisting of vaults, internal staircases and slab
penetration, dumbwaiters, vertical (between floors of the Demised Premises)
transportation systems and other installations made by or at the direction of
Tenant which penetrate the slabs between the floors of the Demised Premises.
Notwithstanding anything in this lease contained to the contrary, upon the
Expiration Date or sooner termination of this lease, Tenant shall, at its sole
cost and expense, remove all Specialty Installation(s) from the Demised Premises
and restore all slab and wall penetrations to the condition that existed prior
to such penetrations (such removal and repair work being hereinafter referred to
as the "RESTORATION WORK") except that prior to commencing such Restoration
Work, Tenant shall notify Landlord thereof and, if Landlord shall advise Tenant,
within five (5) days of receipt of such notice, that it wishes any Specialty
Installations to remain, Tenant shall not perform Restoration Work with respect
to that particular Specialty Installation.
(b) Tenant's obligation and liability with respect to the
removal of Specialty Installation(s) and the performance of the Restoration Work
shall survive the Expiration Date or sooner expiration or termination of this
lease.
ARTICLE 15
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REPAIRS AND MAINTENANCE
15.01 Tenant shall take good care of the Demised Premises. Tenant, at
its expense, but subject to the provisions of Section 11.03, shall promptly make
all repairs, ordinary or extraordinary, interior or exterior, structural or
otherwise, in and about the Demised Premises and the Building, as shall be
required by reason of (i) the performance or existence of Tenant's Work or
Tenant's Changes, (ii) the installation, use or operation of Tenant's Property
in the Demised Premises, (iii) the moving of Tenant's Property in or out of the
Building, or (iv) the misuse or neglect of Tenant or any of its employees,
agents or contractors; but Tenant shall not be responsible for any of such
repairs as are required by reason of Landlord's neglect or other fault in the
manner of performing any of Tenant's Work or Tenant's Changes which may be
undertaken by Landlord for Tenant's account or are otherwise required by reason
of neglect or other fault of Landlord or its employees, agents or contractors.
Except if required by the neglect or other fault of Landlord or its employees,
agents or contractors, Tenant, at its expense, but subject to the provisions of
Section 11.03, shall replace all materially damaged or broken doors or other
glass in or about the Demised Premises and shall be responsible for all repairs,
maintenance and replacement of wall and floor coverings in the Demised Premises
and, for the repair and maintenance of all lighting fixtures therein. All
repairs, except for emergency repairs, made by Tenant as provided herein shall
be performed by contractors or subcontractors approved in writing by Landlord
prior to commencement of such repairs, which approval shall not be unreasonably
withheld, conditioned or delayed. In the event that Landlord fails to respond to
Tenant within ten (10) business days with respect to a request for approval of a
contractor or subcontractor, Tenant shall send to Landlord a notice (hereinafter
referred to as the "ADDITIONAL NOTICE") which shall state that unless Landlord
responds to the request for approval of such contractor or subcontractor within
five (5) days after receipt of the Additional Notice, Landlord's approval of
such contractor or subcontractor shall be deemed granted and, in the event
Landlord fails to respond to such Additional Notice within five (5) days of
receipt thereof, Landlord will be deemed to have approved such contractor or
subcontractor.
15.02 Landlord, at its expense, shall keep and maintain the Building
and its fixtures, appurtenances, systems and facilities serving the Demised
Premises and all common areas of the Building, in good working order, condition
and repair, consistent with other first-class office buildings in the vicinity
of the Building which are approximately the same size and age as the Building,
and shall make all repairs, structural and otherwise, interior and exterior, as
and when needed in or about the Demised Premises, except for those repairs for
which Tenant is responsible pursuant to any other provisions of this lease.
15.03 Except as expressly otherwise provided in this lease, Landlord
shall have no liability to Tenant by reason of any inconvenience, annoyance,
interruption or injury to business arising from Landlord, Tenant or others
making or failing to make any repairs or changes which, with respect to
Landlord, Landlord is required or permitted by this lease, or
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required by law to make, in or to any portion of the Building or the Demised
Premises, or in or to the fixtures, equipment or appurtenances of the Building
or the Demised Premises, provided that Landlord shall use due diligence in
making any repairs and shall perform such repair work, except in case of
emergency, at times reasonably convenient to Tenant and otherwise in such manner
as will not materially interfere with Tenant's use of the Demised Premises or
access thereto; provided, however, that, except as specified below, Landlord
shall have no obligation to employ contractors or labor at so-called overtime or
other premium pay rates or to incur any other overtime costs or expenses
whatsoever, except that Landlord, at its expense (but subject to inclusion as an
Operating Expense as defined in Article 5 hereof), shall employ contractors or
labor at so-called overtime or other premium pay rates if necessary to make any
repair required to be made by it hereunder to remedy any condition that (i)
results in a denial of access to the Demised Premises, (ii) threatens the health
or safety of any occupant of the Demised Premises, or (iii) except in the case
of casualty, materially interferes with Tenant's ability to conduct its business
in the Demised Premises. In all other cases, at Tenant's request and expense,
Landlord shall employ contractors or labor at so-called overtime or other
premium pay rates and incur any other overtime costs or expenses in making any
repairs, alterations, additions or improvements, provided that if more than one
tenant requests such overtime work, the overtime costs therefore shall be shared
pro-rata among such tenants.
ARTICLE 16
ELECTRICITY
16.01
(a) The Building is equipped with risers, feeders and wiring
to furnish electric service to the Demised Premises with a capacity of not less
than five (5) watts per rentable square foot demand load excluding the Building
heat, ventilation and air-conditioning system and which may be distributed, at
Tenant's sole cost and expense, to each of the floors comprising the Demised
Premises in such proportions as Tenant may elect. Additionally, to the extent
not presently installed, a meter system will be furnished and installed by
Landlord, at Landlord's expense, to measure the amount of "Usage" (as defined in
Section 16.02(a)) solely to the Demised Premises. Where more than one meter
measures the amount of Usage, Usage through each meter shall be totalized as if
a single meter was in use, and computed and billed in accordance with the
provisions of this Article 16;
(b) Any additional risers, feeders or other equipment or
service proper or necessary to supply Tenant's electrical requirements, will,
upon written request of Tenant, be installed by Landlord, at the cost and
expense of Tenant, if in Landlord's reasonable judgment, the same are necessary
and will not cause permanent damage or injury to the Building or the Demised
Premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or unreasonably
interfere with or
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unreasonably disturb other tenants or occupants. Rigid conduit only will be
allowed except that notwithstanding anything to the contrary herein, the wiring
for power may be put in armored "BX" cable in accordance with all laws and
requirements of public authorities in effect at time of installation. All branch
circuit and feeder wiring shall be tagged at each box or panel. Tags must
indicate circuit numbers and a complete panel directory must be listed in each
panel.
16.02 For purposes of Sections 16.02 and 16.03:
(a) "Usage" shall mean Tenant's actual usage of electricity in
the Demised Premises as measured by the aforesaid metering system for each
calendar month or such other period as Landlord shall determine during the term
of this lease and shall include the quantity and peak demand (kilowatt hours and
kilowatts);
(b) "Landlord's Rate" shall mean the service classification
(including all applicable taxes, surcharges, demand charges, energy charges,
fuel adjustment charges, time of day charges and other sums payable in respect
thereof and all discounts received by Landlord) pursuant to which Landlord
purchases electric current for the Building from the public utility company (or
its successors) supplying electric current to the Building. Landlord's present
service classification is SC4T;
(c) "Basic Cost" shall mean the product of (i) Usage
multiplied by (ii) Landlord's Rate.
(d) "Tenant's Cost" shall mean an amount equal to the sum of
(i) the Basic Cost plus (ii) five (5%) percent of the Basic Cost for Landlord's
overhead and expenses in connection with submetering.
16.03 Landlord shall, from time to time but not more often than
monthly, furnish Tenant with an invoice indicating the period during which the
Usage was measured and the amount of Tenant's Cost payable by Tenant to Landlord
for such period. Within fifteen (15) days after receipt of each such invoice,
Tenant shall pay the amount of Tenant's Cost set forth thereon to Landlord as
additional rent. In addition, if any tax is imposed upon Landlord by any
municipal, state or federal agency or subdivision with respect to the purchase,
sale or resale of electrical energy supplied to Tenant hereunder, Tenant
covenants and agrees that, where permitted by law, a share of such taxes based
upon the ratio that Tenant's Usage bears to the total usage of other tenants or
occupants of the Building shall be passed on to, included in the bill to and
paid by, Tenant to Landlord, as additional rent.
16.04 Landlord shall not in anywise be liable or responsible to Tenant
for any loss or damage or expense which Tenant may sustain or incur if either
the quantity or character of electric service is changed or is no longer
available or suitable for Tenant's requirements unless due to the willful act or
gross negligence of Landlord or its employees or agents.
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16.05 In no event shall Tenant use or install any fixtures, equipment
or machines the use of which in conjunction with other fixtures, equipment and
machines in the Demised Premises would result in an overload of the electrical
circuits servicing the Demised Premises provided such circuits supply the
electrical capacity described in Section 16.01.
16.06 Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of the then existing feeders to the
Building or the risers or wiring installation. Tenant shall furnish, install and
replace, as required, all lighting tubes, lamps, bulbs and ballasts required in
the Demised Premises, at Tenant's sole cost and expense. All lighting tubes,
lamps, bulbs and ballasts so installed shall become Landlord's property upon the
expiration or sooner termination of this lease.
16.07
(a) In the event the metering system installed in the Demised
Premises for the measurement of electricity consumption in the Demised Premises
or any alternative submetering system installed by Landlord at a later date,
becomes prohibited from use by applicable laws and/or rules of public
authorities having jurisdiction or by the public utility providing electrical
service to the Building, then Landlord, at its expense, may cause an independent
electrical engineer chosen by Landlord or an electrical consulting firm selected
by Landlord (hereinafter referred to as the "Electrical Consultant") to survey
and determine Usage in, and Basic Cost for, the Demised Premises from time to
time, at least once per twelve (12) month period, and the Electrical Consultant
shall make such determination using criteria generally accepted in the
Metropolitan New York City area and Landlord's Rate in effect at the time, and
shall include the quantity and peak demand, for all electricity consumed by
Tenant, plus five (5%) percent of the Basic Cost for Landlord's expenses and
administration fees. Subject to Section 16.07(b), the determination made by the
Electrical Consultant shall be binding on both Landlord and Tenant and such
amount shall be deemed Tenant's Cost.
(b) The determination of Tenant's Cost by the Electrical
Consultant shall be binding and conclusive on Landlord and on Tenant from and
after the delivery of copies of such determinations to Landlord and Tenant,
unless, within forty-five (45) days after delivery thereof, Tenant disputes such
determination. If Tenant so disputes the determination, it shall, at its own
expense, obtain from a reputable, independent electrical consultant its own
determinations in accordance with the provisions of this Article and the
Landlord's meter reading records. Tenant's consultant and the Electrical
Consultant then shall seek to agree. If they cannot agree within thirty (30)
days, they shall choose a third reputable electrical consultant whose cost shall
be shared equally by the parties, to make similar determinations which shall be
controlling, except that its determination shall not be less than the
determination of Tenant's consultant or more than the determination of the
Electrical Consultant. (If they cannot agree on such third consultant within ten
(10) days, then either party may apply to
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the Supreme Court in the County of New York for such appointment). However,
pending such controlling determinations, Tenant shall pay to Landlord the amount
of additional rent in accordance with the determinations of the Electrical
Consultant. If the controlling determinations differ from the Electrical
Consultant, then the parties shall promptly make adjustments for any deficiency
owed by Tenant or overage paid by Tenant.
16.08 Landlord shall, at no cost to Tenant, provide reasonably
sufficient space in the shafts of the Building, the approximate location of
which shall be reasonably acceptable to Landlord and Tenant and which location
shall be subject to availability, to allow Tenant, at Tenant's sole cost and
expense, to run telephone communication feeders and cables, in conduit, from the
telephone frame room in the basement of the Building to the Demised Premises.
Such installation shall be performed in accordance with, and subject to, the
applicable provisions of this lease, including, without limitation, Article 13
hereof.
16.09
(a) Tenant has advised Landlord that it may require a back-up
generator to provide electricity to certain of Tenant's equipment in the Demised
Premises in the event of the interruption of electrical service to the Demised
Premises. Such back-up generator would necessitate the construction,
installation, operation, maintenance and use by Tenant of a generator, together
with a fuel tank and related equipment, mountings, supports and conduit (herein
collectively referred to as the "GENERATOR"). Subject to the further provisions
of this Article 16, upon the request of Tenant, Landlord shall make available to
Tenant, for Tenant's own use (and not for resale or sublicensing purposes) space
in the Building selected by Landlord (hereinafter referred to as the "GENERATOR
AREA") for the Generator at a location designated by Landlord in its sole
discretion but reasonably feasible for the installation of a Generator to serve
the Demised Premises (but in no event in excess of 2,000 rentable square feet).
Landlord shall reserve space in the Building for a Generator Area and in the
conduits of the Building for wiring for a period of three (3) months from the
date hereof, provided, however, that if Tenant has not notified Landlord within
such three (3) month period of its election to install such Generator, Landlord
shall have no further obligation to reserve any portion of the Building as a
Generator Area for Tenant's use and the use of the Generator Area for such
purposes shall be allocated on a "first-come, first served" basis. Tenant's use
of the Generator Area of the Building shall be on a non-exclusive basis. In
connection with Tenant's use of the Generator Area of the Building and subject
to the rights of other tenants, occupants and licensees in the Building,
Landlord shall, upon reasonable prior notice to Tenant, make available to Tenant
access to the Generator Area for the construction, installation, maintenance,
repair, operation and use of the Generator. It is agreed, however, that only
Tenant and authorized licensed electrical engineers and electrical contractors
approved in advance by Landlord (which approval shall not be unreasonably
withheld or delayed), federal, state or local governmental inspectors or persons
under their direct supervision will be permitted to have access to the Generator
Area. Tenant
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further agrees to exercise firm control over the people requiring access to the
Generator Area in order to keep to a minimum the number of people having access
to the Generator Area and the frequency of their visits. Landlord shall provide,
to the extent available, reasonably sufficient space in the conduits of the
Building to allow Tenant, at Tenant's sole cost and expense, to run electrical
wiring from the Generator to the Demised Premises. The specifications of the
Generator and fuel tank, including, without limitation, capacity and type of
fuel, shall be reasonably satisfactory to Landlord. The installation of the
Generator shall constitute a Tenant's Change and shall be performed at Tenant's
sole cost and expense in accordance with, and subject to, the provisions of this
lease, including, without limitation, Article 13 hereof, and notwithstanding
anything herein or in this lease to the contrary, Tenant's right to install the
Generator shall be subject to the prior approval by Landlord of plans and
specifications for the Generator and the manner in which same is attached to the
Generator Area, which approval shall not be unreasonably withheld or delayed.
All of the applicable provisions of this lease shall apply to the installation,
use, operation and maintenance of the Generator, including, without limitation,
provisions relating to compliance with laws, insurance, indemnity, hazardous
material, repairs and maintenance. The license granted to Tenant in this Section
16.09 shall not be assignable by Tenant separate and apart from this lease and
may not be sublicensed by Tenant.
(b) In the event Tenant elects to install a Generator as
aforesaid, then from and after the date that the Generator Area is designated by
Landlord and is made available to Tenant and continuing thereafter throughout
the initial term of this lease, Tenant shall pay to Landlord, as additional
rent, on the dates when Tenant is obligated to pay fixed rent, an amount equal
to the product of (i) $17.50 and (ii) the rentable square footage of the
Generator Area (hereinafter referred to as the "GENERATOR RENT"). In the event
Tenant exercises the Renewal Option, the Generator Rent for the Renewal Term
shall be determined in the same manner as the Renewal Rent but in no event less
than the amount of the Generator Rent payable on the last day of the initial
term.
16.10 Tenant shall install, maintain, operate, repair and use the
Generator, all at its sole cost and expense, and in such a manner so as not to
cause any interference to other tenants, occupants, licensees or Landlord in the
Building or damage to or interference with the operation of the Building or any
Building systems.
16.11 If Tenant is in default under any provision of this Article 16
which continues after notice and the expiration of any applicable cure period
then, without limiting Landlord's rights and remedies Landlord may otherwise
have under this lease, Tenant, upon written notice from Landlord, shall, at
Tenant's sole cost and expense, immediately discontinue its use of the Generator
and remove the same from the Generator Area of the Building and the provisions
of Section 16.14 with respect to repair of the Generator Area shall apply.
