<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MEDSITE.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 13-3982605
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
60 EAST 13TH STREET, 3RD FLOOR
NEW YORK, NEW YORK 10003
(212) 253-6913
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SUNDEEP BHAN
CHIEF EXECUTIVE OFFICER
MEDSITE.COM, INC.
60 EAST 13TH STREET, 3RD FLOOR
NEW YORK, NEW YORK 10003
(212) 253-6913
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JEFFREY D. SAPER, ESQ. KRIS F. HEINZELMAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI CRAVATH, SWAINE & MOORE
PROFESSIONAL CORPORATION 825 EIGHTH AVENUE
650 PAGE MILL ROAD WORLDWIDE PLAZA
PALO ALTO, CALIFORNIA 94304-1050 NEW YORK, NEW YORK 10019-7475
(650) 493-9300 (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $0.0001
per share...................... $100,000,000 $26,400
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 2000
SHARES
[LOGO]
MEDSITE.COM, INC.
COMMON STOCK
------------------------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of our common stock is expected to be
between $ and $ per share. We have applied to list our common
stock on The Nasdaq Stock Market's National Market under the symbol "MSTE".
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
6.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS MEDSITE.COM
-------- ------------- -----------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
E*OFFERING
The date of this prospectus is , 2000.
<PAGE> 3
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 3
RISK FACTORS.......................... 6
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS.................. 16
USE OF PROCEEDS....................... 16
DIVIDEND POLICY....................... 16
CAPITALIZATION........................ 17
DILUTION.............................. 18
SELECTED FINANCIAL DATA............... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 20
UNAUDITED PRO FORMA FINANCIAL DATA.... 25
BUSINESS.............................. 27
MANAGEMENT............................ 36
RELATED PARTY TRANSACTIONS............ 45
PRINCIPAL STOCKHOLDERS................ 47
DESCRIPTION OF CAPITAL STOCK.......... 49
SHARES ELIGIBLE FOR FUTURE SALE....... 51
UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS.................... 53
UNDERWRITING.......................... 56
NOTICE TO CANADIAN RESIDENTS.......... 59
LEGAL MATTERS......................... 60
EXPERTS............................... 60
WHERE YOU CAN FIND MORE INFORMATION... 60
INDEX TO FINANCIAL STATEMENTS......... F-1
APPENDIX: "MEET THE MANAGEMENT"
PRESENTATION AVAILABLE THROUGH
ONLINE PROSPECTUS [CLICK HERE FOR
"MEET THE MANAGEMENT"
PRESENTATION]....................... A-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4
Inside Front Cover
Text: The physician's home on the internet.
Graphic: A computer screen displaying the Medsite logo with a stethoscope
resting on the computer screen.
Gatefold
Text: Our Mission: We use the internet to create products and services that save
physicians time and money and foster a climate for improved patient care.
Graphic: There is a large circle in the center of the page containing the words
"Physicians" and "medsite" with the Medsite Logo. The large circle is connected
on the right to another circle containing the word "Patients" by a line with
arrows on each end. The large circle is connected on the top to three circles
connected to each other by lines. Above the first circle are the words "Medical
Device Companies." Above the middle circle are the words "Pharmaceutical
Companies." Above the last circle are the words "Healthcare Organizations." The
large circle is connected on the left to five circles connected to form a "V"
shape. Each of the circles along the "V" shape is accompanied by text. From the
circle at uppermost point of the "V" to the last circle at the bottom of the "V"
the text reads "Books and Software," "Medical Supplies," "Email and Calendar,"
"Electronic Information" and "Other Services."
At the bottom of the page there is a rectangular block containing three images
of web pages with the words "e-Commerce," "Information" and "Communication"
below. There is also text which reads "Medsite.com is a leading provider of
online e-commerce, information and communication solutions for physicians,"
followed by the Medsite logo.
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should read this entire
prospectus carefully, including the risk factors and financial statements.
MEDSITE.COM
Medsite.com is a leading provider of online business-to-business
e-commerce, information and communication products and services to the
physician. We design our products and services to meet the needs of physicians
throughout their careers, beginning in medical school, extending through
residency and continuing into clinical practice. The relationship we build with
our customers enables us to offer pharmaceutical, managed care, medical device
and other healthcare companies with an attractive means of reaching physicians.
There are approximately 660,000 practicing physicians, including residents,
in the United States. We believe physicians are the focal point of the
healthcare industry as they directly or indirectly influence an estimated 80% of
healthcare expenditures. In 1999, healthcare expenditures in the United States
totaled an estimated $1.1 trillion, representing one of the largest segments of
our economy.
Physicians can purchase online from us a comprehensive selection of medical
supplies, books and other practice needs through our e-commerce offerings. Our
information management tools help physicians filter and organize medical content
from a vast number of sources. Our communication products and services assist
physicians in communicating with their patients and colleagues using the
internet.
We have created an extensive online distribution network to reach the
physician through our agreements with numerous medical websites, universities,
medical associations and healthcare organizations. Medsite Books, our online
bookstore, is the designated medical bookstore for many healthcare websites
including the American Medical Association, the American Medical Students
Association, Healtheon/WebMD, Medscape and Physicians' Online.
Our objective is to be both the leading online destination site for the
physician and a preferred marketing channel for pharmaceutical and other
healthcare companies to reach the physician. Key elements of our strategy
include:
- assessing the physician's needs and providing products and services that
address those needs,
- continuing to pursue strategic relationships with both online and offline
organizations in order to gain better access to physicians,
- expanding our programs that facilitate communication and commercial
interaction between physicians and pharmaceutical companies, and
- expanding our business through strategic acquisitions that enhance our
products and services or increase our access to physicians.
In December 1999, we acquired Total Health Products, or THP, a company that
sells medical supplies and books to physicians with pharmaceutical company
sponsorship. After our acquisition of THP, we have access to a total of over
250,000 practicing physicians, residents and medical students to whom we can
offer our online products and services. In January 2000, we acquired American
Medical Communications, Inc., or AMC, a creator of medical education
information.
We were organized as a New York limited liability company in November 1995.
In November 1997, we reorganized as a Delaware corporation. Our principal
executive offices are located at 60 East 13th Street, 5th Floor, New York, New
York 10003, and our telephone number is (212) 253-6913. Our world wide web
address is www.medsite.com. The information on our website is not part of this
prospectus.
Medsite, Medcite, Medsite University and The Physician's Home on the
Internet are our trademarks. Other trademarks or service marks appearing in this
prospectus are trademarks or service marks of the companies that use them.
3
<PAGE> 6
THE OFFERING
Common stock offered.......... shares
Common stock to be outstanding
after this offering........... shares
Use of proceeds............... We intend to use the proceeds from this
offering for general corporate purposes, sales
and marketing, product development and working
capital. We also may use a portion to acquire
complementary businesses.
Proposed Nasdaq National
Market symbol................. MSTE
The share amounts in this table are based on shares outstanding as of
December 31, 1999. This table excludes:
- 3,250,000 shares of common stock reserved for issuance under our 1999
stock plan as of December 31, 1999, 3,178,000 of which are subject to
outstanding options,
- 5,000,000 shares of common stock reserved for issuance under our 2000
stock plan as of February 8, 2000, none of which are subject to
outstanding options,
- 1,500,000 shares of common stock available for issuance under our 2000
employee stock purchase plan,
- 250,000 shares of common stock available for issuance under our 2000
director option plan,
- 661,422 shares of common stock reserved that are issuable on the exercise
of outstanding warrants, at a per share weighted average exercise price
of $3.11, and
- the issuance of 490,000 shares of our common stock in connection with
acquisitions we have completed since December 31, 1999, including our
acquisition of American Medical Communications, Inc.
------------------------
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
- 10,316,788 shares of convertible preferred stock which will convert into
16,692,702 shares of our common stock immediately before completion of
this offering,
- the issuance of 490,000 shares of common stock in connection with
acquisitions we have completed since December 31, 1999, including our
acquisition of American Medical Communications, Inc.,
- no exercise of the underwriters' over-allotment option, and
- the filing of our amended and restated certificate of incorporation upon
completion of this offering.
4
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
----- ------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $ 297 $ 1,417 $ 8,893
Cost of sales............................................... 90 1,299 8,883
----- ------- --------
Gross profit................................................ 207 117 10
Operating expenses:
General and administrative................................ 439 1,288 7,117
Sales and marketing....................................... 115 541 7,174
Product and technology development........................ 66 172 3,371
Depreciation and amortization............................. -- 14 333
----- ------- --------
Total operating expenses.................................. 620 2,015 17,995
----- ------- --------
Loss from operations........................................ (413) (1,897) (17,985)
Interest income (expense), net.............................. (17) (38) 337
----- ------- --------
Net loss.................................................... (430) (1,936) (17,649)
Accreted dividends on preferred stock....................... -- -- (3,013)
----- ------- --------
Net loss attributable to common stockholders................ $(430) $(1,936) $(20,662)
===== ======= ========
Net loss per share attributable
to common stockholders, basic and diluted................. -- $ (0.15) $ (1.28)
Weighted-average shares outstanding......................... -- 12,513 16,096
Pro forma net loss per share basic and diluted
(unaudited)...............................................
Shares used in computing pro forma net loss per share, basic
and diluted (unaudited)...................................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents, and short term investments.......... $33,714 $
Restricted cash equivalents................................. 1,503
Working capital............................................. 30,922
Total assets................................................ 57,392
Redeemable convertible preferred stock...................... 55,500 --
Stockholders' equity (deficit).............................. $(8,706)
</TABLE>
The preceding balance sheet data is shown on an actual and a pro forma as
adjusted basis to give effect to the sale of shares of common stock by
Medsite.com in this offering at an assumed initial public offering price of
$ per share, after deducting the estimated underwriting discounts and
commissions and offering expenses.
5
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should consider carefully
the risks and uncertainties described below and the other information in this
prospectus, including the financial statements and related notes, before
deciding to invest in shares of our common stock. If any of the following risks
or uncertainties actually occurs, our business, financial condition and
operating results would likely suffer. In that event, the market price of our
common stock could decline and you could lose all or part of the money you paid
to buy our common stock.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF LOSSES, WE EXPECT CONTINUING LOSSES AND WE MAY NEVER
ACHIEVE PROFITABILITY.
We have incurred net losses of approximately $20 million in the last three
years. We expect to continue to incur net losses for the foreseeable future and
may never become profitable. We cannot assure you that our revenues will
continue to grow or that we will achieve or maintain profitability in the
future. As our business evolves, we expect to introduce new products and
services. Accordingly, our product development, sales and marketing and
administrative expenses will increase significantly. Consequently, we will need
to significantly increase our revenues to achieve and maintain profitability.
WE HAVE A LIMITED OPERATING HISTORY AND ANY PREDICTIONS ABOUT OUR FUTURE
REVENUES AND EXPENSES MAY NOT BE AS ACCURATE AS THEY WOULD BE IF WE HAD A LONGER
BUSINESS HISTORY.
We were organized in November 1995 and commenced active operations in
January 1997. Our limited operating history makes financial forecasting and
evaluation of our business difficult. Since we have limited financial data, any
predictions about our future revenues and expenses may not be as accurate as
they would be if we had a longer business history.
IF PHYSICIANS DO NOT ADOPT THE INTERNET TO FULFILL THEIR TRADITIONAL NEEDS FOR
INFORMATION, SERVICES AND PRODUCTS, WE WILL BE UNABLE TO GENERATE REVENUES AND
MAY BE UNABLE TO CONTINUE OUR OPERATIONS.
Our success depends upon achieving significant market acceptance of our
products and services by physicians. Failure to achieve or maintain market
acceptance of Medsite.com or the internet in general would result in a loss of
revenues. Physicians may not accept Medsite.com or the internet as a replacement
for traditional sources of healthcare products and services. The internet may
not become a viable channel for these products and services because of:
- inadequate development of necessary reliable network infrastructure or
complementary services, such as high-speed modems and security procedures
for the transmission of confidential information,
- development and acceptance of competing methods for delivering healthcare
related products and services to medical professionals,
- delays in the development or adoption of new standards and protocols
required to handle increased levels of internet activity, and
- governmental regulation of the healthcare industry.
IF WE ARE UNABLE TO BUILD AND MAINTAIN A SIGNIFICANT CUSTOMER BASE OF
PHYSICIANS, WE WILL BE UNABLE TO GENERATE REVENUES AND UNABLE TO CONTINUE
OPERATIONS.
Our ability to generate revenues is highly dependent on building and
maintaining a substantial customer base of physicians who use our suite of
products. If we are unable to build and maintain a large
6
<PAGE> 9
customer base of physicians, we may be unable to increase our revenues. Failure
to maintain a significant customer base of physicians may result from:
- our inability to provide services that physicians need,
- our failure to offer new services that physicians need and want,
- our inability to market our brand name to a broad audience of physicians,
- our inability to maintain an easily accessible and easily navigable
online interface,
- delays inherent in the internet infrastructure, and
- increased competition.
If we are unable to build and maintain a large physician customer base, we
may be unable to generate revenues from those pharmaceutical, managed care,
medical device and other healthcare companies seeking to reach the physician
market. Historically, many of THP's customers purchased products through
traditional channels. If we are unable to sell our products and service to these
physicians online, we may not be able to increase our revenues.
OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY VARY, WHICH MAY CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE.
Our quarterly revenues and operating results have fluctuated in the past,
and we expect that they will continue to do so in future periods due to a number
of factors. For example, book purchases increase in the fall due to the
beginning of the school year for medical students. We also derive revenue from
selling our products and services directly to physicians at medical conferences
and trade shows. Because there are fewer medical conferences and trade shows
during the winter months, we may have lower revenues during the winter months.
Our limited operating history makes it difficult to predict how this seasonal
trend will affect our business or the price of our common stock. Also, since a
substantial portion of our current and future costs is fixed, we may be unable
to adjust our expenses in a period to compensate for revenues that are lower
than we expect.
OUR MEDSITE BRANDS MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY FOR US TO
CONTINUE TO INCREASE OUR CUSTOMER BASE AND SELL OUR PRODUCTS AND SERVICES TO
THIRD PARTIES SEEKING TO REACH THE PHYSICIAN MARKET.
We believe that broad recognition and favorable perception of the Medsite
brands are essential to our future success. If we fail to increase our
membership and traffic, we may be unable to sell our products and services to
third parties seeking to reach the physician market. Successful positioning of
Medsite will largely depend on:
- the success of our advertising and promotional efforts,
- our ability to enhance our existing strategic marketing relationships,
and
- our ability to continue to provide high-quality products and services for
physicians.
We incurred sales and marketing expenses of approximately $7.2 million
during the year ended December 31, 1999. To increase awareness of the Medsite
brands, we expect to spend significantly more on sales and marketing in the
future. If our brand enhancement strategy is unsuccessful, these expenses may
never be recovered, and we may be unable to increase future revenues.
WE DEPEND ON THE PHARMACEUTICAL INDUSTRY FOR A SIGNIFICANT PORTION OF OUR
REVENUES.
Our revenues could seriously decline if pharmaceutical companies limit
their physician directed marketing expenditures. A major element of our business
strategy is to increase our sales to pharmaceutical companies. We expect that
our future revenues will be heavily dependent on sales to pharmaceutical
companies. Our future success is highly dependent on the sales and marketing
expenditures
7
<PAGE> 10
of pharmaceutical companies and our ability to attract these expenditures. Some
of the potential adverse developments in the pharmaceutical industry that could
affect our revenues include:
- public or private marketing initiatives or reforms designed to regulate
the manner in which pharmaceutical companies promote their products,
- regulatory or legislative developments that discourage or prohibit
pharmaceutical companies' promotional activities,
- a decrease in the number of new drugs being developed, or
- the adoption of current legislative and regulatory proposals to control
drug costs for Medicare and Medicaid patients, including proposals in the
United States Congress.
IF OUR CUSTOMERS DO NOT PROVIDE US WITH ACCURATE INFORMATION ABOUT THEMSELVES,
OUR PHARMADIRECT PROGRAM MAY BE LESS ATTRACTIVE TO PHARMACEUTICAL COMPANIES.
If we are unable to identify our customers, our PharmaDirect program may be
less attractive to pharmaceutical companies, and our revenues may decline. We
identify our customers as physicians, residents and students based on
information customers supply to us at the time of purchase, though this
information may not be accurate. Possible changes in state or federal
confidentiality laws also may make it more costly and more difficult to verify
the accuracy of information about our customers.
IF WE CANNOT MANAGE OUR EXPECTED GROWTH, WE MAY NOT BE ABLE TO SUCCESSFULLY
OFFER OUR PRODUCTS AND SERVICES AND IMPLEMENT OUR BUSINESS PLAN.
Since we began operations, we have significantly increased the size of our
operations. This growth has placed, and we expect that any future growth we
experience will continue to place, a significant strain on our management,
systems and resources. If we cannot manage our expected growth, we may be unable
to successfully offer our products and services and implement our business plan.
To manage anticipated growth of our operations, we must:
- improve existing and implement new operational, financial and management
information controls, reporting systems and procedures,
- expand, train and manage our employee base, and
- maintain close coordination among our technical, finance, marketing,
sales and editorial staffs.
We also expect that our customer base of physicians and other medical
professionals will continue to grow. This expansion could place significant
pressures on our customer service and network infrastructures, and we may be
unable to accommodate greater sales volume and increased traffic to our website
without systems interruptions or degradations in customer service. Any of these
problems could result in bad publicity, reduced revenues or damage to our
reputation.
IF WE CANNOT ATTRACT AND RETAIN KEY PERSONNEL, WE MAY BE UNABLE TO EXECUTE OUR
BUSINESS STRATEGY.
Our future success will depend on our ability to attract and retain highly
skilled personnel. Our executive offices are located in an area of New York
City, commonly referred to as the Silicon Alley, where we face extreme
competition for professionals from other internet companies as well as from more
traditional occupations. If we fail to identify, attract, retain and motivate
these highly skilled personnel, we may be unable to successfully introduce new
products or services or otherwise implement our business strategy.
In addition, we depend heavily on the skills, experience and efforts of our
senior management, the loss of whose services or the loss of services of any of
our executive officers or other key employees could have a material adverse
effect on our business, operating results and financial condition.
8
<PAGE> 11
WE MAY FAIL TO IMPLEMENT OUR ACQUISITION STRATEGY, WHICH WOULD PREVENT US FROM
EXPANDING OUR PRODUCT AND SERVICE OFFERINGS AND COULD RESULT IN LOWER REVENUES.
We recently acquired two medical companies, and we may make additional
acquisitions or investments in the future. The process of integrating
acquisitions is complex and will place significant demands on our management,
technical, financial and other resources which could lead to higher than
anticipated costs or lower than expected revenues. The successful integration of
these acquisitions is critical to our future success. Some of the factors that
will affect our ability to successfully integrate an acquired company include:
- our ability to assimilate the personnel and operations of the acquired
company,
- our ability to retain the personnel of the acquired company, and
- the extent to which newly acquired services or technologies are
incompatible with and must be integrated into our existing services and
marketing, sales and support efforts.
In addition, if we finance the acquisitions by issuing equity securities,
this could dilute our existing stockholders. Any amortization of goodwill or
other assets, or other charges resulting from the costs of these acquisitions,
could adversely affect our operating results.
WE DEPEND ON THIRD PARTIES TO SUPPLY AND FULFILL GOODS PURCHASED ON OUR WEBSITE
TO OUR CUSTOMERS. IF THE COST OF GOODS TO US CHANGE, OR IF OUR SUPPLIERS DO NOT
PERFORM ADEQUATELY, OUR MARGINS OR REPUTATION MAY BE HARMED.
If our third party suppliers increase their prices of the goods and
services we purchase from them, our margins or reputation may be harmed. We
currently do not maintain an inventory for most of our goods. We rely primarily
on third parties to maintain our inventories and to fulfill those goods to
purchasers. Our business could be significantly disrupted if our suppliers
failed to deliver goods to our customers. If for any reason our suppliers are
unable or unwilling to supply goods to our customers in sufficient quantities
and in a timely manner, we may not be able to secure alternative means of
fulfillment on acceptable terms in a timely manner, or at all.
Because we rely on third parties to fulfill orders, we depend on their
systems for tracking inventory and financial data. If our distributors' systems
fail or are unable to scale or adapt to changing needs, or if we cannot
integrate information systems with any new distributors, we may not have
adequate, accurate or timely inventory or financial information. We also rely on
third-party carriers for shipments to and from distribution facilities. We are
therefore subject to the risks, including employee strikes and inclement
weather, associated with our distributors and of our carriers' ability to
provide product fulfillment and delivery services to meet our distribution and
shipping needs. Failure to deliver products to our customers in a timely and
accurate manner would harm our reputation, the Medsite brand and our results of
operations.
WE COULD BE LIABLE FOR PRODUCT LIABILITY CLAIMS RELATED TO PRODUCTS AND SERVICES
PURCHASED THROUGH OUR WEBSITE, WHICH COULD RESULT IN PROTRACTED AND COSTLY
LITIGATION AND LIABILITY.
Many of the products obtained by customers through our system may be used
to treat patients, including medical equipment and supplies, prescription drugs,
non-prescription drugs and dietary supplements. Any defects or other performance
problems of these products could result in injury to these patients. A product
liability claim brought against us could expose us to substantial liability and,
even if not successful, would likely be time consuming and costly, would divert
management attention from the operation of our business, and could seriously
harm our business. Any insurance coverage we have may not be applicable to such
a claim. Even if our insurance is applicable, the amount of coverage may be
inadequate.
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<PAGE> 12
THE CONTENT OF OUR WEBSITE MAY EXPOSE US TO VARIOUS CLAIMS WHICH COULD RESULT IN
SUBSTANTIAL COSTS AND LIABILITIES.
Our website contains information concerning the products offered by
suppliers, including product descriptions, specifications and pricing. This
information is provided by suppliers and we generally do not independently
verify this information. In addition, if our website contains erroneous
information, such as pricing inaccuracies or mislabeling, our public relations
could suffer and we could lose customers. We could also potentially face
liability for fraud, negligence, copyright, patent or trademark infringement and
other claims based on the information contained on our website. A successful
claim could subject us to significant liability that would harm our reputation
and financial results. Even the successful defense of a claim could divert the
attention of our management and damage our brand perception and reputation.
WE RELY ON OUR SUPPLIERS AND THEIR CARRIERS TO COMPLY WITH GOVERNMENT
REGULATIONS REGARDING THE SALE AND DISTRIBUTION OF REGULATED PRODUCTS AND THEIR
FAILURE TO COMPLY COULD RESULT IN SUBSTANTIAL CIVIL AND CRIMINAL LIABILITY.
Many of the products offered through our website are subject to direct
regulation by governmental agencies. We rely upon our suppliers to meet all
packaging, distribution, labeling, hazard and health information notice, record
keeping and licensing requirements applicable to transactions conducted on our
system. We may be subject to liability for violations of these regulations
regardless of our actual involvement in a violation. In addition, we rely upon
the carriers retained by our suppliers to comply with regulations regarding the
shipment of any hazardous materials sold through our system. We cannot assure
you that our suppliers or their carriers will comply with all applicable
government regulations. We could be fined or exposed to civil or criminal
liability for any violations which could have a negative impact on our business
or financial results.
WE MAY NEED TO OBTAIN ADDITIONAL FINANCING WHICH MAY BE UNAVAILABLE OR, IF IT IS
AVAILABLE, MAY RESULT IN A REDUCTION IN PERCENTAGE OWNERSHIP OF OUR EXISTING
STOCKHOLDERS.
The proceeds of this offering are expected to be sufficient to meet our
cash requirements for at least the next twelve to eighteen months. However, we
may need to raise additional funds in order to:
- finance unanticipated working capital requirements,
- develop or enhance our technological infrastructure and our existing
services,
- fund strategic relationships,
- respond to competitive pressures, or
- acquire complementary businesses, technologies, products or services.
Additional financing may not be available on terms favorable to us, or at
all. If adequate funds are not available or are not available on acceptable
terms, our ability to fund our expansion, take advantage of unanticipated
opportunities, develop or enhance technology or services or otherwise respond to
competitive pressures would be significantly limited. If we raise additional
funds by issuing equity or convertible debt securities, the percentage ownership
of our then-existing stockholders will be reduced, and these securities may have
rights, preferences or privileges senior to those of our existing stockholders.
WE HAVE LIMITED EXPERIENCE WITH INTERNATIONAL OPERATIONS, WHICH MAY RESULT IN
OUR INABILITY TO SUCCEED ON AN INTERNATIONAL LEVEL.
Our revenues could be adversely affected if we are unable to successfully
market and operate our online services in foreign markets. To date we have had
limited experience in developing localized versions of our online services and
in marketing and operating our online services internationally. One element of
our strategy is to develop our online service brands in international markets.
To achieve this, we plan to enter into collaborative arrangements with foreign
businesses. We may experience difficulty in obtaining
10
<PAGE> 13
these relationships and managing international operations because of distance,
trade regulation, language barriers and cultural differences.
RISKS RELATED TO HEALTHCARE REFORM AND REGULATION
THE FAILURE BY US OR OUR CUSTOMERS TO COMPLY WITH GOVERNMENT REGULATIONS COULD
NEGATIVELY AFFECT OUR OPERATING RESULTS.
The healthcare industry is heavily regulated. Various laws, regulations and
guidelines promulgated by government, industry and professional bodies affect
the provision, licensing, labeling, marketing, promotion and reimbursement of
healthcare services and products, including pharmaceutical products. Our failure
or our clients' failure to comply with applicable regulatory requirements or
industry guidelines could:
- limit or prohibit our business activities,
- subject us or our clients to adverse publicity, or
- increase the costs of regulatory compliance or subject us or our clients
to monetary fines or other penalties.
The Medicare/Medicaid Antikickback law, and several similar state laws,
prohibit certain business practices and relationships that might affect the
provision and cost of healthcare services, including pharmaceuticals payable
under Medicare, Medicaid and other government programs, including offering,
soliciting, paying or receiving remuneration in return for the referral of
patients whose care will be paid for by such programs. Sanctions for violating
the Antikickback law include criminal penalties and civil sanctions, including
fines and exclusion from government programs. The "Stark" law prohibits
physicians from referring Medicare and Medicaid patients for designated health
services to entities with which they have a financial relationship, unless that
relationship qualifies for an explicit exception to the referral ban. The Stark
law is a civil, rather than criminal, statute. Penalties under the Stark law
include significant civil monetary penalties and possible exclusion from
government programs.
The Prescription Drug Marketing Act of 1987, or PDMA, places restrictions
on the distribution of prescription drugs to prevent the introduction and
eventual resale of substandard, ineffective, or counterfeit drugs. The PDMA,
among other restrictions, prohibits the distribution of drug samples by a
representative of a drug manufacturer or distributor except when the sample is
intended to be provided to a patient by a doctor, pharmacist, or other
healthcare provider. Further, the PDMA requires wholesale distributors of
prescription drugs to provide documentation identifying each sale of the drug.
Sanctions for violating the PDMA, include criminal and civil penalties. The
Health Insurance Portability and Accountability Act of 1996, or HIPAA, included
a new general prohibition against committing any scheme to defraud any health
care benefit program, including private payors. Violation of this statute can
result in criminal penalties and fines.
Some of these laws have been applied to the marketing and promotional
practices of pharmaceutical manufacturers, to payments to physicians for
services and to other benefits to physicians, and could constrain our
relationships, including financial, marketing and continuing medical education
relationships, with our sponsors and with physicians, including any physicians
who perform services for us. It is possible that additional or changed laws,
regulations or guidelines could be adopted in the future.
HEALTHCARE REFORMS AND ADDITIONAL REGULATION COULD REDUCE THE OVERALL HEALTHCARE
EXPENDITURES WHICH MAY AFFECT OUR ABILITY TO GENERATE REVENUES.
Healthcare reform measures have been considered by Congress and other
federal and state bodies during recent years. The intent of the proposals
generally has been to reduce the growth of total healthcare expenditures and
expand healthcare coverage for the uninsured. Implementation of government
healthcare reform may adversely affect physician and other healthcare
professional spending as well as promotional
11
<PAGE> 14
and marketing expenditures by pharmaceutical companies, which could reduce our
opportunities for growth.
IF THE REGULATION OF CONTINUING EDUCATION AND TRAINING FOR PHYSICIANS AND OTHER
HEALTHCARE PROFESSIONALS RESULTS IN A REDUCTION IN REQUIRED CREDIT HOURS, OUR
ABILITY TO GENERATE REVENUES WILL BE REDUCED.
Any reduction in the regulation of continuing education and training in the
healthcare industry may adversely affect our business. Our business is dependent
in part on required continuing education and training for healthcare
professionals and other healthcare workers resulting from regulations of state
and federal agencies, state licensing boards and professional organizations. Any
change in these regulations which reduce the requirements for continuing
education and training for the healthcare industry could harm our business.
RISKS RELATED TO ONLINE COMMERCE
COMPETITION IN OUR INDUSTRY IS INTENSE AND, IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, WE WILL BE UNABLE TO GENERATE REVENUES AND CONTINUE OPERATIONS.
The market for internet products and services is new, rapidly evolving and
intensely competitive. We expect this competition will increase significantly.
Our financial results and the price of our common stock would be adversely
affected if we are unable to compete successfully. We compete with many internet
providers of healthcare products and services as well as with traditional
suppliers of healthcare information, products and services. We expect
competition will intensify in the future. Barriers to entry are low, and current
and new competitors may be able to launch new websites at a relatively low cost.
We compete directly and indirectly for physicians and service and product
suppliers with:
- companies and organizations maintaining online services or websites
targeted to physicians or the healthcare industry,
- vendors of healthcare information, products and services distributed
through other means, including direct sales, mail and fax messaging,
- companies and organizations maintaining internet search and retrieval
services and other high-traffic websites, and
- publishers and distributors of traditional media, including those that
target to medical professionals, many of which have established or may
establish websites.
Competition for members, users and product suppliers as well as in the
e-commerce market, is intense and is expected to increase significantly.
NEW REGULATION OF AND UNCERTAINTIES REGARDING THE APPLICATION OF EXISTING LAWS
AND REGULATIONS TO E-COMMERCE AND THE INTERNET, COULD PROHIBIT, LIMIT OR
INCREASE THE COSTS OF RUNNING OUR BUSINESS.
Any new law or regulation pertaining to the internet, or the application or
interpretation or existing laws, could decrease demand for our products and
services, increase our costs of doing business or otherwise have a material
adverse effect on our financial results or prospects.
Laws and regulations may be adopted in the future that address
internet-related issues, including online content, user privacy, pricing and
quality of products and services. For example, although it was held
unconstitutional, in part, the Communications Decency Act of 1996 prohibited the
transmission over the internet of various types of information and content. In
addition, several telecommunications carriers are seeking to have
telecommunications over the internet regulated by the Federal Communications
Commission in the same manner as other telecommunications services. Because the
growing popularity and use of the internet has burdened the existing
telecommunications infrastructure in many areas, local exchange carriers have
petitioned the FCC to regulate internet service providers in a manner similar to
long distance telephone carriers and to impose access fees on the internet
service providers.
12
<PAGE> 15
The United States or foreign nations may adopt legislation aimed at
protecting the privacy of internet users. This legislation could increase our
cost of doing business and negatively affect our financial results. Moreover, it
may take years to determine the existing laws governing issues like property
ownership, libel, negligence and personal privacy applicable to the internet.
Currently, privacy law in the United States consists of disparate state and
federal statutes regulating specific industries that collect personal data. Most
of them predate and therefore do not specifically address online activities.
However, European nations are now implementing a European Union Directive on
Data Protection regulating the transmission and storage of personal information
and data. In addition, a number of comprehensive legislative and regulatory
privacy proposals are now under consideration by federal, state and local
governments in the United States.
TAXATION OF ONLINE COMMERCE COULD REDUCE DEMAND FOR OUR SERVICES AND INCREASE
OUR ADMINISTRATIVE EXPENSES.
Some states are reviewing the appropriate tax treatment of e-commerce, and
any new local, state or federal tax regulations may subject us, our suppliers or
our customers to additional state sales and income taxes. The imposition of
additional sales taxes on transactions conducted through our website could make
our service less valuable to customers and suppliers and reduce transaction
volume. This effect would harm our revenues. In addition, the collection and
payment of such taxes may cause us or our customers to incur significant
administrative effort and expense.
In addition, federal legislation imposing limitations on the ability of
states to tax internet access was enacted in 1998. The Internet Tax Freedom Act,
as this legislation is known, exempts specific transactions conducted over the
internet from multiple or discriminatory state and local taxation through
October 21, 2001. It is possible that this legislation will not be renewed when
it terminates. Failure to renew this legislation could allow state and local
governments to impose taxes on particular transactions, and these taxes could
decrease the demand for our services or increase our costs of operations.
SECURITY BREACHES ON OUR SYSTEM OR OTHER INTERNET-BASED SYSTEMS COULD DAMAGE OUR
REPUTATION OR RESULT IN LIABILITY TO US.
Despite our security measures, we may be vulnerable to breaches in the
security of our computer infrastructure. Security breaches on our system or
other internet-based systems could reduce customer confidence in our websites
leading to reduced usage and lower revenues. The secure transmission of
confidential information over the internet is essential in maintaining
confidence in our websites and will be increasingly important as we expand our
customer-oriented offerings. Consumers generally are concerned with security and
privacy on the internet and any publicized security problems could inhibit the
growth of the internet and, therefore, our services.
In addition, if third parties were able to penetrate our network security
or otherwise misappropriate our customers' personal information we could be
subject to liability, including lawsuits. Any lawsuit would be costly, divert
the attention of our management and damage our reputation.
WE ARE EXPOSED TO RISKS ASSOCIATED WITH CREDIT CARD FRAUD, WHICH MAY REDUCE
COLLECTIONS AND DISCOURAGE ONLINE TRANSACTIONS.
If we fail to adequately control fraudulent credit card transactions, our
revenues and results of operations would be harmed because we do not carry
insurance against this risk. Under current credit card practices, we are liable
for fraudulent credit card transactions because we do not obtain a cardholder's
signature.
OUR BUSINESS IS DEPENDENT ON THE CONTINUED DEVELOPMENT AND MAINTENANCE OF THE
INTERNET WHICH IS BEYOND OUR CONTROL. IF THE INTERNET IS NOT DEVELOPED, WE MAY
BE UNABLE TO IMPLEMENT OUR BUSINESS PLAN.
The success of our business will depend on others for the ongoing
development and maintenance of the internet infrastructure, including the
maintenance of a reliable network with the necessary speed, data capacity and
security, as well as timely development of complementary products like high
speed modems,
13
<PAGE> 16
for providing reliable internet access and services. Because global commerce on
the internet and the online exchange of information is new and evolving, we
cannot predict whether the internet will prove to be a viable commercial
marketplace in the long term. The success of our business is dependent on the
continued improvement of the internet as a convenient means of interaction and
commerce, as well as an efficient medium for the purchase and sale of healthcare
supplies. If the internet does not develop into an efficient medium for these
transactions, our business and financial condition and results of operations
will be harmed.
FAILURE TO ATTAIN YEAR 2000 COMPLIANCE COULD CAUSE AND INTERRUPTION IN, OR A
FAILURE OF, OUR NORMAL BUSINESS ACTIVITIES AND OPERATIONS.
The term "Year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000
was reached. We may be exposed to a loss of revenues and our operating expenses
could increase if the systems on which we are dependent to conduct our
operations are not Year 2000 compliant. To date, we are not aware of any major
Year 2000 compliance problems impacting our business, but there can be no
assurance that there will be no Year 2000 compliance disruptions in the coming
months.
RAPIDLY CHANGING TECHNOLOGY MAY IMPAIR OUR ABILITY TO DEVELOP AND MARKET OUR
SERVICES.
All businesses which rely on internet technology, including the healthcare
supplies e-commerce business that we are developing, are subject to risks and
uncertainties, including:
- rapid technological change;
- changing customer needs;
- frequent new service introductions;
- evolving industry standards; and
- relatively low barriers to entry.
Internet technologies are evolving rapidly, and the technology used by our
e-commerce business is subject to rapid change. These market characteristics are
magnified by the emerging nature of the market and the fact that many companies
are expected to introduce new internet products and services in the near future.
In addition, use of the internet may decrease if alternatives are developed or
if problems associated with increased internet use are not resolved. As the
communications, computer and software industries continue to experience rapid
technological change, we will need to modify our services so that they adapt to
those changes. We may experience difficulties that could delay or prevent the
successful development and introduction of our services or hinder our ability to
respond to technological changes in a timely and cost-effective manner.
Moreover, technologically superior service offerings could be developed by
competitors.
In addition, we rely on patent, copyrights, trademark and trade secret law,
as well as nondisclosure agreements and other methods to protect our property
rights. Which may not be adequate to safeguard the technology and processes
underlying our products. Further, third parties may assert infringement or other
intellectual property claims against us. These factors could harm our business
and our ability to develop and market our services.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
There has been no public market for our common stock prior to this
offering. The initial public offering price for our common stock will be
determined through negotiations between the underwriters and
14
<PAGE> 17
us. This initial public offering price may vary from the market price of our
common stock after the offering. If you purchase shares of common stock, you may
not be able to resell those shares at or above the initial public offering
price. The market price of our common stock may fluctuate significantly in
response to factors, some of which are beyond our control, including the
following:
- actual or anticipated fluctuations in our annual and quarterly operating
results,
- changes in market valuations of other technology companies,
- changes in financial estimates by securities analysts,
- variations in our operating results which may cause us to fail to meet
analysts' or investors' expectations,
- announcements by us or our competitors of significant technical
innovations, contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments,
- additions or departures of key personnel,
- future sale of equity or debt securities, and
- general economic, industry and market conditions.
In addition, the stock market has experienced extreme volatility that often
has been unrelated to the performance of particular companies. These market
fluctuations may cause our stock price to fall regardless of our performance. In
the past, companies that have experienced volatility in the market price of
their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of management's attention and resources.
You should read the "Underwriting" section for a more complete discussion
of the factors that were considered in determining the initial public offering
price of our common stock.
SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock after this offering could cause
our stock price to fall. In addition, the sale of these shares could impair our
ability to raise capital through the sale of additional stock. You should read
"Shares Eligible for Future Sale" for a full discussion of shares that may be
sold in the public market in the future.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
SHARES.
The initial public offering price is substantially higher than the book
value per share of our outstanding common stock immediately after the offering.
Accordingly, if you purchase common stock in the offering, you will incur
immediate dilution of approximately $ in the net tangible book value per
share of our common stock from the price you pay for our common stock. For
additional information on this calculation, see "Dilution."
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS OF THIS OFFERING, AND WE MAY
NOT USE THESE PROCEEDS EFFECTIVELY.
Our management has broad discretion in the use of the net proceeds of this
offering and could spend the net proceeds in ways that do not yield a favorable
return or to which stockholders object. We may also use the proceeds to acquire
complementary businesses or technologies, although no such acquisitions are
currently planned.
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<PAGE> 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
substantial risks and uncertainties. In some cases you can identify these
statements by forward-looking words such as "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "should," "will" and "would" or similar
words. You should read statements that contain these words carefully because
they discuss our future expectations, contain projections of our future results
of operations or our future financial position or state other "forward-looking"
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or control. The important factors listed
above, as well as any cautionary language in this prospectus, provides examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could have an adverse effect on our business, results of operations and
financial position.
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock we are
offering in this prospectus at an assumed public offering price of $ per
share, are estimated to be $ , or $ if the underwriters'
over-allotment option is exercised in full and after deducting the underwriting
discounts and commissions and estimated offering expenses.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including working capital. Such uses are expected to include
an expansion of our sales and marketing efforts and technical support services
as well as expenses associated with our product development and geographic
expansion. We also may use a portion of the net proceeds to acquire
complementary businesses, products or technologies; however, we currently have
no commitments or agreements to do so. Pending use of the net proceeds of this
offering, we intend to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently intend to retain all future earnings, if any, for use in the operation
and expansion of our business and do not anticipate declaring or paying cash
dividends for the foreseeable future.
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<PAGE> 19
CAPITALIZATION
The following table sets forth the following information:
- the actual capitalization of Medsite.com as of December 31, 1999;
- the pro forma capitalization of Medsite.com after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
16,692,702 shares of common stock; and
- the pro forma as adjusted capitalization to give effect to the sale of
shares of common stock at an assumed initial public
offering price of $ per share in this offering, less underwriting
discounts and commissions and estimated offering expenses payable by
Medsite.com.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
<S> <C> <C> <C>
Lease obligations payable less current portion... $ 171,704 $ 171,704 $ 171,704
Redeemable Convertible Preferred Stock:
Series A Convertible Preferred Stock; $.0001
par value; 3,000 shares authorized; 3,000
shares issued and outstanding, actual; 0
shares issued and outstanding, pro forma and
pro forma as adjusted....................... 3,000,000 -- --
Series B1 Convertible Preferred Stock; $.0001
par value; 9,500,000 shares authorized;
9,113,788 shares issued and outstanding,
actual; 0 shares issued and outstanding, pro
forma and pro forma as adjusted............. 46,500,428 -- --
Series B2 Convertible Preferred Stock; $.0001
par value; 1,200,000 shares authorized;
1,200,000 shares issued and outstanding,
actual; 0 shares issued and outstanding, pro
forma and pro forma as adjusted............. 6,000,000 -- --
------------ ------------ ------------
Total Redeemable Convertible Preferred Stock..... 55,500,428 -- --
------------ ------------ ------------
Stockholders' equity (deficit):
Common Stock; $.00001 par value; 50,000,000
shares authorized, 17,514,464 shares issued
and outstanding, actual; 34,207,166 shares
issued and outstanding, pro forma
shares issued and outstanding, pro forma as
adjusted.................................... 876 1,710 2,110
Additional paid in capital..................... 13,889,914 66,376,508 157,876,108
Accumulated deficit............................ (22,597,062) (19,584,062) (19,584,062)
------------ ------------ ------------
Total stockholders' equity (deficit)........ (8,706,272) 46,794,156 138,294,156
------------ ------------ ------------
Total capitalization...................... $ 46,965,860 $ 46,965,860 $138,465,860
============ ============ ============
</TABLE>
This tables excludes:
- 3,250,000 shares of common stock that were reserved for issuance on the
exercise of stock options under our stock option plan as of December 31,
1999, 3,178,000 of which were outstanding at such date at a per share
weighted average exercise price of $4.96;
- 5,000,000 shares of common stock reserved for issuance under our 2000
stock plan,
- 1,500,000 shares of common stock reserved for issuance under our 2000
employee stock purchase plan,
- 250,000 shares of common stock reserved for issuance under our 2000
director option plan,
- 661,422 shares of common stock that are issuable upon the exercise of
outstanding warrants, and
- 490,000 shares of common stock issued in connection with acquisitions we
have completed since December 31, 1999.
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<PAGE> 20
DILUTION
The pro forma net tangible book value as of December 31, 1999 was
$ or approximately $ per share of common stock. Pro forma net
tangible book value represents the amount of our total tangible assets less
total liabilities, divided by the total number of shares of common stock
outstanding. Dilution in pro forma net tangible book value per share represents
the difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the pro forma net tangible book value per
share of our common stock immediately following this offering.
After giving effect to our sale of the shares of common
stock offered by this prospectus and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, our pro
forma net tangible book value as of December 31, 1999 would have been
$ , or approximately $ per share. This represents an immediate
increase in net tangible book value of $ per share to existing stockholders
and an immediate dilution in net tangible book value of $ per share to
new investors. The following table illustrates this dilution on a per share
basis:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of December
31, 1999...............................................
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after the
offering..................................................
-------
Dilution in pro forma net tangible book value per share to
new investors............................................. $
=======
</TABLE>
The following table sets forth, on a pro forma basis as of December 31,
1999, the differences between the number of shares of common stock purchased
from us, the total price and average price per share paid by existing investors
and by the new investors, before deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us, at the assumed
public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
----------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... 34,207,166 % $ % $
New investors.................
----------- --- ---------- ----
Total......................... 100% $ 100%
=========== === ========== ====
</TABLE>
This table assumes no exercise of outstanding options. See Note 12 to the
Financial Statements. The exercise of outstanding options would increase the
dilutive effect to new investors.
If the underwriters' over-allotment option is exercised in full, the
following will occur:
- the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our
common stock outstanding after the offering and
- the number of shares held by new investors will be increased to
or approximately % of the total number of shares of our
common stock outstanding after this offering.
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<PAGE> 21
SELECTED FINANCIAL DATA
The selected statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the selected balance sheet data as of December 31, 1997,
1998 and 1999 have been derived from our audited financial statements included
elsewhere in this prospectus. The statement of operations data for the period
from November 24, 1995 (date of inception) to December 31, 1995 and the year
ended December 31, 1996 and the balance sheet data at December 31, 1995 and 1996
have been derived from financial statements not included in this prospectus. In
the opinion of management the statement of operations data from November 24,
1995 (date of inception) to December 31, 1995 and the year ended December 31,
1996 and the balance sheet data as of December 31, 1995 and 1996 have been
prepared on the same basis as the audited financial statements appearing on this
prospectus and include all necessary adjustments, consisting only of normal
recurring adjustments we believe to be necessary for a fair presentation of the
data. The historical results are not necessarily indicative of results to be
expected for any future period. The data should be read in conjunction with the
Financial Statements and the Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 24, 1995 YEAR ENDED DECEMBER 31,
(INCEPTION) TO ----------------------------------
DECEMBER 31, 1995 1996 1997 1998 1999
----------------- ----- ----- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.................................... $-- $ 137 $ 297 $ 1,417 $ 8,893
Cost of sales................................ -- 80 91 1,299 8,883
--- ----- ----- ------- --------
Gross profit................................. -- 57 207 117 10
Operating expenses:
General and administrative................. -- 299 439 1,288 7,117
Sales and marketing........................ -- -- 115 541 7,174
Product and technology development......... -- -- 66 172 3,371
Depreciation and amortization.............. -- -- -- 14 333
--- ----- ----- ------- --------
Total operating expenses..................... -- 299 620 2,015 17,995
--- ----- ----- ------- --------
Operating loss............................... -- (242) (413) (1,897) (17,985)
Interest income (expense), net............... -- (1) (17) (38) 337
--- ----- ----- ------- --------
Net loss..................................... -- (243) (430) (1,936) (17,649)
Accreted dividends on preferred stock........ -- -- -- -- (3,013)
--- ----- ----- ------- --------
Net loss attributable to common
stockholders............................... $ $(243) $(430) $(1,936) $(20,662)
=== ===== ===== ======= ========
Net loss per common share attributable to
common stockholders, basic and diluted..... n/a n/a n/a $ (0.15) $ (1.28)
Weighted average common shares outstanding... n/a n/a n/a 12,513 16,096
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1995 1996 1997 1998 1999
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash, cash equivalents and short term
investments................................. $ -- $ 20 $ 10 $ 29 $33,714
Restricted cash equivalents................... -- -- -- -- 1,503
Working capital (deficit)..................... -- (23) (429) (1,538) 30,922
Total assets.................................. -- 141 80 309 57,392
Redeemable convertible preferred stock........ -- -- -- -- 55,500
Total stockholders' (deficit)................. -- (143) (562) (1,591) (8,706)
</TABLE>
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<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations in conjunction with our financial statements and related
notes. This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of factors including
those discussed in "Risk Factors" starting on page 6 and elsewhere in this
prospectus.
OVERVIEW
We were initially organized in 1995, commenced active operations in 1996,
and launched our website as a medical bookstore in September 1997. During 1998
and 1999, we continued to build our medical book store business while enhancing
our website to support additional products and services, selecting our
fulfillment sources, broadening our distribution channels and building our
brand.
Historically, our revenues have been generated primarily through the sale
of medical books over the internet. Since November 1999, we significantly
expanded our product and service offerings. These expanded offerings include a
comprehensive selection of medical books, supplies, and additional services to
provide physicians access to medical information and to manage communications
over the internet.
Customer orders are processed at Medsite and we either charge the
customer's credit card, invoice monthly for corporate accounts, or for our
PharmaDirect Program, accept certificates for redemption for goods and services.
The purchaser is charged when the product is shipped. For subscription based
services, the purchaser is billed when the service is initiated. Certificates
issued in our PharmaDirect program are paid for by pharmaceutical company
sponsors.
When a customer places an order, we either fulfill the order from our own
inventory or purchase the product or service from our suppliers at a
pre-negotiated price. For customer orders that involve the delivery of products
through third party fulfillment arrangements, we take legal title to the
products purchased at the date of shipment and relinquish title to our customers
upon delivery. For customer orders that involve subscription based services, we
distribute the services through our website.
We have pursued an aggressive customer acquisition program, offering
promotional discounts such as free or discounted shipping, and coupons to
targeted groups of customers. Product returns are generally allowed within 10 to
30 days, depending on the product, if goods are returned in their original
condition.
Net sales includes primarily revenues from product and service sales. For
product sales, we recognize revenue when the product is shipped. The revenue
recognized is the item sales price plus outbound shipping costs less returns,
promotional discounts and coupons. For service transactions, we recognize
revenue as the sales price of the service provided to the purchaser. If the
service is subscription based, the revenue and associated costs are amortized
over the life of the subscription.
Cost of sales consists primarily of the cost of products sold to customers
and related shipping costs. Payments for goods and services purchased are made
based on standard terms with vendors. Cost of sales are recognized consistently
with the revenue recognition of the associated products or services.
Marketing and sales expenses consist primarily of advertising and
promotional expenditures, distribution expenses, including order processing and
fulfillment charges, payroll and related expenses for personnel engaged in
marketing, merchandising product management and customer service, and sales
commissions. Out of pocket costs for promotional programs such as free shipping
or free books are recorded as sales and marketing expenses.
Product and technology development expenses consist primarily of payroll
and related expenses of personnel engaged in maintaining and expanding our
website functionality and updating website content.
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<PAGE> 23
General and administrative expenses consist primarily of payroll and
related expenses for executive, administrative, and human resources personnel,
professional services expenses and general corporate expenses.
Depreciation and amortization expenses consist primarily of depreciation
and amortization of property and equipment, assets acquired under capital
leases, leasehold improvements, intangible assets and goodwill.
RECENT DEVELOPMENTS
In December 1999, we acquired Total Health Products, Inc., or THP, a
company that sells medical supplies and books to physicians with pharmaceutical
company sponsorship. This acquisition provides us with access to over 200,000
additional physicians. We intend to transition most of THP's physicians to our
online business. In the acquisition, we obtained our current inventory and
fulfillment facilities. Our financial statements for the year ended December 31,
1999 reflect only one month of combined operations with THP. THP accounted for
approximately $1.5 million of net sales in 1999. In January 2000, we acquired
American Medical Communications, Inc., or AMC, a creator of medical education
information.
Because of these recent acquisitions and other factors, we do not believe
that our historical financial results are necessarily indicative of results to
be expected for future periods. In particular, we expect that revenues derived
from THP's operations may significantly impact our results of operations for the
foreseeable future.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 1998.
Net sales. Net sales increased from $1.4 million for the year ended
December 31, 1998 to $8.9 million for the year ended December 31, 1999. The
increase in sales is primarily due to the increased number of customers
purchasing medical books from us, in addition to the $1.5 million of net sales
generated by THP in December 1999.
Cost of Sales and Gross Margins. Cost of sales increased from $1.3 million
for the year ended December 31, 1998 to $8.9 for the year ended December 31,
1999. This increase is primarily due to the increased unit volume of medical
books sold and shipped. Cost of sales increased as a percentage of net sales
from 91.7% for the year ended December 31, 1998 to 99.9% for the year ended
December 31, 1999. The increase reflects our significant initial use of
promotions, discounts and coupons to build our customer base.
We expect the cost of sales to increase in absolute dollar terms as our
sales volume increases, and expect our gross margin to improve, as our use of
discounts and coupon programs becomes a lower percentage of sales. We expect our
gross margin will fluctuate based on a number of factors that will be
significantly influenced by pricing conditions and the competitive environment.
These factors include the cost of our products, our pricing strategy and
policies relative to the cost of our products, the use of promotions, discounts
and coupons, our product mix, and our pricing strategy for shipping costs.
Marketing and sales. Marketing and sales expenses increased from $540,802
for the year ended December 31, 1998 to $7.2 million for the year ended December
31, 1999. The increase was primarily due to growth in our direct sales force and
marketing staff, as well as an increase in promotional spending targeted at
building our brand, increasing our client base and growing sales. We expect an
increase in the absolute dollars spent for marketing and sales resulting from
continued aggressive promotion of our products and services. To the extent that
our business grows in the future, we expect increased costs related to customer
service and product management activities. Marketing and sales expenses may vary
considerably from quarter to quarter, depending on the timing of promotional
activities and advertising.
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<PAGE> 24
Product and Technology Development. Product and technology development
expenses increased from $172,020 for the year ended December 31, 1998 to $3.4
million for the year ended December 31, 1999. This increase was primarily due to
the expansion of the products and services available on our website and the
increase in the number of employees, contract programmers and consultants
engaged in this effort. We believe that continued investment in product
development is critical to achieving our objectives and expect product
development costs to increase in absolute dollars.
General and Administrative. General and administrative expenses increased
from $1.3 million for the year ended December 31, 1998 to $7.1 million for the
year ended December 31, 1999. This increase was primarily due to the increased
number of employees we hired to develop and manage our acquisition and financing
activities, accounting and administrative operations, and employee recruitment
and training. We expect general and administrative expenses to increase in
absolute dollars in the future as we continue to expand our staff and incur
additional costs related to anticipated growth of the business.
Depreciation and Amortization. Depreciation and amortization expense
increased from $14,141 for the year ended December 31, 1998 to $332,961 for the
year ended December 31, 1999. The increase was due to increased expenditures on
property and equipment necessary to support our growth. In addition, the
acquisition of THP resulted in goodwill of $12.3 million, which is being
amortized over ten years starting in December 1999. We expect expenditures for
property and equipment to increase in the future, as we build out our newly
leased office space, acquire additional computer equipment, and acquire
furniture and equipment for additional staff.
Income Taxes. No provision for federal and state income taxes was recorded
as we incurred net operating losses in each of the past three years. As of
December 31, 1999, we had approximately $17.9 million of federal and state net
operating loss carryforwards which expire in varying amounts beginning in 2018.
Due to the uncertainty regarding the ultimate utilization of the net operating
loss carryforwards, we have not recorded any benefit for losses and a valuation
allowance has been recorded for the entire amount of the net deferred tax asset.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997.
Net sales. Net sales increased from $297,330 for the year ended December
31, 1997 to $1.4 million for the year ended December 31, 1998. The increase is
primarily due to customer purchases of medical books following the launch of our
website.
Cost of Sales and Gross Margins. Cost of sales increased from $90,600 for
the year ended December 31, 1997 to $1.3 for the year ended December 31, 1998.
This increase is primarily due to increased unit sales volume of medical books
following the launch of our website. Comparison of cost of sales as a percentage
of net sales is not meaningful, as the our business during the year ended
December 31, 1997 was primarily development and distribution of computer
software, and during the year ended December 31, 1998, was the sale of medical
books.
Marketing and Sales. Marketing and sales expenses increased from $114,450
for the year ended December 31, 1997, to $540,802 million for the year ended
December 31, 1998. This increase is primarily due to increased promotional
expenditures.
Product and Technology Development. Product and technology development
expenses increased from $66,065 for the year ended December 31, 1997 to $172,020
for the year ended December 31, 1998. This increase is due primarily to costs
related to the development of our product offering for our website.
General and Administrative. General and administrative expenses increased
from $439,170 for the year ended December 31, 1997 to $1.3 million for the year
ended December 31, 1998. This increase was primarily due an increase in the
number of people hired to perform administrative activities required by the
growth of our business.
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<PAGE> 25
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each of the four
quarters in the year ending December 31, 1999. The information for each of these
quarters is unaudited and has been prepared on the same basis as our audited
financial statements appearing elsewhere in this prospectus. In the opinion of
management, all necessary adjustments, consisting only of normal recurring
adjustments, have been included to present fairly the unaudited quarterly
results when read in conjunction with our audited financial statements and
related notes. We have experienced, and expect to continue to experience,
fluctuations in operating results from quarter to quarter. Historical operating
results are not necessarily indicative of the results that may be expected for
any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................... $ 906 $ 1,444 $ 2,419 $ 4,123
Cost of sales................................ 832 1,413 2,713 3,925
------- ------- ------- -------
Gross profit................................. 74 31 (294) 198
General and administrative................. 683 1,230 2,819 2,384
Sales and marketing........................ 339 1,126 2,490 3,220
Product and technology development......... 82 763 1,311 1,215
Depreciation & amortization................ 8 19 62 244
------- ------- ------- -------
Total operating expenses..................... 1,112 3,138 6,682 7,063
Loss from operations......................... (1,038) (3,107) (6,976) (6,865)
Interest, net................................ 17 22 (66) 364
------- ------- ------- -------
Net loss..................................... $(1,021) $(3,085) $(7,042) $(6,501)
======= ======= ======= =======
</TABLE>
Due to our acquisition of THP and other factors, we do not believe
historical quarterly results are indicative of expected future performance. In
particular, we expect increased revenue due to acquisitions as well as internal
growth. In addition, we do not believe the trend in quarterly operating expenses
are indicative of expected future results. We expect operating expenses to
increase significantly in future periods as we add personnel and purchase
equipment and services necessary to support future growth in our business.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $29,353 at December 31, 1998 and $32.3
million at December 31, 1999. During 1998 and 1999, we financed our operations
through the private issuance of equity securities and convertible notes which
have been converted to equity securities.
Net cash used in operating activities was $861,416 for the year ended
December 31, 1998 and $14.1 million for the year ended December 31, 1999. Net
cash used in operations consists primarily of net losses during each year,
resulting from significant initial discounts, promotions and coupons used to
grow our customer base, and expenditures to establish and expand our offerings
on our website.
Net cash used in investing activities was $55,160 for the year ended
December 31, 1998. Net cash used in investing activities was $12.0 million for
the year ended December 31, 1999 and consisted primarily of acquisition costs
for THP, capital expenditures for computers, furniture and equipment to support
growth in personnel and investment of a portion of cash proceeds from financing
activities in short term debt securities. Subsequent to December 31, 1999, we
completed the acquisition of AMC for total consideration of 420,000 shares of
our common stock. Cash flows used in investing activities could increase if we
use our cash to make future acquisitions.
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<PAGE> 26
Net cash flows provided by financing activities were $935,786 for the year
ended December 31, 1998 and $58.4 million for the year ended December 31, 1999.
Net cash provided by financing activities in each year primarily consisted of
the net cash proceeds from private issuances of common and preferred stock.
Our principal commitments as of December 31, 1999 consist of obligations
under capital and operating leases aggregating $21.7 million over the next ten
years. We have no material commitments for capital expenditures, but we
anticipate a substantial increase in capital expenditures for equipment,
including computer equipment, furniture and leasehold improvements for the
additional office space we leased in December 1999 and to support expected
growth in operations, infrastructure and personnel.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through at least the next twelve to
eighteen months. We may need to raise additional funds prior to the expiration
of such period. If we raise additional funds through the issuance of equity,
equity related or debt securities, such securities may have rights, preferences
or privileges senior to those rights of our common stock and our common
stockholders may experience additional dilution. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
133 requires that all derivatives be recognized at fair value in the statement
of financial position, and that the corresponding gains or losses be reported
either in the statement of operations or as a component of comprehensive income,
depending on the type of hedging relationship that exists. SFAS 133 will be
effective for fiscal years beginning after June 15, 1999. We do not currently
hold derivative instruments or engage in hedging activities.
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<PAGE> 27
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information is based on the
historical financial statements of Medsite.com and THP as of and for the year
ended December 31, 1999. The statement of operations data and other financial
data have been prepared as if the THP acquisition had occurred on January 1,
1999. The pro forma financial information does not purport to represent what our
financial condition or results of operations actually would have been for the
date or periods presented had the transaction occurred on the date indicated or
to indicate the financial results for future periods. The pro forma financial
information should be read in conjunction with the historical financial
statements of Medsite.com and THP included elsewhere in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
ELEVEN MONTHS
YEAR ENDED ENDED
DECEMBER 31, NOVEMBER 30, 1999
1999 TOTAL HEALTH
MEDSITE.COM PRODUCTS(1) ADJUSTMENTS PRO FORMA
------------ ----------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $ 8,893 $12,801 $ -- $ 21,694
Cost of sales............................ 8,883 8,831 -- 17,737
-------- ------- ------- --------
Gross profit............................. 10 3,970 -- 3,957
-------- ------- ------- --------
Operating Expenses:
General and administrative............. 7,117 5,302 -- 12,396
Sales and marketing.................... 7,174 497 -- 7,671
Product and technology development..... 3,371 -- -- 3,371
Depreciation and amortization.......... 333 189 1,131(2) 1,653
-------- ------- ------- --------
Total operating expenses............ 17,995 5,988 1,131 25,091
-------- ------- ------- --------
Loss from operations..................... (17,985) (2,018) (1,131) (21,134)
Income (expense), net.................. 337 (83) (257)(2) (3)
-------- ------- ------- --------
Net loss................................. (17,648) (2,101) (1,388) (21,137)
Accreted dividends on preferred stock.... 3,013 -- -- 3,013
-------- ------- ------- --------
Net loss attributable to common
stockholders........................... $(20,661) $(2,101) $(1,388) $(24,150)
======== ======= ======= ========
Net loss per share, attributable to
common stockholders, basic and
diluted(3)............................. $ (1.28) $ (1.40)
======== ========
Weighted average number of shares
outstanding............................ 16,096 1,100(4) 17,196
======== ======= ========
</TABLE>
- ---------------
(1) On December 1, 1999, we acquired all of the outstanding common stock of THP
for $5.6 million in cash and 1.1 million shares of common stock.
(2) Reflects the effects of our acquisition of THP, recorded under the purchase
method of accounting as if it had occurred on January 1, 1999. Comprised of:
(a) an increase in amortization expense of $1.1 million for the
amortization of the excess of purchase price over the estimated fair
value of net assets acquired over a ten-year period, and
(b) a decrease in interest income of approximately $257,000 for the year
associated with approximately $5.6 million of cash and investments used
to partially fund the purchase price of THP.
(3) Net loss per share is computed on the basis described in Note 1 of our
consolidated financial statements.
(4) Reflects the net increase in weighted average common shares outstanding as a
result of our acquisition of THP.
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QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We provide our services to clients primarily in the U.S. As a result, it is
unlikely that our financial results could be directly affected by factors such
as changes in foreign currency exchange rates or weak economic conditions in
foreign markets. All of our sales are currently denominated in U.S. dollars.
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our outstanding debt instruments. The risk
associated with fluctuating interest expense is limited, however, to the
exposure related to those debt instruments and credit facilities which are tied
to market rates. We do not plan to use derivative financial instruments in our
investment portfolio. We plan to ensure the safety and preservation of our
invested principal funds by limiting default risk, market risk and reinvestment
risk. We plan to mitigate default risk by investing in high quality securities.
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<PAGE> 29
BUSINESS
OVERVIEW
Medsite.com is a leading provider of online business-to-business
e-commerce, information and communication products and services to the
physician. We design our products and services to increase physicians'
productivity and to complement their daily routines and behavioral patterns. We
tailor our products and services to meet the needs of physicians throughout
their careers, beginning in medical school, extending through residency and
continuing into clinical practice. The relationship we build with our customers
also enables us to offer pharmaceutical, managed care, medical device and other
healthcare companies an attractive means of reaching physicians.
We address physician needs for e-commerce, information and communication
products and services. Our e-commerce products and services enable physicians to
conveniently purchase from us a comprehensive selection of medical supplies,
books and other practice needs online. Our information management tools help
physicians filter and organize medical content from a vast number of sources.
Our communication products and services assist physicians in communicating with
their patients and colleagues using the internet.
We have created an extensive online distribution network. Our agreements
with numerous medical websites, universities, medical associations and
healthcare organizations provide us with an effective means of reaching the
physician market. Medsite Books, our online bookstore, is the designated medical
bookstore for many healthcare websites including the American Medical
Association, the American Medical Students Association, Healtheon/WebMD,
Medscape and Physicians' Online.
INDUSTRY BACKGROUND
Healthcare Industry Overview
We believe that the physician is the focal point in the healthcare
industry. There are approximately 660,000 practicing physicians, including
residents, in the United States who directly or indirectly influence an
estimated 80% of healthcare expenditures. In 1999, healthcare expenditures in
the United States totaled an estimated $1.1 trillion, representing one of the
largest segments of our economy.
Physicians are an attractive customer segment because of their significant
influence over healthcare expenditures and their need for products and services.
These needs are diverse and include purchasing medical and office supplies for
their practices, obtaining medical information and educational materials, and
communicating effectively with their colleagues and patients. Physicians exert
significant influence over the use of prescription drugs and medical procedures,
which encourages pharmaceutical companies and other medical manufacturers and
service companies to focus significant efforts to reach the physician.
The $32 billion domestic market for physician medical supplies consists of
traditional products including bandages, latex gloves, thermometers, syringes
and small equipment. This market is highly fragmented, with inefficient and
traditional distribution channels, requiring physicians to search through
catalogs and meet with sales representatives on a one-to-one basis. The
cost-effective procurement of these products is important to managing a
physician's practice expenses.
Physicians and medical students spend $1.4 billion annually purchasing
books, software and medical journals. They often view the experience of
purchasing these materials at a physical store to be inconvenient and time
consuming as traditional retailers typically only carry a limited selection of
titles.
The market for medical education and information is over $6 billion
annually. This market is highly fragmented and most purchases are made through
traditional channels of distribution, including offline publications, such as
medical journals and CD-ROMs, and by attending conferences and seminars. Each
year, government regulations and accrediting organizations require physicians to
satisfy continuing medical education requirements. Physicians may view
satisfying these medical education requirements as inconvenient and expensive.
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<PAGE> 30
Pharmaceutical companies spent over $10 billion in 1999 on promotional and
educational activities that targeted the physicians in the United States.
Approximately $6.2 billion of these expenditures were spent on 61 million
face-to-face product sales meetings, a process in which a sales representative
visits a physician and describes the therapeutic benefits and adverse effects of
new or existing drugs. In addition to these physician product sales meetings,
pharmaceutical companies spent over $2.1 billion on traditional advertising
means, such as print ads in medical journals, sponsored meetings and events.
The Internet and its Applicability to the Physician
The internet is increasingly being used as a business-to-business solution
to streamline existing business practices, improve productivity and reduce
costs. Physicians have recognized the power and applicability of the internet to
provide tools to address their e-commerce, information and communication needs.
As of June 1999, approximately 60% of physicians were regularly using the
internet.
- e-Commerce. The traditional medical office purchase order process
usually involves searching through paper catalogs, placing and tracking
orders by telephone or facsimile, and receiving frequent, time-consuming
visits from numerous medical supply representatives. The internet enables
physicians to streamline and automate the procurement process and access
a broad product offering from a single website.
- Information. Healthcare is an information intensive industry. The sheer
volume of medical information and the time constraints facing physicians
make it difficult for them to stay current and quickly and efficiently
access the information that is most relevant to their practices and their
patients. The internet provides tools that enable physicians to
conveniently access, filter and organize data specific to their needs
from many different sources.
- Communication. The exchange of information among physicians, their
colleagues and patients is essential to provide quality treatment to
patients. Information exchange is typically a labor-intensive, manual
process that is done in person or by telephone, facsimile or mail. The
internet provides a flexible and efficient means for physicians, patients
and other healthcare constituents to instantaneously and conveniently
communicate with each other.
The internet also provides a new marketing and sales channel for
pharmaceutical companies and other healthcare organizations to reach the
physician in an efficient and direct manner. These companies can use the
internet to target physicians by medical specialty, measure the effectiveness of
their sales efforts and quickly revise them in response to the prompt feedback.
OUR OPPORTUNITY
The emergence of the internet and the potential benefits of online
business-to-business solutions for physicians have highlighted many of the
inefficiencies inherent in the physician's practice. The internet has given rise
to a broad but fragmented array of healthcare e-commerce, information and
communication websites. Time and economic pressures facing physicians compound
the need for a one-stop online destination site addressing all of these needs.
In addition, one website with access to a large physician base also provides
pharmaceutical, managed care, medical device and other healthcare companies with
the opportunity to market directly to this targeted audience.
We believe there is an opportunity for Medsite.com to become the
physician's one-stop destination on the internet by providing goods and services
to physicians that satisfy their e-commerce, information and communication
needs.
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<PAGE> 31
STRATEGY
We seek to be the leading online destination site for the physician and the
preferred sales and marketing channel for pharmaceutical and other healthcare
companies to reach the physician. Key elements of our business strategy include
the following:
Focus on Physicians' Needs
We seek to attract and maintain a large and loyal physician audience by
actively assessing their needs and offering personalized products and services
under the Medsite brand. Our products and services are designed to increase
productivity and efficiency and to complement the daily routines and behavioral
patterns of the physician. We develop our products and services to fulfill
physicians' needs throughout their careers, beginning in medical school,
extending through residency and continuing into clinical practice.
Enhance the Relationship Between Physicians and Pharmaceutical Companies
We seek to expand our PharmaDirect program which facilitates communication
and commercial interaction between physicians and pharmaceutical companies. Our
PharmaDirect program currently provides:
- physicians with cost reductions in product and service purchases and a
convenient way to learn about pharmaceutical products, and
- pharmaceutical companies with a convenient and cost effective medium to
target product specific information to physicians and to obtain marketing
data.
We currently have PharmaDirect programs with top pharmaceutical companies.
We seek to expand these programs by forming relationships with additional
pharmaceutical companies as well as medical device companies and other
healthcare organizations.
Pursue Strategic Relationships to Increase Access to Physicians
We intend to continue to pursue relationships with leading online and
offline medical organizations to expand our physician reach, lower our customer
acquisition cost, increase our revenues and promote our brand as the leading
online destination site for the physician. We offer our products and services
through an extensive online distribution network. Medical books and software
from Medsite Books, for example, are offered on over 200 medical websites,
universities and healthcare organizations. We seek to expand the scope of the
existing relationships we have with companies and healthcare organizations,
including the American Medical Association, American Medical Student
Association, Healtheon/WebMD, Medscape and Physicians' Online. In addition, we
intend to expand our international distribution channels by forming
relationships with leading international companies and organizations.
Expand Our Product and Service Offerings
We intend to selectively augment our existing offerings with new products
and services through internal development, relationships with third parties or
by acquisition. In November 1999, we entered into an agreement with a large
distributor of medical supplies which will enable us to offer a comprehensive
selection of over 40,000 medical supplies. We are also developing new products
and services with other providers, including Reuters Health, Inc. and Harrison's
Online, a division of McGraw Hill. We intend to leverage our established
platform to efficiently cross-promote our products and services and
cost-effectively introduce new products and services to our existing customer
base.
Enhance Our Business Through Strategic Acquisitions
We intend to continue to acquire companies that enhance our business. In
December 1999, we acquired Total Health Products, to increase both the number of
pharmaceutical companies using PharmaDirect and our overall customer base. In
January 2000, we acquired American Medical
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<PAGE> 32
Communications, Inc. to strengthen our relationship with pharmaceutical
companies and increase the breadth and quality of our medical education product
offerings. We intend to continue to identify and acquire companies with
potential for expanded growth through leveraging the internet that meet one or
more of the following criteria:
- diversify our product and service offerings to physicians,
- increase our access to additional physicians, or
- strengthen our relationship with pharmaceutical companies.
PRODUCTS AND SERVICES
We offer a comprehensive suite of web-based products and services that are
designed to address physicians' e-commerce, information and communication needs,
and to provide solutions that save the physician time and money and increase the
time available for patient interaction. In addition, we provide products and
services to companies seeking to reach the physician, including pharmaceutical
and medical device companies.
e-Commerce
Our e-commerce offerings include:
Medsite Supplies. Medsite Supplies, which we launched in March 1999,
enables physicians to purchase their office and medical supplies online.
Currently, we sell over 3,000 products commonly used in physicians' offices,
ranging from gauze pads and disposable gloves to surgical instruments and
diagnostic equipment. We recently entered into an agreement which will enable us
to increase the number of products we offer our customers to more than 40,000
items from over 2,500 different manufacturers.
Medsite Supplies provides a detailed listing, the current price and
available stock for all the products we sell in addition to a picture and
detailed description for a majority of our products. We designed Medsite
Supplies to be easy to use with multiple search and browse functions, including
searching by product category, specific product criteria or manufacturer.
Medsite Supplies also includes features that enable physicians to browse the
list of new items from manufacturers, view the best selling products and access
a particular manufacturer's product showcase. Through our fulfillment
arrangements, more than 95% of our supply orders are shipped within two business
days of order receipt.
Medsite Books and Software. We operate Medsite Books which we believe is
the largest medical bookstore either on or off the internet. Medsite Books
offers more than 50,000 medical books and software titles for physicians,
residents and medical students. By comparison, traditional medical bookstores
usually offer approximately 5,000 titles. Medical books and software from
Medsite Books are offered on over 200 websites, universities and healthcare
organizations such as the American Medical Association, the American Medical
Student Association, Healtheon/WebMD, Medscape, and Physicians' Online.
We provide our customers with detailed information for all of our books.
For our popular titles, we provide additional information, including the table
of contents, introduction, contributing authors, excerpts, back cover comments,
pictures and descriptions. For selected titles, we rate the product on a
five-star scale and provide customer reviews. We also provide the availability,
shipping time and return policy for all titles available for sale. Through our
fulfillment arrangements, more than 85% of our book orders are shipped within
one business day of order receipt. At the end of 1999, we had customers in over
125 countries.
Medsite Filer. Medsite Filer is a secure, online service designed to save
physicians' time by allowing them to answer once questions common to all
healthcare managed care application forms. Physicians participating in multiple
managed care programs are required to complete numerous duplicative forms,
containing a significant number of questions. Medsite Filer enables a physician
to complete one form that will then generate the appropriate paper-based forms
that meet the filing requirements of each managed care plan.
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Information
Our suite of information management tools is designed to help physicians
filter and organize medical content from a vast number of sources, including
publishers of medical information and websites. Our information products
include:
Medsite Clinical Medline. Medsite Clinical Medline, also known as Medcite
Clinical Medline, is an advanced search engine provided free of charge to the
student, resident or physician seeking medical information online. This product
enables the user to retrieve information from the National Library of Medicine's
MEDLINE database and contains recent references and abstracts, as well as
archive information from the last ten years. Medsite Clinical Medline allows
physicians to customize their searches by specific medical specialty or
individual journals. Once a search is complete, the physician can save search
results, receive automated updates by email on selected medical research, and
send these updates to a distribution list of colleagues.
Medsite ISI Journal Tracker. The Medsite ISI Journal Tracker is a
subscription service that allows physicians to receive summaries of 25 journals
of their choice from a library of over 3,000 medical publications. The
subscriber receives an email of the table of contents and abstracts for each
selected journal as often as new issues are published. Journal Tracker also
allows the user to purchase full-text versions of specific articles.
Medsite University. Medsite University is an online source for medical
education, including accredited Continuing Medical Education, or CME. Generally,
state licensing boards, professional organizations, insurers, and employers each
require, to varying degrees, that physicians accumulate a minimum number of CME
credits to maintain their license to practice medicine. Medsite University
provides CME courses online in accordance with an agreement we have with
Healthstream, Inc. Our recent acquisition of American Medical Communications,
Inc. expands our library of online courses and enables us to create customized
medical content sponsored by pharmaceutical and other healthcare companies.
Interactive Grand Rounds. Interactive Grand Rounds is an online sponsored
educational product that targets physicians by specialty. We create content in
cooperation with physician experts who serve as guest editors. Each Interactive
Grand Rounds program is developed in cooperation with a nationally recognized
medical journal. For example, we launched our Interactive Grand Rounds in
Cardiology in November 1999 in cooperation with The American Journal of
Cardiology.
Medsite Money. Medsite Money provides a suite of financial services. Key
services include a Medsite credit card co-branded with MBNA, medical equipment
leasing with Media Capital, and a financial information page called My Medsite
Money. In cooperation with News Alert, a leading aggregator of financial
information, My Medsite Money provides personalization features that enable
users to monitor their own stock portfolios and to receive emails of news
relevant to their medical practices or personal interests.
Communication
Our communications products and services allow physicians to efficiently
communicate with their colleagues and patients and keep track of their schedules
from any location with internet access. Our communications offerings include:
Medsite MedMail. Medsite MedMail is an online email service for medical
professionals. Physicians can create personalized features on Medsite MedMail,
including the ability to receive medical and financial news and stock prices by
email. We are developing services such as voicemail and pager messaging to help
address the medical community's need for messaging and communication.
Medsite Calendar. Medsite Calendar, a scheduling tool for the medical
community, features a complete suite of services to organize schedules and
appointments including a calendar of worldwide medical events, a personal
calendar and a marketing tool for event organizers. The medical event calendar
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is a resource that allows the physician to research, locate and register for any
medical event, conference or meeting of interest. The calendar accesses a
database of 3,200 events hosted in over 50 countries. Medsite Calendar provides
automated notification messages when information is updated. Event organizers
can use Medsite Event Calendar to market and publicize their events by posting
relevant information on their upcoming events.
COMMERCIAL RELATIONSHIPS
We enter into contracts with websites, healthcare organizations,
universities and medical goods and services companies to diversify our products
and services and to expand our physician reach. We have key relationships with:
American Medical Students Association. The American Medical Students
Association, or AMSA, is an independent association of physicians-in-training.
In September 1998, we entered into an agreement with AMSA that provides for
MedsiteBooks to be the exclusive online medical bookstore for AMSA.
Matthews Medical Books. Matthews Medical Books is a distributor of medical
text books in the United States. In July 1998, we entered into an agreement that
made Matthews one of our key fulfillment vendors for medical books. Matthews
delivers all of our products in packaging bearing the Medsite logo.
Medscape. Medscape's website provides medical information to healthcare
professionals. In October 1998, we entered into an agreement that provides for
MedsiteBooks to be the exclusive medical bookstore for Medscape's website.
Physicians'Online. Physicians'Online, a wholly-owned subsidiary of
Mediconsult.com, Inc., operates a website that provides medical content to
healthcare professionals. In April 1998, we entered into an agreement that
provides for Medsite Books to be the exclusive medical bookstore for the
Physicians' Online website.
SALES, MARKETING AND CUSTOMER SUPPORT
We employ a variety of methods to promote the Medsite brand and to attract
new physicians, including advertising, direct sales, promotional programs and
public relations.
We advertise in professional journals, websites and other publications that
target physicians. We use direct marketing programs to reach individual
physicians, either through traditional direct mail or emarketing techniques. We
engage in direct, in-person marketing of our products and services to physicians
at trade shows and industry conferences. We maintain a dedicated event
department and currently intend to staff a Medsite.com booth at over 50 medical
meetings and conferences in 2000.
We use promotional programs to encourage physicians to make initial and
repeat purchases. Our marketing programs include coupons or discounts on
purchases, first-time buyer promotions and free shipping promotions. Since
physicians register on Medsite by specialty, we can customize our marketing
programs to offer products and services that best serve the needs of our
customers.
Our internal public relations department provides support in managing our
branding and promotions program. We seek to reach physicians and other medical
professionals through our broadcast and print media marketing programs.
We believe that a high level of customer service and support and a positive
online experience is important to retaining our existing physician customers and
ensuring repeat purchases of goods and services. Our primary form of customer
support is web based. On our website, we have email support and an extensive
list of answers to frequently asked questions. In addition, we maintain two
telephone customer
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support centers that operate from 8:00 a.m. to 10:00 p.m. Eastern Standard Time
to assist physicians with their purchases of goods or services and to provide
after-sales support, including product returns.
As of December 31, 1999, we had 107 sales, marketing and customer support
personnel.
CUSTOMERS
Our primary customers are physicians, including residents and students. We
also sell our products and services to pharmaceutical companies, healthcare
organizations, universities and governments. No individual or entity accounted
for more than 10% of our 1999 revenues.
PRODUCT AND TECHNOLOGY DEVELOPMENT
Our business is supported by a reliable, expandable and secure system
platform. This platform includes website management, advanced searching tools,
customer account management, transaction processing, order management,
purchasing, payment services and a variety of marketing applications. Our system
enables us to accept and validate our customer orders, organize, place and
manage orders with our vendors, receive products and manage shipment information
of products.
We have developed proprietary software to augment those that we have
licensed from vendors, such as Microsoft, Cybersource and Allaire Corporation.
To date, we have focused our internal development efforts on creating and
enhancing our proprietary software. Our advanced searching tools, customer
account management, order collection and back-end systems are all proprietary to
Medsite.com. Our system is designed to include an open application-programming
interface that provides real-time connectivity to our suppliers. The employment
of multiple web servers, application servers and database servers allows our
systems to be resilient and redundant.
We incurred $3.4 million in product and technology development expenses for
the year ended December 31, 1999. We anticipate that we will continue to devote
significant resources to product development in the future as we add new
features and functionality to our websites and enhance our distribution system.
We have implemented a variety of features to ensure the security and
integrity of transaction communication through our system. For example:
- we use secure socket layer, or SSL, an internet security technology, at
appropriate points in the transaction flow to protect customer
information during transactions,
- our customer information is encrypted to provide a high degree of
security,
- our employees do not have access to customer information, except as
necessary to perform customer support functions, and
- we use standard secure login and password systems to authenticate
customers.
In addition, we have both on-site and off-site stand-by systems for rapid
disaster recovery. Our systems infrastructure is hosted at Global Center, a
Global Crossings Company, in New York City, which utilizes communication
infrastructure from multiple providers and provides 24-hour monitoring and
engineering support.
COMPETITION
We face competition in attracting physicians to our website and in selling
our products and services. We compete with numerous companies and organizations,
including traditional off-line companies such as catalogue and sales-force based
medical distributors, book retailers, continuing medical education programs and
conferences and symposia. We also face significant online competition from
healthcare-related websites, including medical professional websites and book
retailers. In addition, companies with whom we currently have relationships,
including Medscape and Healtheon/WebMD, may compete with us. We believe that
competition for our customers and sources of revenue will continue to increase.
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Some of our current and potential competitors may have competitive
advantages compared to us, including:
- greater resources to devote to the development, promotion and sale of
their services,
- greater financial, technical and marketing resources,
- greater brand recognition and larger marketing budgets, and
- larger customer and user bases.
We believe that the principal competitive factors in obtaining and
retaining customers are the attractiveness of our products and services to
physicians, depth and breadth of our products and services, our ability to
convert web traffic into revenue, and brand recognition. Other important factors
include the ease of use, the quality of service and the cost of our products and
services. We believe that the principal competitive factors that will continue
to attract companies into our market include the number of physicians and
medical professionals who use the internet and healthcare expenditures in the
United States. Competition is likely to increase significantly as new companies
enter the market and current competitors expand their services. There can be no
assurance that we will be able to compete successfully against current and
future competitors or that the competitive pressures we face will not seriously
harm our business.
GOVERNMENT REGULATION
Many aspects of the healthcare supplies industry are subject to regulation
by federal, state and local government agencies. Many of the healthcare supplies
offered by sellers who use our system are subject to compliance with laws and
regulations, including operating and security standards for the sellers and
their distribution centers, and regulation by agencies including the Food and
Drug Administration, the Drug Enforcement Agency, the Occupational Safety and
Health Administration state boards of pharmacy and, in some areas, state boards
of health. We rely upon sellers who use our services to meet all packaging,
distribution, labeling, hazard and health information notices to buyers, record
keeping and licensing requirements applicable to transactions conducted through
our system. We cannot guarantee that the sellers are in compliance with
applicable laws and regulations. If sellers have failed, or fail in the future
to adequately comply with any of the relevant laws or regulations and we are
found in any way to be legally responsible, we could be subject to governmental
penalties or fines, as well as private lawsuits to enforce these laws and
regulations. Any damage awards, injunctions, penalties or fines resulting from
any of those actions could harm our business.
Due to the increasing popularity and use of the internet, it is possible
that a number of laws and regulations may be adopted or interpreted in the
United States and abroad with particular applicability to the internet. It is
also possible that new laws and regulations may be adopted or interpreted by the
Untied States and foreign governments to address the sale and distribution of
healthcare supplies using the internet. It is possible that governments will
enact legislation that may be applicable to us in areas including content,
products distribution, network security, encryption, the use of measures for
data and privacy protection, electronic authentication or "digital" signatures,
illegal and harmful content, access charges and re-transmission activities. The
applicability to the internet of existing laws governing issues like property
ownership, content, taxation, defamation, personal privacy, product liability
and environmental protection, as well as the necessity for governmental permits,
labeling, certifications and the need to supply information to relevant parties,
is uncertain. Most of these laws were adopted before the widespread use and
commercialization of the internet and, as a result, do not contemplate or
address the unique issues of the internet and related technologies. Any export
or import restrictions, new legislation or regulation or governmental
enforcement of existing regulations may limit the growth of the internet,
increase our cost of doing business or increase our liability exposure. Any of
these factors could harm our business.
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PROPRIETARY RIGHTS
There are limited technological barriers to entry into the business of
providing online healthcare e-commerce, information and communication products
and services. Consequently, others can develop, market and sell products and
services or use technologies similar to those used by us.
We rely on a combination of copyright, trademark, trade secret and other
intellectual property law, nondisclosure agreements and other protective
measures to protect our proprietary rights. We also use proprietary know-how and
trade secrets and employ various methods to protect our trade secrets and
know-how. We currently do not have any patents protecting our technology. We
cannot assure you that our intellectual property measures will be sufficient to
prevent misappropriation of our technology.
EMPLOYEES
As of December 31, 1999, we had a total of 165 full-time employees. Of
these, 107 were engaged in sales, marketing and business development, 33 were
engaged in technical development and support and 25 were engaged in finance and
administration. Our future performance depends in significant part upon the
continued service of our key technical, sales and senior management personnel.