16.12 Landlord may, at its option, at any time during the term of this
lease, after
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reasonable prior notice to Tenant (except in the event of an emergency when no
notice shall be required) relocate the Generator to another area in the Building
designated by Landlord, provided that such relocation does not cause the back-up
electrical service to be interrupted or impaired and such relocation shall be
performed at Landlord's sole cost and expense.
16.13
(a) Landlord shall not have any obligations with respect to
the Generator or compliance with any laws or requirements of public authorities
relating thereto (including, without limitation, the obtaining of any required
permits or licenses, or the maintenance thereof), nor shall Landlord be
responsible for any damage that may be caused to Tenant or the Generator by any
other tenant or occupant of the Building. Landlord makes no representation with
respect to the Generator or its capacity or ability to provide back-up
electrical service and Tenant agrees that Landlord shall not be liable to Tenant
therefor.
(b) Any electrical service required for Tenant's use of the
Generator shall be paid for by Tenant pursuant to the provisions of Article 16
of this lease.
(c) Tenant shall (i) be solely responsible for any damage
caused to Landlord or any other entity, person or property as a result of the
installation, maintenance or use of the Generator, (ii) promptly pay any tax,
license, permit or other fees or charges imposed pursuant to any laws and/or
requirements of public authorities relating to the installation, maintenance or
use of the Generator, (iii) promptly comply with all precautions and safeguards
recommended by Landlord's insurance company and all federal, state or municipal
governmental authorities or agencies, and (iv), at its sole cost and expense,
(x) promptly perform all necessary repairs or replacements to, or maintenance
of, the Generator, and (y) promptly repair any and all damage to the Generator
Area and to any other part of the Building caused by or resulting from the
installation, maintenance, repair, operation or removal of the Generator or any
portion thereof, except that, at Landlord's option, Landlord may elect to
perform such repairs, replacements or maintenance at Tenant's sole cost and
expense.
16.14 Tenant acknowledges and agrees that the privileges granted Tenant
under Sections 16.09-16.14 shall merely constitute a license and shall not, now
or at any time after the installation of the Generator, be deemed to grant
Tenant a leasehold or other real property interest in the Building or any
portion thereof. The license granted to Tenant in Sections 16.09-16.14 shall
automatically terminate and expire upon the expiration or earlier termination of
this lease and the termination of such license shall be self-operative and no
further instrument shall be required to effect such termination and Tenant
shall, at its sole cost and expense, within three (3) months after the
expiration or earlier termination of this lease, remove the Generator from the
Generator Area and repair any damage to the Generator Area and the Building
resulting from
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such removal so as to place same, as closely as possible, in the same condition
as existed prior to the installation of the Generator, normal wear and tear
excepted. This obligation shall survive the expiration or sooner termination of
this lease. The foregoing notwithstanding, upon request by Landlord, Tenant, at
Tenant's sole cost and expense, promptly shall execute and deliver to Landlord,
in recordable form, any certificate or other document confirming the termination
of Tenant's right to use the Generator Area.
ARTICLE 17
HEAT, VENTILATING AND AIR-CONDITIONING
17.01 Landlord, at its expense, shall maintain and operate the heating,
ventilating and air-conditioning systems (hereafter referred to as the
"SYSTEMS") and, subject to energy conservation requirements of governmental
authorities, shall furnish heat, ventilating and air-conditioning (hereinafter
collectively referred to as the "AIR-CONDITIONING SERVICE") in the Demised
Premises through the systems, which shall be in compliance with the performance
specifications in EXHIBIT C. Air-conditioning shall be provided from May 15
through October 15 during "REGULAR HOURS" (that is between the hours of 8:00
A.M. and 6:00 P.M.) of "BUSINESS DAYS" (which term is used herein to mean all
days except Saturdays, Sundays and days now or hereafter observed by the Federal
or New York State government as legal holidays and those now or hereafter
designated by the applicable building service union employees service contract
or by the applicable Operating Engineers contract) throughout the year. Heating
and ventilation shall be provided during other periods of the year as may be
required for comfortable occupancy of the Demised Premises during regular hours
of business days. If Tenant shall require heating, ventilating or
air-conditioning service at any other time (hereinafter referred to as "AFTER
HOURS"), Landlord shall furnish such after hours service upon reasonable advance
notice from Tenant, and Tenant shall pay to Landlord, within thirty (30) days
after receipt of an invoice therefor, the then Building standard charge for such
after hours service which presently is $315.00 per hour per zone of the Building
Systems which must be operated to provide such after hours service to the
portions of the Demised Premises for which such service was requested and which
charge is subject to increase as Landlord's costs to provide such after hours
service increases. Landlord represents that the floors of the Demised Premises
are located in a one zone comprised of the sixteenth (16th) through the
twenty-first (21st) floors of the Building. In the event the after hours service
is shared by other tenants, the cost thereof shall be prorated among all such
tenants. Notwithstanding anything in the foregoing to the contrary, after hours
air-conditioning service may only be requested from May 15 through October 15 or
at such other times as Landlord is operating such air-conditioning service.
17.02 Use of the Demised Premises, or any part thereof, in a manner
exceeding the design conditions (including occupancy and connected electrical
load) specified in Exhibit C for the systems, rearrangement of partitionings or
opening of windows in the Demised Premises while the systems are in operation
which interferes with normal operation of the heat, ventilation
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and air-conditioning in the Demised Premises, may require changes in the
systems. Such changes, so occasioned, shall be made by Tenant, at its expense,
as Tenant's Changes pursuant to Article 13.
17.03 Landlord agrees that Tenant may install at Tenant's own cost and
expense, an additional air-conditioning system (which, together with any
supplemental air-conditioning system either presently in the Demised Premises or
being installed by Landlord as part of Landlord's Work, is hereinafter referred
to as the "SUPPLEMENTAL AIR-CONDITIONING SYSTEM") to enable Tenant to receive,
together with any supplemental air-conditioning system either presently in the
Demised Premises or being installed by Landlord as part of Landlord's Work, at
any one time, not more than an additional one hundred (100) tons of
air-conditioning for the Demised Premises plus, but only if and to the extent
available at the completion of Landlord's leasing program for the Building, up
to an additional twenty-five (25) tons of air-conditioning for the Demised
Premises. The costs of installation (including, without limitation, connection
to any condenser water source), maintenance and operation of the Supplemental
Air- Conditioning System shall be borne by Tenant. The connection to the
Building condenser water source shall be performed by Landlord's Building
contractors and Tenant shall pay to Landlord a one time tap-in charge in the
amount of $2,000.00 per each point of tap-in for such Supplemental
Air-Conditioning System. The connection charge shall be payable by Tenant as
additional rent within fifteen (15) days of Landlord's demand and does not
include the costs for any labor, materials or services provided to Tenant based
on the actual out of pocket costs and expenses incurred by Landlord in
connecting the Supplemental Air-Conditioning System to the Building condenser
water source. Additionally, Landlord shall make available to Tenant, at no cost
to Tenant, access to, and the right to use and connect the Supplemental
Air-Conditioning System to an approximately 3' by 3' air shaft as designated by
Landlord.
17.04 Landlord shall operate the Building's condenser water system on a
24 hours per day, 7 days per week basis and shall furnish condenser water to the
Demised Premises in sufficient capacity to operate the Supplemental Air
Conditioning System. Tenant covenants and agrees to pay Landlord for its use of
condenser water at the rate of $0.14 (hereinafter referred to as the "BASE
RATE") per hour per rated ton of cooling capacity of the Supplemental Air-
Conditioning System as measured by a clock or similar measuring devices, which
will monitor compressor run time, to be installed by Tenant with the
Supplemental Air-Conditioning System. The Base Rate shall be subject to
proportionate adjustment for increases in the actual out-of-pocket cost to
Landlord in connection with the creating and furnishing of condenser water over
the costs which exist as of the date hereof. All payments due under this Section
shall be payable by Tenant within fifteen (15) business days after demand from
Landlord therefor. Tenant may, at its sole cost and expense connect to
Landlord's Building waste lines and the manner of such connection shall be
subject to Landlord's prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed. All facilities, machinery and
equipment related to the Supplemental Air-Conditioning System shall be connected
by Tenant
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and operated and maintained by Tenant solely at Tenant's cost and expense. All
such facilities shall be installed by Tenant solely within the Demised Premises.
Tenant's blowers, chilling equipment, fans and other facilities, equipment and
machinery used in connection with the Supplemental Air-Conditioning System shall
operate on electricity purchased by Tenant in accordance with the provisions of
Article 16 of this lease. All facilities, equipment, machinery and ducts
installed by Tenant in connection with the Supplemental Air-Conditioning System
shall (a) be subject to Landlord's prior written approval which approval shall
not be unreasonably withheld, conditioned or delayed, (b) comply with Landlord's
reasonable requirements as to installation, maintenance and operation, and (c)
comply with all other terms, covenants and conditions of this lease applicable
thereto.
ARTICLE 18
LANDLORD'S OTHER SERVICES
18.01
(a) Landlord, at its expense, shall provide public elevator
service, passenger and freight, by elevators serving the floors on which the
Demised Premises are situated during regular hours of business days, and shall
have at least one passenger elevator subject to call at all other times. The
floors comprising the Demised Premises shall, at all times, be part of the same
elevator bank.
(b) Landlord will make available to Tenant the use of the
freight elevators in the Building on an after hours basis upon not less than 24
hours notice from Tenant to Landlord in each instance provided, however, that
Tenant shall pay to Landlord the Landlord's then Building rate with respect to
such use which presently is $85.00 per hour with a one (1) hour minimum on
business days if the use of such freight elevator is scheduled to commence at
5:30 p.m. and a four (4) hour minimum on days other than business days or on a
business day, if the use of such freight elevator is scheduled to commence after
5:30 p.m. Use of such after hours freight elevator facilities may not be
exclusive and Tenant may be required to share such after hours use with other
tenants who have requested such after hours use at the same, time on a
non-discriminatory basis, but in such event the other tenants using the same
shall share the costs and expenses in connection with such after hours use. The
present Building rate is subject to increase as Landlord's costs to provide same
increases.
18.02 Landlord, at its expense, shall cause the Demised Premises to be
cleaned in accordance with the cleaning specifications annexed hereto as EXHIBIT
F. Tenant shall pay to Landlord on demand the costs incurred by Landlord for (a)
extra cleaning work in the Demised Premises required because of (i) misuse or
neglect on the part of Tenant or its employees or visitors, (ii) use of portions
of the Demised Premises for preparation, serving or consumption of food or
beverages, data processing or reproducing operations, private lavatories or
toilets or other special purposes requiring greater or more difficult cleaning
work than office areas, (iii) unusual
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quantity of interior glass surfaces, (iv) materials or finishes installed by
Tenant or at its request which require greater or more difficult cleaning work
than typical office installations, and (b) removal from the Demised Premises and
the Building of so much of any refuse and rubbish of Tenant as shall exceed that
ordinarily accumulated daily in the routine of business office occupancy.
Landlord, its cleaning contractor and their employees shall have after hours
access to the Demised Premises and the free use of light, power and water in the
Demised Premises as reasonably required for the purpose of cleaning the Demised
Premises in accordance with Landlord obligations hereunder.
18.03 Landlord, at its expense, shall furnish hot and cold water to the
floor(s) on which the Demised Premises are located through the existing
wet-columns, for drinking, lavatory and cleaning purposes. If Tenant uses water
for any other purpose Landlord, at Tenant's expense, shall install meters to
measure Tenant's consumption of cold water and/or hot water for such other
purposes, as the case may be. Tenant shall pay for the quantities of cold water
and hot water shown on such meters in excess of the amounts typically used for
drinking, lavatory and cleaning purposes by office tenants leasing comparably
sized space in the Building, at Landlord's cost thereof, within fifteen (15)
days after the rendition of Landlord's bills therefor.
18.04 Landlord, at its expense, and on Tenant's request, shall maintain
the listings on the Building directory of the names of Tenant and any permitted
subtenant, and the names of any of their respective officers and employees,
provided that the names so listed shall not take up more than Tenant's
Proportionate Share of the number of lines on the Building directory. In the
event Tenant shall require additional or substitute listings on the Building
directory, Landlord shall, to the extent space for such additional listing is
available, maintain such listings and Tenant shall pay to Landlord an amount
equal to Landlord's out-of-pocket costs for such additional or substitute
listings.
18.05
(a) Except as otherwise expressly set forth herein, Landlord
reserves the right, without any liability to Tenant, except as otherwise
expressly provided in this lease, to stop service of any of the heating,
ventilating, air conditioning, electric, sanitary, elevator or other Building
systems serving the Demised Premises, or the rendition of any of the other
services required of Landlord under this lease, whenever and for so long as may
be necessary, by reason of accidents, emergencies, strikes or the making of
repairs or changes which Landlord is required by this lease or by law to make or
in good faith deems necessary, by reason of difficulty in securing proper
supplies of fuel, steam, water, electricity, labor or supplies, or by reason of
any other cause beyond Landlord's reasonable control. Landlord shall endeavor to
minimize inconvenience to Tenant in connection with such stoppages.
(b) Notwithstanding anything to the contrary contained in this
lease, if, as a result of (i) Landlord's failure to provide any service under
this lease which
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is required to be provided by Landlord, or (ii) Landlord's failure to make or
complete repairs to the Demised Premises and/or the Building which it is
required to make and complete pursuant to the provisions of this lease or, (iii)
in connection with making any such repair, Landlord materially interferes with
Tenant's use of the Demised Premises, in each case resulting from causes other
than the act, omission or negligence of Tenant, or its agents, employees,
contractors or invitees, or, with respect to items (i) and (ii) above, of any
public utility company serving the Building, Tenant is unable to use all or any
portion of the Demised Premises in the normal course of its business and does
not use all or such portion of the Demised Premises for a period in excess of
fifteen (15) consecutive business days by reason of such failure, then, to the
extent Tenant is not reimbursed by the proceeds of any business interruption
insurance carried by Tenant, Tenant shall be entitled to an abatement of fixed
rent from and after the sixteenth (16th) business day through the day when such
service is restored or repairs are completed based upon the ratio that the
rentable square foot area of the Demised Premises not used by Tenant bears to
the rentable square foot area of the Demised Premises. The foregoing provisions
shall not apply in the event the Demised Premises are damaged in whole or part
as a result of fire or other casualty, which is dealt with in other provisions
of this lease.
ARTICLE 19
ACCESS, CHANGES IN BUILDING FACILITIES, NAME
19.01 All portions of the Building except the inside surfaces of all
walls, windows and doors bounding the Demised Premises (including exterior
Building walls, core corridor walls and doors and any core corridor entrance)
and any space in or adjacent to the Demised Premises used for shafts, stacks,
pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other
Building facilities, and the use thereof, as well as access thereto through the
Demised Premises for the purpose of operation, maintenance, decoration and
repair, are reserved to Landlord.
19.02 Tenant shall permit Landlord to install, use, replace and
maintain pipes, ducts and conduits within the demising walls, bearing columns
and ceilings of the Demised Premises provided that such pipes, ducts and
conduits are concealed and are installed in a manner which does not materially
detract from the appearance of the Demised Premises or interfere with Tenant's
use and occupancy of the Demised Premises and which does not reduce the usable
area of the Demised Premises. If necessary, Landlord shall repair and restore
the Demised Premises in connection with any such installation.
19.03 Landlord or Landlord's agent shall have the right, upon
reasonable prior request (except in emergency under clause (ii) hereof) to enter
and/or pass through the Demised Premises or any part thereof, except for areas
designated by Tenant as private or where money or other valuables are kept
(hereinafter referred to as "SECURITY AREAS") unless accompanied by a
representative of Tenant, which representative Tenant agrees shall be made
available by Tenant,
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at reasonable times during reasonable hours, (i) to examine the Demised Premises
and to show them to the fee owners, lessors of superior leases, holders of
superior mortgages, or prospective purchasers, mortgagees or lessees of the
Building as an entirety, and (ii) for the purpose of making such repairs or
changes in or to the Demised Premises or in or its facilities, as may be
provided for by this lease or as may be mutually agreed upon by the parties or
as Landlord may be required to make by law or in order to repair and maintain
said structure or its fixtures or facilities. Landlord shall be allowed to take
all materials into and upon the Demised Premises that may be reasonably required
for such repairs, changes, repainting or maintenance to the Demised Premises
only, without liability to Tenant, but Landlord shall not unreasonably interfere
with Tenant's use of the Demised Premises. Landlord shall also have the right to
enter on and/or pass through the Demised Premises, or any part thereof, at such
times as such entry shall be required by circumstances of emergency affecting
the Demised Premises or said structure. In such circumstances of emergency, a
policeman or fireman shall accompany Landlord's entry into any security area
whenever possible and Landlord will give Tenant prompt notice after such entry.