Our future success also depends on our continuing ability to attract, train and
retain highly qualified technical, sales and managerial personnel. Competition
for such personnel is intense, and we may not be able to retain our key
personnel in the future. None of our employees is a member of a labor union or
is covered by a collective bargaining agreement and we have never experienced a
work stoppage. We believe that our relations with our employees are
satisfactory.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings. We may in
the future be a party to litigation arising in the course of our business. These
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources.
FACILITIES
Our principal executive offices are located in New York, New York, where we
lease approximately 65,000 square feet under the terms of a lease that expires
in June 2002. We also lease satellite offices in New York, New York and
Bloomfield, New Jersey. We believe that these facilities are adequate for our
present and anticipated levels of operations for the foreseeable future.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to our executive
officers, key employees and directors as of February 15, 2000:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
- -------------------------------- ---- --------
<S> <C> <C>
Sundeep Bhan........................ 27 President, Chief Executive Officer and Chairman of
the Board
Gregory Scott....................... 46 Executive Vice President, Chief Financial Officer
and Secretary
Sameer Shariff...................... 28 Executive Vice President, Sales
Sanjay Pingle....................... 28 Executive Vice President, Product Development
Douglas Mack........................ 39 Senior Vice President, e-Commerce
Thomas Feitel....................... 47 Senior Vice President, Corporate Marketing
Vincent Friedewald, Jr., M.D........ 58 Senior Vice President, Medical Editor
Walter H. Barandiaran (1)(2)........ 47 Director
Mitchell Blutt, M.D.(1)(2).......... 42 Director
Gary Stein (1)...................... 32 Director
</TABLE>
<TABLE>
<CAPTION>
KEY EMPLOYEES AGE POSITION
- ------------- ---- --------
<S> <C> <C>
John Eastman........................ 44 Senior Vice President, Information
Joanne Brown Lee.................... 47 Senior Vice President, Administration and Treasurer
James Mench......................... 41 Senior Vice President, Finance
K.J. Singh, M.D..................... 44 Senior Vice President, Communication
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
EXECUTIVE OFFICERS AND DIRECTORS
Sundeep Bhan has served as our Chief Executive Officer since November 1997
and as Chairman of our Board of Directors since January 1997. From January 1995
to December 1996, Mr. Bhan served as President of Oblisk Interactive, L.L.C., a
healthcare software company that he founded. From January 1994 to January 1995,
he served as a Project Manager for Intermedia Software, a software company. Mr.
Bhan holds a B.A. in communications from the Annenberg School of Communications
at the University of Pennsylvania with a concentration in business from the
Wharton School of the University of Pennsylvania.
Gregory Scott has served as our Executive Vice President, Chief Financial
Officer since August 1999. From November 1995 to August 1999, Mr. Scott served
as the Chief Financial Officer of Prudential Healthcare Group. From August 1993
to November 1995, Mr. Scott was the Chief Financial Officer, Executive Vice
President and a director of Prudential Securities, Inc. Mr. Scott holds an A.B.
from Colgate University and an M.B.A. from the University of Michigan.
Sameer Shariff has served as our Executive Vice President, Sales since
January 1997. From January 1997 to February 2000, Mr. Shariff served as a member
of our board of directors. From January 1995 to December 1996, Mr. Shariff
served as Vice President, Sales and Marketing of Oblisk Interactive, L.L.C., a
healthcare software company. Mr. Shariff holds a B.S. in economics from the
Wharton School of the University of Pennsylvania.
Sanjay Pingle has served as our Executive Vice President, Product
Development since January 1997. From November 1997 to February 2000, Mr. Pingle
served as a member of our board of directors. From January 1995 to December
1996, Mr. Pingle was Vice President, Marketing and Product Development at Oblisk
Interactive, L.L.C., a healthcare software company. From August 1993 to December
1994,
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Mr. Pingle was a senior consultant at Kaiser Associates, a consulting firm. Mr.
Pingle holds a B.S. in economics from the Wharton School of the University of
Pennsylvania.
Douglas Mack has served as our Senior Vice President, e-Commerce since
December 1999. From April 1988 to December 1999, Mr. Mack was the President of
Total Health Products, a medical supply fulfillment company. Mr. Mack holds a
B.A. from Connecticut College and an M.B.A. from the University of Chicago.
Thomas Feitel has served as our Senior Vice President, Corporate Marketing
since September 1999. From May 1989 to March 1999, Mr. Feitel held a variety of
marketing management positions at Schering-Plough, a pharmaceutical company,
including Vice President of Marketing. Prior to that, Mr. Feitel served as Brand
Manager of Quaker Oats, Inc. for Life Cereal and Gatorade Thirst Quencher. Mr.
Feitel holds a B.A. in English from Yale University and an M.B.A. from Columbia
University.
Vincent Friedewald, Jr., M.D., has served as our Senior Vice President,
Medical Editor since January 2000. From January 1995 to January 2000, Dr.
Friedewald served as Executive Producer of American Medical Communications,
Inc., a medical education company. From 1988 to 1998 Dr. Friedewald also served
as Chairman of the Board of American Medical Communications, Inc. Dr. Friedewald
holds a B.S. from the University of Notre Dame and an M.D. from Southwestern
Medical School of the University of Texas.
Walter H. Barandiaran has served as a member of our board of directors
since February 1999. Mr. Barandiaran is a Managing Partner of The Argentum
Group, a private venture capital investment firm, a position he has held since
1987. Since February 1990, Mr. Barandiaran has been a general partner of
Argentum Capital Partners, L.P. and since April 1997, Mr. Barandiaran has been a
general partner of Argentum Capital Partners II, L.P. He also serves on the
boards of several private companies. Mr. Barandiaran holds a B.A. from Baruch
College, City University of New York and attended New York University's Stern
School of Business.
Mitchell Blutt, M.D. has served as a member of our board of directors since
December 1999. Since 1992, Dr. Blutt has been the Executive Partner of Chase
Capital Partners L.P., a venture capital investment firm. Dr. Blutt also serves
as an adjunct Assistant Professor of Medicine at The New York Hospital, Cornell
Medical Center. Dr. Blutt serves on the board of directors of Hangar Orthopedic
Group Inc., Fisher Scientific International, Inc. and La Petite Academy, Inc.
Dr. Blutt also serves on the board of several private companies and is a member
of the board of trustees of the University of Pennsylvania. Dr. Blutt holds a
B.A. in psychology, an M.D. and an M.B.A. from the University of Pennsylvania.
Gary Stein has served as a member of our board of directors since December
1999. Mr. Stein is a Vice President of Morgan Stanley & Co. Incorporated, and
the corporate managing member of Morgan Stanley Dean Witter Venture Partners IV,
L.P. Mr. Stein has been employed by Morgan Stanley Dean Witter since August
1997. From August 1992 to August 1997, Mr. Stein was a Senior Associate at
Patricof & Co. Ventures, a venture capital investment firm. Mr. Stein serves on
the board of directors of Allscripts, Inc., an internet healthcare company. Mr.
Stein holds a B.S. in economics from the Wharton School of the University of
Pennsylvania and an M.B.A. from Columbia University.
KEY EMPLOYEES
John Eastman has served as our Senior Vice President, Information since
June 1999. From February 1996 to May 1999, Mr. Eastman was founder and President
of Teton Ventures, a medical publishing consulting firm. Mr. Eastman holds a
B.S., J.D. and an M.B.A. from Southern Methodist University.
Joanne Brown Lee has served as our Senior Vice President, Administration
and Treasurer since September 1999. From July 1974 to August 1999, Ms. Brown Lee
served as Vice President and Treasurer of the Prudential Healthcare division of
Prudential Insurance Company of America. Ms. Brown Lee holds a B.S. from
Montclair State University.
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James Mench has served as our Senior Vice President, Finance since January
2000. From September 1988 to December 1999, Mr. Mench was Vice President,
Finance at Prudential Insurance Company of America. Mr. Mench holds a B.A. in
economics from Rutgers University.
K.J. Singh, M.D. has served as our Senior Vice President, Communication
since January 2000. From April 1998 to January 2000, Dr. Singh was an Engagement
Manager of McKinsey & Co., a management consulting firm. From March 1997 to
April 1998, Dr. Singh served as Coordinator, Business Redesign at Glaxo
Wellcome, a pharmaceutical company. From June 1996 to October 1996, Mr. Singh
was a resident in Internal Medicine at the New York University Medical Center.
Dr. Singh holds a B.A. and a Master of Philosophy degree from Oxford University,
an M.D. from Columbia University and an M.B.A. from the Sloan School of the
Massachusetts Institute of Technology.
BOARD COMPOSITION
We currently have authorized seven directors. Our certificate of
incorporation provides for a classified board of directors consisting of three
classes of directors, each serving staggered three-year terms. As a result, a
portion of the board of directors will be elected each year. To implement the
classified structure, prior to the consummation of the offering, one of the
nominees will be elected to a one-year term, one will be elected to a two-year
term and two will be elected to three-year terms. Thereafter, directors will be
elected for three-year terms. Mr. Stein has been designated a Class I director
whose term expires at the 2000 annual meeting of stockholders. Dr. Blutt has
been designated a Class II director whose term expires at the 2001 annual
meeting of stockholders. Mr. Barandiaran and Mr. Bhan have been designated Class
III directors whose term expires at the 2002 annual meeting of stockholders. We
intend to add two outside directors to the board of directors in the near
future. There are no family relationships among any of our directors, officers
or key employees.
BOARD COMMITTEES
Our board of directors has an audit committee and a compensation committee.
Our audit committee reviews, acts on and reports to our board of directors
with respect to various auditing and accounting matters, including the selection
of our independent accountants, the scope of our annual audits, fees to be paid
to the independent accountants, the performance of our independent accountants
and our accounting practices. Mr. Barandiaran, Dr. Blutt and Mr. Stein are the
members of our audit committee.
Our compensation committee establishes salaries, incentives and other forms
of compensation for officers and other employees. This committee also
administers our incentive compensation and benefit plans. Mr. Barandiaran and
Dr. Blutt are the members of the compensation committee.
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation from us for their
services as members of our board of directors except for reimbursement of
reasonable expenses incurred in connection with serving as a director. Directors
who are employees of Medsite.com are eligible to participate in our 2000 stock
plan and our 2000 employee stock purchase plan. Directors who are not employees
of Medsite.com are eligible to participate in our 2000 director option plan. Our
2000 director option plan generally provides for an automatic initial grant of
options to purchase 20,000 shares of our common stock to each non-employee
director on the later to occur of the effective date of the plan or the date on
which a person first becomes a non-employee director. After the initial grant, a
non-employee director will be granted a subsequent option to purchase 5,000
shares of our common stock each year on the date of our annual meeting of
stockholders, if on that date he or she has served as a director for at least
six months. The option grants have a term of ten years. Each initial option
grant will vest as to 25% of the shares issuable under the option on each
anniversary of its date of grant and each subsequent option grant will vest as
to 100% of the shares issuable under the grant on the fourth anniversary of its
date of grant. The exercise price of all
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<PAGE> 41
options will be 100% of the fair market value per share of our common stock on
its date of grant. For an additional description of these option plans, please
refer to our discussion under "-- Compensation Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee is an officer or employee
of Medsite.com. No interlocking relationship exists between our board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has such an interlocking relationship
existed in the past.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned for services
rendered to us in all capacities for the fiscal year ended December 31, 1999 by
our Chief Executive Officer and the four next most highly compensated executive
officers who earned more than aggregate cash compensation of $100,000 during the
fiscal year ended December 31, 1999 (collectively, our "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
--------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION OPTIONS COMPENSATION($)
- --------------------------- --------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Sundeep Bhan................ $220,883 $36,000 -- 72,000 --
President and Chief
Executive Officer
Gregory Scott............... 78,846 -- -- 625,000 --
Executive Vice President,
Chief Financial Officer
Sanjay Pingle............... 170,833 28,000 -- 56,000 --
Executive Vice President,
Product Development
Sameer Shariff.............. 170,833 28,000 -- 56,000 --
Executive Vice President,
Sales
Rajnish Kapoor.............. 170,833 7,000 -- 56,000 --
Executive Vice President,
Operations
</TABLE>
Mr. Scott was hired as an executive officer in August 1999 and is currently
compensated at an annual rate of $200,000. Mr. Kapoor terminated his employment
with us as of February 2000. All bonuses reflect 1998 bonus paid in 1999.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Bhan, our Chief Executive Officer, is party to an employment agreement
dated as of January 29, 1999. Under this agreement, we agreed to pay Mr. Bhan an
annual salary of $200,000, which was raised to $250,000 in August 1999. Mr. Bhan
is also eligible to receive a bonus of up to 25% of his salary. If Mr. Bhan is
terminated without cause, he will be entitled to receive continued payment of
his base salary for up to one year as severance.
Mr. Pingle, our Executive Vice President, Product Development, is party to
an employment agreement dated as of January 29, 1999. Under this agreement, we
agreed to pay Mr. Pingle an annual salary of $150,000, which was raised to
$200,000 in August 1999. Mr. Pingle is also eligible to receive a
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<PAGE> 42
bonus of up to 25% of his salary. If Mr. Pingle is terminated without cause, he
will be entitled to receive continued payment of his base salary for up to one
year as severance.
Mr. Shariff, our Executive Vice President, Sales, is party to an employment
agreement, dated as of January 29, 1999. Under this agreement, we agreed to pay
Mr. Shariff an annual salary of $150,000, which was raised to $200,000 in August
1999. Mr. Shariff is also eligible to receive a bonus of up to 25% of his
salary. If Mr. Shariff is terminated without cause, he will be entitled to
receive continued payment of his base salary for up to one year as severance.
Mr. Kapoor, our former Executive Vice President, Operations, is party to an
employment agreement dated as of January 29, 1999. Under this agreement, we
agreed to pay Mr. Kapoor an annual salary of $150,000, which was raised to
$200,000 in August 1999. Mr. Kapoor is also eligible to receive a bonus of up to
25% of his salary. Mr. Kapoor terminated his employment with us as of February
4, 2000.
Mr. Scott, our Chief Financial Officer, is party to an employment agreement
dated as of August 12, 1999. Under the agreement, we agreed to pay Mr. Scott an
annual salary of $200,000 for three years with automatic renewal for additional
one year terms unless notice is given 30 days prior to the expiration of the
current term. We also granted him an option to purchase 625,000 shares of our
common stock. The shares issuable under this option will vest over a five year
period with 20% vesting on the anniversary of the date of the agreement. If Mr.
Scott's agreement is not renewed within the first five years of the date of the
agreement, if Mr. Scott is terminated without cause, or in the event of a change
of control, 100% of the shares subject to the option will vest immediately. If
Mr. Scott is terminated without cause and he signs a release of claims, he will
be entitled to receive continued payments of his base salary for the longer of
the remaining term of the agreement or twelve months. If within twelve months of
a change of control, Mr. Scott terminates his employment voluntarily or is
terminated without cause, he will be entitled to a lump-sum payment equal to
twelve months salary. A change of control is defined as a merger or
consolidation in which we are not the surviving corporation, a liquidation or
the sale or disposition of all or substantially all of our assets.
OPTION GRANTS IN LAST FISCAL YEAR
The following table presents the grants of stock options to each of the
named officers under our 1999 stock option plan during the fiscal year ended
December 31, 1999.
The information regarding such options granted to named executive officers
as a percentage of total options granted to employees in the fiscal year, as
disclosed in the table, is based upon options to purchase on aggregate of
3,178,000 shares of common stock that were granted to all employees and
directors as a group, including named executive officers, in the fiscal year
ended December 31, 1999.
The potential realizable value of the options at assumed 0%, 5%, and 10%
annual rates of such appreciation are based upon the initial public offering
price of $ per share over the 10 year term, compounded annually and
subtracting from net result the total option exercise price. These rates of
return are mandated by the rules of the Securities and Exchange commission and
do not represent our estimate or projection of our future stock prices. Actual
gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL RATE OF STOCK
NUMBER OF PERCENTAGE OF PRICE APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION TERM
UNDERLYING GRANTED TO -----------------------
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
GRANTED FISCAL YEAR PER SHARE DATE 0% 5% 10%
---------- ------------- -------------- ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Gregory Scott......... 625,000 19.7% $5.00 8/12/09
</TABLE>
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<PAGE> 43
FISCAL YEAR-END OPTION VALUES
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by each of the named
executive officers as of December 31, 1999. No options were exercised by the
named executive officers during the year ended December 31, 1999.
The values are based on the deemed fair market value as of December 31,
1999, minus the exercise price, multiplied by the number of shares underlying
the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT A
AT DECEMBER 31, 1999 DECEMBER 31, 1999
------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Sundeep Bhan............................ 28,800 43,200 $112,000 $ 172,800
Sanjay Pingle........................... 22,400 33,600 89,600 134,400
Sameer Shariff.......................... 22,400 33,600 89,600 134,400
Rajnish Kapoor.......................... 22,400 33,600 89,600 134,400
Gregory Scott........................... 0 625,000 0 1,250,000
</TABLE>
COMPENSATION PLANS
1999 Stock Option Plan
Our 1999 stock option plan provides for the granting to employees including
officers and employee directors, of incentive stock options within the meaning
of Section 422 of the Internal Revenue Code and for the granting to employees,
directors and consultants of nonstatutory stock options. As of December 31,
1999, 3,250,000 shares were authorized under the plan, 3,178,000 shares were
subject to outstanding options and approximately 72,000 shares remain available
for future grant. No further option grants will be made under the 1999 stock
option plan after the completion of this offering.
2000 Stock Plan
Our 2000 stock plan provides for the grant of incentive stock options to
employees, including officers and employee directors, and for the grant of
nonstatutory stock options and stock purchase rights to employees, directors and
consultants. The 2000 stock plan was originally adopted by our board of
directors in February 2000 and is subject to stockholder approval. Unless
terminated sooner, the 2000 stock plan will terminate automatically ten years
from the date of obtaining stockholder approval.
A total of 5,000,000 shares of our common stock has been reserved for
issuance under this plan. In addition, annual increases will be added on the
first day of our fiscal year beginning in 2001, equal to the lesser of 2,000,000
shares, 3% of the outstanding shares or an amount determined by our board of
directors. There have been no options granted under the 2000 stock plan prior to
the completion of this offering.
The administrator of our 2000 stock plan has the power to determine, among
other things:
- the terms of the options or stock purchase right granted, including the
exercise price of the option or stock purchase right,
- the number of shares issuable under each option or stock purchase right,
- the exercisability of each option or stock purchase right, and
- the form of consideration payable upon the exercise of each option or
stock purchase right.
In addition, the administrator has the authority to amend, suspend or
terminate the 2000 stock plan, so long as no such action affects any shares of
common stock previously issued and sold or any option previously granted under
the 2000 stock plan. During any fiscal year, each optionee may be granted
options
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<PAGE> 44
to purchase a maximum of 1,500,000 shares. In addition, in connection with an
optionee's initial employment with us, such optionee may be granted an option
covering an additional 1,500,000 shares.
Options and stock purchase rights granted under our 2000 stock plan are
generally not transferable by the optionee, and each option and stock purchase
right is exercisable during the lifetime of the optionee only by such optionee.
Options granted under the 2000 stock plan must generally be exercised within
three months after the end of optionee's status as an employee, director or
consultant of Medsite.com, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's term.
In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement grants us a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with us for any reason, including death or
disability. The purchase price for shares repurchased under the restricted stock
purchase agreement must be the original price paid by the purchaser and may be
paid by cancellation of any indebtedness of the purchaser to us. The repurchase
option lapses at a rate determined by the administrator.
The exercise price of all incentive stock options granted under the 2000
stock plan must be at least equal to the fair market value of the common stock
on the date of grant. The exercise price of nonstatutory stock options and stock
purchase rights granted under the 2000 stock plan is determined by the
administrator, but for nonstatutory stock options intended to qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code, the exercise price must be at least equal to the fair market value of our
common stock on the date of grant. For any participant who owns stock possessing
more than 10% of the voting power of all classes of our outstanding capital
stock the exercise price of any incentive stock option granted must be at least
equal to 110% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The terms of all other
options granted under the 2000 stock plan may not exceed ten years.
The 2000 stock plan provides that if we merge with or into another
corporation, or sell substantially all of our assets, each option and stock
purchase right shall be assumed or an equivalent option substituted for by the
successor corporation. If the outstanding and stock purchase rights are not
assumed or substituted for by the successor corporation, the optionees will
become fully vested in and have the right to exercise such options or stock
purchase rights. If an option or stock purchase right becomes fully vested and
exercisable upon a merger or sale of assets, the administrator must notify the
optionee that the option or stock purchase right is fully exercisable for a
period of 15 days from the date of the notice, and the option or stock purchase
right will terminate upon the expiration of the 15 day period.
2000 Employee Stock Purchase Plan
Our 2000 employee stock purchase plan was adopted by our board of directors
in February 2000 and is subject to approval by our stockholders. A total of
1,500,000 shares of our common stock has been reserved for issuance under the
2000 employee stock purchase plan, plus annual increases beginning on the first
day of our fiscal year beginning in 2001 equal to the lesser of 1,000,000
shares, 1% of the outstanding shares on such date or an amount determined by our
board of directors. As of the date of this prospectus, no shares have been
issued under the 2000 employee stock purchase plan.
The 2000 employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, contains consecutive, overlapping,
twelve month offering periods. Each offering period includes two six-month
purchase periods. The offering periods generally start on the first trading day
on or after May 15 and November 15 of each year, except for the first such
offering period which commences on the first trading day on or after the
effective date of this offering and ends on the last trading day on or before
November 14, 2000 or May 14, 2000.
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However,
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<PAGE> 45
employees may not be granted an option to purchase stock under the 2000 employee
stock purchase plan if they either:
- immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock, or
- hold rights to purchase stock under our employee stock purchase plans
which accrue at a rate which exceed $25,000 worth of stock for each
calendar year.
The 2000 employee stock purchase plan permits participants to purchase our
common stock through payroll deductions of up to 15% of the participant's
compensation. Compensation is defined as the participant's base straight time
gross earnings and commissions but exclusive of payments for overtime, profit
sharing payments, shift premium payments, incentive compensation, incentive
payments and bonuses. The maximum number of shares a participant may purchase
during a single purchase period is 10,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 2000 purchase plan is generally 85% of the lower of the fair
market value of the common stock either:
- at the beginning of the offering period, or
- at the end of the purchase period.
If the fair market value at the end of a purchase period is less than the
fair market value at the beginning of the offering period, the participants will
be withdrawn from the current offering period following exercise and
automatically re-enrolled in a new offering period. The new offering period will
use the lower fair market value as of the first date of the new offering period
to determine the purchase price for future purchase periods. Participants may
end their participation at any time during an offering period, and they will be
paid their payroll deductions to date. Participation ends automatically upon
termination of employment with Medsite.com.
Rights granted under the 2000 employee stock purchase plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the 2000 employee stock purchase
plan. The 2000 employee stock purchase plan provides that, if we merge with or
into another corporation or there is a sale of substantially all of our assets,
each outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be shortened
and a new exercise date will be set.
The 2000 employee stock purchase plan will terminate in 2010. Our board of
directors has the authority to amend or terminate the 2000 employee stock
purchase plan, except that no such action may adversely affect any outstanding
rights to purchase stock under the 2000 employee stock purchase plan.
2000 Director Option Plan
Non-employee directors are entitled to participate in our 2000 director
option plan. The 2000 director option plan was adopted by our board of directors
in February 2000 and is subject to approval by our stockholders. The 2000
director option plan has a term of ten years, unless terminated sooner by our
board of directors. A total of 250,000 shares of our common stock have been
reserved for issuance under the 2000 director option plan. In addition, annual
increases will be added to this plan on the first day of our fiscal year
beginning in 2001, equal to the number of options granted under the plan during
the prior fiscal year.
The 2000 director option plan generally provides for an automatic initial
grant of an option to purchase 20,000 shares of our common stock to each
non-employee director on the date which the later of the following events occur.
- the effective date of the 2000 director option plan, or
- the date when a person first becomes a non-employee director.
After the initial grant, a non-employee director will be granted a
subsequent option to purchase 5,000 shares of our common stock each year on the
date of our annual meeting of stockholders, if on such date
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<PAGE> 46
he or she has served on our board of directors for at least six months. Each
initial option grant and each subsequent option grant shall have a term of 10
years. Each initial option grant will vest as to 25% of the shares issuable
under the option on each anniversary of its date of grant and each subsequent
option grant will vest as to 100% of the shares issuable under the option on the
fourth anniversary of its date of grant. The exercise prices of all options will
be 100% of the fair market value per share of our common stock on the date of
grant.
The 2000 director option plan provides that if we merge with or into
another corporation, or sell substantially all of our assets, the successor
corporation shall assume each option or substitute an equivalent option. If
following such assumption or substitution, the optionee's status as a director
is terminated other than upon voluntary resignation, each option will become
fully vested and exercisable generally for a period of three months from the
date of termination. If outstanding options are not assumed or substituted for
by the successor corporation, each option will become fully vested and
exercisable for a period of thirty days from the date our board of directors
notifies the optionee of the option's full exercisability, after which period
the option shall terminate. Options granted under the 2000 director option plan
must be exercised within three months of the end of the optionee's tenure as our
director, or within twelve months after such director's termination by death or
disability, but in no event later than the expiration of the option's ten year
term. No option granted under the 2000 director option plan is transferable by
the optionee other than by will or the laws of descent and distribution, and
each option is exercisable, during the lifetime of the optionee, only by the
optionee.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders,
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- unlawful payments of dividends or unlawful stock repurchases or
redemption, or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify other officers and
employees and our agents to the fullest extent permitted by law. We believe that
indemnification under our bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Our bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for certain expenses including attorneys' fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of Medsite.com, arising out
of such person's services as a director or executive officer of ours, any
subsidiary of ours or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
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<PAGE> 47
RELATED PARTY TRANSACTIONS
PREFERRED STOCK SALES
Class A Convertible Preferred Stock
In February 1999, we sold shares of our class A preferred stock convertible
into an aggregate of 6,378,907 shares of common stock at a price of
approximately $0.47 per share, to raise capital to finance our operations. The
following 5% stockholder purchased shares in the financing:
<TABLE>
<CAPTION>
NUMBER OF
COMMON EQUIVALENT AGGREGATE
PURCHASER SHARES CONSIDERATION
- --------- ----------------- -------------
<S> <C> <C>
Entities affiliated with the Argentum Group.......... 6,378,907 $3,000,000
</TABLE>
The share numbers and price per share above reflect the two-for-one stock
split of our capital stock effected in March 1999. The holders of our class A
preferred stock were allotted two seats on our board of directors, one of which
is currently filled by Walter H. Barandarian. This right expires upon the
closing of this offering.
Class B Convertible Preferred Stock
In October 1999, we sold shares of our class B1 preferred stock convertible
into an aggregate of 5,539,088 shares of common stock at a price of $5.50 per
share, to raise capital to finance our operations. The following stockholders
purchased shares in the financing:
<TABLE>
<CAPTION>
NUMBER OF
COMMON EQUIVALENT AGGREGATE
PURCHASER SHARES CONSIDERATION
- --------- ----------------- -------------
<S> <C> <C>
Argentum Capital Partners II, L.P. .................. 181,818 $ 999,999
CB Capital L.P....................................... 727,273 4,000,002
</TABLE>
In December 1999, we sold shares of our class B1 preferred stock
convertible into an aggregate of 3,574,707 shares of common stock at a price of
$5.50 per share, to raise capital to finance our operations. The following
stockholders purchased shares in the financing:
<TABLE>
<CAPTION>
NUMBER OF
COMMON EQUIVALENT AGGREGATE
PURCHASER SHARES CONSIDERATION
- --------- ----------------- -------------
<S> <C> <C>
CB Capital L.P....................................... 1,090,909 $6,000,000
Morgan Stanley Dean Witter Venture Partners IV,
L.P................................................ 1,090,909 6,000,000
</TABLE>
Mitchell Blutt, M.D., a member of our board of directors, is an executive
partner at Chase Capital Partners, L.P. a venture capital investment firm
affiliated with CB Capital L.P. Gary Stein, a member of our board of directors,
is a Vice President of Morgan Stanley & Co. Incorporated.
Other Transactions
Gregory Scott, our Chief Financial Officer, is a managing member of Post
Kennel Investors, LLC and may be deemed to beneficially own 100,000 shares of
our common stock held by Post Kennel Investors, LLC.
Douglas Mack, our Executive Vice President, e-Commerce, received 800,001
shares of our common stock in connection with our acquisition of Total Health
Products, Inc. Mr. Mack is the former President of Total Health Products, Inc.
Investor Rights Agreement. Medsite.com and the preferred stockholders
described above have entered into an agreement pursuant to which these and other
stockholders will have registration rights with respect to their shares of
common stock following this offering. Upon completion of this offering, all
shares
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<PAGE> 48
of our outstanding preferred stock will be commercially converted into an equal
number of shares of common stock. For more information regarding this agreement,
see "Description of Capital Stock -- Registration Rights."
For information regarding agreements between us and some of our executive
officers, please see "Management -- Employment Contracts and Change of Control
Arrangements."
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<PAGE> 49
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 31, 1999, by:
- each person known by us to be the beneficial owner of more than 5% of our
outstanding common stock,
- each of our executive officers and directors, and
- all of our executive officers and directors as a group.
Except as otherwise noted, the address of each person listed in the table
is c/o Medsite.com, 60 East 13th Street, 3rd Floor, New York, New York 10003.
The table includes all shares of common stock issuable within 60 days of
December 31, 1999 upon the exercise of options and other rights beneficially
owned by the indicated stockholders on that date. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to the shares.
To our knowledge, except under applicable community property laws or as
otherwise indicated, the persons named in the table have sole voting and sole
investment control with respect to all shares beneficially owned.
The applicable percentage of ownership for each stockholder is based on
34,207,166 shares of common stock outstanding as of December 31, 1999, together
with applicable options for that stockholder. Shares of common stock issuable
upon exercise of options and other rights beneficially owned are deemed
outstanding for the purpose of computing the percentage ownership of the person
holding those options and other rights, but are not deemed outstanding for
computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
--------------------
NUMBER OF SHARES PRIOR TO AFTER
OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ----- ------------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Argentum Capital Partners........ 6,560,725 19.0%
CB Capital Partners....................................... 1,818,182 5.3%
Sundeep Bhan.............................................. 3,015,840 8.8%
Gregory Scott............................................. 100,000 *
Sameer Shariff............................................ 2,999,840 8.8%
Sanjay Pingle............................................. 2,999,840 8.8%
Rajnish Kapoor............................................ 2,999,840 8.8%
Douglas Mack.............................................. 800,001 2.3%
Thomas Feitel............................................. -- *
Vincent Friedewald, Jr. M.D. ............................. -- *
Walter H. Barandiaran..................................... 6,560,725 19.1%
Mitchell Blutt, M.D....................................... 1,818,182 5.3%
Gary Stein................................................ 1,090,909 3.2%
All executive officers and directors as a group (10
persons)................................................ 22,385,187 65.4%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of common stock.
The shares listed above for Gregory Scott include all shares beneficially
owned by Post Kennel Investors, LLC.
On January 12, 2000, we issued Dr. Friedewald 84,000 shares of our common
stock and options to purchase 100,000 shares of our common stock. These options
vest as to 20% of the shares issuable on each anniversary of its date of grant.
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<PAGE> 50
The shares listed above for Walter H. Barandiaran, Mitchell Blutt, M.D. and
Gary Stein include all shares beneficially owned by entities affiliated with
Argentum Capital Partners, CB Capital L.P. and Morgan Stanley Dean Witter
Venture Partners IV, L.P. respectively. Mr. Barandiaran, Dr. Blutt and Mr. Stein
disclaim beneficial ownership of the shares held by these entities except to the
extent of their pecuniary interest in these entities.
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<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, we will be authorized to issue
shares of common stock, $ par value, and
shares of undesignated preferred stock, $ par value. The following
description of our capital stock does not purport to be complete and is subject
to and qualified in its entirety by our certificate of incorporation and bylaws,
which are included as exhibits to the registration statement of which this
prospectus forms a part, and by the provisions of applicable Delaware law.
COMMON STOCK
As of December 31, 1999, there were 34,207,166 shares of common stock
outstanding which were held of record by 135 stockholders.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of Medsite.com, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of preferred stock, if any, then outstanding. The holders of
common stock have no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
nonassessable, and the shares of common stock to be issued upon the closing of
this offering will be fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. It is not possible
to state the actual effect of the issuance of any shares of preferred stock upon
the rights of holders of the common stock until the Board of Directors
determines the specific rights of the holders of such preferred stock. However,
the effects might include, among other things, restricting dividends on the
common stock, diluting the voting power of the common stock, impairing the
liquidation rights of the common stock and delaying or preventing a change in
control without further action by the stockholders. Immediately prior to the
closing no shares of preferred stock will be outstanding, and we have no present
plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
As of December 31, 1999, the holders of 17,642,703 shares of our common
stock and warrants to purchase our common stock, or their transferees, are
entitled to rights with respect to the registration of these shares under the
Securities Act. These rights are provided under the terms of an agreement
between us and the holders of these securities. Subject to limitations in the
agreement, if we register any of our common stock either for our own account or
for the account of other security holders, these holders are entitled to include
their shares of common stock in that registration, subject to the ability of the
underwriters to limit the number of shares included in the offering. We will be
responsible for paying all registration expenses, and the holders selling their
shares will be responsible for paying all selling expenses.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of Delaware law and our certificate of incorporation and
bylaws summarized below could make more difficult our acquisition by means of a
tender offer, a proxy contest or otherwise and the removal of incumbent officers
and directors. These provisions are expected to discourage certain types of
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<PAGE> 52
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control to first negotiate with us. We believe that
the benefits of increased protection of our potential ability to negotiate with
the proponent of an unfriendly or unsolicited proposal to acquire or restructure
us outweighs the disadvantages of discouraging such proposals because, among
other things, negotiation of such proposals could result in an improvement of
their terms.
Stockholder Meetings
Under our restated certificate of incorporation and restated bylaws, the
Board of Directors, the Chairman of the Board and the President may call special
meetings of stockholders but the stockholders may not call a special meeting. In
addition, our restated certificate of incorporation and restated bylaws do not
provide for the right of stockholders to act by written consent without a
meeting or for cumulative voting in the election of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our restated bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the Board of
Directors or a committee thereof.
Delaware Anti-Takeover Law
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover 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 following the date the person became an
interested stockholder, unless, with some exceptions, the "business combination"
or the transaction in which the person became an interested stockholder is
approved in a prescribed manner. Generally, a "business combination" includes a
merger, asset or stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder" is
a person who, together with affiliates and associates, owns, or within three
years prior to the determination of interested stockholder status, did own, 15%
or more of a corporation's voting stock. The existence of this provision would
be expected to have an anti-takeover effect with respect to transactions not
approved in advance by the Board of Directors, including discouraging attempts
that might result in a premium over the market price for the shares of common
stock held by stockholders.
Undesignated Preferred Stock
The authorization of undesignated preferred stock makes it possible for the
Board of Directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
Medsite.com. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
NASDAQ NATIONAL MARKET LISTING
We have applied to list our common stock on The Nasdaq National Market
under the trading symbol "MSTE".
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<PAGE> 53
SHARES ELIGIBLE FOR FUTURE SALE
If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options) in the public market
following this offering, the market price of our common stock could fall
dramatically. These sales also might make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we
deem appropriate.
The number of shares of common stock available for sale in the public
market is limited by restrictions under federal securities law and by certain
"lock-up" agreements that our stockholders have entered into with the
underwriters. For a description of these "lock-up" agreements, please see
"Underwriting."
Upon completion of this offering, we will have outstanding
shares of common stock (based upon shares outstanding as of ),
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options after . Taking into account the lock-up
agreements and assuming Credit Suisse First Boston Corporation does not release
stockholders from these agreements, the following shares will be eligible for
sale in the public market at the following times:
- beginning on the date of this prospectus, only the shares sold in the
offering will be immediately available for sale in the public market;
- beginning 180 days after the date of this prospectus, approximately
shares will be eligible for sale pursuant to Rules 144 and
701 of the Securities Act;
- an additional shares will become eligible for sale
pursuant to Rule 144 beginning on , 2000;
- an additional shares will become eligible for sale
pursuant to Rule 144 beginning on , 2000.
Any common stock that has been purchased or may be purchased in this
offering by our "affiliates," as defined in Rule 144 of the Securities Act, will
be subject to the volume and other selling limitations under Rule 144 of the
Securities Act. All of the shares eligible for sale at the 180th day after the
date of this prospectus or afterward will be subject initially to certain volume
and other limitations under Rule 144 of the Securities Act.
In general, under Rule 144, a stockholder, including one of our affiliates,
who has beneficially owned his or her restricted securities for at least one
year is entitled to sell, within any three-month period commencing 90 days after
the date of this prospectus, a number of shares that does not exceed the greater
of 1% of the then outstanding shares of our common stock (approximately
shares immediately after this offering) or the aggregate weekly
trading volume in our common stock during the four calendar weeks preceding the
date on which notice of such sale was filed under Rule 144, provided certain
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, a stockholder that is not one of our
affiliates at any time during the three months preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years is
entitled to sell the shares immediately under Rule 144(k) without compliance
with the above described requirements under Rule 144.
Securities issued in reliance on Rule 701 (such as shares of our common
stock acquired pursuant to the exercise of certain options granted under our
stock plans) are also restricted securities and, beginning 90 days after the
date of this prospectus (subject to the 180-day lock-up agreement described
above), may be sold by stockholders other than our affiliates subject only to
the manner of sale provisions of Rule 144 and by affiliates under Rule 144
without compliance with its one-year holding period requirement.
On or prior to the 180th day following the date of this prospectus, we
intend to register for resale an additional 9,250,000 shares of common stock
reserved for issuance under our 1999 stock plan, 2000 stock plan, 2000 employee
stock purchase plan and 2000 director option plan. In addition, the holders of
approximately 18,739,970 shares of common stock have the right to require us to
register their shares for
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<PAGE> 54
sale to the public. If these holders cause a large number of shares to be
registered and sold in the public market, our stock price could fall materially.
Prior to this offering, there has been no public market for our common
stock and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares for sale will have on
the market price of our common stock prevailing from time to time. Nevertheless,
sales of significant numbers of shares of our common stock in the public market
could adversely affect the market price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
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<PAGE> 55
UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of the principal United States
federal income and estate tax consequences of the acquisition, ownership and
disposition of our common stock by a Non-U.S. Holder. As used in this
prospectus, the term "Non-U.S. Holder" is a person who holds our common stock
other than:
- a citizen or resident of the United States,
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or of any political
subdivision of the United States,
- an estate the income of which is includable in gross income for United
States federal income tax purposes regardless of its source, or
- a trust subject to the primary supervision of a United States court and
the control of one or more United States persons.
This discussion does not consider:
- state, local or foreign tax consequences,
- specific facts and circumstances that may be relevant to a particular
Non-U.S. Holder's tax position in light of their particular
circumstances,
- the tax consequences for the stockholders or beneficiaries of a Non-U.S.
Holder,
- special tax rules that may apply to certain Non-U.S. Holders, including
without limitation, partnerships, banks, insurance companies, dealers in
securities and traders in securities, or
- special tax rules that may apply to a Non-U.S. Holder that holds our
common stock as part of a "straddle," "hedge" or "conversion
transaction."
The following discussion is based on provisions of the United States
Internal Revenue Code of 1986, as amended ("the Code"), applicable Treasury
regulations and administrative and judicial interpretations, all as of the date
of this prospectus, and all of which are subject to change, retroactively or
prospectively. The following discussion assumes that our common stock is held as
a capital asset. The following summary is for general information. ACCORDINGLY,
EACH NON-U.S. HOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE UNITED STATES
FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF SHARES OF OUR COMMON STOCK.
DIVIDENDS
We do not anticipate paying cash dividends on our common stock in the
foreseeable future. See "Dividend Policy." In the event, however, that dividends
are paid on shares of our common stock, dividends paid to a Non-U.S. Holder of
our common stock generally will be subject to withholding of United States
federal income tax at a 30% rate, or such lower rate as may be provided by an
applicable income tax treaty. Non-U.S. Holders should consult their tax advisors
regarding their entitlement to benefits under a relevant income tax treaty.
Dividends that are effectively connected with a Non-U.S. Holder's conduct
of a trade or business in the United States or, if an income tax treaty applies,
attributable to a permanent establishment in the United States ("United States
trade or business income"), are generally subject to United States federal
income tax on a net income basis at regular graduated rates, but are not
generally subject to the 30% withholding tax if the Non-U.S. Holder files the
appropriate United States Internal Revenue Service form with the payor. Any
United States trade or business income received by a Non-U.S. Holder that is a
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as specified by an
applicable income tax treaty.
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<PAGE> 56
Dividends paid prior to 2001 to an address in a foreign country are
presumed, absent actual knowledge to the contrary, to be paid to a resident of
such country for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. For dividends paid after
2000, a Non-U.S. Holder of our common stock who claims the benefit of an
applicable income tax treaty rate generally will be required to satisfy
applicable certification and other requirements.
A Non-U.S. Holder of our common stock that is eligible for a reduced rate
of United States withholding tax under an income tax treaty may obtain a refund
or credit of any excess amounts withheld by filing an appropriate claim for a
refund with the United States Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of our common stock
unless:
- the gain is United States trade or business income, in which case the
branch profits tax described above may also apply to a corporate Non-U.S.
Holder,
- the Non-U.S. Holder is an individual who holds our common stock as a
capital asset within the meaning of Section 1221 of the Code, is present
in the United States for more than 182 days in the taxable year of the
disposition and meets certain other requirements,
- the Non-U.S. Holder is subject to tax pursuant to the provisions of the
United States tax law applicable to certain United States expatriates, or
- we are or have been a "United States real property holding corporation"
for United States federal income tax purposes at any time during the
shorter of the five-year period ending on the date of disposition or the
period that the Non-U.S. Holder held our common stock.
Generally, a corporation is a "United States real property holding
corporation" if the fair market value of its "United States real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or held for use in
a trade or business. We believe we have never been, are not currently and are
not likely to become a United States real property holding corporation for
United States federal income tax purposes.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death will be included in the individual's gross estate
for United States federal estate tax purposes, unless an applicable estate tax
or other treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
We must report annually to the United States Internal Revenue Service and
to each Non-U.S. Holder the amount of dividends paid to that holder and the tax
withheld with respect to those dividends. Copies of the information returns
reporting those dividends and withholding may also be made available to the tax
authorities in the country in which the Non-U.S. Holder is a resident under the
provisions of an applicable income tax treaty or agreement.
Under certain circumstances, United States Treasury Regulations require
information reporting and backup withholding at a rate of 31% on certain
payments on our common stock. Under currently applicable law, Non-U.S. Holders
of our common stock generally will be exempt from these information reporting
requirements and from backup withholding on dividends paid prior to 2001 to an
address outside the United States. For dividends paid after 2000, however, a
Non-U.S. Holder of our common stock that fails to certify its Non-U.S. Holder
status in accordance with applicable United States Treasury Regulations may be
subject to backup withholding at a rate of 31% on payments of dividends.
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<PAGE> 57
The payment of the proceeds of the disposition of our common stock by a
holder to or through the United States office of a broker or through a foreign
branch of a United States broker generally will be subject to information
reporting and backup withholding at a rate of 31% unless the holder either
certifies its status as a Non-U.S. Holder under penalties of perjury or
otherwise establishes an exemption. The payment of the proceeds of the
disposition by a Non-U.S. Holder of our common stock to or through a foreign
office of a foreign broker will not be subject to backup withholding or
information reporting unless the foreign broker is a "United States related
person." In the case of the payment of proceeds from the disposition of our
common stock by or through a foreign office of a broker that is a United States
person or a "United States related person," information reporting, but currently
not backup withholding, on the payment applies unless the broker receives a
statement from the owner, signed under penalty of perjury, certifying its
foreign status or the broker has documentary evidence in its files that the
holder is a Non-U.S. Holder and the broker has no actual knowledge to the
contrary. For this purpose, a "United States related person" is:
- a "controlled foreign corporation" for United States federal income tax
purposes,
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment, or for such part of the period that the broker has been
existence, is derived from activities that are effectively connected with
the conduct of a United States trade or business, or
- effective after 2000, a foreign partnership if, at any time during the
taxable year, (A) at least 50% of the capital or profits interest in the
partnership is owned by United States persons, or (B) the partnership is
engaged in a United States trade or business.
Effective after 2000, backup withholding may apply to the payment of
disposition proceeds by or through a foreign office of a broker that is a United
States person or a United States related person unless certain certification
requirements are satisfied or an exemption is otherwise established and the
broker has no actual knowledge that the holder is a United States person.
Non-U.S. Holders should consult their own tax advisors regarding the application
of the information reporting and backup withholding rules to them, including
changes to these rules that will become effective after 2000.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded, or credited against the holder's United States
federal income tax liability, if any, provided that the required information is
furnished to the United States Internal Revenue Service.
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<PAGE> 58
UNDERWRITING
Under the terms of and subject to the conditions contained in an
underwriting agreement dated , 2000, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation, Bear,
Stearns & Co. Inc., and E*OFFERING Corp. are acting as representatives, the
following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Bear, Stearns & Co. Inc. ...................................
E*OFFERING Corp. ...........................................
--------
Total..................................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other brokers/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............. $ $ $ $
Expenses payable by us............... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof or pursuant to our dividend reinvestment plan.
Our officers and directors and our stockholders and optionholders have
agreed that we and they will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common
56
<PAGE> 59
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of our common stock, whether any such
aforementioned transaction is to be settled by delivery of our common stock or
such other securities, in cash or otherwise, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, or to enter into any such
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list our common stock on The Nasdaq National Market
under the symbol "MSTE."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters, and does not reflect the market price for our
common stock following the offering. The principal factors to be considered in
determining the public offering price will be:
- the information included in this prospectus and otherwise available to
the representative;
- market conditions for initial public offerings;
- the history and the prospects for the industry in which we will compete;
- the ability of our management;
- our prospects for future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of this
offering; and
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The initial public offering price may not correspond to the price at which
our common stock will trade in the public market subsequent to this offering,
and an active trading market for our common stock may not develop or continue
after this offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed to cover
syndicate short positions.
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<PAGE> 60
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing transaction or a syndicate
covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would be in the
absence of these transactions. These transactions may be effected on The Nasdaq
National Market and, if commenced, may be discontinued at any time.
ELECTRONIC PROSPECTUSES
E*OFFERING Corp. is the exclusive internet underwriter for this offering.
E*OFFERING Corp. has agreed to allocate a portion of the shares that it
purchases to E*TRADE Securities, Inc. E*OFFERING Corp. and E*TRADE Securities
Inc. will allocate shares to their respective customers in accordance with usual
and customary industry practices. A prospectus in electronic format, from which
you can link to a "Meet the Management" Presentation through an embedded
hyperlink, 'click here for "Meet the Management" Presentation', is being made
available on the Web site maintained by E*OFFERING Corp., www.eoffering.com.
Other than the prospectus in electronic format, the information that is
identified as being a part of the prospectus and any other information that
references Medsite.com, the information on E*OFFERING Corp. is not part of this
prospectus and has not been approved or endorsed by Medsite.com and should not
be relied upon by prospective investors.
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<PAGE> 61
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE> 62
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Cravath, Swaine & Moore, New York, New York, has represented the
underwriters. Persons associated with Wilson Sonsini Goodrich & Rosati are the
holders of 31,546 shares of our common stock and an option to purchase 150,000
shares of our common stock.
EXPERTS
The consolidated financial statements and schedule of Medsite.com, Inc. and
subsidiary as of December 31, 1999 and 1998, and for each of the three years in
the period ended December 31, 1999 appearing in this prospectus and in this
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
The financial statements for Total Health Products, Inc. as of November 30,
1999 and for the eleven months then ended, appearing in this prospectus and
registration statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein in
this prospectus, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements for Total Health Products, Inc. as of December 31,
1998 and 1997 and for the years then ended included in this prospectus and
elsewhere in the registration statement, have been audited by Amper, Politziher
& Mattia P.A., independent auditors, as set forth in their report appearing
elsewhere in this prospectus, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration
statement and the exhibits filed as a part thereof, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information with respect to us and the common stock offered hereby, reference is
made to the registration statement and to the exhibits filed as a part thereof.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete and are
qualified in their entirety by reference to each such contract, agreement or
other document which is filed as an exhibit to the registration statement. The
registration statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, or at the Regional Offices of the
SEC at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Our
SEC filings are also available to the public from the SEC's Web site at
http://www.sec.gov. In addition, such material will be available for inspection
at the offices of The Nasdaq Stock Market, Inc., at 1735 K Street, N.W.,
Washington D.C. 20006. Copies of such material may be obtained by mail from the
Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
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<PAGE> 63
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
MEDSITE.COM, INC. AND SUBSIDIARY -- AS OF DECEMBER 31, 1999
AND 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998
AND 1997
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' (Deficit)........ F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
TOTAL HEALTH PRODUCTS, INC. -- AS OF NOVEMBER 30, 1999
ELEVEN MONTHS THEN ENDED
Report of Independent Auditors............................ F-17
Balance Sheet............................................. F-18
Statement of Operations................................... F-19
Statement of Stockholder's Deficit........................ F-20
Statement of Cash Flows................................... F-21
Notes to Financial Statements............................. F-22
TOTAL HEALTH PRODUCTS, INC. -- AS OF DECEMBER 31, 1998 AND
1997 AND FOR THE YEARS THEN ENDED
Report of Independent Auditors............................ F-25
Balance Sheets............................................ F-26
Statements of Income and Retained Earnings................ F-27
Statements of Cash Flows.................................. F-28
Notes to Financial Statements............................. F-29
</TABLE>
F-1
<PAGE> 64
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Medsite.com, Inc.
We have audited the accompanying consolidated balance sheets of
Medsite.com, Inc., and Subsidiary (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of operations, stockholders'
(deficit) 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Medsite.com,
Inc. and Subsidiary as of December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
New York, New York
February 9, 2000
F-2
<PAGE> 65
MEDSITE.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 32,298,253 $ 29,353
Restricted cash equivalents............................... 1,503,250 --
Short term investments.................................... 1,415,802 --
Accounts receivable, less allowance of $217,000
in 1999 and $32,000 in 1998............................ 4,045,924 86,609
Inventory................................................. 813,294 --
Prepaid expenses and other current assets................. 1,272,278 111,424
------------ -----------
Total current assets........................................ 41,348,801 227,386
Property and equipment, net................................. 2,690,845 74,265
Intangible assets, net...................................... 12,330,876 --
Other assets................................................ 1,021,680 7,430
------------ -----------
Total assets...................................... $ 57,392,202 $ 309,081
============ ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 4,014,578 $ 743,369
Accrued expenses and other current liabilities............ 3,835,722 633,018
Deferred revenue.......................................... 2,493,029 --
Bridge notes payable...................................... -- 385,030
Lease obligation payable -- current....................... 83,013 4,247
------------ -----------
Total current liabilities................................... 10,426,342 1,765,664
Notes payable............................................... -- 130,000
Lease obligations payable, net of current portion........... 171,704 4,662
Redeemable Convertible Preferred Stock:
Series A Convertible Preferred Stock -- $.0001 par value;
3,000 shares authorized; 3,000 shares issued and
outstanding in 1999.................................... 3,000,000 --
Series B1 Convertible Preferred Stock -- $.0001 par value;
9,500,000 shares authorized; 9,113,788 shares issued
and outstanding in 1999................................ 46,500,428 --
Series B2 Convertible Preferred Stock -- $.0001 par value;
1,200,000 shares authorized; 1,200,000 shares issued
and outstanding in 1999................................ 6,000,000 --
------------ -----------
Total Redeemable Convertible Preferred Stock...... 55,500,428 --
------------ -----------
Stockholders' (deficit):
Common stock -- $.00005 par value; 50,000,000 shares
authorized; 17,514,464 and 13,499,134 shares issued and
outstanding in 1999 and 1998, respectively............. 876 675
Additional paid-in capital................................ 13,889,914 (12,387)
Common stock to be issued................................. -- 355,975
Accumulated (deficit)..................................... (22,597,062) (1,935,508)
------------ -----------
Total stockholders' (deficit)............................... (8,706,272) (1,591,245)
------------ -----------
Total liabilities and stockholders' (deficit)............... $ 57,392,202 $ 309,081
============ ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 66
MEDSITE.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
------------ ----------- ---------
<S> <C> <C> <C>
Net sales............................................. $ 8,892,617 $ 1,416,872 $ 297,330
Cost of sales......................................... 8,882,732 1,299,384 90,600
------------ ----------- ---------
Gross profit.......................................... 9,885 117,488 206,730
------------ ----------- ---------
Operating expenses:
General and administrative.......................... 7,116,665 1,287,662 439,170
Sales and marketing................................. 7,174,214 540,802 114,450
Product and technology development.................. 3,371,328 172,020 66,065
Depreciation and amortization....................... 332,961 14,141 --
------------ ----------- ---------
Total operating expenses.............................. 17,995,168 2,014,625 619,685
------------ ----------- ---------
Loss from operations.................................. (17,985,283) (1,897,137) (412,955)
Interest income (expense), net........................ 336,729 (38,371) (16,898)
------------ ----------- ---------
Net loss.............................................. (17,648,554) (1,935,508) (429,853)
Accreted dividends on preferred stock................. (3,013,000) -- --
------------ ----------- ---------
Net loss attributable to common stockholders.......... $(20,661,554) $(1,935,508) $(429,853)
============ =========== =========
Net loss per share attributable to common
stockholders, basic and diluted..................... $ (1.28) $ (0.15) --
============ =========== =========
Weighted average common shares outstanding............ 16,096,209 12,512,710 --
============ =========== =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 67
MEDSITE.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON
COMMON STOCK ADDITIONAL STOCK
MEMBERS' ------------------- PAID-IN TO ACCUMULATED
DEFICIT SHARES AMOUNT CAPITAL BE ISSUED DEFICIT TOTAL
--------- ---------- ------ ----------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996..... $(143,209) -- $ -- $ -- $ -- $ -- $ (143,209)
Imputed interest on convertible
promissory notes............... 11,261 -- -- -- -- -- 11,261
Net loss......................... (429,853) -- -- -- -- -- (429,853)
--------- ------------
Balance at December 31, 1997..... (561,801) -- -- -- -- -- (561,801)
Members' deficit converted to
shareholders' deficit.......... 561,801 13,083,734 654 (562,455) -- -- --
Imputed interest on convertible
promissory notes............... -- -- -- 1,019 -- -- 1,019
Common stock issued for the
conversion of promissory
notes.......................... -- 122,400 6 152,994 -- -- 153,000
Common stock issued.............. -- 193,600 10 241,975 -- -- 241,985
Exercise of options.............. -- 99,400 5 6,375 -- -- 6,380
Common stock to be issued
(254,666 shares)............... -- -- -- -- 355,975 -- 355,975
Issuance of warrants in
connection with bridge notes... -- -- -- 19,752 -- -- 19,752
Compensation related to stock
options........................ -- -- -- 127,953 -- -- 127,953
Net loss......................... -- -- -- -- -- (1,935,508) (1,935,508)
--------- ---------- ---- ----------- --------- ------------ ------------
Balance at December 31, 1998..... -- 13,499,134 675 (12,387) 355,975 (1,935,508) (1,591,245)
Common stock issued.............. -- 1,377,998 69 3,890,906 (355,975) -- 3,535,000
Common stock issued in
satisfaction of accounts
payable........................ -- 1,450,000 73 1,839,927 -- -- 1,840,000
Common stock issued for the
conversion of promissory
notes.......................... -- 87,332 4 129,996 -- -- 130,000
Issuance of Series A Redeemable
Convertible Preferred Stock,
net of issuance costs of
$1,476,547..................... -- -- -- 1,523,453 -- -- 1,523,453
Issuance of warrants in
connection with Series B1
Convertible Preferred Stock.... -- -- -- 433,281 -- -- 433,281
Issuance of Common Stock related
to acquisition of business..... -- 1,100,000 55 6,049,945 -- -- 6,050,000
Compensation related to stock
options........................ -- -- -- 34,793 -- -- 34,793
Net loss......................... -- -- -- -- -- (17,648,554) (17,648,554)
Accreted dividends on preferred
stock.......................... -- -- -- -- -- (3,013,000) (3,013,000)
--------- ---------- ---- ----------- --------- ------------ ------------
Balance at December 31, 1999..... $ -- 17,514,464 $876 $13,889,914 $ -- $(22,597,062) $ (8,706,272)
========= ========== ==== =========== ========= ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 68
MEDSITE.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
------------ ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(17,648,554) $(1,935,508) $(429,853)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 332,961 14,141 6,094
Amortization of deferred financing cost and imputed
interest................................................ -- 16,800 11,261
Bad debt expense.......................................... 184,625 22,869 13,409
Accrued interest on marketable securities................. (15,802) -- --
Stock compensation........................................ 34,793 127,953 --
Changes in operating assets and liabilities:
Accounts receivable..................................... (4,143,940) (75,117) (34,819)
Inventory............................................... (813,294) -- --
Prepaid expenses and other current assets............... (1,162,401) (186,095) 1,698
Other assets............................................ (1,014,250) (6,930) (500)
Accounts payable and accrued expenses................... 7,644,163 1,160,471 68,424
Deferred revenue........................................ 2,493,029 -- --
------------ ----------- ---------
Net cash used in operating activities....................... (14,108,670) (861,416) (364,286)
------------ ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment.......................... (2,691,662) (55,160) (6,808)
Acquisition of business, net of cash acquired of $135,843... (6,288,699) -- --
Restricted cash related to business acquired................ (1,503,250) -- --
Issuance of note receivable................................. (100,000) -- --
Purchase of marketable securities........................... (1,400,000) -- --
------------ ----------- ---------
Net cash used in investing activities....................... (11,983,611) (55,160) (6,808)
------------ ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Series B1 Convertible Preferred
Stock..................................................... 46,920,708 -- --
Proceeds from issuance of 8% Convertible Promissory Notes... 6,000,000 -- --
Proceeds from issuance of Series A Convertible Preferred
Stock..................................................... 2,465,000 -- --
Proceeds from issuance of common stock...................... 3,535,000 241,985 --
Repayment of bridge notes payable........................... (385,030) -- --
Proceeds from exercise of options........................... -- 6,380 --
Proceeds from common stock to be issued..................... -- 355,975 --
Proceeds from bridge notes payable.......................... -- 385,030 --
Proceeds from notes payable................................. -- 215,000 118,500
Repayments of notes payable................................. -- (90,000) --
Repayments of lease obligations............................. (4,247) (3,517) (264)
Increase (decrease) in due to shareholders.................. (170,250) (175,067) 243,167
------------ ----------- ---------
Net cash provided by financing activities................... 58,361,181 935,786 361,403
------------ ----------- ---------
Net increase (decrease) in cash and cash equivalents........ 32,268,900 19,210 (9,691)
Cash and cash equivalents, beginning of year.............. 29,353 10,143 19,834
------------ ----------- ---------
Cash and cash equivalents, end of year...................... $ 32,298,253 $ 29,353 $ 10,143
============ =========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest...................... $ 12,890 $ 9,495 $ 5,693
============ =========== =========
NON CASH INVESTING AND FINANCING ACTIVITIES
Common Stock issued for acquisition of business............. $ 6,050,000 $ -- $ --
============ =========== =========
Common Stock issued in satisfaction of accounts payable..... $ 1,840,000 $ -- $ --
============ =========== =========
Warrants issued in connection with Series B1 Convertible
Preferred Stock........................................... $ 433,281 $ -- $ --
============ =========== =========
Warrants issued in connection with Series A Convertible
Preferred Stock........................................... $ 396,778 $ -- $ --
============ =========== =========
Notes payable converted to common stock..................... $ 130,000 $ 153,000 $ --
============ =========== =========
Stock options issued to independent contractors............. $ 34,793 $ -- $ --
============ =========== =========
Warrants issued in connection with bridge notes............. $ -- $ 19,752 $ --
============ =========== =========
Capital lease obligation for equipment...................... $ -- $ -- $ 12,690
============ =========== =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 69
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION OF BUSINESS
Medsite.com, Inc. (the "Company") is a leading provider of online
business-to-business e-commerce, information and communication products and
services to the physician principally in the United States. Physicians can
purchase online from the Company a comprehensive selection of medical supplies,
books and other practice needs through our e-commerce offerings. The Company's
information tools help physicians filter and organize medical content from a
vast number of services. The Company's communication products and services
assist physicians in communicating with their patients and colleagues using the
internet.
The Company was founded in November 1995 as Oblisk Interactive, LLC, a New
York limited liability corporation ("LLC"). During 1997, LLC changed its name to
Medsite Publishing, LLC ("Publishing").
In January 1998, the members of Publishing formed Medsite Publishing, Inc.
("Publishing, Inc."), a Delaware corporation, and merged Publishing into
Publishing, Inc. In connection therewith, Publishing, Inc. issued 13,083,734
shares of its common stock ("Common Stock") in exchange for the membership units
of Publishing. In June 1999, Publishing, Inc. changed its name to Medsite.com,
Inc.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant inter-company balances and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company's policy is to maintain its uninvested cash at minimum levels.
Unrestricted cash equivalents, which include highly liquid debt instruments
purchased with a maturity of three months or less, were $23.6 million at
December 31, 1999.
INVENTORIES
Inventories, consisting principally of medical supplies, are stated at the
lower of cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Assets acquired under capital
leases are stated at the present value of the future minimum lease payments.
F-7
<PAGE> 70
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets. Leasehold improvements are amortized over
the life of the lease, or the useful life of the improvement, whichever is
shorter. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Office Equipment and Furniture 2 to 5 years
Purchased Software 1 to 5 years
Tradeshow Fixtures 3 years
Leasehold Improvements 0.5 to 10 years
</TABLE>
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over the expected
period to be benefited, which is ten years.
The costs of all other intangible assets are amortized over their useful
lives, which is five years.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income or expense in the period it occurs.
NET LOSS PER SHARE
Basic loss per share is computed by dividing net income or loss by the
weighted average number of common shares outstanding for the period. Diluted
loss per share reflects the potential dilution from the exercise or conversion
of securities into Common Stock.
Net loss and weighted average shares outstanding used for computing diluted
loss per common share were the same as that used for computing basic loss per
common share for each of the years ended December 31, 1999 and 1998.
The Company had potentially dilutive common stock equivalents of 20,559,038
and 654,000 at December 31, 1999 and 1998, respectively. These common stock
equivalents were not included in the computation of diluted net loss per common
share because they were anti-dilutive for the periods presented.
STOCK-BASED COMPENSATION
The Company measures compensation expense related to the grant of stock
options and stock-based awards to employees in accordance with the provisions of
Accounting Principles Board Opinion No. 25 ("APB 25"), under which compensation
expense, if any, is generally based on the difference between the exercise price
of an option, or the amount paid for the award, and the market price or fair
value of the underlying common stock at the date of the award. Stock-based
compensation arrangements involving non-employees are accounted for under
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation", under which such arrangements are accounted for based
on the fair value of the option or award. As required by SFAS 123, the Company
discloses pro forma net loss information reflecting the effect of applying SFAS
123 fair value measurement to employee arrangements.
F-8
<PAGE> 71
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS
Costs incurred in connection with advertising and promotion of the
Company's services and products are expensed as incurred. For the years ended
December 31, 1999 and 1998, advertising expenses amounted to approximately
$901,000 and $192,000, respectively.
REVENUE RECOGNITION
The Company operates in one business segment, which is the sale of products
and services to the medical community. The Company derives revenue from the sale
of medical books and supplies, information and communication services and
advertising impressions on its website.
Medical Books and Supplies: The Company sells medical books and medical
supplies through its website. Customers place orders both online and through
traditional sales channels and either pay for the goods with credit cards or on
account. Once an order is placed, it is processed for shipment through either
the Company's internal fulfillment operation or an outside fulfillment center.
When the order is shipped, the Company recognizes the revenue. Included in
medical books and supplies revenue is $380,530, $82,161 and $0 of shipping
revenue for the years ended December 31, 1999, 1998 and 1997, respectively.
Information and Communication Products and Services: Revenues from
information and communication products and services are recognized ratably over
the contracted period. For the year ended December 31, 1999 such revenues
amounted to approximately $139,000.
Advertising: The Company generates revenues from advertisements on the
Company's website. Advertising revenue, derived from the sale of banner
advertisements and sponsorships, is recognized ratably over the period the
advertising is displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. For the year
ended December 31, 1999, advertising revenue amounted to approximately $32,000.
There was no significant advertising revenue for the year ended December 31,
1998.
PRODUCT AND TECHNOLOGY DEVELOPMENT
Costs incurred in the classification and organization of listings and
information within the website and the development of new products and services
and enhancements to original products and services are charged to expense as
incurred. Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," requires capitalization of certain software development costs
subsequent to the establishment of technological feasibility. Based upon the
Company's product development process, technological feasibility is established
upon the Company's completion of a working model.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of temporary cash investments
and accounts receivable. The Company restricts temporary cash investments to
financial institutions with a high credit standing. Two major customers account
for $1.9 million of accounts receivable at December 31, 1999.
There was no concentration of revenues for the years ended December 31,
1999 and 1998.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's financial
statements to conform with the current year's presentation.
F-9
<PAGE> 72
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment recognized is measured by the
amount by which the carrying amounts of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less selling costs.
2. SHORT TERM INVESTMENTS
Management determines the appropriate classification of its investments in
debt securities at the time of purchase and classifies them as held to maturity
or available for sale. These investments are diversified among high credit
securities in accordance with the Company's investment policy. Debt securities
that the Company has both the intent and ability to hold to maturity are carried
at amortized cost. Debt securities that the Company does not have the intent or
ability to hold to maturity are classified as available for sale. Securities
available for sale are carried at fair value with unrealized gains and losses,
net of tax, reported in a separate component of stockholders' equity. The
Company does not invest in securities for the purpose of trading and as such
does not classify any securities as trading.
The cost of debt securities classified as held to maturity are adjusted for
amortization of premiums and accretion of discounts to maturity over the
estimated useful life of the security. Such amortization and accretion are
included in interest income. There were no securities classified as available
for sale as of December 31, 1999 and 1998.
The amortized cost, which approximates fair value, of U.S. corporate debt
securities held to maturity at December 31, 1999 is $1,415,802. All securities
held to maturity at December 31, 1999 are due within one year.
There were no changes in the classification of any securities held to
maturity or securities available for sale from the time of purchase to the time
of maturity or sale.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Office equipment and furniture....................... $1,671,973 $ 94,831
Purchased software................................... 660,149 3,268
Tradeshow fixtures................................... 363,742 --
Leasehold improvements............................... 243,953 --
---------- --------
2,939,817 98,099
Less accumulated depreciation........................ 248,972 23,834
---------- --------
Property and equipment, net.......................... $2,690,845 $ 74,265
========== ========
</TABLE>
F-10
<PAGE> 73
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INTANGIBLE ASSETS
Intangible Assets consist of the following at December 31, 1999:
<TABLE>
<S> <C>
Goodwill.................................................... $12,338,699
Trademarks and servicemarks................................. 100,000
-----------
12,438,699
Less accumulated amortization............................... 107,823
-----------
Intangible assets, net...................................... $12,330,876
===========
</TABLE>
5. NOTES PAYABLE
In 1996, the Company issued a 4.25% convertible promissory note for $34,500
payable on demand and had a $5,000 non-interest bearing convertible promissory
note outstanding. During 1997 and 1998, the Company issued non-interest bearing
convertible promissory notes aggregating $118,500 and $125,000, respectively,
payable on demand. The Company imputed interest in the amount of approximately
$1,000 in 1998 related to these loans. During 1998, notes aggregating $153,000
were converted at the rate of $1.25 per share into 122,400 shares of common
stock. The remainder of these notes were converted in January 1999 at the rate
of $1.50 per share into 87,332 shares of common stock.
During 1998, the Company issued promissory notes aggregating $90,000,
bearing interest at rates ranging from 30% to 32% and payable on demand. Such
notes were repaid during 1998.
6. BRIDGE NOTES
During 1998, the Company received approximately $385,000 under bridge
notes. These notes bear interest at 10% per annum and were due when the Company
sold preferred shares as part of an investment agreement (see Note 8). The
Company recorded interest expense of approximately $12,000 for the year ended
December 31, 1998 in connection with the bridge notes. Such notes were repaid in
February 1999.
The Company granted warrants to purchase 344,000 shares of Common Stock to
the bridge noteholders (see Note 9).
7. LONG TERM LIABILITIES -- CONVERTIBLE NOTES
In June 1999, the Company issued convertible promissory notes in the amount
of $6 million. These notes bear interest at 8% and are due on June 30, 2000, and
are convertible into shares of the Company's Series B2 preferred stock at a
conversion price equal to $5.00 per share of Common Stock. Such notes were
converted in October 1999 (see Note 8).
8. PREFERRED STOCK
On February 3, 1999, the Company authorized 3,000 shares of $.0001 par
value Series A Redeemable Convertible Preferred Stock ("Series A Stock") and
issued 3,000 shares of the Series A Stock for gross proceeds of $3 million.
Prior to the closing of the Series A Stock and as a condition of the closing,
the Company performed the following:
1) Issued 600,000 shares of Common Stock to a significant supplier in full
satisfaction of $750,000 in payables outstanding as of February 3, 1999.
2) For value received in connection with investment banking services, the
Company issued 800,000 shares of Common Stock and warrants to purchase
247,422 shares of Common Stock to an investment banking firm. The
warrants are exercisable for five years at $1.00 per share. This
F-11
<PAGE> 74
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
investment banking firm was also paid $300,000 in cash from the proceeds
of the Series A Stock sale (see above).
In October 1999, the Company increased its authorized shares of preferred
stock, par value $0.0001, to 10,703,000 shares. Of the total shares authorized,
3,000 shares are designated as Series A, 9,500,000 shares are designated as
Series B1 and 1,200,000 shares are designated as Series B2.
In October 1999, the Company issued 5,539,088 shares of Series B1
Convertible Preferred Stock for gross proceeds of approximately $30.5 million
and issued 1,200,000 shares of Series B2 Convertible Preferred Stock in exchange
for the $6 million, 8% convertible promissory notes issued in June 1999 (see
Note 7).
In December 1999, the Company issued 3,574,707 shares of Series B1
Convertible Preferred Stock for gross proceeds of approximately $19.7 million.
The Series A, Series B1 and Series B2 are each redeemable after 5 years
should the Company fail to complete an Initial Public Offering or fail to
receive a qualifying offering, as defined. The shares are redeemable at the
greater of fair market value or at their original issue price plus all declared
and unpaid dividends.
The Series A shares are convertible into 6,378,907 common shares. The
Series B1 and B2 shares are convertible into common shares on a one for one
basis. In accordance with EITF 98-5 "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,"
the beneficial conversion feature of $3,000,000 relating to the Series A Stock
was accounted for as a reduction of income attributable to common stockholders.
9. STOCKHOLDERS' EQUITY
COMMON STOCK
In March 1999, the Company announced a 2-for-1 stock split for all shares
of its common stock issued and outstanding. All common stock information
included in the accompanying financial statements have been adjusted to reflect
the 2-for-1 stock split.
During 1999, the Company issued 1,123,332 shares of Common Stock for net
proceeds of $3,535,000 at prices ranging from $1.50 to $5.00.
During 1999, the Company issued 1,450,000 shares of Common Stock to vendors
as consideration for services rendered in the amount of $1,840,000.
In December 1999, the Company issued 1,100,000 shares of Common Stock as
consideration for the acquisition of Total Health Products, Inc. (see Note 10).
COMMON STOCK TO BE ISSUED
Common Stock to be issued at December 31, 1998 represents cash received in
advance for 254,666 shares of Common Stock that were issued during 1999.
WARRANTS
As an incentive to the bridge financing (see Note 6), the Company issued
warrants to purchase 200,000 shares of Common Stock at an exercise price of
$1.00 per share, and warrants to purchase 144,000 shares of Common Stock at an
exercise price of $1.50 per share. These warrants can be exercised over a period
of five years. The Company valued the warrants at an aggregate of $19,752 and
recorded
F-12
<PAGE> 75
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
such amount as deferred financing costs, which was amortized over the lives of
the underlying notes (through February 1999).
In connection with services provided relating to the issuance of Series B1
Convertible Preferred Stock, the Company issued options to purchase 150,000
shares of Common Stock and warrants to purchase 194,343 shares of Common Stock
at an exercise price of $5.00 per share. These options and warrants can be
exercised over a period of five years. The Company valued the options and
warrants at an aggregate of $433,281 and recorded such amounts as an offset to
shareholders' equity.
10. ACQUISITION
On December 1, 1999, the Company acquired Total Health Products, Inc., a
medical supplies distributor, for approximately $5.6 million in cash and 1.1
million shares of the Common Stock. The Company recorded the acquisition under
the purchase method of accounting. The purchase price has been allocated to the
assets acquired and liabilities assumed, based upon the estimated fair values at
the date of acquisition. The excess purchase price was approximately $12.3
million and will be amortized on a straight-line basis over a ten-year period.
If the acquisition had occurred on January 1, 1998, (i) unaudited net sales for
the years ended December 31, 1999 and 1998 would have been $21.7 million and
$12.6 million, respectively, (ii) unaudited net loss for the years ended
December 31, 1999 and 1998 would have been $(21.1) million and $(3.1) million,
respectively (iii) unaudited net loss per common share for the years ended
December 31, 1999 and 1998 would have been $(1.23) and $(0.23), respectively. In
connection with the acquisition, the Company put into escrow $1.5 million to
cover certain contingencies. This amount has been classified as restricted cash
on the accompanying balance sheet.
11. INCOME TAXES
The Company was an LLC from January 1, 1998 through August 26, 1998, and
was treated as a "pass-through" partnership for income tax purposes. As a
result, the Company's members were responsible for income taxes and no provision
for income taxes was required. On August 27, 1998, the Company terminated the
LLC and merged into a newly incorporated "C" corporation.
The federal tax rates for the years ended December 31, 1999 and 1998 were
35%. The effective tax rates were zero for the years ended December 31, 1999 and
1998 due to the Company incurring net operating losses for which no tax benefit
was recorded.
For Federal income tax purposes, the Company had unused net operating loss
carry-forwards of approximately $17.9 million expiring in 2018 through 2019. The
availability of the net operating loss carry-forwards to offset income in future
years may be restricted as a result of future sales of the Company's stock and
other events.
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
----------- ---------
<S> <C> <C>
Accounts receivable, principally due to allowance
for doubtful accounts............................ $ 50,000 $ 11,000
Federal net operating loss carry-forwards.......... 6,282,000 214,000
----------- ---------
Total gross deferred tax assets.................. 6,332,000 225,000
Less valuation allowance........................... 6,332,000 225,000
----------- ---------
Net deferred tax assets.......................... $ -- $ --
=========== =========
</TABLE>
F-13
<PAGE> 76
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments. During 1999 and 1998, the
valuation allowance increased by $6.1 million and $225,000, respectively.
12. STOCK OPTION PLAN
During 1998, the Board of Directors approved the 1999 Stock Option Plan
(the "Stock Option Plan") under which "non-qualified" stock options ("NQSOs") to
acquire shares of Common Stock may be granted to employees, directors and
consultants of the Company and "incentive" stock options ("ISOs") to acquire
shares of Common Stock may be granted to employees, including non-employee
directors.
The Stock Option Plan provides for the issuance of up to a maximum of
3,250,000 shares of Common Stock and is currently administered by a committee of
the Board of Directors. Under the Stock Option Plan, the option price of any ISO
may not be less than the fair market value of a share of Common Stock on the
date on which the option is granted. The option price of an NQSO may be less
than the fair market value on the date the NQSO is granted if the Board of
Directors so determines. An ISO may not be granted to a "ten percent
shareholder" (as such term is defined in Section 422A of the Internal Revenue
Code) unless the exercise price is at least 110% of the fair market value of the
Common Stock and the term of the option may not exceed five years from the date
of the grant. The maximum term of each stock option granted to persons other
than ten percent shareholders is ten years from the date of the grant.
The per share weighted average fair value of stock options granted during
1999 and 1998 was $1.93 and $0.35, respectively, on the date of the grant using
a Minimum Value option pricing model with the following assumptions: risk-free
interest yield of 5.5% for 1999 and ranging from 4.6% to 5.7% for 1998, no
dividend yield and an average life of five years.
The Company applies the provisions of APB Opinion No. 25 in accounting for
its Stock Option Plan and, accordingly, no compensation cost has been recognized
for ISOs in the financial statements since the exercise price was equal to or
greater than the fair market value at the date of grant. Had the Company
determined compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Net loss, as reported............................ $(20,661,554) $(1,935,508)
Net loss, pro forma.............................. $(21,208,863) $(1,949,908)
Net loss per common share, as reported........... $ (1.28) $ (0.15)
Net loss per common share, pro forma............. $ (1.32) $ (0.16)
</TABLE>
During 1999 and 1998, the Company granted NQSOs to certain employees and
outside consultants that immediately vested and are exercisable over five years
from the date of grant. Options to purchase 240,000 shares were granted to
employees at exercise prices at or above the fair value of Common Stock during
1999. Options to purchase 55,400 shares of Common Stock were granted to
employees at exercise prices below the estimated fair value of the Company's
common stock on the date of the grant and 240,000 shares were granted to
employees at exercise prices above the fair value of Common Stock during 1998.
Additionally, the Company granted options to purchase 90,500 and 44,000 shares
of Common Stock to outside consultants during 1999 and 1998, respectively. In
accordance with APB 25 and SFAS 123, the Company recorded aggregate compensation
expense of approximately $35,000 and $128,000 for the years ended December 31,
1999 and 1998, respectively, related to these options.
F-14
<PAGE> 77
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Option pricing models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Stock option activity under the Stock Option Plan is shown below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE NUMBER OF
PRICES SHARES
-------- ---------
<S> <C> <C>
Outstanding at January 1, 1998......................... $1.50 240,000
Granted.............................................. $0.01 99,400
Exercised............................................ $0.01 (99,400)
---------
Outstanding at December 31, 1998....................... $1.50 240,000
Granted.............................................. $5.20 3,421,500
Forfeited............................................ $5.00 (483,500)
---------
Outstanding at December 31, 1999....................... $4.96 3,178,000
=========
</TABLE>
The following table summarizes weighted average option exercise price
information:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------- --------------------------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
RANGE OF DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICES 1999 LIFE PRICE 1999 PRICE
- --------------- -------------- --------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$1.50 to
$5.00....... 2,642,500 7 $4.66 634,499 $3.57
$5.01 to
$7.00....... 535,500 9 6.44 20,000 7.00
--------- -- ----- ------- -----
2,642,500 $4.96 565,499 $3.67
========= == ===== ======= =====
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
LEASES
At December 31, 1999, the Company was committed under non-cancelable
operating and capital leases for the rental of office space and computer
equipment. At December 31, 1999, property and equipment included equipment
acquired under capital lease obligations of approximately $220,000.
F-15
<PAGE> 78
MEDSITE.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's future minimum capital and operating lease payments are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- -----------
<S> <C> <C>
2000................................................ $106,260 $ 1,675,438
2001................................................ 101,144 2,252,997
2002................................................ 79,572 2,098,541
2003................................................ -- 2,103,393
2004................................................ -- 2,106,655
Thereafter.......................................... -- 11,485,012
-------- -----------
286,976 $21,722,036
======== ===========
Less interest costs 32,259
--------
$254,717
========
</TABLE>
Rent expense amounted to $100,980 and $30,500 for the years ended December
31, 1999 and 1998, respectively.
EMPLOYMENT CONTRACTS
During 1999, the Company entered into employment agreements with certain of
its officers for an aggregate amount of approximately $3.6 million expiring
through 2002. Such agreements may be terminated by either party without cause as
defined in the agreements. The Company's remaining commitment as of December 31,
1999 under such agreements aggregated approximately $2.1 million.
14. SUBSEQUENT EVENTS
ACQUISITION
On January 8, 2000, the Company acquired American Medical Communications,
Inc., ("AMC") a continuing medical education provider, for 420,000 shares of
Common Stock. The Company recorded the acquisition under the purchase method of
accounting. The purchase price has been allocated to the assets acquired and
liabilities assumed, based upon the estimated fair values at the date of
acquisition. The excess purchase price was approximately $7.6 million and will
be amortized on a straight-line basis over a ten-year period.
INITIAL PUBLIC OFFERING
The Company is proposing an initial public offering of its Common Stock.
F-16
<PAGE> 79
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Total Health Products, Inc.
We have audited the accompanying balance sheet of Total Health Products,
Inc. as of November 30, 1999 and the related statements of operations,
stockholder's deficit, and cash flows for the eleven months then ended. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Health Products, Inc.
as of November 30, 1999 and the results of its operations and its cash flows for
the eleven months then ended in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG
New York, New York
February 11, 2000
F-17
<PAGE> 80
TOTAL HEALTH PRODUCTS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
NOVEMBER 30,
1999
--------------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 117
Accounts receivable, less allowance of $1,900............. 3,649
Inventories............................................... 726
Prepaid expenses and other current assets................. 107
-------
Total current assets........................................ 4,599
Property and equipment, net................................. 716
-------
Total assets................................................ $ 5,315
=======
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
Current liabilities:
Line of credit............................................ $ 1,750
Accounts payable.......................................... 2,425
Accrued expenses and other current liabilities............ 852
Loan payable, stockholder................................. 258
Deferred revenue.......................................... 1,444
Lease obligation payable -- current....................... 82
-------
Total current liabilities................................... 6,811
Lease obligation payable, net of current portion............ 175
-------
Total liabilities........................................... 6,986
Stockholder's (deficit):
Common stock, no par value, authorized 100 shares, 80
shares issued and outstanding.......................... 1
Accumulated deficit....................................... (1,672)
-------
Total stockholder's (deficit)............................... (1,671)
-------
Total liabilities and stockholder's (deficit)............... $ 5,315
=======
</TABLE>
See accompanying notes
F-18
<PAGE> 81
TOTAL HEALTH PRODUCTS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
NOVEMBER 30,
1999
-------------------
(IN THOUSANDS)
<S> <C>
Net Sales................................................... $12,801
Cost of sales............................................... 8,831
-------
Gross profit................................................ 3,970
Selling, general and administrative expenses................ 5,988
-------
Loss from operations........................................ (2,018)
Interest expense, net....................................... (83)
-------
Net loss.................................................... $(2,101)
=======
</TABLE>
See accompanying notes
F-19
<PAGE> 82
TOTAL HEALTH PRODUCTS, INC.
STATEMENT OF STOCKHOLDER'S (DEFICIT)
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
NOVEMBER 30, 1999
-----------------------------------------------
RETAINED TOTAL
COMMON STOCK EARNINGS/ STOCKHOLDER'S
--------------- ACCUMULATED EQUITY
SHARES AMOUNT (DEFICIT) (DEFICIT)
------ ------ ----------- -------------
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance at December 31, 1998..................... 80 $1 $ 579 $ 580
Net loss......................................... (2,101) (2,101)
Dividends paid................................... (150) (150)
-- -- ------- -------
Balance at November 30, 1999..................... 80 $1 $(1,672) $(1,671)
== == ======= =======
</TABLE>
See accompanying notes
F-20
<PAGE> 83
TOTAL HEALTH PRODUCTS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED
NOVEMBER 30,
1999
-------------------
(IN THOUSANDS)
<S> <C>
Cash flows from operating activities:
Net loss.................................................... $(2,101)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 188
Bad debt expense.......................................... 1,836
Increase (decrease) in cash attributable to changes in
operating assets and liabilities:
Accounts receivable.................................... (3,682)
Inventories............................................ (57)
Prepaid expenses and other current assets.............. 135
Accounts payable....................................... 1,444
Accrued expenses and other current liabilities......... 714
Deferred revenue....................................... 876
-------
Net cash used in operating activities....................... (647)
-------
Net cash used in investing activities -- purchase of
property and equipment.................................... (411)
Cash flows from financing activities:
Proceeds from line of credit borrowings................... 1,348
Dividends paid............................................ (150)
Principal payments on obligations under capital leases.... (62)
-------
Net cash provided by financing activities................... 1,136
-------
Net increase in cash........................................ 78
Cash, beginning of period................................... 38
-------
Cash, end of period......................................... $ 117
=======
Supplemental disclosure of cash flow information -- cash
paid during period for interest........................... $ 71
=======
</TABLE>
See accompanying notes
F-21
<PAGE> 84
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Total Health Products, Inc., the "Company," is located in Bloomfield, New
Jersey and was established in 1988 as an "S" Corporation. The Company's
principal business activity is to sell medical supplies and books to physicians.
The Company issues certificates to doctors through companies which sponsor
seminars for individual doctors to attend. Each doctor in attendance receives a
certificate. The certificates are returned to the Company and a credit to each
doctor's account is then recognized for use toward current or future purchases.
INVENTORIES
Inventories, consisting of medical supplies, are stated at the lower of
cost (first-in, first-out method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over the
estimated useful lives of the assets ranging from three to seven years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses the recoverability of the carrying
amounts of long-lived assets. A loss is recognized when expected undiscounted
future cash flows are less than the carrying amount of the asset. An impairment
loss is the difference by which the carrying amount of an asset exceeds its fair
value.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of its products. The
certificates that are received from the doctors are classified as deferred
revenue at the time the Company invoices the respective sponsoring companies,
and operating revenues are credited when shipment occurs.
ADVERTISING COSTS
Advertising costs are expensed as incurred and totaled approximately $4 for
the 11 month period ended November 30, 1999.