19.04 During the period of twelve (12) months prior to the Expiration
Date, Landlord may, upon reasonable prior notice to Tenant, exhibit the Demised
Premises (other than security areas unless accompanied by a representative of
Tenant which representative Tenant agrees shall be made available by Tenant), to
prospective tenants during the times allowed in Section 19.03.
19.05 Landlord reserves the right, upon reasonable prior notice without
incurring any liability to Tenant therefor, and without it constituting an
actual or constructive eviction, to make such changes in or to the Building and
the fixtures and equipment thereof, as well as in or to the size, composition,
number, arrangement or location of the public entrances, doors, doorways, halls,
passages, elevators, escalators and stairways and other public portions thereof,
as it may deem reasonably necessary or desirable provided that Tenant shall, at
all times, have ingress and egress to and from the Building and the Demised
Premises, and provided that such change does not unreasonably interfere with
Tenant's access to and from the Demised Premises or unreasonably diminish
elevator or other services presently available to Tenant or reduce the size of
the Demised Premises.
19.06 Landlord may adopt any name for the Building. Landlord reserves
the right to change the name or address of the Building at any time.
19.07 For the purposes of Article 19, the term "Landlord" shall include
lessors of leases and the holders of mortgages to which this lease is subject
and subordinate as provided in Article 7.
19.08 Any reservation in this lease of a right by Landlord to enter
upon the
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Demised Premises and to make or perform any repairs, alterations or other work
in, to or about the Demised Premises which, in the first instance, is the
obligation of Tenant pursuant to this lease shall not be deemed to: (i) impose
any obligation on Landlord to do so, (ii) render Landlord liable (to Tenant or
any third party) for the failure to do so, or (iii) relieve Tenant from any
obligations to indemnify Landlord as otherwise provided elsewhere in this lease.
19.09 Landlord agrees that the Demised Premises will be accessible 24
hours a day 7 days per week, subject to Landlord's reasonable security
procedures, and that a lobby attendant will be on duty 24 hours a day 7 days per
week.
19.10 Tenant, at Tenant's sole cost and expense, shall directly arrange
and contract with an internet service provider (hereinafter referred to as an
"ISP") to provide internet service to the Demised Premises and with a
telecommunications service provider (hereinafter referred to as a
"TELECOMMUNICATIONS PROVIDER") to provide telecommunications service to the
Demised Premises. Tenant's ISP and Telecommunications Provider shall be subject
to Landlord's prior written approval (which approval shall not be unreasonably
withheld, conditioned or delayed, except that if the proposed ISP is the then
ISP designated by Landlord for the Building or if the proposed
Telecommunications Provider is the then Telecommunications Provider designated
by Landlord for the Building, such approval shall be deemed given. All wiring
and related work required to be performed within the Demised Premises to allow
Tenant to access such internet service and telecommunications service, and all
fees and charges charged by the ISP and the Telecommunications Provider, shall
be paid directly to Tenant's ISP and Telecommunications Provider by Tenant.
Landlord shall in no event have any responsibility with respect to such services
and providers.
ARTICLE 20
NOTICE OF ACCIDENTS
20.01 Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of (i) any accident in or about the Demised Premises for which
Landlord might be liable, (ii) all fires in the Demised Premises, (iii) all
damages to or defects in the Demised Premises, including the fixtures, equipment
and appurtenances thereof, for the repair of which Landlord might be
responsible, and (iv) all damage to or defects in any parts or appurtenances of
the Building's sanitary, electrical, heating, ventilating, air-conditioning,
elevator and other systems located in or passing through the Demised Premises or
any part thereof.
ARTICLE 21
NON-LIABILITY AND INDEMNIFICATION
21.01 Neither Landlord nor any agent or employee of Landlord shall be
liable to Tenant for any injury or damage to Tenant or to any other person or
for any damage to, or loss (by theft or otherwise) of, any property of Tenant or
of any other person, irrespective of the cause
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of such injury, damage or loss, unless caused by or due to the
negligence of Landlord, its agents or employees occurring within the scope of
their respective employments.
21.02
(a) Subject to the provisions of Section 11.03, Tenant shall
indemnify and save harmless Landlord and its agents against and from (i) any and
all claims (x) arising from (A) the conduct or management of the Demised
Premises or of any business therein, or (B) any work or thing whatsoever done,
or any condition created (other than by Landlord for Landlord's or Tenant's
account) in or about the Demised Premises during the term of this lease or
during the period of time, if any, prior to the Commencement Date that Tenant
may have been given access to the Demised Premises, or (C) arising from any
negligent or otherwise wrongful act or omission of Tenant or any of its
subtenants or licensees or its or their employees, agents or contractors, and
(ii) all costs, expenses and liabilities incurred in or in connection with each
such claim or action or proceeding brought thereon. In case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall resist and defend such action or proceeding.
(b) Subject to the provisions of Section 11.03, Landlord shall
indemnify and save harmless Tenant and its agents against and from (i) any and
all claims (x) arising from (A) the conduct or management of the Building (other
than the Demised Premises) or of any business therein including, without
limitation, Landlord's obligations pursuant to Section 10.01(a), or (B) any work
or thing whatsoever done, or any condition created (other than by Tenant) in or
about the Building (other than the Demised Premises) during the term of this
lease, or (y) arising from any negligent or otherwise wrongful act or omission
of Landlord or any of its tenants or licensees or its or their employees, agents
or contractors, and (ii) all costs, expenses and liabilities incurred in or in
connection with each such claim or action or proceeding brought thereon. In case
any action or proceeding be brought against Tenant by reason of any such claim,
Landlord, upon notice from Tenant, shall resist and defend such action or
proceeding.
21.03 Except as otherwise expressly provided in this lease,
this lease and the obligations of Tenant hereunder shall be in no wise affected,
impaired or excused because Landlord is unable to fulfill, or is delayed in
fulfilling, any of its obligations under this lease by reason of strike, other
labor trouble, governmental pre-emption or priorities or other controls in
connection with a national or other public emergency or shortages of fuel,
supplies or labor resulting therefrom, acts of God or other like cause beyond
Landlord's reasonable control.
ARTICLE 22
DESTRUCTION OR DAMAGE
22.01 If the Building or the Demised Premises shall be damaged
or destroyed by
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fire or other cause, Landlord, within ninety (90) days after such damage or
destruction, shall deliver to Tenant an estimate of the time (hereinafter
referred to as the "ESTIMATED TIME") required to repair or restore the damage or
destruction, prepared by an independent contractor or architect (such estimate
being hereinafter referred to as the "ESTIMATE"). If the Building or the Demised
Premises shall be partially damaged or partially destroyed by fire or other
cause, the rents payable hereunder shall be abated to the extent that the
Demised Premises shall have been rendered untenantable or inaccessible by
elevator and for the period from the date of such damage or destruction to the
date the damage shall be repaired or restored in accordance with the provisions
of Section 22.03. If the Demised Premises or a major part thereof shall be
totally (which shall be deemed to include substantially totally) damaged or
destroyed or rendered completely (which shall be deemed to include substantially
completely) untenantable or inaccessible on account of fire or other cause, the
rents shall abate as of the date of the damage or destruction and until Landlord
shall repair, restore and rebuild the Building and the Demised Premises,
provided, however, that should Tenant reoccupy a portion of the Demised Premises
for the conduct of its business (other than for computer set-up) during the
period the restoration work is taking place and prior to the date that the same
are made completely tenantable, rents allocable to such portion shall be payable
by Tenant from the date of such occupancy.
22.02 If the Building or the Demised Premises shall be totally
damaged or destroyed by fire or other cause, or if the Building shall be so
damaged or destroyed by fire or other cause (whether or not the Demised Premises
are damaged or destroyed) as to require a reasonably estimated expenditure of
more than 40% of the full insurable value of the Building immediately prior to
the casualty, then in either such case Landlord may terminate this lease by
giving Tenant notice to such effect within ninety (90) days after the date of
the casualty. In case of any damage or destruction mentioned in this Article
Tenant may terminate this lease, (a) by notice to Landlord sent within thirty
(30) days after receipt of the Estimate if the Estimated Time exceeds twelve
(12) months or, (b) if Landlord has not completed the making of the required
repairs and restored and rebuilt the Building and the Demised Premises within
twelve (12) months from the date of such damage or destruction, or within such
period after such date (not exceeding three (3) months) as shall equal the
aggregate period Landlord may have been delayed in doing so by adjustment of
insurance, labor trouble, governmental controls, act of God, or any other cause
beyond Landlord's reasonable control, by notice to Landlord sent within thirty
(30) days after such twelve (12) month period (as same may be extended pursuant
to the provisions of Section 22.02(b)) or (c) by notice to Landlord sent within
thirty (30) days of receipt of the Estimate if such damage or destruction occurs
during the last two (2) years of the term hereof and the Estimated Time exceeds
four (4) months, or (d) if such damage or destruction occurs during the last two
(2) years of the term hereof if Landlord shall not have completed making the
required repairs and restoration and rebuilt the Building and Demised Premises
within four (4) months from the date of such damage or destruction, by notice to
Landlord sent within thirty (30) days after such four (4) month period.
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22.03 If the Building or the Demised Premises shall be
partially or totally damaged or destroyed by fire or other cause, then, whether
or not the damage or destruction shall have resulted from the fault or neglect
of Tenant, or its employees, agents or visitors (and if this lease shall not
have been terminated as in this Article provided), Landlord shall repair the
damage and restore and rebuild the Building and/or the Demised Premises, at its
expense, with reasonable dispatch after notice to it of the damage or
destruction; provided, however, that Landlord shall not be required to repair or
replace any of Tenant's Property, Tenant's Changes or Tenant's Work.
22.04 No damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the Building
pursuant to this Article. Landlord shall use its best efforts to effect such
repair or restoration promptly and in such manner as to not unreasonably
interfere with Tenant's use and occupancy.
22.05 Tenant will cooperate with Landlord or the lessor of any
superior lease or the holder of any superior mortgage in connection with the
collection of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Demised Premises or the Building by
fire or other cause.
22.06 Landlord will not carry insurance of any kind on
Tenant's Property, Tenant's Changes or Tenant's Work, and, except as provided by
law or by reason of its fault or its breach of any of its obligations hereunder,
shall not be obligated to repair any damage thereto or replace the same.
22.07 The provisions of this Article shall be considered an
express agreement governing any case of damage or destruction of the Demised
Premises by fire or other casualty, and Section 227 of the Real Property Law of
the State of New York, providing for such a contingency in the absence of an
express agreement, and any other law of like import, now or hereafter in force,
shall have no application in such case.
22.08 Any dispute which may arise between the parties with
respect to the meaning or application of any of the provisions of this Article
shall be determined by arbitration in the manner provided in Article 34.
ARTICLE 23
EMINENT DOMAIN
23.01 If the whole of the Building shall be lawfully taken by
condemnation or in any other manner for any public or quasi-public use or
purpose, this lease and the term and estate hereby granted shall forthwith
terminate as of the date of vesting of title in such taking (which date is
hereinafter also referred to as the "DATE OF THE TAKING"), and the rents shall
be prorated and adjusted as of such date.
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23.02 Except as hereafter expressly set forth, if only a part
of the Building shall be so taken, this lease shall be unaffected by such
taking, except that Tenant may elect to terminate this lease in the event access
to and from the Demised Premises is materially impeded or in the event of a
partial taking of the Demised Premises if the remaining area of the Demised
Premises shall not be reasonably sufficient for Tenant to continue feasible
operation of its business. Tenant shall give notice of such election to Landlord
not later than sixty (60) days after (i) notice of such taking is given by
Landlord to Tenant, or (ii) the date of such taking, whichever occurs sooner.
Upon the giving of such notice by Tenant this lease shall terminate on the date
of such taking and the rents shall be prorated as of such termination date. Upon
such partial taking and this lease continuing in force as to any part of the
Demised Premises, the rents apportioned to the part taken shall be prorated and
adjusted as of the date of taking and from such date the fixed rent for the
Demised Premises and additional rent shall be payable pursuant to Article 5
according to the rentable area remaining.
23.03 Landlord shall be entitled to receive the entire award
in any proceeding with respect to any taking provided for in this Article
without deduction therefrom for any estate vested in Tenant by this lease and
Tenant shall receive no part of such award, except as hereinafter expressly
provided in this Article. Tenant hereby expressly assigns to Landlord all of its
right, title and interest in or to every such award. Notwithstanding anything
herein to the contrary, Tenant may, at its sole cost and expense, make a claim
with the condemning authority for Tenant's moving expenses, the value of
Tenant's fixtures or Tenant's Changes which do not become part of the Building
or property of Landlord, provided however that Landlord's award is not thereby
reduced or otherwise adversely affected.
23.04 If the temporary use or occupancy of all or any part of
the Demised Premises shall be lawfully taken by condemnation or in any other
manner for any public or quasi-public use or purpose during the term of this
lease, Tenant shall be entitled, except as hereinafter set forth, to receive
that portion of the award for such taking which represents compensation for the
use and occupancy of the Demised Premises and, if so awarded, for the taking of
Tenant's Property and for moving expenses, and Landlord shall be entitled to
receive that portion which represents reimbursement for the cost of restoration
of the Demised Premises. This lease shall be and remain unaffected by such
taking and Tenant shall continue responsible for all of its obligations
hereunder insofar as such obligations are not affected by such taking and shall
continue to pay in full the fixed rent and additional rent when due. If the
period of temporary use or occupancy shall extend beyond the Expiration Date,
that part of the award which represents compensation for the use or occupancy of
the Demised Premises (or a part thereof) shall be divided between Landlord and
Tenant so that Tenant shall receive so much thereof as represents the period
prior to the Expiration Date and Landlord shall receive so much thereof as
represents the period subsequent to the Expiration Date. All moneys received by
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Tenant as, or as part of, an award for temporary use and occupancy for a period
beyond the date to which the rents hereunder have been paid by Tenant shall be
received, held and applied by Tenant as a trust fund for payment of the rents
falling due hereunder.
23.05 In the event of any taking of less than the whole of the
Building which does not result in a termination of this lease, or in the event
of a taking for a temporary use or occupancy of all or any part of the Demised
Premises which does not extend beyond the Expiration Date, Landlord, at its
expense, and to the extent any award or awards shall be sufficient for the
purpose, shall proceed with reasonable diligence to repair, alter and restore
(a) the remaining parts of the Building to substantially a building standard
condition to the extent that the same may be feasible and so as to constitute a
complete and tenantable Building and (b) the Demised Premises to substantially
the condition existing prior to the taking.
23.06 Should any part of the Demised Premises be taken to
effect compliance with any law or requirement of public authority other than in
the manner hereinabove provided in this Article, then (i) if such compliance is
the obligation of Tenant under this lease, Tenant shall not be entitled to any
diminution or abatement of rent or other compensation from Landlord therefor,
but (ii) if such compliance is the obligation of Landlord under this lease, the
fixed rent hereunder shall be reduced and additional rents under Article 5 shall
be adjusted in the same manner as is provided in Section 23.02 according to the
reduction in rentable area of the Demised Premises resulting from such taking.
23.07 Any dispute which may arise between the parties with
respect to the meaning or application of any of the provisions of this Article
shall be determined by arbitration in the manner provided in Article 34.
ARTICLE 24
SURRENDER; HOLDOVER
24.01 On the last day of the term of this lease, or upon any
earlier termination of this lease, or upon any re-entry by Landlord upon the
Demised Premises, Tenant shall quit and surrender the Demised Premises to
Landlord in good order, condition and repair, except for ordinary wear and tear
and damage by fire or other casualty and Tenant shall remove all of Tenant's
Property therefrom except as otherwise expressly provided in this lease and
shall restore the Demised Premises wherever such removal results in damage
thereto.
24.02
(a) In the event this lease is not renewed or extended
or a new lease is not entered into between the parties, and if Tenant shall then
hold over after the expiration of the term of this lease, and if Landlord shall
then not proceed to remove Tenant from the Demised Premises in the manner
permitted by law (or shall not have given written notice to
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Tenant that Tenant must vacate the Demised Premises) irrespective of whether or
not Landlord accepts rent from Tenant for a period beyond the Expiration Date,
the parties hereby agree that Tenant's occupancy of the Demised Premises after
the expiration of the term shall be under a month-to-month tenancy commencing on
the first day after the expiration of the term, which tenancy shall be upon all
of the terms set forth in this lease except Tenant shall pay on the first day of
the first month of the holdover period as fixed rent, an amount equal to the
higher of (i) two (2) times (except one and one-half (1-1/2) times during the
first thirty (30) days of the holdover period) one-twelfth the fixed rent
payable by Tenant during the last year of the term of this lease (i.e., the year
immediately prior to the holdover period) and (ii) the product of two (2) times
(except one and one-half (1-1/2) times during the first thirty (30) days of the
holdover period) an amount equal to the then monthly fair market rental value
for the Demised Premises as shall be established by Landlord giving notice to
Tenant of Landlord's good faith estimate of such fair market rental value.