INCOME TAXES
The Company's stockholder has elected "S" Corporation status for federal
and state income tax purposes. As an "S" Corporation, the stockholder is liable
for federal and substantially all state income taxes on the Company's taxable
income and receives the benefit of losses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-22
<PAGE> 85
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
2. PROPERTY AND EQUIPMENT
Property and equipment as of November 30, 1999 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
-------------
<S> <C> <C>
Equipment................................................... $ 935 3-7 years
Leasehold improvements...................................... 41 life of lease
Furniture and fixtures...................................... 45 3-5 years
------
1,021
Less accumulated depreciation and amortization.............. 305
------
$ 716
======
</TABLE>
3. LINE OF CREDIT BORROWINGS
The Company has a $1,750 line of credit with a bank. Borrowings under this
line bear interest at the prime rate (8.5% at November 30, 1999) plus 1/4%, are
guaranteed by the Company's stockholder and are collateralized by the Company's
assets. The balance was paid in full in December 1999 in connection with the
sale of the Company (Note 10).
4. OBLIGATIONS UNDER CAPITAL LEASES
At November 30, 1999, property and equipment included equipment acquired
under capital lease obligations of $342 and accumulated amortization includes
$110.
Aggregate future required principal payments at November 30, 1999 are as
follows:
<TABLE>
<S> <C>
Year ending November 30,
2000...................................................... $101
2001...................................................... 101
2002...................................................... 88
----
Total............................................. 290
Less amount representing interest........................... 33
----
Present value of future lease payments...................... 257
Less current portion........................................ 82
----
$175
====
</TABLE>
5. RELATED PARTY TRANSACTIONS
At November 30, 1999, the Company had a loan payable to the stockholder of
$258. The loan bears interest at 12% per annum. Interest expense on this loan
for the 11 months ended November 30, 1999 was $31. The loan is subordinated to
the line of credit borrowing, and was paid in full on December 1, 1999 in
connection with the sale of the Company (Note 10).
6. RETIREMENT PLAN
The Company has a profit sharing plan (the "Plan"), which has a 401(k)
provision that was added in April 1997. The Plan covers all employees who meet
certain eligibility requirements, as indicated in the Plan, and deferral of
compensation under the 401(k) provision is voluntary. Employees who elect to
F-23
<PAGE> 86
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
participate are required to defer between 1% and 15% of their eligible
compensation. Prior to the addition of the 401(k) provision, contributions to
the profit sharing plan were made at the discretion of the Board of Directors.
Under the 401(k) provision, the Company is required to make matching
contributions equal to 50% of the first 5% of employee deferred compensation.
Company contributions for 1999 were $20.
7. MAJOR CUSTOMERS AND SUPPLIERS
The Company had sales to two major customers in 1999 aggregating
approximately $9.3 million. These two major customers account for approximately
$3.2 million in accounts receivable for 1999. The Company had purchases of
products for sale from four suppliers in 1999 aggregating $2,900.
8. COMMITMENTS
The Company is obligated under office and warehouse leases expiring between
2002 and 2004. Aggregate future rental payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
NOVEMBER 30
-----------
<S> <C>
2000........................................................ $71
2001........................................................ 71
2002........................................................ 40
2003........................................................ 30
2004........................................................ 5
</TABLE>
Rent expense for the eleven months ended November 30, 1999 was $71.
9. CONCENTRATION
The Company maintains its cash balances in one financial institution. These
balances are insured by the Federal Deposit Insurance Corporation up to $100.
10. SUBSEQUENT EVENTS
On November 30, 1999, the Company and its shareholders entered an Agreement
and Plan of Merger with Medsite.com, Inc. Under the terms of the agreement, in
December 1999, all shares of the Company were extinguished and the Company was
merged into a subsidiary of Medsite.com, Inc. In connection with this
transaction both the line of credit and the stockholder loan were paid in full.
F-24
<PAGE> 87
REPORT OF INDEPENDENT AUDITORS
Stockholder of
Total Health Products, Inc.
We have audited the accompanying balance sheets of Total Health Products,
Inc. as of December 31, 1998 and 1997, and the related statements of income and
retained earnings, and cash flows for the years then ended. 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 audit 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Total Health Products, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ AMPER, POLITZINER & MATTIA P.A.
Edison, New Jersey
August 13, 1999
F-25
<PAGE> 88
TOTAL HEALTH PRODUCTS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ---------
(IN THOUSANDS, EXCEPT
FOR SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 38 $ 9
Accounts receivable, less allowance for doubtful accounts
of $65 in 1998 and $100 in 1997........................ 1,803 1,153
Inventory................................................. 669 795
Prepaid expenses and other current assets................. 242 229
------ ------
Total current assets.............................. 2,752 2,186
Equipment, property and purchased software, net............. 494 93
------ ------
$3,246 $2,279
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Line of credit borrowings................................. $ 402 $ 179
Obligations under capital leases, current portion......... 77 --
Accounts payable.......................................... 981 1,113
Accrued expenses and other current liabilities............ 138 33
Loan payable, stockholder................................. 258 --
Unearned revenues......................................... 568 327
------ ------
Total current liabilities......................... 2,424 1,652
------ ------
Long-term liability
Obligations under capital leases, less current portion.... 242 --
Loan payable, stockholder................................. -- 258
------ ------
242 258
------ ------
Commitment
Stockholder's equity
Common stock, no par value, authorized 100 shares......... 1 1
80 shares issued and outstanding....................... 579 368
------ ------
Retained earnings......................................... 580 369
------ ------
Total stockholder's equity........................ $3,246 $2,279
====== ======
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE> 89
TOTAL HEALTH PRODUCTS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................... $11,128 $11,339
Cost of revenues............................................ 7,562 8,072
------- -------
Gross profit................................................ 3,566 3,267
Selling, general and administrative expenses................ 3,300 2,856
------- -------
Income from operations...................................... 266 411
Interest expense, net....................................... 55 43
------- -------
Net income.................................................. 211 368
Retained earnings, beginning of year........................ 368 --
------- -------
Retained earnings, end of year.............................. $ 579 $ 368
======= =======
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE> 90
TOTAL HEALTH PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1998 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income................................................ $ 211 $ 368
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 34 26
Provision for bad debts................................ 73 48
Increase (decrease) in cash attributable to changes in
operating assets and liabilities:
Accounts receivable.................................. (723) (725)
Inventory............................................ 126 (386)
Prepaid expenses and other current assets............ (14) (179)
Accounts payable..................................... (132) 494
Accrued expenses and other current liabilities....... 105 (38)
Unearned revenues.................................... 241 138
----- -----
Net cash used in operating activities....................... (79) (254)
----- -----
Net cash used in investing activities, purchases of
equipment and software.................................... (93) (65)
----- -----
Cash flows from financing activities
Principal payments on obligations under capital leases.... (22) --
Principal payments on loan payable, stockholder........... -- (63)
Proceeds from line of credit borrowings................... 223 174
----- -----
Net cash provided by financing activities................... 201 111
----- -----
Net increase (decrease) in cash............................. 29 (208)
Cash, beginning of year..................................... 9 217
----- -----
Cash, end of year........................................... $ 38 $ 9
===== =====
Supplemental disclosures of cash flow information, cash paid
during the year for interest.............................. $ 52 $ 43
===== =====
Supplemental disclosures of noncash investing and financing
activities, equipment and software purchased by
obligations under capital leases.......................... $ 319 $ --
===== =====
</TABLE>
See accompanying notes to financial statements
F-28
<PAGE> 91
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Total Health Products, Inc., (the "Company,") is located in Bloomfield, New
Jersey and was established in 1988 as a S-Corporation. The Company's principal
business activity is to sell wholesale medical supplies to individual doctors
throughout the United States. The Company issues certificates to doctors through
"Meeting" companies, which sponsor seminars for individual doctors to attend.
Each doctor in attendance receives a certificate from the Company. The
certificates are returned to the Company and a credit to each doctor's account
is then recognized for use toward current or future purchases. The Company is
currently integrating its operations through a newly designed website.
Inventories
Inventories, consisting of medical supplies, are stated at the lower of
cost (first in, first out method) or market.
Equipment, Property and Purchased Software
Equipment, property and purchased software are stated at cost less
accumulated depreciation and amortization. The Company provides for depreciation
and amortization primarily on the declining-balance method as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSETS USEFUL LIVES
------ -------------
<S> <C>
Leasehold improvements.................................. life of lease
Equipment............................................... 5-7 Years
Purchased software...................................... 3 Years
</TABLE>
Impairment of Long-Lived Assets
The Company periodically assesses the recoverability of the carrying
amounts of long-lived assets. A loss is recognized when expected undiscounted
future cash flows are less than the carrying amount of the asset. An impairment
loss is the difference by which the carrying amount of an asset exceeds its fair
value.
Revenue Recognition
The Company recognizes revenue upon shipment of its products. The coupons
that are received from the doctors are classified as unearned revenue at the
time the Company invoices the respective meeting companies, until shipment
occurs.
Advertising Costs
Advertising costs are expensed as incurred and totaled approximately $50
and $5 in 1998 and 1997, respectively.
Income Taxes
The Company's stockholder has elected "S" Corporation status for federal
and state income tax purposes. As a "S" Corporation, the stockholder is liable
for federal and substantially all state income taxes on the Company's taxable
income and receives the benefit of losses.
F-29
<PAGE> 92
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. EQUIPMENT, PROPERTY AND PURCHASED SOFTWARE
Details of equipment, property and purchased software as of December 31,
1998 and 1997, are as follows:
<TABLE>
<S> <C> <C>
Equipment............................................. $488 $135
Leasehold improvements................................ 41 41
Purchased software.................................... 82 --
---- ----
611 176
Less accumulated depreciation and amortization........ 117 83
---- ----
$494 $ 93
==== ====
</TABLE>
3. LINE OF CREDIT BORROWINGS
The Company has a $1,250 line of credit with a bank. Borrowings under this
line bears interest at the prime rate (7.75% at December 31, 1998) plus 1/4% and
is guaranteed by the Company's stockholder and is collateralized by the
Company's assets. This line expired on June 30, 1999, and is being renewed on a
monthly basis.
4. OBLIGATIONS UNDER CAPITAL LEASES
At December 31, 1998, equipment and purchased software acquired under
capital lease obligations include $319 and accumulated amortization includes $5.
Aggregate future required lease payments at December 31, 1998, are as
follows:
<TABLE>
<S> <C>
Year ending December 31,
1999...................................................... $101
2000...................................................... 101
2001...................................................... 101
2002...................................................... 70
----
Total....................................................... 373
Less amount representing interest........................... 54
----
Present value of future lease payments...................... 319
Less current portion........................................ 77
----
$242
====
</TABLE>
5. RELATED PARTY TRANSACTIONS
At December 31, 1998 and 1997, the Company had a loan payable to a
stockholder of $258. The loan bears interest at 12% per annum. Interest expense
on this loan for 1998 and 1997 was $31 and $29,
F-30
<PAGE> 93
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
respectively. The loan is subordinated to the line of credit borrowing (Note 3).
The loan is expected to be repaid by December 31, 1999.
6. RETIREMENT PLAN
The Company has a profit sharing plan (the "Plan"), which has a 401(k)
provision that was added in April 1997. The Plan covers all employees who meet
certain eligibility requirements, as indicated in the Plan, and deferral of
compensation under the 401(k) provision is voluntary. Employees who elect to
participate are required to defer between 1% and 15% of their eligible
compensation. Prior to the addition of the 401(k) provision, contributions to
the profit sharing plan were made at the discretion of the Board of Directors.
Under the 401(k) provision, the Company is required to make matching
contributions equal to 50% of the first 5% of employee deferred compensation.
Company contributions for 1998 and 1997, were $19 and $13, respectively.
7. MAJOR CUSTOMERS AND SUPPLIERS
The Company had sales to two major customers in 1998 and 1997, aggregating
approximately $7.5 million and $8.5 million, respectively. These two major
customers accounted for approximately $700 and $550 in account receivable
balances for 1998 and 1997, respectively. The Company had purchases of products
for sale from three suppliers in 1998 and 1997, aggregating $2.4 million and
$2.7 million, respectively.
8. COMMITMENT
The Company is obligated under office and warehouse leases expiring between
2002 and 2004. Aggregate future minimum rental payments are as follows:
<TABLE>
<S> <C>
Year Ending December 31,
1999...................................................... $49
2000...................................................... 71
2001...................................................... 71
2002...................................................... 37
2003...................................................... 30
Thereafter.................................................. 3
</TABLE>
Rent expense for 1998 and 1997, was $30 and $29, respectively.
9. CONCENTRATION
The Company maintains its cash balances in one financial institution. These
balances are insured by the Federal Deposit Insurance Corporation up to $100.
10. YEAR 2000 (UNAUDITED)
The Company has completed an assessment of the effect of Year 2000 Issues
on operations. Such assessment included consideration of: hardware, software,
and imbedded systems. A plan has been developed to remedy issues identified in
the assessment. The implementation of this plan provides for the Company to be
year 2000 compliant by the third quarter of 1999. The implementation of this
plan is currently on target and such progress is monitored monthly by the
management. Management estimates that the costs associated with these activities
will not have a material effect on the Company's operations.
F-31
<PAGE> 94
TOTAL HEALTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
11. SUBSEQUENT EVENTS
In July 1999 the Company entered into a five-year employment with an
employee, effective January 1, 1999. The agreement provides for, among other
things, a $100 bonus, a salary based upon a gross profit computation and a
payment in the event of sale or merger of the Company.
In June 1999, the stockholder of the Company has expressed an intent to
enter into a proposed transaction subject to the execution of a binding
definitive agreement to sell all of his stock in the Company.
F-32
<PAGE> 95
"MEET THE MANAGEMENT" PRESENTATION FOR
MEDSITE.COM, INC.
Prospective investors will be able to log on to a website maintained by
E*OFFERING Corp. at www.eoffering.com, where a prospectus is available for
review. Within designated sections of the prospectus, including the table of
contents and the Underwriting Section of the prospectus, an embedded hyperlink
Iclick here for "Meet the Management" PresentationJ will provide exclusive
access to the "Meet the Management" Presentation. This presentation highlights
selected information contained elsewhere in the prospectus. This presentation
does not contain all of the information that you should consider before
investing in our common stock. You should read the entire prospectus carefully,
including the "Risk Factors" and our financial statements and notes to those
financial statements, before making an investment decision.
Visual 1: Disclaimer
Imagery: Company logo.
Visual Text: The "Meet the Management" Presentation is part of our
prospectus. This presentation highlights selected information contained
elsewhere in this prospectus. This presentation does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the "Risk Factors" and
our financial statements and notes to those financial statements, before making
an investment decision.
Script: (Sundeep Bhan) The "Meet the Management" Presentation is part of
our prospectus. This presentation highlights selected information contained
elsewhere in this prospectus. This presentation does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the "Risk Factors" and
our financial statements and notes to those financial statements, before making
an investment decision.
Visual 2: Introduction
Imagery: See Description of Artwork on page A-7 of the Registration
Statement for a description of the image located on the inside front cover of
the prospectus.
Script: (Sundeep Bhan) Welcome to the "Meet the Management" Presentation
for Medsite.com. I'm Sundeep Bhan, Founder, Chairman and CEO. I would like to
introduce you to Gregory Scott, our Chief Financial Officer. We would like to
talk to you about Medsite.com, a leading provider of online business-to-business
ecommerce, information and communication products and services to the physician.
Visual 3: Industry Background
Imagery: Border and Company logo. Three arrows on the left of the page
pointing to the right.
Visual Text: Title: Industry Background. To the right of the first arrow
will appear the caption, "We believe that the physician is the focal point in
the healthcare industry." To the right of the second arrow will appear the
caption, "Approximately 660,000 practicing physicians, including residents, in
the United States directly or indirectly influence an estimated 80% of
healthcare expenditures." To the right of the third arrow will appear the
caption, "In 1999, healthcare expenditures in the United States totaled an
estimated $1.1 trillion."
Script: (Sundeep Bhan) ("Business -- Industry Background -- Healthcare
Industry Overview"): We believe that the physician is the focal point in the
healthcare industry. There are approximately 660,000 practicing physicians,
including residents, in the United States who directly or indirectly influence
an estimated 80% of healthcare expenditures. In 1999, healthcare expenditures in
the United States totaled an estimated $1.1 trillion, representing one of the
largest segments of our economy. Physicians are an attractive customer segment
because of their significant influence over healthcare expenditures and their
need for products and services. These needs are diverse and include purchasing
medical and office supplies for their practices, obtaining medical information
and educational materials, and communicating effectively with their colleagues
and patients. Physicians exert significant influence over the use of
prescription drugs and medical procedures, which encourages pharmaceutical
companies and other medical manufacturers and service companies to focus
significant efforts to reach the physician.
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Visual 4: Internet Opportunity
Imagery: Border and Company logo. Three arrows on the left of the page
pointing to the right.
Visual Text: Title: Internet Opportunity. To the right of the first arrow
will appear the caption, "e-Commerce." To the right of the second arrow will
appear the caption, "Information." To the right of the third arrow will appear
the caption, "Communication."
Script: (Sundeep Bhan) (see "Business -- Industry Background -- The
Internet and its Applicability to the Physician" and " -- Our Opportunity"): The
internet is increasingly being used as a business-to-business solution to
streamline existing business practices, improve productivity and reduce costs.
Physicians have recognized the power and applicability of the internet to
provide tools to address their e-commerce, information and communication needs.
As of June 1999, approximately 60% of physicians were regularly using the
internet.
The internet also provides a new marketing and sales channel for
pharmaceutical companies and other healthcare organizations to reach the
physician directly in an efficient and direct manner. These companies can use
the internet to target physicians by medical specialty, measure the
effectiveness of their sales efforts and quickly revise them in response to the
prompt feedback.
The internet has given rise to a broad but fragmented array of healthcare
e-commerce, information and communication websites. We believe there is an
opportunity for Medsite.com to become the physician's one-stop destination on
the internet by providing goods and services to physicians that satisfy their
ecommerce, information and communication needs.
Visual 5: Medsite.com Strategy
Imagery: Border and Company logo. Medsite.com logo in center of page. Five
circles filled with text heading will be connected to the logo as spokes.
Visual Text: Title: Medsite.com Strategy. Each of the five surrounding
circles will include one of the following captions: "Focus on physicians'
needs;" "Enhance the relationship between physicians and pharmaceutical
companies;" "Pursue strategic relationships to increase access to physicians,"
"Expand our product and service offerings;" and "Enhance our business through
strategic acquisitions."
Script: (Sundeep Bhan) (see "Business -- Strategy"): We seek to be the
leading online destination site for the physician and the preferred marketing
channel for pharmaceutical and other healthcare companies to reach the
physician. Key elements of our business strategy include the following.
We seek to attract and maintain a large and loyal physician audience by
actively assessing their needs and offering personalized products and services
under the Medsite brand. Our products and services are designed to increase
productivity and efficiency and to complement the daily routines and behavioral
patterns of the physician. We develop our products and services to fulfill
physicians' needs throughout their careers, beginning in medical school,
extending through residency and continuing into clinical practice.
We seek to expand our PharmaDirect program which facilitates communication
and commercial interaction between physicians and pharmaceutical companies. Our
PharmaDirect program currently provides physicians with cost reductions in
product and service purchases and a convenient way to learn about pharmaceutical
products. In addition, our PharmaDirect program provides pharmaceutical
companies with a convenient and cost effective medium to target product specific
information to physicians and to obtain marketing data. We currently have a
PharmaDirect program with top pharmaceutical companies. We seek to expand these
programs by forming relationships with additional pharmaceutical companies and
other healthcare organizations.
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We intend to continue to pursue strategic relationships with leading online
and offline medical organizations to expand our physician reach, lower our
customer acquisition cost, increase our revenues and promote our brand as the
leading online destination for the physician. We offer our products and services
through an extensive online distribution network. Medical books and software
from Medsite Books, for example, are offered on over 200 websites, universities
and healthcare organizations. We seek to expand the scope of the existing
relationships we have with companies and healthcare organizations, including the
American Medical Association, American Medical Student Association, Healtheon/
WebMD, Medscape and Physicians' Online. In addition, we intend to expand our
international distribution channels by forming relationships with leading
international companies and organizations.
We intend to selectively augment our existing offerings with new products
and services through internal development, relationships with third parties or
by acquisition. In November 1999, we entered into an agreement with a large
distributor of medical supplies which will enable us to offer a comprehensive
selection of over 40,000 medical supplies. We are also developing new products
and services with other providers, including Reuters Health, Inc. and Harrison's
Online, a division of McGraw Hill. We intend to leverage our established
platform to efficiently cross-promote our products and services and
cost-effectively introduce new products and services to our existing customer
base.
We intend to continue to acquire companies that enhance our business. In
December 1999, we acquired Total Health Products, to increase both the number of
pharmaceutical companies using PharmaDirect and increase our overall customer
base. In January 2000, we acquired American Medical Communications, Inc., to
strengthen our relationship with pharmaceutical companies and increase the
breadth and quality of our medical education product offerings. We intend to
continue to identify and acquire companies with potential for expanded growth
through leveraging the internet that either diversify our product and service
offerings to physicians, increase our access to additional physicians, or
strengthen our relationship with pharmaceutical companies.
Visual 6: Products and Services
Imagery: Border and Company logo. Three boxes below labeled with the
headings "e-Commerce," "Information," and "Communication."
Visual Text: Title: Medsite.com Products and Services. Under the
e-Commerce heading will appear captions listing the following: "Medsite
Supplies," "Medsite Books and Software," and "Medsite Flier." Under the
Information heading will appear captions listing the following: "Medsite
Clinical Medline," "Medsite ISI Journal Tracker," "Medsite University,"
"Interactive Grand Rounds," and "Medsite Money." Under the Communication heading
will appear captions listing the following: "Medsite MedMail" and "Medsite
Calendar."
Script: (Sundeep Bhan) (see "Business -- Overview", "Business -- Products
and Services"): We offer a comprehensive suite of web-based products and
services that are designed to address physicians' e-commerce, information and
communication needs, and to provide solutions that save the physician time and
money and increase the time available for patient interaction. In addition, we
provide products and services to companies seeking to reach the physician,
including pharmaceutical and medical device companies.
Medsite Supplies enables physicians to purchase their office and medical
supplies online. Currently, we sell over 3,000 products commonly used in
physicians' offices, ranging from gauze pads and disposable gloves to surgical
instruments and diagnostic equipment. We recently entered into an agreement
which will enable us to increase the number of products we offer our customers
to more than 40,000 items from over 2,500 different manufacturers.
We operate Medsite Books which we believe is the largest medical bookstore
either on or off the internet. Medsite Books offers more than 50,000 medical
books and software titles for physicians, residents and medical students. By
comparison, traditional medical bookstores usually offer approximately 5,000
titles. Medical books from Medsite Books are offered on over 200 websites,
universities, healthcare
A-3
<PAGE> 98
organizations such as the American Medical Association, the American Medical
Student Association, Healtheon/WebMD, Medscape, and Physicians' Online.
Medsite Filer is a secure, online service designed to save physicians' time
by allowing them to answer once questions common to all healthcare managed care
application forms. Medsite Filer then generates the appropriate paper-based
forms that meet the filing requirements of each managed care plan.
Next, we offer a suite of information management tools designed to help
physicians filter and organize medical content from a vast number of sources,
including publishers of medical information and websites.
Medsite Clinical Medline, also known as Medcite Clinical Medline, is an
advanced search engine provided free of charge to the student, resident or
physician seeking medical information online. This product enables the user to
retrieve information from the National Library of Medicine's MEDLINE database
and contains recent references and abstracts, as well as archive information
from the last ten years.
The Medsite ISI Journal Tracker is a subscription service that allows
physicians to receive summaries of 25 journals of their choice from a library of
over 3,000 medical publications. The subscriber receives an email of the table
of contents and abstracts for each selected journal. Journal Tracker also allows
the user to purchase full-text versions of specific articles.
Medsite University is an online source for medical education, including
accredited Continuing Medical Education, or CME. Medsite University provides CME
courses online in accordance with an agreement we have with Healthstream, Inc.
Our acquisition of American Medical Communications, Inc. expands our library of
online courses and enables us to create customized medical content sponsored by
pharmaceutical and other healthcare companies.
Interactive Grand Rounds is an online sponsored educational product that
targets physicians by specialty. We create content in cooperation with physician
experts who serve guest editors. Each Interactive Grand Rounds program is
developed in cooperation with a nationally recognized medical journal. For
example, we launched our Interactive Grand Rounds in Cardiology in November 1999
in cooperation with The American Journal of Cardiology.
Medsite Money provides a suite of financial services. Key services include
a Medsite credit card co-branded with MBNA, medical equipment leasing with Media
Capital, and a financial information page called My Medsite Money. My Medsite
Money provides personalization features that enable users to monitor their own
stock portfolios and to receive emails of news relevant to their medical
practices or personal interests.
Our communications products and services allow physicians to efficiently
communicate with their colleagues and patients and keep track of their schedules
from any location with internet access.
Medsite MedMail is an online email service for medical professionals.
Physicians can create personalized features on Medsite MedMail, including the
ability to receive medical and financial news and stock prices by email. We are
developing services such as voicemail and pager messaging to help address the
medical community's need for messaging and communication.
Medsite Calendar, a scheduling tool for the medical community, features a
complete suite of services to organize schedules and appointments. The medical
event calendar is a resource that allows the physician to research, locate and
register for any medical event, conference or meeting of interest. In addition,
event organizers can use Medsite Event Calendar to market and publicize their
events by posting relevant information on their upcoming events.
Visual 7: Commercial Relationships
Imagery: Border and Company logo. Five arrows on the left of the page
pointing to the right.
Visual Text: Title: Commercial Relationships. To the right of the first
arrow will appear the caption, "American Medical Student Association." To the
right of the second arrow will appear the caption, "Henry Schein, Inc." To the
right of the third arrow will appear the caption, "Matthews Medical Books.,"
A-4
<PAGE> 99
To the right of the fourth arrow will appear the caption, "Medscape." To the
right of the fifth arrow will appear the caption, "Physicians' Online."
Script: (Sundeep Bhan) (see "Business -- Commercial Relationships"): We
enter into contracts with websites, healthcare organizations, universities, and
medical goods and services companies to diversify our products and services and
expand our physician reach. We have key relationships with the American Medical
Student Association, an independent association of physicians-in-training;
Matthews Medical Books, a distributor of medical text books in the United
States; Medscape, a website that provides medical information to healthcare
professionals; and Physicians' Online, a website that provides medical content
to healthcare professionals.
Visual 8: Competition
Imagery: Border and Company logo. Five arrows on the left of the page
pointing to the right.
Visual Text: Title: Competition. To the right of the first arrow will
appear the caption, "Catalogue and sales-force based medical distributors." To
the right of the second arrow will appear the caption, "Book retailers." To the
right of the third arrow will appear the caption, "Continuing medical education
programs." To the right of the fourth arrow will appear the caption,
"Conferences and symposia." To the right of the fifth arrow will appear the
caption, "Healthcare-related websites."
Script: (Sundeep Bhan) (see "Business -- Competition") We compete with
numerous companies and organizations, including traditional off-line companies
such as catalogue and sales-force based medical distributors, book retailers,
continuing medical education programs and conferences and symposia. We also face
significant online competition from healthcare-related websites, including
medical professional websites and book retailers. In addition, companies with
whom we currently have relationships, including Medscape and Healtheon/WebMD,
may compete with us.
And with that, I will turn it over to Gregory Scott for an overview of our
financial results. Gregory . . .
Visual 9: Financial Summary
Imagery: (See "Selected Financial Data") Statement of Operations.
Visual Text: (See "Selected Financial Data") Statement of Operations.
Script: (Gregory Scott) (See "Management's Discussion and
Analysis -- Results of Operation" and "-- Recent Developments"): Thanks Sundeep.
Historically, our revenues have been generated primarily through the sale of
medical books over the internet. Since November 1999, we significantly expanded
our product and service offerings. These expanded offerings include a
comprehensive selection of medical books, supplies, and additional services to
provide physicians access to medical information and to manage communications
over the internet.
Net sales increased from $1.4 million for the year ended December 31, 1998
to $8.9 million for the year ended December 31, 1999. The increase in sales is
primarily due to the increased number of customers purchasing medical books from
us, in addition to the $1.5 million of sales generated by THP in December 1999.
Cost of sales increased from $1.3 million for the year ended December 31,
1998 to $8.9 for the year ended December 31, 1999. This increase is primarily
due to the increased unit volume of medical books sold and shipped. Cost of
sales increased as a percentage of net sales from 91.7% for the year ended
December 31, 1998 to 99.9% for the year ended December 31, 1999. The increase
reflects our significant initial use of promotions, discounts and coupons to
build our customer base.
We expect the cost of sales to increase in absolute dollar terms as our
sales volume increases, and expect our gross margin to improve, as our use of
discounts and coupon programs becomes a lower percentage of sales. We expect our
gross margin will fluctuate based on a number of factors that will be
significantly influenced by pricing conditions and the competitive environment.
These factors include the cost of our products, our pricing strategy and
policies relative to the cost of our products, the use of promotions, discounts
and coupons, our product mix, and our pricing strategy for shipping costs.
Marketing and sales expenses increased from $540,802 for the year ended
December 31, 1998 to $7.2 million for the year ended December 31, 1999. The
increase was primarily due to growth in our direct sales force and marketing
staff, as well as an increase in promotional spending targeted at building our
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<PAGE> 100
brand, increasing our client base and growing sales. We expect an increase in
the absolute dollars spent for marketing and sales resulting from continued
aggressive promotion of our products and services. To the extent that our
business grows in the future, we expect increased costs related to customer
service and product management activities. Marketing and sales expenses may vary
considerably from quarter to quarter, depending on the timing of promotional
activities and advertising.
Product and technology development expenses increased from $172,020 for the
year ended December 31, 1998 to $3.4 million for the year ended December 31,
1999. This increase was primarily due to the expansion of the products and
services available on our website and the increase in the number of employees,
contract programmers and consultants engaged in this effort. We believe that
continued investment in product development is critical to achieving our
objectives and expect product development costs to increase in absolute dollars.
General and administrative expenses increased from $1.3 million for the
year ended December 31, 1998 to $7.1 million for the year ended December 31,
1999. This increase was primarily due to the increased number of employees we
hired to develop and manage our acquisition and financing activities, accounting
and administrative operations, and employee recruitment and training. We expect
general and administrative expenses to increase in absolute dollars as we
continue to expand our staff and incur additional costs related to anticipated
growth of the business.
Depreciation and amortization expenses increased from $14,141 for the year
ended December 31, 1998 to $332,961 for the year ended December 31, 1999. The
increase was due to increased expenditures on property and equipment necessary
to support our growth. In addition, the acquisition of THP resulted in goodwill
of $12.3 million, which is being amortized over ten years starting in December
1999. We expect expenditures for property and equipment to increase in the
future, as we build out our newly leased office space, acquire additional
computer equipment, and acquire furniture and equipment for additional staff.
No provision for federal and state income taxes was recorded as we incurred
net operating losses in each of the past three years. As of December 31, 1999,
we had approximately $17.9 million of federal and state net operating loss
carryforwards which expire in varying amounts beginning in 2018. Due to the
uncertainty regarding the ultimate utilization of the net operating loss
carryforwards, we have not recorded any benefit for losses and a valuation
allowance has been recorded for the entire amount of the net deferred tax asset.
In December 1999, we acquired Total Health Products, Inc., or THP, a
company that sells medical supplies and books to physicians with pharmaceutical
company sponsorship. This acquisition provides us with access to over 200,000
additional physicians. We intend to transition most of THP's physicians to our
online business. In the acquisition, we obtained our current inventory and
fulfillment facilities. Our financial statements for the year ended December 31,
1999 reflect only one month of combined operations with THP. THP accounted for
approximately $1.5 million of net sales in 1999. In January 2000, we acquired
American Medical Communications, Inc., or AMC, a creator of medical education
information.
Because of these recent acquisitions and other factors, we do not believe
that historical financial results are necessarily indicative of results to be
expected for future periods. In particular, we expect that revenues derived from
THP's operations may significantly impact our results of operations for the
foreseeable future.
Sundeep.
Visual 10: End of Presentation
Imagery: See Description of Artwork on page A-7 of the Registration
Statement for a description of the image located on the inside and outside of
the back cover of the prospectus.
Script: (Sundeep Bhan): We hope that this presentation was helpful in
understanding the business model of Medsite.com and the strategy that our
management team intends to execute. We encourage you to refer back to the
prospectus for additional support and disclosure as well as to take a look at
the "Risk Factors" in detail. Again, thank you for your interest in Medsite.com.
A-6
<PAGE> 101
[DESCRIPTION OF ARTWORK]
Inside Front Cover
Text: The physician's home on the internet.
Graphic: A computer screen displaying the Medsite logo with a stethoscope
resting on the computer screen.
Gatefold
Text: Our Mission: We us the internet to create products and services that
save physicians time and money and foster a climate for improved patient care.
Graphic: There is a large circle in the center of the page containing the
words "Physicians" and "medsite" with the Medsite Logo. The large circle is
connected on the right to another circle containing the word "Patients" by a
line with arrows on each end. The large circle is connected on the top to three
circles connected to each other by lines. Above the first circle are the words
"Medical Device Companies." Above the middle circle are the words
"Pharmaceutical Companies." Above the last circle are the words "Healthcare
Organizations." The large circle is connected on the left to five circles
connected to form a "V" shape. Each of the circles along the "V" shape is
accompanied by text. From the circle at uppermost point of the "V" to the last
circle at the bottom of the "V" the text reads "Books and Software," "Medical
Supplies." "Email and Calendar," "Electronic Information" and "Other Services."
At the bottom of the page there is a rectangular block containing three
images of web pages with the words "e-Commerce," "Information" and
"Communication" below. There is also text which reads "Medsite.com is a leading
provider of online e-commerce, information and communication solutions for
physicians," followed by the Medsite logo.
Inside Back Cover
Blank
Outside Back Cover
Company Logo
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<PAGE> 102
[LOGO]
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the securities being registered. All amounts shown are estimates except for
the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................ $ 26,400
NASD filing fee............................................. 10,500
NASDAQ National Market Fees................................. 95,000
Printing and engraving expenses............................. 250,000
Accountant's fees and expenses.............................. 300,000
Legal fees and expenses..................................... 650,000
Miscellaneous............................................... 18,100
----------
Total.................................................. $1,350,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VIII of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the Registrant if such
person acted in good faith and in a manner reasonably believed to be in and not
opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 1997, the Registrant has issued and sold the following
unregistered securities:
(1) Between March 1999 and December 31, 1999, the Registrant granted
and issued options to purchase 3,178,000 shares of common stock to
employees and consultants, of the registrant under the Registrant's 1999
Stock Plan.
(2) During 1997, the Company issued convertible promissory notes
aggregating $118,500 to nine individuals and during 1998 the Company issued
convertible promissory notes aggregating $215,000 to 5 individuals.
(3) In December 1997, the Registrant granted and issued options to
purchase an aggregate of 240,000 shares of common stock to Sundeep Bhan,
Sameer Shariff, Sanjay Pingle and Rajnish Kapoor for an aggregate exercise
price of $360,000.
(4) In February 1999, the Registrant issued and sold 3,000 shares of
its class A preferred stock convertible into an aggregate of 6,378,907
shares of common stock to entities affiliated with Argentum Capital
Partners L.P. for an aggregate purchase price of $3,000,000.
II-1
<PAGE> 104
(5) In March 1999, the Registrant completed a two-for-one stock split
of its outstanding common stock in which each share of common stock was
split into two shares of common stock.
(6) In October 1999, the Registrant issued and sold shares of class B1
preferred stock convertible into an aggregate of 5,539,088 shares of common
stock to Reuters Holding Switzerland S.A, CB Capital L.P., Brookside
Partners Fund, L.P., TCW/ICICI India Private Equity AMP Fund, entities
affiliated with Weiss, Peck & Greer, Delmas Business LTD, Hikari Tsushin,
Inc., Argentum Capital Partners II, L.P., Metchem Engineering SA, Tevet
Healthcare Corporation, Merchant Capital Inc., Everest Venture Partners II,
individuals associated with Wilson Sonsini Goodrich & Rosati, P.C., and
thirteen other individual investors for an aggregate purchase price of
$30,464,984. In connection with this sale of securities, Registrant paid an
advisory fee of approximately $2.8 million.
(7) In October 1999, the Registrant issued shares of class B2
preferred stock convertible into an aggregate of 1,200,000 shares of common
stock to MEDNUT LLC, Investcare Partners Limited Partnership, Jordex
Resources, Inc. and Aspen Associates LLC in exchange for full cancellation
of $6,000,000 of convertible promissory notes issued by the Registrant in
June 1999.
(8) In December 1999, the Registrant issued shares of class B1
preferred stock convertible into an aggregate of 3,574,708 shares of common
stock to CB Capital L.P., Morgan Stanley Dean Witter Partners, L.P., The
Goldman Sachs Group, Inc., Reuters Holding Switzerland S.A., Brookside
Capital Partners Fund, L.P., MEDNUT LLC, Investcare Partners Limited
Partnership, Hikari Tsushin, Inc., Jordex Resources, Inc., Tenet Healthcare
Corporation, entities associated with Weiss, Peck & Greer, Delmas Business
LTD, Metchem Engineering SA and two individual investors for an aggregate
purchase price of $19,660,894.
(9) In December 1999, the Registrant issued 827,273 shares of common
stock to the former stockholder of Total Health Products, Inc. in
connection with the acquisition of Total Health Products, Inc.
(10) In January 2000, the Registrant issued 420,000 shares of common
stock to the former shareholders of American Medical Communications, Inc.
in connection with the acquisition of American Medical Communications, Inc.
(11) From July 1998 to December 1999 the Registrant issued warrants to
purchase an aggregate of 661,422 shares of common stock to 26 individuals,
three trusts and East 88th Street Corp., White Rock Tuscon LLC, Internet
Ventures Partners LLC, Dan Lee Ltd. and Dall Inc.
There were no underwriters involved in connection with any transaction set
forth above. The issuances of the securities set forth in paragraphs 1 and 3 of
this Item 15 were deemed to be exempt from registration under the Securities Act
in reliance upon Rule 701 promulgated thereunder as grants of options pursuant
to written compensatory benefit plans approved by the Registrant's Board of
Directors. The other issuances set forth in this Item 15 were deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering.
In all of such transactions, the recipients of securities represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends
were affixed to the securities issued.
II-2
<PAGE> 105
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of
Registrant*
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant to be filed promptly after the closing of the
offering
3.3 Bylaws of the Registrant
3.4 Form of Bylaws of the Registrant to be in effect after the
closing of the offering
4.1 Specimen Common Stock Certificate*
4.2 Investor Rights Agreement by and among Registrant and
Purchasers of Registrant's Class A, B-1 and B-2 Preferred
Stock, Sundeep Bhan, Sanjay Pingle, Sameer Shariff, Rajnish
Kapoor, Mercer Management Consulting, Merchant Capital, Inc.
and Douglas Mack
4.3 Rights Agreement by and among Registrant and the former
shareholders of American Medical Communications, Inc.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation*
10.1 Form of Indemnification Agreement between the Registrant and
each of its directors and officers*
10.2 1999 Stock Option Plan
10.3 2000 Stock Option Plan and form of agreement thereunder
10.4 2000 Employee Stock Purchase Plan and form of agreement
thereunder
10.5 2000 Director Option Plan and form of agreement thereunder
10.6 Employment Agreement by and between Registrant and Sundeep
Bhan
10.7 Employment Agreement by and between Registrant and Sameer
Shariff
10.8 Employment Agreement by and between Registrant and Sanjay
Pingle
10.9 Employment Agreement by and between Registrant and Gregory
Scott
10.10 Employment Agreement by and between Registrant and Douglas
Mack
10.11 Employment Agreement by and between Registrant and Vincent
Friedewald, Jr., M.D.
10.12 Lease Agreement by and between Registrant and
Broadway -- 13th Associates, L.P.
10.13 Lease Agreement by and between Registrant and 59 Maiden Lane
Associates, LLC
10.14 Supply Agreement by and between Registrant and Matthews
Medical Books+*
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.1a Consent of Amper, Politziner & Mattia P.A.
23.2 Consent of Counsel (see Exhibit 5.1)*
24.1 Power of Attorney (see page II-5)
27.1 Financial Data Schedules
</TABLE>
- ---------------
* To be filed by amendment
+ Confidential treatment has been requested for portions of this exhibit. The
omitted portions have been separately filed with the Commission.
II-3
<PAGE> 106
(B) FINANCIAL STATEMENT SCHEDULES.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto, duly
authorized, in the City of New York, New York, on February 17, 2000.
Medsite.com, Inc.
By: /s/ SUNDEEP BHAN
------------------------------------
Sundeep Bhan
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Sundeep Bhan and Gregory Scott, and each
of them his attorney-in-fact, with the power of substitution, for him in any and
all capacities, to sign any amendment or post-effective amendment to this
Registration Statement on Form S-1 or abbreviated registration statement
(including, without limitation, any additional registration filed pursuant to
Rule 462 under the Securities Act of 1933) with respect hereto and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ SUNDEEP BHAN President, Chief Executive Officer and February 17, 2000
- ------------------------------------- Chairman of the Board of Directors
Sundeep Bhan (Principal Executive Officer)
/s/ GREGORY SCOTT Executive Vice President, Chief Financial February 17, 2000
- ------------------------------------- Officer and Secretary (Principal Financial
Gregory Scott and Accounting Officer)
/s/ SAMEER SHARIFF Executive Vice President, February 17, 2000
- ------------------------------------- Sales & Marketing
Sameer Shariff
/s/ SANJAY PINGLE Executive Vice President, February 17, 2000
- ------------------------------------- Products
Sanjay Pingle
/s/ DOUGLAS MACK Senior Vice President, February 17, 2000
- ------------------------------------- e-Commerce
Douglas Mack
/s/ WALTER BARANDIARAN Director February 17, 2000
- -------------------------------------
Walter Barandiaran
/s/ MITCHELL BLUTT, M.D. Director February 17, 2000
- -------------------------------------
Mitchell Blutt, M.D.
/s/ GARY STEIN Director February 17, 2000
- -------------------------------------
Gary Stein
</TABLE>
II-5
<PAGE> 108
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Medsite.com., Inc.
and subsidiary as of December 31, 1999 and 1998 and the related consolidated
statements of operations, stockholders' (deficit) and cash flows for each of the
three years in the period ended December 31, 1999 and have issued our report
thereon dated February 9, 2000. Our audits also included the consolidated
financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
New York, New York
February 9, 2000
II-6
<PAGE> 109
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO WRITE-OFFS BALANCE AT
BEGINNING COSTS AND OTHER NET OF END
OF YEAR EXPENSES ACCOUNTS RECOVERIES OF YEAR
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts 1997........ $ -- $ -- $ --
Allowance for Doubtful Accounts 1998........ $ -- $ 32,125 $ 32,125
Allowance for Doubtful Accounts 1999........ $32,125 $184,625 $216,750
</TABLE>
II-7
<PAGE> 110
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER
- ------- ----------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of
Registrant*
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant to be filed promptly after the closing of the
offering
3.3 Bylaws of the Registrant
3.4 Form of Bylaws of the Registrant to be in effect after the
closing of the offering
4.1 Specimen Common Stock Certificate*
4.2 Investor Rights Agreement by and among Registrant and
Purchasers of Registrant's Class A, B-1 and B-2 Preferred
Stock, Sundeep Bhan, Sanjay Pingle, Sameer Shariff, Rajnish
Kapoor, Mercer Management Consulting, Merchant Capital, Inc.
and Douglas Mack
4.3 Rights Agreement by and among Registrant and the former
shareholders of American Medical Communications, Inc.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation*
10.1 Form of Indemnification Agreement between the Registrant and
each of its directors and officers*
10.2 1999 Stock Option Plan
10.3 2000 Stock Option Plan and form of agreement thereunder
10.4 2000 Employee Stock Purchase Plan and form of agreement
thereunder
10.5 2000 Director Option Plan and form of agreement thereunder
10.6 Employment Agreement by and between Registrant and Sundeep
Bhan
10.7 Employment Agreement by and between Registrant and Sameer
Shariff
10.8 Employment Agreement by and between Registrant and Sanjay
Pingle
10.9 Employment Agreement by and between Registrant and Gregory
Scott
10.10 Employment Agreement by and between Registrant and Douglas
Mack
10.11 Employment Agreement by and between Registrant and Vincent
Friedewald, Jr., M.D.
10.12 Lease Agreement by and between Registrant and
Broadway -- 13th Associates, L.P.
10.13 Lease Agreement by and between Registrant and 59 Maiden Lane
Associates, LLC
10.14 Supply Agreement by and between Registrant and Matthews
Medical Books+*
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.1a Consent of Amper, Politziner & Mattia P.A.
23.2 Consent of Counsel (see Exhibit 5.1)*
24.1 Power of Attorney (see page II-5)
27.1 Financial Data Schedules
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment has been requested for portions of this exhibit. The
omitted portions have been separately filed with the Commission.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
MEDSITE.COM, INC.
A DELAWARE CORPORATION
Medsite.com, Inc., a corporation organized and existing under the laws
of the State of Delaware, does hereby certify:
1. The name of the corporation is Medsite.com, Inc. (the
"Corporation"). The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on November 25, 1997.
2. The amendment and restatement herein set forth has been duly
approved by the Board of Directors of the Corporation and by the stockholders of
the Corporation pursuant to Sections 141, 228 and 242 of the General Corporation
Law of the State of Delaware ("Delaware Law"). Approval of this amendment and
restatement was approved by a written consent signed by less than all of the
stockholders of the Corporation pursuant to Section 228 of the Delaware Law, and
notice has been given in accordance with Section 228(d) of the Delaware Law to
those stockholders not signing such written consent.
3. The restatement herein set forth has been duly adopted pursuant to
Section 245 of the Delaware Law. This Amended and Restated Certificate of
Incorporation restates and integrates and amends the provisions of the
Corporation's Certificate of Incorporation.
4. The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
ARTICLE I
The name of this corporation is Medsite.com, Inc. (hereinafter, the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
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.
<PAGE> 2
ARTICLE IV
This Corporation is authorized to issue two classes of shares to be
designated, respectively, Common Stock and Preferred Stock. Each share of Common
Stock shall have a par value of $0.0001 and each share of Preferred Stock shall
have a par value of $0.0001. The total number of shares of Common Stock this
Corporation shall have authority to issue is [_____] and the total number of
shares of Preferred Stock this Corporation shall have authority to issue is
[_____].
The Preferred Stock initially shall be undesignated as to series. Any
Preferred Stock not previously designated as to series may be issued from time
to time in one or more series pursuant to a resolution or resolutions providing
for such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board), and such resolution or resolutions shall
also set forth the voting powers, full or limited or none, of each such series
of Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights of each such series of Preferred
Stock and the qualifications, limitations or restrictions of such powers,
designations, preferences or rights. The Board of Directors is also authorized
to fix the number of shares of each such series of Preferred Stock. The Board of
Directors is authorized to alter the powers, designation, preferences, rights,
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series.
Each share of Preferred Stock issued by the Corporation, if reacquired
by the Corporation (whether by redemption, repurchase, conversion to Common
Stock or other means), shall upon such reacquisition resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series and
available for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion, if applicable, of the
Preferred Stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
The Board of Directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. At the first annual meeting of stockholders following the date
hereof, the term of office of the Class I directors shall expire and Class I
directors shall be elected for a full term of three years. At the second annual
meeting of stockholders following the date hereof, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the date hereof, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed
-2-
<PAGE> 3
the directors of the class whose term expire at such annual meeting. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director.
ARTICLE VII
Section 1. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
Section 2. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt, alter,
amend or repeal the Bylaws of the Corporation. The affirmative vote of at least
a majority of the Board of Directors then in office shall be required to adopt,
amend, alter or repeal the Corporation's Bylaws. The Corporation's Bylaws also
may be adopted, amended, altered or repealed by the affirmative vote of the
holders of at least a majority of the voting power of the shares entitled to
vote at an election of directors. No Bylaw hereafter legally adopted, amended,
altered or repealed by the stockholders of the Corporation shall invalidate any
prior act of the directors or officers of the Corporation which would have been
valid if such Bylaw had not been adopted, amended, altered or repealed.
Section 3. Elections of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
Section 4. At the election of directors of the Corporation, each holder
of Common Stock shall be entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at any election of directors.
Section 5. The number of directors which constitute the whole Board of
Directors shall be fixed exclusively in the manner designated in the Bylaws of
the Corporation.
ARTICLE VIII
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Section 2. The Corporation shall indemnify to the fullest extent
permitted by law, as now or hereinafter in effect, any person made or threatened
to be made a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he, his testator or
intestate is or was a director or officer of the Corporation or any predecessor
of the Corporation or serves or served at any other enterprise as a director,
officer, employee or agent at the request of the Corporation or any predecessor
to the Corporation and such right to indemnification shall continue as to a
person who has ceased to be a director or officer of the Corporation and shall
inure to the benefit of his or her heirs, executors and personal and legal
representatives; PROVIDED, HOWEVER, that, except for proceedings to enforce
rights to indemnification, the Corporation shall not be obligated to indemnify
any director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation.. The right to indemnification
conferred by this Section 2 shall include the right to be paid by the
-3-
<PAGE> 4
Corporation the expenses incurred in defending or otherwise participating in any
proceeding in advance of its final disposition. The Corporation may indemnify to
the fullest extent permitted by law, as now or hereinafter in effect, any person
made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was an employee or agent of the Corporation or
any predecessor of the Corporation or serves or served at any other enterprise
as a director, officer, employee or agent at the request of the Corporation or
any predecessor to the Corporation. The rights to indemnification and to the
advancement of expenses conferred in this Section 2 shall not be exclusive of
any other right which any person may have or hereafter acquire under this
Amended and Restated Certificate Incorporation (as amended and restated from
time to time, the "Restated Certificate of Incorporation"), the Bylaws of the
Corporation, any statute, agreement, vote of the stockholders of the Corporation
or disinterested directors of the Corporation or otherwise.
Section 3. Neither any amendment nor repeal of any Section of this
Article VIII, nor the adoption of any provision of the Restated Certificate of
Incorporation inconsistent with this Article VIII, shall adversely affect any
right or protection of any director or officer established pursuant to this
Article VIII existing at the time of such amendment, repeal or adoption of an
inconsistent provision, including without limitation by eliminating or reducing
the effect of this Article VIII, for or in respect of any act, omission or other
matter occurring, or any action or proceeding accruing or arising (or that, but
for this Article VIII, would accrue or arise) prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
Section 1. Except as otherwise provided for or fixed by or pursuant to
the provisions of Article IV hereof in relation to the rights of the holders of
Preferred Stock to elect directors under specified circumstances, newly-created
directorships resulting from any increase in the number of directors, created in
accordance with the Bylaws of the Corporation, and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 2. Any director or the entire Board of Directors may be removed
from office at any time, but only for cause, and only by the affirmative vote of
the holders of at least a majority of the voting power of the issued and
outstanding capital stock of the Corporation entitled to vote in the election of
directors.
-4-
<PAGE> 5
ARTICLE XI
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
ARTICLE XII
Section 1. Stockholders of the Corporation may not take action by
written consent in lieu of a meeting but must take any actions at a duly called
annual or special meeting.
Section 2. Unless otherwise required by law, special meetings of the
stockholders of the Corporation, for any purpose or purposes, may be called only
by either (i) the Board of Directors of the Corporation, (ii) the Chairman of
the Board of Directors of the Corporation, if there be one, (iii) the Chief
Executive Officer of the Corporation or (iv) the President of the Corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation."
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<PAGE> 6
IN WITNESS WHEREOF, Medsite.com, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Sundeep Bhan and attested
to by Gregory Scott, its Secretary, on February __, 2000.
Medsite.com, Inc.
a Delaware Corporation
By:
-----------------------------------
Sundeep Bhan,
Chief Executive Officer
ATTEST:
By:
----------------------------
Gregory Scott,
Secretary
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EXHIBIT 3.3
MEDSITE.COM, INC.
(Delaware)
AMENDED AND RESTATED BYLAWS
ARTICLE ONE
STOCKHOLDERS
SECTION 1.1 Annual Meetings. An annual meeting of stockholders to elect
directors and transact such other business as may properly be presented to the
meeting shall be held at such place as the Board of Directors may from time to
time fix and at such hour as the Board of Directors may designate. If the day
fixed for the meeting is a legal holiday, the meeting shall be held at the same
hour on the next business day which is not a legal holiday.
SECTION 1.2 Special Meetings. A special meeting of stockholders may be
called at any time by the Board of Directors, the Chief Executive Officer, any
Class A Director or Class B Director (each as defined in Section 2.5 of these
Amended and Restated Bylaws) and shall be called by the Secretary upon receipt
of a written request to do so specifying the matter or matters appropriate for
action at such a meeting, proposed to be presented at the meeting and signed by
holders of record of a majority of the shares of stock that would be entitled to
be voted on such matter or matters if the meeting were held on the day such
request is received and the record date for such meeting were the close of
business on the preceding day. Any such meeting shall be held at such time and
at such place, within or without the State of Delaware, as shall be determined
by the body or person calling such meeting and as shall be stated in the notice
of such meeting.
SECTION 1.3 Notice of Meeting. For each meeting of stockholders written
notice shall be given stating the place, date and hour and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Except
as otherwise provided by law, the written notice of any meeting shall be given
not less than 10 or more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice shall be deemed
to be given when deposited in the United States mail, postage prepaid, directed
to the stockholder at his or her address as it appears on the records of the
Corporation. Business transacted at any special meeting shall be confined to the
purposes stated in the notice.
SECTION 1.4 Quorum. Except as otherwise required by law or the
Certificate of Incorporation, the holders of record of a majority of the shares
of stock entitled to be voted present in person or represented by proxy at a
meeting shall constitute a quorum for the transaction of business at the
meeting, but in the absence of a quorum the holders of record present or
represented by proxy at such meeting may vote to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is obtained. At any such adjourned session of the meeting at which there shall
be present or represented the holders of record of the requisite number
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of shares, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 1.5 Presiding Officer and Secretary at Meeting. Each meeting of
stockholders shall be presided over by the Chief Executive Officer, if present,
and if he is not present, by the President, if present. If neither officer
specified in the preceding sentence is present, the meeting shall be presided
over by the person designated in writing by the Chief Executive Officer, or if
the Chief Executive Officer has made no designation, by the person designated in
writing by the President, or if the President has made no such designation, by a
person designated by the Board of Directors, and if no such designated person is
present, the stockholders at the meeting in person or represented by proxy may
elect a presiding officer from among the persons present. The Secretary, or in
his or her absence an Assistant Secretary, shall act as secretary of the
meeting, or if no such officer is present, a secretary of the meeting shall be
designated by the person presiding over the meeting.
SECTION 1.6 Voting; Proxies. Except as otherwise provided by law or the
Certificate of Incorporation, and subject to the provisions of Section 1.10:
(a) Each stockholder shall at every meeting of the stockholders be
entitled to one vote for each share of capital stock held by such stockholder.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for such stockholder by proxy,
but no such proxy shall be voted or acted upon after one year from its date,
unless the proxy provides for a longer period.
(c) Each matter, including the election of directors, properly
presented to any meeting shall be decided by a majority of the votes cast on the
matter.
(d) Election of directors and the vote on any other matter presented to
a meeting shall be by written ballot only if so ordered by the presiding officer
of the meeting.
SECTION 1.7 Adjourned Meetings. A meeting of stockholders may be
adjourned to another time or place. Unless the Board of Directors fixes a new
record date, stockholders of record for an adjourned meeting shall be as
originally determined for the meeting from which the adjournment was taken. A
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote. At the adjourned meeting any business may be transacted that
might have been transacted at the meeting as originally called.
SECTION 1.8 Consent of Stockholders in Lieu of Meeting. Any action that
may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if (i) one or more
consents in writing, setting forth the action so taken are signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, and (ii) the consents are
delivered to the Corporation by delivery to
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its registered office in Delaware (by hand or by certified or registered mail,
return receipt requested or by fax), its principal place of business, or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Every written consent
shall bear the date of signature and no written consent will be effective to
take the corporate action referred to therein unless written consents sufficient
to take such action are delivered to the Corporation within 60 days of the date
of the earliest dated consent so delivered. Notice of the taking of such action
shall be given promptly to each stockholder, if any, that would have been
entitled to vote thereon at a meeting of stockholders and that did not consent
thereto in writing.
SECTION 1.9 List of Stockholders Entitled to Vote. At least 10 days
before every meeting of stockholders a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder, shall be prepared and shall be open to the examination of any
stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. Such list shall be produced and kept at the place of the
meeting during the whole time thereof and may be inspected by any stockholder
who is present.
SECTION 1.10 Fixing of Record Date. The Board of Directors, by
resolution, may fix a date for determining the stockholders of record for any
lawful action, which record date shall not be earlier than the date of such
resolution. The record date shall be determined as follows:
(a) The record date for stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof shall not be more than
60 nor less than 10 days before the date of the meeting. If no such record date
is fixed by the Board of Directors, the record date shall be at the close of
business on the day immediately preceding the date on which notice is given or,
if notice is waived, at the close of business on the day immediately preceding
the date on which the meeting is held. The record date shall apply to any
adjournment of the meeting unless the Board of Directors fixes a new record date
for the adjourned meeting.
(b) The record date for determining the stockholders entitled to
consent to corporate action in writing without a meeting shall not be more than
10 days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no such record date is fixed by the Board
of Directors, the record date shall be determined as follows:
(i) if prior action by the Board of Directors is required
under Delaware law, the record date shall be the close of business on the date
on which the Board of Directors adopts a resolution taking such action; and
(ii) if prior action by the Board of Directors is not required
under Delaware law, the record date shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation pursuant to Section 1.09.
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(c) The record date for determining the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
shall be not more than 60 days prior to such action. If no record date is fixed
by the Board of Directors, the record date for determining stockholders for any
such action shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such action.
ARTICLE TWO
DIRECTORS
SECTION 2.1 Number; Term of Office; Qualifications; Vacancies. The
number of directors that shall constitute the whole Board of Directors shall be
nine or, subject to the rights of the holders of the Class A Preferred Stock and
Class B Preferred Stock to elect directors, such number as may be determined
from time to time by action of the Board of Directors taken by the affirmative
vote of a majority of the whole Board. Directors shall be elected at the annual
meeting of stockholders to hold office, subject to Sections 2.2 and 2.3, until
the next annual meeting of stockholders and until their respective successors
are elected and qualified. Subject to the rights of the holders of the Class A
Preferred Stock and Class B Preferred Stock to elect directors, vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled, subject to Section 2.3, by a majority of the
directors then in office, although less than a quorum, or by the sole remaining
director, and the directors so chosen shall hold office, subject to Sections 2.2
and 2.3, until the next annual meeting of stockholders and until their
respective successors are elected and qualified.
SECTION 2.2 Resignation. Any director of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the chairman or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein or, if no time is specified, upon
receipt thereof by the Board of Directors or one of the above-named officers;
and, unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from the
Board of Directors effective at a future date, a majority of the directors then
in office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in these Bylaws in the filling of other vacancies; except
that any vacancy created by the resignation of a director elected by the holders
of the Class A Preferred Stock (a "Class A Director") or holders of the Class B
Preferred Stock (a "Class B Director") shall be filled by the holders of the
Class A Preferred Stock or the holders of the Class B Preferred Stock,
respectively.
SECTION 2.3 Removal. Except for the Class A Directors and Class B
Directors, any one or more directors may be removed, with or without cause, by
the vote or written consent of the holders of a majority of the shares entitled
to vote at an election of directors. In case the Board of Directors or any one
or more directors (other than the Class A Directors and Class B Directors) be so
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removed, a new director or directors may be elected by the stockholders at the
time of such removal; any vacancy resulting from such removal, if not so filled
by such election by the stockholders, may be filled as provided in Section 2.1.
A Class A Director or Class B Director may only be removed by the vote of the
holders of not less than a majority of the Class A Preferred Stock or Class B
Preferred Stock, as the case may be.
SECTION 2.4 Regular and Annual Meetings; Notice. Regular meetings of
the Board of Directors shall be held at such time and at such place, within or
without the State of Delaware, as the Board of Directors may from time to time
prescribe. No notice need be given of any regular meeting, and a notice, if
given, need not specify the purposes thereof. A meeting of the Board of
Directors may be held without notice immediately after an annual meeting of
stockholders at the same place as that at which such meeting was held.
SECTION 2.5 Special Meetings; Notice. A special meeting of the Board of
Directors may be called at any time by the Board of Directors, any Class A
Director, any Class B Director, the chairman of the Board of Directors (the
"Chairman") or the Chief Executive Officer, and shall be called by the Chairman
or the Secretary upon receipt of a written request to do so specifying the
matter or matters, appropriate for action at such a meeting, proposed to be
presented at the meeting and signed by at least two directors. Any such meeting
shall be held at such time and at such place, within or without the State of
Delaware, as shall be determined by the body or officer calling such meeting.
Notice of such meeting stating the time, place and purposes thereof shall be
given (a) by deposit of the notice in the United States mail, first class,
postage prepaid, at least three days before the day fixed for the meeting
addressed to each director at his or her address as it appears on the
Corporation's records or at such other address as the director may have
furnished the Corporation for that purpose, or (b) by delivery of the notice
similarly addressed for dispatch by telegraph, telecopy, cable or radio or by
delivery of the notice by telephone or in person, in each case at least 24 hours
before the time fixed for the meeting.
SECTION 2.6 Presiding Officer and Secretary at Meetings. Each meeting
of the Board of Directors shall be presided over by the chairman or in his or
her absence the person designated in writing by the chairman, or if no such
person is so designated, then by such member of the Board of Directors as shall
be chosen at the meeting. The Secretary, or in his or her absence an Assistant
Secretary, shall act as secretary of the meeting, or if no such officer is
present, a secretary of the meeting shall be designated by the person presiding
over the meeting.
SECTION 2.7 Quorum. A majority of directors shall constitute a quorum
for the transaction of business, but in the absence of a quorum a majority of
those present (or if only one be present, then that one) may adjourn the meeting
without notice until such time as a quorum is present. Except as otherwise
required by the Certificate of Incorporation or the Bylaws, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 2.8 Meeting by Telephone. Members of the Board of Directors or
of any committee thereof may participate in meetings of the Board of Directors
or of such committee by means of conference telephone, video conference or
similar communications equipment by means of
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which all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting.
SECTION 2.9 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation, 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 of Directors or of such 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 of Directors or of such
committee.
SECTION 2.10 Committees. Subject to the Certificate of Incorporation,
the Board of Directors may designate one or more committees, each such committee
to consist of one or more directors as the Board of Directors may from time to
time determine. Any such committee, to the extent provided in such resolution or
resolutions, 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, including the power to authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have such
power or authority in reference to approving or adopting, or recommending to
stockholders, any action or matter expressly required by Delaware law to be
submitted to stockholders for approval. Subject to the Certificate of
Incorporation, in the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Each such committee shall have
such name as may be determined from time to time by the Board of Directors.
SECTION 2.11 Compensation. No director shall receive any stated salary
for his or her services as a director or as a member of a committee but shall
receive such sum, if any, as may from time to time be fixed by the Board of
Directors for attendance at each meeting of the Board of Directors or of a
committee. He or she may also be reimbursed for his or her expenses in attending
any meeting. However, any director who serves the Corporation in any capacity
other than as a member of the Board of Directors or of a committee may receive
compensation therefor.
ARTICLE THREE
OFFICERS
SECTION 3.1 Election; Qualification. The officers of the Corporation
shall be a Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. The Board of Directors may elect one or more Assistant Secretaries as
one or more Assistant Treasurers and such other officers as it may from time to
time determine. The Chief Executive Officer shall be elected from among the
directors. Two or more offices may be held by the same person.
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SECTION 3.2 Term of Office. Each officer shall hold office from the
time of his or her election and qualification to the time at which his or her
successor is elected and qualified, unless sooner he or she shall die or resign
or shall be removed pursuant to Section 3.4.
SECTION 3.3 Resignation. Any officer of the Corporation may resign at
any time by giving written notice of such resignation to the Board of Directors,
the Chief Executive Officer or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if no time is
specified, upon receipt thereof by the Board of Directors or one of the
above-named officers; and, unless specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.4 Removal. Any officer may be removed at any time, with or
without cause, by the vote of a majority of the whole Board of Directors.
SECTION 3.5 Vacancies. Any vacancy however caused in any office of the
Corporation may be filled by the Board of Directors.
SECTION 3.6 Compensation. The compensation of each officer shall be
such as the Board of Directors may from time to time determine.
SECTION 3.7 Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the Corporation and shall have general
direction of its business affairs, subject, however, to the control of the Board
of Directors. He or she shall, if present, preside at all meetings of
stockholders and of the Board of Directors and shall perform such other duties
and have such responsibilities as the Board of Directors may from time to time
determine.
SECTION 3.8 President. The President shall have such powers and duties
as the Board of Directors may from time to time prescribe. During the absence of
the Chief Executive Officer or his or her inability to act, the President shall
perform the duties of the Chief Executive Officer and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the Chief
Executive Officer.
SECTION 3.9 Vice President. Each Vice President shall have such powers
and duties as the Board of Directors may from time to time prescribe.
SECTION 3.10 Secretary. The Secretary shall keep the minutes of all
meetings of stockholders and of the Board of Directors. He or she shall be
custodian of the corporate seal and shall affix it or cause it to be affixed to
such instruments as require such seal and attest the same and shall exercise the
powers and shall perform the duties incident to the office of Secretary, subject
to the direction of the Board of Directors.
SECTION 3.11 Treasurer. The Treasurer shall have care of all funds and
securities of the Corporation and shall exercise the powers and shall perform
the duties incident to the office of Treasurer, subject to the direction of the
Board of Directors.
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SECTION 3.12 Other Officers. Each other officer of the Corporation
shall exercise the powers and shall perform the duties incident to his or her
office, subject to the direction of the Board of Directors.
ARTICLE FOUR
CAPITAL STOCK
SECTION 4.1 Stock Certificates. The interest of each holder of stock of
the Corporation shall be evidenced by a certificate or certificates in such form
as the Board of Directors may from time to time prescribe. Each certificate
shall be signed by or in the name of the Corporation by the Chief Executive
Officer, President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary. Any or all of the
signatures appearing on such certificate or certificates may be a facsimile. If
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
SECTION 4.2 Transfer of Stock. Shares of stock shall be transferable on
the books of the Corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe.
SECTION 4.3 Holders of Record. Prior to due presentment for
registration of transfer the Corporation may treat the holder of record of a
share of its stock as the complete owner thereof exclusively entitled to vote,
to receive notifications and otherwise entitled to all the rights and powers of
a complete owner therefore, notwithstanding notice to the contrary.
SECTION 4.4 Lost, Stolen, Destroyed or Mutilated Certificates. The
Corporation shall issue a new certificate of stock to replace a certificate
theretofore issued by it alleged to have been lost, destroyed or wrongfully
taken, if the owner or his or her legal representative (i) requests replacement
before the Corporation has notice that the stock certificate has been acquired
by a bona fide purchaser; (ii) files with the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss or destruction of any such stock certificate or the
issuance of any such new stock certificate; and (iii) satisfies such other terms
and conditions as the Board of Directors may from time to time prescribe.
ARTICLE FIVE
MISCELLANEOUS
SECTION 5.1 Indemnity. (a) The Corporation shall indemnify, subject to
the requirements of subsection (d) of this Section, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil,
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criminal, administrative or investigative (other than an action by or in the
right of the Corporation), by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
(b) The Corporation shall indemnify, subject to the requirements of
subsection (d) of this Section, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery of the State of Delaware or such other court shall deem
proper.
(c) To the extent that a present or former director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Section, or in defense of any claim, issue or matter therein, the Corporation
shall indemnify such person against expenses (including attorneys fees) actually
and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this Section
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this Section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum or (2) by a
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committee of such directors designated by a majority vote of such directors,
even though less than a quorum, or (3) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(4) by the stockholders.
(e) Expenses incurred (including attorneys fees) by an officer or
director in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Section. Such expenses (including attorneys fees) incurred by former
directors and officers or other employees and agents may be so paid upon such
terms and conditions, if any, as the Corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, 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.
(g) The Corporation may 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, employee or agent of another corporation, 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 the provisions of this
Section.
(h) For the purposes of this Section, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Section with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an
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employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation" as referred to in this Section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 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.
SECTION 5.2 Waiver of Notice. Whenever notice is required by the
Certificate of Incorporation, the Bylaws or any provisions of the General
Corporation Law of the State of Delaware, a written waiver thereof, signed by
the person entitled to notice, whether before or after the time required for
such notice, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice.
SECTION 5.3 Fiscal Year. The fiscal year of the Corporation shall be
set by resolution of the Board of Directors.
SECTION 5.4 Corporate Seal. The corporate seal shall be in such form as
the Board of Directors may from time to time prescribe, and the same may be used
by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE SIX
AMENDMENT OF BYLAWS
SECTION 6.1 Amendment. The Bylaws may be adopted, amended or repealed
by the stockholders or by the Board of Directors by a majority vote of the whole
Board, subject to the consent of (i) the Class A Directors or the holders of a
majority of the outstanding shares of Class A Preferred Stock and (ii) the Class
B Directors or the holders of a majority of the outstanding shares of Class B
Preferred Stock.
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<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
MEDSITE.COM, INC.
(a Delaware corporation)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I CORPORATE OFFICES....................................................................................... 1
1.1 REGISTERED OFFICE............................................................................... 1
1.2 OTHER OFFICES................................................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS............................................................................... 1
2.1 PLACE OF MEETINGS............................................................................... 1
2.2 ANNUAL MEETING.................................................................................. 1
2.3 SPECIAL MEETING................................................................................. 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................................................ 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.................................................... 2
2.6 QUORUM.......................................................................................... 3
2.7 ADJOURNED MEETING; NOTICE....................................................................... 3
2.8 VOTING.......................................................................................... 3
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT............................................... 4
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING......................................... 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS..................................... 5
2.12 PROXIES......................................................................................... 5
2.13 INSPECTORS OF ELECTION.......................................................................... 5
2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS.......................................................... 6
2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS.......................................................... 7
ARTICLE III DIRECTORS............................................................................................. 8
3.1 POWERS.......................................................................................... 8
3.2 NUMBER AND TERM OF OFFICE....................................................................... 8
3.3 RESIGNATION AND VACANCIES....................................................................... 8
3.4 REMOVAL......................................................................................... 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE........................................................ 9
3.6 REGULAR MEETINGS................................................................................ 9
3.7 SPECIAL MEETINGS; NOTICE........................................................................ 9
3.8 QUORUM.......................................................................................... 10
3.9 WAIVER OF NOTICE................................................................................ 10
3.10 ADJOURNMENT..................................................................................... 10
3.11 NOTICE OF ADJOURNMENT........................................................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............................................... 10
3.13 FEES AND COMPENSATION OF DIRECTORS.............................................................. 11
3.14 APPROVAL OF LOANS TO OFFICERS................................................................... 11
3.15 INTERESTED DIRECTORS............................................................................ 11
ARTICLE IV COMMITTEES............................................................................................. 11
4.1 COMMITTEES OF DIRECTORS......................................................................... 11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE V OFFICERS................................................................................................ 12
5.1 OFFICERS........................................................................................ 12
5.2 ELECTION OF OFFICERS............................................................................ 13
5.3 SUBORDINATE OFFICERS............................................................................ 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................................................. 13
5.5 VACANCIES IN OFFICES............................................................................ 13
5.6 CHAIRMAN OF THE BOARD........................................................................... 13
5.7 CHIEF EXECUTIVE OFFICER......................................................................... 13
5.8 PRESIDENT....................................................................................... 14
5.9 VICE PRESIDENTS................................................................................. 14
5.10 SECRETARY....................................................................................... 14
5.11 CHIEF FINANCIAL OFFICER......................................................................... 14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.................................... 15
6.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT
OF THE CORPORATION.............................................................................. 15
6.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION....... 15
6.3 AUTHORIZATION OF INDEMNIFICATION................................................................ 16
6.4 GOOD FAITH DEFINED.............................................................................. 16
6.5 INDEMNIFICATION BY A COURT...................................................................... 16
6.6 EXPENSES PAYABLE IN ADVANCE..................................................................... 17
6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES................................... 17
6.8 INSURANCE....................................................................................... 17
6.9 CERTAIN DEFINITIONS............................................................................. 17
6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES......................................... 18
6.11 LIMITATION ON INDEMNIFICATION................................................................... 18
6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS......................................................... 18
ARTICLE VII RECORDS AND REPORTS................................................................................... 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS........................................................... 18
7.2 INSPECTION BY DIRECTORS......................................................................... 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS................................................................ 19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................................................. 19
ARTICLE VIII GENERAL MATTERS...................................................................................... 19
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING........................................... 19
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS....................................................... 20
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED............................................... 20
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES.......................................................... 20
8.5 SPECIAL DESIGNATION ON CERTIFICATES............................................................. 20
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C> <C>
8.6 LOST CERTIFICATES............................................................................... 21
8.7 CONSTRUCTION; DEFINITIONS....................................................................... 21
ARTICLE IX AMENDMENTS............................................................................................. 21
</TABLE>
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<PAGE> 5
BYLAWS
OF
MEDSITE.COM, INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
Certificate of Incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated from time to time by the board of directors. In
the absence of any such designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated from time to time by the board of directors. In the
absence of such designation, the annual meeting of stockholders shall be held on
the first Wednesday of May in each year at 10:00 a.m. However, if such day falls
on a legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At the meeting, directors shall be
elected, and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, by the chief executive
officer, or by the president or by one of the foregoing if so requested by one
or more stockholders holding shares in the aggregate entitled to cast not less
than ten percent
<PAGE> 6
(10%) of the votes at that meeting. At and following such time as the
corporation files a Registration Statement with the Securities and Exchange
Commission for the purpose of effecting the initial public offering of its
common stock and such Registration Statement is declared effective by the
Commission (such time is hereinafter referred to as the "Public Offering Date"),
a special meeting of the stockholders may only be called by the board of
directors, by the chairman of the board, by the chief executive officer, or by
the president.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, chief
executive officer, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in the notice of
such special meeting delivered to stockholders (or any supplement thereto
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice (or in any supplement thereto)
may be transacted) or (ii) in the case of the annual meeting, those matters
which the board of directors, at the time of giving the notice, intends to
present for action by the stockholders (but any proper matter may be presented
at the meeting for such action). The notice of any meeting at which directors
are to be elected shall include the name of any nominee or nominees who, at the
time of the notice, the board intends to present for election.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given by
first-class mail or by facsimile, telegraphic or other written communication or
in such other manner as permitted by law. Notices shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a stockholder at the address of that
stockholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at that address, then all future notices or reports shall be deemed to have been
duly given without further mailing if the same shall be available to the
stockholder on written demand of the stockholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice (or
supplement thereto) of any stockholders' meeting, executed by the secretary,
assistant secretary or any transfer agent of the corporation giving the notice,
shall be prima facie evidence of the giving of such notice (or supplement
thereto).
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<PAGE> 7
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of stockholders. The stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
for which such meeting is called until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as has been transacted while a quorum was present, if any, as provided in
Section 2.6 of these bylaws.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting is
fixed or if the adjournment is for more than thirty (30) days from the date set
for the original meeting, then notice of the adjourned meeting shall be given.
Notice of any such adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of
Incorporation, each outstanding share, regardless of class, shall be entitled to
one vote on each matter submitted to a vote of the stockholders.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the stockholders, unless the vote of a greater number or a vote by
classes is required by law, by the Certificate of Incorporation or by these
bylaws. The board of directors, in its discretion, or the officer of the
corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
At a stockholders' meeting at which directors are to be elected, a
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the stockholder has given notice prior
to commencement of the voting of the stockholder's intention to cumulate votes.
If any stockholder has given such a notice, then every stockholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes
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<PAGE> 8
to which that stockholder's shares are normally entitled or (ii) by distributing
the stockholder's votes on the same principle among any or all of the
candidates, as the stockholder thinks fit. The candidates receiving the highest
number of affirmative votes, up to the number of directors to be elected, shall
be elected; votes against any candidate and votes withheld shall have no legal
effect. Notwithstanding the foregoing provisions of this paragraph, unless
otherwise provided in the Certificate of Incorporation, a stockholder shall not
be entitled to cumulate votes at any time following the Public Offering Date.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and notice,
if a quorum be present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not present in person
or by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the Certificate of Incorporation, any
action which may be taken at any annual or special meeting of stockholders may
be taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take that action at a meeting at which all shares entitled to
vote on that action were present and voted and shall be delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by this Section 2.10 to
the corporation, written consents signed by a sufficient number of holders to
take action are delivered to the corporation by delivery to its registered
office in the state of Delaware, its principal place of business, or an officer
or agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Notwithstanding the foregoing provisions
of this paragraph, unless otherwise provided in the Certificate of
Incorporation, stockholders shall not be entitled to take action by written
consent at any time following the Public Offering Date.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning
- 4 -
<PAGE> 9
any vote of stockholders, that written notice and written consent have been
given as provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only stockholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
If the board of directors does not so fix a record date:
(a) 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 business day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; and
(b) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given as required by Section 2.10, or (ii) when prior action by the
board has been taken, shall be at the close of business on the day on which the
board adopts the resolution relating to that action.
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;
providing, however, that the board of directors may fix a new record date for
the adjourned meeting. The record date for any other purpose shall be as
provided in Article VIII of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.13 INSPECTORS OF ELECTION
The board of directors of the corporation may adopt by resolution such
rules and regulations for the conduct of the meeting of the stockholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the board of directors, the chairman of any meeting of
the stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the board of directors or
prescribed by the
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<PAGE> 10
chairman of the meeting, and such acts may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) the determination of when the polls shall open and close for any
given matter to be voted on at the meeting; (iii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iv)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (v) restrictions
on entry to the meeting after the time fixed for the commencement thereof; (vi)
limitations on the time allotted to questions or comments by participants; (vii)
determination of the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies; (viii) counting and
tabulation of all votes or consents; (ix) hearing and determining all challenges
and questions in any way arising in connection with the right to vote; (x) any
other acts that may be proper to conduct the election or vote with fairness to
all stockholders and (xi) the appointment of an inspector or inspectors of
election to act at the meeting or its adjournment in respect of one or more of
the foregoing matters. The board of directors or chairman may hear and determine
all challenges and questions in any way arising in connection with the right to
vote.
2.14 ADVANCE NOTICE OF STOCKHOLDER BUSINESS
To be properly brought before an annual meeting, any business must be
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the board of directors, (b) otherwise properly brought
before the meeting by or at the direction of the board of directors, or (c)
otherwise properly brought before the meeting by a stockholder (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2.14 and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 2.14. For such nominations or other
business to be considered properly brought before the meeting by a stockholder
such stockholder must, in addition to any other applicable requirements, have
given timely notice and in proper form of such stockholder's intent to bring
such business before such meeting. To be timely, such stockholder's notice must
be delivered to or mailed and received by the Secretary of the corporation at
the principal executive offices of the corporation not less than ninety (90)
days prior to the anniversary date of the immediately preceding annual meeting;
provided, however, that in the event the annual meeting is called for a date
that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure made, whichever occurs
first. To be in proper form, a stockholder's notice to the Secretary shall set
forth:
(a) the name and record address of the stockholder who intends
to propose the business and the class or series and number of shares of capital
stock of the corporation which are owned beneficially or of record by such
stockholder;
(b) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting introduce the business specified
in the notice;
(c) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting; and ;
(d) any material interest of the shareholder in such business.
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<PAGE> 11
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section; provided, however, that, once business has
been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 2.13 shall be deemed to preclude discussion
by any stockholder of any such business. The chairman of the meeting may refuse
to acknowledge the proposal of any business not made in compliance with the
foregoing procedure.
2.15 ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the corporation,
except as may be otherwise provided in the Restated Certificate of Incorporation
with respect to the right of holders of preferred stock of the corporation to
nominate and elect a specified number of directors in certain circumstances. To
be properly brought before an annual meeting, meeting of stockholders, or any
special meeting of stockholders called for the purpose of electing directors,
nominations for the election of director must be (a) specified in the notice of
meeting (or any supplement thereto), (b) made by or at the direction of the
board of directors (or any duly authorized committee thereof) or (c) made by any
stockholder of the corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 2.15 and on the record
date for the determination of stockholders entitled to vote at such meeting and
(ii) who complies with the notice procedures set forth in this Section 2.15.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the corporation. To be timely, a
stockholder's notice to the Secretary must be delivered to or mailed and
received at the principal executive offices of the corporation (a) in the case
of an annual meeting, not less than ninety (90) days prior to the anniversary
date of the immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure of the date
of the annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth (10th) day following the day
on which notice of the date of the special meeting was mailed or public
disclosure of the date of the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth:
(a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and
(b) as to the stockholder giving the notice (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the corporation which are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their
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<PAGE> 12
names) pursuant to which the nomination(s) are to be made by such stockholder,
(iv) a representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the persons named in its notice and (v) any
other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
Section 2.15. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the Restated Certificate of Incorporation or these
bylaws relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER AND TERM OF OFFICE
The authorized number of directors shall be established from time to
time by resolution of the board of directors or by amendment of this Section
3.2, duly adopted by the board of directors or by the stockholders.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors (including such director whose resignation is to be effective
at a later time) may elect a successor to take office when the resignation
becomes effective.
Prior to the Public Offering Date, vacancies in the board of directors
may be filled by a majority of the remaining directors, even if less than a
quorum, or by a sole remaining director; however, a vacancy created by the
removal of a director by the vote or written consent of the stockholders or by
court order may be filled only by the affirmative vote of a majority of the
shares represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute a majority of the
required quorum), or by the unanimous written consent of all shares entitled to
vote thereon. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
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qualified. From and after the Public Offering Date, unless otherwise required by
law or the Restated Certificate of Incorporation, vacancies arising through
death, resignation, removal, an increase in the number of directors or otherwise
may be filled only by a majority of the directors then in office, though less
than a quorum, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified, or until such director's earlier death, resignation
or removal. No decrease in the number of directors constituting the board of
directors shall shorten the term of any incumbent director.
3.4 REMOVAL
Prior to the Public Offering Date, subject to any limitations imposed
by law or the Certificate of Incorporation, the board of directors, or any
individual director, may be removed from office at any time with or without
cause by the affirmative vote of the holders of at least a majority of the then
outstanding shares of the capital stock of the corporation entitled to vote at
an election of directors. From and after the Public Offering Date, any director
may be removed from office at any time only with cause by the affirmative vote
of the holders of at least a majority of the then outstanding shares of the
capital stock of the corporation entitled to vote at an election of directors.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, or any
two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
facsimile or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by facsimile, it shall be delivered
personally or by telephone or by facsimile machine at least forty-eight (48)
hours before the time of the holding of the meeting or on such shorter notice as
the person or persons calling such meeting may deem necessary or appropriate in
the
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circumstances. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director.
3.8 QUORUM
Except as otherwise required by law, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business,
except to adjourn as provided in Section 3.11 of these bylaws. Every act or
decision done or made by a majority of the directors present at a duly held
meeting at which a quorum is present shall be regarded as the act of the board
of directors, subject to the provisions of the Certificate of Incorporation and
applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all the members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
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3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services. 3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 INTERESTED DIRECTORS
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 of
directors or committee thereof which authorizes the contract or transaction, or
solely because the director or officer's vote is counted for such purpose if (i)
the material facts as to the director or officer's 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 of directors 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 (ii) the material facts as to the director or
officer's 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 (iii) 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. 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 IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may designate one (1) or more committees, each
consisting of one (1) or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee. In
the absence or disqualification of a member of a committee, and in the absence
of a designation by the board of
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directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the board
of directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers which
may require it; provided, however, that no such committee shall have the power
or authority to (i) amend the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware. Each committee shall keep regular minutes and
report to the board of directors when required
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V.
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, a chief executive officer, a
treasurer, one or more vice presidents, one or more assistant secretaries, one
or more
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assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these bylaws. Any number of offices may be
held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no chief
executive officer, then the chairman of the board shall also be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these bylaws.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the chief executive officer shall be subject to the control of the board of
directors and have general supervision, direction and control of the business.
He or she shall preside at all meetings of the stockholders and, in the absence
or non-existence of the chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in
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the office of the chief executive officer of a corporation, and shall have such
other powers and perform such other duties as from time to time may be
prescribed by the board of directors or these bylaws.
5.8 PRESIDENT
In the absence or disability of the chief executive officer, and if
there is no chairman of the board, the president shall perform all the duties of
the chief executive officer and when so acting shall have the power of, and be
subject to all the restrictions upon, the chief executive officer. The president
shall have such other powers and perform such other duties as from time to time
may be prescribed for the president by the board of directors, these bylaws, the
chief executive officer or the chairman of the board.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated in accordance with procedures established by the
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board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the corporation, and shall
have such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION
Subject to Section 6.3 of this Article VI, the corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director or officer of the corporation, or is or was a director or officer of
the corporation serving at the request of the corporation as a director or
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's con-duct was unlawful.
6.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION
Subject to Section 6.3 of this Article VI, the corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director or officer of the corporation, or is or was a
director or officer of the corporation serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
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6.3 AUTHORIZATION OF INDEMNIFICATION
Any indemnification under this Article VI (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 6.1 or Section 6.2 of this Article VI, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders (but only if a
majority of the directors who are not parties to such action, suit or
proceeding, if they constitute a quorum of the board of directors, presents the
issue of entitlement to indemnification to the shareholders for their
determination). Such determination shall be made, with respect to former
directors and officers, by any person or persons having the authority to act on
the matter on behalf of the corporation. To the extent, however, that a present
or former director or officer of the corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith, without the necessity of
authorization in the specific case.
6.4 GOOD FAITH DEFINED
For purposes of any determination under Section 6.3 of this Article VI,
a person shall be deemed to have acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe such person's conduct was unlawful, if such
person's action is based on the records or books of account of the corporation
or another enterprise, or on information supplied to such person by the officers
of the corporation or another enterprise in the course of their duties, or on
the advice of legal counsel for the corporation or another enterprise or on
information or records given or reports made to the corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the corporation or another
enterprise. The term "another enterprise" as used in this Section 6.4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the corporation as a director, officer, employee or agent. The provisions of
this Section 6.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 6.1 or 6.2 of this Article VI, as the
case may be.