Tenant may dispute such fair market rental value for the Demised Premises as
estimated by Landlord by giving notice to Landlord within but in no event after
ten (10) days after the giving of Landlord's notice to Tenant (as to the giving
of which notice to Landlord, time shall be deemed of the essence). Enclosed with
such notice, Tenant shall be required to furnish to Landlord a certified opinion
of a reputable New York licensed real estate broker having leasing experience in
the Borough of Manhattan for a period of not less than ten (10) years setting
forth said broker's good faith opinion of the fair market rental value of the
Demised Premises. If Tenant and Landlord are unable to resolve any such dispute
as to the fair market rental value for the Demised Premises then an independent
arbitrator who shall be a real estate broker of similar qualifications and shall
be selected from a listing of not less than three (3) brokers furnished by the
Real Estate Board of New York, Inc., to Tenant and Landlord (at the request of
either Landlord or Tenant). If Landlord and Tenant are unable to agree upon the
selection of the individual arbitrator from such listing, then the first
arbitrator so listed by the Real Estate Board of New York, Inc. shall be
conclusively presumed to have been selected by both Landlord and Tenant. The
average of the determination of the independent arbitrator and the determination
of the broker coming closest to the independent arbitrator shall be conclusive
and binding upon the parties as to the fair market rental value of the Demised
Premises. Pending the determination of the fair market rental value of the
Demised Premises upon the expiration of the term of this lease, Tenant shall pay
to Landlord as fixed rent an amount computed in accordance with clauses (i) or
(ii) of this subsection 24.02(a) (as Landlord shall then elect), and upon
determination of the fair market rental value of the Demised Premises in
accordance with the preceding provisions hereof appropriate adjustments and
payments shall be effected. It is further stipulated and agreed that if Landlord
shall, at any time after the expiration of the original term or after the
expiration of any term created thereafter, proceed to remove Tenant from the
Demised Premises as a holdover, the fixed rent for the use and occupancy of the
Demised Premises during any holdover period shall be calculated in the same
manner as set forth above. In addition to the foregoing, in the event such
holdover exceeds sixty (60) days, Landlord shall be entitled to recover from
Tenant any losses or damages arising from such holdover.
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(b) Notwithstanding anything to the contrary contained
in this lease, the acceptance of any rent paid by Tenant pursuant to subsection
24.02(a) above shall not preclude Landlord from commencing and prosecuting a
holdover or summary eviction proceeding, and the preceding sentence shall be
deemed to be an "agreement expressly providing otherwise" within the meaning of
Section 232-c of the Real Property Law of the State of New York.
(c) All damages to Landlord by reason of holding over by
Tenant may be of the subject of a separate action and need not be asserted by
Landlord in any summary proceedings against Tenant.
ARTICLE 25
CONDITIONS OF LIMITATION
25.01 To the extent permitted by applicable law this lease and
the term and estate hereby granted are subject to the limitation that whenever
Tenant shall make an assignment of the property of Tenant for the benefit of
creditors, or shall file a voluntary petition under any bankruptcy or insolvency
law, or an involuntary petition alleging an act of bankruptcy or insolvency
shall be filed against Tenant under any bankruptcy or insolvency law, or
whenever a petition shall be filed or against Tenant under the reorganization
provisions of the United States Bankruptcy Act or under the provisions of any
law of like import, or whenever a petition shall be filed by Tenant under the
arrangement provisions of the United States Bankruptcy Act or under the
provisions of any law of like import, or whenever a permanent receiver of Tenant
or of or for the property of Tenant shall be appointed, then, Landlord, (a) at
any time after receipt of notice of the occurrence of any such event, or (b) if
such event occurs without the acquiescence of Tenant, at any time after the
event continues unstayed for one hundred twenty (120) days, Landlord may give
Tenant a notice of intention to end the term of this lease at the expiration of
five (5) days from the date of service of such notice of intention, and upon the
expiration of said five (5) day period this lease and the term and estate hereby
granted, whether or not the term shall theretofore have commenced, shall
terminate with the same effect as if that day were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 27.
25.02 This lease and the term and estate hereby granted are
subject to the further limitation that:
(a) whenever Tenant shall default in the payment of any
installment of fixed rent, or in the payment of any additional rent or any other
charge payable by Tenant to Landlord, on any day upon which the same ought to be
paid, and such default shall continue for ten (10) days after Landlord shall
have given Tenant a notice specifying such default; or
(b) whenever Tenant shall do or permit anything to be
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done, whether by action or inaction, contrary to any of Tenant's obligations
hereunder, and if such situation shall continue and shall not be remedied by
Tenant within thirty (30) days after Landlord shall have given to Tenant a
notice specifying the same, or, in the case of a happening or default which
cannot with due diligence be cured within a period of thirty (30) days and the
continuance of which for the period required for cure will not subject Landlord
to the risk of criminal liability (as more particularly described in Section
10.02) or termination of any superior lease or foreclosure of any superior
mortgage, if Tenant shall not, (i) within said thirty (30) day period advise
Landlord of Tenant's intention to duly institute all steps necessary to remedy
such situation, (ii) duly institute within said thirty (30) day period, and
thereafter diligently prosecute to completion all steps necessary to remedy the
same and (iii) complete such remedy within such time after the date of the
giving of said notice of Landlord as shall reasonably be necessary; or
(c) whenever any event shall occur or any contingency
shall arise whereby this lease or the estate hereby granted or the unexpired
balance of the term hereof would, by operation of law or otherwise, devolve upon
or pass to any person, firm or corporation other than Tenant, except as
expressly permitted by Article 9; or
(d) whenever Tenant shall abandon the Demised Premises
(unless as a result of a casualty) and the Demised Premises shall remain so
abandoned after notice thereof to Tenant and Tenant shall fail to provide
reasonable security measures to prevent unauthorized entry into the Demised
Premises, or
(e) when Tenant shall be in default in the observance or
performance of its obligations under any other lease in the Building which
default continues after notice and beyond applicable grace periods,
then in any of said cases set forth in the foregoing Subsections (a), (b), (c)
(d) and (e), Landlord may give to Tenant a notice of intention to end the term
of this lease at the expiration of five (5) days from the date of the service of
such notice of intention, and upon the expiration of said five (5) days this
lease and the term and estate hereby granted, whether or not the term shall
theretofore have commenced, shall terminate with the same effect as if that day
were the Expiration Date, but Tenant shall remain liable for damages as provided
in Article 27.
ARTICLE 26
RE-ENTRY BY LANDLORD
26.01 If Tenant shall default in the payment of any
installment of fixed rent, or of any additional rent, on any date upon which the
same ought to be paid, and if such default shall continue for ten (10) days
after Landlord shall have given to Tenant a notice specifying such default, or
if this lease shall expire as in Article 25 provided, Landlord or Landlord's
agents and employees may immediately or at any time thereafter re-enter the
Demised Premises, or any part thereof, in the name of the whole, either by
summary dispossess proceedings or by any suitable
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action or proceeding at law, without being liable to indictment, prosecution or
damages therefor, and may repossess the same, and may remove any persons
therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises again as and of its first estate and interest therein. The word
re-enter, as herein used, is not restricted to its technical legal meaning. In
the event of any termination of this lease under the provisions of Article 25 or
if Landlord shall re-enter the Demised Premises under the provisions of this
Article or in the event of the termination of this lease, or of re-entry, by or
under any summary dispossess or other proceeding or action or any provision of
law by reason of default hereunder on the part of Tenant, Tenant shall thereupon
pay to Landlord the fixed rent and additional rent payable by Tenant to Landlord
up to the time of such termination of this lease, or of such recovery of
possession of the Demised Premises by Landlord, as the case may be, and shall
also pay to Landlord damages as provided in Article 27.
26.02 In the event of a breach or threatened breach by
Landlord or Tenant of any of their respective obligations under this lease,
Tenant or Landlord, as the case may be, shall also have the right of injunction.
The special remedies to which Landlord may resort hereunder are cumulative and
are not intended to be exclusive of any other remedies or means of redress to
which Landlord may lawfully be entitled at any time and Landlord may invoke any
remedy allowed at law or in equity as if specific remedies were not provided for
herein.
26.03 If this lease shall terminate under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article, or in the event of the termination of this lease, or
of re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of default hereunder on the part of Tenant,
Landlord shall be entitled to retain all moneys, if any, paid by Tenant to
Landlord, whether as advance rent, security or otherwise, but such moneys shall
be credited by Landlord against any fixed rent or additional rent due from
Tenant at the time of such termination or re-entry or, at Landlord's option,
against any damages payable by Tenant under Article 27 or pursuant to law.
ARTICLE 27
DAMAGES
27.01 If this lease is terminated under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of Article 26, or in the event of the termination of this lease, or
of re-entry, by or under any summary dispossess or other proceeding or action or
any provision of law by reason of default hereunder on the part of Tenant which
continues after notice and the expiration of any applicable cure period, Tenant
shall pay to Landlord as damages, at the election of Landlord, either:
(a) a sum which at the time of such termination of this
lease or at the time of any such re-entry by Landlord, as the case may be,
represents the then present value of the excess, if any, discounted at the rate
of six (6%) percent per annum, of:
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(i) the aggregate of the fixed rent and the additional
rent payable hereunder which would have been payable by Tenant (conclusively
presuming the additional rent to be the same as was payable for the year
immediately preceding such termination) for the period commencing with such
earlier termination of this lease or the date of any such re-entry, as the case
may be, and ending with the Expiration Date, had this lease not so terminated or
had Landlord not so re-entered the Demised Premises; over
(ii) the aggregate rental value of the Demised Premises
for the same period; or
(b) sums equal to the fixed rent and the additional rent (as
above presumed) payable hereunder which would have been payable by Tenant had
this lease not so terminated, or had Landlord not so re-entered the Demised
Premises, payable upon the due dates therefor specified herein following such
termination or such re-entry and until the Expiration Date, provided, however,
that if Landlord shall relet the Demised Premises during said period, Landlord
shall credit Tenant with the net rents received by Landlord from such reletting,
such net rents to be determined by first deducting from the gross rents as and
when received by Landlord from such reletting the expenses incurred or paid by
Landlord in terminating this lease or in re-entering the Demised Premises and in
securing possession thereof, as well as the expenses of reletting, including
altering and preparing the Demised Premises for new tenants, brokers'
commissions, and all other expenses properly chargeable against the Demised
Premises and the rental therefrom; it being understood that any such reletting
may be for a period shorter or longer than the remaining term of this lease; but
in no event shall Tenant be entitled to receive any excess of such net rents
over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be
entitled in any suit for the collection of damages pursuant to this Subsection
to a credit in respect of any net rents from a reletting, except to the extent
that such net rents are actually received by Landlord. If the Demised Premises
or any part thereof should be relet in combination with other space, then proper
apportionment on a square foot basis (for equivalent space) shall be made of the
rent received from such reletting and of the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for the
unexpired portion of the term of this lease, or any part thereof, before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting.
27.02 Suit or suits for the recovery of such damages, or any
installments thereof, may be brought by Landlord from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the term of this lease would have expired if
it had not been so terminated under the provisions of Article 25, or under any
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provision of law, or had Landlord not re-entered the Demised Premises. Nothing
herein contained shall be construed to limit or preclude recovery by Landlord
against Tenant of any sums or damages to which, in addition to the damages
particularly provided above, Landlord may lawfully be entitled by reason of any
default hereunder on the part of Tenant, but subject to Section 27.01, neither
party shall be entitled to consequential damages under this lease. Nothing
herein contained shall be construed to limit or prejudice the right of Landlord
to prove for and obtain as liquidated damages by reason of the termination of
this lease or re-entry on the Demised Premises for the default of Tenant under
this lease, an amount equal to the maximum allowed by any statute or rule of law
in effect at the time when, and governing the proceedings in which, such damages
are to be proved whether or not such amount be greater, equal to, or less than
any of the sums referred to in Section 27.01, but subject to Section 27.01,
neither party shall be entitled to consequential damages under this lease.
ARTICLE 28
WAIVER
28.01 Tenant, for Tenant, and on behalf of any and all persons
claiming through or under Tenant, including creditors of all kinds, does hereby
waive and surrender all right and privilege which they or any of them might have
under or by reason of any present or future law, to redeem the Demised Premises
or to have a continuance of this lease for the term hereby demised after being
dispossessed or ejected therefrom by process of law or under the terms of this
lease or after the termination of this lease as herein provided.
28.02 In the event that Tenant is in arrears in payment of
fixed rent or additional rent hereunder, Tenant waives Tenant's right, if any,
to designate the items against which any payments made by Tenant are to be
credited, and Tenant agrees that Landlord may apply any payments made by Tenant
to any items it sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items against which any such payments shall be
credited.
28.03 Landlord and Tenant hereby waive trial by jury in any
action, proceeding or counterclaim brought by either against the other on any
matter whatsoever arising out of or in any way connected with this lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Demised
Premises, including any claim of injury or damage, or any emergency or other
statutory remedy with respect thereto. In the event Landlord commences any
summary proceeding for possession of the Demised Premises, Tenant covenants and
agrees that it will not interpose any counterclaim of any nature or description
in any such proceeding except a mandatory counterclaim or defense that would be
lost if not so interposed.
28.04 The provisions of Articles 17 and 18 shall be considered
expressed agreements governing the services to be furnished by Landlord, and
Tenant agrees that any laws and/or requirements of public authorities, now or
hereafter in force, shall have no application in
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connection with any enlargement of Landlord's obligations with respect to such
services unless Tenant agrees, in writing, to pay to Landlord, as additional
rent, Landlord's reasonable charges for any additional services provided.
28.05 If, at any time during the term of this lease, any
requirement of public authority shall have the effect of limiting, for any
period of time, the amount of the rents payable by Tenant, or receivable by
Landlord, under this lease, and the maximum rents so permitted to be paid by
Tenant, or received by Landlord, hereunder shall be less than the rents herein
reserved, then:
(a) throughout the period of limitation, Tenant shall remain
liable for the maximum amount of rents that is lawfully payable; and
(b) if and when the period of limitation ends, the requirement
of public authority imposing such limitation is repealed, or such limitation is
restrained or rendered unenforceable by any order or ruling of a court of
appropriate jurisdiction:
(i) to the extent that the same is not prohibited by any
requirement of public authority, Tenant shall pay to Landlord, on demand, all
amounts that would have been due from Tenant to Landlord during the period of
limitation, but that were not paid because of the requirements of public
authorities; and
(ii) thereafter, Tenant shall pay to Landlord all of the
rents reserved under this lease, all of which shall be calculated as if there
had been no intervening period of limitation.
ARTICLE 29
NO OTHER WAIVERS OR MODIFICATIONS
29.01 The failure of either party to insist in any one or more
instances upon the strict performance of any one or more of the obligations of
this lease, or to exercise any election herein contained, shall not be construed
as a waiver or relinquishment for the future of the performance of such one or
more obligations of this lease or of the right to exercise such election, but
the same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission. No executory agreement hereafter made
between Landlord and Tenant shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this lease, in whole
or in part, unless such executory agreement is in writing, refers expressly to
this lease and is signed by the party against whom enforcement of the change,
modification, waiver, release, discharge or termination or effectuation of the
abandonment is sought.
29.02 The following specific provisions of this Section shall
not be deemed to
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limit the generality of any of the foregoing provisions of this Article:
(a) no agreement to accept a surrender of all or any
part of the Demised Premises shall be valid unless in writing and signed by
Landlord. The delivery of keys to an employee of Landlord or of its agent shall
not operate as a termination of this lease or a surrender of the Demised
Premises. If Tenant shall at any time request Landlord to sublet the Demised
Premises for Tenant's account, Landlord or its agent is authorized to receive
said keys for such purposes without releasing Tenant from any of its obligations
under this lease, and Tenant hereby releases Landlord from any liability for
loss or damage to any of Tenant's property in connection with such subletting
except arising out of the negligence or willful act of Landlord or its agent.
(b) the receipt by Landlord or payment by Tenant of rent
with knowledge of breach of any obligation of this lease shall not be deemed a
waiver of such breach;
(c) no payment by Tenant or receipt by Landlord of a
lesser amount than the correct fixed rent or additional rent due hereunder shall
be deemed to be other than a payment on account, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance or pursue any other
remedy in this lease or at law provided.