6.5 INDEMNIFICATION BY A COURT
Notwithstanding any contrary determination in the specific case under
Section 6.3 of this Article VI, and not withstanding the absence of any
determination thereunder, any director or officer may apply to the Court of
Chancery in the State of Delaware for indemnification to the extent otherwise
permissible under Sections 6.1 and 6.2 of this Article VI. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standards of conduct set forth in
Section 6.1 or 6.2 of this Article VI, as the case may be. Neither a contrary
determination in the specific case under Section 6.3 of this Article VI nor the
absence of any determination thereunder shall be a defense to such application
or create a presumption that the director or officer seeking indemnification has
not met any applicable standard of conduct. Notice of any
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application for indemnification pursuant to this Section 5 shall be given to the
corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
6.6 EXPENSES PAYABLE IN ADVANCE
Expenses incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized in
this Article VI.
6.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by or granted
pursuant to this Article VI shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under the Restated Certificate of Incorporation, any Bylaw, 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, it being the policy of the corporation that indemnification of the
persons specified in Sections 6.1 and 6.2 of this Article VI shall be made to
the fullest extent permitted by law. The provisions of this Article VI shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 6.1 or 6.2 of this Article VI but whom the corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
6.8 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the corporation, or is or was a
director or officer of the corporation serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan 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 or the obligation to indemnify such person
against such liability under the provisions of this Article VI.
6.9 CERTAIN DEFINITIONS
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors or officers, so that any person who is or
was a director or officer of such constituent corporation, or is or was a
director or officer of such constituent corporation serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VI, references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation "
shall include any service as a
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director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this Article VI.
6.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
6.11 LIMITATION ON INDEMNIFICATION
Notwithstanding anything contained in this Article VI to the contrary,
except for proceedings to enforce rights to indemnification (which shall be
governed by Section 6.5 hereof), the corporation shall not be obligated to
indemnify any director or officer in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof) was
authorized or consented to by the board of directors of the corporation.
6.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation may, to the extent authorized from time to time by the
board of directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the corporation similar to those conferred
in this Article VI to directors and officers of the corporation.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the
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meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president
or any other person authorized by the board of directors or the chief executive
officer or president, is authorized to vote, represent, and exercise on behalf
of this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
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If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable resolution
or the sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed in the name of the corporation by(a) the chairman or vice-chairman of the
board of directors, or the chief executive officer, president or vice-president,
and by (b) the chief financial officer, treasurer, secretary or an assistant
secretary of the corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the 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 shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
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rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
These bylaws of the corporation may be altered, amended or repealed, in
whole or in part, or new bylaws may be adopted by the stockholders entitled to
vote or by the board of directors. All such amendments must be approved by
either the holders of a majority of the outstanding capital stock entitled to
vote thereon or by a majority of the board of directors then in office. The fact
that such power has been so conferred upon the board of directors shall not
divest the stockholders of the power, nor limit their power to adopt, alter,
amend or repeal bylaws.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
MEDSITE.COM, INC.
A Delaware corporation
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of Medsite.com, Inc. hereby adopts the foregoing Bylaws,
comprising twenty (20) pages, as the Bylaws of the corporation.
Executed this __th day of February, 2000.
_______________________________
Ava M. Hahn, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected Secretary
of Medsite.com, Inc. and that the foregoing Bylaws, comprising twenty-one (21)
pages, were adopted as the Bylaws of the corporation on October 8, 1999, by the
person appointed in the Certificate of Incorporation to act as the Incorporator
of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this __th
day of February, 2000.
_______________________________
Secretary
<PAGE> 1
EXHIBIT 4.2
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "AGREEMENT") is made as of this
28th day of October, 1999, by and among (a) Medsite.com, Inc., a Delaware
corporation (the "CORPORATION"), (b) the purchasers of Class A Preferred Stock
(the "CLASS A PURCHASERS") listed on Schedule I attached hereto, (c) the
purchasers of Class B1 Preferred Stock listed on Schedule II attached hereto
(the "CLASS B1 PURCHASERS"), (d) the purchasers of Class B2 Preferred Stock
listed on Schedule III attached hereto (the "CLASS B2 PURCHASERS"); the Class A
Purchasers, the Class B1 Purchasers, the Class B2 Purchasers being collectively
referred to as the "PURCHASERS", (e) Sundeep Bhan ("BHAN"), (f) Sanjay Pingle
("PINGLE"), (g) Sameer Shariff ("SHARIFF"), (h) Rajnish Kapoor ("KAPOOR", and
collectively with Bhan, Pingle and Shariff, the "FOUNDERS"), (i) Mercer
Management Consulting, Inc. ("MERCER"), (j) upon its subsequent execution of a
counterpart to this Agreement, Merchant Capital, Inc. ("MERCHANT"), and (k) upon
his subsequent execution of a counterpart to this Agreement, Douglas Mack
("MACK").
R E C I T A L S
A. Concurrent with the execution and delivery of this Agreement, the
Class B1 Purchasers are purchasing up to 6,000,000 shares of the Corporation's
Class B1 Preferred Stock (the "CLASS B1 PREFERRED") pursuant to a Class B
Preferred Stock Purchase Agreement dated the date hereof (the "CLASS B PURCHASE
AGREEMENT") and the holders of $6,000,000 of convertible promissory notes (the
"CONVERTIBLE NOTES") are receiving 1,200,000 shares of the Corporation's Class
B2 Preferred Stock (the "CLASS B2 PREFERRED") upon conversion of the Convertible
Notes pursuant to the Class B Purchase Agreement.
B. The Corporation wishes to grant and the Class B1 Purchasers and the
Class B2 Purchasers wish to receive certain registration rights, rights of first
refusal and other rights, and the Corporation, the Class A Purchasers, the Class
B1 Purchasers, the Class B2 Purchasers desire to conform such rights of all
Purchasers in accordance with the terms and conditions of this Agreement.
C. In connection with a previous strategic agreement and the placement
of the Class B1 Preferred, the Corporation wishes to grant to Mercer and
Merchant, respectively, registration rights.
D. In connection with the proposed acquisition of Total Health
Products, Inc., the Corporation intends to issue shares of Common Stock to Mack
(the "MACK COMMON STOCK") and to grant to Mack certain registration rights with
respect to the Mack Common Stock.
E. The Corporation and the Purchasers contemplate additional closings
with respect to the sale of additional shares of the Class B1 Preferred which
may occur on or before November 26, 1999, and accordingly, this Agreement shall
be automatically amended so that this Agreement shall apply by its terms to the
Purchasers of such additional shares of Class B1 Preferred.
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NOW, THEREFORE, in reliance on the foregoing recitals, and in and for
the mutual covenants and consideration set forth herein, the parties hereto
agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1 "AFFILIATE" and "AFFILIATED" shall refer to any person who is an
"AFFILIATE" as defined in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended. For purposes of this
definition, "PERSON" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
corporation, governmental authority or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
1.2 "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1.3 "COMMON STOCK" shall mean the Corporation's Common Stock, $0.0001
par value.
1.4 "CONVERSION STOCK" means the Common Stock issued or issuable
pursuant to conversion of the Preferred Stock.
1.5 "DEMAND HOLDERS" shall mean (i) any Holder or Holders holding Class
A Preferred, Class B1 Preferred or Class B2 Preferred and (ii) Mack.
1.6 "HOLDER" shall mean (i) any holder of Registrable Securities and
(ii) any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 13 hereof.
1.7 "PREFERRED STOCK" shall mean the Corporation's Class A Preferred
Stock, $.0001 par value, issued pursuant to the Investment Agreement dated as of
February 3, 1999, the Corporation's Class B1 Preferred Stock, $.0001 par value,
issued pursuant to the Class B Purchase Agreement, and the Corporation's Class
B2 Preferred Stock, $.0001 par value, issued pursuant to the Class B Purchase
Agreement.
1.8 "REGISTRABLE SECURITIES" means (i) the Conversion Stock, (ii) any
Common Stock of the Corporation issued or issuable in respect of the Conversion
Stock, upon any stock split, stock dividend, recapitalization or similar event
or otherwise issued or issuable in respect of the Conversion Stock, (iii) 50,000
shares of Common Stock held by Mercer, (iv) up to 100,000 shares of Common Stock
issuable to Merchant upon the exercise of a warrant granted to Merchant in
connection with the Corporation's sale of its Class B1 Preferred, and (v) the
Mack Common Stock after Mack's execution of a counterpart to this Agreement;
provided, however, that shares of Common Stock or other securities shall only be
treated as Registrable Securities until the earlier of
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(A) such time as such securities have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, or
(B) such time as all securities held by a Holder may be sold under Rule 144(k)
or such securities are otherwise available for sale in the opinion of counsel to
the Corporation in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act such that all transfer restrictions
and restrictive legends with respect thereto may be removed upon the
consummation of such sale.
1.9 The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.10 "RESTRICTED SECURITIES" shall mean the securities of the
Corporation required to bear the legend set forth in Section 3 hereof.
1.11 "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.12 "SIGNIFICANT PURCHASERS" shall mean all Purchasers who hold in
excess of 150,000 shares of the Corporation's Common Stock or a number of shares
of Preferred Stock convertible into in excess of 150,000 shares of Common Stock
(as adjusted for any stock splits, stock dividends, combinations,
recapitalizations or the like).
2. RESTRICTIONS ON TRANSFERABILITY. The Preferred Stock, the Conversion
Stock and the Mack Common Stock shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Agreement, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
Each Holder will cause any proposed purchaser, assignee, transferee, or pledgee
of the Preferred Stock or such Common Stock held by such Holder to agree to take
and hold such securities subject to the provisions and upon the conditions
specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (i) the Preferred
Stock, (ii) the Conversion Stock, (iii) the Mack Common Stock and (iv) any other
securities issued in respect of the Preferred Stock, the Conversion Stock, or
the Mack Common Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event shall (unless otherwise permitted by the
provisions of Section 4 below) be stamped or otherwise imprinted with the
following legend (in addition to any legend required under applicable state
securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SHARES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN OPINION OF
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Medsite.com, Inc.
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COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE ACT. COPIES OF THE AGREEMENTS
COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR
TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN MARKET STAND-OFF PROVISIONS CONTAINED IN THE
CORPORATION'S INVESTOR RIGHTS AGREEMENT DATED OCTOBER 28,
1999. A COPY OF SUCH AGREEMENT MAY BE OBTAINED WITHOUT CHARGE
UPON WRITTEN REQUEST TO THE TO THE CORPORATION AT ITS
PRINCIPAL PLACE OF BUSINESS."
Each Holder consents to the Corporation making a notation on
its records and giving instructions to any transfer agent of the Preferred Stock
or the Common Stock in order to implement the restrictions on transfer
established in this Registration.
4. NOTICE OF PROPOSED TRANSFERS. The Holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership or (ii) in transactions
involving the distribution without consideration of Restricted Securities by any
of the Purchasers to any of its (A) constituent partners or members, or retired
constituent partners or members, or to the estate of any of such partners or
members or retired partners or members or (B) at least majority-owned
subsidiaries, so long as each such transferee agrees in writing to be bound by
the terms of this Agreement), unless there is in effect a registration statement
under the Securities Act covering the proposed transfer, the Holder thereof
shall give written notice to the Corporation of such Holder's intention to
effect such transfer, sale, assignment or pledge. Each such notice shall
describe the manner and circumstances of the proposed transfer, sale, assignment
or pledge in sufficient detail, and shall be accompanied, at such Holder's
expense by either (a) an unqualified written opinion of legal counsel who shall,
and whose legal opinion shall be, reasonably satisfactory to the Corporation
addressed to the Corporation, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act, or (b) a "no action" letter from the Commission to the effect that the
transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the Holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Corporation. Notwithstanding
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Medsite.com, Inc.
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the foregoing, no such "no action" letter or opinion of counsel shall be
necessary for a transfer by a Holder, if the Holder is a partnership or limited
liability corporation, to a constituent partner or member of such entity or
retired constituent partner or member, or the transfer by gift, will or
intestate succession of any such entity partner or member to his or her spouse
or to the siblings, lineal descendants or ancestors of such partner or member or
his or her spouse. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section 3
above, except that such certificate shall not bear such restrictive legend if in
the opinion of counsel for such Holder and the Corporation such legend is not
required in order to establish compliance with any provision of the Securities
Act.
5. PIGGYBACK REGISTRATION.
(a) Notice. If, at any time, the Corporation proposes to file
a registration statement under the Securities Act, other than a registration
relating solely to employee benefit plans, Rule 145 transactions (a
"REGISTRATION STATEMENT"), with respect to an offering for its own account or
for the account of others of any class of securities of the Corporation, then
each such time, the Corporation shall give written notice of such intention to
file a Registration Statement (a "PIGGYBACK NOTICE") to each Holder at least
forty-five (45) days before the anticipated filing date. The Piggyback Notice
shall describe the intended method of distribution and offer each Holder the
opportunity to register pursuant to such Registration Statement such Registrable
Securities as the Holder may request in writing to the Corporation within thirty
(30) days after the date the Holder first received the Piggyback Notice (a
"PIGGYBACK REGISTRATION"). The Corporation shall take all necessary steps,
subject to the provisions of the following paragraph (b), to include in the
Registration Statement all Registrable Securities which the Corporation has been
so requested to register by the Holders. The Corporation shall be entitled to
withdraw a Registration Statement (not filed pursuant to Section 6 hereof) prior
to its becoming effective.
(b) Underwritten Registrations. In a registration pursuant to
this Section 5 involving an underwritten offering, whether or not for sale for
the account of the Corporation, any request pursuant to this Section 5 may
require that all Registrable Securities be included in such offering on
identical terms and conditions. If the offering is a public offering of the
Corporation's securities, and if the managing underwriter with respect to such
an offering advises the Corporation in writing that the inclusion of all the
Registrable Securities which the Holders have requested to be included in the
Registration Statement would materially jeopardize the success of the offering,
then the Corporation shall be required to include in the underwriting only that
number, if any, of Registrable Securities which the underwriter advises the
Corporation in writing may be sold without materially jeopardizing the offering.
In the event that the number of Registrable Securities included in such
Piggyback Registration is limited as described above, then Registrable
Securities shall be included based on the following priority: (i) first, all
securities to be registered for the Corporation's account, (ii) second, up to
133,600 shares of Common Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) if required by bridge
lenders to the Corporation
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Medsite.com, Inc.
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pursuant to Registration Right Agreements between the Corporation and such
bridge lenders dated July 22, 1998 and November 3, 1998, and (iii) third,
Registrable Securities of Holders who have requested their Registrable
Securities to be so included and securities for the account of persons other
than the Corporation (having the contractual right to require registration of
such securities), but in no event shall the amount of Registrable Securities to
be included be reduced below the Holders' proportionate share of securities to
be registered for persons other than the Corporation (the Holders' proportionate
share shall be equal to the ratio of the aggregate holdings of the Corporation's
securities held by all Holders (on an as converted basis) to the aggregate
holdings of the Corporation's securities held by all security-holders requesting
registration in such offering, including the Holders (on an as converted
basis)). The right to register Registrable Securities shall be allocated among
the Holders on a pro rata basis based on the number of Registrable Securities
requested to be registered by each Holder. Any Holder disapproving of the terms
of any such underwriting may elect to withdraw from it by written notice to the
Corporation and the underwriter.
6. DEMAND REGISTRATION.
(a) Notice. A Demand Holder or Demand Holders (the "INITIATING
HOLDER") holding individually or in the aggregate fifteen percent (15%) of the
outstanding shares of Registrable Securities then held by the Demand Holders at
any time after the earlier of (i) eighteen (18) months following the date of
this Agreement or (ii) six (6) months after the registration of the
Corporation's initial public offering may propose that the Corporation file a
Registration Statement with respect to all or some of the Registrable Securities
held by the Initiating Holder (a "DEMAND REGISTRATION"), upon giving written
notice (a "DEMAND NOTICE") of such demand to the Corporation. The Corporation
shall promptly deliver to each other Holder a copy of the Demand Notice. Each
Holder other than the Initiating Holders shall have the right to participate in
such Demand Registration. The Corporation's obligation under this Section 6(a)
shall in the aggregate be limited to four (4) Demand Registrations, whether from
one or more Demand Holders. The Demand Notice shall describe the number of
shares intended to be disposed of and the intended method of disposition. If the
Initiating Holders intend to distribute the Registrable Securities by means of
an underwriting, they shall so advise the Corporation in the Demand Notice. In
such event, the Company shall have the right to select the investment banker or
bankers and managers to administer the offering, which selection shall be
reasonably acceptable to the Initiating Holders. The Corporation shall then take
all steps necessary, as expeditiously and promptly as reasonably possible, to
effect the registration of all Registrable Securities which the Corporation has
been requested to so register.
(i) If at the time the Corporation receives a Demand
Notice, neither the Common Stock nor any other class of securities of the
Corporation are traded on an exchange or reported on a consolidated reporting
system, the Corporation shall take all steps necessary to effect an initial
public offering of its Common Stock and shall otherwise comply with all the
terms of this Agreement relating to Demand Registrations.
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(ii) If at the time the Corporation receives a Demand
Notice, the Corporation (A) is in the process of preparing a Registration
Statement for filing or (B) has filed a Registration Statement and is waiting
for it to be declared effective, then the Corporation shall not be obligated to
effect any Demand Registration pursuant to this Section 6(a) for a period of one
hundred twenty (120) days from the date the Corporation received the Demand
Notice. In order to exercise its right to delay a Demand Registration for the
period set forth in the previous sentence, the Corporation shall deliver written
notice to the Initiating Holders, stating that it is a notice under this Section
6(a) and providing reasonable detail as to the offering in progress and the
expected effective date of the Registration Statement pertaining thereto.
(b) Registration Statement Form. Registrations under this
Section 6 shall be on such appropriate form of Registration Statement (i) as
shall be selected by the Corporation and as shall be reasonably acceptable to
the Initiating Holder and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in the request for such registration.
(c) Underwritten Registrations. In a registration pursuant to
this Section 6 involving an underwritten offering, if the managing underwriter
with respect to such offering advises the Corporation in writing that the
inclusion of all of the Registrable Securities which the Holders have requested
to be included in the Registration Statement would materially jeopardize the
success of the offering, then the Corporation shall be required to include in
the underwriting only that number, if any, of Registrable Securities which the
underwriter advises the Corporation in writing may be sold without materially
jeopardizing the offering. In the event that the number of Registrable
Securities to be included in such an offering is limited as described above,
then Registrable Securities shall be included based on the following priority:
(i) first, up to 133,600 shares of Common Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) if required by
bridge lenders to the Corporation pursuant to Registration Rights Agreements
between the Corporation and such bridge lenders dated July 22, 1998 and November
3, 1998 and (ii) second, Registrable Securities of Holders who have requested
their Registrable Securities to be so included and securities for the account of
persons having the contractual right to require registration of such securities,
but in no event shall the amount of Registrable Securities to be included be
reduced below the Holders' proportionate share of securities to be registered
for persons other than the Corporation (the Holders' proportionate share shall
be equal to the ratio of the aggregate holdings of the Corporations' securities
held by all Holders (on an as-converted basis) to the aggregate holdings of the
Corporation's securities held by all security-holders requesting registration in
such offering, including the Holders (on an as-converted basis)). The right to
register Registrable Securities shall be allocated among the Holders on a pro
rata basis based on the number of Registrable Securities requested to be
registered by each Holder. Any Holder disapproving of the terms of any such
underwriting may elect to withdraw from it by written notice to the Corporation
and the underwriter.
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(d) Effective Registration Statement. A Registration Statement
requested pursuant to this Section 6 shall not be deemed to have been effected
and will not be considered a Demand Registration for purposes of the limit on
Demand Registrations which may be requested pursuant to paragraph (a) above,
unless (i) a Registration Statement with respect thereto has been declared and
remains effective for a period of at least ninety (90) consecutive days (unless
the Registrable Securities registered thereunder have been sold or disposed of
prior to the expiration of such ninety (90) day period) and is not interfered
with by any stop order, injunction or other order or requirement of the
Securities and Exchange Commission (the "COMMISSION") or any other governmental
agency or court for any reason, and (ii) if the securities to be registered were
to be sold pursuant to an underwritten offering, the conditions to closing
specified in the underwriting agreement entered into in connection with such
registration applicable to the Corporation are satisfied or waived.
(e) Piggyback Status. If the number of shares registered by
any party (including the Corporation) other than Demand Holders pursuant to this
Section 6 exceeds the number of shares registered by Demand Holders, then such
registration by the Demand Holders shall be deemed to be a Piggyback
Registration and not a Demand Registration.
7. REGISTRATION ON FORM S-3.
(a) If any Holder or Holders request that the Corporation file
a registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Corporation is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Corporation shall use its reasonable best efforts to cause
such Registrable Securities to be registered for the offering on such form and
to cause such Registrable Securities to be qualified in such jurisdictions as
the Holder or Holders may reasonably request; provided, however, that the
Corporation shall not be required to effect more than two (2) registrations
pursuant to this Section 7 in any twelve (12) month period. The substantive
provisions of Section 5 shall be applicable to each registration initiated under
this Section 7.
(b) Notwithstanding the foregoing, the Corporation shall not
be obligated to take any action pursuant to this Section 7: (i) in any
particular jurisdiction in which the Corporation would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Corporation is already subject to service
in such jurisdiction and except as may be required by the Securities Act; (ii)
if the Corporation, within fifteen (15) days of the receipt of the request of
the Holders, gives notice of its bona fide intention to effect the filing of a
registration statement with the Commission within ninety (90) days of receipt of
such request (other than with respect to a registration statement relating to a
Rule 145 transaction, an offering solely to employees or any other registration
which is not appropriate for the registration of Registrable Securities) in
which such Holders can exercise their rights pursuant to Section 5 hereof; (iii)
during the period starting with the date ninety (90) days prior to the
Corporation's estimated date
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of filing of, and ending on the date one hundred eighty (180) days immediately
following, the effective date of any registration statement pertaining to
securities of the Corporation (other than a registration of securities in a Rule
145 transaction or with respect to an employee benefit plan), provided that the
Corporation is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective; or (iv) if the Corporation
shall furnish to such Holder a certificate signed by the President of the
Corporation stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Corporation or its stockholders for
registration statements to be filed in the near future; then the Corporation's
obligation to use its reasonable best efforts to file a registration statement
shall be deferred for a period not to exceed ninety (90) days from the receipt
of the request to file such registration by such Holder, such right to delay a
request to be exercised by the Corporation not more than once in any twelve (12)
month period
8. REGISTRATION EXPENSES. All expenses incident to a registration
pursuant to Sections 5, 6, or 7, including, without limitation, all registration
and filing fees, including fees with respect to filings required to be made with
the Commission, the National Association of Securities Dealers, Inc., fees and
expenses of compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the underwriters),
printing expenses, messenger, telephone and delivery expenses, and fees and
disbursements of counsel of the Corporation, counsel of the Holders (but not
more than one counsel to the Holders per registration) and of all independent
public accountants of the Corporation (including the expenses of any special
audit and "comfort" letters required by or incident to such performance),
underwriters fees (excluding discounts, commissions or fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Securities which shall be paid
by the selling Holders on a pro rata basis based on the number of Registrable
Securities being sold by them), securities acts liability insurance and fees and
expenses of other persons or entities retained by the Corporation will be borne
by the Corporation whether or not any of the Registration Statements become
effective.
9. HOLDBACK AGREEMENT. Each Holder of Registrable Securities (including
any transferee thereof) agrees in connection with the first two underwritten
registrations of the Corporation's equity securities with the Securities and
Exchange Commission, other than (i) a registration relating solely to employee
benefit plans or (ii) a registration relating solely to a Rule 145 transaction,
upon request of the underwriters managing such underwritten offering of the
Corporation's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any of the Corporation's
securities, including any Registrable Securities (other than those included in
the registration), without the prior written consent of such underwriters for
such period of time (not to exceed one hundred eighty (180) days in the case of
an initial public offering and ninety (90) days in the case of the second public
offering) from the effective date of such registration, as may be requested by
the underwriters. Each such Holder further agrees to execute any agreement
reflecting the above as may be requested by the underwriters at the time of the
public offering, provided, however that the executive officers and directors of
the Corporation who own stock of the
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Corporation and each other holder of five percent (5%) or more of the
Corporation's securities also agree to such restrictions.
10. REGISTRATION PROCEDURES.
(a) Subject to the last sentence of Section 5(a), in
connection with any registration under Section 5, 6 or 7, the Corporation
covenants and agrees that it shall, as expeditiously as practicable (and within
ninety (90) days with respect to clause (i) below):
(i) prepare and file with the Commission a Registration
Statement with respect to the Registrable Securities and use its reasonable best
efforts to cause such Registration Statement to become and remain effective;
(ii) notify each Holder of Registrable Securities
included in such registration promptly after it shall receive notice thereof, of
the time such Registration Statement has become effective or any supplement to
any prospectus forming a part of such Registration Statement has been filed;
(iii) notify each Holder of Registrable Securities
included in such registration promptly of any request by the Commission for the
amendment or supplement of such Registration Statement or prospectus or of a
request for additional information;
(iv) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the prospectus
used in connection therewith and such other documents necessary to comply with
the Securities Act, the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations promulgated under the Securities
Act and the Exchange Act, as may be necessary to keep such Registration
Statement filed pursuant to Section 5 and 6 hereto effective for a period of not
less than ninety (90) consecutive days and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such Registration
Statement;
(v) furnish to each Holder of Registrable Securities
included in such registration such number of copies of such Registration
Statement, each amendment and supplement thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus) and such
other documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder;
(vi) concurrently with the effectiveness of the
Registration Statement under the Securities Act, qualify the Registrable
Securities under such other securities or "blue sky" laws of such jurisdictions
as each Holder reasonably may request, and do any and all other acts and things
necessary to enable each Holder to consummate the sale of the Registrable
Securities owned by such Holder; provided that the Corporation shall not be
required in connection
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with this paragraph (vi) to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction where the Corporation
is not then so qualified or subject to service of process or to subject the
Corporation to income taxation in any jurisdiction where it is not then so
subject;
(vii) notify each Holder of Registrable Securities
included in such registration, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such Registration Statement
contains an untrue statement of a material fact or omits any fact necessary to
make any statement therein not misleading in light of the circumstances in which
such statement is made, and prepare and furnish to such Holder a reasonable
number of copies of a supplement to or amendment of such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading in light
of the circumstances in which they are made;
(viii) advise each Holder of Registrable Securities
included in such registration promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the Commission suspending the
effectiveness of any such Registration Statement or the initiation or threat of
any proceeding for that purpose and promptly use its reasonable best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued;
(ix) cause all such Registrable Securities to be listed
on each securities exchange or reported on each consolidated reporting system on
which similar securities issued by the Corporation are then listed or reported,
as the case may be; provided, if the registration constitutes an initial public
offering of the Common Stock, then the Corporation shall cause such Registrable
Securities to be listed on such securities exchange or reported on such
consolidated reporting systems as shall be reasonably acceptable to a majority
in interest of the Holders participating in such registration;
(x) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such Registration
Statement; and
(xi) use its best efforts to furnish, at the request of
any Holder or Holders requesting registration of Registrable Securities pursuant
to Section 5, 6 or 7 of this Agreement, on the date that such Registrable
Securities are delivered to the underwriters for the sale pursuant to such
registration, an opinion, dated such date, of the independent counsel
representing the Corporation for the purposes of such registration, addressed to
the underwriters, if any, and to the Holder or Holders making such request, in
form and substance as is customarily given to underwriters in an underwritten
public offering, and a letter dated such date, from the independent certified
public accountants of the Corporation, addressed to the underwriters, if any,
and to the Holder or Holders making such request, in form and substance as is
customarily given by independent certified public accountants to underwriters in
a public offering.
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(b) The Corporation may require each Holder participating in a
registration hereunder to furnish the Corporation such information regarding
such Holder and the distribution of such Registrable Securities as the
Corporation may from time to time reasonably request in writing and as shall be
required by law to effect such registration.
(c) The Holder or Holders who include Registrable Securities
in any registration under Section 5, 6 or 7 shall distribute those Registrable
Securities in a manner consistent with the distribution described in the
relevant registration statement.
11. RULE 144. After an initial public offering of Common Stock, the
Corporation shall take all actions reasonably necessary to enable the Holders to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission, including, without limiting the
generality of the foregoing, filing on a timely basis all reports required to be
filed under the Exchange Act. Upon the request of any Holder, the Corporation
will deliver to such Holder a written statement as to whether it has complied
with such requirements and shall provide such Holder with such publicly filed
documents of the Corporation as are reasonably requested by such Holder in
connection with such sale.
12. INDEMNIFICATION.
(a) Indemnification by the Corporation. In the event of any
registration of any of the Registrable Securities under the Securities Act
pursuant to this Agreement, the Corporation will indemnify and hold harmless
each Holder participating in the registration, its directors, stockholders,
officers and partners and each underwriter involved in such registration and
each other person, if any, who controls each selling Holder or underwriter
within the meaning of the Securities Act or the Exchange Act against any losses,
claims, damages or liabilities (or actions in respect thereof), joint or
several, to which each selling Holder or its officers, directors, stockholders
or partners or underwriter or controlling person may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in such Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse such selling Holder, its officers, directors, stockholders
and partners and such underwriter and each such controlling person for any legal
or any other expenses reasonably incurred by any of them as they are incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Corporation will not be liable
to any selling Holder or its officers, directors, stockholders or partners or
controlling persons in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
omission made in such Registration Statement, preliminary prospectus or final
prospectus, or any such amendment or supplement thereto, (i) in reliance upon
and in conformity with information furnished to the Corporation, in writing, by
or on behalf of such selling Holder or its officers, directors, stockholders or
partners or controlling persons, specifically for use in the preparation of such
Registration Statement,
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preliminary prospectus or final prospectus or amendment or supplement thereto,
or (ii) where such untrue statement or omission or alleged untrue statement or
omission (A) was corrected in a subsequent final prospectus delivered in
sufficient number to the selling Holder pursuant to Section 10(a)(v) hereof and
with sufficient time to permit distribution by such selling Holder, (B) such
selling Holder failed to so distribute such subsequent final prospectus, and (C)
to the extent such distribution would have avoided the applicable loss, claim,
damage, liability or action.
(b) Indemnification by the Holder. In the event of any
registration of any of the Registrable Securities under the Securities Act
pursuant to this Agreement, each selling Holder, severally and not jointly, will
indemnify and hold harmless the Corporation, each of its directors, each of its
officers who has signed such Registration Statement, each underwriter involved
in such registration, each other selling Holder and their respective officers,
directors, stockholders and partners and each person, if any, who controls the
Corporation or any such underwriter or other selling Holder within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages
or liabilities (or actions in respect thereof), to which the Corporation, such
directors and officers, such underwriter or other selling Holder or its
respective officers, directors, stockholders or partners or controlling person
may become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement under which such Registrable Securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in such
Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
are made, and will reimburse the Corporation, the underwriters, each other
selling Holder and their respective officers, directors, stockholders' partners
and controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action, if the statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Corporation by or on behalf of such selling Holder or its officers, directors,
stockholders or partners or controlling persons, specifically for use in
connection with the preparation of such Registration Statement, preliminary
prospectus or final prospectus or amendment or supplement thereto; provided,
however, that the maximum obligation of each selling Holder for indemnification
shall be limited to the proceeds received by it from the sale of Registrable
Securities pursuant to such Registration Statement.
(c) Required Notices. Each party entitled to indemnification
under this Section 12 (the "INDEMNIFIED PARTY") shall give notice to the party
required to provide indemnification (the "INDEMNIFYING PARTY") promptly after
the Indemnified Party has actual
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knowledge of any claim as to which indemnity may be sought and, with respect to
third party claims, shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting from it, provided that counsel for
the Indemnifying Party who shall conduct the defense of such claim or litigation
must be approved by the Indemnified Party (whose approval shall not unreasonably
be withheld), and provided further that the failure of any Indemnified Party to
give notice as provided in this Section 12(c) shall not relieve the Indemnifying
Party of its obligations under Section 12(a) or (b), as the case may be except
to the extent such Indemnifying Party was actually prejudiced thereby. The
Indemnified Party shall have the right to employ its own counsel in any claim or
litigation, but, with respect to third party claims or litigation, the fees and
expenses of counsel shall be at the expense of such Indemnified Party, when and
as incurred, unless the Indemnified Party shall have reasonably concluded that
there may be a conflict of interest between the Indemnifying Party and the
Indemnified Party in the conduct of the defense of such claim or litigation (in
which case the Indemnifying Party shall not have the right to direct the defense
of such claim or litigation on behalf of the Indemnified Party), or the
Indemnifying Party shall fail, within a reasonable time after notice of the
claim, to have given written notice of its intention to assume such defense, and
to have employed counsel to assume the defense of such claim or litigation, or
the Indemnifying Party fails timely and actively to assume or to continue the
defense of such claim. No Indemnifying Party, in the defense of any claim or
litigation, shall, without the consent of the Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect of such third party claim or
litigation. In no event shall an Indemnified Party consent to any entry of any
judgment in a third party claim or litigation, or settle a third party claim or
litigation without the prior written consent of the Indemnifying Party unless
the Indemnifying Party fails to timely give notice of its intention to assume
defense or timely and actively to assume and continue such defense.
13. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Corporation to register securities granted Holders under Sections 5, 6 and 7 may
be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Holder provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, (ii) such assignee or transferee acquires at least 250,000 shares of
Preferred Stock and/or Common Stock issued upon conversion thereof (as may be
appropriately adjusted upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event) and (iii) such assignee or transferee
agrees to be bound by the terms of this Agreement and assumes all of the
obligations of the transferring Holder hereunder. Notwithstanding the foregoing,
the rights to cause the Corporation to register securities may be assigned to
any non-individual Affiliate, constituent partner or member of a Holder
(including spouses and ancestors, lineal descendants and siblings of such
partners or members or spouses who acquire registered securities by gift, will
or intestate succession) without compliance with items (ii) or (iii) above,
provided written notice thereof is promptly given to the Corporation.
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14. TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to
Sections 5, 6 and 7 of this Agreement shall terminate as to any Holder five (5)
years after the closing of the first firmly underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock to the public resulting in net
proceeds to the Corporation of not less than $25 million at a per share offering
price of not less than $10.50 per share (as adjusted for any stock splits, stock
dividends, combinations, recapitalizations or the like) (a "QUALIFIED PUBLIC
OFFERING").
15. RIGHT OF FIRST REFUSAL. The Corporation hereby grants to each
Significant Purchaser a right of first refusal (the "RIGHT OF FIRST REFUSAL") to
purchase all (or any part) of such Significant Purchaser's pro rata portion of
any "NEW SECURITIES" (as defined in this Section 15), that the Corporation may,
from time to time propose to sell and issue. Such pro rata portion, for purposes
of this Right of First Refusal, shall be the ratio of (x) the number of shares
of Common Stock issued and issuable upon the conversion of the shares of
Preferred Stock held by such Significant Purchaser, to (y) the sum of the total
number of shares of Common Stock then held by the Significant Purchasers plus
the total number of shares of Common Stock issuable upon the conversion of the
total number of the shares of Preferred Stock then held by the Significant
Purchasers. This Right of First Refusal shall be subject to the following
provisions:
(a) "NEW SECURITIES" shall mean any Common Stock or preferred
stock of the Corporation whether or not authorized on the date hereof; rights,
options, warrants to purchase Common Stock or preferred stock, together with
securities of any type issued in conjunction with any such rights, options or
warrants and securities of any type whatsoever that are, or may become,
convertible into or exchangeable for Common Stock or preferred stock; provided
however, that New Securities does not include the following:
(i) any shares of Class B Preferred issuable pursuant
to the Class B Purchase Agreement;
(ii) shares of Common Stock issuable upon conversion of
the Corporation's Preferred Stock;
(iii) securities of the Corporation issued or deemed
issued pursuant to the acquisition of a business or product line by the
Corporation by merger, purchase of assets, or other acquisition or
reorganization approved by the Corporation's Board of Directors;
(iv) securities of the Corporation issued in connection
with equipment lease arrangements or bank financing transactions approved by the
Corporation's Board of Directors;
(v) shares of Common Stock, or options to purchase
shares of Common Stock, issued or granted to officers, directors, employees and
consultants of the Corporation pursuant to stock plans, option plans or other
arrangements approved by the
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Corporation's Board of Directors prior to the date hereof or by the Compensation
Committee of the Board of Directors following such time as the Compensation
Committee shall consist of the directors required by Section 16.8 herein;
(vi) shares of Common Stock or Preferred Stock issued
in connection with any stock split, stock dividend, or recapitalization by the
Corporation; and
(vii) shares of Common Stock issued in connection with
the Corporation's initial public offering of the Common Stock to the general
public effected pursuant to a registration statement filed with and declared
effective by the Commission under the Securities Act.
(b) In the event that the Corporation proposes to undertake an
issuance of New Securities, it shall give each Significant Purchaser written
notice of its intention, describing the type of New Securities, the aggregate
number of such shares, the price, and the general terms upon which the
Corporation proposes to issue the same. Each Significant Purchaser shall have
twenty (20) business days after receipt of such notice to agree to purchase its
pro rata share (or a portion thereof) (calculated pursuant to the first
paragraph of Section 15) of such New Securities at the price and upon the terms
specified in the notice by giving written notice to the Corporation and stating
therein the quantity of New Securities to be purchased. If any Significant
Purchaser fails to agree to purchase its full pro rata share (calculated
pursuant to the first paragraph of Section 15) within such twenty (20) business
day period, the Corporation will give the Significant Purchasers who did so
agree (the "ELECTING PURCHASERS") notice of the number of shares which were not
subscribed for. Such notice may be by telephone if followed by written
confirmation within two (2) days. The Electing Purchasers shall have ten (10)
business days from the date of such written notice (or telephonic notification
confirmed in writing) to agree to purchase the New Securities not purchased by
such non-purchasing Significant Purchasers.
(c) In the event that all of the Significant Purchasers fail
to exercise in full the Right of First Refusal within the twenty (20) business
day and ten (10) business day period specified above, the Corporation shall have
ninety (90) days thereafter to sell (or enter into an agreement pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) the New Securities
respecting which the rights of the Purchasers were not exercised at a price and
upon terms no more favorable to the purchasers thereof than specified in the
Corporation's notice. In the event the Corporation has not sold the New
Securities within such ninety (90) day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of such
agreement) the Corporation shall not thereafter issue or sell any New
Securities, without first offering such New Securities to the Purchasers in the
manner provided above.
(d) The Right of First Refusal hereunder is not assignable, in
whole or in part, except (i) by a Significant Purchaser that is a partnership to
any of its partners, (ii) by a Significant Purchaser that is any venture capital
group, private equity group or fund to an Affiliated entity or
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person or (iii) by a Significant Purchaser that is a corporation to any of its
shareholders or its controlled subsidiaries.
(e) The Right of First Refusal granted under this Agreement
shall expire upon the first to occur of the following: (i) the closing of a
Qualified Public Offering of the Common Stock of the Corporation to the general
public which is effected pursuant to a registration statement filed with, and
declared effective by, the Commission under the Securities Act or a Change of
Control (as defined in Section 17.1) and (ii) as to a specific Significant
Purchaser when such Significant Purchaser holds less than 250,000 shares of
Registrable Securities.
16. AFFIRMATIVE COVENANTS. The Corporation and each Purchaser hereby
covenants and agrees as follows:
16.1 Financial Information. For so long as any of the Purchasers
own any Preferred Stock (or securities issued upon conversion or exchange
thereof other than Common Stock), the Corporation shall prepare and furnish to
each Purchaser the following:
(a) within ninety (90) days after the end of each fiscal year,
a copy of the consolidated balance sheet as of the end of such year, statements
of income, retained earnings and cash flows of the Corporation for such year as
prepared and certified by a nationally recognized independent public accounting
firm reasonably acceptable to the Purchasers;
(b) as soon as practicable after the end of each quarter, and,
in any event, within forty-five (45) days after the end of each quarter, a copy
of the consolidated balance sheet of the Corporation as of the end of such
quarter and a statement of income, retained earnings and cash flows of the
Corporation for such quarter and the portion of the fiscal year ending on the
last day of such quarter, prepared in reasonable detail and certified as to
accuracy, subject to year-end audit adjustments, by the principal financial
officer of the Corporation;
(c) and not later than the forty-fifth (45th) day prior to the
first day of each fiscal year of the Corporation (commencing with the fiscal
year beginning on January 1, 2000), an annual plan containing projections
(including detailed assumptions) of the balance sheets of the Corporation and
income statements and statements of cash flows of the Corporation and, in each
case as of the end of each month in such fiscal year and as of the end of each
of the four following fiscal years, all in such reasonable detail as the
Purchasers may require; and
(d) as applicable, furnish to the Purchasers the following:
(i) Copies of all financial statements and reports that
the Corporation sends to its stockholders, lenders or directors, or files with
the Securities and Exchange Commission or any stock exchange or quotation bureau
on which any securities of the Corporation may be listed or quoted; and
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(ii) Promptly upon receipt thereof, copies of any
reports submitted to the Corporation by independent certified public
accountants, including, without limitation, in connection with examination of
the financial statements of the Corporation made by such accountants.
16.2 Access. For as long as any of the Purchasers own any Preferred
Shares, or any securities issued upon conversion or exchange thereof (other than
Common Stock), the Corporation will give to the Purchasers and to their counsel,
accountants and other consultants and representatives (collectively,
"ADVISORS"), reasonable access to material documents of the Corporation and
reasonable rights to examine without undue disruption the facilities and offices
of the Corporation during normal business hours, upon at least five (5) days
notice in advance of such visit, and will furnish to the Purchasers and their
Advisors such information concerning the affairs of the Corporation as such
persons may reasonably request and will make available to the Purchasers and
their Advisors, any of the officers, directors, employees, counsel, accountants,
or other consultants of the Corporation as the Purchasers may reasonably
request.
16.3 Confidential Information. Each Purchaser agrees that any
information obtained by such Purchaser pursuant to Section 16.1 or Section 16.2
which is marked or identified as proprietary to the Corporation or otherwise
confidential will not be disclosed without the prior written consent of the
Corporation. Notwithstanding the foregoing, each Purchaser may disclose such
information, on a need to know basis, to its employees, accountants or
attorneys, or to the employees, accountants or attorneys of its general partner
or investment manager (so long as each such person to whom confidential
information is disclosed agrees to keep such information confidential), in
compliance with a court order or when otherwise necessary to enforce any of the
Purchaser's rights hereunder. Such information may also be disclosed to a
Purchaser's constituent partners, members or shareholders (so long as each such
person to whom confidential information is disclosed agrees to keep such
information confidential). Each Purchaser further acknowledges and understands
that any information will not be utilized by such Purchaser in connection with
purchases and/or sales of the Corporation's securities except in compliance with
applicable state and federal antifraud statutes.
16.4 Assignment of Rights to Financial Information. The rights and
obligations pursuant to Sections 16.1 and 16.2 may be assigned or otherwise
conveyed by any Purchaser, as the case may be, or by any subsequent transferee
of any such rights to a transferee, upon prior written notice to the
Corporation, upon the transfer by such Holder of at least 250,000 shares, of
Registrable Securities to any transferee other than a competitor or customer of
the Corporation (including any of its direct or indirect subsidiaries);
provided, however, that the Corporation shall not be obligated under Section
16.1 or 16.2 to provide information to any transferee that the Board of
Directors of the Corporation determines in good faith to be an actual or
potential competitor, customer or vendor of the Corporation.
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16.5 Notice of Material Adverse Change and Other Matters. The
Corporation will promptly deliver to each of the Class A Directors and Class B
Directors (each as defined in the Corporation's Second Amended and Restated
Certificate of Incorporation) written notice of:
(a) Any material adverse change in the business, operations,
properties, assets or financial condition of the Corporation;
(b) Any litigation, administrative or other similar proceeding
commenced or, to its knowledge, threatened against the Corporation which could
reasonably be expected to have a material adverse effect on the Corporation's
business or financial condition;
(c) Any notice of investigation or request for information
from any federal, state or local government authority or agency which could
reasonably be expected to have a material adverse effect on the Corporation's
business or financial condition; and
(d) Any notice received by the Corporation from any financial
institution, lender or other third party relating to any claimed or actual
breach or default by the Corporation with respect to any obligation arising
under any loan agreement or guaranty, or any other arrangement or agreement the
breach of or default in respect of which could reasonably be expected to have a
material adverse effect on the Corporation's business or financial condition.
16.6 Availability of Stock for Issuance on Conversion. The
Corporation will at all times keep reserved for issuance an appropriate number
of shares of Common Stock to permit the conversion of all outstanding shares of
Class A Preferred Stock, Class B1 Preferred Stock and Class B2 Preferred Stock
into Common Stock in accordance with the Corporation's Second Amended and
Restated Certificate of Incorporation and any amendments thereto.
16.7 Board of Directors.
(a) Directors. The holders of Class A Preferred Stock and
Class B Preferred Stock agree to notify the Corporation of their selection of
the Class A Directors and Class B Directors (each as defined in the
Corporation's Second Amended and Restated Certificate of Incorporation) and such
directors shall be reasonably satisfactory to the Corporation. In the event
that, and so long as, the Board of Directors of the Corporation consists of six
(6) or less members (including as a result of any vacancy created by the
resignation of any non-Class A Director or non-Class B Director), the holders of
Class A Preferred and Class B Preferred shall take all actions necessary to
effect the respective resignation of one (1) of the Class A Directors and one
(1) of the Class B Directors in accordance with Article IV(B)(5)(b) of the
Corporation's Second Amended and Restated Certificate of Incorporation. Without
the consent of the holders of a majority of the outstanding shares of Class A
Preferred and Class B Preferred, voting as a single class, the Board of
Directors may not be increased to greater than nine (9) members.
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(b) Voting Agreement. For so long as Reuters Holdings
Switzerland S.A. or its Affiliate ("Reuters") holds not less than an aggregate
of 750,000 shares of Class B Preferred Stock (as adjusted for any stock splits,
dividends, combinations, recapitalizations or the like)(or Common Stock issuable
upon the conversion thereof), each of the Class B1 Purchasers and Class B2
Purchasers party hereto (and their transferees hereunder) shall take such
actions as are necessary to cause the election to the Board of Directors as a
Class B Director such person as designated by Reuters (the "Reuters Director"),
including, but not limited to voting or causing to be voted all shares of Class
B Preferred now or hereafter beneficially owned by such Class B1 Purchasers and
Class B2 Purchasers in favor of the election of the Reuters Director and against
the removal of the Reuters Director, or upon Reuters' written request, vote in
favor of the removal and replacement of the Reuters Director.
(c) Observers' Rights. In the event that representatives of
Brookside Capital Partners Fund, L.P. ("Brookside"), CB Capital LP, Mednut LLC,
Weiss Peck & Greer and/or Reuters are not elected by the holders of Class B
Preferred to serve as Class B Directors, the Corporation shall permit
representatives of Brookside, CB Capital LP, Fred Mayerson on behalf of Mednut,
Weiss Peck & Greer and/or Reuters (the "REPRESENTATIVES"), as the case may be,
to attend all meetings of the Board of Directors (whether in person, telephonic
or other) in a nonvoting fully participating observer capacity, and shall
provide to such Representatives notice and other information with respect to
such meetings as are delivered to the directors of the Corporation; provided
however that the Corporation reserves the right to withhold any information or
to exclude the Representatives from any meeting or portion thereof if delivery
of such information or attendance by such Representatives could, in the sole
opinion of the Corporation and its counsel, conflict with the Board of
Directors' fiduciary obligations to the Corporation's stockholders, adversely
affect the attorney-client privilege between the Corporation and its counsel or
pose an actual or potential conflict of interest for Brookside, CB Capital LP,
Mednut LLC, Weiss Peck & Greer or Reuters, as the case may be. The rights
granted hereunder shall terminate upon the earlier of (i) a Qualified Public
Offering of the Common Stock of the Corporation, (ii) a Change of Control or
(iii) such time as the number of shares of Preferred Stock (or securities issued
upon conversion thereof) held by Brookside, CB Capital LP, Reuters or Weiss Peck
& Greer as the case may be, falls below 400,000 (or 200,000 shares with respect
to Mednut LLC)(as adjusted for any stock splits, stock dividends, combinations,
recapitalizations or the like).
16.8 Committees of Board of Directors. The Corporation, the
Founders and the Purchasers will take all reasonable necessary actions to ensure
that the Board of Directors establishes a Compensation Committee, the majority
of the members of which shall be non-employee directors. A Class A Director and
a Class B Director shall each serve on the Compensation Committee. The
Compensation Committee shall make all decisions with respect to the salaries,
benefits option grants and other compensation of senior management. A Class A
Director and a Class B Director shall each be entitled to serve on any other
committee of the Board of Directors, including but not limited to an audit
committee.
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16.9 Key Man Life Insurance. Within thirty (30) days after the
date of this Agreement, the Company shall obtain a term life insurance policy
for Bhan (the "KEY MAN POLICY"), such policy to designate the Corporation as
beneficiary and to provide coverage in the amount of $10,000,000. The
Corporation shall thereafter maintain the Key Man Policy, including, but not
limited to, paying the cost of any premiums therefor, for so long as the
Purchasers own any Preferred Stock or any securities issued upon conversion or
exchange thereof (other than Common Stock). Bhan shall submit to all medical
examinations in connection with the Key Man Policy and shall cooperate in
compliance with all other reasonable requirements in connection with such
policies of any company with which a Key Man Policy is sought.
16.10 Rule 144 Transfers. The Class A Purchasers party hereto
hereby agree that such Class A Purchasers shall not sell pursuant to Rule 144
any securities of the Corporation held by them until the first anniversary of
the initial closing of the sale of Class B1 Preferred or, if earlier, such time
as any Class B1 Purchaser party hereto is eligible to sell any securities of the
Corporation held by such Class B1 Purchaser pursuant to Rule 144.
17. RESTRICTIONS ON FOUNDER TRANSFERS; PURCHASERS' RIGHTS OF FIRST
REFUSAL AND CO-SALE.
17.1 Definitions. For purposes of this Section 17 only, the
following definitions shall apply:
(a) "CHANGE OF CONTROL" shall mean (i) a sale of all or
substantially all of the assets of the Corporation or (ii) any merger or
consolidation of the Corporation unless the Corporation's stockholders of record
as constituted immediately prior to such merger or consolidation will,
immediately after such merger or consolidation, hold at least fifty percent
(50%) of the voting power of the surviving or successor entity to the business
of the Corporation.
(b) "COMMON STOCK EQUIVALENTS" shall mean the Corporation's
Common Stock then outstanding plus the shares of Common Stock then issuable upon
conversion of the outstanding shares of Preferred Stock.
(c) "TRANSFER" shall mean any transfer of shares of Common
Stock whether in one or more related transactions, including any sale,
assignment, conveyance, donation or pledge or any other manner of encumbering or
disposing of shares, which require the giving of notice by a Founder in
accordance with this Section 17.
17.2 Consent to Transfer. Without the written consent of a
majority of the then outstanding shares of Common Stock Equivalents held by the
Purchasers, no Founder shall, directly or indirectly, during the term of this
Agreement, Transfer shares of Common Stock held by him or any of his relatives
or affiliates having an aggregate value in excess of $1,000,000 (based on the
most recent price per share of Common Stock paid in a sale of the Corporation's
Common Stock (not including the purchase of Common Stock pursuant to an exercise
of an option grant)) (such
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$1,000,000 threshhold to be calculated by aggregating all Transfers during the
term of this Agreement), except for:
(a) Transfers among the Founders;
(b) Transfers by disposition pursuant to the last will and
testament of a Founder or laws of intestate succession;
(c) Transfers to the spouse, parents or lineal descendents of
a Founder or to a trust solely for the benefit of any such Founder and/or his
spouse, parents or lineal descendents (provided that such spouse, parent or
lineal descendents or trustee on behalf of such trust agrees in writing to be
bound by the restriction set forth in this Section 17.2), or
(d) Transfers to the estate of any Founder, on such Founder's
death.
17.3 Notice of Proposed Transfer. In the event that a Founder
(the "SELLING HOLDER") proposes to make any Transfer of more than $1,000,000 of
Common Stock (or its equivalent) otherwise permitted pursuant to this Agreement,
then prior to effecting such Transfer the Selling Holder shall deliver to the
Corporation and to each Purchaser a written notice (the "TRANSFER NOTICE")
stating: (i) the Selling Holder's bona fide intention to Transfer such Common
Stock; (ii) the name of each proposed purchaser or other transferee ("PROPOSED
TRANSFEREE"); (iii) the number of shares of Common Stock to be transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Selling Holder proposes to transfer the Common Stock (the "OFFERED
PRICE"), and (v) a copy of any applicable term sheets.
17.4 Purchasers' Right of First Refusal.
(a) Each Significant Purchaser shall have a right of first
refusal, exercisable upon written notice to the Selling Holder within thirty
(30) days (the "EXERCISE PERIOD") after receipt of the Transfer Notice by the
Purchasers, to purchase up to its Pro Rata Share (as defined in Section 17.4(b)
below) of the shares specified in the Transfer Notice at the Offered Price and
upon the terms indicated in the Transfer Notice. Such right shall be exercisable
by written notice (the "EXERCISE NOTICE") to the Selling Holder prior to the
expiration of the Exercise Period. If such rights are exercised, then the
Significant Purchasers shall effect the purchase of the shares specified in the
Transfer Notice, including payment of the purchase price, not more than fifteen
(15) days after the date of the Exercise Notice. At such time, the Selling
Holder shall deliver to the Significant Purchasers the certificates representing
the shares to be purchased by the Significant Purchasers, each certificate to be
properly endorsed for transfer.
(b) The "PRO RATA SHARE" of each Significant Purchaser shall
be that number of shares of Common Stock Equivalents owned by such Significant
Purchaser equal to the product obtained by multiplying (x) the aggregate number
of shares of Common Stock Equivalents proposed to be sold in the Transaction by
the Selling Holder by (y) a fraction, the numerator of which is
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the number of shares of Common Stock Equivalents owned by the Significant
Purchaser immediately prior to the Transaction, and the denominator of which is
the number of shares of Common Stock Equivalents owned by all Significant
Purchasers who desire to exercise their right of first refusal with respect to
the Transaction.
17.5 Significant Purchasers' Right of Co-Sale.
(a) To the extent that a Significant Purchaser does not
exercise the right of first refusal pursuant to Section 17.4, a Significant
Purchaser shall have the right, exercisable upon written notice to the Selling
Holder within fifteen (15) days after receipt of the Transfer Notice by the
Significant Purchasers, to participate in the Selling Holder's sale of Common
Stock pursuant to the specified terms and conditions of such Transaction. To the
extent that one or more of the Significant Purchasers exercise such right of
participation in accordance with the terms and conditions set forth below, the
number of shares of Common Stock which the Selling Holder may sell in the
Transaction shall be correspondingly reduced. The right of participation of each
of the Significant Purchasers shall be subject to the following terms and
conditions:
(i) Each of the Significant Purchasers may sell all or any
part of that number of shares of Common Stock Equivalents owned by such
Significant Purchasers equal to the product obtained by multiplying (x) the
aggregate number of shares of Common Stock Equivalents proposed to be sold in
the Transaction by the Selling Holder (after deduction of any Common Stock
Equivalents purchased by Significant Purchasers pursuant to Section 17.4) by (y)
a fraction, the numerator of which is the number of shares of Common Stock
Equivalents owned by the Significant Purchaser immediately prior to the
Transaction, and the denominator of which is the number of shares of Common
Stock Equivalents owned by all Significant Purchasers who desire to participate
in the Transaction, plus the number of shares of Common Stock Equivalents held
by the Selling Holder immediately prior to the Transaction.
(ii) Each of the Significant Purchasers shall effect its
participation in the sale by delivering to the Selling Holder for transfer to
the Proposed Transferee one or more certificates, properly endorsed for
transfer, which represent the number of shares of Common Stock Equivalents which
the Significant Purchaser elects to sell pursuant to this Section 17.5.
(b) The certificates which the Significant Purchasers deliver
to the Selling Holder pursuant to Section 17.5(a) shall be transferred by the
Selling Holder to the Proposed Transferee upon consummation of the sale in the
Transaction pursuant to the terms and conditions specified in the Transfer
Notice, and the Selling Holder shall promptly, and in any event no later than
five (5) days thereafter, remit to each Purchaser that portion of the sale
proceeds to which the Purchaser is entitled by reason of its participation in
such sale.
(c) The exercise or non-exercise of the rights of the
Significant Purchasers hereunder to participate in one or more Transactions
shall not adversely affect their rights to participate in subsequent
Transactions. In the event that a Transaction does not occur, the Selling
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Holder shall have no obligation to any Purchaser other than to return any stock
certificates delivered to the Selling Holder pursuant to Section 17.5(a)(ii) in
anticipation of such Transaction.
17.6 Prohibited Transfer. Any attempt by a Selling Holder to
transfer Common Stock in violation of Section 17 of this Agreement shall be void
and the Corporation agrees that it will not effect such a transfer nor will it
treat any alleged transferee as the holder of such shares without the written
consent of the Purchasers that hold at least 50% of the Common Stock Equivalents
held by the Purchasers.
17.7 Future Stock Subject. All shares of capital stock of the
Corporation acquired by the Founders in the future shall be subject to the
provisions of this Section 17.
17.8 Termination of Rights. The provisions of this Section 17,
including the restrictions on transfers by Founders and the rights of first
refusal and co-sale granted under this Agreement, shall expire immediately prior
to the occurrence of a Qualified Public Offering or Change of Control of the
Corporation.
17.9 Legends. All certificates representing any Common Stock held
by a Founder shall have endorsed thereon the following legend, in addition to
any legends required by applicable state securities laws or otherwise:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERABLE ONLY UPON COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THE RIGHT OF FIRST REFUSAL AND CO-SALE
PROVISIONS OF A RIGHTS AGREEMENT AMONG THE CORPORATION, THE
HOLDER AND CERTAIN OTHER STOCKHOLDERS OF THE CORPORATION, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS
CORPORATION AND MAY BE OBTAINED BY WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION."
18. MISCELLANEOUS.
18.1 Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of New York.
18.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby.
18.3 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
Nothing in this Agreement, express or implied, is intended to
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Medsite.com, Inc.
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confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
18.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the Parties hereto with regard to the subjects hereof and
thereof, and no such party shall be liable or bound to any other Party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that, subject to Section 18.5, any provision of this Agreement may be
amended, waived or modified with the written consent of the Corporation and the
holders of at least a majority of the outstanding Registrable Securities or, for
so long as Argentum Capital Partners II, L.P. and its affiliates own a majority
of the Registrable Securities, by at least 66 2/3 of the outstanding Registrable
Securities; provided, that any such amendment, waiver or modification shall
apply by its terms to all Holders; provided, further, that any Holder or
assignee hereunder may waive any of such Holder's rights or the Corporation's
obligations hereunder without obtaining the consent of any other Holder or
assignee.
18.5 Effect of Amendment or Waiver. Each Holder acknowledges that
by the operation of Section 18.4 hereof the holders of a majority of the
outstanding shares of Registrable Securities will have the right and power to
diminish or eliminate all rights of the Holders under this Agreement; provided,
however, that (a) the provisions of Sections 15, 16 and 17 of this Agreement and
this clause (a) may be amended, waived or modified only with the written consent
of the Corporation, the holders of at least a majority of the outstanding
Registrable Securities held by the Purchasers and, with respect to Section 17,
the consent of a Founder, as to such Founder; (b) the provisions of Section 6
and this clause (b) may be amended, waived or modified only with the written
consent of the Corporation and the holders of at least a majority of the
outstanding Registrable Securities held by the Demand Holders; (c) the
provisions of Section 16.10 and this clause (c) may be amended, waived or
modified only with the written consent of the Corporation and the holders of at
least a majority of the Class B1 Preferred; and (d) the provisions of Section
16.7(b) and this clause (d) may be amended, waived or modified only with the
written consent of the beneficiaries of those provisions.
18.6 Termination of Prior Rights. The Class A Purchasers party
hereto hereby terminate all rights set forth in the Investment Agreement dated
as of February 3, 1999 by and among the Corporation, the Founders and the Class
A Purchasers (the "INVESTMENT AGREEMENT"), including but not limited to the
rights of the Class A Purchasers pursuant to covenants of the Corporation set
forth in Articles 5 and 6 of the Investment Agreement and the rights of the
Class A Purchasers pursuant to the indemnification provisions of Article 7 of
the Investment Agreement.
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The Class A Purchasers shall have no obligation to increase the Class A
Conversion Price under any circumstances.
18.7 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) for
delivery in the United States, five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) for delivery in
the United States, one (1) business day after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid, (d) for delivery
outside the United States three (3) business days after the business day of
deposit with an international express carrier if sent freight prepaid or ten
(10) days if sent by air mail or (e) one (1)business day after the business day
of facsimile transmission, if delivered by facsimile transmission with copy by
first class mail, postage prepaid, and shall be addressed (i) if to a Holder,
such Holder's address as set forth beneath his signature to this Agreement, and
(ii) if to the Corporation, at the address of its principal corporate offices
(attention: Secretary), or at such other address as a party may designate by ten
days' advance written notice to the other party pursuant to the provisions
above.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
seventy-two (72) hours after the same has been deposited in a regularly
maintained receptacle for the deposit of the United States mail, addressed and
mailed as aforesaid.
18.8 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Preferred Stock, Conversion Stock, upon any breach or default of the
Corporation under this Agreement, shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any such holder of any breach or default under this Agreement, or
any waiver on the part of any such holder of any provisions or conditions of
this agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any such holder, shall be
cumulative and not alternative.
18.9 Expenses. Except as otherwise provided in Section 7 in the
Class B Preferred Stock Purchase Agreement or in the acquisition agreement
proposed to be executed by and among the Corporation, Mack and a wholly-owned
subsidiary of the Corporation, and except for the payment by the Corporation,
upon receipt of an invoice in reasonable detail, of an amount not to exceed
$10,000 for fees of counsel of each Class A Purchaser in connection with the
negotiation, execution and delivery of this Agreement, the Corporation and each
Holder shall bear its own
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expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
18.10 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all of the
Purchasers, each of which shall be enforceable against the signers actually
executing such counterparts, and all of which together shall constitute one
instrument.
18.11 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
18.12 Aggregation of Stock. All shares of Preferred Stock held or
acquired (or Common Stock issued upon conversion thereof) by affiliated entities
or persons shall be aggregated for the purpose of determining the availability
or discharge of any rights under this Agreement.
18.13 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
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The foregoing agreement is hereby executed as of the date first above
written.
"CORPORATION"
MEDSITE.COM, INC.
By:
-------------------------------------
Title:
-------------------------------------
"CLASS A PURCHASERS"
ARGENTUM CAPITAL PARTNERS II, L.P.
By: Argentum Partners II, L.L.C.,
its general partner
By: Argentum Investments, L.L.C., its
managing member
By:
-------------------------------------
Walter Barandiaran, Managing Member
MEDSITE ACPII LIMITED PARTNERS, L.P.
By:
-------------------------------------
Walter Barandiaran, General Partner
"CLASS B1 PURCHASERS"
REUTERS HOLDINGS SWITZERLAND S.A.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<PAGE> 29
MEDSITE.COM, INC.
RIGHTS AGREEMENT
CB CAPITAL INVESTORS, L.P.
By: Chase Capital Partners, Its
General Partner
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
BROOKSIDE CAPITAL PARTNERS FUND, L.P.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
TCW/ICICI INDIA PRIVATE EQUITY FUND
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
TCW/ICICI INDIA PRIVATE EQUITY AMP FUND
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
WPG NETWORKING FUND, LP
By its General Partner Weiss, Peck &
Greer, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
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MEDSITE.COM, INC.
RIGHTS AGREEMENT
WPG INSTITUTIONAL NETWORKING
FUND, LP
By its General Partner Weiss, Peck &
Greer, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
WPG SOFTWARE FUND, LP
By its General Partner Weiss, Peck &
Greer, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
WPG INSTITUTIONAL SOFTWARE FUND, LP
By its General Partner Weiss, Peck &
Greer, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
WPG RAYTHEON NETWORKING FUND, LP
By its attorney-in-fact Weiss, Peck &
Greer, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<PAGE> 31
MEDSITE.COM, INC.
RIGHTS AGREEMENT
WPG RAYTHEON SOFTWARE FUND, LP
By its attorney-in-fact Weiss, Peck &
Greer, LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
RAJ MEHRA
-----------------------------------------
DELMAS BUSINESS LTD
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
HIKARI TSUSHIN, INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
ARGENTUM CAPITAL PARTNERS II, L.P.
By Argentum Partners II, L.L.C.,
its general partner
By Argentum Investments, L.L.C.,
its managing member
By:
-------------------------------------
Walter Barandiaran, Managing Member
<PAGE> 32
MEDSITE.COM, INC.
RIGHTS AGREEMENT
METCHEM ENGINEERING SA
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
TENET HEALTHCARE CORPORATION
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
MERCHANT CAPITAL INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
EVEREST VENTURE PARTNERS II
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
DR. P. ROY VAGELOS
------------------------------------------
BRIAN HERMALIN
------------------------------------------
<PAGE> 33
MEDSITE.COM, INC.
RIGHTS AGREEMENT
LINDEN NELSON
------------------------------------------
STEVE M. MIZEL
------------------------------------------
JEFFREY D. SAPER
------------------------------------------
WS INVESTMENTS 99B
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
SCOTT BAXTER
------------------------------------------
ALLEN BUILDER
------------------------------------------
SIG HELLER
------------------------------------------
<PAGE> 34
MEDSITE.COM, INC.
RIGHTS AGREEMENT
NINA LOCKER
------------------------------------------
TERRY MAHONY
------------------------------------------
LAURENCE PAUL
------------------------------------------
STEVEN J. POSNER
------------------------------------------
DEFINED BENEFIT KEOGH
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
DR. S. K. RAMASWAMI
------------------------------------------
DAVID RISPLER
------------------------------------------
KURT J. BERNEY
------------------------------------------
SELIM DAY
------------------------------------------
<PAGE> 35
MEDSITE.COM, INC.
RIGHTS AGREEMENT
SELWYN GOLDBERG
------------------------------------------
THOMAS G. LAWER
------------------------------------------
MARK BRAZEAL
------------------------------------------
ALLISON BERRY
------------------------------------------
YAPHET L. SMITH
------------------------------------------
<PAGE> 36
MEDSITE.COM, INC.
RIGHTS AGREEMENT
"CLASS B2 PURCHASERS"
------------------------------------------
MEDNUT LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
INVESTCARE PARTNERS LIMITED PARTNERSHIP
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
JORDEX RESOURCES INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
ASPEN ASSOCIATES LLC
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
<PAGE> 37
MEDSITE.COM, INC.
RIGHTS AGREEMENT
"FOUNDERS"
SUNDEEP BHAN
------------------------------------------
SANJAY PINGLE
------------------------------------------
SAMEER SHARIFF
------------------------------------------
RAJNISH KAPOOR
------------------------------------------
"MERCER"
MERCER MANAGEMENT CONSULTING, INC.
------------------------------------------
"CSFB"
CREDIT SUISSE FIRST BOSTON CORPORATION
------------------------------------------
"MACK"
DOUGLAS MACK
------------------------------------------
<PAGE> 38
MEDSITE.COM, INC.
RIGHTS AGREEMENT
SCHEDULE I
Schedule of Class A Purchasers
Medsite.com, Inc.
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- --------------
<S> <C> <C>
Argentum Capital Partners II, L.P. 1,500 $ 1,500,000
405 Lexington Avenue
54th Floor
New York, NY 10174
Medsite ACPII Limited Partners, L.P. 1,500 1,500,000
405 Lexington Avenue
54th Floor
New York, NY 10174
----- --------------
TOTAL 3,000 $ 3,000,000
</TABLE>
<PAGE> 39
MEDSITE.COM, INC.
RIGHTS AGREEMENT
SCHEDULE II
Schedule of Class B1 Purchasers
Medsite.com, Inc.
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- ----------
<S> <C> <C>
Reuters Holdings Switzerland S.A 909,091 $5,000,000
1700 Broadway
40th Floor
New York, NY 10019
CB Capital LP 727,273 4,000,000
380 Madison Avenue
12th Floor
New York, NY 10017
Brookside Capital Partners Fund, L.P. 727,273 4,000,000
2 Copley Place
Boston, MA 02116
TCW/ICICI India Private Equity Fund 510,848 2,809,664
c/o Trust Company of the West
Attn: Krishnan Ramaswami
865 South Figueroa Street, #1800
Los Angeles, CA 90017
TCW/ICICI India Private Equity AMP Fund 216,424 1,190,332
c/o Trust Company of the West
Attn: Krishnan Ramaswami
865 South Figueroa Street, #1800
Los Angeles, CA 90017
WPG Networking Fund, LP 51,200 281,600
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
</TABLE>
<PAGE> 40
MEDSITE.COM, INC.
RIGHTS AGREEMENT
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- ----------
<S> <C> <C>
WPG Institutional Networking Fund, LP 4,436 24,400
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
WPG Software Fund, LP 144,145 792,800
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
WPG Institutional Software Fund, LP 306,182 1,684,000
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
WPG Raytheon Networking Fund, LP 103,273 568,000
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
WPG Raytheon Software Fund, LP 118,036 649,200
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
Raj Mehra 2,727 15,000
c/o Weiss Peck & Greer
30th Floor
1 New York Plaza
New York, NY 10004
</TABLE>
2
<PAGE> 41
MEDSITE.COM, INC.
RIGHTS AGREEMENT
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- ----------
<S> <C> <C>
Delmas Business LTD 545,455 3,000,000
Exelfid Societe Fiduciaire SA
Attn M. Jean-Marc Jorand
Case Postale 3319
1211 Geneve 3
Hikari Tsushin, Inc. 363,636 2,000,000
Ohtemachi Nomura
Bldg. 2-1-1 Ohtemachi
Chiyoda-ku, Tokyo, 100-0004 Japan
Argentum Capital Partners II, L.P. 181,818 1,000,000
405 Lexington Avenue
54th Floor
New York, NY 10174
Metchem Engineering SA 181,818 1,000,000
c/o Finaco Treuhand AG
P.O. Box 1705
CH-8048 Zurich
Switzerland
Tenet Healthcare Corporation 181,818 1,000,000
320 State Street
Santa Barbara, CA 93105
Merchant Capital Inc. 59,091 325,000
11 Madison Avenue
New York, NY 10010
Everest Venture Partners II 45,455 250,000
c/o Vinod Gupta
5711 South 86th Circle
Omaha, NE 68127
</TABLE>
3
<PAGE> 42
MEDSITE.COM, INC.
RIGHTS AGREEMENT
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- ----------
<S> <C> <C>
Dr. P. Roy Vagelos 45,455 250,000
1 Crossroads Drive
Building A
Bedminster, NJ 07921
Brian Hermalin 18,182 100,000
20500 Civic Center Drive
Suite #3000
Southfield, MI 48076
Linden Nelson 18,182 100,000
1501 HA-LO Drive
Troy, MI 48084
Steven M. Mizel 9,091 50,000
430 Moon Light Lane
Encinitas, CA 92024
Jeffrey D. Saper 9,091 50,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
WS Investments 99B 9,091 50,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Scott Baxter 4,545 25,000
129 Deerhaven Road
Mahwah, NJ 07430
Allen Builder 4,545 25,000
Builder Investment Group
5 Piedmont Center
Suite 700
Atlanta, GA 30305
</TABLE>
4
<PAGE> 43
MEDSITE.COM, INC.
RIGHTS AGREEMENT
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- ----------
<S> <C> <C>
Sig Heller 4,545 25,000
450 Crow Hill Road
Mt. Kisco, NY 10549
Nina Locker 4,545 25,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Terry Mahony 4,545 25,000
1st Floor
41A Shouson Hill Road
Hong Kong
Laurence Paul 4,545 25,000
109 Ocean Front Walk
Venice, CA 90291
Steven J. Posner Defined Benefit Keogh 4,545 25,000
80 Cuttermill Road
Great Neck, NY 11021
Dr. S. K. Ramaswami 4,545 25,000
11 Shepherds Lane
Whitehouse Station, NJ 08889
David Rispler 4,545 25,000
3300 Country Club Drive
Jefferson City, MO 65109
Kurt J. Berney 2,909 16,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
</TABLE>
5
<PAGE> 44
MEDSITE.COM, INC.
RIGHTS AGREEMENT
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- -------------
<S> <C> <C>
Selim Day 2,909 16,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
Selwyn Goldberg 1,364 7,500
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
Thomas G. LaWer 909 5,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
Mark Brazeal 364 2,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
Allison Berry 364 2,000
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
Yaphet L. Smith 273 1,500
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 940304
--------- -----------
TOTAL CLASS B1 PREFERRED 5,539,088 $30,464,996
</TABLE>
6
<PAGE> 45
MEDSITE.COM, INC.
RIGHTS AGREEMENT
SCHEDULE III
CLASS B2 PREFERRED STOCK
<TABLE>
<CAPTION>
Name and Address of Purchaser Number of Shares Amount
----------------------------- ---------------- ------
<S> <C> <C>
Mednut LLC 400,000 $2,000,000
c/o Walnut Capital Partners
312 Walnut, Suite 1151
Cinncinati, OH 45202
Investcare Partners Limited Partnership LLC 400,000 2,000,000
31500 Northwestern Highway, Suite 120
Farmington Hills, MI 48334
Jordex Resources Inc. 200,000 1,000,000
200 High Wood Circle
Oyster Bay Cove, NY 11771
Aspen Associates LLC 200,000 1,000,000
320 Park Avenue, Suite 2500
New York, NY 10022
--------- ----------
TOTAL CLASS B2 PREFERRED 1,200,000 $6,000,000
</TABLE>
<PAGE> 1
EXHIBIT 4.3
RIGHTS AGREEMENT
This Rights Agreement (the "Agreement") is made as of January 12, 2000,
by and among Medsite.com, Inc., a Delaware corporation (the "Company") and the
persons and entities listed on Schedule A attached hereto (each, a "Shareholder"
and together, the "Shareholders") in connection with the acquisition of American
Medical Communications, Inc. by the Company (the "Merger") pursuant to that
certain Agreement and Plan of Merger of even date herewith.
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
1.2 "Common Stock" shall mean the Company's Common Stock, par value
$0.0001 per share.
1.3 "Qualified Holder" shall mean any Shareholder holding Registrable
Securities on the date hereof and those succeeding to the interest of such
Qualified Holder by the laws of descent and distribution, in compliance with
Section 13 hereof.
1.4 "Registrable Securities" means (i) any and all shares of Common
Stock received by the Qualified Holders in the Merger in exchange for the shares
of common stock of American Medical Communications, Inc. beneficially owned by
them on the date hereof, (ii) any other securities issued or issuable with
respect to any shares of Common Stock described in clause (i) above by way of a
stock dividend or stock split or in connection with a combination, exchange,
reorganization, recapitalization or reclassification of Company securities, or
pursuant to a merger, consolidation or other similar business combination
transaction involving the Company; provided, however, that shares of Common
Stock or other securities shall only be treated as Registrable Securities if and
so long as (A) such securities have not been sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction, (B) such securities have not been sold or are available for sale in
the opinion of counsel to the Company in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale or (C) all such securities may be
sold by the Qualified Holder thereof under Rule 144 promulgated under the
Securities Act, or a successor rule, within a three-month period.
1.5 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE> 2
1.6 "Registration Expenses" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Section 5
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company and Selling Expenses (as hereinafter defined)).
1.7 "Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 3 hereof.
1.8 "Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.9 "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Qualified Holders and all fees and disbursements of counsel for any
Qualified Holder (other than fees and disbursements of counsel included in
Registration Expenses).
2. RESTRICTIONS ON TRANSFERABILITY. The Common Stock shall not be sold,
assigned, transferred or pledged except upon the conditions specified in this
Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. Each Shareholder will cause any proposed
purchaser, assignee, transferee, or pledgee of the Common Stock held by such
Shareholder to agree to take and hold such securities subject to the provisions
and upon the conditions specified in this Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing the Common Stock and
any other securities issued in respect of the Common Stock upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event shall
(unless otherwise permitted by the provisions of Section 4 below) be stamped or
otherwise imprinted with the following legend (in addition to any legend
required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE
SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION."
<PAGE> 3
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN MARKET STAND-OFF PROVISIONS CONTAINED IN THE COMPANY'S RIGHTS
AGREEMENT DATED JANUARY __, 2000, AS IT MAY BE AMENDED. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO THE TO
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
Each Shareholder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the the Common Stock in
order to implement the restrictions on transfer established in this
Registration.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than a
transfer not involving a change in beneficial ownership), unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear, except if such transfer is made pursuant to Rule 144,
the appropriate restrictive legend set forth in Section 3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of
counsel for such holder and the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
5. PIGGYBACK REGISTRATION.
5.1 Notice. If, at any time or from time to time, the Company proposes
to file a registration statement under the Securities Act, other than a
registration relating solely to employee benefit plans or relating solely to
Rule 145 transactions (a "Registration Statement"), with respect to an offering
for its own account or for the account of security holders of any class of
securities of the Company, then each such time, the Company shall give written
notice of such intention to file a Registration Statement (a "Piggyback Notice")
to each Qualified Holder at least forty-five (45) days before the anticipated
filing date. The Piggyback Notice shall describe the intended method of
distribution and offer each Qualified Holder the opportunity to register
pursuant to such Registration Statement such Registrable Securities as the
Qualified Holder may request in writing to the Company within thirty (30) days
after the date the Qualified Holder first received the Piggyback
<PAGE> 4
Notice (a "Piggyback Registration"). The Company shall take all necessary steps
to include in the Registration Statement all Registrable Securities which the
Company has been so requested to register by the Qualified Holders, subject to
the superior rights of certain of the Company's stockholders pursuant to that
certain Amended and Restated Investor Rights Agreement dated as of December 10,
1999, as it may be amended (the "First Rights Agreement"). The Company shall be
entitled to withdraw a Registration Statement prior to its becoming effective.
5.2 Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Qualified Holders as a part of the written notice given pursuant
to Section 5.1. In such event the right of any Qualified Holder to registration
pursuant to this Section 5 shall be conditioned upon such Qualified Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Qualified Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 5, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so advise all
Qualified Holders and other holders distributing their securities through such
underwriting and, subject to and in compliance with the superior rights of
certain of the Company's stockholders pursuant to the First Rights Agreement,
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Qualified Holders and
such other holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Qualified Holders and such other
holders at the time of filing the registration statement. To facilitate the
allocation of shares in accordance with the above provisions, the Company may
round the number of shares allocated to any Qualified Holder to the nearest 100
shares. If any Qualified Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to ninety (90) days after the
effective date of the registration statement relating thereto, or such other
shorter period of time as the underwriters may require.
5.3 Termination of Rights. The rights to cause the Company to register
Registrable Securities pursuant to this Section 5 shall terminate two (2) years
after the effective date of the registration statement pertaining to the first
underwritten firm commitment public offering of securities of the Company for
its own account (other than a registration relating solely to a Commission Rule
145 transaction or a registration relating solely to employee benefit plans).
6. GRANTS OF SUBSEQUENT RIGHTS. From and after the date of this Agreement,
the Company shall notify the Shareholder Representative (as defined in that
certain Agreement and Plan of Merger by and between the Company, AMCI
Acquisition Corp., American Medical Communications, Inc. and the Significant
Shareholders of American Medical Communications, Inc.,
<PAGE> 5
dated as of the date hereof) in writing within thirty (30) days of entering into
any agreement granting any holder or prospective holder of any securities of the
Company registration rights with respect to such securities unless such new
registration rights are subordinate to the registration rights granted Qualified
Holders hereunder.
7. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with all registrations pursuant to Section 5 shall be borne by the
Company. Unless otherwise stated, all Selling Expenses relating to securities
registered on behalf of a Qualified Holder and all other expenses actually
incurred directly by Qualified Holders, including fees and expenses of their
legal counsel, shall be borne by such Qualified Holder of such securities pro
rata on the basis of the number of shares so registered. In connection with any
registration pursuant to Section 5, if the participating Qualified Holders elect
to be represented by counsel for the Company, the Company will pay the fees and
disbursements of its counsel incurred in so representing such participating
Qualified Holders.
8. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Qualified Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its reasonable best efforts to cause
such registration statement to become and remain effective;
(b) Furnish to the Qualified Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(c) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Qualified
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions; and
(d) Notify each Qualified Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
<PAGE> 6
9. INDEMNIFICATION.
9.1 The Company will indemnify each Qualified Holder, each of its
officers and directors and partners, and each person controlling such Qualified
Holder within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, or any violation by the Company of the Securities Act or
any rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Qualified Holder, each of its officers
and directors, and each person controlling such Qualified Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Qualified Holder, controlling
person or underwriter and stated to be specifically for use therein.
9.2 Each Qualified Holder will, if Registrable Securities held by
such Qualified Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Qualified Holder, each of its officers and
directors and each person controlling such Qualified Holder within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Qualified Holders, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Qualified Holder and stated to be specifically for use
therein.
<PAGE> 7
Notwithstanding the foregoing, the liability of each Qualified Holder under this
subsection 9.2 shall be limited in an amount equal to the aggregate initial
public offering price of the shares sold by such Qualified Holder, unless such
liability arises out of or is based on willful conduct by such Qualified Holder.
9.3 Each party entitled to indemnification under this Section 9
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
9.4 Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and Qualified Holders are subject to the condition
that, insofar as they relate to any violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the Commission
at the time the registration statement in question becomes effective or the
amended prospectus filed with the Commission pursuant to Commission's Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was furnished to the
Indemnified Party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
9.5 Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Qualified Holder exercising rights under this Agreement, or any
controlling person of any such Qualified Holder, makes a claim for
indemnification pursuant to this Section 9 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 9 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling Qualified Holder or any such controlling person in circumstances for
which indemnification is provided under this Section 9; then, and in each such
case, the Company and such Qualified Holder will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after
contribution from others) in such proportion so that such Qualified Holder is
responsible for the portion represented by
<PAGE> 8
the percentage such Qualified Holder's aggregate public offering price of its
Registrable Securities offered by and sold under the registration statement
bears to the public offering price of all securities offered by and sold under
such registration statement, and the Company and other selling Qualified Holders
are responsible for the remaining portion; provided, however, that, in any such
case, (A) no such Qualified Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered
and sold by such Qualified Holder pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
9.6 Survival. The obligations of the Company and Qualified Holders
under this Section 9 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
10. INFORMATION BY QUALIFIED HOLDER. Each Qualified Holder of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Qualified Holder, the Registrable Securities held by
them and the distribution proposed by such Qualified Holder as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
11. RULE 144. After an initial public offering of Common Stock, the Company
shall take all actions reasonably necessary to enable the Qualified Holders to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission,
including, without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed under the Exchange Act. Upon the request
of any Qualified Holder, the Company will deliver to such Qualified Holder a
written statement as to whether it has complied with such requirements and shall
provide such Qualified Holder with such publicly filed documents of the Company
as are reasonably requested by such Qualified Holder in connection with such
sale.
12. TRANSFER OF RIGHTS. The rights to cause the Company to register
securities granted Qualified Holders under Section 5 hereof may be assigned to a
transferee or assignee reasonably acceptable to the Company in connection with
any transfer or assignment of Registrable Securities by a Qualified Holder
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws, (ii) such assignee or transferee acquires at least
10,000 shares of Common Stock (as may be appropriately adjusted upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event)
and (iii) such assignee or transferee becomes a party to this Agreement and
assumes all of the obligations of the transferring Qualified Holder hereunder.
13. STANDOFF AGREEMENT. Each Shareholder agrees upon request of the Company
or the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
<PAGE> 9
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the underwriters; provided, that the
officers and directors of the Company who own stock of the Company also agree to
such restrictions.
14. CONFIDENTIAL INFORMATION. Each Shareholder agrees that any information
obtained by such Shareholder pursuant to this Agreement which is, or would
reasonably be perceived to be, proprietary to the Company or otherwise
confidential will not be disclosed without the prior written consent of the
Company. Notwithstanding the foregoing, each Shareholder may disclose such
information, on a need to know basis, to its employees, accountants or
attorneys, or to the employees, accountants or attorneys of its general partner
or investment manager (so long as each such person to whom confidential
information is disclosed agrees to keep such information confidential), in
compliance with a court order or when otherwise necessary to enforce any of
Shareholder's rights hereunder. Such information may also be disclosed to a
Shareholder's limited partners or shareholders (so long as each such person to
whom confidential information is disclosed agrees to keep such information
confidential). Each Shareholder further acknowledges and understands that any
information will not be utilized by such Shareholder in connection with
purchases and/or sales of the Company's securities except in compliance with
applicable state and federal antifraud statutes.
15. MISCELLANEOUS.
15.1 Governing Law. This Agreement shall be governed in
all respects by the internal laws of the State of New York. The parties
expressly stipulate that any litigation under this Agreement shall be brought in
the state courts of the Borough of Manhattan, New York and in the United States
District Court for the Southern District of New York. The parties agree to
submit to the jurisdiction and venue of those courts.
15.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Shareholder
and the closing of the transactions contemplated hereby.
15.3 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
15.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered in connection herewith constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is
<PAGE> 10
sought; provided, however, that any provision of this Agreement may be amended,
waived or modified with the written consent of the Company and the Qualified
Holders of at least a majority of the outstanding shares of Registrable
Securities to the extent that the effect of any such amendment, waiver or
modification by its terms applies equally to all Qualified Holders.
15.5 Effect of Amendment or Waiver. Each Shareholder acknowledges
that by the operation of Section 15.4 hereof (but subject to the final proviso
thereof) the Qualified Holders of a majority of the outstanding shares of
Registrable Securities will have the right and power to diminish or eliminate
all rights of such Shareholders under this Agreement.
15.6 Rights of Purchasers and Shareholders. Each Qualified Holder
of Registrable Securities shall have the absolute right to exercise or refrain
from exercising any right or rights that such Qualified Holder may have by
reason of this Agreement, including without limitation the right to consent to
the waiver of any obligation of the Company under this Agreement and to enter
into an agreement with the Company for the purpose of modifying this Agreement
or any agreement effecting any such modification, and such Qualified Holder
shall not incur any liability to any other Qualified Holder with respect to
exercising or refraining from exercising any such right or rights.
15.7 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one (1) business day if domestic and two (2) business
days if overseas, after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid or (d) one business day after the
business day of facsimile transmission, if delivered by facsimile transmission
with copy by first class mail, postage prepaid, and shall be addressed (i) if to
a Shareholder, at the Shareholder's address as set forth in this Agreement, and
(ii) if to the Company, at the address of its principal corporate offices
(attention: Secretary), or at such other address as a party may designate by ten
days' advance written notice to the other party pursuant to the provisions
above.
15.8 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any
Qualified Holder of any Shares, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such Qualified
Holder nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Qualified Holder of any breach or default under this Agreement, or any waiver on
the part of any Qualified Holder of any provisions or conditions of this
agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Qualified Holder, shall be
cumulative and not alternative.
<PAGE> 11
15.9 Expenses. Except as otherwise provided in Section 7, the
Company and each Shareholder shall bear its own expenses incurred on its behalf
with respect to this Agreement and the transactions contemplated hereby.
15.10 Counterparts. This Agreement may be executed in any number
of counterparts, each of which may be executed by less than all of the
Shareholders, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
15.11 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
15.12 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE> 12
The foregoing agreement is hereby executed as of the date first above
written.
MEDSITE.COM, INC.
By:
-------------------------------
Name: Gregory Scott
Title: Chief Financial Officer
[signature page to Rights Agreement]
<PAGE> 13
SIGNIFICANT SHAREHOLDERS:
BESSEMER VENTURE PARTNERS
By:
-------------------------------
Its:
------------------------------
EDWARD O. GAYLORD
TRIAD VENTURES LIMITED II, L.P.
By:
-------------------------------
Its:
------------------------------
B.U.N.P.
By:
-------------------------------
Its:
------------------------------
VINCENT E. FRIEDEWALD, JR.
----------------------------------
[signature page to Rights Agreement]
<PAGE> 14
PAUL S. MCCORMACK
----------------------------------
KEITH A. JEZEK
----------------------------------
[signature page to Rights Agreement]
<PAGE> 15
SCHEDULE A
Shareholder Name and Address
<PAGE> 1
Exhibit 10.2
MEDSITE.COM, INC.
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Medsite.com, Inc. 1999 Stock Option
Plan (the "Plan") is to promote the growth and general prosperity of
Medsite.com, Inc. (the "Company"), to attract qualified personnel to accept
positions of responsibility with the Company, to provide incentives for
personnel to remain in the employ of the Company and to induce personnel to
maximize the Company's performance during the terms of their options.
This Plan is intended to provide incentives: (a) to the officers and
other employees of the Company and Related Corporations (as hereinafter defined)
by providing them with opportunities to purchase stock in the Company pursuant
to options granted hereunder which qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
("ISOs"); and (b) to directors, officers, employees and consultants of the
Company and Related Corporations by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which do not
qualify as ISOs ("Non-Qualified Options").
2. DEFINITIONS. As used in the Plan, unless the context requires
otherwise, the following terms shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Committee" shall mean a committee of the Board,
designated by the Board, and composed solely of members of the Board (at least
two in number).
(c) "Common Stock" shall mean the Company's common
stock, $0.00005 par value, or if, pursuant to the adjustment provisions of
Section 14 hereof security is substituted for the common stock, such other
security.
(d) "Discharge(d) for Cause" shall mean the cessation
of Employee's employment by the Company for (i) chronic insubordination; (ii)
fraud; (iii) embezzlement; (iv) dishonesty; (v) gross neglect or dereliction of
duty; (vi) conduct that has or may cause serious injury to the Company (monetary
or otherwise), as determined by the Board of Directors of the Company; or (vii)
conviction of, or pleading guilty or no contest to, a felony, or any lesser
crime which involves property of the Company.
(e) "Discharge(d) Without Cause" shall mean the
cessation of Employee's employment with the Company for any reason other than
Discharge for Cause.
(f) A "Disqualifying Disposition" shall mean any
disposition (including any sale) of Common Stock before the later of (a) two
years after the date the employee was granted the ISO pursuant to which he
acquired the Common Stock, or (b) one year after the date the employee acquired
Common Stock by exercising the ISO.
<PAGE> 2
(g) "Effective Date" shall mean January 1, 1999.
(h) "Employee" shall mean any employee of the Company
or Related Corporation to whom an Option has been granted.
(i) "Grant Date" shall mean the date on which an
Option is granted.
(j) "Independent Third Party" means any Person or
group of Persons who, immediately prior to the contemplated transaction, does
not own in excess of 10% of the common equity of the Company or a Related
Corporation on a fully-diluted basis, who is not controlling, controlled by or
under common control with any such 10% owner of capital stock and who is not the
spouse or descendent (by birth or adoption) of any such 10% owner of capital
stock.
(k) "Option" shall mean an ISO or a Non-Qualified
Option, granted pursuant to the Plan, to purchase one or more shares of Common
Stock. To the extent the Option adheres to the provisions of Section 422 of the
Code, it qualifies as an ISO; to the extent it does not so adhere, it is a
Non-Qualified Option.
(l) "Optionee" shall mean a person to whom an Option
has been granted under the Plan.
(m) "Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department, agency
or political subdivision thereof.
(n) "Public Sale" means any sale pursuant to a
registered public offering under the Securities Act of 1933, as amended from
time to time.
(o) "Related Corporation" shall mean a subsidiary
corporation as such term is defined in Section 424(f) of the Code.
(p) "Sale of the Company" means the sale of the
Company to an Independent Third Party or affiliated group of Independent Third
Parties pursuant to which such party or parties acquire (i) capital stock of the
Company possessing the voting power to elect a majority of the Board (whether by
merger, consolidation or sale or transfer of the Company's capital stock) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
(q) "Termination of Employment" shall mean the
cessation of Employee's employment with the Company.
(r) "Termination Date" shall mean the effective date
of Employee's Termination of Employment irrespective of the cause or reason for
such termination.
3. ADMINISTRATION OF THE PLAN.
3.1 Board or Committee Administration. The Plan shall be administered
by the Board or by a Committee appointed by the Board; provided, that, to the
extent required by
- 2 -
<PAGE> 3
Rule 16b-3, or any successor provision ("Rule 16b-3"), of the Securities
Exchange Act of 1934, with respect to specific grants of stock rights, the Plan
shall be administered by a disinterested administrator or administrators within
the meaning of Rule 16b-3. Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each stock right by the Board and
subject to the terms of the Plan, the Committee shall have the authority to (i)
determine the employees of the Company and Related Corporations (from among the
class of employees eligible under Section 5 to receive ISOs) to whom ISOs may be
granted, and to determine (from among the class of individuals and entities
eligible under Section 5 to receive Non-Qualified Options) to whom Non-Qualified
Options may be granted; (ii) determine the time or times at which Options may be
granted; (iii) determine the option price of shares subject to each Option,
which price shall not be less than the minimum price specified in Section 7;
(iv) determine whether each Option granted shall be an ISO or a Non-Qualified
Option; (v) determine (subject to Section 8) the time or times when each Option
shall become exercisable and the duration of the exercise period; (vi) determine
whether restrictions such as repurchase options in favor of the Company are to
be imposed on shares subject to Options and the nature of such restrictions, if
any, and; (vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it. If the Committee determines to issue a Non-Qualified
Option, it shall take (or fail to take) whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated thereunder, to
ensure that such Option is not treated as an ISO. The interpretation and
construction by the Committee of any provisions of the Plan or of any Option
granted under it shall be final unless otherwise determined by the Board. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem best. No member of the Board or the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Option granted under it.
3.2 Committee Action. The Committee may select one of its members as
its chairperson, and shall hold meetings at such time and places as it may be
determined. Acts by a majority of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee (if consistent with
applicable state law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
3.3 Grant of Options to Board Members. Options may be granted to
members of the Committee or the Board consistent with the provisions of the
first sentence of Section 3.1 above, if applicable. All grants of Options to
members of the Committee or the Board shall in all other respects be made in
accordance with the provisions of the Plan applicable to other eligible persons.
Members of the Committee or the Board who are either (i) eligible for Options
pursuant to the Plan or (ii) have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of any Options pursuant to
the Plan, except that no such member shall act upon the granting to himself of
Options, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board during which action is taken with respect to
the granting to him of Options.
- 3 -
<PAGE> 4
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $0.00005 per share, or shares
of Common Stock acquired by the Company in any manner. The aggregate number of
shares of Common Stock which may be issued pursuant to the Plan is 800,000 (post
split). This number is subject to adjustment as provided in Section 14. Any such
shares may be issued as ISOs or Non-Qualified Options, so long as the number of
shares so issued does not exceed such number, as adjusted. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or in
part, or if the Company shall reacquire any unexercised shares, the unpurchased
shares subject to such Options and any unexercised shares so acquired by the
Company shall again be available for grants of Options under the Plan.
5. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee
of the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options may be granted to any employee, officer or director
(whether or not also an employee) or consultant of the Company or any Related
Corporation. The Committee may take into consideration a recipient's individual
circumstance in determining whether to grant an ISO or a Non-Qualified Option.
Granting of any Option to any individual or entity shall neither entitle that
individual or entity to, nor disqualify him/her or it from, participation in any
other grant of Options.
6. GRANTING OF OPTIONS. Options may be granted under the Plan at any
time on or after the Effective Date and prior to December 31, 2008. The date of
an Option under the Plan will be the date specified by the Committee at the time
it grants the Option; provided, however, that such date shall not be prior to
the date on which the Committee acts to approve the grant. The Committee shall
have the right, with the consent of the Optionee, to convert an ISO granted
under the Plan to a Non-Qualified Option pursuant to Section 15.
7. MINIMUM OPTION PRICE; ISO LIMITATIONS.
7.1 Price for ISOs. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock possessing more
than ten (10%) percent of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share specified
in the agreement relating to such ISO shall not be less than one hundred ten
(110%) percent of the fair market value per share of Common Stock on the Grant
Date.
7.2 Price for Non-Qualified Options. The exercise price per
share specified in the agreement relating to each Non-Qualified Option granted
under the Plan shall in no event be less than the minimum legal consideration
required therefor under the law of the State of New York or the laws of any
jurisdiction in which the Company or its successors in interest may be
organized.
7.3 $100,000 Annual Limitation on ISOs. Each eligible employee
may be granted ISOs only to the extent that, in the aggregate under the Plan and
all incentive stock option plans of the Company and any Related Corporation, the
value of Common Stock (determined at the time ISOs were granted) which is
subject to ISOs that become exercisable for the first time by such
- 4 -
<PAGE> 5
employee during any calendar year does not exceed $100,000. Any options granted
to an employee in excess of such amount will be granted as Non-Qualified
Options.
7.4 Determination of Fair Market Value. The fair market value
of Option shares shall be an amount per share determined on the basis of the
price at which shares of the Common Stock could reasonably be expected to be
sold in an arms-length transaction, for cash, other than on an installment
basis, to a person not employed by, controlled by, in control of or under common
control with the Company. Fair market value shall be determined by the
Committee, giving due consideration to recent grants of ISOs for shares of
Common Stock, recent transactions involving shares of the Common Stock, if any,
earnings of the Company to the date of such determination, projected earnings of
the Company, the effect of the transfer restrictions to which the Option shares
are subject under law and the Plan, the absence of a public market for the
Common Stock and such other matters as the Committee deems pertinent. If the
Common Stock of the Company is traded on any national securities exchange or the
NASDAQ Interdealer Quotation System, fair market value shall be (i) the average
of the high and low closing sales prices, or (ii) the average of the last
reported sale price on the NASDAQ National Market System, or (iii) the average
of the closing bid prices for the twenty (20) consecutive trading days preceding
the date of the event. The determination by the Committee of the fair market
value shall be conclusive and binding. The fair market value of the Option
shares shall be determined as of the day on which the event occurs.
8. OPTION DURATION. Subject to earlier termination as provided in
Section 12, each Option shall expire on the date specified by the Committee, but
not more than (a) ten years from Grant Date in the case of ISOs generally, (b)
five years from the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the Company or any Related Corporation, and (c)
ten years and one day from the Grant Date in the case of Non-Qualified Options.
Subject to earlier termination as provided in Section 12, the term of each ISO
shall be the term set forth in the original instrument granting such ISO, except
with respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to Section 15.
9. EXERCISE OF OPTION. Subject to the provisions of Sections 10, 12 and
17, each Option granted under the Plan shall be exercisable as follows:
9.1 Incentive Stock Options. All ISOs shall be either be fully
exercisable on the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
9.2 Non-Qualified Options. All Non-Qualified Options shall be
either be fully exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
9.3 Period of Exercisability. Once an Option or installment
becomes exercisable, it shall remain exercisable until expiration or termination
of the Option, unless otherwise specified by the Committee.
- 5 -
<PAGE> 6
9.4 Partial Exercise. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
9.5 Acceleration of Installments. The Committee shall have the
right to accelerate the date of exercise of any installment of any Option;
provided that the Committee shall not, without the consent of an Optionee,
accelerate the exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Section 15) if such acceleration would violate the annual exercise
limitation contained in Section 422(d) of the Code, as described in Section 7.3.
10. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in Sections 7, 8, 9, 12 and 17 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. Non-Qualified Options shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
11. MEANS OF EXERCISING STOCK OPTION. An Option (or any part or
installation thereof) shall be exercisable by giving written notice to the
Company at its principal office address. Such notice shall identify the Option
being exercised and specify the number of shares as to which such Option is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Option, or (c) at the discretion of the Committee and consistent
with applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of the Stock Option and an authorization to the broker or selling
agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, or (d) at the discretion of the
Committee, by any combination of (a), (b) and (c) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clause (b), (c) or (d) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of an Option shall not have the rights of a
stockholder with respect to the shares covered by his Option until the date of
issuance of a stock certificate to him for such shares. Except as expressly
provided above in Section 14 with respect to changes in capitalization and stock
dividends, no adjustment shall be made for dividends or similar rights for which
the record date is before the date such stock certificate is issued.
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<PAGE> 7
12. TERMINATION OF EMPLOYMENT.
12.1 Termination of Options. In the event that Employee is
Discharged Without Cause or if Employee voluntarily resigns from employment with
the Company, Employee shall have ninety (90) days from the such date of
Discharge Without Cause or resignation in which to exercise any Option vested in
Employee under this Plan, to the extent of the number of shares with respect to
which he could have exercised it on the date of his Discharge. Thereafter, any
Option vested in, or granted to, Employee shall terminate.
12.2 Termination for Cause. If Employee is Discharged for
Cause, at any time during the term of this Plan, any Option granted to Employee
under this Plan shall automatically terminate as of the Termination Date.
12.3 Death. If any ISO Optionee ceases to be employed by the
Company and all Related Corporations by reason of his death, any ISO of his may
be exercised, to the extent of the number of shares with respect to which he
could have exercised it on the date of his death, by his estate, personal
representative or beneficiary who has acquired the ISO by will or by the law of
descent and distribution, at any time prior to the earlier of the specified
expiration date of the ISO or 90 days from the date of the Optionee's death.
Thereafter, any Option granted to Employee shall terminate.
12.4 Disability. If an ISO Optionee ceases to be employed by
the Company and all Related Corporations by reason of his/her disability, he/she
shall then have the right to exercise any ISO hold by him/her on the date of
termination of employment, to the extent of the number of shares with respect to
which he/she could have exercised it on that date, at any time prior to the
earlier of the specified expiration date of the ISO or one year from the date of
the termination of the Optionee's employment. Thereafter, any Option granted to
Employee shall terminate. For the purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code.
13. RESTRICTIVE COVENANT.
13.1 As an express condition to the granting of an Option to
Employee under this Plan, Employee shall agree that during his/her employment
with the Company and upon his/her Termination of Employment for any reason
whatsoever (whether voluntary or involuntary, and whether or not Discharged With
Cause) Employee shall not directly or indirectly:
(a) with respect to products or services that are
competitive with those of the Company, solicit or accept business or orders from
any persons, firms or entities, which were, prior to the Termination Date,
customers or clients of the Company;
(b) interfere with, disrupt or attempt to disrupt
relationships, contractual or otherwise, between the Company, and any of its
customers, clients, employees or vendors; or
(c) be employed by, or have any interest in (whether
as partner, shareholder, director, officer, consultant, contractor or
otherwise), any business located in, or doing
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<PAGE> 8
business in, the United States of America with respect to products or services
that are competitive with those of the Company.
13.2 Further, Employee shall acknowledge that if Employee
violates the provisions of Section 13.1, money damages would be an inadequate
remedy for the Company, and that therefore, in such event, the Company, in
addition to any other remedies that it may have at law or in equity or under
this Plan, shall be entitled to an injunction issued by a court of competent
jurisdiction, restraining the Employee from committing or continuing to engage
in such prohibited activities. Employee agrees that upon request of the Company
the Employee shall execute such instruments as the Company and/or its counsel
deems advisable to effectuate the purposes of this Section 13.
13.3 In the event Employee violates the covenant described in
Section 13.1, at any time during or after the term of this Plan, any Options
granted to Employee under this Plan shall automatically terminate.
14. ADJUSTMENTS. Upon the occurrence of any of the following events, an
Optionee's rights with respect to Options granted him/her hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the Optionee and the Company relating to such Option:
14.1 Stock Dividends and Stock Splits. If the shares of the
Common Stock shall be subdivided or combined into a greater or smaller number of
shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
14.2 Sale of the Company. If the Company is to be consolidated
with or acquired by another entity in a Sale of the Company, the Committee or
the board of directors of any successor entity (the "Successor Board"), shall,
as to outstanding Options, either (a) make appropriate provision for the
continuation of such Options by substituting on an equitable basis for the
shares then subject to such Options any equity securities of the successor
entity; (b) upon written notice to the Optionee, provide that all Options must
be exercised, if at all, within a specified number of days of the date of such
notice, at the end of which period the Options shall terminate; (c) terminate
all Options in exchange for a cash payment equal to the excess of the fair
market value of the shares subject to such Options over the exercise price
thereof; (d) terminate some or all Options in exchange for the right to
participate in any stock option or other employee benefit plan of any successor
entity; or (e) provide for the acceleration of any time period relating to the
exercise of the Option. If a proposed Sale of the Company is abandoned or
otherwise not consummated then, to the extent that the portion of the Option not
exercised prior to such abandonment shall have become exercisable solely by
operations of this Section 14.2, such exercisability shall be annulled and of no
further force or effect, and the exercisability period set forth in the
instrument ordering the Option shall be reinstated as of the date of such
abandonment.
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<PAGE> 9
14.3 Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in Section 14.2) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an Optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he/she would have
received if he/she had exercised his/her Option prior to such recapitalization
or reorganization.
14.4 Change in Control. In order to preserve an Optionee's
rights in the event of a change in control of the Company (as defined by the
Committee), the Committee in its discretion may, at the time an Option is
granted or at any time thereafter, take one or more of the following actions:
(i) provide for the acceleration of any time period relating to the exercise of
the Option, (ii) provide for payment to the Optionee of cash or other property
with a fair market value equal to the amount that would have been received upon
the exercise of the Option had the Option been exercised upon the change in
control, (iii) adjust the terms of the Option in a manner determined by the
Committee to reflect the change in control, (iv) cause the Option to be assumed,
or new rights substituted therefor, by another entity, or (v) make such other
provision as the Committee may consider equitable to Optionees and in the best
interests of the Company.
14.5 Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to Section 14.1, 14.2 or 14.3 with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424(h) of the Code) or would
cause any adverse tax consequences for the holders of such ISOs. If the
Committee determines such adjustments made with respect to ISOs would constitute
a modification of such ISOs, it may refrain from making such adjustments.
14.6 Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, other than a dissolution or
liquidation in connection with a Sale of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
14.7 Issuances of Securities. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
14.8 Fractional Shares. No fractional shares shall be issued
under the Plan and the Optionee shall receive from the Company cash in lieu of
such fractional shares.
14.9 Adjustments. Upon the happening of any of the events
described in Section 14.1, 14.2 or 14.3, the class and aggregate number of
shares set forth in Section 4 hereof that are subject to Options which
previously have been subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subsections. The
Committee or
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<PAGE> 10
the Successor Board shall determine the specific adjustments to be made under
this Section 14 and, subject to Section 3, its determination shall be
conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of an Option made hereunder receives shares or securities or cash in
connection with a corporate transaction described in Section 14.1, 14.2 or 14.3
as a result of owning such restricted Common Stock, such shares or securities or
cash shall be subject to all of the conditions and restrictions applicable to
the restricted Common Stock with respect to which such shares or securities or
cash were issued, unless otherwise determined by the Committee or the Successor
Board.
14.10 Rights of Repurchase. If any of the events specified in
Section 14.11 below occur, then,
(a) with respect to shares acquired upon exercise of
an Option ("Option Shares") prior to the occurrence of such event, within ninety
(90) days after the Company receives actual knowledge of the event, and
(b) with respect to Option Shares acquired after the
occurrence of such event, within ninety (90) days following the date of such
exercise, (in either case, the "Repurchase Period"), the Company shall have the
option, but not the obligation, to repurchase all, but not a portion of, the
Option Shares from the Optionee, or his/her legal representatives, as the case
may be (the "Repurchase Option"). The Repurchase Option shall be exercised by
the Company by giving the Optionee, or his/her legal representative, written
notice of its intention to exercise the Repurchase Option on or before the last
day of the Repurchase Period, and, together with such notice, tendering to the
Optionee, or his/her representative, an amount equal to the Option exercise
price. The Company may, in exercising the Repurchase Option, designate one or
more nominees to purchase the Option Shares either within or without the
Company. Upon timely exercise of the Repurchase Option in the manner provided in
this Section 14.10, Optionee, or his/her legal representative, shall deliver to
the Company the stock certificate or certificates representing the Option
Shares, duly endorsed and free and clear of any and all liens, charges and
encumbrances. Upon the failure to so deliver such stock certificate or
certificates, the Company at its option may deem the Option Shares canceled and
reflect such cancellation on its books.
If the Option Shares are not purchased under the Repurchase Option, the
Optionee and his/her successor in interest, if any, will hold any of the Option
Shares in his/her possession subject to all of the provisions of the Plan.
Notwithstanding any of the foregoing to the contrary, the repurchase
options set forth in this Section 14.10 shall expire and terminate on the
earlier of (i) the tenth (10th) anniversary of the date of the grant hereof; or
(ii) the date on which shares of the same class of the Option Shares are listed
or admitted to unlisted trading privileges on a national securities exchange or
as to which sales or bid and offer quotations are reported in the automated
quotation system operated by the National Association of Securities Dealers,
Inc.
14.11 Company's Right to Exercise Repurchase Option. The
Company shall have the Repurchase Option in the event that any of the following
events shall occur:
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<PAGE> 11
(a) The receivership, bankruptcy or other creditor's
proceeding regarding the Optionee or the taking of any of Optionee's Option
Shares by legal process, such as a levy of execution; or
(b) Distribution of shares held by the Optionee to
his/her spouse as such spouse's joint or community interest pursuant to a decree
of dissolution, operation of law, divorce, property settlement agreement or for
any other reason, except as may be otherwise permitted by the Company.
15. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
The Committee, at the written request of any Optionee, may, in its discretion,
take such actions as may be necessary to convert such Optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the Optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such ISOs. At the
time of such conversion, the Committee (with the consent of the Optionee) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any Optionee the right to have such Optionee's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. The Committee, with the consent of the
Optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
16. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, or the making of a Disqualifying Disposition (as defined
in Section 2), the Company, in accordance with Section 3402(a) of the Code, may
require the Optionee to pay additional withholding taxes in respect of the
amount that is considered compensation includible in such person's gross income.
The committee in its discretion may condition (i) the exercise of an Option, or
(ii) the vesting of restricted Common Stock acquired by exercising an Option, on
the grantee's payment of such additional withholding taxes.
17. ASSIGNABILITY. No Option shall be assigned or transferable by the
Optionee except by will or by the laws of descent and distribution. During the
lifetime of the Optionee, each ISO shall be exercisable only by him/her.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each Employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. If the Employee has died before such stock
is sold, these holding period requirements do not apply and no Disqualifying
Disposition can occur thereafter.
19. TERMS AND AMENDMENT OF PLAN. This Plan was adopted by the Board of
Directors of the Company on March 5, 1999 and is effective January 1, 1999,
subject (with respect to the validation of ISOs granted under the Plan) to
approval of the Plan by the stockholders of the
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<PAGE> 12
Company at a Meeting of the Stockholders or, in lieu thereof, by written
consent. If the approval of stockholders is not obtained prior to March 1, 2000,
any grants of ISOs under the Plan made prior to that date will be rescinded. The
Plan shall expire at the end of the day on December 31, 2008 (except as to
Options outstanding on that date). The Board may terminate or amend the Plan in
any respect at any time, except that, without the approval of the stockholders
obtained within twelve (12) months before or after the Board adopts a resolution
authorizing any of the following actions: (a) the total number of shares that
may be issued under the Plan may not be increased (except by adjustment pursuant
to Section 14); (b) the provisions of Section 5 regarding the eligibility for
grants of ISOs may not be modified; (c) the provisions of Section 7.2 regarding
the exercise price at which shares may be offered pursuant to ISOs may not be
modified (except by adjustment pursuant to Section 14); and (d) the expiration
date of the Plan may not be extended. Except as otherwise provided in this
Section 19, in no event may action of the Board of Directors or stockholders
alter or impair the rights of an Optionee, without his/her consent, under any
Option previously granted to him/her.
20. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for working capital and other general corporate purposes.
21. GOVERNMENTAL REGULATION; STOCK OPTION AGREEMENT. Anything contained
herein to the contrary notwithstanding, the Company shall not be obliged to sell
or issue any shares of Common Stock pursuant to the exercise of the Option
unless and until (i) the Company is satisfied that such sale or issuance
complies with all applicable provisions of the 1933 Securities Act and all other
laws or regulations by which the Company is bound or to which the Company or
such shares are subject and (ii) if Optionee has not already done so, Optionee
executes and delivers any Stock Option Agreement in the form then being utilized
by the Company with respect to new employee-stockholders which covers the shares
of Common Stock acquired pursuant to the exercise of the Option.
22. MISCELLANEOUS PROVISIONS.
22.1 No Employee of the Company or any other person shall have
any claim or right to have an Option granted to him under this Plan except as
specifically set forth herein. The Optionee shall have no rights as stockholder
with respect to an Option until a stock certificate therefor has been issued to
the Optionee and is fully paid for by the Optionee. Except as expressly provided
in this Plan with respect to certain changes in capitalization of the Company,
no adjustment shall be made for dividends or similar rights for which the record
date is prior to the date such stock certificate is issued.
22.2 Neither the existence nor provisions of this Plan nor any
action taken hereunder shall be deemed to give Employee the right to be retained
in the employ or service of the Company or to interfere with the rights of the
Company to discharge Employee at any time.
22.3 The Company shall have the right to deduct from all
grants of Options and their conversion to Common Stock on the Trigger Date any
Federal, State, County or municipal taxes required by law to be withheld with
respect to same.
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<PAGE> 13
22.4 This Plan and all requirements thereunder shall be
construed in accordance with and governed by the laws of the State of New York.
22.5 Any provision of this Plan which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
22.6 Throughout this Plan, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Plan indicates otherwise.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has duly executed this Stock Option
Plan on this ________ day of March, 1999.
MEDSITE.COM, INC.
By: _______________________________
Sundeep Bhan, President
<PAGE> 1
Exhibit 10.3
MEDSITE.COM, INC.
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees, Directors
and Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Medsite.com, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
<PAGE> 2
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
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<PAGE> 3
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this Medsite.com, Inc. 2000 Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b) " means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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<PAGE> 4
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is [3,200,000] Shares plus an annual increase to be added on
the first day of the Company's fiscal year beginning in 2001, equal to the
lesser of (i) [2,000,000] shares, (ii) [3%] of the outstanding shares on such
date or (iii) a lesser amount determined by the Board.. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees
with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock
to be covered by each Option and Stock Purchase Right granted hereunder;
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<PAGE> 5
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
-5-
<PAGE> 6
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights
may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than [1,500,000] Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
[1,500,000] Shares, which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock
-6-
<PAGE> 7
Option shall be five (5) years from the date of grant or such shorter term as
may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and
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<PAGE> 8
(B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the
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<PAGE> 9
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
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<PAGE> 10
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
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<PAGE> 11
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
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<PAGE> 12
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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<PAGE> 13
MEDSITE.COM, INC.
2000 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
<TABLE>
<S> <C>
Grant Number ____________________________________________
Date of Grant ____________________________________________
Vesting Commencement Date ____________________________________________
Exercise Price per Share $___________________________________________
Total Number of Shares Granted ____________________________________________
Total Exercise Price $___________________________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ____________________________________________
</TABLE>
Vesting Schedule:
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
[20% OF THE SHARES SUBJECT TO THE OPTION SHALL VEST TWELVE MONTHS AFTER
THE VESTING COMMENCEMENT DATE, AND 1/60TH OF THE SHARES SUBJECT TO THE OPTION
SHALL VEST EACH MONTH THEREAFTER ON THE SAME DAY OF THE MONTH AS THE VESTING
COMMENCEMENT DATE, SUBJECT TO THE OPTIONEE CONTINUING TO BE A SERVICE PROVIDER
ON SUCH DATES].
<PAGE> 14
Termination Period:
This Option may be exercised for [THREE MONTHS] after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for [TWELVE MONTHS] after Optionee ceases to be a
Service Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
A. Grant of Option.
The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
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<PAGE> 15
C. Method of Payment.
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the
Plan; or
4. surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (ii) have a
Fair Market Value on the date of surrender equal to the aggregate
Exercise Price of the Exercised Share; or
5. [WITH THE ADMINISTRATOR'S CONSENT, DELIVERY OF OPTIONEE'S
PROMISSORY NOTE (THE "NOTE") IN THE FORM ATTACHED HERETO AS EXHIBIT C,
IN THE AMOUNT OF THE AGGREGATE EXERCISE PRICE OF THE EXERCISED SHARES
TOGETHER WITH THE EXECUTION AND DELIVERY BY THE OPTIONEE OF THE
SECURITY AGREEMENT ATTACHED HERETO AS EXHIBIT B. THE NOTE SHALL BEAR
INTEREST AT THE "APPLICABLE FEDERAL RATE" PRESCRIBED UNDER THE CODE AND
ITS REGULATIONS AT TIME OF PURCHASE, AND SHALL BE SECURED BY A PLEDGE
OF THE SHARES PURCHASED BY THE NOTE PURSUANT TO THE SECURITY
AGREEMENT;] OR
6. to the extent permitted by the Administrator, delivery of a
properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company
of the sale proceeds required to pay the Exercise Price.
D. Non-Transferability of Option.
This Option may not be transferred in any manner otherwise
than by will or by the laws of descent or distribution and may be exercised
during the lifetime of Optionee only by the Optionee. The terms of the Plan and
this Option Agreement shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
E. Term of Option.
This Option may be exercised only within the term set out in
the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.
F. Tax Consequences.
Some of the federal tax consequences relating to this Option,
as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD
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<PAGE> 16
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
G. Exercising the Option.
1. Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
2. Incentive Stock Option. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
3. Disposition of Shares.
(a) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares for at
least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes. If the Optionee disposes of ISO Shares within
one year after exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the lesser of (A) the
difference between the Fair Market Value of the Shares acquired on the date of
exercise and the aggregate Exercise Price, or (B) the difference between the
sale price of such Shares and the aggregate Exercise Price. Any additional gain
will be taxed as capital gain, short-term or long-term depending on the period
that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO
Shares. If the Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to an ISO on or before the later of (i) two years after the
grant date, or (ii) one year after the exercise date, the Optionee shall
immediately notify the Company in writing of such disposition. The Optionee
agrees that he or she may be subject to income tax withholding by the Company on
the compensation income recognized from such early disposition of ISO Shares by
payment in cash or out of the current earnings paid to the Optionee.
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<PAGE> 17
H. Entire Agreement; Governing Law.
The Plan is incorporated herein by reference. The Plan and
this Option Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and may not be modified adversely to the Optionee's
interest except by means of a writing signed by the Company and Optionee. This
agreement is governed by the internal substantive laws, but not the choice of
law rules, of New York.
I. NO GUARANTEE OF CONTINUED SERVICE.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: MEDSITE.COM, INC.
- ----------------------------------- -------------------------------------
Signature By
- ----------------------------------- -------------------------------------
Print Name Title
- ----------------------------------- -------------------------------------
Residence Address
- -----------------------------------
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<PAGE> 18
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
--------------------------------
Spouse of Optionee
<PAGE> 19
EXHIBIT A
MEDSITE.COM, INC.
2000 STOCK OPTION PLAN
EXERCISE NOTICE
Medsite.com, Inc.
59 Maiden Lane
New York, NY 10038
Attention: [Title]
1. Exercise of Option. Effective as of today, ________________, _____,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Medsite.com, Inc. (the "Company") under
and pursuant to the 2000 Stock Plan (the "Plan") and the Stock Option Agreement
dated, _____ (the "Option Agreement"). The purchase price for the Shares shall
be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE> 20
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
New York.
Submitted by: Accepted by:
PURCHASER: MEDSITE.COM, INC.
- ----------------------------------- -------------------------------------
- ----------------------------------- -------------------------------------
Signature By
- ----------------------------------- -------------------------------------
Print Name Its
Address: Address:
- ----------------------------------- 59 Maiden Lane
New York, NY 10038
- -----------------------------------
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<PAGE> 1
EXHIBIT 10.4
MEDSITE.COM, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of Medsite.com, Inc..
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or any
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Medsite.com, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings and
commissions, but exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each Offering
Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 15th and
November 15th of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the last Trading Day on
or before [November 14, 2000 or May 14, 2001]. The duration and timing of
Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a share
of Common Stock on the Enrollment Date or on the Exercise Date, whichever is
lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
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<PAGE> 3
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 15th and November 15th each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
[NOVEMBER 14, 2000 OR MAY 14, 2001]. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
-3-
<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
[10,000] shares of the Company's Common Stock (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board
may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of
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<PAGE> 5
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in Section
10 hereof, his or her option for the purchase of shares shall be exercised
automatically on the Exercise Date, and the maximum number of full shares
subject to option shall be purchased for such participant at the applicable
Purchase Price with the accumulated payroll deductions in his or her account. No
fractional shares shall be purchased; any payroll deductions accumulated in a
participant's account which are not sufficient to purchase a full share shall be
retained in the participant's account for the subsequent Purchase Period or
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
-5-
<PAGE> 6
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the Company
as provided in Section 19 hereof, the maximum number of shares of the Company's
Common Stock which shall be made available for sale under the Plan shall be
[750,000] shares plus an annual increase to be added on the first day of the
Company's fiscal year beginning in 2001, equal to the lesser of (i) [1,000,000]
shares, (ii) [1%] of the outstanding shares on such date or (iii) a lesser
amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
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<PAGE> 7
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of
-7-
<PAGE> 8
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount
-8-
<PAGE> 9
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of the
Plan may result in unfavorable financial accounting consequences, the Board may,
in its discretion and, to the extent necessary or desirable, modify or amend the
Plan to reduce or eliminate such accounting consequence including, but not
limited to:
(i) altering the Purchase Price for any Offering Period including
an Offering Period underway at the time of the change in Purchase Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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<PAGE> 10
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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<PAGE> 11
EXHIBIT A
MEDSITE.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Medsite.com, Inc.
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the
<PAGE> 12
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ _______________________________________
Relationship
_______________________________________
(Address)
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<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
___________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ___________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary other
than spouse)
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<PAGE> 14
EXHIBIT B
MEDSITE.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Medsite.com,
Inc. Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
Signature:
--------------------------------
Date:
--------------------------------
<PAGE> 1
EXHIBIT 10.5
MEDSITE.COM, INC.
2000 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 2000 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Medsite.com, Inc., a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Disability" means total and permanent disability as
defined in section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall
<PAGE> 2
be the mean between the high bid and low asked prices for the Common Stock for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(j) "Inside Director" means a Director who is an Employee.
(k) "Option" means a stock option granted pursuant to the
Plan.
(l) "Optioned Stock" means the Common Stock subject to an
Option.
(m) "Optionee" means a Director who holds an Option.
(n) "Outside Director" means a Director who is not an
Employee.
(o) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 2000 Director Option Plan.
(q) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is [250,000] Shares (the "Pool") plus an annual increase to
be added on the first day of the Company's fiscal year beginning in 2001, equal
to the number of options granted under the Plan during the prior fiscal year.
The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
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<PAGE> 3
(i) No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options.
(ii) Each Outside Director shall be automatically
granted an Option to purchase [20,000] Shares (the "First Option") on the date
on which the later of the following events occurs: (A) the effective date of
this Plan, as determined in accordance with Section 6 hereof, or (B) the date on
which such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically
granted an Option to purchase [5,000] Shares (a "Subsequent Option") on the date
of the annual stockholder's meeting of each year provided he or she is then an
Outside Director and if as of such date, he or she shall have served on the
Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections
(ii) and (iii) hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with Section 16 hereof
shall be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.
(v) The terms of a First Option granted hereunder
shall be as follows:
(A) the term of the First Option shall be
ten (10) years.
(B) the First Option shall be exercisable
only while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be
100% of the Fair Market Value per Share on the date of grant of the First
Option.
(D) subject to Section 10 hereof, the First
Option shall become exercisable as to [TWENTY-FIVE PERCENT (25%)] of the Shares
subject to the First Option on each anniversary of its date of grant, provided
that the Optionee continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option shall
be ten (10) years.
(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
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<PAGE> 4
(C) the exercise price per Share shall be
100% of the Fair Market Value per Share on the date of grant of the Subsequent
Option.
(D) subject to Section 10 hereof, the
Subsequent Option shall become exercisable as to all of the Shares subject to
the Subsequent Option on the [FOURTH] anniversary of its date of grant, provided
that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the
Plan would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the shareholders to increase the number of
Shares which may be issued under the Plan or through cancellation or expiration
of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however,
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<PAGE> 5
that no Options shall be exercisable until shareholder approval of the Plan in
accordance with Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. A share certificate for the number of Shares so acquired
shall be issued to the Optionee as soon as practicable after exercise of the
Option. No adjustment shall be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as
a Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration
-5-
<PAGE> 6
of its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of death, and to the extent that the Optionee's
estate or a person who acquired the right to exercise such Option does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or substituted
for, the Option or equivalent option shall continue to be exercisable as
provided in Section 4 hereof for so long as the Optionee serves as a Director or
a director of the Successor Corporation. Following such assumption or
substitution, if the Optionee's status as a Director or director of the
Successor Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
-6-
<PAGE> 7
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-7-
<PAGE> 8
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
-8-
<PAGE> 9
MEDSITE.COM, INC.
DIRECTOR OPTION AGREEMENT
Medsite.com, Inc., (the "Company"), has granted to ___________________
(the "Optionee"), an option to purchase a total of [________ (____)] shares of
the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 2000Director Option Plan (the "Plan") adopted by the
Company which is incorporated herein by reference. The terms defined in the Plan
shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is not
intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of Common
Stock.
3. Exercise of Option. This Option shall be exercisable during its term in
accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
(a) This Option shall become exercisable in installments
cumulatively with respect to percent ( %) of the Optioned Stock one year after
the date of grant, and as to an additional percent ( %) of the Optioned Stock on
each anniversary of the date of grant, so that one hundred percent (100%) of the
Optioned Stock shall be exercisable [__________] years after the date of grant;
provided, however, that in no event shall any Option be exercisable prior to the
date the stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by written
notice, which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
<PAGE> 10
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with such
other documentation as the Company and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
9. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof. This Agreement and the
Plan are governed by New York law except for that body of law pertaining to
conflict of laws.
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<PAGE> 11
DATE OF GRANT: ______________
Medsite.com, Inc.
a Delaware corporation
By: _________________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
_____________________________________
Optionee
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<PAGE> 12
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Medsite.com, Inc.
59 Maiden Lane
New York, NY 10038
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Medsite.com, Inc. (the "Company") under and pursuant to the
Company's 2000 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the Shares
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act"), or unless an exemption from such registration
is available, and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
<PAGE> 13
6. Entire Agreement. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof. This
Exercise Notice and the Agreement are governed by New York law except for that
body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: MEDSITE.COM, INC.
By: By:
---------------------------- ---------------------------
Its:
---------------------------
Address:
Dated: Dated:
---------------------------- ---------------------------
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<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, by and
between, Medsite Publishing, a Delaware corporation, with an address at 60 East
13th Street, 5th Floor, New York, New York 10003 (the "Company") and Sundeep
Bhan, an individual with an address at 155 East 31st Street, New York, NY 10016
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company
and is responsible for duties of the Chief Executive Officer ("CEO");
WHEREAS, the Company and the Executive desire to express the
terms and conditions of the employment by the Company of the Executive as CEO of
the Company; and
WHEREAS, the purchasers of Class A Redeemable Convertible
Participating Preferred Stock of the Company have requested, and it is a
condition precedent to the consummation of their investments, that the Company
and Executive enter into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:
1. Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts and agrees to such employment,
commencing as of the date hereof, upon the terms and conditions hereinafter set
forth.
2. Term. The term of the Executive's employment under this
Agreement shall commence as of the date hereof and shall continue for a period
of two (2) years from the date hereof, unless sooner terminated as provided
elsewhere in this Agreement (the "Initial Term"). The Initial Term hereof will
be automatically renewed for additional terms (each a "Renewal Term," and,
together, with the Initial Term, collectively the "Term") of one (1) year unless
either party hereto provides the other party hereto written notice of its
election not to renew this Agreement ninety (90) days prior to the expiration of
the Initial Term, or, if applicable, ninety (90) days prior to the expiration of
any Renewal Term.
3. Duties and Services. (a) The Executive agrees, from and
after the date hereof, to serve the Company faithfully, diligently and to the
best of his ability, as its CEO, with primary responsibility for creating value.
The Executive shall devote his entire business time, energy and skill to such
activities on behalf of the Company; provided, however that this Agreement shall
not be interpreted to prohibit the Executive from making passive personal
investments in publicly traded companies comprising less than 5% of any class
thereof, if those activities do not contravene the provisions of Section 9
hereof and do not interfere with the duties required of the Executive under this
Agreement.
<PAGE> 2
(b) The Executive agrees to perform such other services as the
Company shall reasonably request, and to act in such capacities for the Company
and its Affiliates (as hereinafter defined), including serving as a director
and/or officer of any thereof, as may be designated by the Board of Directors of
the Company, without further compensation other than that for which provision is
made in this Agreement. For purposes of this Agreement, the term "Affiliate"
shall refer to any entity which controls, is controlled by, or is under common
control with the Company.
4. The Company's Assistance to the Executive. The Company shall supply
the Executive with all materials, data and technical assistance which shall be
reasonably necessary to assist the Executive. Such materials and the contents
thereof and all intellectual property referenced or represented therein shall
remain the property of the Company.
5. Compensation. (a) During the Term, the Company agrees to pay to the
Executive, and the Executive agrees to accept, a salary for all his services
(the "Salary") at the rate set forth on Table A hereto, payable in accordance
with the Company's standard payroll policies from time to time.
(b) During the Term, the Company agrees to pay to the
Executive an annual bonus, determined in the sole discretion of the Compensation
Committee of the Board of Directors of the Company with the maximum bonus
potential being 25% of Salary.
(c) The Executive agrees that the Company shall withhold from
any and all payments required to be made to the Executive pursuant to this
Agreement (including the travel allowance) all federal, state, local and/or
other taxes which are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
6. Employee Benefits. (a) In accordance with the policies of the
Company, the Company shall reimburse the Executive for his reasonable business
expenses incurred by him for or on behalf of the Company in furtherance of the
performance of his duties hereunder. Such reimbursement shall be subject to
receipt by the Company from the Executive of an itemized accounting therefor,
together with such vouchers and other reasonable verifications as the Company
shall require to satisfactorily evidence such expenses, and such policies as the
Company shall establish from time to time.
(b) The Executive shall be entitled to participate, in
accordance with the terms thereof, in employee benefit plans maintained for the
executives of the Company, including, without limitation, any health,
hospitalization and medical insurance programs and in any pension or retirement
or other similar plans or policies. The foregoing shall not be construed to
require the Company to establish any such plans, or to prevent the Company from
modifying or terminating any such plans once established. The Executive shall be
entitled to the vacation, benefits and sick days set forth on Table A hereto.
7. Termination. (a) Notwithstanding anything to the contrary contained
herein, the Company's employment of the Executive under this Agreement and the
Executive's right to any and
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<PAGE> 3
all compensation to which the Executive would otherwise be entitled hereunder,
shall terminate upon the earliest to occur of the following events:
(i) The death of the Executive.
(ii) The permanent disability (as hereinafter
defined) of the Executive.
(iii) The non-renewal and expiration of the Term of
hereunder pursuant to Section 2 hereof.
(iv) Upon written notice to the Executive from the
Company for Cause (as hereinafter defined).
(v) Upon 60 days' written notice to the Executive
from the Company without Cause.
(vi) Upon 60 days' written notice to the Company from
the Executive.
(b) "Cause" for purposes hereof shall mean: (i) the commission
by the Executive of theft, embezzlement, fraud, obtaining funds or property
under false pretenses, or similar acts of material misconduct with respect to
the property of the Company or any of its Affiliates or their respective
employees or the Company's customers or suppliers, or the Company's
determination that any oral or written representations made to the Company by
the Executive shall prove false; (ii) the commission by the Executive of a
material act of malfeasance, dishonesty or breach of trust against the Company
or any of its Affiliates or their respective employees or the Company's
franchisees, customers or suppliers, including a breach by the Executive of his
covenants or obligations under Section 9 of this Agreement; (iii) the conviction
of the Executive of a felony or of a misdemeanor involving moral turpitude; or
(iv) the Executive's repeated and continued failure to successfully fulfill his
duties or obligations of employment or his breach of any of his material
obligations and covenants hereunder.
(c) No waiver by the Company of any default by the Executive
or any breach by him of any of his covenants or obligations under any provision
of this Agreement shall be deemed a waiver of any future breach or default,
whether or not such breach or default is of the same nature.
(d) The Executive shall be deemed to be permanently disabled
for purposes hereof, at the option of the Company, in the event that the
Executive shall fail to render and perform the services required of him under
this Agreement because of physical or mental incapacity or disability for a
continuous period of three (3) consecutive months, or for shorter periods
aggregating one hundred and twenty (120) days or more during any period of six
(6) successive months.
(e) In the event this Agreement and the Executive's employment
by the Company is terminated for reasons stated in Sections 7(a)(i), 7(a)(ii) or
7(a)(v) above, then the
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<PAGE> 4
Executive shall receive from the Company, as severance hereunder, the Salary for
a period equal to the lesser of (x) the unexpired Term and (y) one (1) year.
8. Effect of Termination. Upon the termination of this Agreement, for
any reason, or upon the termination of the Executive's employment hereunder, for
any reason, the Executive (i) shall immediately discontinue the use of any and
all trade names, trademarks, trade secrets, copyrights or copyrighted materials,
and customer lists, offering circulars and materials and advertising media
belonging to or supplied to the Executive by the Company, and (ii) shall, at the
Executive's expense, return to the Company all such materials.
9. Non-Competition, Restrictive Covenants, Confidentiality and
Injunctive Relief. (a) The Executive agrees that, commencing as of the date
hereof and during the term of the Executive's employment with the Company
(including any period for which the Executive shall act as a consultant to the
Company), and for a period of two (2) years thereafter, the Executive shall not,
without the prior written approval of the Board of Directors of the Company,
directly or indirectly, through any other person, firm or corporation, whether
for himself or as agent on behalf of any other person or entity, and whether as
employee, consultant, agent, principal, lender, partner, officer, director,
stockholder or otherwise, with our without compensation:
(i) sell products or provide services which are
competitive with the businesses, products or services of the Company or the
business, products or services of the Company contemplated or under development
(the "Businesses"), or promote, market, sell, become or acquire an interest in,
or associate in a business relationship with, or aid or assist any other person,
corporation, firm, partnership or other entity whatsoever who is engaged in any
line of business competitive with the Businesses;
(ii) become an employee, consultant, agent,
principal, lender, partner, officer, director, stockholder or otherwise provide
services to or on behalf of any entity (A) which the Board reasonably determines
is or could become a competitor of the Company or the Businesses or (B) which as
of the date of this Agreement is a business partner or contractual party with
the Company;
(iii) solicit or refer, directly or indirectly, any
clients or prospective clients of any services and/or products offered by the
Company (or which are competitive with those offered by the Company) to any
other provider of such services;
(iv) promote, market, assist or participate in the
development, sale, lease or licensing of any services and/or products
competitive with those provided by the Company to, for or with any person,
corporation, firm, partnership or other entity whatsoever; or
(v) solicit, raid, entice, induce or assist any
person who presently is, or any time during the Executive's employment with the
Company shall be or shall have been, an employee of the Company or any of its
Affiliates, during the twelve (12) months preceding such solicitation, raid,
enticement, inducement or assistance, to become employed or retained by any
other person or entity.
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<PAGE> 5
(b) Recognizing that the Executive's knowledge, information
and relationship with existing or prospective clients, licensees, customers,
suppliers, accounts, agents, brokers and representatives of the Company and its
Affiliates, and the knowledge of the business, methods, systems, plans and
policies of the Company and its Affiliates which he has heretofore and shall
hereafter establish, receive or obtain as an employee of the Company or in
connection with services performed for the Company or any such Affiliates, are
valuable and unique assets of the Company and such Affiliates, the Executive
agrees that, at all times during and after the Executive's employment by the
Company, he shall not (otherwise than pursuant to his duties hereunder),
directly or indirectly, use, divulge, furnish or make accessible to anyone,
without the prior written consent of the Board of Directors of the Company, any
such knowledge or information pertaining to the Company or any of its
Affiliates, or the businesses, shareholders, personnel, methods, systems, plans
or policies thereof, to any person, firm or corporation or other entity, for any
reason or purpose whatsoever.
(c) The Company shall be deemed and entitled to own all of the
results and proceeds of the Executive's services, including all right, title and
interest in and to any and all franchises, products, processes, concepts,
methods, ideas, creations, designs and/or systems (including, without
limitation, all those of an advertising, marketing or promotional nature), and
any improvement thereon, which may be developed, created or devised by the
Executive during the term of his employment by the Company. The Executive will,
at the request of the Company, and without further compensation other than that
for which provision is made in this Agreement, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any of the foregoing.
Without limiting the generality of the previous sentences, the Executive
acknowledges and agrees that all memoranda, notes, records, customer lists and
other documents made or compiled by the Executive or made available to the
Executive during the term of his employment by the Company concerning the
business of the Company and/or any of its Affiliates shall be the Company's
property and shall be delivered by the Executive to the Company upon termination
of his employment by the Company or at any other time on the Company's request.
(d) The Executive shall execute and deliver to and for the
benefit of the Company an agreement substantially in the form of Exhibit 9(d)
hereto, pertaining, among other matters, to Proprietary Information and
Inventions (as such terms are defined in said Exhibit 9(d) and confidentiality
obligations, the provisions of which shall be deemed incorporated herein by
reference as if set forth herein (the "Proprietary Rights Agreement").
(e) The provisions of this Section 9 shall survive the
termination or expiration of this Agreement, irrespective of the reason
therefore, including under circumstances in which the Executive continues
thereafter in the employ of the Company.
(f) The Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
vital to the business of the Company. By reason of the foregoing, the Executive
consents and agrees that, if he violates any of the provisions of this Section
9, the Company would sustain irreparable harm and, therefore, in addition to any
other remedies
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<PAGE> 6
which the Company may have under this Agreement or otherwise, the Company shall
be entitled to apply (without the necessity of posting any bond) to any court of
competent jurisdiction for an injunction restraining the Executive or any other
party from committing or continuing any such violation (or participating
therein) of this Agreement, and the Executive shall not object to any such
application.
10. Warranty. The Executive warrants and represents that he is not a
party to any agreement, contract or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from undertaking his
position as an executive of the Company and complying with his obligations in
accordance with the terms and conditions of this Agreement.
11. Insurance. The Executive agrees that the Company may from time to
time and for the Company's own benefit apply for and take out life insurance
covering the Executive, either independently or together with others, in any
amount and form which the Company may deem to be in its best interests. The
Company shall own all rights in such insurance and in the cash values and
proceeds thereof and the Executive shall not have any right, title or interest
therein. The Executive agrees to assist the Company, at the Company's expense,
in obtaining any such insurance by, among things, submitting to customary
examinations and correctly preparing, signing and delivering such applications
and other documents as reasonably may be required.
12. Notices. All notices shall be in writing and shall be deemed to
have been duly given to a party hereto on the date of such delivery, if
delivered personally, or on the third day after being deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid, or on the next business day after being sent by recognized national
overnight courier services, at the addresses of the parties as set forth the
first paragraph of this Agreement, or such other address as the parties may
specify in writing from time to time in accordance herewith.
13. Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive, and shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
Executive may not assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of this Agreement, or any of his rights or obligations hereunder, and
any such attempted delegation or disposition shall be null and void and without
effect.
14. Severability. In the event that any provisions of this Agreement
would be held to be invalid, prohibited or unenforceable in any jurisdiction for
any reason (including, but not limited to, any provisions which would be held to
be unenforceable because of the scope, duration or area of its applicability),
unless narrowed by construction, this Agreement shall, as to such jurisdiction
only, be construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or unenforceable
(or if such language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify such scope, duration or area or all
of them, but only to the extent necessary to make such provision or provisions
enforceable in such jurisdiction, and such provision shall then be applicable in
such modified form in such jurisdiction only). If, notwithstanding the
foregoing, any provision of this Agreement would be held to be invalid,
prohibited or unenforceable in any jurisdiction, such
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<PAGE> 7
provision shall be ineffective to the extent of such invalidity, prohibition or
unenforceability, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
16. Complete Understanding; Drafting; Counterparts. This Agreement
constitutes the complete understanding and supersedes any and all prior
agreements and understandings between the parties with respect to its subject
matter (except with respect to 36,000 options issued to the Executive and
outstanding on the date hereof), and no statement, representation, warranty or
covenant has been made by either party with respect thereto except as expressly
set forth herein. This Agreement shall not be altered, modified, amended or
terminated except by written instrument signed by each of the parties hereto.
The language used in this Agreement will be deemed to be the language chosen by
the both of the parties to express their mutual intent, and no rule of strict
construction shall be applied against either party. The Section and paragraph
headings contained herein are for convenience only, and are not part of and are
not intended to define or limit the contents of said Sections and paragraphs.
This Agreement may be executed in
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<PAGE> 8
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE COMPANY:
MEDSITE PUBLISHING, INC.
By: /s/ Rajnish J. Kapoor
----------------------------------
Name: Rajnish Kapoor
Title: VP Product Development
THE EXECUTIVE:
/s/ Sundeep Bhan
---------------------------------------
Sundeep Bhan
-8-
<PAGE> 9
TABLE A
<TABLE>
<S> <C>
Salary (per annum) $200,000
Vacation Days 15
Sick Days 5
</TABLE>
<PAGE> 1
Exhibit 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, by and
between, Medsite Publishing, a Delaware corporation, with an address at 60 East
13th Street, 5th Floor, New York, New York 10003 (the "Company"), and Sameer
Shariff, an individual with an address at 155 East 31st Street, New York, NY
10016 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company and is
responsible for sales;
WHEREAS, the Company and the Executive desire to express the terms and
conditions of the employment by the Company of the Executive as Vice President
of the Company; and
WHEREAS, the purchasers of Class A Redeemable Convertible Participating
Preferred Stock of the Company have requested, and it is a condition precedent
to the consummation of their investments, that the Company and Executive enter
into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts and agrees to such employment, commencing as of the
date hereof, upon the terms and conditions hereinafter set forth.
2. Term. The term of the Executive's employment under this Agreement
shall commence as of the date hereof and shall continue for a period of two (2)
years from the date hereof, unless sooner terminated as provided elsewhere in
this Agreement (the "Initial Term"). The Initial Term hereof will be
automatically renewed for additional terms (each a "Renewal Term," and,
together, with the Initial Term, collectively the "Term") of one (1) year unless
either party hereto provides the other party hereto written notice of its
election not to renew this Agreement ninety (90) days prior to the expiration of
the Initial Term, or, if applicable, ninety (90) days prior to the expiration of
any Renewal Term.
3. Duties and Services. (a) The Executive agrees, from and after the
date hereof, to serve the Company faithfully, diligently and to the best of his
ability, subject to and under the direction and control of the president and
chief executive officer of the Company, as its Vice President, with primary
responsibility for sales. The Executive shall devote his entire business time,
energy and skill to such activities on behalf of the Company; provided, however
that this Agreement shall not be interpreted to prohibit the Executive from
making passive personal investments in publicly traded companies comprising less
than 5% of any class
<PAGE> 2
thereof, if those activities do not contravene the provisions of Section 9
hereof and do not interfere with the duties required of the Executive under this
Agreement.
(b) The Executive agrees to perform such other services as the
Company shall reasonably request, and to act in such capacities for the Company
and its Affiliates (as hereinafter defined), including serving as a director
and/or officer of any thereof, as may be designated by the Board of Directors of
the Company, without further compensation other than that for which provision is
made in this Agreement. For purposes of this Agreement, the term "Affiliate"
shall refer to any entity which controls, is controlled by, or is under common
control with the Company.
4. The Company's Assistance to the Executive. The Company shall supply
the Executive with all materials, data and technical assistance which shall be
reasonably necessary to assist the Executive. Such materials and the contents
thereof and all intellectual property referenced or represented therein shall
remain the property of the Company.
5. Compensation. (a) During the Term, the Company agrees to pay to the
Executive, and the Executive agrees to accept, a salary for all his services
(the "Salary") at the rate set forth on Table A hereto, payable in accordance
with the Company's standard payroll policies from time to time.
(b) During the Term, the Company agrees to pay to the
Executive an annual bonus, determined in the sole discretion of the Compensation
Committee of the Board of Directors of the Company with the maximum bonus
potential being 25% of Salary.
(c) The Executive agrees that the Company shall withhold from
any and all payments required to be made to the Executive pursuant to this
Agreement (including the travel allowance) all federal, state, local and/or
other taxes which are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
6. Employee Benefits. (a) In accordance with the policies of the
Company, the Company shall reimburse the Executive for his reasonable business
expenses incurred by him for or on behalf of the Company in furtherance of the
performance of his duties hereunder. Such reimbursement shall be subject to
receipt by the Company from the Executive of an itemized accounting therefor,
together with such vouchers and other reasonable verifications as the Company
shall require to satisfactorily evidence such expenses, and such policies as the
Company shall establish from time to time.
(b) The Executive shall be entitled to participate, in
accordance with the terms thereof, in employee benefit plans maintained for the
executives of the Company, including, without limitation, any health,
hospitalization and medical insurance programs and in any pension or retirement
or other similar plans or policies. The foregoing shall not be construed to
require the Company to establish any such plans, or to prevent the Company from
modifying or terminating any such plans once established. The Executive shall be
entitled to the vacation, benefits and sick days set forth on Table A hereto.
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<PAGE> 3
7. Termination. (a) Notwithstanding anything to the contrary contained
herein, the Company's employment of the Executive under this Agreement and the
Executive's right to any and all compensation to which the Executive would
otherwise be entitled hereunder, shall terminate upon the earliest to occur of
the following events:
(i) The death of the Executive.
(ii) The permanent disability (as hereinafter defined) of
the Executive.
(iii) The non-renewal and expiration of the Term of
hereunder pursuant to Section 2 hereof.
(iv) Upon written notice to the Executive from the
Company for Cause (as hereinafter defined).
(v) Upon 60 days' written notice to the Executive from
the Company without Cause.
(vi) Upon 60 days' written notice to the Company from the
Executive.
(b) "Cause" for purposes hereof shall mean: (i) the commission
by the Executive of theft, embezzlement, fraud, obtaining funds or property
under false pretenses, or similar acts of material misconduct with respect to
the property of the Company or any of its Affiliates or their respective
employees or the Company's customers or suppliers, or the Company's
determination that any oral or written representations made to the Company by
the Executive shall prove false; (ii) the commission by the Executive of a
material act of malfeasance, dishonesty or breach of trust against the Company
or any of its Affiliates or their respective employees or the Company's
franchisees, customers or suppliers, including a breach by the Executive of his
covenants or obligations under Section 9 of this Agreement; (iii) the conviction
of the Executive of a felony or of a misdemeanor involving moral turpitude; or
(iv) the Executive's repeated and continued failure to successfully fulfill his
duties or obligations of employment or his breach of any of his material
obligations and covenants hereunder.
(c) No waiver by the Company of any default by the Executive
or any breach by him of any of his covenants or obligations under any provision
of this Agreement shall be deemed a waiver of any future breach or default,
whether or not such breach or default is of the same nature.
(d) The Executive shall be deemed to be permanently disabled
for purposes hereof, at the option of the Company, in the event that the
Executive shall fail to render and perform the services required of him under
this Agreement because of physical or mental incapacity or disability for a
continuous period of three (3) consecutive months, or for shorter periods
aggregating one hundred and twenty (120) days or more during any period of six
(6) successive months.
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<PAGE> 4
(e) In the event this Agreement and the Executive's employment
by the Company is terminated for reasons stated in Sections 7(a)(i), 7(a)(ii) or
7(a)(v) above, then the Executive shall receive from the Company, as severance
hereunder, the Salary for a period equal to the lesser of (x) the unexpired Term
and (y) one (1) year.
8. Effect of Termination. Upon the termination of this Agreement, for
any reason, or upon the termination of the Executive's employment hereunder, for
any reason, the Executive (i) shall immediately discontinue the use of any and
all trade names, trademarks, trade secrets, copyrights or copyrighted materials,
and customer lists, offering circulars and materials and advertising media
belonging to or supplied to the Executive by the Company, and (ii) shall, at the
Executive's expense, return to the Company all such materials.
9. Non-Competition, Restrictive Covenants, Confidentiality and
Injunctive Relief. (a) The Executive agrees that, commencing as of the date
hereof and during the term of the Executive's employment with the Company
(including any period for which the Executive shall act as a consultant to the
Company), and for a period of two (2) years thereafter, the Executive shall not,
without the prior written approval of the Board of Directors of the Company,
directly or indirectly, through any other person, firm or corporation, whether
for himself or as agent on behalf of any other person or entity, and whether as
employee, consultant, agent, principal, lender, partner, officer, director,
stockholder or otherwise, with our without compensation:
(i) sell products or provide services which are
competitive with the businesses, products or services of the Company or the
business, products or services of the Company contemplated or under development
(the "Businesses"), or promote, market, sell, become or acquire an interest in,
or associate in a business relationship with, or aid or assist any other person,
corporation, firm, partnership or other entity whatsoever who is engaged in any
line of business competitive with the Businesses;
(ii) become an employee, consultant, agent, principal,
lender, partner, officer, director, stockholder or otherwise provide services to
or on behalf of any entity (A) which the Board reasonably determines is or could
become a competitor of the Company or the Businesses or (B) which as of the date
of this Agreement is a business partner or contractual party with the Company;
(iii) solicit or refer, directly or indirectly, any
clients or prospective clients of any services and/or products offered by the
Company (or which are competitive with those offered by the Company) to any
other provider of such services;
(iv) promote, market, assist or participate in the
development, sale, lease or licensing of any services and/or products
competitive with those provided by the Company to, for or with any person,
corporation, firm, partnership or other entity whatsoever; or
(v) solicit, raid, entice, induce or assist any person
who presently is, or any time during the Executive's employment with the Company
shall be or
-4-
<PAGE> 5
shall have been, an employee of the Company or any of its Affiliates, during the
twelve (12) months preceding such solicitation, raid, enticement, inducement or
assistance, to become employed or retained by any other person or entity.
(b) Recognizing that the Executive's knowledge, information
and relationship with existing or prospective clients, licensees, customers,
suppliers, accounts, agents, brokers and representatives of the Company and its
Affiliates, and the knowledge of the business, methods, systems, plans and
policies of the Company and its Affiliates which he has heretofore and shall
hereafter establish, receive or obtain as an employee of the Company or in
connection with services performed for the Company or any such Affiliates, are
valuable and unique assets of the Company and such Affiliates, the Executive
agrees that, at all times during and after the Executive's employment by the
Company, he shall not (otherwise than pursuant to his duties hereunder),
directly or indirectly, use, divulge, furnish or make accessible to anyone,
without the prior written consent of the Board of Directors of the Company, any
such knowledge or information pertaining to the Company or any of its
Affiliates, or the businesses, shareholders, personnel, methods, systems, plans
or policies thereof, to any person, firm or corporation or other entity, for any
reason or purpose whatsoever.
(c) The Company shall be deemed and entitled to own all of the
results and proceeds of the Executive's services, including all right, title and
interest in and to any and all franchises, products, processes, concepts,
methods, ideas, creations, designs and/or systems (including, without
limitation, all those of an advertising, marketing or promotional nature), and
any improvement thereon, which may be developed, created or devised by the
Executive during the term of his employment by the Company. The Executive will,
at the request of the Company, and without further compensation other than that
for which provision is made in this Agreement, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any of the foregoing.
Without limiting the generality of the previous sentences, the Executive
acknowledges and agrees that all memoranda, notes, records, customer lists and
other documents made or compiled by the Executive or made available to the
Executive during the term of his employment by the Company concerning the
business of the Company and/or any of its Affiliates shall be the Company's
property and shall be delivered by the Executive to the Company upon termination
of his employment by the Company or at any other time on the Company's request.
(d) The Executive shall execute and deliver to and for the
benefit of the Company an agreement substantially in the form of Exhibit 9(d)
hereto, pertaining, among other matters, to Proprietary Information and
Inventions (as such terms are defined in said Exhibit 9(d) and confidentiality
obligations, the provisions of which shall be deemed incorporated herein by
reference as if set forth herein (the "Proprietary Rights Agreement").
(e) The provisions of this Section 9 shall survive the
termination or expiration of this Agreement, irrespective of the reason
therefore, including under circumstances in which the Executive continues
thereafter in the employ of the Company.
-5-
<PAGE> 6
(f) The Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
vital to the business of the Company. By reason of the foregoing, the Executive
consents and agrees that, if he violates any of the provisions of this Section
9, the Company would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to apply (without the necessity of posting any bond)
to any court of competent jurisdiction for an injunction restraining the
Executive or any other party from committing or continuing any such violation
(or participating therein) of this Agreement, and the Executive shall not object
to any such application.
10. Warranty. The Executive warrants and represents that he is not a
party to any agreement, contract or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from undertaking his
position as an executive of the Company and complying with his obligations in
accordance with the terms and conditions of this Agreement.
11. Insurance. The Executive agrees that the Company may from time to
time and for the Company's own benefit apply for and take out life insurance
covering the Executive, either independently or together with others, in any
amount and form which the Company may deem to be in its best interests. The
Company shall own all rights in such insurance and in the cash values and
proceeds thereof and the Executive shall not have any right, title or interest
therein. The Executive agrees to assist the Company, at the Company's expense,
in obtaining any such insurance by, among things, submitting to customary
examinations and correctly preparing, signing and delivering such applications
and other documents as reasonably may be required.
12. Notices. All notices shall be in writing and shall be deemed to
have been duly given to a party hereto on the date of such delivery, if
delivered personally, or on the third day after being deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid, or on the next business day after being sent by recognized national
overnight courier services, at the addresses of the parties as set forth the
first paragraph of this Agreement, or such other address as the parties may
specify in writing from time to time in accordance herewith.
13. Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive, and shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
Executive may not assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of this Agreement, or any of his rights or obligations hereunder, and
any such attempted delegation or disposition shall be null and void and without
effect.
14. Severability. In the event that any provisions of this Agreement
would be held to be invalid, prohibited or unenforceable in any jurisdiction for
any reason (including, but not limited to, any provisions which would be held to
be unenforceable because of the
-6-
<PAGE> 7
scope, duration or area of its applicability), unless narrowed by construction,
this Agreement shall, as to such jurisdiction only, be construed as if such
invalid, prohibited or unenforceable provision had been move narrowly drawn so
as not to be invalid, prohibited or unenforceable (or if such language cannot be
drawn narrowly enough, the court making any such determination shall have the
power to modify such scope, duration or area or all of them, but only to the
extent necessary to make such provision or provisions enforceable in such
jurisdiction, and such provision shall then be applicable in such modified form
in such jurisdiction only). If, notwithstanding the foregoing, any provision of
this Agreement would be held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
16. Complete Understanding; Drafting; Counterparts. This Agreement
constitutes the complete understanding and supersedes any and all prior
agreements and understandings between the parties with respect to its subject
matter (except with respect to 28,000 options issued to the Executive and
outstanding on the date hereof), and no statement, representation, warranty or
covenant has been made by either party with respect thereto except as expressly
set forth herein. This Agreement shall not be altered, modified, amended or
terminated except by written instrument signed by each of the parties hereto.
The language used in this Agreement will be deemed to be the language chosen by
the both of the parties to express their mutual intent, and no rule of strict
construction shall be applied against either party. The Section and paragraph
headings contained herein are for convenience only, and are not part of and are
not intended to define or limit the contents of said Sections and paragraphs.
This Agreement may be executed in
-7-
<PAGE> 8
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY:
MEDSITE PUBLISHING, INC.
By: /s/ Sundeep Bhan
----------------------------------
Name: Sundeep Bhan
Title: President and CEO
THE EXECUTIVE:
By: /s/ Sameer Shariff
----------------------------------
Name: Sameer Shariff
Title: Vice President
-8-
<PAGE> 9
TABLE A
<TABLE>
<S> <C>
Salary (per annum) $150,000
Vacation Days 15
Sick Days 5
</TABLE>
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 29, 1999, by and
between, Medsite Publishing, a Delaware corporation, with an address at 60 East
13th Street, 5th Floor, New York, New York 10003 (the "Company"), and Sanjay
Pingle, an individual with an address at 155 East 31st Street, New York, NY
10016 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company
and is responsible for marketing;
WHEREAS, the Company and the Executive desire to express the
terms and conditions of the employment by the Company of the Executive as Vice
President of the Company; and
WHEREAS, the purchasers of Class A Redeemable Convertible
Participating Preferred Stock of the Company have requested, and it is a
condition precedent to the consummation of their investments, that the Company
and Executive enter into this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts and agrees to such employment, commencing as of the
date hereof, upon the terms and conditions hereinafter set forth.
2. Term. The term of the Executive's employment under this Agreement
shall commence as of the date hereof and shall continue for a period of two (2)
years from the date hereof, unless sooner terminated as provided elsewhere in
this Agreement (the "Initial Term"). The Initial Term hereof will be
automatically renewed for additional terms (each a "Renewal Term," and,
together, with the Initial Term, collectively the "Term") of one (1) year unless
either party hereto provides the other party hereto written notice of its
election not to renew this Agreement ninety (90) days prior to the expiration of
the Initial Term, or, if applicable, ninety (90) days prior to the expiration of
the Initial Term, or, if applicable, ninety (90) days prior to the expiration of
any Renewal Term.
3. Duties and Services. (a) The Executive agrees, from and after the
date hereof, to serve the Company faithfully, diligently and to the best of his
ability, subject to and under the direction and control of the president and
chief executive officer of the Company, as its Vice President, with primary
responsibility for marketing. The Executive shall devote his entire business
time, energy and skill to such activities on behalf of the Company; provided,
however that this Agreement shall not be interpreted to prohibit the Executive
from making passive personal investments in publicly traded companies comprising
less than 5% of any
<PAGE> 2
class thereof, if those activities do not contravene the provisions of Section 9
hereof and do not interfere with the duties required of the Executive under this
Agreement.
(b) The Executive agrees to perform such other services as the
Company shall reasonably request, and to act in such capacities for the Company
and its Affiliates (as hereinafter defined), including serving as a director
and/or officer of any thereof, as may be designated by the Board of Directors of
the Company, without further compensation other than that for which provision is
made in this Agreement. For purposes of this Agreement, the term "Affiliate"
shall refer to any entity which controls, is controlled by, or is under common
control with the Company.
4. The Company's Assistance to the Executive. The Company shall supply
the Executive with all materials, data and technical assistance which shall be
reasonably necessary to assist the Executive. Such materials and the contents
thereof and all intellectual property referenced or represented therein shall
remain the property of the Company.
5. Compensation. (a) During the Term, the Company agrees to pay to the
Executive, and the Executive agrees to accept, a salary for all his services
(the "Salary") at the rate set forth on Table A hereto, payable in accordance
with the Company's standard payroll policies from time to time.
(b) During the Term, the Company agrees to pay to the
Executive an annual bonus, determined in the sole discretion of the Compensation
Committee of the Board of Directors of the Company with the maximum bonus
potential being 25% of Salary.
(c) The Executive agrees that the Company shall withhold from
any and all payments required to be made to the Executive pursuant to this
Agreement (including the travel allowance) all federal, state, local and/or
other taxes which are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
6. Employee Benefits. (a) In accordance with the policies of the
Company, the Company shall reimburse the Executive for his reasonable business
expenses incurred by him for or on behalf of the Company in furtherance of the
performance of his duties hereunder. Such reimbursement shall be subject to
receipt by the Company from the Executive of an itemized accounting therefor,
together with such vouchers and other reasonable verifications as the Company
shall require to satisfactorily evidence such expenses, and such policies as the
Company shall establish from time to time.
(b) The Executive shall be entitled to participate, in
accordance with the terms thereof, in employee benefit plans maintained for the
executives of the Company, including, without limitation, any health,
hospitalization and medical insurance programs and in any pension or retirement
or other similar plans or policies. The foregoing shall not be construed to
require the Company to establish any such plans, or to prevent the Company from
modifying or terminating any such plans once established. The Executive shall be
entitled to the vacation, benefits and sick days set forth on Table A hereto.
-2-
<PAGE> 3
7. Termination. (a) Notwithstanding anything to the contrary contained
herein, the Company's employment of the Executive under this Agreement and the
Executive's right to any and all compensation to which the Executive would
otherwise be entitled hereunder, shall terminate upon the earliest to occur of
the following events:
(i) The death of the Executive.
(ii) The permanent disability (as hereinafter
defined) of the Executive.
(iii) The non-renewal and expiration of the Term of
hereunder pursuant to Section 2 hereof.
(iv) Upon written notice to the Executive from the
Company for Cause (as hereinafter defined).
(v) Upon 60 days' written notice to the Executive
from the Company without Cause.
(vi) Upon 60 days' written notice to the Company from
the Executive.
(b) "Cause" for purposes hereof shall mean: (i) the commission
by the Executive of theft, embezzlement, fraud, obtaining funds or property
under false pretenses, or similar acts of material misconduct with respect to
the property of the Company or any of its Affiliates or their respective
employees or the Company's customers or suppliers, or the Company's
determination that any oral or written representations made to the Company by
the Executive shall prove false; (ii) the commission by the Executive of a
material act of malfeasance, dishonesty or breach of trust against the Company
or any of its Affiliates or their respective employees or the Company's
franchisees, customers or suppliers, including a breach by the Executive of his
covenants or obligations under Section 9 of this Agreement; (iii) the conviction
of the Executive of a felony or of a misdemeanor involving moral turpitude; or
(iv) the Executive's repeated and continued failure to successfully fulfill his
duties or obligations of employment or his breach of any of his material
obligations and covenants hereunder.
(c) No waiver by the Company of any default by the Executive
or any breach by him of any of his covenants or obligations under any provision
of this Agreement shall be deemed a waiver of any future breach or default,
whether or not such breach or default is of the same nature.
(d) The Executive shall be deemed to be permanently disabled
for purposes hereof, at the option of the Company, in the event that the
Executive shall fail to render and perform the services required of him under
this Agreement because of physical or mental incapacity or disability for a
continuous period of three (3) consecutive months, or for shorter periods
aggregating one hundred and twenty (120) days or more during any period of six
(6) successive months.
-3-
<PAGE> 4
(e) In the event this Agreement and the Executive's employment
by the Company is terminated for reasons stated in Sections 7(a)(i), 7(a)(ii) or
7(a)(v) above, then the Executive shall receive from the Company, as severance
hereunder, the Salary for a period equal to the lesser of (x) the unexpired Term
and (y) one (1) year.
8. Effect of Termination. Upon the termination of this Agreement, for
any reason, or upon the termination of the Executive's employment hereunder, for
any reason, the Executive (i) shall immediately discontinue the use of any and
all trade names, trademarks, trade secrets, copyrights or copyrighted materials,
and customer lists, offering circulars and materials and advertising media
belonging to or supplied to the Executive by the Company, and (ii) shall, at the
Executive's expense, return to the Company all such materials.
9. Non-Competition, Restrictive Covenants, Confidentiality and
Injunctive Relief. (a) The Executive agrees that, commencing as of the date
hereof and during the term of the Executive's employment with the Company
(including any period for which the Executive shall act as a consultant to the
Company), and for a period of two (2) years thereafter, the Executive shall not,
without the prior written approval of the Board of Directors of the Company,
directly or indirectly, through any other person, firm or corporation, whether
for himself or as agent on behalf of any other person or entity, and whether as
employee, consultant, agent, principal, lender, partner, officer, director,
stockholder or otherwise, with our without compensation:
(i) sell products or provide services which are
competitive with the businesses, products or services of the Company or the
business, products or services of the Company contemplated or under development
(the "Businesses"), or promote, market, sell, become or acquire an interest in,
or associate in a business relationship with, or aid or assist any other person,
corporation, firm, partnership or other entity whatsoever who is engaged in any
line of business competitive with the Businesses;
(ii) become an employee, consultant, agent,
principal, lender, partner, officer, director, stockholder or otherwise provide
services to or on behalf of any entity (A) which the Board reasonably determines
is or could become a competitor of the Company or the Businesses or (B) which as
of the date of this Agreement is a business partner or contractual party with
the Company;
(iii) solicit or refer, directly or indirectly, any
clients or prospective clients of any services and/or products offered by the
Company (or which are competitive with those offered by the Company) to any
other provider of such services;
(iv) promote, market, assist or participate in the
development, sale, lease or licensing of any services and/or products
competitive with those provided by the Company to, for or with any person,
corporation, firm, partnership or other entity whatsoever; or
(v) solicit, raid, entice, induce or assist any
person who presently is, or any time during the Executive's employment with the
Company shall be or
-4-
<PAGE> 5
shall have been, an employee of the Company or any of its Affiliates, during the
twelve (12) months preceding such solicitation, raid, enticement, inducement or
assistance, to become employed or retained by any other person or entity.
(b) Recognizing that the Executive's knowledge, information
and relationship with existing or prospective clients, licensees, customers,
suppliers, accounts, agents, brokers and representatives of the Company and its
Affiliates, and the knowledge of the business, methods, systems, plans and
policies of the Company and its Affiliates which he has heretofore and shall
hereafter establish, receive or obtain as an employee of the Company or in
connection with services performed for the Company or any such Affiliates, are
valuable and unique assets of the Company and such Affiliates, the Executive
agrees that, at all times during and after the Executive's employment by the
Company, he shall not (otherwise than pursuant to his duties hereunder),
directly or indirectly, use, divulge, furnish or make accessible to anyone,
without the prior written consent of the Board of Directors of the Company, any
such knowledge or information pertaining to the Company or any of its
Affiliates, or the businesses, shareholders, personnel, methods, systems, plans
or policies thereof, to any person, firm or corporation or other entity, for any
reason or purpose whatsoever.
(c) The Company shall be deemed and entitled to own all of the
results and proceeds of the Executive's services, including all right, title and
interest in and to any and all franchises, products, processes, concepts,
methods, ideas, creations, designs and/or systems (including, without
limitation, all those of an advertising, marketing or promotional nature), and
any improvement thereon, which may be developed, created or devised by the
Executive during the term of his employment by the Company. The Executive will,
at the request of the Company, and without further compensation other than that
for which provision is made in this Agreement, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any of the foregoing.
Without limiting the generality of the previous sentences, the Executive
acknowledges and agrees that all memoranda, notes, records, customer lists and
other documents made or compiled by the Executive or made available to the
Executive during the term of his employment by the Company concerning the
business of the Company and/or any of its Affiliates shall be the Company's
property and shall be delivered by the Executive to the Company upon termination
of his employment by the Company or at any other time on the Company's request.
(d) The Executive shall execute and deliver to and for the
benefit of the Company an agreement substantially in the form of Exhibit 9(d)
hereto, pertaining, among other matters, to Proprietary Information and
Inventions (as such terms are defined in said Exhibit 9(d) and confidentiality
obligations, the provisions of which shall be deemed incorporated herein by
reference as if set forth herein (the "Proprietary Rights Agreement").
(e) The provisions of this Section 9 shall survive the
termination or expiration of this Agreement, irrespective of the reason
therefore, including under circumstances in which the Executive continues
thereafter in the employ of the Company.
-5-
<PAGE> 6
(f) The Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
vital to the business of the Company. By reason of the foregoing, the Executive
consents and agrees that, if he violates any of the provisions of this Section
9, the Company would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to apply (without the necessity of posting any bond)
to any court of competent jurisdiction for an injunction restraining the
Executive or any other party from committing or continuing any such violation
(or participating therein) of this Agreement, and the Executive shall not object
to any such application.
10. Warranty. The Executive warrants and represents that he is not a
party to any agreement, contract or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit him from undertaking his
position as an executive of the Company and complying with his obligations in
accordance with the terms and conditions of this Agreement.
11. Insurance. The Executive agrees that the Company may from time to
time and for the Company's own benefit apply for and take out life insurance
covering the Executive, either independently or together with others, in any
amount and form which the Company may deem to be in its best interests. The
Company shall own all rights in such insurance and in the cash values and
proceeds thereof and the Executive shall not have any right, title or interest
therein. The Executive agrees to assist the Company, at the Company's expense,
in obtaining any such insurance by, among things, submitting to customary
examinations and correctly preparing, signing and delivering such applications
and other documents as reasonably may be required.
12. Notices. All notices shall be in writing and shall be deemed to
have been duly given to a party hereto on the date of such delivery, if
delivered personally, or on the third day after being deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid, or on the next business day after being sent by recognized national
overnight courier services, at the addresses of the parties as set forth the
first paragraph of this Agreement, or such other address as the parties may
specify in writing from time to time in accordance herewith.
13. Assignability and Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive, and shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
Executive may not assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of this Agreement, or any of his rights or obligations hereunder, and
any such attempted delegation or disposition shall be null and void and without
effect.
14. Severability. In the event that any provisions of this Agreement
would be held to be invalid, prohibited or unenforceable in any jurisdiction for
any reason (including, but not limited to, any provisions which would be held to
be unenforceable because of the
-6-
<PAGE> 7
scope, duration or area of its applicability), unless narrowed by construction,
this Agreement shall, as to such jurisdiction only, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly drawn so
as not to be invalid, prohibited or unenforceable (or if such language cannot be
drawn narrowly enough, the court making any such determination shall have the
power to modify such scope, duration or area or all of them, but only to the
extent necessary to make such provision or provisions enforceable in such
jurisdiction, and such provision shall then be applicable in such modified form
in such jurisdiction only). If, notwithstanding the foregoing, any provision of
this Agreement would be held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
16. Complete Understanding; Drafting; Counterparts. This Agreement
constitutes the complete understanding and supersedes any and all prior
agreements and understandings between the parties with respect to its subject
matter (except with respect to 28,000 options issued to the Executive and
outstanding on the date hereof), and no statement, representation, warranty or
covenant has been made by either party with respect thereto except as expressly
set forth herein. This Agreement shall not be altered, modified, amended or
terminated except by written instrument signed by each of the parties hereto.
The language used in this Agreement will be deemed to be the language chosen by
the both of the parties to express their mutual intent, and no rule of strict
construction shall be applied against either party. The Section and paragraph
headings contained herein are for convenience only, and are not part of and are
not intended to define or limit the contents of said Sections and paragraphs.
This Agreement may be executed in
-7-
<PAGE> 8
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE EXECUTIVE
By: /s/ SANJAY PINGLE
-------------------------------
Name: Sanjay Pingle
Vice President
THE COMPANY
/s/ SUNDEEP BHAN
-----------------------------------
Sundeep Bhan
President & CEO
-8-
<PAGE> 9
TABLE A
<TABLE>
<S> <C>
Salary (per annum) $150,000
Vacation Days 15
Sick Days 5
</TABLE>
<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of August 12, (the "Agreement"), by and
between, Medsite.com, Inc., a Delaware corporation, with an address at 60 East
13th Street, 5th Floor, New York, New York 10003 (the "Company"), and Gregory W.
Scott, an executive with an address at 28-3 Post Kennel Road, Far Hills, New
Jersey 07931 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive desires to be employed by the Company and Company
desires to employ Executive as its Executive Vice President and Chief Financial
Officer;
WHEREAS, the Company and the Executive desire to express the terms and
conditions of the employment by the Company of the Executive.
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by the parties hereto, the parties hereto hereby agree as
follows:
1. Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby accepts and agrees to such employment, commencing as of the
date hereof, upon the terms and conditions hereinafter set forth.
2. Term. The term of the Executive's employment under this Agreement shall
commence as of the date hereof and shall continue for a period of three (3)
years from the date hereof, unless sooner terminated as provided elsewhere in
this Agreement (the "Initial Term"). The Initial Term hereof will be
automatically renewed for additional terms (each a "Renewal Term," and,
together, with the Initial Term, collectively the "Term") of one (1) year unless
either party hereto provides the other party hereto written notice of its
election not to renew this Agreement thirty (30) days prior to the expiration of
the Initial Term, or, if applicable, thirty (30) days prior to the expiration of
any Renewal Term.