ARTICLE 30
CURING TENANT'S DEFAULTS, ADDITIONAL RENT
30.01
(a) if Tenant shall default in the performance of any of
Tenant's obligations under this lease, Landlord, without thereby waiving such
default, may (but shall not be obligated to) perform the same for the account
and at the expense of Tenant, without notice, in a case of emergency, and in any
other case, only if such default continues after the expiration of (i) ten (10)
days from the date Landlord gives Tenant notice of intention so to do, or (ii)
the applicable grace period provided in Section 25.02 or elsewhere in this lease
for cure of such default, whichever occurs later;
(b) if Tenant is late in making any payment due to
Landlord from Tenant under this lease for seven (7) or more days, then interest
shall become due and owing to Landlord on such payment from the date when it was
due computed at the rate of four (4%) percent per annum over the Base Rate as
defined in Section 5.07, but in no event in excess of the maximum legal rate of
interest chargeable in the State of New York.
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30.02 Bills for any reasonable expenses incurred by Landlord
in connection with any such performance by it for the account of Tenant, and
bills for all reasonable costs, expenses and disbursements of every kind and
nature whatsoever, including reasonable counsel fees, involved in collecting or
endeavoring to collect the fixed rent or additional rent or any part thereof or
enforcing or endeavoring to enforce any rights against Tenant, under or in
connection with this lease, or pursuant to law, providing Landlord is the
prevailing party or a settlement is made in favor of Landlord, including any
such reasonable cost, expense and disbursement involved in instituting and
prosecuting summary proceedings, as well as bills for any property, material,
labor or services provided, furnished, or rendered, by Landlord or at its
instance to Tenant, may be sent by Landlord to Tenant monthly, or immediately,
at Landlord's option, and, shall be due and payable in accordance with the terms
of such bills. In the event Tenant institutes any action against Landlord to
enforce any rights against Landlord under this lease or pursuant to law (after
Landlord defaults in the observance or performance of its obligations under this
lease and such default continues after any required notice and the expiration of
any applicable cure period) and providing Tenant is the prevailing party or a
settlement is made in favor of Tenant, Tenant shall be entitled to recover
reasonable counsel fees, costs, expenses and disbursements incurred by Tenant in
connection with such action.
ARTICLE 31
BROKER
31.01 Landlord and Tenant covenant, warrant and represent that
they have not dealt with any broker or finder except Cushman & Wakefield, Inc.,
the rental agent for the Building (hereinafter referred to as the "BROKER"),
concerning the renting of the Demised Premises to Tenant. Landlord and Tenant
agree to hold the other harmless against any claims for a brokerage commission
arising out of any assertion by any broker or finder (except the Broker) that
such broker or finder dealt with such indemnifying party with respect to the
renting of the Demised Premises to Tenant. Landlord agrees to pay any fee or
commission owing to the Broker pursuant to separate agreement made by Landlord
and Broker.
ARTICLE 32
NOTICES
32.01 Except for rent bills and emergency repair notices
(which may be hand-delivered or sent via facsimile machine and shall be deemed
given upon receipt) any notice, statement, demand or other communication
required or permitted to be given, rendered or made by either party to the
other, pursuant to this lease or pursuant to any applicable law or requirement
of public authority, shall be in writing (whether or not so stated elsewhere in
this lease) and shall be deemed to have been properly given, rendered or made,
if sent by registered or certified mail, return receipt requested, addressed to
the other party at the address hereinabove set forth (and in the case of Tenant,
to the attention of Steven Kamen, General Counsel) (except that
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after the Commencement Date, Tenant's address, unless Tenant shall give notice
to the contrary, shall be the Building), or sent via nationally recognized
overnight courier providing for receipted delivery and shall be deemed to have
been given, rendered or made (a) if so mailed, on the third (3rd) business day
after the day so mailed and (b) if sent via nationally recognized overnight
courier, on the date of receipt or refusal. A copy of any notice of default to
Tenant should be sent in the same manner to Loeb & Loeb LLP, 345 Park Avenue,
New York, New York 10154, Attention: Scott I. Schneider, Esq. Either party may,
by notice as aforesaid, designate a different address or addresses for notices,
statements, demands or other communications intended for it.
ARTICLE 33
ESTOPPEL CERTIFICATE
33.01 Each party agrees, at any time and from time to time, as
requested by the other party, upon not less than ten (10) business days' prior
notice, to execute and deliver to the other a statement certifying (a) that this
lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications) and whether any options granted to Tenant pursuant to the
provisions of this lease have been exercised, (b) certifying the dates to which
the fixed rent and additional rent have been paid and the amounts thereof, and
stating whether or not, to the best knowledge of the signer, the other party is
in default in performance of any of its obligations under this lease, and, if
so, specifying each such default of which the signer may have knowledge, it
being intended that any such statement delivered pursuant hereto may be relied
upon by others with whom the party requesting such certificate may be dealing.
Additionally, Tenant's Statement shall contain such other information with
respect to this lease as shall be reasonably required by the holder or proposed
holder of any superior mortgage or the lessor or proposed lessor under any
superior lease.
ARTICLE 34
ARBITRATION
34.01 Either party may request arbitration of any matter in
dispute wherein arbitration is expressly provided in this lease as the
appropriate remedy. The party requesting arbitration shall do so by giving
notice to that effect to the other party, and both parties shall promptly
thereafter jointly apply to the American Arbitration Association (or any
organization successor thereto) in the City and County of New York for the
appointment of a single arbitrator.
34.02 The arbitration shall be conducted in accordance with
the then prevailing rules of the American Arbitration Association (or any
organization successor thereto) in the City and County of New York. In rendering
such decision and award, the arbitrator shall not add to, subtract from or
otherwise modify the provisions of this lease.
34.03 If for any reason whatsoever a written decision and
award of the arbitrator
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shall not be rendered within ninety (90) days after the appointment of such
arbitrator, then at any time thereafter before such decision and award shall
have been rendered either party may apply to the Supreme Court of the State of
New York or to any other court having jurisdiction and exercising the functions
similar to those now exercised by such court, by action, proceeding or otherwise
(but not by a new arbitration proceeding) as may be proper to determine the
question in dispute consistently with the provisions of this lease.
34.04 All the expenses of the arbitration shall be borne by
the parties equally except that each party shall be responsible for its own
legal and witness fees and expenses.
ARTICLE 35
NO OTHER REPRESENTATIONS, CONSTRUCTION,
GOVERNING LAW, CONSENTS
35.01 Tenant expressly acknowledges and agrees that Landlord
has not made and is not making, and Tenant, in executing and delivering this
lease, is not relying upon, any warranties, representations, promises or
statements, except to the extent that the same are expressly set forth in this
lease or in any other written agreement which may be made between the parties
concurrently with the execution and delivery of this lease and shall expressly
refer to this lease. This lease and said other written agreement(s) made
concurrently herewith are hereinafter referred to as the "LEASE DOCUMENTS". It
is understood and agreed that all understandings and agreements heretofore had
between the parties are merged in the lease documents, which alone fully and
completely express their agreements and that the same are entered into after
full investigation, neither party relying upon any statement or representation
not embodied in the lease documents, made by the other.
35.02 If any of the provisions of this lease, or the
application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this lease, or the application of
such provision or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this lease shall be valid and enforceable to the
fullest extent permitted by law.
35.03 This lease shall be governed in all respects by the laws
of the State of New York.
35.04 Wherever in this lease Landlord's consent or approval is
required, if Landlord shall refuse such consent or approval, Tenant in no event
shall be entitled to make, nor shall Tenant make, any claim, and Tenant hereby
waives any claim, for money damages (nor shall Tenant claim any money damages by
way of set-off, counterclaim or defense) based upon any claim or assertion by
Tenant that Landlord unreasonably withheld or unreasonably delayed its consent
or approval. Tenant's sole remedies shall be an action or proceeding to enforce
any such provision, for specific performance, injunction or declaratory judgment
or for a
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determination as to whether Landlord reasonably withheld its consent pursuant to
either (a) the Simplified Procedure For Court Determination of Disputes as set
forth in the CPLR Section 3031 et seq. (or any successor thereto), or (b)
arbitration under the Expedited Procedures provisions (presently Rules 56
through 60, as same may be amended from time to time) of the American
Arbitration Association (or successor thereto) in the City of New York (and the
fees and expenses of such arbitration shall be borne by the unsuccessful party),
and, if Tenant elects either (a) or (b) above, the decision shall be final and
conclusive on the parties.
ARTICLE 36
PARTIES BOUND
36.01 The obligations of this lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 9 shall operate to vest any rights in any successor or
assignee of Tenant and that the provisions of this Article shall not be
construed as modifying the conditions of limitation contained in Article 25.
However, the obligations of Landlord under this lease shall not be binding upon
Landlord herein named with respect to any period subsequent to the transfer of
its interest in the Building as owner or lessee thereof and in event of such
transfer said obligations shall thereafter be binding upon each transferee of
the interest of Landlord herein named as such owner or lessee of the Building,
but only with respect to the period ending with a subsequent transfer within the
meaning of this Article.
36.02 Tenant shall look only to Landlord's estate and property
in the Land and/or Building (or the proceeds thereof including, without
limitation, any proceeds of a sale of the Land and/or Building or of insurance
or condemnation, subject to the rights of any mortgagee) and, where expressly so
provided in this lease, to offset against the rents payable under this lease,
for the satisfaction of Tenant's remedies for the collection of a judgment (or
other judicial process) requiring the payment of money by Landlord in the event
of any default by Landlord hereunder, and no other property or assets of such
Landlord or any partner, member, officer or director thereof, disclosed or
undisclosed shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to this lease,
the relationship of Landlord and Tenant hereunder or Tenant's use or occupancy
of the Demised Premises.
ARTICLE 37
CERTAIN DEFINITIONS AND CONSTRUCTION
37.01 For the purposes of this lease and all agreements
supplemental to this lease, unless the context otherwise requires the
definitions set forth in EXHIBIT E annexed hereto shall be utilized.
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37.02 The various terms which are bolded and/or defined in
other Articles of this lease or are defined in Exhibits annexed hereto, shall
have the meanings specified in such other Articles and such Exhibits for all
purposes of this lease and all agreements supplemental thereto, unless the
context shall otherwise require.
ARTICLE 38
ADJACENT EXCAVATION AND CONSTRUCTION;
SHORING; VAULTS
38.01 If an excavation or other substructure work shall be
made upon land adjacent to the Demised Premises, or shall be authorized to be
made, Tenant shall afford to the person causing or authorized to cause such
excavation, license to enter upon the Demised Premises for the purpose of doing
such work as shall be necessary to preserve the wall of or the Building from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity against Landlord, or diminution or abatement or rent.
38.02 No vaults, vault space or area, whether or not enclosed
or covered, not within the property line of the Building is leased hereunder,
anything contained in or indicated on any sketch, blue print or plan or anything
contained elsewhere in this lease to the contrary notwithstanding. Landlord
makes no representation as to the location of the property line of the Building.
All vaults and vault space and all such areas not within the property line of
the Building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Landlord shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant.
ARTICLE 39
RENEWAL OPTION
39.01
(a) Provided that this lease shall be in
full force and effect without a default on the part of Tenant under this lease,
on the date Tenant exercises the "Renewal Option" (as hereinafter defined) which
default continues after notice and the expiration of any applicable cure period,
Tenant shall have the option (hereinafter referred to as the "RENEWAL OPTION")
to renew this lease for a renewal term (hereinafter referred to as the "RENEWAL
TERM") of five (5) years, to commence on the day (hereinafter referred to as the
"RENEWAL TERM COMMENCEMENT DATE") next succeeding the Expiration Date and to
expire on the day (herein referred to as the "RENEWAL TERM EXPIRATION DATE")
which shall be the fifth
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(5th) anniversary of the Expiration Date.
(b) Tenant shall exercise the Renewal Option
by sending written notice thereof (which notice is hereinafter referred to as
the "RENEWAL NOTICE") to Landlord by registered or certified mail, return
receipt requested, on or before the day which shall be twelve (12) months next
preceding the Expiration Date. If Tenant shall send the Renewal Notice within
the time and in the manner hereinbefore provided, this lease shall be deemed
renewed for the Renewal Term upon the terms, covenants and conditions
hereinafter contained. If Tenant shall fail to send the Renewal Notice within
the time and in the manner hereinbefore provided, the Renewal Option shall cease
and terminate, and Tenant shall have no further option to renew this lease.
39.02 The Renewal Term, if any, shall be upon, and subject to,
all of the terms, covenants and conditions provided in this lease for the
original term hereof, except that:
(a) Any terms, covenants, or conditions
hereof that are expressly or by their nature inapplicable to the Renewal Term
(including, without limitation, Articles 3 and 4 hereof) shall not apply during
the Renewal Term; and
(b) The annual fixed rent payable by Tenant
during the Renewal Term (hereinafter referred to as the "RENEWAL RENT"), subject
to adjustment as otherwise in this lease provided, shall be an amount equal to
ninety-five (95%) percent of the fair market rental value of the Demised
Premises, to be determined as provided in Section 39.03 hereof and to be
calculated as of the "DETERMINATION DATE" (as defined in Section 39.03) on the
basis of a five (5) year letting of the Demised Premises taking into account all
relevant facts, including that the Base Tax Year, Base Tax Rate, Base
Operational Year and Base Operating Expenses will not be changed from those
applicable to the initial term of this lease.
39.03 In the event that Tenant shall exercise the Renewal
Option as provided in Section 39.01 hereof, the Renewal Rent shall be determined
jointly by Landlord and Tenant, and such determination shall be confirmed in a
writing (hereinafter referred to as the "RENTAL AGREEMENT") to be executed in
recordable form by Landlord and Tenant not later than the day (hereinafter
referred to as the "DETERMINATION DATE") which shall be ninety (90) days next
preceding the Expiration Date. In the event that Landlord and Tenant shall have
failed to join in executing the Rental Agreement on or before the Determination
Date because of their failure to agree upon the Renewal Rent then the Renewal
Rent shall be determined by arbitration as follows:
(a) Landlord and Tenant shall each appoint
an arbitrator by written notice given to the other party hereto not later than
thirty (30) days after the Determination Date. If either Landlord or Tenant
shall have failed to appoint an arbitrator within such period of time and
thereafter shall have failed to do so by written notice given within a
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period of five (5) days after notice by the other party requesting the
appointment of such arbitrator, then such arbitrator shall be appointed by the
American Arbitration Association or its successor (the branch office of which is
located in or closest to the City and State of New York), upon request of either
Landlord or Tenant, as the case may be;
(b) The two (2) arbitrators appointed as
above provided shall attempt to reach an agreement as to the rental for the
Renewal Term and in the event they are unable to do so within thirty (30) days
after their joint appointment, then they shall appoint a third (3rd) arbitrator
by written notice given to both Landlord and Tenant, and, if they fail to do so
by written notice given within sixty (60) days after their appointment, such
third (3rd) arbitrator shall be appointed as above provided for the appointment
of an arbitrator in the event either party fails to do so;
(c) All of such arbitrators shall be real
estate appraisers having not less than ten (10) years experience in appraising
the value of leasehold interests in real estate similar to the Building located
within the City of New York and who are members of M.A.I. or S.R.E.A. and the
third (3rd) arbitrator shall not be regularly employed by Landlord or Tenant;
(d) the three arbitrators, selected as
aforesaid, forthwith shall convene and render their decision in accordance with
the then applicable rules of the American Arbitration Association or its
successor, which decision shall be strictly limited to a determination of the
Renewal Rent within twenty (20) days after the appointment of the third (3rd)
arbitrator. The decision of such arbitrators shall be in writing and such
decision shall be the average of the two arbitrators' determinations coming
closest to each other and, insofar as the same is in compliance with the
provisions and conditions of this Section 39.03 and of Section 39.04 hereof
shall, be binding upon Landlord and Tenant. Duplicate original counterparts of
such decision shall be sent forthwith by the arbitrators by certified mail,
return receipt requested, to both Landlord and Tenant. The arbitrators, in
arriving at their decision, shall be entitled to consider all testimony and
documentary evidence that may be presented at any hearing, as well as facts and
data which the arbitrators may discover by investigation and inquiry outside
such hearings. If, for any reason whatsoever, a written decision of the
arbitrators shall not be rendered within twenty (20) days after the appointment
of the third (3rd) arbitrator, then, at any time thereafter before such decision
shall have been rendered, either party may apply to the Supreme Court of the
State of New York or to any other court having jurisdiction and exercising the
functions similar to those now exercised by such court, by action, proceeding or
otherwise (but not by a new arbitration proceeding) as may be proper, to
determine the question in dispute consistently with the provisions of this
lease. The cost and expense of such arbitration, action, proceeding, or
otherwise shall be borne equally by Landlord and Tenant.
39.04 Notwithstanding anything to the contrary contained in
Section 39.03
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hereof, the Renewal Rent shall in no event be less than an amount (hereinafter
referred to as the "RENEWAL MINIMUM RENT") equal to the fixed rent payable under
this lease during the last year of the initial term of this lease.
39.05 In the event that Tenant shall exercise the Renewal
Option and the Renewal Rent shall not be finally determined pursuant to the
terms of Section 39.03 hereof on or before the Renewal Term Commencement Date
then:
(a) The annual fixed rent payable by Tenant
during the Renewal Term until the Renewal Rent shall be so finally determined
shall, subject to adjustment as herein provided, be equal to the Renewal Minimum
Rent, and
(b) In the event that the Renewal Rent or as
finally determined pursuant to the terms of Section 39.03 hereof, shall be
greater than the Renewal Minimum Rent (i) the annual fixed rent payable by
Tenant for the balance of the Renewal Term shall be and become the Renewal Rent
as finally determined, and (ii) Tenant shall, within fifteen (15) days after the
determination of the Renewal Rent, pay to Landlord an amount equal to the
difference between (x) the sum of the actual rental payments paid to Landlord
during the Renewal Term before such final determination and (y) the sum of the
rental payments that Tenant would have paid to Landlord if the Renewal Rent were
finally determined prior to the Renewal Term Commencement Date.
ARTICLE 40
REAL ESTATE TAX ABATEMENT
40.01 For purposes of this Lease, the following terms shall
have the following meanings:
(a) "ABATEMENT" shall mean any abatement in
"Taxes" (as defined in Article 5) to which the Land and/or the Building may be
entitled pursuant to "Title 4" (as hereafter defined) by virtue of the execution
and delivery of this lease and Tenant's occupancy of the Demised Premises.
(b) "BENEFIT PERIOD" shall mean the period
commencing with the "Rent Commencement Date" (as hereafter defined) and ending
on the expiration date of any abatement of Taxes set forth in Title 4 (excluding
any period following the Rent Commencement Date for which Tenant receives any
fixed rent concession as to any portion of the Demised Premises).
(c) "CERTIFICATE" shall mean the certificate
of abatement received by Tenant evidencing compliance with Title 4.
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(d) "FINANCE" shall mean the NYC
Department of Finance.
(e) "MINIMUM EXPENDITURE" shall mean
the minimum expenditure permitted under Title 4. Landlord is providing
Landlord's Work in accordance with the provisions of Article 4 hereof and Tenant
acknowledges that, in order to be eligible for the Abatement, it shall expend
such additional amounts within the "Minimum Expenditure Period" (as hereafter
defined) on improvements (exclusive of "Tenant's Property" as defined in Article
14) to the Demised Premises and/or the common areas of the Building in order
that the Minimum Expenditure shall be equaled or exceeded.
(f) "MINIMUM EXPENDITURE PERIOD"
shall mean the period set forth in Title 4 in which the Minimum Expenditure must
be made.
(g) "RENT COMMENCEMENT DATE" shall
mean the date upon which Tenant is obligated to commence the payment of fixed
rent pursuant to this lease.
(h) "REQUISITE NUMBER OF EMPLOYEES"
shall mean the minimum number of employees a tenant must employ in order for an
Abatement to be granted pursuant to Title 4 (as hereafter defined)
(i) "TITLE 4" shall mean Title 4 of
Article 4 of the Real Property Tax Law.
40.02 Landlord and Tenant acknowledge that, pursuant to Title
4, the Building may be entitled to an Abatement for a portion of the Taxes (as
defined in Article 5 of this lease). Promptly after the execution and delivery
of this lease (but in no event after any deadline provided for in Title 4),
Tenant may file an application with Finance in the form required by Finance for
a Certificate, which application shall contain all the information required
pursuant to Title 4 including, without limitation, the affidavit and abstract
required thereunder and, at Tenant's request, Landlord will join in such
application to the extent required by Title 4.
40.03 Landlord and Tenant agree that upon Tenant's request,
not later than sixty (60) days following the Rent Commencement Date, Landlord
and Tenant shall jointly submit evidence acceptable to Finance in the form
required by Finance that the Requisite Number of Employees and the Minimum
Expenditure requirements of Title 4 have been met together with such additional
information as Finance shall require.
40.04 If the Abatement is granted, then during the Benefit
Period, Tenant agrees that it shall file with Finance on or before July 1st of
each year, an annual certificate in form and content as required by Finance
confirming that the eligibility requirements for the Abatement continue to be
met and containing such additional information as Finance shall require and, at
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Tenant's request, Landlord shall join in such filing to the extent required by
Title 4. Additionally, during the Benefit Period, Tenant and Landlord, at
Tenant's request, shall comply with any other filing and reporting requirements
of Finance pursuant to Title 4.
40.05 In the event that (i) a Certificate is issued by Finance
and (ii) the Abatement is granted, and (iii) the Taxes are reduced by the amount
of the Abatement granted, then, from and after the date the Taxes are reduced
pursuant to the Abatement (hereinafter referred to as the "EFFECTIVE DATE"), the
annual fixed rent payable by Tenant pursuant to Section 1.04 of this lease shall
be reduced during the Benefit Period by the amount (hereinafter referred to as
the "RENT REDUCTION") equal to the annual amount of the Abatement for so long as
the Abatement remains in force and effect.
40.06 Tenant acknowledge that the Abatement may be terminated
at any time if, during the Benefit Period, the Taxes, water and/or sewer charges
or other lienable charges assessed on the Land and/or Building (hereinafter
referred to as the "CHARGES") by Finance are unpaid for one (1) year, unless
such delinquent amounts are paid as provided in Title 4. Tenant also
acknowledges that the Abatement may be revoked or reduced if Tenant vacates all
or any portion of the Demised Premises or subleases all or any part thereof or
converts or uses all or any portion of the Demised Premises for a use which
renders same ineligible for the Abatement under Title 4 or fails to comply with
the eligibility requirements for the Abatement under Title 4.
40.07 If the Abatement is granted and thereafter terminated or
reduced at any time during the Benefit Period by Finance by reason of Landlord's
failure to pay the Charges as required or as a result of Landlord's acts or
failure to act (where Landlord has a duty to act pursuant to this lease or any
law and/or requirement of public authority), the annual fixed rent shall
continue to be reduced by the Rent Reduction during the remainder of the Benefit
Period.
40.08 If the Abatement is granted and thereafter terminated or
reduced at any time during the Benefit Period by Finance by reason of (a)
Tenant's vacatur of all or any portion of the Demised Premises or (b) by any
subletting by Tenant of the Demised Premises or any portion thereof or by using
or converting all or any portion of the Demised Premises for a use which renders
same ineligible for the Abatement under Title 4 or as a result of Tenant's acts
or failure to act (where it is a duty to act pursuant to this lease or any law
and/or requirement of public authority), or (c) for any reason other than as set
forth in Section 40.07, the Rent Reduction shall be terminated or reduced, as
the case may be, effective from and after the date (hereinafter referred to as
the "REVOCATION DATE") that the Abatement is terminated or reduced by Finance
and Tenant shall pay to Landlord, as additional rent, retroactive to the
Revocation Date, the amount of any Taxes (plus any interest thereon) which
Landlord is required to pay to Finance by reason of such termination or
reduction of the Abatement and such obligations shall survive the expiration or
sooner termination of this lease.
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40.09 Any fees or expenses charged by Finance in applying for,
administering or maintaining the Abatement shall be paid by Tenant.
40.10 In the event the Abatement is granted retroactively, the
Rent Reduction shall be deemed effective from the Effective Date and the fixed
rent shall thereafter be appropriately adjusted to reflect any Rent Reduction to
which Tenant shall be entitled.
40.11 Except as set forth in Section 40.07, in no event shall
Tenant be entitled to any Rent Reduction unless and until an Abatement is
granted and is effective and in no event shall the Rent Reduction exceed the
amount of the Abatement to which the Land and/or Building is granted and is
effective.
ARTICLE 41
ADDITIONAL SPACE OPTION
41.01 Subject to the provisions of this Article 41, and
provided that, at the time of delivery of the "Exercise Notice" (as hereafter
defined) and on the "Option Space Commencement Date" (as hereafter defined),
this lease shall be in full force and effect and without a default on the part
of Tenant under this lease in the observance or performance of any of the terms,
covenants and conditions on Tenant's part to be observed or performed, which
continues after notice and the expiration of any applicable cure period, Tenant
shall have the option (hereinafter referred to as "TENANT'S ADDITIONAL SPACE
OPTION") to lease from Landlord the balance of the eighteenth (18th) floor of
the Building (hereinafter referred to as the "OPTION SPACE") as set forth on the
floor plan annexed hereto as Exhibit I which, together with the 18th Premises,
shall be deemed to contain 35,584 rentable square feet, upon the terms and
conditions hereafter set forth.
41.02 Tenant's Additional Space Option shall be exercised, if
at all, by Tenant giving notice (hereinafter referred to as the "EXERCISE
NOTICE") of such exercise to Landlord on or before September 1, 2005, time being
of the essence (such date being hereinafter referred to as the "EXERCISE NOTICE
DATE").
41.03 If Tenant shall send the Exercise Notice to Landlord
within the time and in the manner set forth in Section 41.02 hereof, the parties
hereto shall, within thirty (30) business days thereafter, enter into, at
Tenant's option as set forth in the Exercise Notice, either a new lease or an
amendment of this lease (hereinafter referred to as a "NEW LEASE") for the
Option Space, which New Lease shall contain all of the same terms, covenants and
conditions contained in this lease, except that:
(a) The term of the New Lease
(hereinafter referred to as the "OPTION SPACE TERM") shall (i) commence on a
date determined by Landlord which shall be no earlier than September 1, 2006 and
no later than March 1, 2007 (such date hereinafter
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referred to as the "OPTION SPACE COMMENCEMENT DATE") and (ii) expire upon the
Expiration Date. Landlord shall send notice to Tenant setting forth the Option
Space Commencement Date within thirty (30) days after receipt of the Exercise
Notice;
(b) The Option Space shall be leased
to Tenant "as is" in the state and condition in which the same shall be on the
Option Space Commencement Date and Landlord shall have no liability to Tenant by
reason of such state and condition. Landlord makes no representations as to the
condition of the Option Space or as to any other thing or fact related thereto
and Landlord shall have no obligation to decorate, repair, alter, improve or
otherwise prepare the Option Space for Tenant's occupancy or to make any
payments in connection with any such decoration, repair, alteration or
improvement.
(c) The annual fixed rent to be
payable by Tenant pursuant to the New Lease (herein referred to as the "OPTION
SPACE FIXED RENT") shall, subject to adjustment as therein provided, be an
amount equal to ninety-five (95%) percent of the fair market rental value of the
Option Space, to be determined as provided in Section 41.04 hereof and to be
calculated as of the Option Space Commencement Date on the basis of a new
letting of the Option Space for the Option Space Term taking into account the
provisions of Sections 41.03(b) and 41.03(e)-(h) below;
(d) Sections 1.08, 1.09, 1.10, 1.11,
4.01, 4.02, 4.04 and 4.05, this Article 41, and Exhibit B of this lease shall be
omitted from the New Lease;
(e) The "BASE TAX YEAR" as set forth
in Section 5.01(b) of this lease shall mean the Taxes for the Tax Year in which
physical possession of the Option Space is delivered to Tenant;
(f) "TENANT'S PROPORTIONATE SHARE"
as set forth in Section 5.01(e) of this lease shall be a fraction, expressed as
a percentage, the numerator of which is the Multiplication Factor of the Option
Space and the denominator of which is the Building Area;
(g) The "MULTIPLICATION FACTOR" of
the Option Space shall be deemed to be 12,265 rentable square feet;
(h) The "BASE OPERATIONAL YEAR" as
set forth in Section 5.07(c) of this lease shall mean the calendar year in which
physical possession of the Option Space is delivered to Tenant;
41.04 In the event that Tenant shall duly exercise Tenant's
Additional Space Option as provided in this Article 41, the Option Space Fixed
Rent shall be determined jointly by Landlord and Tenant, and such determination
shall be confirmed in a writing (hereinafter referred
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to as the "RENTAL AGREEMENT") to be executed in recordable form by Landlord and
Tenant not later than the day (hereinafter referred to as the "DETERMINATION
DATE") which shall be thirty (30) days next succeeding the date Landlord
receives the Exercise Notice, provided however, so long as Landlord and Tenant
are continuing to negotiate the Rental Agreement in good faith, such thirty (30)
day period shall be extended by up to an additional thirty (30) days. In the
event that Landlord and Tenant shall have failed to join in executing the Rental
Agreement on or before the Determination Date because of their failure to agree
upon the Option Space Fixed Rent then the Option Space Fixed Rent shall be
determined by arbitration in accordance with the provisions of Sections 39.03,
39.04 and 39.05 of this lease, except that, with respect to the determination of
the Option Space Fixed Rent, all references in Sections 39.03, 39.04 and 39.05
to "Renewal Option", "Renewal Rent", "Demised Premises", "Renewal Term",
"Renewal Term Commencement Date", "Renewal Minimum Rent" and "Section 39.01",
respectively, shall be deemed to refer to "Tenant's Additional Space Option",
"Option Space Fixed Rent", "Option Space", "Option Space Term", "Option Space
Commencement Date", "Option Space Minimum Rent" and "Section 41.01",
respectively, and notwithstanding anything in this lease to the contrary, the
Option Space Minimum Rent shall be equal to the product of (a) the
Multiplication Factor with respect to the Option Space and (b) the fixed rent
plus additional rent payable on account of the Tax Payment and Operating Expense
Payment, on a per rentable square foot basis, then payable by Tenant for the
Demised Premises pursuant to Section 1.04 and Article 5 of this lease.
41.05 The Additional Space Option shall apply to Tenant and
any permitted assignee of the interest of Tenant in and to this lease. If (i)
Tenant fails to give the Exercise Notice to Landlord on or before the Exercise
Notice Date, or (ii) Tenant fails to duly execute and deliver to Landlord the
New Lease within thirty (30) business days after Landlord delivers counterparts
thereof to Tenant in form and content as set forth in this Article 41, or (iii)
if at the time of the giving of the Exercise Notice, or on the Option Space
Commencement Date, this lease shall not be in full force and effect, without any
monetary or material non-monetary default by Tenant in the observance or
performance of any of the terms, covenants and conditions required to be
observed or performed by Tenant under this lease, which default is continuing
after any applicable notice and the expiration of any period allowed to Tenant
to cure same, in any of such events, Tenant's Additional Space Option shall be
deemed revoked, null and void, and of no further force or effect.
41.06 If Landlord is unable to give vacant possession of the
Option Space on the Option Space Commencement Date because of the holding over
or retention of possession of any tenant, undertenant or occupant or for any
other reason, Landlord shall have no liability to Tenant therefor and the
validity of this lease shall not be impaired under such circumstances, nor shall
the same be construed in any way to extend the term of this lease, but the
Option Space Commencement Date shall not be deemed to have occurred and the
fixed and additional rent payable for the Option Space shall be abated (provided
Tenant is not responsible for the inability
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to obtain possession) until Landlord shall have delivered vacant possession of
the Option Space to Tenant. Landlord agrees to use reasonable efforts to remove
any such hold-over and to otherwise obtain possession of the Option Space,
including, without limitation, the institution and diligent prosecution of
hold-over proceedings. The provisions of this Section 41.06 are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-A of the New York Real Property Law. In the event Landlord is unable to give
possession of the Option Space to Tenant within three (3) months of the Option
Space Commencement Date, Tenant, as its sole remedy for Landlord's inability to
deliver such vacant possession within such three (3) month period, may revoke
its exercise of Tenant's Additional Space Option by notice to Landlord sent
within ten (10) business days after the expiration of such three (3) month
period.
41.07 If Tenant does not or cannot timely exercise its option
to lease the Option Space, Landlord shall have the right to lease such Option
Space (alone or in conjunction with other space) to any other prospective tenant
or tenants for any length of term and upon any conditions that Landlord shall
then agree.
41.08 If, by reason of the early termination of any lease
therefor, possession of the Option Space will become available prior to the
Option Space Commencement Date or prior to any date to which the Option Space
Commencement Date may have been postponed by Landlord pursuant to the provisions
of Section 41.06 hereof, and Tenant has not yet exercised Tenant's Additional
Space Option therefor, Landlord shall give notice of such availability to Tenant
in which event Tenant shall have sixty (60) days from the giving of such notice
to elect to exercise Tenant's Additional Space Option on the terms and
conditions of this Article 41 and, if Tenant so elects, the Option Space
Commencement Date as to such space shall be accelerated to the date of
availability of such Option Space or the date of such election by Tenant,
whichever is later, and the other provisions of this Article 41 shall be fully
applicable as if such accelerated Option Space Commencement Date were the
original Option Space Commencement Date. If Landlord gives such notice and
Tenant does not or cannot exercise Tenant's Additional Space Option to lease the
Option Space within said sixty (60) day period (time being of the essence in
respect thereof), Tenant's Additional Space Option with respect to the Option
Space shall terminate and be of no further force or effect.