3. Duties and Services.
(a) The Executive agrees, from and after the date hereof, to serve the
Company faithfully, diligently and to the best of his or her ability, as its
Executive Vice President and Chief Financial Officer with primary responsibility
for the Company. At all times during the Term, the Executive shall report
directly to the Chief Executive Officer of the Company. The Executive shall
devote his or her entire business time, energy and skill to such activities on
behalf of the Company; provided, however, that until December 31, 1999, the
Executive shall be entitled to devote not more than ten (10) hours per week to
perform consulting services for the Prudential Insurance Company of America.
<PAGE> 2
(b) The Executive agrees to perform such other services as the Company
shall reasonably request, and to act in such capacities for the Company and its
Affiliates (as hereinafter defined), as may be designated by the Chief Executive
Officer of the Company, without further compensation other than that for which
provision is made in this Agreement. For purposes of this Agreement, the term
"Affiliate" shall refer to any entity which controls, is controlled by, or is
under common control with the Company.
4. The Company's Assistance to the Executive. The Company shall supply the
Executive with all materials, data and technical assistance which shall be
reasonably necessary to assist the Executive. Such materials and the contents
thereof and all intellectual property referenced or represented therein shall
remain the property of the Company.
5. Compensation.
(a) During the Term, the Company agrees to pay to the Executive, and the
Executive agrees to accept, a salary for all his services (the "Salary") of
$200,000 per year, payable in accordance with the Company's standard payroll
policies and subject to annual review by the Company's Board of Directors (the
"Base Compensation").
(b) During the Term, the Company agrees to pay to the Executive an
annual bonus in stock or cash, as determined by the Company's Board of
Directors.
(c) The Executive agrees that the Company shall withhold from any and
all payments required to be made to the Executive pursuant to this Agreement all
federal, state, local and/or other taxes which are required to be withheld in
accordance with applicable statutes and/or regulations from time to time in
effect.
(d) Stock Option. The Company shall grant Executive an option (the
"Option") to purchase 625,000 shares of the Company's Common Stock effective on
the date Executive begins employment (the "Employment Date"). The per share
exercise price for the Option shall be $5 per share. The term of the Option
shall be ten (10) years. The Option shall vest as to twenty percent (20%) of the
shares subject to the Option on each anniversary of the Employment Date;
provided, however, that upon a nonrenewal of this Agreement by the Company
during the first five (5) years from the date hereof, or upon a "Change in
Control" (as defined below) of the Company, the Option shall immediately vest as
to one hundred percent (100%) of the shares subject to the Option. Except as
otherwise provided herein, the Option shall be granted pursuant to, and shall be
governed by, the Company's Stock Option Plan and conform to the Company's
standard policies with respect to options. To the extent permitted under
applicable law, the Option shall be an incentive stock option. For this purpose,
"Change in Control" is defined as (i) the date of the consummation of a merger
or consolidation of the Company with any other corporation that has been
approved by the stockholders of the Company, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of the Company approve a plan of complete liquidation of the Company; or (ii)
the date of the
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<PAGE> 3
consummation of the sale or disposition by the Company of all or substantially
all the Company's assets.
(e) Stock Purchase. Within thirty (30) days of signing this Agreement,
Executive (either personally or through an entity controlled by the Executive)
may purchase up to 100,000 shares of common stock of the Company at a price of
$5.00 per share.
6. Employee Benefits.
(a) In accordance with the policies of the Company, the Company shall
reimburse the Executive for pre approved business expenses incurred by him for
or on behalf of the Company in furtherance of the performance of his duties
hereunder including, but not limited to, reasonable cellular phone expenses.
Such reimbursement shall be subject to receipt by the Company from the Executive
of an itemized accounting therefor, together with such vouchers and other
reasonable verifications as the Company shall require to satisfactorily evidence
such expenses, and such policies as the Company shall establish from time to
time.
(b) The Executive shall be entitled to participate, in accordance with
the terms thereof, in employee benefit plans maintained for the executives of
the Company including, without limitation, any health, hospitalization and
medical insurance programs and in any pension or retirement or other similar
plans or policies. The foregoing shall not be construed to require the Company
to establish any such plans, or to prevent the Company from modifying or
terminating any such plans once established. The Executive shall be entitled to
the vacation, benefits and sick days set forth on Table A hereto.
7. Termination.
(a) Notwithstanding anything to the contrary contained herein, the
Company's employment of the Executive under this Agreement and the Executive's
right to any and all compensation to which the Executive would otherwise be
entitled hereunder, shall terminate upon the earliest to occur of the following
events:
(i) The death of the Executive.
(ii) The permanent disability (as hereinafter defined) of the
Executive.
(iii) The non-renewal and expiration of the Term of hereunder
pursuant to Section 2 hereof.
(iv) Upon written notice to the Executive from the Company for
Cause (as hereinafter defined).
(v) Upon 2 weeks' written notice to the Executive from the
Company without Cause.
(vi) Upon 2 weeks' written notice to the Company from the
Executive.
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<PAGE> 4
(b) "Cause" for purposes hereof shall mean: (i) the commission by the
Executive of theft, embezzlement, fraud, obtaining funds or property under false
pretenses, or similar acts of material misconduct with respect to the property
of the Company or any of its Affiliates or their respective employees or the
Company's customers or suppliers; (ii) the commission by the Executive of a
material act of malfeasance, dishonesty or breach of trust against the Company
or any of its Affiliates or their respective employees or the Company's
franchisees, customers or suppliers, including a breach by the Executive of his
covenants or obligations under Section 9 of this Agreement; (iii) the conviction
of the Executive of a felony or of a misdemeanor involving moral turpitude; or
(iv) the Executive's breach of any of his or her material obligations and
covenants hereunder.
(c) No waiver by the Company of any default by the Executive or any
breach by him or her of any of his or her covenants or obligations under any
provision of this Agreement shall be deemed a waiver of any future breach or
default, whether or not such breach or default is of the same nature.
(d) The Executive shall be deemed to be permanently disabled for
purposes hereof, at the option of the Company, in the event that the Executive
shall fail to render and perform the services required of the Executive under
this Agreement because of physical or mental incapacity or disability for a
continuous period of three (3) consecutive months, or for shorter periods
aggregating one hundred and twenty (120) days or more during any period of six
(6) successive months.
(e) Severance Payments upon Involuntary Termination. If the Executive's
employment is involuntarily terminated by the Company other than for Cause (not
including death or disability or nonrenewal of this Agreement) and the Executive
signs a Release of Claims, then (i) the Company shall pay Executive's Base
Compensation to the Executive for the longer of (A) the remaining term of this
Agreement or (B) a period of twelve (12) months, and (ii) any outstanding stock
options shall immediately become fully vested and exercisable. Such amount shall
be payable in installments in accordance with the Company's standard payroll
practices. Notwithstanding the foregoing, if (i) the Executive's employment is
involuntarily terminated by the Company other than for Cause (not including
death or disability) or (ii) Executive voluntarily resigns his employment either
within twelve (12) months following a Change in Control (as defined in Section
5(2) herein) and the Executive signs a Release of Claims, then the Company shall
pay Executive a lump-sum payment equal to twelve (12) months of Executive's Base
Compensation.
8. Effect of Termination. Upon the termination of this Agreement, for any
reason, or upon the termination of the Executive's employment hereunder, for any
reason, the Executive (i) shall immediately discontinue the use of any and all
trade names, trademarks, trade secrets, copyrights, or copyrighted materials,
and customer lists, offering circulars and materials and advertising media
belonging to or supplied to the Executive by the Company, and (ii) shall, at the
Executive's expense, return to the Company all such materials.
9. Non-Competition, Restrictive Covenants, Confidentiality and Injunctive
Relief.
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<PAGE> 5
(a) The Executive agrees that, commencing as of the date hereof and
during the term of the Executive's employment with the Company (including any
Period for which the Executive shall act as a consultant to the Company), and
for a period of one (1) year thereafter, the Executive shall not, without the
prior written approval of the Board of Directors of the Company, directly or
indirectly, through any other person, firm or corporation, whether for himself
or as agent on behalf of any other person or entity, and whether as employee,
consultant, agent, principal, lender, partner, officer, director, stockholder or
otherwise, with our without compensation:
(i) sell products or provide services which are competitive with
the businesses, products or services of the Company or the business, products or
services of the Company contemplated or under development (the "Businesses"), or
promote, market, sell, become or acquire an interest in, or associate in a
business relationship with, or aid or assist any other person, corporation,
firm, partnership or other entity whatsoever who is engaged in any line of
business competitive with the Businesses;
(ii) become an employee, consultant, agent, principal, lender,
partner, officer, director, stockholder or otherwise provide services to or on
behalf of any entity (A) which the Board reasonably determines is or could
become a competitor of the Company or the Businesses or (B) which as of the date
of this Agreement is a business partner or contractual party with the Company;
provided, however, that Executive may acquire not more than five percent (5%) of
the outstanding stock of publicly traded companies;
(iii) solicit or refer, directly or indirectly, any clients or
prospective clients of any services and/or products offered by the Company (or
which are competitive with those offered by the Company) to any other provider
of such services;
(iv) promote, market, assist or participate in the development,
sale, lease or licensing of any services and/or products competitive with those
provided by the Company to, for or with any person, corporation, firm,
partnership or other entity whatsoever; or
(v) solicit, raid, entice, induce or assist any person who
presently is, or any time during the Executive's employment with the Company
shall be or shall have been, an employee of the Company or any of its
Affiliates, during the twelve (12) months preceding such solicitation, raid,
enticement, inducement or assistance, to become employed or retained by any
other person or entity.
(b) Recognizing that the Executive's knowledge, information and
relationship with existing or prospective clients, licensees, customers,
suppliers, accounts, agents, brokers and representatives of the Company and its
Affiliates, and the knowledge of the business, methods, systems, plans and
policies of the Company and its Affiliates which the Executive has heretofore
and shall hereafter establish, receive or obtain as an employee of the Company
or in connection with services performed for the Company or any such Affiliates,
are valuable and unique assets of the Company and such Affiliates, the Executive
agrees that, at all times during and after the Executive's employment by the
Company, the Executive shall not (otherwise than pursuant to his duties
hereunder), directly or indirectly, use, divulge, furnish or make accessible to
anyone, without the prior written consent of the Board of Directors of the
Company, any such knowledge or information
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<PAGE> 6
pertaining to the Company or any of its Affiliates, or the business,
shareholders, personnel, methods, systems, plans or policies thereof, to any
person, firm or corporation or other entity, for any reason or purpose
whatsoever.
(c) The Company shall be deemed and entitled to own all of the results
and proceeds of the Executive's services, including all right, title and
interest in and to any and all franchises, products, processes, concepts,
methods, ideas, creations, designs and/or systems (including, without
limitation, all those of an advertising, marketing or promotional nature), and
any improvement thereon, which may be developed, created or devised by the
Executive during the term of his employment by the Company. The Executive will,
at the request of the Company, and without further compensation other than that
for which provision is made in this Agreement, execute such assignments,
certificates or other instruments as the Company may from time to time deem
necessary or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend its right, title and interest in or to any of the foregoing.
Without limiting the generality of the previous sentences, the Executive
acknowledges and agrees that all memoranda, notes, records, customer lists and
other documents made or compiled by the Executive or made available to the
Executive during the term of his or her employment by the Company concerning the
business of the Company and/or any of its Affiliates shall be the Company's
property and shall be delivered by the Executive to the Company upon termination
of his or her employment by the Company or at any other time on the Company's
request.
(d) The Executive shall execute and deliver to and for the benefit of
the Company an agreement substantially in the form of Exhibit 9(d) hereto,
pertaining, among other matters, to Proprietary Information and Inventions (as
such terms are defined in said Exhibit 9(d)) and confidentiality obligations,
the provisions of which shall be deemed incorporated herein by reference as if
set forth herein (the "Proprietary Rights Agreement").
(e) The provisions of this Section 9 shall survive the termination or
expiration of this Agreement, irrespective of the reason therefore, including
under circumstances in which the Executive continues thereafter in the employ of
the Company.
(f) The Executive acknowledges that the services to be rendered by him
are of a special, unique and extraordinary character and, in connection with
such services, the Executive will have access to confidential information vital
to the business of the Company. By reason of the foregoing, the Executive
consents and agrees that, if he violates any of the provisions of this Section
9, the Company would sustain irreparable harm and, therefore, in addition to any
other remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to apply (without the necessity of posting any bond)
to any court of competent jurisdiction for an injunction restraining the
Executive or any other party from committing or continuing any such violation
(or participating therein) of this Agreement, and the Executive shall not object
to any such application.
10. Warranty. The Executive warrants and represents that he is not a party
to any agreement, contract or understanding, whether of employment or otherwise,
which would in any way restrict or prohibit the Executive from undertaking his
position as an Executive of the Company and complying with his obligations in
accordance with the terms and conditions of this Agreement.
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<PAGE> 7
11. Notices. All notices shall be in writing and shall be deemed to have
been duly given to a party hereto on the date of such delivery, if delivered
personally, or on the third day after being deposited in the mail if mailed via
registered or certified mail, return receipt requested, postage prepaid, or on
the next business day after being sent by recognized national overnight courier
services, at the addresses of the parties as set forth the first paragraph of
this Agreement, or such other address as the parties may specify in writing from
time to time in accordance herewith.
12. Severability. In the event that any provisions of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason (including, but not limited to, any provisions which would be held to be
unenforceable because of the scope, duration or area of its applicability),
unless narrowed by construction, this Agreement shall, as to such jurisdiction
only, be construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or unenforceable
(or if such Language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify such scope, duration or area or all
of them, but only to the extent necessary to make such provision or provisions
enforceable in such jurisdiction, and such provision shall then be applicable in
such modified form in such jurisdiction only). If, notwithstanding the
foregoing, any provision of this Agreement would be held to be invalid,
prohibited or unenforceable in any jurisdiction, such provision shall be
ineffective to the extent of such invalidity, prohibition or unenforceability,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
13. Assignment. Nothing in this Agreement shall be construed to permit the
assignment by Executive of any of the rights or obligations hereunder, and such
assignment is expressly prohibited without the prior written consent of the
Company.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
15. Forum Selection. The parties agree that the exclusive remedy for
resolving any disputes arising under this Agreement shall be by submitting them
to the American Arbitration Association ("AAA") for adjudication in New York,
New York pursuant to the AAA's National Rules for the Resolution of Employment
Disputes, except to the extent there is no adequate remedy at law and injunctive
relief only is sought in which case the parties select state court in New York,
New York as the exclusive forum to resolve their disputes and both parties
submit to personal jurisdiction and consent to service of process at the
addresses contained in the first paragraph of this Agreement.
16. Waiver. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance, with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
17. Complete Understanding; Drafting; Counterparts. This Agreement and the
Stock Option Agreement dated August [12], 1999 constitute the complete
understanding and supersedes
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<PAGE> 8
any and all prior agreements and understandings between the parties with respect
to its subject matter and no statement, representation, warranty or covenant has
been made by either party with respect thereto except as expressly set forth
herein. This Agreement shall not be altered, modified, amended or terminated
except by written instrument signed by each of the parties hereto. The language
used in this Agreement will be deemed to be the language chosen by both of the
parties to express their mutual intent, and no rule of strict construction shall
be applied against either party. The Section and paragraph headings contained
herein are for convenience only, and are not part of and are not intended to
define or limit the contents of said Sections and paragraphs. This Agreement may
be executed in counterparts, each of which shall be deemed an original and all
of which, when taken together, shall constitute one and the same agreement.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE COMPANY:
MEDSITE.COM, INC.
By: /s/illegible
Name:
Title:
THE INDIVIDUAL:
By: /s/illegible
Name:
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<PAGE> 10
TABLE A
-------
VACATION DAYS:
20 Days
FLOATING HOLIDAYS:
3 Days
SICK DAYS:
5 Days
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<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of November 30, 1999 (the
"Agreement"), by and between, Medsite.com, Inc., a Delaware corporation, with an
address at 60 East 13th Street, 5th Floor, New York, New York 10003 (the
"Company"), and Douglas G. Mack, an individual with an address at 392 Digaetano
Terrace, West Orange, New Jersey, 07052 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive desires to be employed by the Company
and Company desires to employ Executive as the Executive Vice President of the
Company's Commerce Division;
WHEREAS, the Company and the Executive desire to express the
terms and conditions of the employment by the Company of the Executive.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts and agrees to such employment, commencing as of the
date hereof, upon the terms and conditions hereinafter set forth.
2. Term. The term of the Executive's employment under this Agreement
shall commence as of the date hereof and shall continue for a period of five (5)
years from the date hereof, unless sooner terminated as provided elsewhere in
this Agreement (the "Initial Term"). The Initial Term hereof will be
automatically renewed for additional terms (each a "Renewal Term," and,
together, with the Initial Term, collectively the "Term") of one (1) year unless
either party hereto provides the other party hereto written notice of its
election not to renew this Agreement ninety (90) days prior to the expiration of
the Initial Term, or, if applicable, ninety (90) days prior to the expiration of
any Renewal Term.
3. Duties and Services.
(a) The Executive agrees, from and after the date hereof, to
serve the Company faithfully, diligently and to the best of his ability, as
Executive Vice President of the Company's Commerce Division. The Executive shall
devote his entire business time, energy and skill to such activities on behalf
of the Company.
(b) The Executive agrees to perform such other services
consistent with his position as the Executive Vice President of Company's
Commerce division as the Company shall reasonably request, and to act in such
capacities for the Company and its Affiliates (as hereinafter defined), as may
be designated by the Chief Executive Officer of the Company, without further
compensation
<PAGE> 2
other than that for which provision is made in this Agreement. For purposes of
this Agreement, the term "Affiliate" shall refer to any entity which controls,
is controlled by, or is under common control with the Company.
(c) Nothing contained herein shall limit the right of
Executive, solely as an investor, to hold and make investments in securities of
any corporation or limited partnership, provided that Executive's aggregate
interest therein does not exceed 5% of the outstanding shares or interests in
such corporation or partnership.
4. The Company's Assistance to the Executive. The Company shall supply
the Executive with all materials, data and technical assistance which shall be
reasonably necessary to assist the Executive. Such materials and the contents
thereof and all intellectual property referenced or represented therein shall
remain the property of the Company.
5. Compensation.
(a) During the Term, the Company agrees to pay to the
Executive, and the Executive agrees to accept, a salary for all his services
(the "Salary") of $175,000 per year, payable in accordance with the Company's
standard payroll policies (the "Base Compensation") and subject to standard cost
of living and other increases as appropriate as determined by the Company's
Board of Directors.
(b) During the Term, the Executive shall be eligible to
receive a discretionary annual bonus, payable in stock or cash, as determined by
the Company's Board of Directors.
(c) The Executive agrees that the Company shall withhold from
any and all payments required to be made to the Executive pursuant to this
Agreement (including the travel allowance) all federal, state, local and/or
other taxes which are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
(d) Stock Option. The Company shall grant Executive an option
(the "Option") to purchase 200,000 shares of the Company's Common Stock
effective on the date Executive begins employment (the "Employment Date"). The
per share exercise price for the Option shall be equal to $5.50 per share. The
term of the Option shall be ten (10) years. The Option shall vest as to twenty
percent (20%) of the shares subject to the Option on each anniversary of the
Employment Date. Except as otherwise provided herein, the Option shall be
granted pursuant to, and shall be governed by, the Company's Stock Option Plan
and conform to the Company's standard policies with respect to options, except
to the extent inconsistent with this Agreement in its entirety.
(e) Board of Directors Meetings. During the Term, the
Executive shall be entitled to notice of and an opportunity to attend meetings
of the Company's Board of Directors.
6. Employee Benefits.
(a) In accordance with the policies of the Company, the
Company shall reimburse the Executive for reasonable business expenses incurred
by him for or on behalf of the Company in furtherance of the performance of his
duties hereunder. Such reimbursement shall be subject to
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<PAGE> 3
receipt by the Company from the Executive of an itemized accounting therefor,
together with such vouchers and other reasonable verifications as the Company
shall require to satisfactorily evidence such expenses, and such policies as the
Company shall establish from time to time.
(b) The Executive shall be entitled to participate, in
accordance with the terms thereof, in employee benefit plans maintained for the
Executives of the Company including, without limitation, any health,
hospitalization and medical insurance programs and in any pension or retirement
or other similar plans or policies. The foregoing shall not be construed to
require the Company to establish any such plans, or to prevent the Company from
modifying or terminating any such plans once established. The Executive shall be
entitled to the vacation, benefits and sick days set forth on Table A hereto.
7. Termination.
(a) Notwithstanding anything to the contrary contained herein,
the Company's employment of the Executive under this Agreement and the
Executive's right to any and all compensation to which the Executive would
otherwise be entitled hereunder, shall terminate upon the earliest to occur of
the following events:
(i) The death of the Executive.
(ii) The permanent disability (as hereinafter
defined) of the Executive.
(iii) The non-renewal and expiration of the Term
of employment hereunder pursuant to Section
2 hereof.
(iv) Upon written notice to the Executive from
the Company for Cause (as hereinafter
defined).
(v) Upon written notice to the Company from the
Executive for "Good Reason" (as hereinafter
defined).
(vi) Upon 30 days' written notice to the
Executive from the Company without Cause.
(vii) Upon 30 days' written notice to the Company
from the Executive.
(b) "Cause" for purposes hereof shall mean: (i) the commission
by the Executive of theft, embezzlement, fraud, obtaining funds or property
under false pretenses, or similar acts of material misconduct with respect to
the property of the Company or any of its Affiliates or their respective
employees or the Company's customers or suppliers, or the Company's reasonable
determination that any oral or written representations made to the Company by
the Executive shall prove false and shall result in damage to the Company; (ii)
the commission by the Executive of a material act of malfeasance, dishonesty or
breach of trust against the Company or any of its Affiliates or their respective
employees or the Company's franchisees, customers or suppliers, including a
material breach by the Executive of his covenants or obligations under Section 9
of this Agreement; (iii) the conviction of the Executive of a felony or of a
misdemeanor involving moral
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<PAGE> 4
turpitude; or (iv) the Executive's repeated and continued failure to
successfully fulfill his duties or obligations of employment or the Executive's
breach of any of his material obligations and covenants hereunder, which
breaches or failures are not cured within thirty (30) days prior written notice
to Executive.
(c) "Good Reason" for purposes hereof shall mean: (i) the
failure by Company to timely pay to Executive the amounts or provide to
Executive the benefits and prerequisites described in Sections 5 and 6 of this
Agreement; or (ii) any other breach by Company of the terms of this Agreement,
which breach is not cured within thirty (30) days following written notice to
Company of such breach.
(d) No waiver by the Company of any default by the Executive
or any breach by him of any of his covenants or obligations under any provision
of this Agreement shall be deemed a waiver of any future breach or default,
whether or not such breach or default is of the same nature.
(e) The Executive shall be deemed to be permanently disabled
for purposes hereof, at the option of the Company, in the event that the
Executive shall fail to render and perform the services required of the
Executive under this Agreement because of physical or mental incapacity or
disability for a continuous period of four (4) consecutive months, or for
shorter periods aggregating one hundred and twenty (120) days or more during any
period of six (6) successive months.
(f) If the Executive's employment is terminated by the Company
or by the Executive, as applicable, for reasons stated in Sections 7(a)(i),
7(a)(ii), 7(a)(iii), 7(a)(iv) or 7(a)(vii) above, then the Executive or his
heirs, as applicable, shall receive from the Company, Salary, together with any
bonuses, benefits and perquisites up to the date of termination.
(g) If the Executive's employment is terminated without Cause
as stated in Section 7(a)(vi) above or Executive terminates his employment for
"Good Reason" as stated in Section 7(a)(v) above, then the Executive shall
continue to receive from the Company, as severance hereunder and subject to
Executive's compliance with the terms of Section 9 below, the Salary for a
period equal to two (2) years from the date of termination, payable in
accordance with the Company's normal payroll practices. In addition, subject to
Executive's compliance with the terms of Section 9 below, Executive shall
continue to vest in the unvested shares subject to the Option, granted pursuant
to Section 5(d) above, for a period of two years following termination and in
accordance with the terms of the applicable option agreements, and Executive
shall have the right to exercise, for two years following termination, all
vested shares subject to such Option. In the event that Executive does not
comply with the provisions of Section 9 following his termination, then upon
such non-compliance the Option granted to Executive pursuant to Section 5(d)
above shall automatically terminate and the Salary payments shall automatically
cease.
(h) In the event (i) the Company decides not to renew this
Agreement pursuant to Section 2 hereof, and (ii) the Company wishes to subject
the Executive to the non-competition and restrictive covenants set forth in
Section 9(a) below beyond the date of termination, then the Company shall
continue the Executive's Salary for the duration of the non-competition and
restrictive covenants; provided, however, for purposes of this subsection 7(h),
such non-competition and restrictive covenants shall not extend beyond the two
(2) year period following the termination
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<PAGE> 5
of Executive's employment with the Company.
8. Effect of Termination. Upon the termination of this Agreement, for
any reason, or upon the termination of the Executive's employment hereunder, for
any reason, the Executive (i) shall immediately discontinue the use of any and
all trade names, trademarks, trade secrets, copyrights or copyrighted materials,
and customer lists, offering circulars and materials and advertising media
belonging to or supplied to the Executive by the Company, and (ii) shall, at the
Executive's expense, return to the Company all such materials.
9. Non-Competition, Restrictive Covenants, Confidentiality and
Injunctive Relief.
(a) The Executive agrees that commencing as of the date hereof
and continuing until the later of (i) five (5) years from the date hereof or
(ii) two (2) years following the termination of the Executive's employment with
the Company, the Executive shall not, without the prior written approval of the
Board of Directors of the Company, directly or indirectly, through any other
person, firm or corporation, whether for himself or as agent on behalf of any
other person or entity, and whether as employee, consultant, agent, principal,
lender, partner, officer, director, stockholder or otherwise, with or without
compensation:
(i) sell products or provide services which are
competitive with the businesses, products or services of the Company or any of
its Affiliates or the business, products or services of the Company contemplated
or under development (the "Businesses"), or promote, market, sell, become or
acquire an interest in, or associate in a business relationship with, or aid or
assist any other person, corporation, firm, partnership or other entity
whatsoever who is engaged in any line of business competitive with the
Businesses;
(ii) become an employee, consultant, agent,
principal, lender, partner, officer, director, stockholder or otherwise provide
services to or on behalf of any entity (A) which the Board reasonably determines
is or could become a competitor of the Company or any of its Affiliates or
constitutes one of the Businesses or (B) which as of the date of this Agreement
is a business partner or contractual party with the Company or any of its
Affiliates;
(iii) solicit or refer, directly or indirectly, any
clients or prospective clients of any services and/or products offered by the
Company or any of its Affiliates (or which are competitive with those offered by
the Company or any of its Affiliates) to any other provider of such services;
(iv) promote, market, assist or participate in the
development, sale, lease or licensing of any services and/or products
competitive with those provided by the Company or any of its Affiliates to, for
or with any person, corporation, firm, partnership or other entity whatsoever;
or
(v) solicit, raid, entice, induce or assist any
person who presently is, or any time during the Executive's employment with the
Company shall be or shall have been, an employee of the Company or any of its
Affiliates with compensation of more than $30,000 annually,
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<PAGE> 6
during the twelve (12) months preceding such solicitation, raid, enticement,
inducement or assistance, to become employed or retained by any other person or
entity.
(b) Nothing in the Section 9 shall prevent Executive from
engaging in the activities listed in 9(a)(i) through 9(a)(v) above to the extent
such activities relate to businesses, products or services of the Company or any
of its Affiliates for which Executive does not possess any material non-public
information.
(c) Section 9(a) shall supersede and replace Section 16.1 of
the non-qualified stock option agreement and Section 17.1 of the incentive stock
option agreement, which shall be provided to Executive in connection with the
Option granted pursuant to Section 5(d) above.
(d) Recognizing that the Executive's knowledge, information
and relationship with existing or prospective clients, licensees, customers,
suppliers, accounts, agents, brokers and representatives of the Company and its
Affiliates, and the knowledge of the business, methods, systems, plans and
policies of the Company and its Affiliates which the Executive has heretofore
and shall hereafter establish, receive or obtain as an employee of the Company
or in connection with services performed for the Company or any such Affiliates,
are valuable and unique assets of the Company and such Affiliates, the Executive
agrees that, at all times during and after the Executive's employment by the
Company, the Executive shall not (otherwise than pursuant to his duties
hereunder), directly or indirectly, use, divulge, furnish or make accessible to
anyone, without the prior written consent of the Board of Directors of the
Company, any such knowledge or information pertaining to the Company or any of
its Affiliates, or the business, shareholders, personnel, methods, systems,
plans or policies thereof, to any person, firm or corporation or other entity,
for any reason or purpose whatsoever, unless such knowledge or information is in
the public domain or Executive is required to divulge such information by
operation of law.
(e) The Company shall be deemed and entitled to own all of the
results and proceeds of the Executive's services, including all right, title and
interest in and to any and all franchises, products, processes, concepts,
methods, ideas, creations, designs and/or systems (including, without
limitation, all those of an advertising, marketing or promotional nature), and
any improvement thereon, which may be developed, created or devised by the
Executive during the term of his employment by the Company. The Executive will,
at the request of the Company and at its expense, and without further
compensation other than that for which provision is made in this Agreement,
execute such assignments, certificates or other instruments as the Company may
from time to time deem necessary or desirable to evidence, establish, maintain,
perfect, protect, enforce or defend its right, title and interest in or to any
of the foregoing. Without limiting the generality of the previous sentences, the
Executive acknowledges and agrees that all memoranda, notes, records, customer
lists and other documents made or compiled by the Executive or made available to
the Executive during the term of his employment by the Company concerning the
business of the Company and/or any of its Affiliates shall be the Company's
property and shall be delivered by the Executive to the Company upon termination
of his employment by the Company or at any other time on the Company's request.
(f) The Executive shall execute and deliver to and for the
benefit of the Company an agreement substantially in the form of Exhibit 9(d)
hereto, pertaining, among other matters, to
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<PAGE> 7
Proprietary Information and Inventions (as such terms are defined in said
Exhibit 9(d)) and confidentiality obligations, the provisions of which shall be
deemed incorporated herein by reference as if set forth herein (the "Proprietary
Rights Agreement").
(g) The provisions of this Section 9 shall survive the
termination or expiration of this Agreement, irrespective of the reason
therefore, including under circumstances in which the Executive continues
thereafter in the employ of the Company.
(h) The Executive acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, the Executive will have access to confidential
information vital to the business of the Company. By reason of the foregoing,
the Executive consents and agrees that, if he violates any of the provisions of
this Section 9, the Company would sustain irreparable harm and, therefore, in
addition to any other remedies which the Company may have under this Agreement
or otherwise, the Company shall be entitled to apply (without the necessity of
posting any bond) to any court of competent jurisdiction for an injunction
restraining the Executive or any other party from committing or continuing any
such violation (or participating therein) of this Agreement.
10. Warranty. The Executive warrants and represents that he is not a
party to any agreement, contract or understanding, whether of employment or
otherwise, which would in any way restrict or prohibit the Executive from
undertaking his position as an Executive of the Company and complying with his
obligations in accordance with the terms and conditions of this Agreement.
11. Notices. All notices shall be in writing and shall be deemed to
have been duly given to a party hereto on the date of such delivery, if
delivered personally, or on the third day after being deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid, or on the next business day after being sent by recognized national
overnight courier services, at the addresses of the parties as set forth the
first paragraph of this Agreement, or such other address as the parties may
specify in writing from time to time in accordance herewith.
12. Severability. In the event that any provisions of this Agreement
would be held to be invalid, prohibited or unenforceable in any jurisdiction for
any reason (including, but not limited to, any provisions which would be held to
be unenforceable because of the scope, duration or area of its applicability),
unless narrowed by construction, this Agreement shall, as to such jurisdiction
only, be construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or unenforceable
(or if such Language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify such scope, duration or area or all
of them, but only to the extent necessary to make such provision or provisions
enforceable in such jurisdiction, and such provision shall then be applicable in
such modified form in such jurisdiction only). If, notwithstanding the
foregoing, any provision of this Agreement would be held to be invalid,
prohibited or unenforceable in any jurisdiction, such provision shall be
ineffective to the extent of such invalidity, prohibition or unenforceability,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
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<PAGE> 8
13. Assignment. Nothing in this Agreement shall be construed to permit
the assignment by Executive of any of the rights or obligations hereunder, and
such assignment is expressly prohibited without the prior written consent of the
Company.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
15. Forum Selection. The parties agree that the exclusive remedy for
resolving any disputes arising under this Agreement shall be by submitting them
to the American Arbitration Association ("AAA") for adjudication in New York,
New York pursuant to the AAA's National Rules for the Resolution of Employment
Disputes, except to the extent there is no adequate remedy at law and injunctive
relief only is sought in which case the parties select state court in New York,
New York as the exclusive forum to resolve their disputes and both parties
submit to personal jurisdiction and consent to service of process at the
addresses contained in the first paragraph of this Agreement.
16. Waiver. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance, with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
17. Complete Understanding; Drafting; Counterparts. This Agreement
constitutes the complete understanding and supersedes any and all prior
agreements and understandings between the parties with respect to its subject
matter and no statement, representation, warranty or covenant has been made by
either party with respect thereto except as expressly set forth herein. This
Agreement shall not be altered, modified, amended or terminated except by
written instrument signed by each of the parties hereto. The language used in
this Agreement will be deemed to be the language chosen by both of the parties
to express their mutual intent, and no rule of strict construction shall be
applied against either party. The Section and paragraph headings contained
herein are for convenience only, and are not part of and are not intended to
define or limit the contents of said Sections and paragraphs. This Agreement may
be executed in counterparts, each of which shall be deemed an original and all
of which, when taken together, shall constitute one and the same agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE COMPANY:
MEDSITE.COM, INC.
By: /s/ GREGORY W. SCOTT
------------------------------
Name: GREGORY W. SCOTT
Title: CHIEF FINANCIAL OFFICER
THE EXECUTIVE:
By: /s/ DOUGLAS G. MACK
------------------------------
Name:
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<PAGE> 10
TABLE A
VACATION DAYS:
20 Days
FLOATING HOLIDAYS:
5 Days
SICK DAYS
5 Days
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<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Employment Agreement"), dated as of
January 12, 2000 (the "Effective Date"), by and between, Medsite.com, Inc., a
Delaware corporation, with an address at 60 East 13th Street, 5th Floor, New
York, New York 10003 (the "Company"), and Dr. Vincent Friedewald, an Employee
with an address at 1556 Oak Hill Drive North, South Bend, IN 46637 (the
"Employee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain merger (the "Merger")
contemplated by the Agreement and Plan of Merger dated as of January 12, 2000,
among the Company and American Medical Communications, Inc., the Employee
desires to be employed by the Company and Company desires to employ the
Employee;
WHEREAS, the Company and the Employee desire to express the
terms and conditions of the employment by the Company of the Employee;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:
1. Employment. Contingent upon the closing of the Merger, the Company
hereby agrees to employ the Employee, and the Employee hereby accepts and agrees
to such employment, commencing as of the date hereof, upon the terms and
conditions hereinafter set forth.
2. Term. The term of the Employee's employment under this Agreement
shall commence as of the date hereof and shall continue for a period of two (2)
years from the date hereof, unless sooner terminated as provided elsewhere in
this Agreement (the "Initial Term"). The Initial Term hereof will be
automatically renewed for additional terms (each a "Renewal Term," and,
together, with the Initial Term, collectively the "Term") of one (1) year unless
either party hereto provides the other party hereto written notice of its
election not to renew this Agreement thirty (30) days prior to the expiration of
the Initial Term, or, if applicable, thirty (30) days prior to the expiration of
any Renewal Term.
3. Duties and Services. (a) The Employee agrees, from and after the
date hereof, to serve the Company and its Affiliates (as defined below)
faithfully, diligently and to the best of his ability, as its Executive Medical
Editor with primary responsibility for creating value. During the Term, the
Employee shall report directly to the Chief Operating Officer of the Company.
The Employee shall devote his entire business time, energy and skill to such
activities on behalf of the Company, except as otherwise provided herein.
<PAGE> 2
(b) The Employee agrees to perform such other services as the
Company shall reasonably request, and to act in such capacities for the Company
and its Affiliates (as hereinafter defined), as may be designated by the
Management of the Company, without further compensation other than that for
which provision is made in this Agreement. For purposes of this Agreement, the
term "Affiliate" shall refer to any entity which controls, is controlled by, or
is under common control with the Company.
(c) The Employee agrees that he shall work primarily at the
Company's main office located in New York, New York; provided, however, that
after the first six (6) months of the Term and with the mutual consent of the
Employee and the Company, the Employee's primary work location may be modified.
4. The Company's Assistance to the Employee. The Company shall supply
the Employee with all materials, data and technical assistance which shall be
reasonably necessary to assist the Employee. Such materials and the contents
thereof and all intellectual property referenced or represented therein shall
remain the property of the Company.
5. Compensation. (a) During the Term, the Company agrees to pay to the
Employee, and the Employee agrees to accept, a salary for all his services (the
"Salary") at the rate set forth on Table A hereto, payable in accordance with
the Company's standard payroll policies from time to time.
(b) The Employee agrees that the Company shall withhold from any
and all payments required to be made to the Employee pursuant to this Agreement
all federal, state, local and/or other taxes which are required to be withheld
in accordance with applicable statutes and/or regulations from time to time in
effect.
(c) Stock Option. The Company shall grant the Employee an option
(the "Option") to purchase 100,000 shares of the Company's Common Stock
effective on or about the Effective Date. The per share exercise price for the
Option shall be $7 per share. The term of the Option shall be ten (10) years.
The Option shall vest as to twenty percent (20%) of the shares subject to the
Option on each anniversary of the Effective Date. Should the Company provide the
Employee with notice as required by Section 2 so as to not extend the term of
this Employment Agreement, such non-renewal of this Employment Agreement will be
treated as an involuntary termination and the Option shall vest as to that
number of shares provided for in Section 7(e). Except as otherwise provided
herein, the Option shall be granted pursuant to, and shall be governed by, the
Company's Stock Option Plan and Stock Option Agreement and conform to the
Company's standard policies with respect to options. To the extent permitted
under applicable law, the Option shall be an incentive stock option.
6. Employee Benefits. (a) In accordance with the policies of the
Company, the Company shall reimburse the Employee for pre approved business
expenses incurred by him for or on behalf of the Company in furtherance of the
performance of his duties hereunder. Such reimbursement shall be subject to
receipt by the Company from the Employee of an itemized accounting therefor,
together with such vouchers and other reasonable verifications as the Company
shall require to
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<PAGE> 3
satisfactorily evidence such expenses, and such policies as the Company shall
establish from time to time.
(b) The Employee shall be entitled to participate, in accordance
with the terms thereof, in employee benefit plans maintained for the Employees
of the Company including, without limitation, any health, hospitalization and
medical insurance programs and in any pension or retirement or other similar
plans or policies. The foregoing shall not be construed to require the Company
to establish any such plans, or to prevent the Company from modifying or
terminating any such plans once established. The Employee shall be entitled to
the vacation, benefits and sick days set forth on Table A hereto.
7. Termination. (a) Notwithstanding anything to the contrary contained
herein, the Company's employment of the Employee under this Agreement and the
Employee's right to any and all compensation to which the Employee would
otherwise be entitled hereunder, shall terminate upon the earliest to occur of
the following events:
(i) The death of the Employee.
(ii) The permanent disability (as hereinafter defined) of the
Employee.
(iii) The expiration of the Term, pursuant to Section 2
hereof.
(iv) Upon written notice to the Employee from the Company for
Cause (as hereinafter defined).
(v) Upon 2 weeks' written notice to the Employee from the
Company without Cause.
(vi) Upon 2 weeks' written notice to the Company from the
Employee.
(b) "Cause" for purposes hereof shall mean: (i) the
commission by the Employee of theft, embezzlement, fraud, obtaining funds or
property under false pretenses, or similar acts of material misconduct with
respect to the property of the Company or any of its Affiliates or their
respective employees or the Company's customers or suppliers, or the Company's
good faith determination that any oral or written representations made to the
Company by the Employee shall prove false after the Employee has been provided
an opportunity to address the claim; (ii) the commission by the Employee of a
material act of malfeasance, dishonesty or breach of trust against the Company
or any of its Affiliates or their respective employees or the Company's
franchisees, customers or suppliers, including a breach by the Employee of his
covenants or obligations under Section 9 of this Agreement; (iii) the conviction
of the Employee of a felony or of a misdemeanor involving moral turpitude; or
(iv) the Employee's repeated and continued failure to successfully fulfill his
duties or obligations of employment or the Employee's breach of any of his
material obligations and covenants hereunder after having been given reasonable
notice from the Company and the Employee's failure to cure within ten (10) days,
or such other period as the parties agree upon, of such notice.
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<PAGE> 4
(c) No waiver by the Company of any default by the
Employee or any breach by him of any of his covenants or obligations under any
provision of this Agreement shall be deemed a waiver of any future breach or
default, whether or not such breach or default is of the same nature.
(d) The Employee shall be deemed to be permanently
disabled for purposes hereof, at the option of the Company, in the event that
the Employee shall fail to render and perform the services required of the
Employee under this Agreement because of physical or mental incapacity or
disability for a continuous period of three (3) consecutive months, or for
shorter periods aggregating one hundred and twenty (120) days or more during any
period of six (6) successive months.
(e) Severance Payments upon Involuntary Termination. If
the Employee's employment is involuntarily terminated by the Company other than
for Cause (not including the Employee's death or disability or the non-renewal
of this Agreement by the Employee), and the Employee signs and does not revoke a
release of claims, which shall be provided to the Employee by the Company, then,
subject to the Employee's continued compliance with Sections 8 and 9 of this
Employment Agreement, (i) the Company shall pay Employee's Salary to the
Employee for a period of twelve (12) months, to be paid in accordance with the
Company's standard payroll practices and (ii) up to 20,000 of the unvested
shares subject to the Option shall immediately vest and become exercisable.
8. Effect of Termination. Upon the termination of this Agreement, for
any reason, or upon the termination of the Employee's employment hereunder, for
any reason, the Employee (i) shall immediately discontinue the use of any and
all trade names, trademarks, trade secrets, copyrights or copyrighted materials,
and customer lists, offering circulars and materials and advertising media
belonging to or supplied to the Employee by the Company, and (ii) shall, at the
Employee's expense, return to the Company all such materials.
9. Non-Competition, Restrictive Covenants, Confidentiality and
Injunctive Relief. (a) The Employee agrees that, commencing as of the date
hereof and during the term of the Employee's employment with the Company
(including any Period for which the Employee shall act as a consultant to the
Company), and for a period of one (1) year thereafter, the Employee shall not,
without the prior written approval of the Board of Directors of the Company,
directly or indirectly, through any other person, firm or corporation, whether
for himself or as agent on behalf of any other person or entity, and whether as
employee, consultant, agent, principal, lender, partner, officer, director,
stockholder or otherwise, with our without compensation:
(i) sell products or provide services which are
competitive with the businesses, products or services of the Company or the
business, products or services of the Company under development (the
"Businesses"), or promote, market, sell, become or acquire an interest in, or
associate in a business relationship with, or aid or assist any other person,
corporation, firm, partnership or other entity whatsoever who is engaged in any
line of business competitive with the Businesses;
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<PAGE> 5
(ii) become an employee, consultant, agent, principal,
lender, partner, officer, director, stockholder or otherwise provide services to
or on behalf of any entity (A) which the Board reasonably determines is or could
become a competitor of the Company or the Businesses or (B) which as of the date
of this Agreement is a business partner or contractual party with the Company;
(iii) solicit or refer, directly or indirectly, any
clients or prospective clients of any services and/or products offered by the
Company (or which are competitive with those offered by the Company) to any
other provider of such services;
(iv) promote, market, assist or participate in the
development, sale, lease or licensing of any services and/or products
competitive with those provided by the Company to, for or with any person,
corporation, firm, partnership or other entity whatsoever; or
(v) solicit, raid, entice, induce or assist any person
who presently is, or any time during the Employee's employment with the Company
shall be or shall have been an employee of the Company or any of its Affiliates
during the twelve (12) months preceding such solicitation, raid, enticement,
inducement or assistance, to become employed or retained by any other person or
entity.
(b) Recognizing that the Employee's knowledge,
information and relationship with existing or prospective clients, licensees,
customers, suppliers, accounts, agents, brokers and representatives of the
Company and its Affiliates, and the knowledge of the business, methods, systems,
plans and policies of the Company and its Affiliates which the Employee has
heretofore and shall hereafter establish, receive or obtain as an employee of
the Company or in connection with services performed for the Company or any such
Affiliates, are valuable and unique assets of the Company and such Affiliates,
the Employee agrees that, at all times during and after the Employee's
employment by the Company, the Employee shall not (otherwise than pursuant to
his duties hereunder), directly or indirectly, use, divulge, furnish or make
accessible to anyone, without the prior written consent of the Board of
Directors of the Company, any such confidential or proprietary knowledge or
information pertaining to the Company or any of its Affiliates, or the business,
shareholders, personnel, methods, systems, plans or policies thereof, to any
person, firm or corporation or other entity, for any reason or purpose
whatsoever.
(c) The Company shall be deemed and entitled to own
all of the results and proceeds of the Employee's services, including all right,
title and interest in and to any and all franchises, products, processes,
concepts, methods, ideas, creations, designs and/or systems (including, without
limitation, all those of an advertising, marketing or promotional nature), and
any improvement thereon, which may be developed, created or devised by the
Employee during the term of his employment by the Company that are in
conjunction with the Business. The Employee will, at the request of the Company,
and without further compensation other than that for which provision is made in
this Agreement, execute such assignments, certificates or other instruments as
the Company may from time to time deem necessary or desirable to evidence,
establish, maintain, perfect, protect, enforce or defend its right, title and
interest in or to any of the foregoing. Without limiting the generality of the
previous sentences, the Employee acknowledges and agrees that all memoranda,
notes, records, customer lists and other documents made or compiled by the
Employee
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<PAGE> 6
or made available to the Employee during the term of his employment by the
Company concerning the Business of the Company and/or any of its Affiliates
shall be the Company's property and shall be delivered by the Employee to the
Company upon termination of his employment by the Company or at any other time
on the Company's request.
(d) The Employee shall execute and deliver to and for
the benefit of the Company an agreement substantially in the form of Exhibit
9(d) hereto, pertaining, among other matters, to Proprietary Information and
Inventions (as such terms are defined in said Exhibit 9(d)) and confidentiality
obligations, the provisions of which shall be deemed incorporated herein by
reference as if set forth herein (the "Proprietary Rights Agreement").
(e) The provisions of this Section 9 shall survive
the termination or expiration of this Agreement, irrespective of the reason
therefore, including under circumstances in which the Employee continues
thereafter in the employ of the Company.
(f) The Employee acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, the Employee will have access to confidential
information vital to the business of the Company. By reason of the foregoing,
the Employee consents and agrees that, if he violates any of the provisions of
this Section 9, the Company would sustain irreparable harm and, therefore, in
addition to any other remedies which the Company may have under this Agreement
or otherwise, the Company shall be entitled to apply (without the necessity of
posting any bond) to any court of competent jurisdiction for an injunction
restraining the Employee or any other party from committing or continuing any
such violation (or participating therein) of this Agreement, and the Employee
shall not object to any such application.
(g) Notwithstanding anything in this Agreement to the
contrary and provided that the following activities do not violate the terms of
this Section 9, the Employee shall have the right to teach one course per year
at Notre Dame University and shall have the right to continue certain media and
authorship activities which are pre-approved by the Company.
10. Warranty. The Employee warrants and represents that he is not a
party to any agreement, contract or understanding, whether of employment or
otherwise, which would in anyway restrict or prohibit the Employee from
undertaking his position as an employee of the Company and complying with his
obligations in accordance with the terms and conditions of this Agreement.
11. Notices. All notices shall be in writing and shall be deemed to
have been duly given to a party hereto on the date of such delivery, if
delivered personally, or on the third day after being deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid, or on the next business day after being sent by recognized national
overnight courier services, at the addresses of the parties as set forth in the
first paragraph of this Agreement, or such other address as the parties may
specify in writing from time to time in accordance herewith.
12. Severability. In the event that any provisions of this Agreement
would be held to be invalid, prohibited or unenforceable in any jurisdiction for
any reason (including, but not limited to, any provisions which would be held to
be unenforceable because of the scope, duration or area of its
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<PAGE> 7
applicability), unless narrowed by construction, this Agreement shall, as to
such jurisdiction only, be construed as if such invalid, prohibited or
unenforceable provision had been more narrowly drawn so as not to be invalid,
prohibited or unenforceable (or if such Language cannot be drawn narrowly
enough, the court making any such determination shall have the power to modify
such scope, duration or area or all of them, but only to the extent necessary to
make such provision or provisions enforceable in such jurisdiction, and such
provision shall then be applicable in such modified form in such jurisdiction
only). If, notwithstanding the foregoing, any provision of this Agreement would
be held to be invalid, prohibited or unenforceable in any jurisdiction, such
provision shall be ineffective to the extent of such invalidity, prohibition or
unenforceability, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
13. Assignment. Subject to Section 14, nothing in this Agreement shall
be construed to permit the assignment by the Employee or by the Company of any
of the rights or obligations hereunder, and such assignment is expressly
prohibited without the prior written consent of both of the parties.
14. Successors. (a) Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term "Company," shall
include any successor to the Company"s business and/or assets which executes and
delivers the assumption agreement described in this subsection (a) or which
becomes bound by the terms of this Agreement by operation of law.
(b) The terms of this Agreement and all rights of the Employee
hereunder shall inure to the benefit of, and be enforceable by, the Employee"s
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
principles of conflict of laws and regardless of where actually executed,
delivered or performed.
16. Forum Selection. The parties agree that the exclusive remedy for
resolving any disputes arising under this Agreement shall be by submitting them
to the American Arbitration Association ("AAA") for adjudication in New York,
New York pursuant to the AAA's National Rules for the Resolution of Employment
Disputes, except to the extent there is no adequate remedy at law and injunctive
relief only is sought in which case the parties select state court in New York,
New York as the exclusive forum to resolve their disputes and both parties
submit to personal jurisdiction and consent to service of process at the
addresses contained in the first paragraph of this Agreement.
-7-
<PAGE> 8
17. Waiver. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance, with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
18. Complete Understanding; Drafting Counterparts. This Agreement, the
Company's Stock Option Plan and Stock Option Agreement constitute the complete
understanding and supersede any and all prior agreements and understandings
between the parties with respect to its subject matter and no statement,
representation, warranty or covenant has been made by either party with respect
thereto except as expressly set forth herein. This Agreement shall not be
altered, modified, amended or terminated except by written instrument signed by
each of the parties hereto. The language used in this Agreement will be deemed
to be the language chosen by both of the parties to express their mutual intent,
and no rule of strict construction shall be applied against either party. The
Section and paragraph headings contained herein are for convenience only, and
are not part of and are not intended to define or limit the contents of said
Sections and paragraphs. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which, when taken together, shall
constitute one and the same agreement.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
THE COMPANY:
MEDSITE.COM, INC.
By:_________________________________
Name: Gregory Scott
Title: Chief Financial Officer
THE EMPLOYEE:
By:_________________________________
Name: Vincent E. Friedewald, Jr., M.D.
[signature page to Friedewald Employment Agreement]
-9-
<PAGE> 10
TABLE A
SALARY (PER ANNUM):
- $ 220,000 payable at a rate of $20,000 per month for the first
six (6) months of the Term and at a rate of $16,666 per month
thereafter. o
- For purposes of Section 7(e) of the Agreement, the Salary
shall be payable at a rate of $20,000 per month for the first
six (6) months and at a rate of $16,666 per month for the next
six (6) months.
VACATION DAYS:
20 Days
FLOATING HOLIDAYS:
3 Days
SICK DAYS:
5 Days
-10-
<PAGE> 1
Exhibit 10.12
STANDARD FORM OF LOFT LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
AGREEMENT OF LEASE, made as of the 23rd day of November, 1998, between
BROADWAY-13TH ASSOCIATES, L.P., A NEW YORK LIMITED PARTNERSHIP, having an office
at c/o Kenart Realties, Inc., 10 West 47th Street, New York, New York 10036,
party of the first part, hereinafter referred to as OWNER, and MEDSITE
PUBLISHING INC., A NEW YORK CORPORATION, having an office at 60 East 13th
Street, 5th Floor, New York, NY 10003, party of the second part, hereinafter
referred to as TENANT.
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from
Owner, the entire fifth floor of the 62 East 13th Street portion in the building
known as 835 Broadway/58-62 East 13th Street (the "Building" or "building")
located in the Borough of Manhattan, City of New York, which demised premises is
more particularly shown on the diagram annexed to this Lease as Exhibit "A", for
the term set forth in Article "70" and at the annual rental rate set forth in
Article "71" of this Lease which Tenant agrees to pay in lawful money of the
United States which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment, in equal monthly installments in
advance on the first day of each month during said term, at the office of Owner
or such other place as Owner may designate, without any set off or deduction
whatsoever, except that Tenant shall pay the first _____ monthly installment(s)
on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
1. Rent. Tenant shall pay the rent as above and as hereinafter
provided.
2. Occupancy. Tenant shall use and occupy demised premises for the
purposes set forth in Article "74" hereof provided such use is in accordance
with the certificate of occupancy for the building, if any, and for no other
purpose.
3. Alterations. Tenant shall make no changes in or to the demised
premises of any nature without Owner's prior written consent. Subject to the
prior written consent of Owner not to be unreasonably withheld or delayed, and
to the provisions of this article, Tenant, at Tenant's expense, may make
alterations, installations, additions or improvements which are nonstructural
and which do not affect utility services or plumbing and electrical lines, in or
to the interior of the demised premises using contractors or mechanics first
approved in each instance by Owner not to be unreasonably withheld or delayed.
Tenant shall, at its expense, before making any alterations, additions,
installations or improvements obtain all permits, approval and certificates
required by any governmental or quasi-governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly duplicates of
all such permits, approvals and certificates to Owner. Tenant agrees to carry
and will cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as Owner
may reasonably require. If any mechanic's lien is filed against the demised
premises, or the building of which the same forms a part, for work claimed to
have been done for, or materials furnished to, Tenant, whether or not done
pursuant to this article, the same shall be discharged by Tenant within thirty
days thereafter, at Tenant's expense, by payment or filing the bond required by
law or otherwise. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Owner on Tenant's behalf, shall, upon installation, become the property of Owner
and shall remain upon and be surrendered with the demised premises unless Owner,
by notice to Tenant no later than twenty days prior to the date fixed as the
termination of this lease, elects to relinquish Owner's right thereto and to
have them removed by Tenant, in which event the same shall be removed from the
demised premises by Tenant prior to the expiration of the lease, at Tenant's
expense. Nothing in this Article shall be construed to give Owner title to or to
prevent Tenant's removal of trade fixtures, moveable office furniture and
equipment, but upon removal of any such from the premises or upon removal of
other installations as may be required by Owner, Tenant shall immediately and at
its expense, repair and restore the premises to the condition existing prior to
installation and repair any damage to the demised premises or the building due
to such removal. All property permitted or required to be removed by Tenant at
the end of the term remaining in the premises after Tenant's removal shall be
deemed abandoned and may, at the election of Owner, either be retained as
Owner's property or removed from the premises by Owner, at Tenant's expense.
4. Repairs. Owner shall maintain and repair the exterior of and the
public portions of the building. Tenant shall, throughout the term of this
lease, take good care of the demised premises including the bathrooms and
lavatory facilities (if the demised premises encompass the entire floor of the
building) and the windows and window frames and, the fixtures and appurtenances
therein and at Tenant's sole cost and expense promptly make all repairs thereto
and to the building, whether structural or non-structural in nature, caused by
or resulting from the carelessness, omission, neglect or improper conduct of
Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not
arising from such Tenant conduct or omission, when required by other provisions
of this lease, including Article 6. Tenant shall also repair all damage to the
building and the demised premises caused by the moving of Tenant's fixtures,
furniture or equipment. All the aforesaid repairs shall be of quality or class
equal to the original work or construction. If Tenant fails, after ten days
notice, to proceed with due diligence to make repairs required to be made by
Tenant, the same may be made by the Owner at the expense of Tenant, and the
expenses thereof incurred by Owner shall be collectible, as additional rent,
after rendition of a bill or statement therefor. If the demised premises be or
become infested with vermin, Tenant shall, at its expense, cause the same to be
exterminated. Tenant shall give Owner prompt notice of any defective condition
in any plumbing, heating system or electrical lines located in the demised
premises and following such notice, Owner shall remedy the condition with due
diligence, but at the expense of Tenant, if repairs are necessitated by damage
or injury attributable to Tenant, Tenant's servants, agents, employees, invitees
or licensees as aforesaid. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for a
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. It is specifically
agreed that Tenant shall not be entitled to any set off or reduction of rent by
reason of any failure of Owner to comply with the covenants of this or any other
article of this lease. Tenant agrees that Tenant's sole remedy at law in such
instance will be by way of any action for damages for breach of contract. The
provisions of this Article 4, with respect to the making of repairs shall not
apply in the case of fire or other casualty with regard to which Article 9
hereof shall apply.
5. Window Cleaning. Tenant will not clean nor require, permit, suffer
or allow any window in the demised premises to be cleaned from the outside in
violation of Section 202 of the New York State Labor Law or any other applicable
law or of the Rules of the Board of Standards and Appeals, or of any other Board
or body having or asserting jurisdiction.
6. Requirements of Law, Fire Insurance. Prior to the commencement of
the lease term, if Tenant is then in possession, and at all times thereafter
Tenant shall, at Tenant's sole cost and expense, promptly comply with all
present and future laws, orders and regulations of all state, federal, municipal
and local governments, departments, commissions and boards and any direction of
any public officer pursuant to law, and all orders, rules and regulations of the
New York Board of Fire Underwriters, or the Insurance Services Office, or any
similar body which shall impose any violation, order or duty upon Owner or
Tenant with respect to the demised premises, whether or not arising out of
Tenant's use or manner of use thereof, or, with respect to the building, if
arising out of Tenant's use or manner of use of the demised premises of the
building (including the use permitted under the lease). Except as provided in
Article 30 hereof, nothing herein shall require Tenant to make structural
repairs or alterations unless Tenant has, by its manner of use of the demised
premises or method of operation therein, violated any such laws, ordinances,
orders, rules, regulations or requirements with respect thereto. Tenant shall
not do or
<PAGE> 2
permit any act or thing to be done in or to the demised premises which
is contrary to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time carried by or for the
benefit of Owner. Tenant shall not keep anything in the demised premises except
as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization and other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. If by reason of failure to comply with the foregoing the
fire insurance rate shall, at the beginning of this lease or at any time
thereafter, be higher than it otherwise would be, then Tenant shall reimburse
Owner, as additional rent hereunder, for that portion of all fire insurance
premiums thereafter paid by Owner which shall have been charged because of such
failure by Tenant. In any action or proceeding wherein Owner and Tenant are
parties, a schedule or "make-up" or rate for the building or demised premises
issued by a body making fire insurance rates applicable to said premises shall
be conclusive evidence of the facts therein stated and of the several items and
charges in the fire insurance rates then applicable to said premises. Tenant
shall not place a load upon any floor of the demised premises exceeding the
floor load per square foot area which it was designed to carry and which is
allowed by law. Owner reserves the right to prescribe the weight and position of
all safes, business machines and mechanical equipment. Such installations shall
be placed and maintained by Tenant, at Tenant's expense, in settings sufficient,
in Owner's judgement, to absorb and prevent vibration, noise and annoyance.
7. Subordination. This lease is subject and subordinate to all ground
or underlying leases and to all mortgages which may now or hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall from time to time execute promptly any certificate that Owner may
request.
8. Tenant's Liability Insurance Property Loss, Damage, Indemnity. Owner
or its agents shall not be liable for any damage to property of Tenant or of
others entrusted to employees of the building, nor for loss of or damage to any
property of Tenant by theft or otherwise, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence of Owner, its agents, servants or employees; Owner
or its agents shall not be liable for any damage caused by other tenants or
persons in, upon or about said building or caused by operations in connection of
any private, public or quasi public work. If at any time any windows of the
demised premises are temporarily closed, darkened or bricked up (or permanently
closed, darkened or bricked up, if required by law) for any reason whatsoever
including, but not limited to Owner's own acts, Owner shall not be liable for
any damage Tenant may sustain thereby and Tenant shall not be entitled to any
compensation therefor nor abatement or diminution of rent nor shall the same
release Tenant from its obligations hereunder nor constitute an eviction. Tenant
shall indemnify and save harmless Owner against and from all liabilities,
obligations, damages, penalties, claims, costs and expenses for which Owner
shall not be reimbursed by insurance, including reasonable attorney's fees,
paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents,
contractors, employees, invitees, or licensees, of any covenant or condition of
this lease, or the carelessness, negligence or improper conduct of the Tenant,
Tenant's agents, contractors, employees, invitees or licensees. Tenant's
liability under this lease extends to the acts and omissions of any sub-tenant,
and any agent, contractor, employee, invitee or licensee of any sub-tenant. In
case any action or proceeding is brought against Owner by reason of any such
claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist
or defend such action or proceeding by counsel approved by Owner in writing,
such approval not to be unreasonably withheld.
9. Destruction, Fire and Other Casualty. (a) If the demised premises or
any part thereof shall be damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall continue in full force
and effect except as hereinafter set forth. (b) If the demised premises are
partially damaged or rendered partially unusable by fire or other casualty, the
damages thereto shall be repaired by and at the expense of Owner and the rent
and other items of additional rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent and other items of additional rent as hereinafter expressly provided shall
be proportionately paid up to the time of the casualty and thenceforth shall
cease until the date when the premises shall have been repaired and restored by
Owner (or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within 90 days after
such fire or casualty, or 30 days after adjustment of the insurance claim for
such fire or casualty, whichever is sooner, specifying a date for the expiration
of the lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Owner's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, including Owner's obligation to restore under
subparagraph (b) above, each party shall look first to any insurance in its
favor before making any claim against the other party for recovery for loss or
damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery with respect to
subparagraphs (b), (d) and (e) above, against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The release
and waiver herein referred to shall be deemed to include any loss or damage to
the demised premises and/or to any personal property, equipment, trade fixtures,
goods and merchandise located therein. The foregoing release and waiver shall be
in force only if both releasors' insurance policies contain a clause providing
that such a release or waiver shall not invalidate the insurance. If, and to the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefitting from the waiver shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to waiver of subrogation. Tenant acknowledges
that Owner will not carry insurance on Tenant's furniture and or furnishings or
any fixtures or equipment, improvements, or appurtenances installed for or by
Tenant and agrees that Owner will not be obligated to repair any damage thereto
or replace the same. (f) Tenant hereby waives the provisions of Section 227 of
the Real Property Law and agrees that the provisions of this article shall
govern and control in lieu thereof.
10. Eminent Domain. If the whole or any part of the demised premises
shall be acquired or condemned by Eminent Domain for any public or quasi public
use or purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease. Tenant shall
have the right to make an independent claim to the condemning authority for the
value of Tenant's moving expenses and personal property, trade fixtures and
equipment, provided Tenant is entitled pursuant to the terms of the lease to
remove such property, trade fixtures and equipment at the end of the term and
provided further such claim does not reduce Owner's award.
11. Assignment, Mortgage, Etc. 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, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant or the
majority partnership interest of a partnership Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under-tenant 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 Owner to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
of underletting. See Article #59.
12. Electric Current. Rates and conditions in respect to submetering or
rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
13. Access to Premises. Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the demised premises in any emergency at
any time, and at other reasonable times, to examine the same and to make such
repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to any portion of the building or which Owner may elect to
perform in the premises after Tenant's failure to make repairs or perform any
work which Tenant is obligated to perform under this lease, or for the purpose
of complying with laws, regulations and other directions of governmental
authorities. Tenant shall permit Owner to use and maintain and replace pipes and
conduits in and through the demised premises and to erect new pipes and conduits
therein provided, wherever possible, they are within walls or otherwise
concealed. Owner may, during the progress of any work in the demised premises,
take all necessary materials and equipment into said premises without the same
constituting an eviction nor shall the Tenant be entitled to any abatement of
rent while such work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Throughout the term hereof Owner shall
have the right to enter the demised premises at reasonable hours for the purpose
of showing the same to prospective purchasers or mortgagees of the building, and
during the last six months of the term for the purpose of showing the same to
prospective tenants and may, during said six months period, place upon
<PAGE> 3
the demised premises the usual notices "To Let" and "For Sale" which notices
Tenant shall permit to remain thereon without molestation. If Tenant is not
present to open and permit an entry into the demised premises, Owner or Owner's
agents may enter the same whenever such entry may be necessary or permissible by
master key or forcibly and provided reasonable care is exercised to safeguard
Tenant's property, such entry shall not render Owner or its agents liable
therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom. Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligation hereunder.
See Article #75(A)
14. Vault, Vault Space, Area. 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. Owner 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, Owner 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, if used by Tenant, whether or not specifically leased hereunder.
15. Occupancy. Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy issued for the building of
which the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to Owner's
work, if any. In any event, Owner makes no representation as to the condition of
the premises and Tenant agrees to accept the same subject to violations, whether
or not of record. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business, Tenant shall be responsible
for and shall procure and maintain such license or permit.
16. Bankruptcy. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by sending of a written
notice to Tenant within a reasonable time after the happening of any one or more
of the following events: (1) the commencement of a case in bankruptcy or under
the laws of any state naming Tenant as the debtor; or (2) the making of Tenant
of an assignment or any other arrangement for the benefit of creditors under any
state statute. Neither Tenant nor any person claiming through or under Tenant,
or by reason of any statute or order of court, shall thereafter be entitled to
possession of the premises demised but shall forthwith quit and surrender the
premises. If this lease shall be assigned in accordance with its terms, the
provisions of this Article 16 shall be applicable only to the party then owning
Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the
termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rental reserved hereunder for the unexpired portion of
the term demised and the fair and reasonable rental value of the demised
premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the demised premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right to the Owner to
prove for and obtain as liquidated damages by reason of such termination, 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 the amount
of the different referred to above.
17. Default. (1) If Tenant defaults in fulfilling any of the covenants
of this lease including without limitation the covenants for the payment of rent
or additional rent; or if the demised premises becomes vacant or deserted "or if
this lease be rejected under Section 235 of Title 11 of the U.S. Code
(bankruptcy code);" or if any execution or attachment shall be issued against
Tenant or any of Tenant's property whereupon the demised premises shall be taken
or occupied by someone other than Tenant; or if Tenant shall make default with
respect to any other lease between Owner and Tenant; or if Tenant shall have
failed, after ten (10) days written notice, to redeposit with Owner any portion
of the security deposited hereunder which Owner has applied to the payment of
any rent and additional rent due and payable hereunder or failed to move into or
take possession of the premises within thirty (30) days after the commencement
of the term of this lease, of which fact Owner shall be the sole judge, such
judgment to be made in good faith, then in any one or more of such events, upon
Owner serving a written fifteen (15) days notice upon Tenant specifying the
nature of said default and upon the expiration of said fifteen (15) days, if
Tenant shall have failed to comply with or remedy such default, or if the said
default or omission complained of shall be of a nature that the same cannot be
completely cured or remedied within said fifteen (15) day period, and if Tenant
shall not have diligently commenced during such default within such fifteen (15)
day period, and shall not thereafter with reasonable diligence and in good
faith, proceed to remedy or cure such default, then Owner may serve a written
ten (10) days' notice of cancellation of this lease upon Tenant, and upon the
expiration of said ten (10) days this lease and the term thereunder shall end
and expire as fully and completely as if the expiration of such ten (10) day
period were the day herein definitely fixed for the end and expiration of this
lease and the term thereof and Tenant shall then quit and surrender the demised
premises to Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant shall make default
in the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
18. Remedies of Owner and Waiver of Redemption. In case of any such
default, re-entry, expiration and/or dispossess by summary proceedings or
otherwise, (a) the rent, and additional rent, shall become due thereupon and be
paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner
may re-let the premises or any part or parts thereof, either in the name of
Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a higher
rental than that in this lease, (c) Tenant or the legal representatives of
Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and or covenanted to be paid and the net
amount, if any, of the rents collected on account of the subsequent lease or
leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term of this lease. The failure of
Owner to re-let the premises or any part or parts thereof shall not release or
affect Tenant's liability for damages. In computing such liquidated damages
there shall be added to the said deficiency such expenses as Owner may actually
incur in connection with re-letting, such as legal expenses, reasonable
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for re-letting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re-rental may, at
Owner's option, make such alterations, repairs, replacements, and/or decorations
in the demised premises as Owner, in Owner's sole judgment, considers advisable
and necessary for the purpose of re-letting the demised premises, and the making
of such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid. Owner
shall in no event be liable in any way whatsoever for failure to re-let, the
demised premises, or in the event that the demised premises are re-let, for
failure to collect the rent thereof under such re-letting, and in no event shall
Tenant be entitled to receive any excess, if any, of such net rents collected
over the sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws.
19. Fees and Expenses. If Tenant shall default in the observance or
performance of any term or covenant on Tenant's part to be observed or performed
under or by virtue of any of the terms or provisions in any article of this
lease, after notice if required and upon expiration of any applicable grace
period if any, (except in an emergency), then, unless otherwise provided
elsewhere in this lease, Owner may immediately or at any time thereafter and
without notice perform the obligation of Tenant hereunder. If Owner, in
connection with the foregoing or in connection with any default by Tenant in the
covenant to pay rent hereunder, makes any expenditures or incurs any obligations
for the payment of money, including but not limited to reasonable attorney's
fees, in instituting, prosecuting or defending any action or proceedings, and
prevails in any such action or proceeding, then Tenant will reimburse Owner for
such sums so paid or obligations actually incurred with interest and costs. The
foregoing expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within ten (10)
days of rendition of any bill or statement to Tenant therefor. If Tenant's lease
term shall have expired at the time of making of such expenditures or incurring
of such obligations, such sums shall be recoverable by Owner as damages.
20. Building Alterations and Management. Owner shall have the right at
any time without the same constituting an eviction and without incurring
liability to Tenant therefor to change the arrangement and or location of public
entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets
or other public parts of the building and to change the name, number or
designation by which the building may be known. There shall be no allowance to
Tenant for diminution of rental value and no liability on the part of Owner by
reason of inconvenience, annoyance or injury to business arising from Owner or
other Tenant making any repairs in the building or any such alterations,
additions and improvements. Furthermore, Tenant shall not have any claim against
Owner by reason of Owner's imposition of any controls of the manner of access to
the building by Tenant's social or business visitors as the Owner may deem
necessary for the security of the building and its occupants.
<PAGE> 4
21. No Representations by Owner. Neither Owner nor Owner's agents have
made any representations or promises with respect to the physical condition of
the building, the land upon which it is erected or the demised premises, the
rents, leases, expenses of operation or any other matter or thing affecting or
related to the demised premises or the building except as herein expressly set
forth and no rights, easements or licenses are acquired by Tenant by implication
or otherwise except as expressly set forth in the provisions of this lease.
Tenant has inspected the building and the demised premises and is thoroughly
acquainted with their condition and agrees to take the same "as is" on the date
possession is tendered and acknowledges that the taking of possession of the
demised premises by Tenant shall be conclusive evidence that the said premises
and the building of which the same form a part were in good and satisfactory
condition at the time such possession was so taken, except as to latent defects.
All understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
22. End of Term. Upon the expiration or other termination of the term
of this lease, Tenant shall quit and surrender to Owner the demised premises,
broom clean, in good order and condition, ordinary wear and damages which Tenant
is not required to repair as provided elsewhere in this lease excepted, and
Tenant shall remove all its property from the demised premises. Tenant's
obligation to observe or perform this covenant shall survive the expiration of
other termination of this lease. If the last day of the term of this Lease or
any renewal thereof, falls on Sunday, this lease shall expire at noon on the
preceding Saturday unless it be a legal holiday in which case it shall expire at
noon on the preceding business day. See Article #60.
23. Quiet Enjoyment. See Article #42.
24. Failure to Give Possession. If Owner is unable to give possession
of the demised premises on the date of the commencement of the term hereof,
because of the holding-over or retention of possession of any tenant,
undertenant or occupants or if the demised premises are located in a building
being constructed, because such building has not been sufficiently completed to
make the premises ready for occupancy or because of the fact that a certificate
of occupancy has not been procured or if Owner has not completed any work
required to be performed by Owner, or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the rent
payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession or complete any work required) until
after Owner shall have given Tenant notice that Owner is able to deliver
possession in the condition required by this lease. If permission is given to
Tenant to enter into the possession of the demised premises or to occupy
premises other than the demised premises prior to the date specified as the
commencement of the term of this lease, Tenant covenants and agrees that such
possession and/or occupancy shall be deemed to be under all the terms,
covenants, conditions and provisions of this lease, except the obligation to pay
the fixed annual rent set forth in page one of this lease. The provisions of
this article are intended to constitute "an express provision to the contrary"
within the meaning of Section 223-a of the New York Real Property Law.
25. No Waiver. The failure of Owner to seek redress for violation of,
or to insist upon the strict performance of any covenant or condition of this
lease or of any of the Rules or Regulations, set forth or hereafter adopted by
Owner, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Owner of rent with knowledge of the breach of any
covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner unless such
waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement of any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner's right to recover the balance of such rent
or pursue any other remedy in this lease provided. All checks tendered to Owner
as and for the rent of the demised premises shall be deemed payments for the
account of Tenant. Acceptance by Owner of rent from anyone other than Tenant
shall not be deemed to operate as an attornment to Owner by the payor of such
rent or as a consent by Owner to an assignment or subletting by Tenant of the
demised premises to such payor, or as a modification of the provisions of this
lease. No act or thing done by Owner or Owner's agents during the term hereby
demised shall be deemed an acceptance of a surrender of said premises and no
agreement to accept such surrender shall be valid unless in writing signed by
Owner. No employee of Owner or Owner's agent shall have any power to accept the
keys of said premises prior to the termination of the lease and the delivery of
keys to any such agent or employee shall not operate as a termination of the
lease or a surrender of the premises.
26. Waiver of Trial by Jury. It is mutually agreed by and between Owner
and Tenant that the respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any proceeding or
action for possession including a summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4
except for statutory mandatory counterclaims.
27. Inability to Perform. This Lease and the obligation of Tenant to
pay rent hereunder and perform all of the other covenants and agreements
hereunder on part of Tenant to be performed shall in no wise be affected,
impaired or excused because Owner is unable to fulfill any of its obligations
under this lease or to supply or is delayed in supplying any service expressly
or impliedly to be supplied or is unable to make, or is delayed in making any
repair, additions, alterations or decorations or is unable to supply or is
delayed in supplying any equipment, fixtures or other materials if Owner is
prevented or delayed from doing so by reason of strike or labor troubles or any
cause whatsoever beyond Owner's reasonable sole control including, but not
limited to, government preemption or restrictions or by reason of any rule,
order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions which have been or are affected, either
directly or indirectly, by war or other emergency.
28. Bills and Notices. Except as otherwise in this lease provided, a
bill statement, notice or communication which Owner may desire or be required to
give to Tenant, shall be deemed sufficiently give or rendered if, in writing,
delivered to Tenant personally or sent by registered or certified mail addressed
to Tenant at the building of which the demised premises form a part or at the
last known residence address or business address of Tenant or left at any of the
aforesaid premises addressed to Tenant, and the time of the rendition of such
bill or statement and of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant, mailed, or left at
the premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
29. Water Charges. If Tenant requires, uses or consumes water for any
purpose in addition to ordinary lavatory purposes (of which fact Tenant
constitutes Owner to be the sole judge) Owner may install a water meter and
thereby measure Tenant's water consumption for all purposes. Tenant shall pay
Owner for the cost of the meter and the cost of the installation, thereof and
throughout the duration of Tenant's occupancy Tenant shall keep said meter and
installation equipment in good working order and repair at Tenant's own cost and
expense in default of which Owner may cause such meter and equipment to be
replaced or repaired and collect the cost thereof from Tenant, as additional
rent. Tenant agrees to pay for water consumed, as shown on said meter as and
when bills are rendered, and on default in making such payment Owner may pay
such charges and collect the same from Tenant, as additional rent. Tenant
covenants and agrees to pay, as additional rent, the sewer rent, charge or any
other tax, rent, levy or charge which now or hereafter is assessed, imposed or a
lien upon the demised premises or the realty of which they are part pursuant to
law, order or regulation made or issued in connection with the use, consumption,
maintenance or supply of water, water system or sewage or sewage connection or
system. If the building or the demised premises or any part thereof is supplied
with water through a meter through which water is also supplied to other
premises Tenant shall pay to Owner, as additional rent, on the first day
of each month, 0% ($ zero) of the total meter charges as Tenant's portion.
Independently of and in addition to any of the remedies reserved to Owner
hereinabove or elsewhere in this lease, Owner may sue for and collect any monies
to be paid by Tenant or paid by Owner for any of the reasons or purposes
hereinabove set forth.
30. Sprinklers. Anything elsewhere in this lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters or the New York Fire
Insurance Exchange or any bureau, department or official of the federal, state
or city government recommend or require the installation of a sprinkler system
or that any changes, modifications, alterations, or additional sprinkler heads
or other equipment be made or supplied in an existing sprinkler system by reason
of Tenant's business, or the location of partitions, trade fixtures, or other
contents of the demised premises, Tenant shall, at Tenant's expense, promptly
make such sprinkler system installations, changes, modifications, alterations,
and supply additional sprinkler heads or other equipment as required whether the
work involved shall be structural or non-structural in nature.
31. Elevators, Heat, Cleaning. As long as Tenant is not in default
under any the covenants of this lease beyond the applicable grade period
provided in this lease for the curing of such defaults, Owner shall: (a) provide
necessary passenger elevator facilities on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is
provided, same shall be provided only on regular business days Monday through
Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon
and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services
supplied by Owner to the demised premises, when and as required by law, on
business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m.
<PAGE> 5
to 1 p.m.; (d) clean the public halls and public portions of the building which
are used in common by all tenants. Tenant shall, at Tenant's expense, keep the
demised premises, including the windows, clean and in order, to the reasonable
satisfaction of Owner, and for that purpose shall employ the person or persons,
or corporation approved by Owner. Tenant shall pay to Owner the cost of removal
of any of Tenant's refuse and rubbish from the building. Bills for the same
shall be rendered by Owner to Tenant at such time as Owner may elect and shall
be due and payable hereunder, and the amount of such bills shall be deemed to
be, and be paid as, additional rent. Tenant shall, however, have the option of
independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the proper cooperation of the building. Owner reserves the right
to stop service of the heating, elevator, plumbing and electric systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Owner desirable or necessary to
be made, until said repairs, alterations, replacements or improvements shall
have been completed. If the building of which the demised premises are a part
supplies manually operated elevator service, Owner may proceed diligently with
alterations necessary to substitute automatic control elevator service without
in any way affecting the obligations of Tenant hereunder.
32. Security. Tenant has deposited with Owner the sum of $6,800 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,
Owner may use, apply or retain the whole or any part of the security so
deposited 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 Owner may
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 in the reletting of the premises, whether
such damages of deficiency accrued before or after summary proceedings or other
re-entry by Owner. 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 after the date fixed as the end of the
Lease and after delivery of entire possession of the demised premises to Owner.
In the event of a sale of the land and building or leasing of the building, of
which the demised premises form a part, Owner shall transfer the security to the
vendee or lessee and owner shall thereupon be released by Tenant from all
liability for the return of such security; and Tenant agrees to look to the new
Owner solely for the return of said and it is agreed that the provisions hereof
shall apply to every transfer or assignment made of the security to a new Owner.
Tenant further covenants that it will not assign or encumber or attempt to
assign or encumber the monies deposited herein as security and that neither
Owner nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.
33. Captions. The Captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
lease nor the intent of any provision thereof.
34. Definitions. The term "Owner" as used in this lease means only the
owner of the fee or of the leasehold of the building, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised premises form
a part, so that in the event of any sale or sales of said land and building or
of said lease, or in the event of a lease of said building, or of the land and
building, the said Owner shall be and hereby is entirely freed and relieved of
all covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "rent" includes the annual rental rate whether so expressed or
expressed in monthly installments, and "additional rent." "Additional rent"
means all sums which shall be due to Owner from Tenant under this lease, in
addition to the annual rental rate. The term "business days" as used in this
lease, shall exclude Saturdays, Sundays and all days observed by the State or
Federal Government as legal holidays and those designated as holidays by the
applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to HVAC service. Wherever
it is expressly provided in this lease that consent shall not be unreasonably
withheld, such consent shall not be unreasonably delayed.
35. Adjacent Excavation - Shoring. If an excavation 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
said person shall deem necessary to preserve the wall or the building of which
demised premises from a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
36. Rules and Regulations. Tenant and Tenant's servants, employees,
agents, visitors, and licensees shall observe faithfully, and comply strictly
with, the Rules and Regulations annexed hereto and such other and further
reasonable Rules and Regulations as Owner or Owner's agents may from time to
time adopt. Notice of any additional rules or regulations shall be given in such
manner as Owner may elect. In case Tenant disputes the reasonableness of any
additional Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within fifteen
(15) days after the giving of notice thereof. Nothing in this lease contained
shall be construed to impose upon Owner any duty or obligation to enforce the
Rules and Regulations or terms, covenants or conditions in any other lease, as
against any other tenant and Owner shall not be liable to Tenant for violation
of the same by any other tenant, its servants, employees, agents, visitors or
licensees.
37. Glass. Owner shall replace, at the expense of the Tenant, any and
all plate and other glass damaged or broken from any cause whatsoever in and
about the demised premises. Owner may insure, and keep insured, at Tenant's
expense, all plate and other glass in the demised premises for and in the name
of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant
at such times as Owner may elect, and shall be due from, and payable by, Tenant
when rendered, and the amount thereof shall be deemed to be, and be paid, as
additional rent.
38. Estoppel Certificate. See Article #53.
39. Directory of Board Listing. If, at the request of and as
accommodation to Tenant, Owner shall place upon the directory board in the lobby
of the building, one or more names of persons other than Tenant, such directory
board listing shall not be construed as the consent by Owner to an assignment or
subletting by Tenant to such person or persons.
40. Successors and Assigns. The covenants, conditions and agreements
contained in this lease shall bind and inure to the benefit of Owner and Tenant
and their respective heirs, distributees, executors, administrators, successors,
and except as otherwise provided in this lease, their assigns. Tenant shall look
only to Owner's estate and interest in the land and building for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) against Owner in the event of any default by Owner hereunder,
and no other property or assets of such Owner (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 Owner and
Tenant hereunder, or Tenant's use and occupancy of the demised premises.
SEE RIDER ARTICLES #41 TO #76 ATTACHED HERETO AND MADE A PART HEREOF.
In Witness Whereof, Owner and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
Witness for Owner: BROADWAY - 13TH ASSOCIATES, L.P.
By: Columbus Broadway Realty Corp.,
- -------------------------------
General Partner
---------------------------------------
By: /s/ [illegible signature]
---------------------------------------
Witness for Tenant:
MEDSITE PUBLISHING, INC.
- -------------------------------
By: /s/ Sundeep Bhan
---------------------------------------
Sundeep Bhan, President
- ------------------------------- ---------------------------------------
<PAGE> 6
RIDER ATTACHED TO AND FORMING A PART OF LEASE DATED
AS OF NOVEMBER, 1998, BETWEEN BROADWAY - 13TH
ASSOCIATES, L.P., AS OWNER, AND MEDSITE PUBLISHING
INC., TENANT, COVERING THE FIFTH FLOOR OF THE 62 EAST
13TH STREET PORTION OF THE BUILDING KNOWN AS 835
BROADWAY/58-62 EAST 13TH STREET, NEW YORK, NEW YORK
41. Binding Clause. This Lease has been prepared and submitted to Tenant for
signature upon the express understanding that it shall not be binding on Owner
until executed and delivered by Owner.
42. Quiet Enjoyment. Owner covenants and agrees with Tenant that upon Tenant
paying the rent herein reserved and upon Tenant performing all covenants and
conditions herein contained on Tenant's part to be observed and performed,
Tenant may and shall peacefully and quietly have, hold and enjoy the premises
herein demised for the term aforesaid, subject to, nevertheless, the terms and
conditions of this Lease, including, but not limited to Article "34" and Article
"43", provided, however, that no eviction of Tenant by reason of paramount
title, the termination of any ground or underlying lease to which this Lease is
or may be subject and subordinate, the foreclosure of any mortgage which may now
or hereafter affect such ground or underlying lease or the real property of
which the demised premises forms a part and to which this Lease is or may be
subject and subordinate, whether such termination or foreclosure is by operation
of law, by agreement or otherwise, shall be construed as a breach of this
covenant, nor shall any action by reason thereof be brought against the Owner
and provided further that this covenant shall bind and be enforceable against
the Owner only so long as Owner is in possession and is collecting rents from
Tenant, but not thereafter. In addition, any mortgagee under any mortgage to
which this Lease is subject and any lessor under any ground or underlying lease
to which this Lease is subject may elect that this Lease shall have priority
over its mortgage or ground or underlying lease whether this Lease is dated
prior to or subsequent to the date of said mortgage or ground or underlying
lease.
43. Owner's Liability. Tenant agrees that the liability of Owner under this
Lease and all matters pertaining to or arising out of the tenancy and the use
and occupancy of the demised premises shall be limited to Owner's interest in
the building and the Owner's interest in the rents, income and other assets
relating to the building and its operation and no other property or assets of
Owner 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 Owner and Tenant hereunder or Tenant's use and occupancy of the
demised premises, and in no event shall Tenant make any claim against or seek to
impose any personal liability upon any individual, general or limited partner of
any partnership, or principal of any firm or corporation that may now be or
hereafter become the Owner.
44. Additional Rent. In addition to the annual rental rates payable under this
Lease, all other charges, sums and amounts payable by Tenant under this Lease
shall be deemed to be additional
<PAGE> 7
rent ("Additional Rent") hereunder, whether or not the same be designated as
such, and shall be due and payable within ten (10) days after demand (or such
earlier or later time as may be elsewhere specifically provided in this Lease),
and Owner shall have the same rights and remedies upon Tenant's failure to pay
any Additional Rent as for the non-payment of the annual rental rates reserved
under this Lease.
45. Utilities and Other Services. Except as herein specifically provided, during
the term of this Lease Owner shall not be required to furnish or supply any
services to Tenant and/or the demised premises including, without limitation,
electricity, air conditioning, gas, hot or cold water. Any such services shall
be furnished by Tenant at Tenant's sole cost and expense. Tenant shall purchase
its utility requirements directly from the utility company supplying the same
and shall pay for water as additional rent in accordance with the provisions of
Article "29" hereof.
46. "As Is". Tenant acknowledges that it has examined the demised premises and
accepts same in its present condition "AS IS". Tenant warrants and represents
that there are no express or implied warranties, representations or agreements
on the part of Owner with reference to the condition or usability of the demised
premises for the purposes for which Tenant intends to use same. Owner shall not
be required to repair, renovate, restore or redecorate the demised premises at
any time during the term of this Lease, except as may otherwise be specifically
herein provided, and Tenant shall do all work necessary or required by Tenant to
open its business at the demised premises at its sole cost and expense, subject
to and in accordance with the provisions of this Lease.
47. Diagram. Tenant acknowledges that it has been informed by Owner that the
diagram, if any, attached to this Lease is solely for the purpose of identifying
the demised premises and Owner has made no representation and is unwilling to
make any representation and nothing in this Lease shall be deemed or construed
to be a representation or covenant as to the dimensions of and/or the square
foot area contained in the demised premises.
48. Broker. Tenant warrants and represents to Owner that it has dealt with no
broker, real estate salesman, or other similar person, firm or corporation in
connection with the within Lease other than Murray Hill Properties Corp. (the
"Broker"). The Broker shall not be deemed a third party beneficiary of this
Lease. Tenant shall indemnify and hold Owner harmless of and from any and all
claims, liabilities and/or damages which are based upon a claim by any other
broker, person, firm or corporation for brokerage commissions and/or other
compensation by reason of having dealt with Tenant.
49. Remedy Limitation. With respect to any provision of this Lease which
provides, in effect, that Owner shall not unreasonably withhold or unreasonably
delay any consent or any 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 setoff, counterclaim
or defense based upon any claim or assertion by Tenant
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that Owner has unreasonably withheld or unreasonably delayed any consent or
approval. Tenant's sole remedy shall be an action or proceeding to enforce any
such provision, or for specific performance, injunction or declaratory judgment
and in any such action or proceeding, if Tenant substantially prevails, Tenant
shall be entitled to reimbursement for its legal fees and costs in accordance
with Article 50(B) of this Lease.
50. Fees and Expenses.
(A) In the event that, in connection with any default, request, action
or inaction by Tenant with regard to any of the terms, covenants or conditions
of this Lease, Owner makes any expenditure or incurs any obligation for the
payment of money (excluding, however, attorney's fees and expenses in
instituting prosecuting or defending any action or proceeding against Tenant),
each such expenditure so made or obligation so incurred by Owner in connection
with such default, request, action or inaction, with interest and costs, shall
be deemed to be additional rent hereunder and Tenant shall pay the amount
thereof to Owner within ten (10) days after rendition of any bill or statement
to Tenant therefore.
(B) If either Owner or Tenant shall commence any action or proceeding
to enforce this Lease, the party which substantially prevails in such action or
proceeding shall be reimbursed upon demand by the other party for the reasonable
attorneys, fees and other costs incurred in connection with such action or
proceeding.
(C) The provisions of this Article shall apply to expenditures made and
obligations incurred by the parties during and after the term of this Lease and
the obligations of the parties hereunder shall survive the expiration or
termination of the term of this Lease.
51. Late Charges. In the event any rent and/or Additional Rent required under
the provisions of this Lease shall not be paid within ten (10) days after it is
due, Tenant shall pay to Owner a sum equal to THREE ($.03) CENTS for each and
every dollar of rent and/or Additional Rent so overdue ("Late Charges"). Late
Charges shall be immediately due and payable. Late Charges are not payable as a
penalty, but are imposed to partially defray Owner's costs in connection with
the late payment of overdue rent and/or Additional Rent. It is expressly
acknowledged and agreed that nothing herein contained shall be deemed or
construed as permitting or allowing Tenant to pay any rent and/or Additional
Rent at a time other than when it shall be required to be paid pursuant to the
provisions of this Lease. The acceptance of the Late Charge referred to in this
Article shall not in any manner limit or diminish the enforcement of Owner's
rights contained elsewhere in this Lease.
In addition, in the event Tenant shall default (i) in the timely
payment of rent and/or Additional Rent for which late charges are applicable,
and any such default shall continue or be repeated for two (2) consecutive
months, or for a total of four (4) months in any period of twelve (12) months,
or (ii) in performance of any other particular covenant of this Lease more than
six (6) times in any period of twelve (12) months (with respect to which Owner
shall have given one or more default notices), then, notwithstanding that such
defaults shall have each been cured within the period provided therefor in this
Lease, any further similar default shall be conclusively
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deemed to be deliberate and Owner may serve a written seven (7) days' notice of
cancellation of this Lease upon Tenant and upon the expiration of said seven (7)
days, this Lease and the term hereunder shall end and expire as fully and
completely as if the expiration of such seven (7) day period were the day herein
definitely fixed for the end and expiration of this Lease and the term hereof
and Tenant shall then quit and surrender the demised premises to Owner, but
shall remain liable as provided in this Lease. Except for the notice referred to
in (ii) above and the notice of cancellation to be served in accordance with
this paragraph, Owner shall not be required to serve upon Tenant any notice of
such deliberate default (whether pursuant to Article "17" hereof or otherwise)
nor to afford to Tenant any opportunity to cure such deliberate default.
52. No Attornment. All checks tendered to Owner as and for the rent and/or
additional rent required hereunder shall be deemed payments for the account of
the Tenant. Acceptance by the Owner of rent and/or additional rent from anyone
other than the Tenant shall not be deemed to operate as an attornment to the
Owner by the payor of such rent and/or additional rent or as a consent by the
Owner to an assignment of this Lease or subletting by the Tenant of the demised
premises to such payor, or as a modification of any of the provisions of this
Lease.
53. Tenant's Certificate. Tenant shall, without charge at any time and from time
to time, within ten (10) days after request by Owner, certify by written
instrument, duly executed, acknowledged and delivered, to Owner or any person,
firm or corporation specified by Owner:
(A) that this Lease is unmodified and in full force and effect (or, if
there has been modification, that the same is in full force and effect as
modified and stating the modifications);
(B) whether or not there are then any existing alleged setoffs or
defenses against the enforcement by Owner of any of the agreements, terms,
covenants or conditions upon the part of Tenant to be performed or complied with
under this Lease (and, if so, specifying the same);
(C) the date, if any, to which the rental, Additional Rent and other
charges hereunder have been paid in advance;
(D) the respective dates upon which the Lease commenced, the date upon
which the Lease shall expire, and the date upon which the Tenant's obligation to
pay annual rent commenced; and
(E) such other items as any mortgagee or prospective purchaser or
mortgagee may reasonably request.
54. Condition of Premises. Tenant covenants and agrees to maintain the demised
premises in a condition of proper cleanliness, orderliness and state of
attractive appearance at all times and said premises shall also be maintained in
keeping with the standards of the building of which the demised premises forms a
part. Tenant further covenants and agrees, at its own cost and expense, to use
all reasonable diligence in accordance with the best prevailing methods for the
prevention and extermination of vermin, rats and mice in the demised premises.
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55. Permits, Licenses, Etc. Tenant shall, at its own cost and expense, obtain
any and all permits, licenses and/or certificates, of whatsoever kind or nature,
from any and all authorities having jurisdiction over the demised premises,
necessary or required for the occupation and use of the demised premises as
provided for in this Lease and shall comply with such permits, licenses and/or
certificates throughout the term of this Lease.
56. Insurance.
Tenant agrees that it will, at its own cost and expense, take out and
maintain in force at all times while this Lease is in effect, for the benefit of
Owner, Owner's managing agent (if any) and Tenant, and such other parties in
interest, as their respective interests may appear, plate glass insurance and
public liability insurance with a limit of not less than $1,000,000 in the case
of injury or death to one or more than one person in any one occurrence and with
limits of not less than $500,000 in the case of property damage. The originals
of such policies or certificates evidencing coverage of this insurance shall be
delivered to the Owner on or prior to the date Tenant first takes occupancy of
the demised premises. All such policies shall require ten (10) days' notice by
certified mail to Owner of any cancellation or change affecting the coverage or
protection of Owner thereunder.
The Tenant shall promptly pay the premiums for such insurance and, upon
request of Owner, deliver to the Owner, within a reasonable time, duplicate
receipts evidencing payments thereof. All premiums and charges for all of said
policies shall be paid by the Tenant and if the Tenant shall fail to make any
such payment when due, or fail to carry any such policy, the Owner may, but
shall not be obligated to, make such payment or carry such policy, and the
amount paid by the Owner, with interest thereon at two (2%) percent over the
then prime rate published in the Wall Street Journal or, if not then being
published, at the prime or preferred rate announced by the bank in which Owner's
checking account is maintained, shall be repaid to the Owner by the Tenant on
demand. All such amounts so repayable together with such interest shall be
considered as additional rent payable hereunder, for the collection of which the
Owner shall have all of the remedies provided in the Lease or by law provided
for the collection of rent. Payment by the Owner of any such premium or the
carrying by the Owner of any such policy shall not be deemed a waiver, or
release the default of the Tenant with respect thereof.
The Tenant shall not violate or permit to be violated any of the
conditions or provisions of any policy and shall so perform and satisfy the
requirements of the companies writing such policies, that at all times companies
of good standing satisfactory to the Owner shall be willing to write and/or
continue such insurance.
57. Repairs. Notwithstanding anything to the contrary contained in this Lease
(except for the provisions of Article "9" hereof), Tenant shall at Tenant's sole
cost and expense promptly make all structural and non-structural repairs to any
alterations, installations and/or improvements made by Tenant in or to the
demised premises and to the fixtures and equipment contained in the demised
premises, whether ordinary or extraordinary, foreseen or unforeseen.
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58. Additional Re: Article "9". Supplementing the provisions of Article "9"
hereof, Owner shall not be obligated to commence any repairs or restorations to
the demised premises as required thereunder unless and until Owner has received
the proceeds of all fire insurance policies affecting the building of which the
demised premises forms a part.
59. Additional Re: Article "11".
Supplementing the provisions of Article "11" hereof,
(A) The transfer or change of ownership of a majority of the issued and
outstanding capital stock of any corporate tenant or of the proprietary interest
of any partnership tenant, however accomplished, and whether in a single
transaction or in a series of related or unrelated transactions, and whether by
means of an increase in the number of issued and/or outstanding shares of
capital stock and/or the creation of one or more additional classes of capital
stock of any corporate tenant or by the addition of one or more partners to any
partnership tenant, or in any other manner, with the result that at least
fifty-one (51%) percent of the beneficial interest and/or record ownership in
and to such tenant shall no longer be held by the beneficial and/or record
owners thereof as of the date of this Lease, or the date on which such
corporation or partnership shall become the tenant hereunder (whichever is
later), shall be deemed to be an assignment of this Lease.
(B) Upon request of Owner, Tenant shall provide Owner, from time to
time, with a certification or affidavit executed by a principal officer of
Tenant (or if Tenant is a partnership, by a general partner who owns a
substantial portion of Tenant) setting forth the beneficial and record holders
(and the amount held by each of them) of the entire issued and outstanding
capital stock of any corporate tenant or the entire proprietary interest of any
partnership tenant, as of any date or dates that Owner may from time to time
request. The certification shall also contain such other information as Owner
shall reasonably request in order to enable Owner to determine whether a
transfer of a type referred to in paragraph (A) hereof shall have occurred.
60. Additional Re: Article "22". Supplementing the provisions of Article 22
hereof, if the demised premises are not surrendered and vacated as and at the
time required by this Lease (time being of the essence), Tenant shall be liable
to Owner for (a) all losses and damages which Owner may actually incur or
sustain by reason thereof but not punitive damages), including without
limitation, attorneys' fees, and Tenant shall indemnify Owner against all claims
made by any succeeding tenants against Owner or otherwise arising out of or
resulting from the failure of Tenant timely to surrender and vacate the demised
premises in accordance with the provisions of this Lease, and (b) per diem use
and occupancy in respect of the demised premises equal to two (2) times the
annual rental rate and Additional Rent payable hereunder for the last year of
the term of this Lease (which amount Owner and Tenant presently agree is the
minimum to which Owner would be entitled and is presently contemplated by them
as being fair and reasonable under such circumstances and not a penalty). In no
event shall any provision hereof be construed as permitting Tenant to hold over
in possession of the demised premises after expiration, cancellation or
termination of the term hereof.
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61. Hazardous Materials. Tenant shall keep the demised premises free of all
Hazardous Materials (hereinafter defined) and the demised premises shall not be
used to generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, process or in any manner deal with Hazardous Materials.
Tenant covenants and agrees that it shall not cause or permit, as a result of
any intentional or unintentional act or omission on the part of Tenant, its
agents and invitees, the installation of Hazardous Materials in the demised
premises and/or in the building or suffer the presence of Hazardous Materials on
or in the demised premises and/or the building. Tenant shall comply and require
compliance by its agents and invitees, with all applicable federal, state and
local laws, ordinances, rules and regulations with respect to Hazardous
Materials and shall keep the demised premises free and clear of any liens
imposed pursuant to such laws, ordinances, rules and regulations. In event that
Tenant receives any notice or advice from any governmental agency, any other
tenant or other occupant of the demised premises with regard to Hazardous
Materials on, in, from or affecting the demised premises and/or building, Tenant
shall immediately notify Owner and, if requested by Owner, such notice shall
also be sent, in the manner directed by Owner, to any mortgagee of Owner.
For the purposes of this Article, the term "Hazardous Materials" shall
mean and include, among other things, any flammables, explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic substances,
or related or similar materials, asbestos or any material containing asbestos,
or any other substance or material as defined as "hazardous" or "toxic" by any
federal, state or local environmental law, ordinance, rule or regulation,
including, among other things, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et
seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Section
1801, et seq.), the Resource Conservation and Recovery Act, as amended (42
U.S.C. Section 6901, et seq.), or in the regulations adopted and publications
promulgated pursuant thereto or any other material generally considered to be
hazardous.
62. Exterior Limitations. Tenant shall not place or allow to be placed any
personal property of any kind or nature, including but not limited to stands,
booths or show cases, on the door steps, in the lobby, or on the outside walls
of the demised premises. Owner has not conveyed to Tenant any rights in or to
the outer side of the walls of the demised premises or to the walls of the lobby
or any other part of the building, and Tenant shall not display or erect any
lettering, signs, advertisements, awnings or projections thereon without the
prior written consent of Owner.
63. Waste Removal, Etc. Tenant shall, at its own cost and expense, promptly
dispose of all garbage, ashes and waste arising from the conduct of its business
in the demised premises at such times and in such manner so as to avoid any
obnoxious or offensive smells or odors therefrom or otherwise interfering with
the comfort and quiet enjoyment of the other occupants of the building of which
the demised premises forms a part. Tenant further covenants and agrees, at the
Tenant's own cost and expense, to keep the drain waste and connections with
mains, emanating from the demised premises, free from obstruction to the
reasonable satisfaction of the Owner, its agents and all authorities having
jurisdiction thereof.
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64. Manner of Doing Business.
(A) In no event will the demised premises or any portion thereof be
used for a discount operation, clearance center or other highly promotional type
of retail operation. No "clearance sales" or "fire sales" or "auction sales" or
"going out of business sales" or "inventory sales" or other highly promotional
sales will be conducted on, in or from the demised premises.
(B) Tenant shall not affix any sign(s) or other promotional material(s)
to window(s) or door(s) at the demised premises or in the vicinity of any
window(s) or door(s) without the prior written approval of Owner in each
instance. In the event Owner approves any sign (or other promotional material),
such sign (or other promotional material) must be professionally prepared and
must be neat, clean, in good taste and otherwise in keeping with the provisions
of this Article and the other relevant provisions of this Lease. In no event
shall any sign, promotional material, or any lettering, numbering, picture or
image be affixed, painted, written or otherwise created directly on any window
or door. It is specifically acknowledged and agreed that, supplementing the
other provisions of this Lease, the exterior and interior display of any and all
items at the demised premises shall be consistent with the manner of display of
similar items presently utilized by other first class operations of the same
nature.
65. INTENTIONALLY DELETED.
66. Pornographic Uses Prohibited. Tenant agrees that the value of the demised
premises and the reputation of the Owner will be seriously injured if the
demised premises are used for any obscene or pornographic purposes or any sort
of commercial sex establishment. Tenant agrees that Tenant will not bring or
permit any obscene or pornographic material on the demised premises, and shall
not permit or conduct any obscene, nude, or semi-nude live performances on the
demised premises, nor permit use of the demised premises for nude modeling, rap
sessions, or as a so-called rubber goods shop, or as a sex club of any sort, or
as a "massage parlor." Tenant agrees further that Tenant will not permit any of
these uses by any sublessee or assignee of the demised premises. This Article
shall directly bind any successors in interest to the Tenant. Tenant agrees that
if at any time Tenant violates any of the provisions of this Article, such
violation shall be deemed a breach of a substantial obligation of the terms of
this Lease and objectionable conduct. Pornographic material is defined for
purposes of this Article as any written or pictorial matter with prurient appeal
or any object or instrument that is primarily concerned with lewd or prurient
sexual activity. Obscene material is defined here as it is in New York Penal Law
Section 235.00.
67. Real Estate Tax Escalations. The rent payable by Tenant during the term of
this Lease shall be adjusted in accordance with this Article:
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(A) Definitions. Only for the purpose of this Article, and the
computations herein, the following definitions shall apply:
1. The term "Tax Base Year" shall mean the 12 month period
commencing July 1, 1996 and ending June 30, 1997 and the term "Tax Escalation
Year" shall mean any subsequent 12 month period commencing January 1 and ending
December 31, all or any part of which is included within the period covered by
this Lease.
2. The term "Percentage" shall mean thirteen and one-half
(13.5%) percent.
3. The term "Real Estate Taxes" shall mean all taxes levied,
assessed or imposed at any time by any governmental authority of whatever kind
or nature, whether ordinary or extraordinary, foreseen or unforeseen, upon or
against the Land and/or Building and also any tax or assessment levied, assessed
or imposed at any time primarily on owners of real property by any governmental
authority in connection with any franchise and/or the income, rents, profits,
sales, use or occupancy from, out of, or in connection with the Land and/or
Building to the extent that same shall be in lieu of all or a portion of any of
the aforesaid taxes upon or against the Land and/or Building computed as if the
Land and/or Building were the only assets of Owner. The term "Real Estate Taxes"
shall also include all reasonable costs and expenses, including counsel fees,
accounting fees, consultant fees and appraisal fees incurred in connection with
any filing, application, proceeding, hearing or determination for a reduction of
the assessed value of the Land and/or Building and/or otherwise in an attempt to
reduce Real Estate Taxes which shall not have been utilized in connection with
computing an adjustment in accordance with the provisions of Subdivision (D) of
this Article, but in no event shall the amount of any such included costs and
expenses exceed the aggregate of $10,000 with respect to any Tax Escalation
Year. The Percentage shall not be changed notwithstanding any transfer,
hypothecation, alteration, addition or improvement to the Land and/or Building.
If any Real Estate Taxes are permitted to be paid in installments, then all
references in this Article to the dates of which Real Estate Taxes are payable
shall be deemed to refer to the dates on which the installments are payable.
4. The term "Land and/or Building" shall mean the land and
buildings and other improvements thereon known as 835 Broadway/58-62 East 13th
Street, New York, New York and designated on the tax map for New York County as
Block 564, Lot 15.
5. The term "Owner's Statement" shall mean an instrument
containing a computation of any increase in the rent for the Tax Escalation Year
pursuant to the provisions of this Article.
(B) 1. If Real Estate Taxes payable in any Tax Escalation Year shall be
in such amount as shall constitute an increase above the Real Estate Taxes
payable for the Base Tax year, the rent for such Tax Escalation Year shall be
increased by a sum equal to the Percentage of any such increase.
2. The provisions of this Article shall apply to increases in
Real Estate Taxes of any kind or nature, whether or not resulting from a higher
tax rate, an increase in the assessed valuation of the Land and/or Building, or
for any other reason whatsoever, including, without limitation, any increase
which is the result of or in any way related to any sale, financing,
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leasing, or other transfer or hypothecation of the Land and/or Building or of
any interest therein, or any alterations, additions and/or improvements to the
Land and/or Building, whether or not such transfers, hypothecations,
alterations, additions and/or improvements redound to the benefit of Tenant.
3. If the term of this Lease shall commence on a date other
than the first day of a Tax Escalation Year, any increase in rent for the Tax
Escalation Year in which such commencement shall occur, shall be apportioned
based upon the number of days of the term of this Lease which are within such
Tax Escalation Year. If the demised term shall expire on a date other than the
last day of a Tax Escalation Year, any increase in rent for the Tax Escalation
Year in which the date of expiration of the term of this Lease shall occur,
shall be apportioned based upon the number of days of the term of this Lease
which are within such Tax Escalation Year.
(C) After receipt of tax bill and other data necessary to compute any
amounts payable under this Article with respect to any Tax Escalation Year,
Owner shall furnish to Tenant an Owner's Statement setting forth any amounts
computed by Owner to be due under this Article. Owner's Statement shall set
forth the necessary data which is the basis for Owner's computation and the
amount set forth therein shall be due and payable by Tenant to Owner, as
Additional Rent, within ten (10) days after Owner's Statement has been
furnished. Owner's delay or Owner's failure to furnish an Owner's Statement with
respect to any Tax Escalation Year shall not prejudice Owner's right to
subsequently render an Owner's Statement with respect to such Tax Escalation
Year or any subsequent Tax Escalation Year. At the request of Tenant, Owner
shall furnish copies of bills, invoices and/or other reasonable evidence to
support amounts claimed by Owner to be Real Estate Taxes for any Tax Escalation
Year.
(D) If, as a result of any application or proceeding brought for
reduction of the assessed valuation of the Land and/or Building, there shall be
a decrease in Real Estate Taxes for any Tax Escalation Year with respect to
which Owner shall have rendered an Owner's Statement, the rent for such Tax
Escalation Year shall be adjusted to reflect such decrease in Real Estate Taxes
(less all costs and expenses, including counsel fees, incurred in connection
with such application or proceeding) and Tenant shall be entitled to a credit
against the next subsequent payments of rent hereunder for its proportionate
share.
(E) Within ten (10) days next following rendition of the first Owner's
Statement which shows an increase in the rent for any Tax Escalation Year,
Tenant shall pay to Owner the entire amount of such increase. In addition, on
the first day of each month following rendition of each Owner's Statement which
shows an increase in the rent for a Tax Escalation Year, Tenant shall pay to
Owner, on account of the potential increase in the rent for the Tax Escalation
Year following the Tax Escalation Year for which such Owner's Statement shall
have been rendered, a sum equal to one-twelfth (1/12th) of the increase in the
rent shown upon such Owner's Statement (before any apportionment pursuant to the
provisions of subsection (B)(3) herein). Such sum shall be added to each monthly
installment of rent until rendition of the next succeeding Owner's Statement and
shall be collectible by Owner in the same manner as rent. If such Statement be
rendered after the commencement of any Tax Escalation Year, the Tenant shall pay
such 1/12th installment for any past period within such Tax Escalation Year.
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(F) Each succeeding Owner's Statement shall be accompanied by a
reconciliation which shall be made as follows: Tenant shall be debited with any
increase in the rent shown on Owner's Statement and credited with (i) the
aggregate amount, if any, paid by Tenant in accordance with the provisions of
subsection (E) of this Article on account of the potential increase in the rent
for the Tax Escalation Year in question; and (ii) any decrease in the rent shown
on Owner's Statement. Tenant shall pay any net debit balance shown to be due to
the Owner within ten (10) days after rendition by Owner; any net credit balance
shall be applied against the next accruing monthly installments of rent.
(G) Notwithstanding the early termination of this Lease by reason of
Tenant's default under this Lease, Tenant's obligation to pay the rent
adjustment under this Article shall continue and cover all periods up to the
expiration date originally set forth herein, and shall survive such earlier
termination of this Lease by reason of Tenant's default hereunder. In no event
shall anything contained in this Article be deemed or construed to reduce the
rent or Additional Rent provided to be paid under any of the other terms or
provisions of this Lease.
(H) Each Owner's Statement given by Owner pursuant to this Article "68"
shall be conclusive and binding upon Tenant unless Tenant, within one-hundred
eighty (180) days after receipt of such Owner's Statement, shall give Owner a
written notice objecting to Owner's Statement and specifying the nature of the
objection. In such event, Tenant shall pay the additional amounts set forth in
Owner's Statement and said payment or acceptance shall be without prejudice to
Tenant's right to contest the disputed Owner's Statement. The aforesaid period
of one-hundred eighty days shall be tolled for the period of time it shall take
Owner to comply with any request for bills or other evidence by Tenant in
accordance with Paragraph (C) of this Article.
68. Tenant's Alterations. Supplementing the provisions of this Lease, including,
without limitation, Article "3" and "4" hereof, any alterations, installations,
additions, repairs or improvements made by Tenant (hereinafter sometimes
collectively referred to as an "Alteration" or as "Alterations") shall be made
and performed in conformity with and subject to the following provisions:
(A) All Alterations shall be made and performed at Tenant's sole cost
and expense in a good, workmanlike manner, in conformity with all of the rules
and regulations of any and all governmental authorities having jurisdiction
thereof and shall be done in such manner as not to disturb or interfere with any
other tenant in the building.
(B) The Alterations shall not affect (i) the structural parts of the
demised premises or of the building of which the demised premises forms a part,
(ii) any of the mechanical or other systems of the building including, without
limitation, electrical, plumbing, heating, air-conditioning, ventilation and
sanitary systems, or (iii) the interior hallway or any portion of the exterior
of the building.
(C) Tenant shall submit to Owner detailed plans and specifications for
the proposed Alterations and shall not commence any such Alterations without
first obtaining Owner's written approval of such plans and specifications, which
approval Owner agrees not to unreasonably
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withhold; and if the approval of, or notice to, any ground lessor or mortgagee
is required in connection with any Alteration, Tenant shall not commence such
Alteration until such approval has been received or such notice has been given,
as the case may be. Owner shall advise Tenant of the name and address of any
ground lessor or mortgagee whose approval is required.
(D) Prior to the commencement of the proposed Alteration, Tenant shall
furnish to Owner duplicate original policies of workers' compensation insurance
covering all persons to be employed in connection with such Alteration,
including all those to be employed by all contractors and subcontractors, and of
comprehensive liability insurance (including property damage coverage) in which
Owner, and its managing agent, if any, shall be named as parties insured, which
policies shall be issued by companies and shall be in form and amounts
reasonably satisfactory to Owner and shall be maintained by Tenant until the
completion of the Alteration.
(E) All permits, approvals and certificates of all government
authorities required in connection with any Alteration shall be promptly
obtained by Tenant and/or its representatives and submitted to Owner.
(F) Prior to the commencement of any work, Tenant shall submit to Owner
the name of the contractor or contractors who will be doing the work for Owner's
prior approval, which approval is not to be unreasonably withheld or delayed.
(G) Prior to the commencement of any work, Tenant shall furnish to
Owner a duly executed copy of a contract or contracts with the contractor or
contractors who shall do the Alteration. Simultaneously therewith, Tenant shall
also furnish to Owner (i) a guarantee or other by security reasonably
satisfactory to Owner or (ii) a bond, with proof of payment thereof, issued by a
surety company licensed to do business in the City and State of New York, which
bond shall run to the benefit of the Owner and shall be in an aggregate amount
not less than the amount of the contract or contracts for the Alteration. Said
bond shall be conditioned upon and guarantee the completion of the Alteration
within a reasonable period of time after the commencement of the Alteration,
free and clear of all encumbrances, security interests and mechanic's or
materialmen's liens.
(H) After the Alteration has been completed, Tenant shall obtain a
"sign-off" from the New York City Department of Buildings and shall thereafter
obtain a change in the Certificate of Occupancy if required by reason of the
Alteration.
(I) The provisions of this Article are in addition to and not in
limitation of the provisions contained in Article "3" and/or Article "4" of this
Lease.
69. INTENTIONALLY DELETED
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70. Term/Commencement Date/Expiration Date.
(A) At the time of the execution of this Lease Tenant is in possession
of a portion or all of the premises demised under this Lease as a subtenant of
Amanaka's Amazon Network, Inc. ("Amanaka's") which has a lease of the demised
premises for a term which will not end until August 31, 2001 and the parties
have agreed that the term of this Lease is not to commence until the date (the
"Commencement Date") that Amanaka's has executed and delivered a written
termination of its lease in form and substance acceptable to Owner and has
surrendered possession of the demised premises and delivered its entire interest
therein to Owner.
(B) The term of this Lease shall commence on the Commencement Date and
shall end and expire on August 31, 2001, unless the Term shall sooner cease and
expire as otherwise provided in this Lease. Upon the Commencement Date Tenant
will take possession of the entire demised premises.
(C) At the request of Owner, after the occurrence of the Commencement
Date, Owner and Tenant shall execute and deliver written agreements, in form
prepared by Owner, which shall set forth and confirm, for all purposes, the
Commencement Date, but the execution and delivery of such agreements shall not
be deemed or construed as a prerequisite to the occurrence of the Commencement
Date or to the obligation of Tenant to observe and perform all of the covenants
of this Lease.
71. Annual Rental Rate. The annual rental rates for the Term shall be as
follows:
(A) For the period ending August 31, 2000, the annual rental rate of
THIRTY-SEVEN THOUSAND EIGHT HUNDRED ($37,800.00) DOLLARS, payable in advance, in
monthly installments of THREE THOUSAND ONE HUNDRED FIFTY ($3,150.00) DOLLARS
each.
(B) For the year commencing on September 2000 and ending on August 31,
2001, the annual rental rate of FORTY-ONE THOUSAND FOUR HUNDRED ($41,400.00)
DOLLARS, payable in advance, in monthly installments of THREE THOUSAND FOUR
HUNDRED ($3,400.00) DOLLARS each.
(C) In the event that the Commencement Date shall be on a date which is
not the first day of the month, the first installment of annual rental rate
shall be apportioned and that installment shall be payable on the date that the
annual rental rate shall commence to accrue; each monthly installment thereafter
to be payable, in advance, on the first day of each month, unless otherwise
herein provided.
72. INTENTIONALLY DELETED
73. Limited Personal Guaranty Article. In order to induce Owner to enter into
this Lease with Tenant, Sanjay Pingle, residing at 155 E. 31st, 16B, New York,
NY 10016,
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<PAGE> 19
Pingle, Sanjay (hereinafter referred to as the "Guarantor"), by signing his name
at the end of this Article, agrees as follows:
(A) Guarantor unconditionally, irrevocably and as a primary obligor,
guarantees to Owner the full and faithful payment of all rent and additional
rent required to be paid by Tenant pursuant to the provisions of Article "67"
and Article "71" of this Lease and any damages or deficiencies upon or after
termination of this Lease by reason of any default of Tenant in the payments
required to be paid under said Articles. The full and faithful payment by Tenant
of all of the rent and additional rent payable under Article "67" and Article
"71" of this Lease, as aforesaid, is sometimes hereinafter referred to as the
"Tenant's Obligations".
(B) In the event that Tenant shall duly surrender the premises and
deliver all keys to the premises to Owner (the date upon which Tenant duly
surrenders possession and delivers the keys to the premises to the Owner being
hereinafter referred to as the "Surrender Date") Guarantor shall be released
from all liability with respect to the Tenant's Obligations arising or accruing
after the Surrender Date, but Guarantor shall continue to be liable under this
guaranty for (i) all Tenant's Obligations which arose or accrued on or before
the Surrender Date and (ii) any liability of Guarantor theretofore or thereafter
accruing under the provisions of Paragraph E of this guaranty Article.
(C) As contemplated by the immediately preceding subparagraph of this
Article, Tenant shall be deemed to have duly surrendered the premises to Owner
on the last day of the month during which (i) Tenant shall have delivered a
written declaration to Owner which shall state that Tenant has surrendered to
Owner all of Tenant's right, title and interest in this Lease, the premises and
all alterations, installations, additions and improvements in or at the
premises, to the intent and purpose that the estate and interest of the Tenant
in the premises and this Lease shall be wholly extinguished on the date of the
delivery of such notice, (ii) the Tenant shall have fully vacated and
voluntarily delivered possession of the premises to Owner and (iii) at the time
of such delivery of possession, the premises shall be broom clean, vacant and
unoccupied and this Lease and the premises shall be free and clear of any
encumbrance arising out of or in connection with the acts or omissions of the
Tenant; such notice, surrender and delivery of the premises shall not be
construed to diminish, limit, or otherwise reduce any liability or obligation
that Tenant would otherwise have under this Lease.
(D) This guaranty shall remain and continue in full force and effect
notwithstanding any amendment, modification, renewal, extension or assignment of
this Lease and regardless of whether Guarantor shall have approved or consented
to any of the foregoing and, except as hereinabove specifically limited, whether
or not Tenant be actually in possession of the premises. Guarantor expressly
waives any notice of nonpayment, nonperformance or non-observance of any of
Tenant's Obligations, or of proof, notice or demand of any sort in order to
charge Guarantor. The validity of this guaranty and the obligations of Guarantor
hereunder shall not be terminated, affected or impaired by reason of the
assertion or non-assertion by Owner against Tenant of any of the rights or
remedies reserved to Owner pursuant to this Lease, nor by any waivers of
default, extensions of time, or settlement of any action or proceeding with
regard to any matter whatsoever arising out of or in any way connected with this
Lease.
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<PAGE> 20
(E) Guarantor expressly waives trial by jury in any action, proceeding
or counterclaim brought by Tenant or Owner with regard to any matter whatsoever
arising out of, under or in any way connected with this guaranty or this Lease,
and Guarantor expressly waives the right to interpose a counterclaim against
Owner in any action or proceeding brought by Owner against Guarantor with regard
to this guaranty. If Owner shall make any expenditure or incur any obligation
for the payment of money in connection with the enforcement of this guaranty
including, but not limited to, reasonable attorneys' fees, costs and
disbursements in instituting, prosecuting or defending any action or proceeding,
Guarantor shall reimburse Owner on demand for all such expenditures made and
obligations incurred with interest two (2%) percent over the prime rate (as
defined in Article "56" of this Lease), provided however that, if Owner shall
institute or prosecute an action or proceeding against Guarantor, Owner shall
only be entitled to such reimbursement if Owner substantially prevails in such
action or proceeding and, if Guarantor shall substantially prevail in such
action or proceeding, Guarantor shall be entitled to be reimbursed by Owner for
his reasonable attorneys' fees, costs and disbursements in defending such action
or proceeding.
(F) Wherever referred to in this guaranty Article, whether or not
specifically so stated, "Tenant" shall mean Tenant and Tenant's successors,
assigns and sublessees; "Owner" shall mean Owner and Owner's successors or
assigns; this Lease shall mean and also refer to and include any and all
amendments, modifications, extensions, renewals and replacements of this Lease;
and all pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the person
or parties may require, and this guaranty shall inure to the benefit of Owner,
and to any person, firm or corporation to whom Owner's interest in this Lease
shall be transferred or assigned.
(G) All notices permitted or required to be given to Guarantor shall be
sent by registered or certified mail, return receipt requested, to Guarantor at
the address hereinabove set forth or to such other address as Guarantor may
designate from time to time, by notice given to Owner in accordance with the
notice provisions of this Lease.
/s/ Sanjay Pingle
-----------------------------------
Sanjay Pingle
74. Use Of Premises. Tenant shall use and occupy the demised premise for general
and executive offices for the business of the retail sale of medical books and
related software and for no other purpose.
75. Miscellaneous.
(A) Additional Re: Article "13". Whenever in this Lease the Owner is
entitled to enter upon the demised premises (except after default by Tenant
beyond any applicable grace and notice period), such entry shall (i) except in
emergency situations, be upon reasonable advance notice to enable Tenant to have
a representative present; (ii) except in emergency situations, be at
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<PAGE> 21
reasonable times; (iii) if for the purpose of making repairs, the repairs shall
be done in a good and workmanlike manner, minimize interference with the Tenant
(without the necessity for overtime work), without unnecessary storage of
materials within the demised premises; and (iv) to the extent Owner performs any
work in or at the demised premises, it shall be restored to its prior condition
as nearly as possible and practical under the circumstances.
(B) Additional Re: Article "9". Supplementing the Provisions of Article
9 of this Lease, if the demised premises shall be damaged by fire or other
casualty and Owner has not elected to terminate this Lease as therein provided
and in the further event that the premises shall not have been repaired and
restored by Owner, for any reason whatsoever, including lack of receipt of
insurance proceeds within one hundred eighty (180) days from the occurrence of
the fire or other casualty, Tenant shall have the right to terminate this Lease
upon thirty (30) days prior written notice to Owner and, if the premises shall
still not have been repaired and restored within said thirty (30) day period,
this Lease shall terminate and come to an end at the expiration of said thirty
(30) day period as if that date were the date originally herein fixed for the
end of the term of this Lease.
(C) INTENTIONALLY DELETED
(D) Notwithstanding anything to the contrary herein, wherever Owner is
entitled to collect, as additional rent or as damages, costs, expenses, fees or
other charges including attorney's fees, fees and disbursements, only after they
have been actually incurred by Owner. The fact that such costs, expenses, fees,
taxes, or other charges are payable to a person, firm, or corporation affiliated
with Owner shall not prejudiced Owner's right to collect them as additional
rent, provided that they are reasonable in amount. Copies of invoices and/or
other reasonable proof of the foregoing shall be provided to Tenant upon request
and payment by Tenant shall be made promptly after they are provided.
(E) Notwithstanding anything stated to the contrary elsewhere in this
Lease, despite the fact that all services in the building are not provided on a
7-day a week, 24-hours per day basis, Tenant shall be entitled to have
reasonable access to the building and the premises on a 24-hour, 7-day per week
basis and in connection therewith, Owner shall provide Tenant with the necessary
keys and/or other cards, devices, codes, etc. which may be required in order to
afford such access. Tenant shall be responsible for the aforesaid keys, cards,
security devices, codes, etc. which are supplied to it and shall indemnify and
hold Owner harmless with respect to any claims, damages, costs, and expenses
which Owner may incur in connection with their misuse. Tenant acknowledges that
it is aware that the building of which the demised premises forms a part does
not have attending personnel who control access to the building and it is the
responsibility of each of the respective Tenants to use reasonable efforts to
keep the building access doors locked and to otherwise generally cooperate in
the effort to maintain security in the building.
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76. Construction. In the event of a conflict between the printed portions of
this Lease and the provisions of this rider, the provisions of this rider shall
govern and control to the extent of such conflict.
BROADWAY-13TH ASSOCIATES, L.P. MEDSITE PUBLISHING INC.
By: Columbus Broadway Realty Corp.
General Partner
By: By: /s/ Sundeep Bhan
----------------------------------- -----------------------------------
Sundeep Bhan, President
17
<PAGE> 1
Exhibit 10.13
LEASE (herein called this "Lease), dated as of December __, 1999,
between 59 MAIDEN LANE ASSOCIATES, LLC, a New York limited liability company,
having an office at c/o AmTrust Realty Corp., 250 Broadway, New York, New York
10007 (herein called "Landlord") and MEDSITE.COM, INC., a Delaware corporation
having an office at 60 East 13th Street, New York, New York 10003 (herein called
"Tenant").
Landlord and Tenant do hereby covenant and agree as follows:
ARTICLE 1 Term and Fixed Rent
1.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, upon and subject to the terms, covenants, provisions and conditions of
this Lease, the premises described in Section 1.02 in the building (herein
called the "Building") known as 59 Maiden Lane (a/k/a 41-65 Maiden Lane, a/k/a
50-66 John Street, a/k/a 85-109 Williams Street) in the City, County and State
of New York. The Building is located on the land (herein called the "Land")
described in Exhibit A annexed hereto and made a part hereof.
1.02. The premises (herein called the "Premises") leased to Tenant are
located on floors 14, 14A and a portion of floor 15 of the Building,
substantially as shown on the floor plans attached hereto as Exhibits B-1, B-2
and B-3, respectively and made a part hereof. Landlord and Tenant hereby
covenant and agree that the Premises shall be deemed to contain 67,749 rentable
square feet. Landlord hereby grants to Tenant the non-exclusive right to use, in
common with others, the public areas of the Building to the extent required for
access to the Premises or use of the Premises for general and executive offices,
including, without limitation, common hallways on the floors on which the
Premises are located, stairways, common restrooms on the floors on which the
Premises are located, and the Building lobby, subject to the terms, covenants,
provisions and conditions of this Lease.
1.03. The term of this Lease (a) shall commence on the Initial
Commencement Date (as defined in Section 1.05 hereof) and (b) shall end at 11:59
p.m. on the date (herein called the "Expiration Date") that is the last day of
the month in which the tenth (10th) anniversary of the day preceding the Final
Commencement Date (as defined in Section 1.05 hereof) occurs, or on such earlier
date upon which the term of this Lease shall expire or be canceled or terminated
pursuant to any of the conditions or covenants of this Lease or pursuant to law.
As more particularly hereinafter set forth, the term of this Lease shall
commence with respect to various portions of the Premises on a floor-by-floor
basis.
1.04. The rents shall be and consist of:
(a) fixed rent (herein called "Fixed Rent") for each
floor of the Premises as follows: at the following
rates during the following periods:
(i) For Floor 14:
(x) ONE MILLION ONE EIGHTY-SEVEN
THOUSAND TWO HUNDRED EIGHTY-FIVE
AND 75/100 ($1,187,285.75) DOLLARS
per annum (which amount includes a
component equal to the Base
Electric
1
<PAGE> 2
Charge, as defined in Section
14.01(c) hereof), payable in equal
monthly installments of
NINETY-EIGHT THOUSAND NINE HUNDRED
FORTY AND 48/100 ($98,940.48)
DOLLARS per month during the period
commencing on the Floor 14
Commencement Date and ending on the
last day of the month preceding
month in which occurs the third
(3rd) anniversary of the Initial
Commencement Date;
(y) ONE MILLION TWO HUNDRED FIFTY-NINE
THOUSAND SEVEN HUNDRED NINETY-ONE
AND 75/100 ($1,259,791.75) DOLLARS
per annum (which amount includes a
component equal to the Base
Electric Charge, as defined in
Section 14.01(c) hereof), payable
in equal monthly installments of
ONE HUNDRED FOUR THOUSAND NINE
HUNDRED EIGHTY-TWO AND 65/100
($104,982.65) DOLLARS per month
during the period commencing on the
first day of the month in which
occurs the third (3rd) anniversary
of the Initial Commencement Date
and ending on the last day of the
month preceding the month in which
occurs the seventh (7th)
anniversary of the Initial
Commencement Date; and
(z) ONE MILLION THREE HUNDRED
THIRTY-TWO THOUSAND TWO HUNDRED
NINETY-SEVEN AND 75/100
($1,332,297.75) DOLLARS per annum
(which amount includes a component
equal to the Base Electric Charge,
as defined in Section 14.01(c)
hereof), payable in equal monthly
installments of ONE HUNDRED ELEVEN
THOUSAND TWENTY-FOUR AND 81/100
($111,024.81) DOLLARS per month
during the period commencing on the
first day of the month in which
occurs the seventh (7th)
anniversary of the Initial
Commencement Date and ending on the
Expiration Date;
(ii) For Floor 14A, ONE HUNDRED FORTY-SIX
THOUSAND SIX HUNDRED TWENTY-FIVE AND 00/100
($146,625.00) DOLLARS per annum (which
amount includes a component equal to the
Base Electric Charge, as defined in Section
14.01(c) hereof), payable in equal monthly
installments of TWELVE THOUSAND TWO HUNDRED
EIGHTEEN AND 75/100 ($12,218.75) DOLLARS per
month during the period commencing on the
Floor 14A Commencement Date and ending on
the Expiration Date;
(iii) For Floor 15:
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<PAGE> 3
(x) SIX HUNDRED FIFTY-FOUR THOUSAND
EIGHT HUNDRED SIXTY-NINE AND 00/100
($654,869.00) DOLLARS per annum
(which amount includes a component
equal to the Base Electric Charge,
as defined in Section 14.01(c)
hereof), payable in equal monthly
installments of FIFTY-FOUR THOUSAND
FIVE HUNDRED SEVENTY-TWO AND 42/100
($54,572.42) DOLLARS per month
during the period commencing on the
Floor 15 Commencement Date and
ending on the last day of the month
preceding the month in which occurs
the third (3rd) anniversary of the
Initial Commencement Date;
(y) SIX HUNDRED NINETY-FOUR THOUSAND
EIGHT HUNDRED SIXTY-ONE AND 00/100
($694,861.00) DOLLARS per annum
(which amount includes a component
equal to the Base Electric Charge,
as defined in Section 14.01(c)
hereof), payable in equal monthly
installments of FIFTY-SEVEN
THOUSAND NINE HUNDRED FIVE AND
08/100 ($57,905.08) DOLLARS per
month during the period commencing
on the first day of the month in
which occurs the third (3rd)
anniversary of the Initial
Commencement Date and ending on the
last day of the month preceding the
month in which occurs the seventh
(7th) anniversary of the Initial
Commencement Date; and
(z) SEVEN HUNDRED THIRTY-FOUR THOUSAND
EIGHT HUNDRED FIFTY-THREE AND
00/100 ($734,853.00) DOLLARS per
annum (which amount includes a
component equal to the Base
Electric Charge, as defined in
Section 14.01(c) hereof), payable
in equal monthly installments of
SIXTY-ONE THOUSAND TWO HUNDRED
THIRTY-SEVEN AND 75/100
($61,237.75) DOLLARS per month
during the period commencing on the
first day of the month in which
occurs the seventh (7th)
anniversary of the Initial
Commencement Date and ending on the
Expiration Date;
which Fixed Rent shall be payable commencing on the
Commencement Date (with respect to the floor of the
Premises in question) and thereafter in equal monthly
installments in advance on the first day of each and
every calendar month during the term of this Lease
(except that Tenant shall pay, (i) upon the date
Landlord obtains possession of the fourteenth (14th)
floor of the Premises, the sum of NINETY-EIGHT
THOUSAND NINE HUNDRED FORTY AND 48/100 ($98,940.48)
DOLLARS, to be applied against the first full monthly
installment(s) of Fixed Rent due with respect to the
fourteenth (14th ) floor, (ii) upon the date Landlord
obtains possession of floor 14A of the Premises, the
sum of TWELVE THOUSAND TWO HUNDRED EIGHTEEN AND
75/100
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<PAGE> 4
($12,218.75) DOLLARS, to be applied against the first
full monthly installment(s) of Fixed Rent due with
respect to floor 14A, and (iii) upon the date
Landlord obtains possession of the fifteenth (15th)
floor of the Premises, the sum of FIFTY-FOUR THOUSAND
FIVE HUNDRED SEVENTY-TWO AND 42/100 ($54,572.42)
DOLLARS, to be applied against the first full monthly
installment(s) of Fixed Rent due with respect to the
fifteenth (15th ) floor [with respect to each floor
of the Premises, Landlord shall endeavor to give
Tenant at least five (5) days' prior notice, which
need not be in writing, of the date Landlord in good
faith estimates that Landlord will obtain possession
of such floor of the Premises, provided that Landlord
shall have no liability to Tenant and this Lease
shall not be affected in the event that Landlord has
not obtained possession of such floor of the Premises
on the date so estimated by Landlord, and, in such
event, Landlord shall thereafter be required only to
provide two (2) Business Days' notice, which need not
be in writing, of the date Landlord actually obtains
possession of such floor of the Premises]), and
(b) additional rent (herein called "Additional Charges")
consisting of Tax Payments (hereinafter defined),
Operating Payments (hereinafter defined), charges for
electricity furnished to Tenant in the event that
electricity is furnished in accordance with the
provisions of Exhibit F hereof (and not furnished on
an electric "rent inclusion" basis in accordance with
the provisions of Section 14.02 hereof), and all
other sums of money as shall become due from and
payable by Tenant to Landlord hereunder;
all to be paid in lawful money of the United States to Landlord at its office,
or such other place, or to Landlord's agent and at such other place, as Landlord
shall designate by notice to Tenant.
1.05. For purposes of this Lease, the following terms shall have the
following meanings:
"Commencement Date" shall mean, with respect to each floor of the
Premises, the date which is the earlier to occur of: (i) the date on
which "Landlord's Work" (as such term is defined in Section 2.01(d)
hereof) to be performed by Landlord as described in Article 2 hereof
and on Exhibit C attached hereto (with respect to such floor) shall be
substantially completed or shall be deemed to be substantially
completed in accordance with the provisions of Article 2 hereof,
including without limitation, Sections 2.01(c) and (f) hereof, or (ii)
the date Tenant or anyone claiming under or through Tenant, first
occupies such floor of the Premises, or any part thereof, for the
conduct of its business or for any other purpose. For purposes of the
preceding sentence, Tenant shall not be deemed to be in occupancy of
the Premises, or any part thereof, by virtue of Tenant's exercise of
its right of access to the Premises pursuant to Section 2.01(j) hereof.
"Initial Commencement Date" shall mean the first date on which a
Commencement Date shall occur with respect to any floor of the
Premises.
"Final Commencement Date" shall mean the last date on which a
Commencement Date shall occur with respect to any floor of the
Premises.
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<PAGE> 5
Tenant shall, upon the demand of Landlord, execute, acknowledge and deliver to
Landlord an instrument in form reasonably satisfactory to Landlord confirming
the Commencement Date with respect to any floor, the Initial Commencement Date,
the Final Commencement Date and Expiration Date of this Lease; provided,
however, Tenant's failure to execute, acknowledge and deliver such instrument
shall not affect in any manner whatsoever the validity of any of the foregoing
dates set forth in this Section 1.05.
1.06. Tenant covenants and agrees to pay Fixed Rent and Additional
Charges promptly when due without notice or demand therefor and without any
abatement, deduction or setoff for any reason whatsoever, except as may be
expressly provided in this Lease. Unless otherwise instructed by Landlord, Fixed
Rent and Additional Charges shall be paid by good and sufficient check (subject
to collection) drawn on a New York City bank which is a member of the New York
Clearing House Association or a successor thereto, or such other bank that will
permit such good and sufficient check to clear within two (2) Business Days
after deposit thereof.
1.07. If the Commencement Date for any floor, the Initial Commencement
Date or the Final 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 and Additional Charges for the partial
calendar month shall be prorated.
1.08. No payment by Tenant or receipt or acceptance by Landlord of a
lesser amount than the correct Fixed Rent or Additional Charges 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.
1.09. Any apportionments or prorations of Fixed Rent or Additional
Charges to be made under this Lease shall be computed on the basis of a 360-day
year (based on 12 months of 30 days each).
1.10. If any of the Fixed Rent or Additional Charges payable under the
terms and provisions of this Lease shall be or become uncollectible, reduced or
required to be refunded because of any act or law enacted by a governmental
authority, Tenant shall enter into such agreement(s) and take such other steps
(without additional expense to Tenant) as Landlord may reasonably request and as
may be legally permissible to permit Landlord to collect the maximum rents which
from time to time during the continuance of such legal rent restriction may be
legally permissible (but not in excess of the amounts reserved therefor under
this Lease). Upon the termination of such legal rent restriction, (a) the Fixed
Rent and/or Additional Charges shall become and thereafter be payable in
accordance with the amounts reserved herein for the periods following such
termination, and (b) Tenant shall pay to Landlord promptly upon being billed, to
the maximum extent legally permissible, an amount equal to (i) the Fixed Rent
and/or Additional Charges which would have been paid pursuant to this Lease but
for such legal rent restriction less (ii) the rents paid by Tenant during the
period such legal rent restriction was in effect.
1.11. Additional Charges shall be deemed to be rent and Tenant's
failure to pay Additional Charges shall be considered a failure to pay Fixed
Rent hereunder and Landlord shall be entitled to all the rights and remedies
provided herein or by law for a default in the payment of Additional Charges as
for a default in the payment of Fixed Rent (notwithstanding the fact that Tenant
may not then also be in default in the payment of Fixed Rent).
1.12. Notwithstanding the provisions of Section 1.04(a) hereof to the
contrary,
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<PAGE> 6
provided and on condition that Tenant is not in default under any of the terms,
provisions or conditions of this Lease on Tenant's part to be performed, the
Fixed Rent payable hereunder shall be abated as follows:
(a) during the period commencing on the first day of the month
after the month in which occurs the nineteenth (19th) month
anniversary of the Floor 14 Commencement Date and ending on
the last day of the month after the month in which occurs the
twenty-first (21st) month anniversary of the Floor 14
Commencement Date ("Floor 14 Partial Abatement Period"), so
that Tenant's monthly installment of Fixed Rent for Floor 14
during the Floor 14 Partial Abatement Period shall be EIGHT
THOUSAND THREE HUNDRED SEVEN AND 98/100 ($8,307.98) DOLLARS,
which amount represents the monthly installment of the "Base
Electric Charge" (as that term is defined in Section 14.01(c)
hereof) for the fourteenth (14th) floor of the Premises, and
which amount is subject to adjustment as provided in Article
14 hereof; and
(b) during the period commencing on the first day of the month
after the month in which occurs the nineteenth (19th) month
anniversary of the Floor 14A Commencement Date and ending on
the last day of the month after the month in which occurs the
twenty-first (21st) month anniversary of the Floor 14A
Commencement Date ("Floor 14A Partial Abatement Period"), so
that Tenant's monthly installment of Fixed Rent for Floor 14A
during the Floor 14A Partial Abatement Period shall be TWO
THOUSAND SIX HUNDRED THIRTY-FIVE AND 42/100 ($2,635.42)
DOLLARS, which amount represents the monthly installment of
the "Base Electric Charge" (as that term is defined in Section
14.01(c) hereof) for floor 14A of the Premises, and which
amount is subject to adjustment as provided in Article 14
hereof; and
(c) during the period commencing on the first day of the month
after the month in which occurs the nineteenth (19th) month
anniversary of the Floor 15 Commencement Date and ending on
the last day of the month after the month in which occurs the
twenty-first (21st) month anniversary of the Floor 15
Commencement Date ("Floor 15 Partial Abatement Period"), so
that Tenant's monthly installment of Fixed Rent for floor 15
during the Floor 15 Partial Abatement Period shall be FOUR
THOUSAND FIVE HUNDRED EIGHTY-TWO AND 42/100 ($4,582.42)
DOLLARS, which amount represents the monthly installment of
the "Base Electric Charge" (as that term is defined in Section
14.01(c) hereof) for the fifteenth (15th) floor of the
Premises, and which amount is subject to adjustment as
provided in Article 14 hereof.
ARTICLE 2 Delivery and Use of Premises
2.01. (a) Except as expressly provided to the contrary in this
subsection 2.01(a), Tenant shall accept each floor of the Premises "as is" on
the Commencement Date with respect to such floor and Landlord shall not
thereafter be required to perform any work or install any fixtures or equipment
to make the Building or the Premises ready or suitable for Tenant's use or
occupancy. Landlord shall perform Landlord's Work (as such term is hereinafter
defined) in a manner using materials
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of a manufacture, material, design, capacity and finish and otherwise in a
manner selected by Landlord as the standard of the Building ("Building
Standard") (except as otherwise set forth in Exhibit C attached hereto and made
a part hereof) and subject to the provisions of this Article 2 and Exhibit C
attached hereto and made a part hereof. Landlord's Work shall be deemed to have
been substantially completed (subject to Landlord's obligation to complete same)
even though minor details or adjustments may not then be completed. The taking
of possession of any floor of the Premises by Tenant for the conduct of business
or for any other reason whatsoever shall be deemed an acceptance of such floor
of the Premises and substantial completion by Landlord of Landlord's Work with
respect to such floor of the Premises. For purposes of the preceding sentence,
Tenant shall not be deemed to be in occupancy of the Premises, or any part
thereof, by virtue of Tenant's exercise of its right of access to the Premises
pursuant to the provisions of Section 2.01(j) hereof. Landlord shall endeavor to
give Tenant at least five (5) Business Days' prior notice, which need not be in
writing, of the date Landlord in good faith estimates that Landlord's Work will
be substantially completed, provided that Landlord shall have no liability to
Tenant and this Lease shall not be affected in the event Landlord's Work is not
substantially completed on the date so estimated by Landlord, and, in such
event, Landlord shall thereafter be required only to provide two (2) Business
Days' notice, which need not be in writing, of the date Landlord's Work is
actually substantially completed.
(b) If for any reason whatsoever, Landlord shall be unable to
deliver possession of any floor of the Premises on the Commencement Date with
respect to such floor of the Premises, then notwithstanding anything to the
contrary hereinbefore contained, the term of this Lease with respect to such
floor of the Premises shall commence on, and the Commencement Date with respect
to such floor of the Premises shall be, the date on which Landlord is able to so
deliver possession of such floor of the Premises. Landlord shall not be subject
to any liability for failure to give possession on the date that Landlord's Work
is substantially completed and the validity of this Lease shall not be impaired
under such circumstances, nor the same be construed in any way to extend the
term of this Lease. Tenant hereby waives any right to rescind this Lease under
the provisions of Section 223(a) of the Real Property Law of the State of New
York, and agrees that the provisions of this Article are intended to constitute
"an express provision to the contrary" within the meaning of said Section
223(a).
(c) Notwithstanding anything to the contrary contained in
subsections 1.05 and 2.01(b) hereof, in the event that the Commencement Date
with respect to any floor of the Premises is delayed by reason of delays caused
or occasioned by Tenant, Tenant (in addition to paying the costs and damages
Landlord may sustain by reason thereof) agrees that at Landlord's option the
term of this Lease and Tenant's obligations shall commence on the date that this
Lease would have commenced had the Commencement Date for such floor not been so
delayed by Tenant, or that at Landlord's option such delays shall constitute a
default on the part of Tenant and shall entitle Landlord to exercise all rights
and remedies provided for in this Lease in the event of a material default of
Tenant under the provisions of this Lease.
(d) For purposes hereof, the following terms shall have the
following meanings:
"Base Building Work" shall mean:
(i) making such modifications to the Building's electrical
system, if any, that may be necessary to enable Landlord to provide an average
electrical capacity of six (6) watts connected load per rentable square foot
(exclusive of HVAC) to each floor of the Premises;
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(ii) providing Tenant with an ACP-5 with respect to each floor
of the Premises;
(iii) the installation of one (1) Building standard, disabled
accessible ADA compliant toilet facility containing one (1) sink and one (1)
water closet on floor 14A at a location to be reasonably designated by Landlord,
in accordance with the plans annexed hereto as Exhibit L;
(iv) the installation of one (1) Building standard, disabled
accessible ADA compliant toilet facility containing one (1) sink and one (1)
water closet on floor 15 at a location to be reasonably designated by Landlord,
in accordance with the plans annexed hereto as Exhibit L; and where necessary in
Landlord's judgment, refurbish the existing bathrooms on floor 15 (i.e., where
necessary in Landlord's judgment, paint and repair or replace [in a Building
standard manner], broken fixtures, countertops, toilet partitions, floor and
wall tile, clean and regrout (where necessary in Landlord's judgment) floor and
wall tile, place lighting in working order);
(v) provide new Building standard common bathrooms, two (2)
for men and two (2) for women, on the fourteenth (14th) floor, which common
bathrooms shall be in compliance with Legal Requirements, including without
limitation, the ADA;
(vi) provide subpanels associated with Landlord's Class E fire
alarm system on floors of the Building selected by Landlord, provided that such
subpanels shall be no more than three (3) floors apart [i.e., there will not be
more than two (2) consecutive floors without subpanels] with points of
connection sufficient for twelve (12) strobes for each full floor of the
Premises, all in accordance with Legal Requirements and Item 14 of the portion
of the Work Letter (as hereinafter defined) prepared by Loffredo Brooks
Architects P.C. ("Loffredo");
(vii) lower elevator call buttons, provide Braille signage on
elevator floor jambs and otherwise modify, to the extent necessary, the
elevators serving the floors of the Premises to comply with the ADA;
(viii) demolish the floors of the Premises in accordance with
Item 1 of the portion of the Work Letter prepared by Loffredo, provided that
Tenant will reimburse Landlord for all Tenant costs set forth in Item 1(c) of
the portion of the Work Letter prepared by Loffredo;
(ix) provide a Building standard stairway connecting the
floors of the Premises in accordance with Item 11 of the portion of the Work
Letter prepared by Loffredo; and
(x) provide Base Building HVAC in accordance with the portion
of the Work Letter prepared by Robert Director Associates.
"Extra Work" shall mean any work or material requested by Tenant that
is in excess of the quantity of such work or material provided for in the Work
Letter or is set forth in the Work Letter as an item to be installed at Tenant's
option or at Tenant's cost and expense.
"Extra Work Costs" shall mean the actual costs incurred by Landlord in
connection with the performance of Extra Work, plus Landlord's Profit and
Overhead. Landlord's actual costs for the performance of Extra Work shall be
determined by reference to the prices set forth on the Work Letter to the extent
that the Work Letter contains prices for the type of Extra Work involved.
"Landlord's Profit and Overhead" shall mean, for purposes of computing
Extra Work
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Costs and Special Work Costs either:
(x) if Landlord is performing the Extra Work or Special Work in
question, profit in the amount of ten (10%) percent of the
cost of labor and materials, and overhead in the amount of ten
(10%) percent of the cost of labor and materials, or
(y) if a contractor or subcontractor is performing the Extra Work
or Special Work in question, profit in the amount of five (5%)
percent of the cost of labor and materials, and overhead in
the amount of five (5%) percent of the cost of labor and
materials.
"Landlord's Work" shall mean the aggregate of the Base Building Work
and Tenant's Work.
"Long-Lead Work" shall mean (i) work which requires the performance of
work, labor or services or the application of skills not generally utilized in
the performance of tenant improvement work for normal office occupancy in
comparable office buildings in downtown Manhattan or (ii) any item of work,
materials and/or equipment, including, without limitation, cooling towers and
related equipment, emergency generators and related equipment, electrical switch
gear and related equipment, furnishings, cafeteria equipment, and U.P.S.
systems, which requires a lead time of more than sixty (60) days prior to the
date such item is required on site.
"Special Work" shall mean any work or material of a quality or nature
that is not specified in the Work Letter, including, without limitation,
Long-Lead Work and Tenant Change Orders.
"Special Work Costs" shall mean the actual costs incurred by Landlord
in connection with the performance of Special Work plus Landlord's Profit and
Overhead. Landlord's actual costs for the performance of Special Work shall be
determined by reference to the prices set forth on the Work Letter to the extent
that the Work Letter contains prices for the type of Special Work involved.
"Tenant Debits" shall mean the aggregate of all Extra Work Costs and
Special Work Costs.
"Tenant Change Orders" shall mean changes to the Tenant Work Final
Plans initiated by Tenant.
"Tenant's Contribution" shall mean the aggregate amount of Tenant
Debits.
"Tenant Delay" shall have the meaning provided in Section 2.01(f)
hereof.
"Tenant's Work" shall mean all work shown on the Tenant Work Final
Plans, as such Tenant Work Final Plans may be modified from time to time
pursuant to the provisions of this Article 2.
"Work Letter" shall mean the work letter and design layout plans
annexed hereto as Exhibit C.
(e) Tenant shall, at its sole cost and expense, cause (i) a
professionally recognized architect, reasonably acceptable to Landlord, to
prepare a scaled and dimensioned signed and sealed set of working drawings and
specifications for Tenant's Work, and (ii) a professional engineer licensed in
New York State, reasonably acceptable to Landlord, to prepare all mechanical,
electrical, plumbing and structural signed and sealed drawings that may be
required in connection with Tenant's
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Work. All such working drawings and specifications are herein called the "Tenant
Work Final Plans." Tenant shall submit the Tenant Work Final Plans for
Landlord's approval on or before February 15, 2000. Landlord shall, within
fifteen (15) days after receipt of the Tenant Work Final Plans, notify Tenant of
its approval or disapproval thereof and, if Landlord disapproves all or any
portion of the Tenant Work Final Plans, then (i) such notice shall specify in
reasonable detail the grounds for such disapproval, and (ii) Tenant shall revise
all or any such portion of the Tenant Work Final Plans in accordance with
Landlord's objections thereto and resubmit such revised portion(s) of the Tenant
Work Final Plans to Landlord within ten (10) Business Days after Tenant's
receipt of Landlord's notice of disapproval of all or any portion of the Tenant
Work Final Plans.
(f) To the extent Landlord shall be delayed in substantially
completing Landlord's Work with respect to any floor of the Premises, in either
case, as a result of: (i) Tenant's failure to submit the Tenant Work Final Plans
for Landlord's approval on or before February 15, 2000, (ii) Tenant's failure to
revise the Tenant Work Final Plans in accordance with Landlord's objections
thereto within ten (10) Business Days after Tenant's receipt of Landlord's
notice of disapproval thereof, (iii) Tenant's failure to adequately revise the
Tenant Work Final Plans in accordance with Landlord's objections thereto, thus
requiring Landlord to provide Tenant with one or more notices of objection to
the Tenant Work Final Plans, (iv) Tenant's delay, after the expiration of a
reasonable period, in submitting information reasonably requested by Landlord or
Landlord's contractor or required to be submitted hereunder by Tenant, (v)
Tenant Change Orders, (vi) any request by Tenant that Landlord delay the
completion of any portion of Landlord's Work, (vii) the inclusion in the Tenant
Work Final Plans, as same may be modified in accordance with the terms hereof
from time to time, of any work that is Long-Lead Work, Special Work and/or Extra
Work, and/or (viii) any negligent or wrongful act of Tenant or its officers,
agents, servants or contractors, then any such delay shall be deemed to be a
"Tenant Delay", and Landlord's Work on such floor of the Premises shall be
deemed to have been substantially completed on the date on which such Landlord's
Work would have been substantially completed but for such Tenant Delay.
(g) In addition to the Base Building Work, Landlord agrees to
perform, at Landlord's sole cost and expense, Tenant's Work, but only to the
extent that the Tenant Work Final Plans do not call for (i) Special Work and/or
(ii) Extra Work. Landlord further agrees to perform Tenant's Work to the extent
that the Tenant Work Final Plans do call for (i) Special Work and/or (ii) Extra
Work, but only to the extent that Tenant agrees to (x) be responsible for any
Tenant Delay in connection with such Special Work and/or Extra Work and (y)
reimburse Landlord for (i) the Special Work Costs in connection with such
Special Work and/or (ii) the Extra Work Costs in connection with such Extra
Work, in accordance with the terms hereinafter set forth. In no event shall the
following items be deemed Special Work, Extra Work or Long Lead Items: (x) Base
Building Work, (y) the installation of base Building HVAC systems, or (z) the
making of modifications to the Building's electrical system, if any, that may be
necessary to enable Landlord to provide an average electrical capacity of six
(6) watts connected load per rentable square foot (exclusive of electricity
required for base Building HVAC systems servicing the Premises) to each floor of
the Premises.
(h) At the time Landlord notifies Tenant of its approval of
the Tenant Work Final Plans, Landlord shall submit a statement, in reasonable
detail, setting forth all of the Special Work Costs and Extra Work Costs, if
any, based on the Tenant Work Final Plans. With respect to any work for which a
Tenant's Contribution is due, Landlord shall invoice Tenant on a monthly basis,
in an amount equal to (i) the total amount of Tenant's Contribution due with
respect to such work, multiplied by (ii) the percentage of such work that has
been completed, less (iii) any payments theretofore made by Tenant with respect
to such work.
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(i) 1. In the event that Tenant wishes to make any
changes to the Tenant Work Final Plans including, without limitation,
substitutions, additions or deletions of materials, Tenant shall so notify
Landlord and Landlord shall not unreasonably withhold or delay its consent to
such changes, subject to the provisions of Article 11 hereof. Any objection by
Landlord shall be in writing and shall set forth in reasonable detail the
grounds for such objection. Changes to the Tenant Work Final Plans shall
constitute Tenant Change Orders.
2. Subject to (i) Tenant's right to withdraw a Tenant
Change Order and (ii) the provisions of Paragraph 3 of this Section 2.01(i), the
submission by Tenant to Landlord of a Tenant Change Order shall constitute
Tenant's agreement to be liable for all Extra Work Costs, Special Work Costs and
delays in the substantial completion of Landlord's Work (which delays shall
constitute Tenant Delay) resulting from such Tenant Change Order, and to pay for
such costs on a monthly basis, in an amount equal to (i) the total amount of
such costs due with respect to such work, multiplied by (ii) the percentage of
such work that has been completed, less (iii) any payments theretofore made by
Tenant with respect to such work. Landlord's notice to Tenant approving a Tenant
Change Order shall indicate (x) the amount of the Tenant Debit, if any,
associated with such Tenant Change Order and (y) the number of days of Tenant
Delay, if any, associated with such Tenant Change Order. Landlord's version of
any Tenant Debit shall be controlling. Landlord's determination of the number of
days, if any, of Tenant Delay shall (i) be made in Landlord's reasonable
discretion and (ii) be controlling.
3. In the event that Landlord's notice approving a
Tenant Change Order claims a Tenant Debit and/or Tenant Delay in connection with
such Tenant Change Order, Tenant shall notify Landlord in writing within five
(5) days after Tenant's receipt of Landlord's notice that Tenant either (i)
elects to withdraw its request for such Tenant Change Order or (ii) elects to
proceed with such Tenant Change Order, in which event Tenant shall be deemed to
have accepted Landlord's determination as to any Tenant Debit or Tenant Delay in
connection with such Tenant Change Order. In the event that Tenant does not
respond to Landlord's notice within such five (5) day period, Tenant will be
deemed to have elected to withdraw its request for such Tenant Change Order.
(j) Landlord shall permit a representative of Tenant to
inspect the progress of the performance of Landlord's Work at intervals
appropriate to the state of construction, to familiarize Tenant with the
progress of Landlord's Work. In addition, Landlord shall permit Tenant access to
the Premises prior to the Commencement Date for the floor in question upon
reasonable advance notice to Landlord to the extent necessary for the sole
purpose of installing Tenant's telecommunications and computer cabling, subject
to the provisions of this Lease and provided that such access by Tenant will not
interfere with or delay the substantial completion of Landlord's Work. In
connection with such access, Tenant agrees (i) to cease promptly upon request by
Landlord any activity or work which, in Landlord's good faith judgment, shall
interfere with or delay Landlord's prosecution or completion of Landlord's Work;
(ii) that Tenant shall comply promptly with all procedures and regulations
reasonably prescribed by Landlord for coordinating such work and activities with
any other activity or work in the Premises or the Building; (iii) that Tenant
and its contractors shall work harmoniously with the contractors and
subcontractors performing Landlord's Work, (iv) that such access shall be at the
sole risk of Tenant and shall be deemed to be a license on all of the same terms
and conditions contained in this Lease other than the obligation of pay Fixed
Rent, the Base Electric Charge or recurring Additional Charges payable in
connection with Article 3 hereof; (v) that prior to exercising such right,
Tenant shall deliver to Landlord the policies of insurance required by this
Lease; (vi) that Tenant's indemnity set forth in Article 18 of this Lease shall
be effective, and (vii) that to the extent that any such access causes actual
delay in the substantial completion of Landlord's Work, such delay shall be
deemed to be a Tenant Delay.
(k) Subject to the terms and provisions of Section 2.01(a)
hereof, if and when Tenant shall take actual possession of the Premises, it
shall be conclusively presumed that the
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same were in satisfactory condition as of the date of such taking of possession,
unless within ten (10) Business Days after such date Tenant shall give Landlord
notice (hereinafter called the "punchlist") specifying the respects in which
Landlord's Work was not satisfactorily performed or completed. Landlord agrees
to diligently complete all items set forth in the punchlist as soon as
reasonably practicable, at Landlord's sole cost and expense, provided that in no
event shall Landlord be required to perform the same on an overtime or
premium-pay basis.
(l) Notwithstanding anything to the contrary contained herein,
and in the event that (1) Tenant shall have submitted to Landlord the final
Tenant Work Final Plans on or before February 15, 2000 and (2) the Floor 15
Commencement Date shall have not occurred on or before November 15, 2000 ("15th
Floor Outside Inclusion Date"), which 15th Floor Outside Inclusion Date shall be
extended by one day for each day that Landlord is delayed in substantially
completing Landlord's Work by Force Majeure Causes and/or Tenant Delay, then, in
such event, the Floor 15 Partial Abatement Period set forth in Section 1.12(c)
hereof shall be extended by one (1) day for each day that Landlord is so delayed
in the substantial completion of Landlord's Work with respect to the 15th floor
by the number of days occurring during the period commencing on the 15th Floor
Outside Inclusion Date (as such 15th Floor Outside Inclusion Date may have been
extended as set forth above) until the Floor 15 Commencement Date.
2.02. Tenant shall use and occupy the Premises for general and
executive offices and for no other purpose.
2.03. If any governmental license or permit (other than a Certificate
of Occupancy for the entire Building) shall be required for the proper and
lawful conduct of Tenant's business in the Premises or any part thereof, Tenant,
at its expense, shall duly procure and thereafter maintain such license or
permit and submit the same to Landlord for inspection; provided, however,
Landlord shall be responsible for obtaining and maintaining equipment use
permits on all base Building HVAC units in the Premises. Tenant shall at all
times comply with the terms and conditions of each such license or permit.
Additionally, should Alterations, Tenant's use of the Premises for other than
executive and general offices or Tenant's use of any portion of the Premises for
a public assembly use require any modification or amendment of any Certificate
of Occupancy for the Building, Tenant shall, at its expense, take all actions
reasonably requested by Landlord in order to procure any such modification or
amendment and shall reimburse Landlord (as Additional Charges) for all
reasonable costs and expenses Landlord incurs in effecting said modifications or
amendments. The foregoing provisions are not intended to be deemed Landlord's
consent to any Alterations or to a use of the Premises not otherwise permitted
hereunder nor to require Landlord to effect such modifications or amendments of
any Certificate of Occupancy.
2.04. Tenant shall not at any time use or occupy the Premises or the
Building, or suffer or permit anyone to use or occupy the Premises, or do
anything in the Premises or the Building, or suffer or permit anything to be
done in, brought into or kept on the Premises, which in any manner (a) violates
the Certificate of Occupancy for the Premises or for the Building; (b) causes or
is liable to cause injury to the Premises or the Building or any equipment,
facilities or systems therein; (c) constitutes a violation of the laws and
requirements of any public authorities or the requirements of insurance bodies,
provided such insurance requirements do not prohibit the use of the Premises for
the purposes permitted under Section 2.02 hereof; (d) impairs the character,
reputation or appearance of the Building as a first-class office building; (e)
impairs the proper and economic maintenance, operation and repair of the
Building and/or its equipment, facilities or systems; (f) annoys or
inconveniences other tenants or occupants of the Building; (g) constitutes a
nuisance, public or private; (h) makes unobtainable from reputable insurance
companies authorized to do business in New York State all-risk property
insurance, or liability, elevator, boiler or other insurance at standard rates
required to be furnished by
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Landlord under the terms of any mortgages covering the Premises; or (i)
discharges objectionable fumes, vapors or odors into the Building's flues or
vents or otherwise.
2.05. Tenant shall not use, or suffer or permit anyone to use, the
Premises or any part thereof, for (a) a banking, trust company, or safe deposit
business, (b) a savings bank, a savings and loan association, or a loan company
operating an "off the street" business to the general public at the Premises,
(c) the sale of travelers' checks and/or foreign exchange, (d) a stock brokerage
office or for stock brokerage purposes, (e) a restaurant and/or bar and/or the
sale of confectionery and/or soda and/or beverages and/or sandwiches and/or ice
cream and/or baked goods, (f) the business of photographic reproductions and/or
offset printing (except that Tenant and its permitted assignees, subtenants and
occupants may use part of the Premises for photographic reproductions and/or
offset printing in connection with, either directly or indirectly, its own
business and/or activities), (g) an employment or travel agency, (h) a school or
classroom, (i) medical or psychiatric offices, (j) conduct of an auction (other
than over the Internet), (k) gambling activities or (1) the conduct of obscene,
pornographic or similar disreputable activities. Further, the Premises may not
be used by (i) an agency, department or bureau of the United States Government,
any state or municipality within the United States or any foreign government, or
any political subdivision of any of them, (ii) any charitable, religious, union
or other not-for-profit organization, or (iii) any tax exempt entity within the
meaning of Section 168(j)(4)(A) of the Internal Revenue Code of 1986, as
amended, or any successor or substitute statute, or rule or regulation
applicable thereto (as same may be amended).
ARTICLE 3 Escalations
3.01. The terms defined below shall for the purposes of this Lease have
the meanings herein specified:
(a) "Base Operating Amount" shall mean the Operating Expenses
for the Base Operating Year.
(b) "Base Operating Year" shall mean the calendar year
commencing on January 1, 2000.
(c) "Base Tax" shall mean one-half of the sum of: (A) the
amount determined by multiplying (i) the amount for which the Building and the
Land are assessed by the City of New York for purposes of establishing Taxes to
be paid by Landlord for the Tax Year commencing on July 1, 1999, and ending on
June 30, 2000, as finally determined, by (ii) the applicable real property tax
rate for the Borough of Manhattan with respect to such Tax Year; and (B) the
amount determined by multiplying (i) the amount for which the Building and the
Land are assessed by the City of New York for purposes of establishing Taxes to
be paid by Landlord for the Tax Year commencing on July 1, 2000, and ending on
June 30, 2001, as finally determined, by (ii) the applicable real property tax
rate for the Borough of Manhattan with respect to such Tax Year.
(d) "Escalation Statement" shall mean a statement setting
forth the amount payable by Tenant for a specified Tax Year or Operating Year
(as the case may be) pursuant to this Article 3.
(e) "Operating Expenses" shall mean all expenses paid or
incurred by
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Landlord and Landlord's affiliates and/or on their behalf in respect of the
repair, replacement, maintenance, operation and/or security of the Real Property
(hereinafter defined) and the services provided tenants therein, including,
without limitation, (i) salaries, wages, medical, surgical, insurance
(including, without limitation, group life and disability insurance) of
employees of Landlord or Landlord's affiliates and/or the managing agent for the
Building (if any), union and general welfare benefits, pension benefits,
severance and sick day payments, and other fringe benefits of employees of
Landlord and Landlord's affiliates and/or the managing agent for the Building
(if any) and their respective contractors engaged in such repair, replacement,
maintenance, operation and/or security; (ii) payroll taxes, worker's
compensation, uniforms, dry cleaning and related expenses (whether direct or
indirect) for such employees; (iii) the cost of fuel, gas, steam, electricity
(except as otherwise provided herein) heat, ventilation, air conditioning,
chilled and condenser water, water, sewer and other utilities, together with any
taxes and surcharges on, and fees paid in connection with the calculation and
billing of such utilities; (iv) the cost of painting and/or decorating all areas
of the Real Property, excluding, however, any space contained therein which is
demised or to be demised to tenant(s); (v) the cost of casualty, liability,
fidelity, rent and all other insurance regarding the Real Property and/or any
property on, below or above the Real Property, and the repair, replacement,
maintenance, operation and/or security thereof; (vi) the cost of all supplies,
tools, materials and equipment, whether by purchase or rental, used in the
repair, replacement, maintenance, operation and/or security of the Real
Property, and any sales and other taxes thereon; (vii) the rental value as of
the date hereof of the Landlord's Building office utilized by the personnel of
either Landlord or Landlord's affiliates, in connection with the repair,
replacement, maintenance, operation and/or security thereof, and all Building
office expenses, such as telephone, utility, stationery and similar expenses
incurred in connection therewith; (viii) the cost of cleaning, janitorial and
security services, including, without limitation, glass cleaning, snow and ice
removal and garbage and waste collection and/or disposal; (ix) the cost of all
interior and exterior landscaping and all temporary exhibitions located at or
within the Real Property; (x) the cost of alterations and improvements made or
installed after the expiration of the Base Operating Year by reason of the laws
and requirements of any public authorities or the requirements of insurance
bodies and all tools and equipment related thereto; (xi) the cost of all other
alterations, repairs, replacements and/or improvements made or installed after
the expiration of the Base Operating Year by Landlord or Landlord's affiliates,
at their respective expense, whether structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen, and whether or not required by this
Lease, and all tools and equipment related thereto; provided, however, that if
under generally accepted accounting principles consistently applied, any of the
costs referred to in clause (x) or this clause (xi) are required to be
capitalized, then such capitalized costs (and, at Landlord's option, any other
costs included in Operating Expenses), together with interest thereon at the
Base Rate (as defined in subsection 35.05(j) hereof) in effect as of December 31
of the year in which such expenditure is made, shall be amortized or
depreciated, as the case may be, over a period of time which shall be the
shorter of: (A) the useful life of the item in question, as reasonably
determined by Landlord in accordance with generally accepted accounting
principles consistently applied; or (B) ten (10) years; provided however that
with respect to any capital improvement and/or any machinery or equipment which
is made or becomes operational, as the case may be, after the Base Operating
Year, and which has the effect of reducing the expenses which otherwise would be
included in Operating Expenses, the amount included in Operating Expenses in any
Operating Year until such improvement and/or machinery or equipment has been
fully amortized or depreciated, as the case may be, shall be an amount which is
the greater of: (X) the amortization or depreciation, as the case may be, of
such capital improvement and/or machinery or equipment, which would have been
included in Operating Expenses pursuant to the foregoing provisions; or (Y) the
amount of savings, as reasonably estimated by Landlord, resulting from the
installation and operation of such improvement and/or machinery or equipment;
(xii) management fees, provided, however, that if Landlord or an affiliate of
Landlord is the managing agent of the Building then the annual management fee
shall be equal to two and one-half (2-1/2%) percent of rents and additional
rents payable by those tenants of the Building
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which are leasing space therein; (xiii) Intentionally omitted; (xiv) costs
relating to the elevators and escalators, (xv) all reasonable costs and expenses
of legal, bookkeeping, accounting and other professional and consulting services
incurred in connection with the operation, and management of the Real Property
except as hereinafter excluded; (xvi) fees, dues and other contributions paid by
or on behalf of Landlord or Landlord's affiliates to civic or other real estate
organizations provided same do not exceed the level customarily paid by owners
of first-class office buildings in Downtown Manhattan comparable to the
Building; and (xvii) all other fees, costs, charges and expenses properly
allocable to the repair, replacement, maintenance, operation and/or security of
the Real Property, in accordance with then prevailing customs and practices of
the real estate industry in the Borough of Manhattan, City of New York.
Notwithstanding anything to the contrary set forth in this Section 3.01(e), the
term "Operating Expenses", as used and defined under this subsection (e), shall
not include the following items:
(1) interest on and amortization of debts (and costs and charges
incurred in connection with such financings);
(2) the cost of tenant improvements made for tenant(s) of the
Building or allowances in lieu thereof;
(3) brokerage commissions;
(4) financing or refinancing costs;
(5) Taxes;
(6) salaries and fringe benefits and other related costs of
employment, as set forth in clauses (i) and (ii) of the first
sentence of this Section 3.01(e), for officers, employees and
executives above the grade of Building Manager;
(7) attorneys' fees, appraisal fees or accountants' or other
consultants' fees to the extent incurred in connection with
the negotiation and preparation of leases in the Building or
in enforcing Landlord's rights under leases (except to the
extent that the enforcement of such rights benefits tenants of
the Building generally and Landlord does not recover such fees
from the offending tenant), or in connection with financing,
refinancing or transferring the Building or the Real Property
or Landlord's interest therein;
(8) lease takeover costs incurred by Landlord in connection with
leases in the Building;
(9) rents and additional rents under any Superior Lease (as
defined in Section 5.01 hereof);
(10) depreciation (except as otherwise provided herein);
(11) the cost of any items to the extent Landlord is actually
reimbursed by proceeds of insurance or condemnation,
warranties or guarantees, or otherwise compensated, including
direct reimbursement by any tenant for specific services
performed for such tenant (other than under operating expense
escalation provisions of its lease);
(12) the costs of work performed or services provided for other
tenants of the Building to the extent same exceed both the
level of work or services required to be performed or provided
to other tenants of the Building and to Tenant under this
Lease;
(13) the cost of operating any parking facility, observatory,
restaurant or luncheon, athletic or
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recreational club;
(14) advertising, promotional and public relations expenditures;
(15) capital expenditures, other than those which are incurred
after the expiration of the Base Operating Year and which
(i) are occasioned by the necessity of compliance with
any laws and requirements of any public authorities
or the requirements of insurance bodies (subject to
the exclusions set forth in the immediately following
sentence),
(ii) are reasonably intended to reduce Operating Expenses,
or
(iii) relate to replacements or alterations or improvements
(hereinafter collectively called a "replacement")
made in lieu of repairs when such replacement is
reasonably necessary in accordance with sound
management and operating principles, notwithstanding
that the replacement item is of superior quality,
design or utility to the item being replaced;
(16) income, profit, franchise or similar taxes imposed upon
Landlord or in connection with the Land and/or the Building;
and
(17) expenses in the nature of fines and penalties assessed against
the Building or Landlord, unless and to the extent such fines
and penalties are due to an act or omission of Tenant.