41.09 Without in any way limiting the provisions of Section
41.08, Landlord may at any time, at Landlord's discretion, and will, upon
Tenant's request, contact the existing tenant of the Option Space and attempt to
negotiate an early termination of such existing tenant's lease for the Option
Space, but Landlord's inability to effect such early termination shall in no
event give rise to any liability on Landlord's part nor in any way affect
Tenant's obligations under this lease.
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ARTICLE 42
ANTENNA
42.01 Tenant has advised Landlord that it may require
communication services in connection with the operation of Tenant's business
which would necessitate the construction, installation, operation, maintenance
and use by Tenant of a satellite dish or antenna, together with related
equipment, mountings, supports and conduit (herein collectively referred to as
the "ANTENNA") on the roof of the Building. Subject to the existing rights of
other tenants, subtenants or occupants of the Building or any licensees of any
portions of the area on the roof of the Building and the terms of this Article
42, Landlord shall make available to Tenant, for Tenant's own use (and not for
resale or sublicensing purposes) space on the roof of the Building for the
Antenna at a location designated by Landlord in its sole discretion. Landlord
shall reserve space on the roof of the Building for the Antenna for a period of
six (6) months from the date hereof provided, however, that if Tenant has not
notified Landlord within such six (6) month period of its election to install
such Antenna, Landlord shall have no further obligation to reserve any portion
of the roof for Tenant's use and the use of the roof for such purposes shall be
allocated on a "first-come, first served" basis. Tenant's use of the roof of the
Building shall be on a non-exclusive basis. In connection with Tenant's use of
the roof of the Building and subject to the rights of other tenants, occupants
and licensees in the Building, Landlord shall, upon reasonable prior notice to
Landlord, make available to Tenant access to the roof for the construction,
installation, maintenance, repair, operation and use of the Antenna. It is
agreed, however, that only Tenant and authorized licensed engineers and
contractors, federal, state or local governmental inspectors or persons under
their direct supervision will be permitted to have access to the roof. Tenant
further agrees to exercise firm control over the people requiring access to the
roof in order to keep to a minimum the number of people having access to the
roof and the frequency of their visits. Landlord shall provide, to the extent
available, reasonable space in the conduits of the Building to allow Tenant, at
Tenant's sole cost and expense, to run electrical and telecommunications wiring
from the Antenna to the Demised Premises. The installation of the Antenna shall
constitute a Tenant's Change and shall be performed at Tenant's sole cost and
expense (including, without limitation, any costs and expenses in connection
with reinforcing the roof of the Building, if required) in accordance with and
subject to the provisions of this lease, including, without limitation, Article
13 hereof, and notwithstanding anything herein or in this lease to the contrary,
Tenant's right to install the Antenna shall be subject to the prior approval by
Landlord of plans and specifications for the Antenna, including, without
limitation, the size, height, dimensions, color and manner in which same is
attached to the roof, which approval shall not be unreasonably withheld,
conditioned or delayed in accordance with the provisions of Article 13. All of
the applicable provisions of this lease shall apply to the installation, use,
operation and maintenance of the Antenna, including, without limitation,
provisions relating to compliance with laws, insurance, indemnity, repairs and
maintenance. The license granted to Tenant in this Article 42 shall not be
assignable by Tenant separate and apart from this lease and may not be
sublicensed by Tenant.
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42.02 Landlord retains the right to use the portion of the
roof on which the Antenna is located for any purpose whatsoever, but will not
interfere with the use or functioning of the Antenna. Tenant shall install,
maintain, operate, repair and use the Antenna so as not to cause any
interference to other tenants, occupants, licensees or Landlord in the Building
or interference with or disturbance to the reception or transmission of
communication signals by or from any antenna, satellite dishes or similar
equipment previously installed by Landlord or any other tenant, occupant or
licensee in the Building or damage to or interference with the operation of the
Building or any Building systems. Landlord shall make reasonable efforts to
include a provision in other leases of space in the Building hereafter entered
into similar to the preceding sentence. If, after any Antenna is installed by
Tenant, it is discovered that the Antenna causes any such interference, damage
or disturbance, then Tenant, at its sole cost and expense, shall relocate its
Antenna to another area on the roof designated by Landlord in its sole
discretion. If such interference or disturbance still occurs despite such
relocation, or if no portion of the roof is available for such relocation,
Tenant, at its sole cost and expense, shall remove its Antenna from the roof of
the Building and the provisions of Section 42.06 with respect to repair of the
roof shall apply. In the event Tenant fails to relocate or remove the Antenna or
repair the roof as aforesaid, Landlord may do so, and Tenant shall promptly
reimburse Landlord for any costs incurred by Landlord in connection therewith.
42.03 If Tenant is in default under any provision of in this
Article 42 which continues after notice and the expiration of any applicable
cure period then, without limiting Landlord's rights and remedies, Landlord may
otherwise have under this Lease, Tenant, upon written notice from Landlord,
shall, at Tenant's sole cost and expense, immediately discontinue its use of the
Antenna and remove the same from the roof of the Building and the provisions of
Section 42.06 with respect to repair of the roof shall apply.
42.04 In addition to the right of Landlord to cause Tenant to
relocate the Antenna pursuant to Section 42.02 hereof, Landlord may, at its
option, at any time during the term of this lease, after reasonable prior notice
to Tenant (except in the event of an emergency when no notice shall be required)
relocate the Antenna to another area of the roof designated by Landlord,
provided that such relocation does not cause the transmission or receipt of
communication signals to be materially interrupted or impaired other than
temporarily in connection with such relocation and, except as set forth with
respect to Landlord's right to cause Tenant to relocate the Antenna pursuant to
Section 42.02 hereof, such relocation shall be performed at Landlord's sole cost
and expense.
42.05 (a) Landlord shall not have any obligations with respect
to the Antenna or compliance with any laws or requirements of public authorities
relating thereto (including, without limitation, the obtaining of any required
permits or licenses, or the maintenance thereof), nor shall Landlord be
responsible for any damage that may be caused to Tenant or the Antenna by any
other tenant or occupant of the Building. Landlord makes no representation that
the
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Antenna will be able to receive or transmit communication signals without
interference or disturbance (whether or not by reason of the installation or use
of similar equipment by others on the roof) and Tenant agrees that Landlord
shall not be liable to Tenant therefor.
(b) Tenant, at Tenant's sole cost
and expense, shall paint and maintain the Antenna in such color as Landlord
shall determine and shall install such lightening rods or air traffic signals on
or about the Antenna as Landlord may reasonably require.
(c) Any electrical service required
for Tenant's use of the Antenna shall be paid for by Tenant pursuant to the
provisions of Article 16 of this lease.
(d) Tenant shall (i) be solely
responsible for any damage caused to Landlord or any other entity, person or
property as a result of the installation, maintenance or use of the Antenna,
(ii) promptly pay any tax, license, permit or other fees or charges imposed
pursuant to any laws and/or requirements of public authorities relating to the
installation, maintenance or use of the Antenna, (iii) promptly comply with all
precautions and safeguards recommended by Landlord's insurance company and all
federal, state or municipal governmental authorities or agencies, and (iv), at
its sole cost and expense, (x) promptly perform all necessary repairs or
replacements to, or maintenance of, the Antenna, and (y) promptly repair any and
all damage to the roof of the Building and to any other part of the Building
caused by or resulting from the installation, maintenance, repair, operation or
removal of the Antenna or any portion thereof, except that at Landlord's option,
Landlord may elect to perform such repairs, replacements or maintenance at
Tenant's sole cost and expense.
42.06 Tenant acknowledges and agrees that the privileges
granted Tenant under this Article 42 shall merely constitute a license and shall
not, now or at any time after the installation of the Antenna, be deemed to
grant Tenant a leasehold or other real property interest in the Building or any
portion thereof. The license granted to Tenant in this Article 42 shall
automatically terminate and expire upon the expiration or earlier termination of
this lease and the termination of such license shall be self-operative and no
further instrument shall be required to effect such termination and tenant
shall, at its sole cost and expense, within three (3) months after the
expiration or sooner termination of this lease, remove the Antenna from the roof
and repair any damage to the roof and the Building resulting from such removal
so as to place same, as closely as possible, in the same condition as existed
prior to the installation of the Antenna, normal wear and tear excepted and this
obligation shall survive the expiration or sooner termination of this lease. The
foregoing notwithstanding, upon request by Landlord, Tenant, at Tenant's sole
cost and expense, promptly shall execute and deliver to Landlord, in recordable
form, any certificate or other document confirming the termination of Tenant's
right to use the roof of the Building.
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ARTICLE 43
STORAGE SPACE
43.01
(a) During the term of this lease,
Tenant shall be entitled to use the space (hereinafter referred to as the
"STORAGE SPACE") located in the basement of the Building as set forth on Exhibit
I annexed hereto and made a part hereof. The agreed rentable square foot area of
the Storage Space shall be deemed to be 2,400 rentable square feet.
(b) Tenant's use of the Storage
Space shall be upon, and subject to, all of the terms, covenants and conditions
contained in this lease, except that:
(i) Section 2.01 shall be deemed
amended with respect to the Storage Space to allow Tenant's use thereof solely
as storage space to be used in conjunction with the business conducted in the
Demised Premises and for the storage of bicycles, on a daily basis.
(ii) Tenant agrees to take
possession of the Storage Space in its "as is" condition, the parties hereto
agreeing that Landlord shall not be obligated to perform, or to pay the cost and
expense of performing, any work in the Storage Space to prepare the same for
Tenant's occupancy.
(iii) Subject to the provisions of
Section 16.04, Landlord, at its expense, shall provide electricity to the light
fixtures, if any, presently existing in the Storage Space and Tenant shall not
utilize any equipment which consumes electricity in the Storage Space.
(iv) The following provisions of
this lease shall be inapplicable to the Storage Space and shall be deemed
deleted from the lease with respect to the Storage Space:
(A) Articles 4, 5, 9 (except as set forth in
Subsection (vi) below), and 17;
(B) Sections 1.04, 16.01-16.03 and 16.07-16.08 and
18.02-18.05.
(v) For purposes of this
Article 43 and with respect to the Storage Space, all references in Section
18.01 of this lease to elevator service shall be deemed to refer to freight
elevator service, it being acknowledged by Tenant that only freight elevator
service is available to the floor on which the Storage Space is situated and
only such freight elevator(s) may be used, in accordance with the applicable
provisions of this lease, to bring the bicycles set forth above to and from the
Storage Space.
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(vi) Notwithstanding
anything in this lease to the contrary, the Storage Space may not be sublet,
either in whole or in part, except in connection with a valid subletting of all
or a portion of the Demised Premises in accordance with the terms of this lease,
and shall not be assigned except in connection with a valid assignment of this
lease in accordance with the terms of this lease, provided, however, that in
either such case and notwithstanding anything to the contrary, the provisions of
Article 9 of this lease shall be applicable to such assignment or subletting.
(c) In the event that, at any time
during the term of this lease, Landlord shall, in its sole discretion, desire to
relocate the Storage Space or any portion thereof, Landlord shall send written
notice thereof (hereinafter referred to as the "RELOCATION NOTICE") to Tenant by
certified mail, return receipt requested, which Relocation Notice shall be sent
to Tenant together with a floor plan of the space in the Building to which the
Storage Space (or any portion thereof) is to be relocated (hereinafter referred
to as the "NEW STORAGE SPACE") and which New Storage Space shall have a rentable
area equal to the rentable area of Storage Space (or any portion thereof) being
relocated. Promptly after Tenant's receipt of the Relocation Notice, Tenant
shall quit and surrender the Storage Space (or such portion being relocated) to
Landlord and move all of the contents of the Storage Space (or such portion
being relocated) into the New Storage Space at Landlord's sole and reasonable
cost and expense.
43.02 Tenant shall pay to Landlord, on account of the
Storage Space, as additional rent, on the first day of each month during the
term of this lease the amount of $38,400.00 per annum ($3,200.00 per month)
commencing on the 17th Floor Commencement Date (as defined in Section 1.03)
through the day next preceding the fifth (5th) anniversary of the 17th Floor
Rent Commencement Date, both dates inclusive, and the amount of $43,200.00 per
annum ($3,600.00 per month) from the fifth (5th) anniversary of the 17th Floor
Rent Commencement Date and continuing thereafter throughout the remainder of the
initial term of this lease. In the event Tenant exercises the Renewal Option,
the amount of such additional rent with respect to the Storage Space shall be
determined in the same manner as the Renewal Rent but shall not be less than
$43,200.00 per annum.
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this lease
as of the day and year first above written.
LANDLORD:
195 PROPERTY COMPANY
By: 195 PROPERTY CORPORATION,
a general partner
By: /s/ Peter Kalikow
TENANT:
BOLT, INC.
By: /s/ Daniel Pelson
TENANT'S EMPLOYER IDENTIFICATION NO.
13-3905544
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STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 17th day of February, in the year 2000 before me, the
undersigned, a Notary Public in and for said State, personally appeared
Peter Kalikow, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
/s/ Stephen V. Campo
___________________________________
NOTARY PUBLIC
Stephen V. Campo
Notary Public, State of New York
No. 02CA5078414
Qualified in West County
Commission Expires May 27, 2001
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 17th day of February, in the year 2000 before me, the
undersigned, a Notary Public in and for said State, personally appeared
Daniel Pelson, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their capacity(ies), and that by his/her/their signature(s) on
the instrument, the individual(s), or the person upon behalf of which the
individual(s) acted, executed the instrument.
/s/ Scott I. Schneider
___________________________________
NOTARY PUBLIC
Scott I. Schneider
Notary Public, State of New York
No. 015C4839146
Qualified in Westchester County
Certificate Filed in New York County
Commission Expires June 30, 2001
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EXHIBIT A
DESCRIPTION
ALL that certain lot, piece or parcel of land, situate, lying and being
in the Borough of Manhattan, City, County and State of New York, bounded and
described as follows:
BEGINNING at the corner formed by the intersection of the southerly
side of Fulton Street with the westerly side of Broadway; running thence
Southerly along the westerly side of Broadway 78' 11-1/2" to an angle
point, in said westerly side of Broadway; thence
Southerly still along the westerly side of Broadway 75' 3" to the
corner formed by the intersection of the westerly side of Broadway with the
northerly side of Dey Street; thence
Westerly along the northerly side of Dey Street 275' 6 3/4"; thence
Northerly along a line which forms an angle on its westerly side with
the northerly side of Dey Street of 91(degree) 21' 50", 77' 5--1/2"; thence
Easterly along a line which forms an angle on its southerly side with
the last described course of 91(degree) 21' 50", 75' 4-5/8"; thence
Northerly along a line which forms an angle on its westerly side with
the last described course of 91(degree) 00' 00", 77 5-1/4" to the southerly side
of Fulton Street; thence
Easterly along the southerly side of Fulton Street, 99' 8" to an angle
point in said southerly side of Fulton Street; thence
Easterly still along the southerly side of Fulton Street 100' 2--1/2"
to the point or place of BEGINNING.
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EXHIBIT B
FLOOR PLANS
(Follows immediately on next page)
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EXHIBIT C
HEATING, VENTILATING AND AIR-CONDITIONING SYSTEM
The existing HVAC System is designed to meet the following criteria:
Summer:Inside........... 78(degree)D.B., 50% RH
Outside................. 89(degree)D.B., 73% W.B.
Winter:Inside........... 68(degree) D.B.
Outside................. 15(degree) D.B.
HVAC design based upon interior loads as follows:
Lights and appliances = 4 watts/sq. ft.
Population = one person per 200 usable sq. ft.
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EXHIBIT D
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors and
elevators of the Building are limited to ingress to and egress from the tenants'
premises for the tenants and their employees, licensees and invitees, and no
tenant shall use, or permit the use of, the entrances, corridors, or elevators
for any other purpose. No tenant shall invite to the tenant's premises, or
permit the visit of, persons in such numbers or under such conditions as to
interfere with the use and enjoyment of any of the entrances, corridors,
elevators and other facilities of the Building by other tenants. Fire exits and
stairways are for emergency use only, and they shall not be used for any other
purpose by the tenants, their employees, licensees or invitees. No tenant shall
encumber or obstruct, or permit the encumbrance or obstruction of any of the
sidewalks, entrances, corridors, elevators, fire exits or stairways of the
Building. The Landlord reserves the right to control and operate the public
portions of the Building and the public facilities, as well as facilities
furnished for the common use of the tenants, in such manner as it deems best for
the benefit of the tenants generally.
2. The Landlord may refuse admission to the Building outside
of ordinary business hours to any person not known to the watchman in charge or
not having a pass issued by Landlord or the tenant whose premises are to be
entered or not otherwise properly identified, and may require all persons
admitted to or leaving the Building outside of ordinary business hours to
register. Any person whose presence in the Building at any time shall, in the
judgment of Landlord, be prejudicial to the safety, character, reputation and
interests of the Building or of its tenants may be denied access to the Building
or may be ejected therefrom. In case of invasion, riot, public excitement or
other commotion, Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety of
the tenants and protection of property in the Building. The Landlord may require
any person leaving the Building with any package or other object to exhibit a
pass from the tenant from whose premises the package or object is being removed,
but the establishment and enforcement of such requirement shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the premises of the tenant. The Landlord shall, in no way, be
liable to any tenant for damages or loss arising from the admission, exclusion
or ejection of any person to or from the tenant's premises or the Building under
the provisions of this rule. Canvassing, soliciting or peddling in the Building
is prohibited and every tenant shall co-operate to prevent the same.
3. No tenant shall obtain or accept for use in its premises
towel, barbering, boot blacking, floor polishing, lighting maintenance, cleaning
or other similar services from any persons not authorized by Landlord in writing
to furnish such services, provided that the charges for such services by persons
authorized by Landlord are competitively priced. Such
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services shall be furnished only at such hours, in such places within the
tenant's premises and under such reasonable regulations as may be fixed by
Landlord.
4. No lettering, sign, advertisement, notice or object shall
be displayed in or on the windows or doors, or on the outside of any tenant's
premises, or at any point inside any tenant's premises where the same might be
visible outside of such premises, except that the name of the tenant may be
displayed on the entrance door of the tenant's premises, and in the elevator
lobbies of the floors which are occupied entirely by any tenant. The inscription
of the name of the tenant on the door of the tenant's premises shall be done by
Tenant at its expense. Landlord has approval rights on signage (not to be
unreasonably withheld, delayed or conditioned) on exterior door when tenant is a
partial floor tenant. Listing of the name of the tenant on the directory boards
in the Building shall be done by Landlord at its expense; any other listings
shall be in the discretion of Landlord.
5. No awnings or other projections over or around the windows
shall be installed by any tenant, and only such window blinds as are supplied or
permitted by Landlord shall be used in a tenant's premises. Linoleum, tile or
other floor covering shall be laid in a tenant's premises only in a manner
approved by Landlord.
6. The Landlord shall have the right to prescribe the weight
and position of safes and other objects of excessive weight, and no safe or
other object whose weight exceeds the lawful load for the area upon which it
would stand shall be brought into or kept upon a tenant's premises. If, in the
judgment of Landlord, it is necessary to distribute the concentrated weight of
any heavy object, the work involved in such distribution shall be done at the
expense of Tenant and in such manner as Landlord shall determine. The moving of
safes and other heavy objects shall take place only outside of ordinary business
hours upon previous notice to Landlord, and the persons employed to move the
same in and out of the Building shall be reasonably acceptable to Landlord and,
if so required by law, shall hold a Master Rigger's license. Freight, furniture,
business equipment, merchandise and bulky matter of any description shall be
delivered to and removed from the premises only in the freight elevators and
through the service entrances and corridors, and only during hours and in a
manner reasonably approved by Landlord. Arrangements will be made by Landlord
with any tenant for moving large quantities of furniture and equipment into or
out of the building.
7. No machines or mechanical equipment of any kind, other than
typewriters and other ordinary portable business and office machines and
equipment (such as computers, copiers, facsimile machines, shredders and
refrigerators), may be installed or operated in any tenant's premises without
Landlord's prior written consent, and in no case (even where the same are of a
type so excepted or as so consented to by Landlord, which consent shall not be
unreasonably withheld or delayed) shall any machines or mechanical equipment be
so placed or operated as to disturb other tenants but machines and mechanical
equipment which may be
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permitted to be installed and used in a tenant's premises shall be so equipped,
installed and maintained by such tenant as to prevent any disturbing noise,
vibration or electrical or other interference from being transmitted from such
premises to any other area of the Building.
8. No noise, including the playing of any musical instruments,
radio or television, which, in the reasonable judgment of Landlord, might
disturb other tenants in the Building, shall be made or permitted by any tenant,
and no cooking (as opposed to microwaving or re-heating) shall be done in the
tenant's premises, except as expressly approved by Landlord. Nothing shall be
done or permitted in any tenant's premises, and nothing shall be brought into or
kept in any tenant's premises, which would impair or interfere with any of the
Building services or the proper and economic heating, cleaning or other
servicing of the Building or the premises, or the use or enjoyment by any other
tenant of any other premises, nor shall there be installed by any tenant any
ventilating, air conditioning, electrical or other equipment of any kind which,
in the judgment of Landlord, might cause any such impairment or interference. No
dangerous, inflammable, combustible or explosive object or material shall be
brought into the Building by any tenant or with the permission of any tenant.
Any cuspidors or similar containers or receptacles used in any tenant's premises
shall be cared for and cleaned by and at the expense of the tenant.
9. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures in
or serving any tenant's premises shall not be used for any purpose other than
the purposes for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein.
10. No additional locks or bolts of any kind shall be placed
upon any of the doors or windows in any tenant's premises and no lock on any
door therein shall be changed or altered in any respect. Additional keys for a
tenant's premises and toilet rooms shall be procured only from Landlord, which
may make a reasonable charge therefor. Upon the termination of a tenant's lease,
all keys of the tenant's premises and toilet rooms shall be delivered to
Landlord.
11. All entrance doors in each tenant's premises shall be left
locked and all windows shall be left closed by the tenant when the tenant's
premises are not in use. Entrance doors shall not be left open at any time.
12. Hand trucks not equipped with rubber tires and side guards
shall not be used within the Building.
13. All windows in each tenant's premises shall be kept closed
and all blinds therein, if any, above the ground floor shall be lowered when and
as reasonably required
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because of the position of the sun, during the operation of the Building
air-conditioning system to cool or ventilate the tenant's premises.
14. The Landlord reserves the right to rescind, alter or waive
any rule or regulation at any time prescribed for the Building when, in its
judgment, it deems it necessary, desirable or proper for its best interest and
for the best interests of the tenants, and no alteration or waiver of any rule
or regulation in favor of one tenant shall operate as an alteration or waiver in
favor of any other tenant. The Landlord shall not be responsible to any tenant
for the non-observance or violation by any other tenant of any of the rules and
regulations at any time prescribed for the Building.
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EXHIBIT E
DEFINITIONS
(a) The term mortgage shall include an indenture of mortgage
and deed of trust to a trustee to secure an issue of bonds, and the term
mortgagee shall include such a trustee.
(b) The terms include, including and such as shall each be
construed as if followed by the phrase "without being limited to".
(c) The term obligations of this lease, and words of like
import, shall mean the covenants to pay rent and additional rent under this
lease and all of the other covenants and conditions contained in this lease. Any
provision in this lease that one party or the other or both shall do or not do
or shall cause or permit or not cause or permit a particular act, condition, or
circumstance shall be deemed to mean that such party so covenants or both
parties so covenant, as the case may be.
(d) The term Tenant's obligations hereunder, and words of like
import, and the term Landlord's obligations hereunder, and words of like import,
shall mean the obligations of this lease which are to be performed or observed
by Tenant, or by Landlord, as the case may be. Reference to performance of
either party's obligations under this lease shall be construed as "performance
and observance".
(e) Reference to Tenant being or not being in default
hereunder, or words of like import, shall mean that Tenant is in default in the
performance of one or more of Tenant's obligations hereunder, or that Tenant is
not in default in the performance of any of Tenant's obligations hereunder, or
that a condition of the character described in Section 25.01 has occurred and
continues or has not occurred or does not continue, as the case may be.
(f) References to Landlord as having no liability to Tenant or
being without liability to Tenant, shall mean that Tenant is not entitled to
terminate this lease, or to claim actual or constructive eviction, partial or
total, or to receive any abatement or diminution of rent, or to be relieved in
any manner of any of its other obligations hereunder, or to be compensated for
loss or injury suffered or to enforce any other kind of liability whatsoever
against Landlord under or with respect to this lease or with respect to Tenant's
use or occupancy of the Demised Premises.
(g) The term laws and/or requirements of public authorities
and words of like import shall mean laws and ordinances of any or all of the
Federal, state, city, county and borough governments and rules, regulations,
orders and/or directives of any or all departments, subdivisions, bureaus,
agencies or offices thereof, or of any other governmental, public or
quasi-public authorities, having jurisdiction in the premises, and/or the
direction of any public officer pursuant to law.
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<PAGE> 108
(h) The term requirements of insurance bodies and words of
like import shall mean rules, regulations, orders and other requirements of the
New York Board of Fire Underwriters and/or the New York Fire Insurance Rating
Organization and/or any other similar body performing the same or similar
functions and having jurisdiction or cognizance of the Building and/or the
Demised Premises.
(i) The term repair shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and condition.
(j) Reference to termination of this lease includes expiration
or earlier termination of the term of this lease or cancellation of this lease
pursuant to any of the provisions of this lease or to law. Upon a termination of
this lease, the term and estate granted by this lease shall end at noon of the
date of termination as if such date were the date of expiration of the term of
this lease and neither party shall have any further obligation or liability to
the other after such termination (i) except as shall be expressly provided for
in this lease, or (ii) except for such obligation as by its nature or under the
circumstances can only be, or by the provisions of this lease, may be, performed
after such termination, and, in any event, unless expressly otherwise provided
in this lease, any liability for a payment which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this lease.
(k) The term in full force and effect when herein used in
reference to this lease as a condition to the existence or exercise of a right
on the part of Tenant shall be construed in each instance as including the
further condition that at the time in question no default on the part of Tenant
exists, and no event has occurred which has continued to exist for such period
of time (after the notice, if any, required by this lease), as would entitle
Landlord to terminate this lease or to dispossess Tenant.
(l) The term Tenant shall mean Tenant herein named or any
assignee or other successor in interest (immediate or remote) of Tenant herein
named, while such Tenant or such assignee or other successor in interest, as the
case may be, is in possession of the Demised Premises as owner of Tenant's
estate and interest granted by this lease and also, if Tenant is not an
individual or a corporation, all of the persons, firms and corporations then
comprising Tenant.
(m) Words and phrases used in the singular shall be deemed to
include the plural and vice versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender.
(n) The rule of ejusdem generis shall not be applicable to
limit a general statement following or referable to an enumeration of specific
matters to matters similar to the matters specifically mentioned.
(o) All references in this lease to numbered Articles,
numbered Sections and
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<PAGE> 109
lettered Exhibits are references to Articles and Sections of this lease, and
Exhibits annexed to (and thereby made part of) this lease, as the case may be,
unless expressly otherwise designated in the context.
(p) The term "control" shall mean ownership of more than fifty
(50%) percent of all the voting stock of a corporation or more than fifty (50%)
percent of all the legal and equitable interest in any other entity.
(q) The term "Base Rate" shall mean the prime rate of The
Chase Manhattan Bank (or Citibank, N.A. if The Chase Manhattan Bank shall not
then have an established prime rate; or the prime rate of any major banking
institution doing business in New York City, as selected by Landlord, if none of
the aforementioned banks shall be in existence or have an established prime
rate) at the time of in question.
106
<PAGE> 110
EXHIBIT F
CLEANING SPECIFICATIONS
1. GENERAL:
All linoleum, rubber, asphalt tile and other similar types of
flooring (that may be waxed) to be swept nightly, using approved dust-check type
of mop.
All carpeting and rugs to be carpet swept nightly and vacuum
cleaned weekly.
Hand dust and wipe clean all furniture, fixtures and window
sills nightly; wash sills when necessary.
Empty and clean all waste receptacles nightly and remove waste
paper and waste materials.
Empty and clean all ash trays and screen all sand urns nightly
including all ash trays in all toilets.
Dust interior of all waste disposal cans and baskets nightly;
damp-dust as necessary.
Wash clean all water fountains and coolers nightly.
Hand dust all door and other ventilating louvres within reach,
as necessary.
Dust all telephones as necessary.
Sweep all private stairway structures nightly.
2. LAVATORIES IN THE CORE:
Sweep and wash all lavatory floors nightly using proper
disinfectants. Wash and polish all mirrors, powder shelves, bright work and
enameled surfaces in all lavatories nightly.
Scour, wash and disinfect all basins, bowls and urinals
throughout all lavatories, nightly.
Wash all toilet seats, nightly.
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<PAGE> 111
Empty paper towel receptacles and transport wastepaper to
designated area in basements, nightly (towels, soap and receptacles to be
furnished by Tenant).
Fill toilet tissue holders nightly.
Empty sanitary disposal receptacles, nightly.
Thoroughly wash and polish all wall tile and stall surface as
often as necessary.
3. HIGH DUSTING:
Dust all venetian blinds, frames, charts, graphs and similar
wall hangings and vertical surfaces not reached in nightly cleaning, quarterly.
Cleaning of light fixtures shall be for account of Tenant.
4. GLASS:
Exterior windows to be cleaned inside and outside
approximately once every 10 weeks, weather permitting.
5. CONDITIONS:
As herein used "nightly" means five nights a week, Monday
through Friday, during regular cleaning hours (between 6:00 P.M. and 6:00 A.M.)
and excludes legal and union holidays.
Tenant will pay for electricity, power and hot and cold water
in the Demised Premises for cleaning during the regular cleaning hours which are
after hours.
108
<PAGE> 112
EXHIBIT G
CERTIFICATE OF OCCUPANCY
(Follows immediately on next page)
109
<PAGE> 113
EXHIBIT H
FORM OF LETTER OF CREDIT
TRANSFERABLE IRREVOCABLE LETTER OF CREDIT
BANK: ________________________________
ADDRESS: ________________________________
CREDIT #: ________________________________
APPLICANT BENEFICIARY
AMOUNT: $_________________________
DATE OF EXPIRATION: ____________ ____, ____
We hereby issue in favor of Beneficiary this irrevocable Letter of
Credit which is available by your draft, bearing our credit number, at sight.
This Letter of Credit shall be deemed automatically extended without
amendment for consecutive periods of one (l) year each from the present or any
future expiration date hereof, unless thirty (30) days prior to any such
expiration date we shall notify you in writing, by certified or registered mail,
return receipt requested, that we elect not to consider this Letter of Credit
extended for any such additional period. If such notice is received by you less
than twenty (20) days prior to the then expiration date hereof, then such
expiration date shall be deemed extended for a period of twenty (20) days from
the date of your receipt of such notice. In addition to and not in limitation of
your rights hereunder, within twenty (20) days of receipt by you of such notice,
you may draw the full amount of the credit hereunder, against your sight draft.
We hereby agree with you that sight drafts drawn under this Letter of
Credit will be duly honored on due presentation to us, if presented on or before
the expiration date as the same may be extended as herein provided. We further
undertake that any draft(s) presented under this
110
<PAGE> 114
Letter of Credit shall be paid notwithstanding any claim by any person that the
sum demanded is not due or for any other reason the said draft is not to be
honored.
This Letter of Credit may be transferred and assigned by Beneficiary or
any successor Beneficiary in its entirety on one or more occasions at no expense
to the Beneficiary or any successor Beneficiary. Upon receipt by us of a copy of
the instrument effecting such transfer and assignment signed by the transferor
and by the transferee, the transferee, instead of the transferor, shall, without
necessity of further action, be entitled to all of the benefits of, and rights
under, this Letter of Credit in the transferor's place, provided that, in such
case, the sight draft presented hereunder shall be a sight draft of the
transferee.
This Letter of Credit sets forth in full the terms of our undertaking,
and such undertaking shall not in any way be modified or amplified by reference
to any document, instrument or agreement.
This Letter of Credit is subject to the Uniform customs and Practice
for Documentary Credits (1993 Revision), International chamber of Commerce
Publication No. 500.
Sincerely,
____________________________, Bank
By:__________________________
Title
111
<PAGE> 115
EXHIBIT I
OPTION SPACE
(Follows immediately on next page)
112
<PAGE> 116
EXHIBIT J
STORAGE SPACE
(Follows immediately on next page)
113
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to the Registration Statement No.
333-93235 of Bolt, Inc. on Form S-1 of our report dated January 28, 2000
(February 29, 2000, as to Note 16), appearing in the Prospectus, which is part
of such 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
March 2, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT
The undersigned hereby consents to the references to the undersigned
contained under the captions "Prospectus Summary" and "Business" in the
Registration Statement on Form S-1 of Bolt, Inc., and in any amendments thereto
and in any other Registration Statement for the same offering that may be filed
pursuant to Rule 462(b) of the Securities Act of 1933.
NIELSON I/PRO
By: /s/ Michael Sineo
--------------------------
Name: Michael Sineo
Title: Director, Account Mgmt.
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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46,712
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