No item of expense shall be counted more than once either as an inclusion in or
an exclusion from Operating Expenses. Any expense (including, without
limitation, the expenses of the Building office and the expenses of any
employees or contractors of Landlord or Landlord's affiliates and/or the
managing agent for the Building) which should be allocated, in accordance with
generally accepted accounting principles, between the Land and the Building, on
the one hand, and any other property owned by Landlord or an affiliate of
Landlord, on the other hand, shall be properly allocated in accordance
therewith, and there shall be included in Operating Expenses only the portion
thereof allocable to the Land and the Building.
(f) "Operating Year" shall mean each calendar year in which
occurs any part of the term of this Lease following the end of the Base
Operating Year.
(g) "Real Property" shall mean, collectively, the Building
(together with all personal property located therein and all fixtures,
facilities, machinery and equipment used in the operation thereof, including,
but not limited to, all cables, fans, pumps, boilers, heating and cooling
equipment, wiring and electrical fixtures and metering, control and distribution
equipment, component parts of the HVAC, electrical, plumbing, elevator and any
life or property protection systems (including, without limitation, sprinkler
systems), window washing equipment and snow removal equipment), the Land, any
property beneath the Land, the curbs, sidewalks and plazas on and/or immediately
adjoining the Land, and all easements, air rights, development rights and other
appurtenances to the Building or the Land or both the Land and the Building
(h) "Taxes" shall mean (A) all real estate and personal
property taxes, vault taxes, assessments and special assessments, sewer rents
and water charges, governmental levies,
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municipal taxes, county taxes, business improvement district assessments,
special ad valorem levies, and any other governmental charges levied, assessed
or imposed upon or with respect to the Real Property, by any federal, state,
municipal or other governments or governmental bodies or authorities, and (B)
all taxes assessed or imposed with respect to the rentals payable to Landlord
other than general income and gross receipts taxes. If at any time during the
term of this Lease the methods of taxation prevailing on the date 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 such taxes, assessments, charges and levies now imposed on
real estate, there shall be levied, assessed or imposed (x) a tax, assessment,
levy, imposition, license fee or charge wholly or partially as a capital levy or
otherwise on the rents received therefrom, or (y) any other such additional or
substitute tax, assessment, levy, imposition, fee or charge, then all such
taxes, assessments, levies, impositions, fees 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, notwithstanding anything to the
contrary contained herein, exclude any net income, franchise or "value added"
tax, inheritance tax or estate tax imposed or constituting a lien upon Landlord
or all or any part of the Land or Building, except to the extent that any of the
foregoing are hereafter assessed against owners or lessors of real property in
their capacity as such (as opposed to any such taxes which are of general
applicability).
(i) "Tax Year" shall mean each period of twelve months,
commencing on the first day of July of each such period, in which occurs any
part of the term of this Lease, or such other period of twelve months occurring
during the term of this Lease as hereafter may be duly adopted as the fiscal
year for real estate tax purposes of the City of New York.
(j) Except as set forth in the following sentence, "Tenant's
Share" shall mean 6.77 (6.77%) percent, which represents the fraction, expressed
as a percentage, the numerator of which is 67,749, reflecting the number of
rentable square feet deemed by the parties hereto to comprise the rentable
square footage of the Premises, and the denominator of which is 1,000,904,
reflecting the number of rentable square feet deemed by the parties hereto to
comprise the rentable square footage of the Building. Prior to the Final
Commencement Date, "Tenant's Share" shall have the following meanings:
(1) for floor 14, "Tenant's Share" shall mean 3.62
(3.62%) percent, which represents the fraction,
expressed as a percentage, the numerator of which is
36,253, reflecting the number of rentable square feet
deemed by the parties hereto to comprise the rentable
square footage of the fourteenth (14th) floor of the
Premises, and the denominator of which is 1,000,904,
reflecting the number of rentable square feet deemed
by the parties hereto to comprise the rentable square
footage of the Building;
(2) for floor 14A, "Tenant's Share" shall mean 1.15
(1.15%) percent, which represents the fraction,
expressed as a percentage, the numerator of which is
11,500, reflecting the number of rentable square feet
deemed by the parties hereto to comprise the rentable
square footage of floor 14A of the Premises, and the
denominator of which is 1,000,904, reflecting the
number of rentable square feet deemed by the parties
hereto to comprise the rentable square footage of the
Building; and
(3) for floor 15, "Tenant's Share" shall mean 2.0
(2.0%) percent, which represents the fraction,
expressed as a percentage, the numerator of which is
19,996, reflecting the number of rentable square feet
deemed by the parties hereto to comprise the rentable
square footage of the fifteenth (15th) floor of the
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Premises, and the denominator of which is 1,000,904,
reflecting the number of rentable square feet deemed
by the parties hereto to comprise the rentable square
footage of the Building.
3.02. (a) Tenant shall pay as Additional Charges for each Tax Year a
sum (herein called a "Tax Payment") equal to Tenant's Share of the amount by
which the Taxes for such Tax Year exceed the amount of the Base Tax. Any amount
due to Landlord as a result of the preceding sentence shall be due and payable
within thirty (30) days after Landlord shall have submitted to Tenant an
Escalation Statement with respect thereto, together with copies of paid tax
bills. Commencing on July 1, 2000, Tenant shall also make payments to Landlord
on account of estimated increases in Taxes towards the following Tax Year upon
submission of an Escalation Statement and copies of paid tax bills for the then
current Tax Year. The payments shall be made in advance, as Additional Charges,
in equal monthly installments on the first day of each month during the term
hereof. The installments for each month of each Tax Year shall be equal to
Tenant's Share of the difference between (x) the Taxes for the current Tax Year
minus (y) the amount of the Base Tax, divided into twelve (12) equal
installments. Thus, for example, if the amount of the Base Tax is $4.00 per
rentable square foot and the Taxes for the Tax Year commencing on July 1, 2000
are $4.12 per rentable square foot:
(i) Pursuant to the first sentence of this Section
3.02(a), Tenant will make a payment of $0.12 per
rentable square foot (or two or more equal payments
aggregating $0.12 per rentable square foot if
Landlord pays Taxes in two or more equal
installments) to Landlord in respect of the Tax Year
commencing on July 1, 2000 within thirty (30) days
after submission to Tenant of an Escalation Statement
and copies of paid tax bills for such Tax Year; and
(ii) Pursuant to the third through fifth sentences of this
Section 3.02(a), commencing on July 1, 2000, Tenant
will make estimated monthly payments of $0.01 per
rentable square foot to Landlord in respect of the
Tax Year commencing on July 1, 2001.
In the event the total amount paid by Tenant for any Tax Year shall be less than
the actual amount due from Tenant based on the actual tax bills paid by, for or
on behalf of Landlord, Tenant will pay to Landlord in a lump sum that amount by
which the actual amount due from Tenant exceeds the total amount of Tenant's
monthly payments within 30 days from the date Landlord presents such bills to
Tenant. If the total amount of monthly payments paid by Tenant exceeds the
actual amount due from Tenant based on the actual tax bills, then Landlord shall
credit the amount of such excess against the next installment of Fixed Rent due
under this Lease, provided that if Tenant is in default hereunder at such time
(after notice and the expiration of any applicable cure periods), Tenant shall
not receive such credit until such time as such default has been cured by
Tenant.
(b) Tenant shall pay to Landlord upon demand, as Additional
Charges, Tenant's Share of any expenses actually incurred by Landlord
(including, without limitation, appraisal, accounting, consulting and legal fees
and disbursements) in contesting Taxes or the assessed valuation of all or any
part of the Land and/or the Building (a "Tax Contest") or in seeking or
collecting any refund of Taxes or in filing for the benefits and/or complying
with the terms of any program providing for a tax abatement, refund or
reduction, including, without limitation, the Industrial and Commercial
Incentive Program provided for in Title 2-D of Article 4 of the New York Real
Property Tax Law (the foregoing expenses being herein collectively called "Tax
Reduction Expenses"), except to the extent, if any, that Landlord has
theretofore been reimbursed for such expenses pursuant to the first sentence of
Section
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3.02(c) below. Landlord and Tenant hereby acknowledge that, as of the date
hereof, the legal fees incurred by Landlord in connection with Tax Contests or
in seeking or collecting refunds of Taxes are paid on a contingency fee basis
and, therefore, for so long as Landlord shall continue to pay such legal fees on
a contingency fee basis, in the event that Landlord shall fail to obtain a
refund of Taxes as the result of any Tax Contest, the Tax Reduction Expenses
payable under this Section 3.02(b) in connection with such Tax Contest will not
include any expenses incurred on account of legal fees (other than payments made
to reimburse Landlord's counsel for disbursements incurred in connection with
such Tax Contest). Nothing contained in the preceding sentence shall be deemed
to be a representation by Landlord that it will continue, during the term of
this Lease, to pay such legal fees on a contingency fee basis.
(c) If Landlord shall receive a refund of Taxes (herein called
a "Tax Refund") for any Tax Year, Landlord shall permit Tenant to credit against
subsequent payments under this Section 3.02 Tenant's Share of the Tax Refund,
after deducting from the Tax Refund all Tax Reduction Expenses incurred by
Landlord in obtaining such Tax Refund which have not previously been recovered
by Landlord, but not to exceed Tenant's Tax Payment paid for such Tax Year.
Notwithstanding anything to the contrary contained in this Lease, in the event
that Landlord receives any refund or abatement of Taxes pursuant to any tax
benefit program for which Landlord or the Building or the Land may be eligible
and under which Landlord is prohibited from paying all or any portion of such
refund or abatement to Tenant and/or Landlord is required to pay all or any
portion of such refund or abatement to specified tenant(s) or occupant(s) of the
Building, then, in such event, (i) Tenant shall not be entitled to any payment
or credit under this Lease in connection with such refund or abatement (unless
Tenant is otherwise entitled to such payment or credit in accordance with the
regulations governing such program), and (ii) for purposes of computing Tenant's
Tax Payment, there shall not be deducted from Taxes all or any portion of such
refund or abatement.
(d) Nothing contained in this Lease shall obligate Landlord to
bring any application or proceeding seeking a reduction in Taxes or assessed
valuation and, in the event that Landlord shall bring any such application or
proceeding, Landlord shall have the right to settle same on such terms as
Landlord shall, in its sole discretion, deem proper. Tenant, for itself and its
immediate and remote subtenants and successors in interest hereunder, hereby
waives, to the extent permitted by law, any right Tenant may now or in the
future have to protest or contest any Taxes or to bring any application or
proceeding seeking a reduction in Taxes or assessed valuation or otherwise
challenging the determination thereof.
(e) The benefit of any discount for the early payment or
prepayment of Taxes shall accrue solely to the benefit of Landlord and such
discount shall not be subtracted from Taxes.
(f) If the Taxes comprising the Base Tax are reduced as a
result of a certiorari proceeding or otherwise, the Taxes as so reduced shall,
for all purposes be deemed to be the Base Tax and Landlord shall give notice to
Tenant of the amount by which the Tax Payments previously made were less than
the Tax Payments required to be made under this Section 3.02, and Tenant shall
pay the amount of the deficiency within thirty (30) days after demand therefor.
(g) If the real estate tax fiscal year of The City of New York
shall be changed during the term of this Lease, any Taxes for such fiscal year,
a part of which is included within a particular Tax Year and a part of which is
not so included, shall be apportioned on the basis of the number of days in such
fiscal year included in the particular Tax Year for the purpose of making the
computations under this Section 3.02.
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(h) Tenant shall pay to Landlord upon demand, as Additional
Charges, any occupancy tax or rent tax now in effect or hereafter enacted, if
payable by Landlord in the first instance or hereafter required to be paid by
Landlord.
3.03. (a) For each Operating Year, subsequent to the Base Operating
Year, any part of which shall occur during the term of this Lease, Tenant shall
pay an amount (herein called "Operating Payment") equal to the sum of Tenant's
Share of the amount by which the Operating Expenses for such Operating Year
exceed the Operating Expenses for the Base Operating Year.
(b) If during all or part of any Operating Year (including
without limitation, the Base Operating Year), Landlord shall not furnish any
particular item(s) of work or service (which would constitute an Operating
Expense hereunder) to portions of the Building (including without limitation the
Premises) due to the fact that such portions are not occupied or leased, or
because such item of work or service is not required or desired by the tenant
(including without limitation Tenant) of such portion, or such tenant is itself
obtaining and providing such item of work of service, or for any other reasons,
or if Landlord is furnishing any particular item(s) of work or service (which
would constitute an Operating Expense hereunder) to a tenant (including without
limitation Tenant) who has undertaken to reimburse Landlord directly for the
cost thereof, then, for purposes of computing the Additional Charges payable by
Tenant pursuant to this Section 3.03, the Operating Expenses for such period
shall be adjusted to reflect the Operating Expenses which would reasonably have
been incurred during such period by Landlord if it had at its own expense
furnished such item(s) of work or services to such portion of the Building.
(c) Landlord may furnish to Tenant, prior to the commencement
of each Operating Year a written statement setting forth in reasonable detail
Landlord's reasonable estimate of the Operating Payment for such Operating Year.
Tenant shall pay to Landlord on the first day of each month during the Operating
Year in which the Operating Payment will be due, an amount equal to one-twelfth
(1/12th) of Landlord's reasonable estimate of the Operating Payment for such
Operating Year. If, however, Landlord shall not furnish any such estimate for an
Operating Year or if Landlord shall furnish any such estimate for an Operating
Year subsequent to the commencement thereof, then (i) until the first day of the
month following the month in which such estimate is furnished to Tenant, Tenant
shall pay to Landlord on the first day of each month an amount equal to the
monthly sum payable by Tenant to Landlord under this Article 3 in respect of the
last month of the preceding Operating Year; (ii) after such estimate is
furnished to Tenant, Landlord shall give notice to Tenant stating whether the
installments of the Operating Payment previously made for such Operating Year
were greater or less than the installments of the Operating Payment to be made
for the Operating Year in which the Operating Payment will be due in accordance
with such estimate, and (A) if there shall be a deficiency, Tenant shall pay the
amount thereof within thirty (30) days after demand therefor, or (B) if there
shall have been an overpayment, Landlord shall within 30 days of such notice
refund to Tenant the amount thereof; and (iii) on the first day of the month
following the month in which such estimate is furnished to Tenant and monthly
thereafter throughout the remainder of such Operating Year Tenant shall pay to
Landlord an amount equal to one-twelfth (1/12th) of the Operating Payment shown
on such estimate. Landlord may, during each Operating Year, furnish to Tenant a
revised statement of Landlord's reasonable estimate of the Operating Payment for
such Operating Year, and in such case, the Operating Payment for such Operating
Year shall be adjusted and paid or refunded or credited as the case may be,
substantially in the same manner as provided in the preceding sentence.
(d) Landlord shall furnish to Tenant an Escalation Statement
for each Operating Year (and shall endeavor to do so within one hundred eighty
(180) days after the end of each Operating Year). Such statement shall set forth
in reasonable detail the Operating Expenses for such
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<PAGE> 21
Operating Year. If the Operating Statement shall show that the sums paid by
Tenant, if any, under subsection 3.03(c) exceeded the Operating Payment to be
paid by Tenant for the Operating Year for which such Escalation Statement is
furnished, Landlord shall refund to Tenant the amount of such excess; and if the
Operating Statement for such Operating Year shall show that the sums so paid by
Tenant were less than the Operating Payment to be paid by Tenant for such
Operating Year, Tenant shall pay the amount of such deficiency within thirty
(30) days after demand therefor.
(e) Tenant, upon reasonable notice given within one hundred
twenty (120) days of the receipt of such Escalation Statement, may elect to have
Tenant's designated (in such notice) Certified Public Accountant (who may be an
employee of Tenant) examine such of Landlord's books and records (collectively
"Records") as are directly relevant to the Escalation Statement in question,
together with reasonable supporting data therefor. In making such examination,
Tenant agrees, and shall cause its designated Certified Public Accountant to
agree, to keep confidential (i) any and all information contained in such
Records and (ii) the circumstances and details pertaining to such examination
and any dispute or settlement between Landlord and Tenant arising out of such
examination; and Tenant will confirm and cause its Certified Public Accountant
to confirm such agreement in a separate written agreement, if requested by
Landlord. If Tenant shall not give such notice within such one hundred twenty
(120) day period, then the Escalation Statement as furnished by Landlord shall
be conclusive and binding upon Tenant. Pending the resolution of any contest
pursuant to the terms hereof, Tenant shall continue to pay all sums as
determined to be due in the first instance by such Escalation Statement and upon
the resolution of such contest, suitable adjustment shall be made in accordance
therewith with appropriate refund to be made by Landlord to Tenant if required
thereby. Landlord agrees to maintain its Records as are directly relevant to the
Escalation Statement in question until one (1) year after the later of the date
that the Escalation Statement is furnished, or the date that Tenant's designated
Certified Public Accountant, if any, completes its examination of the Records,
or the date that any dispute regarding an Escalation Statement is resolved.
3.04. (a) In any case provided in this Article 3 in which Tenant is
entitled to a refund, Landlord may, in lieu of allowing such refund, credit
against the next due installments of Fixed Rent and Additional Charges any
amounts to which Tenant shall be entitled. Nothing in this Article 3 shall be
construed so as to result in a decrease in the Fixed Rent hereunder. If this
Lease shall expire before any such credit shall have been fully applied, then
(provided Tenant is not in default hereunder beyond any applicable notice and
grace periods) Landlord shall refund to Tenant the unapplied balance of such
credit.
(b) The expiration or termination of this Lease during any Tax
Year or Operating Year (for any part or all of which there is a Tax Payment or
Operating Payment under this Article 3) shall not affect the rights or
obligations of the parties hereto respecting such payment and any Escalation
Statement relating to such payment may be sent to Tenant subsequent to, and all
such rights and obligations shall survive, any such expiration or termination.
Any payments due under such Escalation Statement shall be payable within thirty
(30) days after such statement or bill is sent to Tenant.
(c) The parties agree that the computations under this Article
3 are intended to constitute a formula for agreed rental escalation and may or
may not constitute an actual reimbursement to Landlord for Taxes and other costs
and expenses paid by Landlord with respect to the Real Property.
3.05. In the event that the Initial Commencement Date shall be other
than the first day of a Tax Year or an Operating Year or the date of the
expiration or other termination of this Lease shall
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be a day other than the last day of a Tax Year or an Operating Year, then in
such event in applying the provisions of this Article 3 with respect to any Tax
Year or Operating Year in which such event shall have occurred, appropriate
adjustments shall be made to reflect the occurrence of such event on a basis
consistent with the principles underlying the provisions of this Article 3
taking into consideration the portion of such Tax Year or Operating Year which
shall have elapsed after the term hereof commences in the case of the Initial
Commencement Date, and prior to the date of such expiration or termination in
the case of the Expiration Date or other termination.
3.06. Landlord's failure to render or delay in rendering an Escalation
Statement with respect to any Tax Year or Operating Year or any component of an
Operating Payment or any installment of a Tax Payment shall not prejudice
Landlord's right to thereafter render an Escalation Statement with respect
thereto or with respect to any subsequent Tax Year or Operating Year or
subsequent component of an Operating Payment or subsequent installment of a Tax
Payment, nor shall the rendering of an Escalation Statement for any Tax Year or
Operating Year prejudice Landlord's right to thereafter render a corrected
Escalation Statement for such Tax Year or Operating Year. Notwithstanding
anything to the contrary contained herein, in the event Landlord fails to
deliver an Escalation Statement for any period within three (3) years after the
end of the period as to which such Escalation Statement would have related
(except Landlord must deliver an Escalation Statement within two (2) years after
the end of the Tax Year or Operating Year in which the Expiration Date occurs),
Tenant may give a written notice of such failure to Landlord, and if Landlord
thereafter fails to deliver such Escalation Statement within thirty (30) days
after receipt of Tenant's notice, Landlord shall be deemed to have waived the
payment of any theretofore unpaid Additional Charges as to which such Escalation
Statement would have related, provided Tenant's notice makes specific reference
to the waiver provisions set forth in this sentence.
ARTICLE 4 Security
4.01. Tenant has deposited with Landlord the sum of One Million and
00/100 ($1,000,000.00) Dollars as security for the full and faithful performance
and observance by Tenant of Tenant's covenants and obligations under this Lease.
Landlord shall hold such security deposit in an interest-bearing account in a
bank to be selected by Landlord. If Tenant defaults in the full and prompt
payment and performance of any of Tenant's covenants and obligations under this
Lease, including, but not limited to, the payment of Fixed Rent and Additional
Charges, beyond the expiration of any applicable notice and cure periods,
Landlord may, but shall not be required to, use, apply or retain the whole or
any part of the security so deposited and the interest accrued thereon, if any,
to the extent required for the payment of any Fixed Rent and Additional Charges
or any other sums as to which Tenant is in default or for any sum which Landlord
may 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 in the reletting of the Premises, whether
such damages or deficiency accrue before or after summary proceedings or other
re-entry by Landlord. If Landlord shall so use, apply or retain the whole or any
part of the security or the interest accrued thereon, if any, Tenant shall,
within twenty (20) days after demand, immediately deposit with Landlord a sum
equal to the amount so used, applied or retained, as security as aforesaid
failing which Landlord shall have the same rights and remedies as for the
non-payment of Fixed Rent beyond the applicable grace period.
4.02.(a) In lieu of the cash security deposit provided for in Section
4.01 hereof, Tenant may at any time during the term hereof deliver to Landlord
and, shall, in such instance, except as
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otherwise provided herein, maintain in effect at all times during the term
hereof, an irrevocable letter of credit, substantially in the form annexed
hereto as Exhibit G and otherwise reasonably satisfactory to Landlord in the
amount of the security required pursuant to this Lease issued by a banking
corporation reasonably satisfactory to Landlord and having its principal place
of business or a duly licensed branch or agency in the City and State of New
York. Such letter of credit shall have an expiration date no earlier than the
first anniversary of the date of issuance thereof and shall be automatically
renewed from year to year unless terminated by the issuer thereof by notice to
Landlord given not less than 45 days prior to the expiration thereof. Except as
otherwise provided herein, Tenant shall, throughout the term of this Lease
deliver to Landlord, in the event of the termination of any such letter of
credit, replacement letters of credit in lieu thereof (each such letter of
credit and such extensions or replacements thereof, as the case may be, is
hereinafter referred to as a "Security Letter") no later than 30 days prior to
the expiration date of the preceding Security Letter. The term of each such
Security Letter shall be not less than one year and shall be automatically
renewable from year to year as aforesaid. If Tenant shall fail to obtain any
replacement of a Security Letter within the time limits set forth in this
Section 4.02(a), Landlord may draw down the full amount of the existing Security
Letter and retain the same as security hereunder.
(b) In the event Tenant defaults in respect of any of the
terms, provisions, covenants and conditions of this Lease, including, but not
limited to, the payment of Fixed Rent and Additional Charges, beyond the
expiration of any applicable notice and grace periods, Landlord may, at its
election, draw down the entire Security Letter or any portion thereof and use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any Fixed Rent and Additional Charges or any other
sum as to which Tenant is in default or for any sum which Landlord may expend or
may be required to expend by reason of Tenant's default in respect of any of the
terms, provisions, 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. To insure that Landlord may utilize
the security represented by the Security Letter in the manner, for the purpose,
and to the extent provided in this Article 4, each Security Letter shall provide
that the full amount thereof may be drawn down by Landlord upon the presentation
to the issuing bank of Landlord's draft drawn on the issuing bank without
accompanying memoranda or statement of beneficiary.
(c) In the event that Tenant defaults in respect of any of the
terms, provisions, covenants and conditions of this Lease and Landlord utilizes
all or any part of the security represented by the Security Letter but does not
terminate this Lease as provided in Article 22 hereof, Landlord may, in addition
to exercising its rights as provided in Section 4.02(b) hereof, retain the
unapplied and unused balance of the principal amount of the Security Letter as
security for the faithful performance and observance by Tenant thereafter of the
terms, provisions, and conditions of this Lease, and may use, apply, or retain
the whole or any part of said balance to the extent required for payment of
Fixed Rent, Additional Charges, or any other sum as to which Tenant is in
default or for any sum which Landlord may expend or be required to expend by
reason of Tenant's default in respect of any of the terms, covenants, and
conditions of this Lease. In the event Landlord applies or retains any portion
or all of the security delivered hereunder, Tenant shall forthwith restore the
amount so applied or retained so that at all times the amount deposited shall be
not less than the security required by Section 4.01 hereof.
4.03. If Tenant shall fully and faithfully comply with all of Tenant's
covenants and obligations under this Lease, the security or any balance thereof,
to which Tenant is entitled, shall be returned or paid over to Tenant after the
date fixed as the end of this Lease and after delivery to Landlord of entire
possession of the Premises. In the event of any sale, transfer or leasing of
Landlord's interest in the Building whether or not in connection with a sale,
transfer or leasing of the Land to a vendee, transferee or lessee, Landlord
shall have the right to transfer the unapplied part of the security and the
interest thereon, if any, to which Tenant is entitled, to the vendee, transferee
or lessee and Landlord shall
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thereupon be released by Tenant from all liability for the return or payment
thereof, and Tenant shall look solely to the new landlord for the return or
payment of the same. The provisions of the preceding sentence shall apply to
every subsequent sale, transfer or leasing of the Building, and any successor of
Landlord may, upon a sale, transfer, leasing or other cessation of the interest
of such successors in the Building, whether in whole or in part, pay over any
unapplied part of said security to any vendee, transferee or lessee of the
Building and shall thereupon be relieved of all liability with respect thereto.
In the event of any such sale, transfer or leasing, Landlord shall have the
right to require Tenant to deliver a replacement Security Letter naming the new
landlord as beneficiary and, if Tenant shall fail to timely deliver the same, to
draw down the existing Security Letter and retain the proceeds as security
hereunder until a replacement Security Letter is delivered. Except in connection
with a permitted assignment of this Lease, Tenant shall not assign or encumber
or attempt to assign or encumber the monies deposited herein as security or any
interest thereon to which Tenant is entitled, and neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance. In any event, in the absence of
evidence satisfactory to Landlord of an assignment of the right to receive the
security, or the remaining balance thereof, Landlord may return the security to
the original Tenant regardless of one or more assignments of this Lease.
4.04. (a) (i) Upon Tenant's receipt of notice from Landlord that
Landlord is commencing Landlord's Work in the Premises ("Section 4.04 Notice"),
Tenant will deposit with Landlord the sum of $1,000,000.00 as additional
security for the full and faithful performance and observance by Tenant of
Tenant's covenants and obligations under this Lease (the "Additional Security"),
which Additional Security shall be in addition to the $1,000,000 cash security
deposit provided for in Section 4.01 hereof. In lieu of the cash Additional
Security provided for in this Section 4.04(a), Tenant shall have the same right
to deliver to Landlord a Security Letter pursuant to the same terms and
conditions set forth in Section 4.02 hereof. The Additional Security shall be
held by Landlord in the same manner as the original security deposited by Tenant
in accordance with Sections 4.01, 4.02 and 4.03 hereof, except as provided in
Sections 4.04(b) and (c) hereof.
(ii) Provided and on condition that, as of the applicable
Reduction Date as set forth on the following chart, (i) Tenant shall not be in
default under this Lease after notice and the expiration of any applicable cure
period, and (ii) Tenant shall have not have failed more than two (2) times
during the entire term of this Lease to pay any installments of Fixed Rent and
Additional Charges within ten (10) days after the due date thereof, then in such
case, as of the applicable Reduction Date, the Additional Security required
under this Section 4.04(a)
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shall be reduced to the amount indicated in the following chart:
<TABLE>
<CAPTION>
------------------------------------------------------ ---------------
REDUCTION DATE SECURITY AMOUNT
------------------------------------------------------ ---------------
<S> <C>
The first day of the first full calendar month $800,000.00
occurring after the fourth (4th) anniversary of the Final
Commencement Date
The first day of the first full calendar month $600,000.00
occurring after the fifth (5th) anniversary of the Final
Commencement Date
The first day of the first full calendar month $400,000.00
occurring after the sixth (6th) anniversary of the Final
Commencement Date
The first day of the first full calendar month $200,000.00
occurring after the seventh (7th) anniversary of the Final
Commencement Date
The first day of the first full calendar month $ 0.00
occurring after the eighth (8th) anniversary of the Final
Commencement Date
</TABLE>
In the event that the Additional Security shall be held in the form of
a Security Letter, the Security Letter then in effect may be replaced by Tenant
after the applicable Reduction Date with a Security Letter in the amount of the
Additional Security as reduced pursuant to the foregoing, in the same form and
manner as described heretofore in this Article 4, and Landlord agrees to agree
to promptly return the existing Security Letter covering the Additional Security
to Tenant upon Landlord's receipt of said replacement Security Letter.
(b) For the purposes of this Section 4.04,"Tangible Net Worth"
shall mean the owner's equity of Tenant, computed in accordance with generally
accepted accounting principles, consistently applied, specifically excluding
goodwill from the calculation thereof. Upon Tenant's receipt of the Section 4.04
Notice, Tenant will provide Landlord with an unaudited consolidated balance
sheet (or the audited statements described in Section 4.04(c) hereof, if
available) setting forth Tenant's Tangible Net Worth, prepared in accordance
with generally accepted accounting principles, consistently applied, all in
reasonable detail and certified to be true and correct by Tenant's Chief
Financial Officer. Notwithstanding the foregoing provisions of this Section
4.04, if Tenant's Tangible Net Worth on the date that Tenant receives the
Section 4.04 Notice shall be not less than $20,000,000, then Tenant shall not be
required to provide Landlord with the Additional Security.
(c) Within ninety (90) days after the close of each fiscal
year of Tenant during the term of this Lease, Tenant will provide Landlord with
evidence of its Tangible Net Worth by providing Landlord with an audited
consolidated balance sheet, together with a report by an independent certified
public accounting firm reasonably acceptable to Landlord, setting forth that
they have examined Tenant's consolidated financial statements in accordance with
generally accepted accounting principles, consistently applied, and that in
their opinion, said consolidated financial statements present fairly the
consolidated financial position of Tenant in accordance with generally accepted
accounting principles, consistently applied. Notwithstanding the foregoing
provisions of this Section 4.04, if Tenant's Tangible Net Worth set forth in
such audited statements shall be not less than $20,000,000, then Landlord shall
return the Additional Security to Tenant; provided, however, if subsequent to
Landlord's return of the
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<PAGE> 26
Additional Security to Tenant, Tenant's Tangible Net Worth set forth in
subsequent audited statements is less than $20,000,000, then Tenant will be
required to deposit or re-deposit with Landlord the Additional Security as more
particularly described in this Section 4.04.
ARTICLE 5 Subordination, Notice to Superior Lessors and Mortgagees
5.01. This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate to all ground leases, overriding leases and underlying
leases of the Land and/or the Building and/or that portion of the Building of
which the Premises are a part, now or hereafter existing and to all mortgages
which may now or hereafter affect the Land and/or the Building and/or that
portion of the Building of which the Premises are a part and/or any of such
leases, whether or not such mortgages shall also cover other lands and/or
buildings and/or leases, 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 mortgages. This Section 5.01 shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver any
instrument that Landlord, the lessor under 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. Any lease to which this Lease is, at the
time referred to, subject and subordinate is herein called "Superior Lease" and
the lessor of a Superior Lease or its successor in interest, at the time
referred to, is herein called "Superior Lessor"; and any mortgage to which this
Lease is, at the time referred to, subject and subordinate is herein called
"Superior Mortgage" and the holder of a Superior Mortgage is herein called
"Superior Mortgagee." 5.02. If any act or omission of Landlord 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 (a) until it has given written notice of such act or
omission to Landlord and each Superior Mortgagee and each Superior Lessor whose
name and address shall previously have been furnished to Tenant, and (b) 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 Superior
Mortgagee or Superior 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 Superior Mortgagee or Superior Lessor shall with due
diligence give Tenant notice of intention to, and commence and continue to,
remedy such act or omission.
5.03. If any Superior Lessor or Superior Mortgagee, or any designee of
any Superior Lessor or Superior Mortgagee, 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 called "Successor Landlord") and upon such
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 a direct lease
between the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease, except that the Successor Landlord
shall not be:
(a) liable for any previous act or omission of Landlord (or
its predecessors in
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interest);
(b) responsible for any monies owing by Landlord to the credit
of Tenant;
(c) subject to any credits, offsets, claims, counterclaims,
demands or defenses which Tenant may have against Landlord (or its predecessors
in interest);
(d) bound by any payments of rent which Tenant might have made
for more than one (1) month in advance of the date such payment is due under
this Lease to Landlord (or its predecessors in interest);
(e) bound by any covenant to undertake or complete any
construction of the Premises or any portion thereof; provided, however, that
such Successor Landlord shall be liable for all on-going obligations of Landlord
to undertake or complete such construction of the Premises from and after the
date on which it shall acquire title to the Premises or become a
mortgagee-in-possession;
(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 and which landlords of like properties ordinarily perform at the
Landlord's expense, 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 Premises;
(h) bound by any modification of this Lease, including without
limitation, any modification which reduces the Fixed Rent or Additional Charges
or other charges payable under this Lease, or shortens the term thereof, or
otherwise materially adversely affects the rights of the lessor thereunder, made
without the written consent of the Successor Landlord; or
(i) required to remove any person occupying the Premises or
any part thereof.
5.04. Landlord represents that as of the date hereof: (i) there is one
Superior Mortgage affecting the Real Property, the holder of which is Capacity
Funding Company, LLC (herein called the "Existing Superior Mortgagee"), and (ii)
there are no existing Superior Leases affecting the Building. Landlord agrees to
obtain and deliver to Tenant a subordination, non-disturbance and attornment
agreement (herein called the "SNDA Agreement"), in recordable form, from the
Existing Superior Mortgagee, substantially in the form of Exhibit J annexed
hereto. Tenant shall execute concurrently with the execution of this Lease six
(6) counterparts of the SNDA Agreement, which SNDA Agreement Landlord shall
promptly deliver to the Existing Superior Mortgagee for counter-execution.
5.05. (a) With respect to future Superior Mortgages (and to the
existing Superior Mortgage if same is assigned to an entity which is not an
Affiliate of Landlord) and future Superior Leases affecting the Building,
Landlord agrees (subject to the qualifications hereinafter set forth) to use
reasonable efforts to obtain from the holders of any such future Superior
Mortgages and future Superior Leases, an SNDA Agreement in favor of Tenant on
such Superior Mortgagee's or Superior Lessor's standard form, which Tenant
agrees to execute and deliver to Landlord within ten (10) Business Days after
receipt thereof; provided, however, Landlord shall have no liability to Tenant
and this Lease shall not be affected in the event that Landlord is unable,
despite such reasonable efforts, to obtain such an
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<PAGE> 28
SNDA Agreement. Landlord shall in no event be required to expend any monies or
commence or prosecute litigation or reject financing which is otherwise
satisfactory to it to obtain such an SNDA Agreement, and Tenant agrees to be
liable for any reasonable attorneys' fees of the holders of such superior
instruments actually charged in connection with obtaining such SNDA Agreement.
(b) For the purposes of this Article 5, the term "Affiliate of
Landlord" shall mean an entity controlled by, controlling or under common
control with Landlord, and for the purposes of this Article 5, the term
"control" shall mean ownership of at least ninety (90%) percent of all of the
stock or other beneficial ownership interest therein and the possession of the
power to direct or cause direction of the management and policy of such entity,
and the term "Institution" shall mean a bank, trust company, insurance company,
savings and loan association, pension or profit sharing trust, investment
company (as defined by the Investment Company Act of 1940), educational
institution or any corporation or other entity in the business of making loans
which is not an Affiliate of Landlord. Notwithstanding the provisions of Section
5.05(a) hereof, and with respect to the holder of a future Superior Mortgage or
Superior Lease which is either an Affiliate of Landlord or not an Institution,
Landlord agrees (subject to the qualifications hereinafter set forth) to obtain
from such future Affiliate of Landlord or non-Institution, an SNDA Agreement in
recordable form, and on the commercially reasonable form of such Affiliate of
Landlord or non-Institution, and Tenant agrees that the form of SNDA Agreement
annexed hereto as Exhibit J is commercially reasonable and acceptable to Tenant
and that Tenant shall promptly execute the same upon delivery thereof by
Landlord.
ARTICLE 6 Quiet Enjoyment
6.01. So long as Tenant pays all of the Fixed Rent and Additional
Charges and observes and performs all of Tenant's other obligations hereunder,
Tenant shall peaceably and quietly have, hold and enjoy the Premises without
hindrance, ejection or molestation by Landlord or any person lawfully claiming
through or under Landlord, subject, nevertheless, to the provisions of this
Lease and to Superior Leases and Superior Mortgages. This covenant shall be
construed as a covenant running with the Land, and is not, nor shall it be
construed as, a personal covenant of Landlord, except to the extent of
Landlord's interest in the Real Property and only so long as such interest shall
continue, and thereafter Landlord shall be relieved of all liability hereunder
thereafter arising and this covenant shall be binding only upon subsequent
successors in interest of Landlord's interest in this Lease, to the extent of
their respective interests, as and when they shall acquire the same, and so long
as they shall retain such interest.
ARTICLE 7 Assignment, Subletting and Mortgaging
7.01. Subject to the rights of Tenant set forth in the following
Sections of this Article 7, Tenant shall not, whether voluntarily,
involuntarily, or by operation of law or otherwise (a) assign in whole or in
part or otherwise transfer in whole or in part this Lease or the term and estate
hereby granted, or advertise to do so, (b) sublet the Premises or any part
thereof, or offer or advertise to do so, or allow the same to be used, occupied
or utilized by anyone other than Tenant and Tenant's Affiliates (as such term is
defined in Section 7.02 hereof), (c) mortgage, pledge, encumber or otherwise
hypothecate this Lease or the Premises or any part thereof in any manner
whatsoever or (d) permit the Premises or any part
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<PAGE> 29
thereof to be occupied, or used for desk space, mailing privileges or otherwise,
by any person other than Tenant, without in each instance obtaining the prior
written consent of Landlord (which consent shall be granted or withheld in
accordance with the following provisions of this Article 7).
7.02. If Tenant (or any subtenant) is a corporation, the provisions of
subdivision (a) of Section 7.01 shall apply to a transfer, whether by a single
transaction or by a series of related or unrelated transactions), of stock
(other than a transfer though the "over the counter market" or through any
recognized stock exchange by persons who are not deemed "insiders" within the
meaning of the Securities Exchange Act of 1934, as amended) or any other
mechanism, such as 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 (or
such subtenant) as if such transfer of stock or other mechanism which results in
a change of control of Tenant (or such subtenant) were an assignment of this
Lease, and if Tenant (or such subtenant) is a partnership, joint venture or
limited liability company, said provisions shall apply with respect to a
transfer, by one or more transfers, of an interest in the distributions of
profits and losses of such partnership, joint venture or limited liability
company (or other mechanism, such as the creation of additional general
partnership or limited partnership interests) which results in a change of
control of such partnership, joint venture or limited liability company, as if
such transfer of an interest in the distributions of profits and losses of such
partnership, joint venture or limited liability company which results in a
change of control of such partnership, joint venture or limited liability
company were an assignment of this Lease; provided, however, the provisions of
subdivision (a) of Section 7.01 shall not apply to transactions with a
corporation into or with which Tenant (or any permitted subtenant of Tenant) is
merged or consolidated or to transactions with a corporation or partnership to
which substantially all of Tenant's assets are transferred or to any corporation
(herein collectively called "Tenant's Affiliates") which controls or is
controlled by Tenant or is under common control with Tenant, provided that in
any of such events:
(i) the successor to Tenant or transferee is a reputable entity of
good character and has a net worth computed in accordance with
generally accepted accounting principles at least equal to the
greater of (1) the net worth of Tenant thirty (30) days prior
to such merger, consolidation or transfer, or (2) the net
worth of the Tenant herein named on the date of this Lease,
(ii) proof satisfactory to Landlord of such net worth shall have
been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction,
(iii) a duplicate original instrument of assignment in form and
substance satisfactory to Landlord, duly executed by Tenant,
shall have been delivered to Landlord at least ten (10) days
prior to the effective date of any such transaction,
(iv) an instrument in form and substance reasonably satisfactory to
Landlord, duly executed by the assignee, in which such
assignee assumes (as of the Initial Commencement Date)
observance and performance of, and agrees to be personally
bound by, all of the terms, covenants and conditions of this
Lease on Tenant's part to be performed and observed shall have
been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction, and
(v) such merger, consolidation or transfer shall be for a good
business purpose and not principally for the purpose of
transferring this Lease.
Furthermore, the provisions of Section 7.01 shall not be deemed to prohibit the
simultaneous occupancy of the Premises by, or a subletting of all or a portion
of the Premises to, a Tenant's Affiliate, provided,
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<PAGE> 30
however that (i) Landlord shall be given not less than ten (10) days prior
written notice of any such sublease or occupancy arrangement accompanied by
reasonable evidence of such affiliate relationship, and (ii) the cessation of
such affiliate relationship while such sublease or occupancy is continuing shall
be deemed a transaction to which all of the terms of this Article 7 shall apply.
For purposes of this Section 7.02, the term "control" shall mean, in the case of
a corporation, ownership or voting control, directly or indirectly, of at least
fifty percent (50%) of all the voting stock, and in case of a joint venture,
partnership or limited liability company, or similar entity, ownership, directly
or indirectly, of at least fifty percent (50%) of all the general or other
partnership or membership (or similar) interests therein. Any agreement pursuant
to which (x) Tenant is relieved from the obligation to pay, or a third party
agrees to pay on Tenant's behalf, all or a part of Fixed Rent or Additional
Charges under this Lease, and/or (y) such third party undertakes or is granted
any right to assign or attempt to assign this Lease or sublet or attempt to
sublet all or any portion of the Premises, shall be deemed an assignment of this
Lease and subject to the provisions of Section 7.01.
7.03. If this Lease be assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect rent from the assignee. If the
Premises or any part thereof are sublet or used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant, and expiration of Tenant's time to cure such default, collect
rent from the subtenant or occupant. In either event, Landlord may apply the net
amount collected to the Fixed Rent and Additional Charges herein reserved, but
no such assignment, subletting, occupancy or collection shall be deemed a waiver
of any of the provisions of Section 7.01, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to a
particular assignment, mortgaging, subletting or use or occupancy by others
shall not in any way be considered a consent by Landlord to any other or further
assignment, mortgaging or subletting or use or occupancy by others not expressly
permitted by this Article 7. References in this Lease to use or occupancy by
others (that is, anyone other than Tenant) shall not be construed as limited to
subtenants and those claiming under or through subtenants but shall also include
licensees and others claiming under or through Tenant, immediately or remotely.
7.04. Any assignment or transfer, whether made with Landlord's consent
pursuant to Sections 7.01 or 7.11 hereof or without Landlord's consent pursuant
to Section 7.02 hereof, 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 and whereby the assignee shall agree that the provisions in Section
7.01 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 Charges by Landlord from an assignee,
transferee, or any other party, the original named Tenant shall remain fully
liable for the payment of the Fixed Rent and Additional Charges and for the
performance and observance of other obligations of this Lease on the part of
Tenant to be performed or observed.
7.05. 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.
7.06. The listing of any name other than that of Tenant, whether on the
doors of the Premises or the Building directory, or otherwise, shall not operate
to vest any right or interest in this
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<PAGE> 31
Lease or in the 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 Premises
or to the use or occupancy thereof by others.
7.07. Notwithstanding anything to the contrary contained in this
Article 7, 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 Premises, Tenant shall
give notice thereof to Landlord, which notice shall set forth (i) in the case of
a proposed subletting, the area proposed to be sublet, and, in the case of a
proposed assignment such notice shall set forth Tenant's intention to assign
this Lease, (ii) the proposed dates of the commencement and the expiration of
the term of the proposed sublease or the effective date of the proposed
assignment, as the case may be, (iii) the full consideration to be paid by the
proposed assignee to Tenant, or by Tenant to the proposed assignee (as the case
may be), in connection with any proposed assignment, or the proposed subrental
rate and any periods of rent-free occupancy, in the case of a proposed
subletting, and all other material provisions that are proposed to be included
in the transaction, (iv) any work contributions and any sums paid for the sale
or rental of any of Tenant's leasehold improvements, furniture, fixtures,
equipment or other personal property to be purchased or rented by the proposed
assignee or subtenant, (v) the identity of the proposed assignee or subtenant,
the nature of its business and its proposed use of the Premises, all in
reasonable detail, (vi) current financial information with respect to the
proposed assignee or subtenant, including, without limitation, its most recent
financial report and (vii) such other information as Landlord may reasonably
request. Except for any assignment or sublease which does not require Landlord's
consent pursuant to Section 7.02 hereof, such notice shall be deemed an
irrevocable offer from Tenant to Landlord whereby Landlord (or Landlord's
designee) may, at its option, (i) sublease such space from Tenant upon the terms
and conditions hereinafter set forth (if the proposed transaction is a sublease
of all or part of the Premises, provided that if such proposed transaction is a
sublease of part of the Premises, the same shall consist of at least a full
floor thereof), (ii) have this Lease assigned to it or its designee or terminate
this Lease (if the proposed transaction is an assignment or a sublease for
"substantially the remaining lease term" [as such term is hereinafter defined]
of all or substantially all of the Premises or a sublease for substantially the
remaining lease term of a portion of the Premises which, when aggregated with
other subleases then in effect, covers all or substantially all of the
Premises), or (iii) terminate this Lease with respect to the space covered by
the proposed sublease (if the proposed transaction is a sublease for
substantially the remaining lease term of part of the Premises provided that
such part of the Premises to be sublet consists of at least a full floor
thereof). As used in this Section 7.07, the term "substantially the remaining
lease term" shall mean a term of a proposed subletting, which (including any
extension options contained in such proposed sublease), would expire within the
last two (2) years of the term of this Lease. Any of the foregoing options may
be exercised by Landlord by notice to Tenant at any time within 30 days after
such notice has been given by Tenant to Landlord and Landlord shall have
received all other information required to be furnished to Landlord by Tenant
pursuant to the provisions of this Article 7; and during such 30-day period
Tenant shall not assign this Lease or sublet such space to any person.
7.08. (a) If Landlord exercises its option to terminate this Lease in
the case where Tenant desires either to assign this Lease or sublet all or
substantially all of the Premises for substantially the remaining lease term,
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 (but in no event shall this
Lease expire sooner than ninety (90) days after the date on which Landlord
exercises its option to terminate this Lease unless Landlord waives this
condition in its sole discretion), and the Fixed Rent and Additional Charges
shall be paid and apportioned to such date.
(b) In the event that Landlord exercises its option to
terminate this Lease in a case where (i) Tenant proposes to assign this Lease
and (ii) the terms of such proposal require Tenant to make a payment and/or
provide other consideration to the
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proposed assignee in consideration of the assignee's agreement to accept such
assignment (the total amount of such consideration, as set forth in Tenant's
notice given to Landlord pursuant to Section 7.07 hereof, being herein called
the "Assignment Payment"), Tenant shall pay the full amount of the Assignment
Payment to Landlord, as Additional Charges hereunder, on or before the date upon
which this Lease shall terminate as set forth in subsection 7.08(a) hereof.
(c) If Landlord exercises its option to have this Lease
assigned to it (or its designee) in the case where Tenant desires either to
assign this Lease or to sublet all or substantially all of the Premises for
substantially the remaining lease term, then Tenant shall assign this Lease to
Landlord (or Landlord's designee) by an assignment in form and substance
reasonably satisfactory to Landlord. Such assignment shall be effective on the
date the proposed assignment was to be effective or the date the proposed
sublease was to commence, as the case may be (but in no event shall such
assignment be effective sooner than ninety (90) days after the date on which
Landlord exercises its option to have this Lease so assigned, unless Landlord
waives this condition in its sole discretion). Tenant shall not be entitled to
consideration or payment from Landlord (or Landlord's designee) in connection
with any such assignment. If the proposed assignee or sublessee was to receive
any consideration or concessions from Tenant in connection with the proposed
assignment or sublease, then Tenant shall pay such consideration and/or grant
any such concessions to Landlord (or Landlord's designee) on the date Tenant
assigns this Lease to Landlord (or Landlord's designee).
7.09. If Landlord exercises its option to terminate this Lease with
respect to the space covered by Tenant's proposed sublease in any case where
Tenant desires to sublet part of the Premises for substantially the remaining
lease term, then (a) this Lease shall end and expire with respect to such part
of the Premises on the date that the proposed sublease was to commence (but in
no event shall this Lease expire with respect to such part of the Premises
sooner than ninety (90) days after the date on which Landlord exercises its
option to terminate this Lease with respect to such part of the Premises unless
Landlord waives this condition in its sole discretion); (b) from and after such
date the Fixed Rent and Additional Charges shall be adjusted, based upon the
proportion that the rentable area of the Premises remaining bears to the total
rentable area of the Premises; and (c) Tenant shall pay to Landlord, upon
demand, as Additional Charges hereunder the reasonable costs incurred by
Landlord in physically separating such part of the Premises from the balance of
the Premises and in complying with any laws and requirements of any public
authorities relating to such separation.
7.10. If Landlord exercises its option to sublet the Premises or the
portion(s) of the Premises which Tenant desires to sublet, such sublease to
Landlord or its designee (as subtenant) (x) shall be at the lower of (i) the
rental rate per rentable square foot of Fixed Rent and Additional Charges then
payable pursuant to this Lease or (ii) the rentals set forth in the proposed
sublease, (y) shall commence on the date that the proposed sublease was to
commence (but in no event shall such sublease commence sooner than ninety (90)
days after the date on which Landlord exercises its option to sublet the
Premises or such portion(s) thereof unless Landlord waives this condition in its
sole discretion), and (z) shall be for the same term as that of the proposed
subletting, unless the proposed subletting if for all or substantially all the
remainder of the term of this Lease, in which event such sublease shall, at
Landlord's option, be for the remainder of the term of this Lease (less one day)
or for the same term as that of the proposed subletting; and:
(a) The sublease shall 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) Such sublease shall be upon the same terms and conditions
as those
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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) Such sublease shall 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 space covered by such sublease or any part
or parts of such space and to make any and all changes, alterations, and
improvements in the space covered by such sublease;
(d) Such sublease shall 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 such space or
any part thereof and shall also provide in substance that any such alterations,
decorations and installations in such 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 such space so sublet caused
by such removal and Tenant shall not, in any event, be obligated to remove any
alterations, decorations and installations made by Landlord or its designee or
any subtenant or assignee thereof; and
(e) Such sublease shall 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 such space so sublet by Tenant to Landlord
or its designee, (iv) Landlord, at Tenant's expense, may make such alterations
as may be required or reasonably deemed necessary by Landlord to physically
separate the subleased space from the balance of the Premises and to 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.
Performance by Landlord or its designee under such sublease shall be deemed
performance by Tenant of a similar obligation under this Lease related to such
space, and any default under any such sublease shall not give rise to a default
under a similar obligation in this Lease, nor shall Tenant be liable for any
default under this Lease or be deemed to be in default hereunder if such default
is occasioned by or arises from any act or omission of the subtenant under such
sublease or is occasioned by or arises from any act or omission of any occupant
under or pursuant to any such sublease.
For purposes of this Section 7.10, a sublease shall be deemed to be for
substantially all the remainder of the term of this Lease if it is scheduled to
expire within the two (2) year period preceding the Expiration Date.
7.11. In the event Landlord does not exercise any of its options
pursuant to Section 7.07 to so sublet the Premises or terminate (in whole or in
part) or have assigned to it or its designee this Lease and provided that Tenant
is not in default of any of Tenant's obligations under this Lease after the
giving of notice and the expiration of any applicable cure period, Landlord's
consent (which must be in writing, in form satisfactory to Landlord and signed
by Landlord, Tenant and the proposed assignee or subtenant) to the proposed
assignment or sublease shall not be unreasonably withheld, conditioned or
delayed, provided and upon condition that:
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(a) Tenant shall have complied with the provisions of Section
7.07 and Landlord shall not have exercised any of its options under said Section
7.07 within the time permitted therefor and Tenant shall have delivered to
Landlord a duplicate original of the sublease or assignment instrument and all
other documents to be executed in connection therewith;
(b) In Landlord's reasonable judgment the proposed assignee or
subtenant is engaged in a business and the Premises, or the relevant part
thereof, will be used in a manner which (i) is in keeping with the then
standards of the Building, and (ii) will not violate any negative covenant as to
use contained in any other lease of space in the Building (and Landlord shall
advise Tenant of any such negative covenants in writing promptly after written
request therefor by Tenant made in connection with a proposed subletting or
assignment);
(c) The proposed assignee or subtenant is a reputable person
or entity of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof;
(d) Provided that Landlord shall have comparable space for a
comparable term then available, or to become available, for leasing in the
Building, within six (6) months from the effective date of the proposed
assignment or subletting, as the case may be, 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 or a party who dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building during the six (6) months immediately preceding Tenant's request for
Landlord's consent;
(e) The form of the proposed sublease or assignment instrument
shall be reasonably satisfactory to Landlord and shall comply with the
applicable provisions of this Article 7;
(f) The Premises shall not be subdivided into more than 2
separate units;
(g) 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 costs of making
investigations as to the acceptability of the proposed assignee or subtenant,
and reasonable legal costs incurred in connection with the granting of any
requested consent; and
(h) Tenant shall not have (i) advertised the availability of
the Premises without prior notice to and approval by Landlord, which approval
Landlord agrees shall not be unreasonably withheld or delayed, nor shall any
advertisement state the name (as distinguished from the address) of the Building
or the proposed rental nor (ii) listed the Premises for subletting, whether
through a broker, agent, representative, or otherwise at a rental rate less than
the Fixed Rent and Additional Charges at which Landlord is then offering to
lease other space in the Building, but nothing contained in this Article 7 shall
be deemed to prohibit Tenant from listing with brokers the availability of the
Premises for sublet or assignment.
7.12. (a) In the event that in connection with Tenant's request for
Landlord's consent pursuant to Section 7.11 hereof, the proposed sublease or
proposed assignment delivered to Landlord contains (i) economic terms which are
"substantially different from" (as hereinafter defined) the economic terms set
forth in the notice delivered to Landlord pursuant to Section 7.07 hereof
[including, without limitation, in the case of a sublease, with respect to the
subrental rate (giving effect to the
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financial value of any abatements, concessions, credits or improvements for the
benefit of the subtenant), the sublet term, the sublet space or, in the case of
an assignment, with respect to the consideration and all other sums being paid
in connection with such assignment], or (ii) material non-economic terms that
are different from the material non-economic terms set forth in the notice
delivered to Landlord pursuant to Section 7.07 hereof, then in such event,
Tenant's request for consent pursuant to Section 7.11 hereof shall be deemed to
be an irrevocable offer from Tenant to Landlord as to which Landlord shall have
all of the options set forth in Section 7.07 hereof and Tenant shall again
comply with all of the provisions and conditions of Section 7.07 hereof before
entering into such sublease or assignment. The economic terms of a proposed
sublet or proposed assignment shall be deemed "substantially different from" the
economic terms set forth in the notice delivered to Landlord pursuant to Section
7.07 hereof if the economic terms of such proposed sublease or assignment on an
aggregate basis differ by more than five (5%) percent from the terms contained
in the terms set forth in the notice delivered to Landlord pursuant to Section
7.07 hereof.
(b) In the event that Landlord fails to exercise any of its
options under Section 7.07 hereof, and Tenant fails to request Landlord's
consent to an assignment or sublease on the terms and conditions set forth in
the notice delivered to Landlord pursuant to Section 7.07 hereof within six (6)
months from the date of Landlord's response to such notice, Tenant shall again
comply with all of the provisions and conditions of Section 7.07 hereof before
assigning this Lease or subletting all or part of the Premises.
7.13. With respect to each and every sublease or subletting authorized
by Landlord under the provisions of this Lease, it is further agreed that:
(a) No subletting shall be for a term (including any renewal
or extension options contained in the sublease) ending later than one day prior
to the expiration date of this Lease;
(b) No sublease shall be valid, and no subtenant shall take
possession of the Premises or any part thereof, until an executed counterpart of
such sublease (and all ancillary documents executed in connection with, with
respect to or modifying such sublease) has been delivered to Landlord;
(c) Each sublease shall provide that it is subject and
subordinate to this Lease and to any matters to which this Lease is or shall be
subordinate, and that in the event of termination, reentry 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 be (i)
liable for any previous act or omission of Tenant under such sublease, (ii)
subject to any credit, offset, claim, counterclaim, demand or defense which such
subtenant may have against Tenant, (iii) bound by any previous modification of
such sublease or by any previous prepayment of more than one (1) month's rent,
(iv) bound by any covenant of Tenant to undertake or complete any construction
of the Premises or any portion thereof, (v) required to account for any security
deposit of the subtenant other than any security deposit actually delivered to
Landlord by Tenant, (vi) bound by any obligation to make any payment to such
subtenant or grant any credits, except for services, repairs, maintenance and
restoration provided for under the sublease to be performed after the date of
such attornment, (vii) responsible for any monies owing by Landlord to the
credit of Tenant or (viii) required to remove any person occupying the Premises
or any part thereof; and
(d) Each sublease shall provide that the subtenant may not
assign its rights thereunder or further sublet the space demised under the
sublease, in whole or in part, except in
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compliance with all of the terms of provisions of this Article 7.
7.14. (a) If Landlord shall give its consent to any assignment of this
Lease or to any sublease, Tenant shall in consideration therefor, pay to
Landlord, as Additional Charges an amount equal to the fifty (50%) percent of
any Assignment Profit (hereinafter defined) or Sublease Profit (hereinafter
defined), as the case may be.
(b) For purposes of this Section 7.14, the term "Assignment
Profit" shall mean an amount equal to 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 or rental of Tenant's fixtures, leasehold
improvements, equipment, furniture, furnishings or other personal property,
less, in the case of a sale thereof, the then net unamortized or undepreciated
portion (determined on the basis of Tenant's federal income tax returns) of the
amount, if any, by which the original cost thereof exceeded any amounts paid for
or contributed by Landlord which were applied by Tenant against such original
cost pursuant to the terms of this Lease), after first deducting therefrom the
amount of "Tenant's Costs", as hereinafter defined, as and when paid by Tenant.
(c) For purposes of this Section 7.14, the term "Sublease
Profit" shall mean in any year of the term of this Lease (i) any rents,
additional charges or other consideration payable under the sublease to Tenant
by the subtenant which is in excess of the Fixed Rent and Additional Charges
accruing during such year of the term of this Lease in respect of the subleased
space (at the rate per square foot payable by Tenant hereunder) pursuant to the
terms hereof, and (ii) all 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 net unamortized or
undepreciated portion (determined on the basis of Tenant's federal income tax
returns) of the amount, if any, by which the original cost thereof exceeded any
amounts paid for or contributed by Landlord which were applied by Tenant against
such original cost pursuant to the terms of this Lease), which net unamortized
amount shall be deducted from the sums paid in connection with such sale in
equal monthly installments over the balance of the term of the sublease (each
such monthly deduction to be in an amount equal to the quotient of the net
unamortized amount, divided by the number of months remaining in the term of
this Lease), after first deducting therefrom the amount of Tenant's Costs as and
when paid by Tenant.
(d) The sums payable under this Section 7.14 shall be paid to
Landlord as and when paid by the assignee or subtenant to Tenant.
(e) For purposes of this Section 7.14, the term "Tenant's
Costs" shall mean the reasonable expenses actually incurred by Tenant in
connection with the assignment or subletting in question for transfer taxes,
brokerage commissions, advertising expenses, attorneys' fees, any commercially
reasonable rent credit or concession or work allowance and any tenant work
performed by Tenant at its expense in connection with such assignment or
subletting based on bills, receipts or other evidence of such costs reasonably
satisfactory to Landlord.
7.15. Except for any subletting by Tenant to Landlord or its designee
pursuant to the provisions of this Article 7, each subletting 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, but subject to the provisions of Section 7.10(d)
and (e) hereof to the extent applicable, Tenant shall and will remain fully
liable for the payment of the Fixed Rent and Additional Charges due and to
become due hereunder and for the performance of all the covenants, agreements,
terms,
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provisions and conditions contained in this Lease on the part of Tenant to be
performed and all acts and omissions of any licensee or subtenant or anyone
claiming under or through any subtenant which shall be in violation of any of
the obligations of this Lease, and any such violation shall be deemed to be a
violation by Tenant. Tenant further agrees that notwithstanding any such
subletting, no other and further subletting of the Premises by Tenant or any
person claiming through or under Tenant (except as provided in Section 7.10
hereof) 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 any of its
options under Section 7.07 hereof, Tenant shall indemnify, defend and hold
harmless Landlord against and from any and all loss, liability, damages, costs
and expenses (including, but not limited to, 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.
ARTICLE 8 Compliance with Laws
8.01. Tenant shall give prompt notice to Landlord of any notice it
receives of the violation of any law or requirement of any public authority with
respect to the Premises or the use or occupation thereof. Tenant shall, at
Tenant's expense, comply with all present and future laws and requirements of
any public authorities in respect of the Premises or the use and occupation
thereof, or the abatement of any nuisance in, on or about the Premises;
provided, however, that Tenant shall not be obligated to make structural repairs
or alterations or repairs or alterations to Building systems installed by
Landlord unless the need for same arises out of one or more of the causes set
forth in clauses (i) through (iii) of the next succeeding sentence. Tenant shall
also be responsible for the cost of compliance with all present and future laws
and requirements of any public authorities in respect of the Real Property
arising from (i) Tenant's particular manner of use of the Premises or operation
of its installations, equipment or other property therein (other than the mere
use of the Premises as generic executive and general offices), (ii) any cause or
condition created by or at the instance of Tenant, or (iii) the breach of any of
Tenant's obligations hereunder, whether or not such compliance arising from any
of the causes set forth in this sentence requires work which is structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen. Tenant shall
pay all the costs, expenses, fines, penalties and damages which may be imposed
upon Landlord or any Superior Lessor by reason of or arising out of Tenant's
failure to fully and promptly comply with and observe the provisions of this
Section 8.01. Without limiting the generality of the foregoing, after the
completion of Landlord's Work, it is specifically agreed that Tenant shall
comply with all laws that require the installation, modification or maintenance
within the Premises of (i) any fire-rated partitions, gas, smoke, or fire
detector or alarm, any emergency signage or lighting system, or any sprinkler or
other system to extinguish fires or (ii) any handicap facilities. However,
Tenant need not comply with any such law or requirement of any public authority
so long as Tenant shall be contesting the validity thereof, or the applicability
thereof to the Premises, in accordance with Section 8.02 hereof. Landlord, at
its expense, but subject to recoupment pursuant to Article 3 hereof, shall
comply with all other such laws and requirements of public authorities as shall
affect the Premises and the public areas of the Building, to the extent that
non-compliance therewith would materially affect Tenant's use of the Premises,
but may similarly defer compliance so long as Landlord shall be contesting the
validity or applicability thereof.
8.02. Tenant, at its expense, after notice to Landlord, may contest, by
appropriate proceedings prosecuted diligently and in good faith, the validity,
or applicability to the Premises, of any
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law or requirement of any public authority, provided that (a) Landlord shall not
be subject to criminal penalty or to prosecution for a crime, or any other fine
or charge, nor shall the Premises or any part thereof or the Building or Land,
or any part thereof, be subject to being condemned or vacated, nor shall the
Building or Land, or any part thereof, be subjected to any lien (unless Tenant
shall remove such lien by bonding or otherwise) or encumbrance, by reason of
non-compliance or otherwise by reason of such contest; (b) before the
commencement of such contest, Tenant shall furnish to Landlord a cash deposit or
other security in amount, form and substance reasonably satisfactory to Landlord
and shall indemnify Landlord against the cost thereof and against all liability
for damages, interest, penalties and expenses (including reasonable attorneys'
fees and expenses), resulting from or incurred in connection with such contest
or non-compliance; (c) such non-compliance or contest shall not constitute or
result in any violation of any Superior Lease or Superior Mortgage, or if any
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; (d) such noncompliance or contest shall not prevent Landlord
from obtaining any and all permits and licenses in connection with the operation
of the Building; and (e) Tenant shall keep Landlord advised as to the status of
such proceedings. Without limiting the application of the above, Landlord shall
be deemed subject to prosecution for a crime if Landlord, or its managing agent,
or any officer, director, partner, shareholder or employee of Landlord or its
managing agent, as an individual, 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 its managing agent, or such officer, director,
partner, shareholder or employee of Landlord or its managing agent (as the case
may be) is required to plead or answer thereto.
ARTICLE 9 Insurance
9.01. Tenant shall not violate, or permit the violation of, any
condition imposed by any insurance policy then issued in respect of the Real
Property and shall not do, or permit anything to be done, or keep or permit
anything to be kept in the Premises which would subject Landlord, any Superior
Lessor or any Superior Mortgagee to any liability or responsibility for personal
injury or death or property damage, or which would increase any insurance rate
in respect of the Real Property over the rate which would otherwise then be in
effect or which would result in insurance companies of good standing refusing to
insure the Real Property in amounts reasonably satisfactory to Landlord, or
which would result in the cancellation of or the assertion of any defense by the
insurer in whole or in part to claims under any policy of insurance in respect
of the Real Property; provided, however, that in no event shall the mere use of
the Premises for customary and ordinary office purposes, as opposed to the
manner of such use, constitute a breach by Tenant of the provisions of this
Section 9.01.
9.02. If, by reason of any failure of Tenant to comply with the
provisions of this Lease, the premiums on Landlord's insurance on the Real
Property shall be higher than they otherwise would be, and Landlord shall notify
Tenant of such fact and, if Tenant shall not within 15 days thereafter, rectify
such failure so as to prevent the imposition of such increase in premiums, then
Tenant shall reimburse Landlord, on demand and as Additional Charges, for that
part of such premiums attributable to such failure on the part of Tenant. A
schedule or "make up" of rates for the Real Property or the Premises, as the
case may be, issued by the New York Fire Insurance Rating Organization or other
similar body making rates for insurance for the Real Property or the Premises,
as the case may be, together with any other evidence reasonably satisfactory to
Tenant (such as a statement, letter or other writing from Landlord's insurer)
that Tenant's failure to comply with a provision of this Lease has caused
Landlord's
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insurance premiums to be higher than they otherwise would be, shall be
conclusive evidence of the facts therein stated and of the several items and
charges in the insurance rate then applicable to the Real Property or the
Premises, as the case may be.
9.03. Tenant, at its expense, shall maintain at all times during the
term of this Lease (a) "all risk" property insurance covering all present and
future Tenant's Property and Tenant's improvements and betterments installed by
or on behalf of Tenant to a limit of not less than the full replacement value
thereof, such insurance to include a replacement cost endorsement, and (b)
commercial general liability insurance, including contractual liability, in
respect of the Premises and the conduct or operation of business therein, with
Landlord and its managing agent, if any, and each Superior Lessor and Superior
Mortgagee whose name and address shall previously have been furnished to Tenant,
as additional insureds, with limits of not less than Five Million ($5,000,000)
Dollars combined single limit for bodily injury and property damage liability in
any one occurrence, (c) steam boiler, air-conditioning or machinery insurance,
if there is a boiler or pressure object or similar equipment in the Premises,
with Landlord and its managing agent, if any, and each Superior Lessor and
Superior Mortgagee whose name and address shall previously have been furnished
to Tenant, as additional insureds, with limits of not less than Five Million
($5,000,000) Dollars and (d) when Alterations are in progress, the insurance
specified in Section 11.05 hereof. The limits of such insurance shall not limit
the liability of Tenant. Tenant shall deliver to Landlord and any additional
insureds, at least ten (10) days prior to the Initial Commencement Date, such
fully paid-for policies or certificates of insurance, in form reasonably
satisfactory to Landlord issued by the insurance company or its authorized
agent. Such insurance may be carried in a blanket policy covering the Premises
and other locations of Tenant, if any, provided that each such policy shall in
all respects comply with this Article 9 and shall specify that the portion of
the total coverage of such policy allocated to the Premises is in the amounts
required pursuant to this Section 9.03. In addition, Tenant may carry the
coverage required hereunder with respect to the Premises under umbrella
policies. Tenant shall procure and pay for renewals of such insurance from time
to time before the expiration thereof, and Tenant shall deliver to Landlord and
any additional insureds such renewal policy or a certificate thereof at least
thirty (30) days before the expiration of any existing policy. 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 canceled or modified unless
Landlord and any additional insureds are given at least thirty (30) days prior
written notice of such cancellation or modification. The proceeds of policies
providing "all risk" property insurance of Tenant's improvements and betterments
shall be payable to Landlord, Tenant and each Superior Lessor and Superior
Mortgagee as their interests may appear. The parties shall cooperate with each
other in connection with the collection of any insurance monies that may be due
in the event of loss and Tenant shall execute and deliver to Landlord such
proofs of loss and other instruments which may be reasonably required to recover
any such insurance monies.
9.04. Each party agrees to have included in each of its insurance
policies (insuring the Building and any other Landlord's property therein in
case of Landlord, and insuring Tenant's Property (hereinafter defined) and
improvements and betterments in the case of Tenant, against loss, damage or
destruction by fire or other casualty) a waiver of the insurer's right of
subrogation against the other party during the term of this Lease or, if such
waiver should be unobtainable or unenforceable, (i) an express agreement that
such policy shall not be invalidated if the assured waives the right of recovery
against any party responsible for a casualty covered by the policy before the
casualty or (ii) any other form of permission for the release of the other
party. If such waiver, agreement or permission shall not be, or shall cease to
be, obtainable from either party's then current insurance company, the insured
party shall so notify the other party promptly after learning thereof, and shall
use its best efforts to obtain the same
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from another insurance company described in Section 9.03 hereof. Each party
hereby releases the other party, with respect to any claim (including a claim
for negligence) which it might otherwise have against the other party, for loss,
damage or destruction with respect to its property occurring during the term of
this Lease to the extent to which it is, or is required to be, insured under a
policy or policies containing a waiver of subrogation or permission to release
liability, as provided in the preceding subdivisions of this Section. Nothing
contained in this Section shall be deemed to relieve either party of any duty
imposed elsewhere in this Lease to repair, restore or rebuild or to nullify any
abatement of rents provided for elsewhere in this Lease.
9.05. Landlord may from time to time require that the amount of the
insurance to be maintained by Tenant under Section 9.03 hereof be reasonably
increased, so that the amount thereof adequately protects Landlord's interest;
provided, however, that the amount to which such insurance requirements may be
increased shall not exceed an amount then being required by landlords of
comparable first-class office buildings in lower Manhattan. Landlord agrees that
Landlord shall not require increases in the amounts of such insurance carried by
Tenant more than once in any three (3) year period unless more frequent
increases are reasonably necessary by reason of requirements of law or any
public authority or requirements of Landlord's insurer or if required in
connection with refinancing (except a refinancing with an Affiliate of Landlord)
of the Land and/or the Building or Landlord's interest therein.
9.06. Landlord shall maintain in respect of the Building at all times
during the term of this Lease property insurance covering the Building,
comprehensive general liability insurance, fire and casualty insurance covering
the Building and Landlord's property in amounts of coverage required by any
institutional mortgagee of the Building, or, if there is no institutional
mortgagee of the Building, then in amounts comparable to the amounts carried by
owners of first-class office buildings in lower Manhattan comparable to the
Building.
ARTICLE 10 Rules and Regulations
10.01. 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 to Tenant,
which, in Landlord's reasonable judgment, shall be necessary for the reputation,
safety, care and appearance of the Real Property, or the preservation of good
order therein, or the operation or maintenance of the Real Property, and which
do not unreasonably affect the conduct of Tenant's business in the Premises
(such rules and regulations as changed from time to time being herein called
"Rules and Regulations"); provided, however, that in case of any conflict or
inconsistency between the provisions of this Lease and any of the Rules and
Regulations, the provisions of this Lease shall control.
10.02. Nothing in this Lease contained shall be construed to impose
upon Landlord any duty or obligation to enforce the Rules and Regulations
against Tenant or any other tenant or any employees or agents of Tenant or any
other tenant, and Landlord shall not be liable to Tenant for violation of the
Rules and Regulations by another tenant or its employees, agents, invitees or
licensees. However, Landlord shall not discriminate against Tenant in enforcing
the Rules and Regulations.
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ARTICLE 11 Alterations
11.01. Tenant shall have the right to make improvements, changes and
alterations in or to the Premises ("Alterations") with Landlord's written
approval, which approval Landlord shall not unreasonably withhold or delay;
provided, however, that (i) Landlord's approval shall not be required with
respect to painting, wall covering, carpeting and other minor alterations which
do not require a building alteration permit, do not affect Building systems and
involve a scope of work for which plans and specifications are not generally
prepared in comparable office buildings in lower Manhattan (herein collectively
called "Minor Alterations") and (ii) notwithstanding anything to the contrary
contained in this Lease, Landlord may withhold its approval of Major Alterations
(hereinafter defined) in Landlord's sole discretion, which discretion Landlord
hereby agrees to exercise in good faith. A "Major Alteration" is an Alteration
which (a) is not limited to the interior of the Premises or which affects the
exterior (including the appearance) of the Building, (b) adversely affects the
strength or structural integrity of the Premises or the Building, (c) adversely
affects the usage or the proper functioning of the mechanical, electrical,
sanitary, heating, ventilating, air-conditioning or other service systems of the
Building, or (d) requires the consent of any Superior Mortgagee or Superior
Lessor and such consent is withheld by such Superior Mortgagee or Superior
Lessor, as the case may be.
11.02. (a) Before proceeding with any Alteration (other than Minor
Alterations), Tenant shall submit to Landlord, for Landlord's approval, plans
and specifications for the work to be done, and Tenant shall not proceed with
such work until it obtains Landlord's written approval of such plans and
specifications, which approval shall not be unreasonably withheld or delayed
(except with respect to Major Alterations, the approval of which by Landlord is
subject to the provisions of Section 11.01 hereof).
(b) Tenant shall pay to Landlord upon demand, as Additional
Charges, Landlord's actual and reasonable costs and expenses (including, without
limitation, the fees of any architect or engineer employed by Landlord or any
Superior Lessor or Superior Mortgagee for such purpose) for (i) reviewing said
plans and specifications and (ii) inspecting the Alterations to determine
whether the same are being performed in accordance with the approved plans and
specifications, the provisions of any Superior Lease or Superior Mortgage and
all laws and requirements of public authorities.
(c) Tenant agrees that any review or approval by Landlord of
any plans and/or specifications with respect to any Alterations 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.
11.03. (a) Before proceeding with any Alteration which will cost more
than $100,000 (exclusive of the costs of decorating work and items constituting
Tenant's Property), as estimated by a reputable contractor designated by
Landlord, Tenant shall furnish to Landlord one of the following: (i) a cash
deposit or (ii) a performance bond and a labor and materials payment bond
(issued by a corporate surety licensed to do business in New York reasonably
satisfactory to Landlord), or (iii) an irrevocable, unconditional, negotiable
letter of credit, issued by and drawn on a bank or trust company which is a
member of the New York Clearing House Association in a form reasonably
satisfactory to Landlord; each to be in an amount equal to one hundred
twenty-five (125%) percent of the cost of the Alteration, estimated as set forth
above. Any such letter of credit shall be for one year and shall be renewed by
Tenant each and every year until the Alteration in question is completed and
shall be
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delivered to Landlord not less than thirty (30) days prior to the expiration of
the then current letter of credit. Failure to deliver such new letter of credit
on or before said date shall be a material breach of this Lease and Landlord
shall have the right, inter alia, to present the then current letter of credit
for payment.
(b) Upon (i) the completion of the Alteration in accordance
with the terms of this Article 11 and (ii) the submission to Landlord of proof
evidencing the payment in full for said Alteration, the security deposited with
Landlord (or the balance of the proceeds thereof, if Tenant has furnished cash
or a letter of credit and if Landlord has drawn on the same) shall be returned
to Tenant.
(c) Upon Tenant's failure to properly perform, complete and
fully pay for the said Alteration, which failure continues after the giving of
notice and the expiration of applicable grace period, Landlord shall be entitled
to draw on the security deposited under this Article 11 to the extent Landlord
reasonably deems necessary in connection with the said Alteration, the
restoration and/or protection of the Premises or the Real Property and the
payment or satisfaction of any costs, damages or expenses in connection with the
foregoing and/or Tenant's obligations under this Article 11.
11.04. Tenant, in connection with any Alterations, shall fully and
promptly comply with and observe the Tenant Construction Approval Procedures set
forth as Exhibit E hereto and made a part hereof. Notwithstanding anything to
the contrary contained in Exhibit E annexed hereto and made a part hereof, and
in the event that any Alteration costs more than $25,000 as estimated by a
reputable contractor designated by Landlord, then all references in Exhibit E to
"ten (10%) percent" shall be changed to "seven (7%) percent".
11.05. Tenant, at its expense, shall obtain (and furnish true and
complete copies to Landlord of) all necessary governmental permits and
certificates for the commencement and prosecution of Alterations and for final
approval thereof upon completion, and shall cause Alterations to be performed in
compliance therewith, with all applicable laws and requirements of public
authorities, with all applicable requirements of insurance bodies and with the
plans and specifications approved by Landlord. Alterations shall be diligently
performed in a good and workmanlike manner, using new materials and equipment at
least equal in quality and class to the better of (i) the original installations
of the Building or (ii) the then standards for the Building established by
Landlord. Alterations shall be performed by contractors first approved by
Landlord, which approval shall not be unreasonably withheld or delayed;
provided, however, that any Alterations in or to the mechanical, electrical,
sanitary, heating, ventilating, air-conditioning, life safety or other systems
of the Building shall be performed only by the contractor(s) designated by
Landlord, provided that the charges of such contractors are commercially
reasonable when compared to the cost that would be charged by other first-class
contractors for performing similar work in comparable first-class office
buildings in the Borough of Manhattan. Alterations shall be performed in such
manner as not to unreasonably interfere with or delay and as not to impose any
additional expense upon Landlord in the construction, maintenance, repair or
operation of the Building; and if any such additional expense shall be incurred
by Landlord as a result of Tenant's performance of any Alterations, Tenant shall
pay such additional expense within twenty (20) days after demand as Additional
Charges. Throughout the performance of Alterations, Tenant, at its expense,
shall carry, or cause to be carried, worker's compensation insurance in
statutory limits, all risk "Builders Risk" insurance and general liability
insurance, with completed operation endorsement, for any occurrence in or about
the Real Property, under which Landlord and its agent and any Superior Lessor
and Superior Mortgagee whose name and address shall previously have been
furnished to Tenant shall be named as parties insured, in such limits as
Landlord may reasonably require, with insurers reasonably satisfactory to
Landlord. Tenant shall furnish Landlord with reasonably satisfactory evidence
that such insurance is in effect at or before the commencement of Alterations
and, on request, at reasonable intervals thereafter
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during the continuance of Alterations. No Alterations shall involve the removal
of any fixtures, equipment or other property in the Premises which are not
Tenant's Property without Landlord's prior written consent, unless such
fixtures, equipment or other property shall be promptly replaced at Tenant's
expense with new fixtures, equipment or other property of like utility and at
least equal value.
11.06. Tenant agrees that the exercise of its rights pursuant to the
provisions of this Article 11 or of any other provisions of this Lease or the
Exhibits hereto shall not be done in a manner which would violate Landlord's
union contracts affecting the Real Property, or create any work stoppage,
picketing, labor disruption or dispute or disharmony or any interference (beyond
a de minimis extent) with the business of Landlord or any tenant or occupant of
the Building. Tenant shall immediately stop work or other activity if Landlord
notifies Tenant that continuing such work or activity would violate Landlord's
union contracts affecting the Real Property, or create any work stoppage,
picketing, labor disruption or dispute or disharmony or any interference (beyond
a de minimis extent) with the business of Landlord or any tenant or occupant of
the Building. Landlord agrees that it shall not discriminate as against Tenant
in enforcing the foregoing prohibition against interfering with the business of
Landlord or other tenants in the Building.
11.07. 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 Alterations, or any other work, labor, services or
materials done for or supplied to Tenant, or any person claiming through or
under Tenant (other than by Landlord or its affiliates, agents, representatives
or contractors), which shall be issued by the Department of Buildings of the
City of New York or any other public authority having or asserting jurisdiction.
Tenant shall defend, indemnify and save harmless Landlord from and against any
and all mechanic's and other liens and encumbrances filed in connection with
Alterations, or any other work, labor, services or materials done for or
supplied to Tenant, or any person claiming through or under Tenant, including,
without limitation, security interests in any materials, fixtures or articles so
installed in and constituting part of the Premises and against all costs,
expenses and liabilities incurred in connection with any such lien or
encumbrance or any action or proceeding brought thereon. Tenant, at its expense,
shall procure the satisfaction or discharge of record of all such liens and
encumbrances within twenty (20) days after Tenant shall have received notice of
the filing thereof. However, nothing herein contained shall prevent Tenant from
contesting, in good faith and at its own expense, any notice of violation,
provided that Tenant shall comply with the provisions of Section 8.02 hereof.
11.08. Tenant will promptly upon the completion of an Alteration
deliver to Landlord "as-built" drawings of any Alterations (other than Minor
Alterations) Tenant has performed or caused to be performed in the Premises
which cost in excess of $50,000.
11.09. All fixtures and equipment installed or used by Tenant in the
Premises shall be fully paid for by Tenant in cash and shall not be subject to
conditional bills of sale, chattel mortgage or other title retention agreements.
11.10. Tenant shall keep records of Tenant's Alterations costing in
excess of $50,000 and of the cost thereof. Tenant shall, within forty-five (45)
days after demand by Landlord, furnish to Landlord copies of such records and
cost if Landlord shall require same in connection with any proceeding to reduce
the assessed valuation of the Real Property, or in connection with any
proceeding instituted pursuant to Article 8 hereof or for any other reasonable
purpose.
ARTICLE 12 Landlord's and Tenant's Property
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12.01. All fixtures, equipment, improvements and appurtenances attached
to or built into the 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 Premises, shall, upon the expiration or sooner termination of this Lease,
be deemed the property of Landlord and shall not be removed by Tenant, except as
provided in Section 12.02. Further, any carpeting or other personal property in
the Premises on the Commencement Date with respect to any floor of the Premises,
unless installed and paid for by Tenant, shall be and shall remain Landlord's
property and shall not be removed by Tenant. Notwithstanding the foregoing
provisions, upon notice to Tenant no later than thirty (30) days prior to the
Expiration Date or upon reasonable notice with respect to such earlier date upon
which the term of this Lease shall expire, Landlord may require Tenant to remove
all or part of the foregoing fixtures, equipment, improvements and appurtenances
attached to or built into the Premises during the term of this Lease; provided,
however, that (i) Tenant shall not be obligated to remove any such fixtures,
equipment, improvements and appurtenances installed prior to the date of this
Lease, (ii) Tenant's obligation to remove fixtures, equipment, improvements and
appurtenances installed after the date of this Lease shall be limited to
non-standard items such as kitchens, vaults, private restrooms, raised or
reinforced flooring, or other items which are unusually difficult or expensive
to remove and (iii) Tenant shall not be obligated to remove any item of Base
Building Work. In connection with any request by Tenant for Landlord's consent
to the proposed installation of any fixtures, equipment, improvements or
appurtenances in the Premises, Landlord agrees to inform Tenant at the time of
Landlord's consent if the proposed installation will be required to be removed
upon the expiration of the term of this Lease in accordance with the standards
set forth in the preceding sentence, provided that any notice requesting
Landlord's consent to such installation shall contain a legend in capital
letters and bold type on the first page thereof which states "PURSUANT TO
SECTION 12.01 OF THE LEASE, IN THE EVENT THAT YOU SHALL CONSENT TO THE PROPOSED
INSTALLATION DESCRIBED IN THIS NOTICE, YOU ARE REQUIRED TO INFORM TENANT AT THE
TIME OF YOUR CONSENT IF SUCH INSTALLATION WILL BE REQUIRED TO BE REMOVED UPON
THE EXPIRATION OF THE TERM OF THE LEASE IN ACCORDANCE WITH THE STANDARDS SET
FORTH IN SAID SECTION 12.01." Tenant shall remove any such items from the
Premises as required by Landlord as hereinabove set forth prior to the
expiration of this Lease at Tenant's expense. Upon such removal Tenant shall
immediately and at its expense, repair and restore the Premises to the condition
existing prior to installation and repair any damage to the Premises or the
Building due to such removal.
12.02. All movable partitions, furniture systems, special cabinet work,
business and trade fixtures, machinery and equipment, communications equipment
(including, without limitation, telephone system, security system and wiring)
and office equipment, whether or not attached to or built into the Premises,
which are installed in the Premises by or for the account of Tenant without
expense to Landlord and can be removed without structural damage to the
Building, and all furniture, furnishings and other articles of movable personal
property owned by Tenant and located in the Premises (herein collectively called
"Tenant's Property") shall be and shall remain the property of Tenant and may be
removed by Tenant at any time during the term of this Lease; provided that if
any of Tenant's Property is removed, Tenant shall repair or pay the cost of
repairing any damage to the Premises or to the Building resulting from the
installation and/or removal thereof. Any equipment or other property for which
Landlord shall have granted any allowance or credit to Tenant shall not be
deemed to have been installed by or for the account of Tenant without expense to
Landlord, shall not be considered Tenant's Property and shall be deemed the
property of Landlord.
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12.03. At or before the Expiration Date of this Lease (or within 15
days after any earlier termination of this Lease) Tenant, at its expense, shall
remove from the Premises all of Tenant's furniture, equipment (including,
without limitation, telecommunications equipment and wiring and cabling) and
other moveable personal property not affixed or attached to the Premises (except
for such items thereof as Landlord shall have expressly permitted to remain,
which property shall become the property of Landlord), and Tenant shall repair
any damage to the Premises or the Building resulting from any installation
and/or removal of Tenant's Property.
12.04. Any other items of Tenant's Property which shall remain in the
Premises after the Expiration Date of this Lease, or within 15 days following an
earlier termination date, may at the option of Landlord, be deemed to have been
abandoned, and in such case such items may be retained by Landlord as its
property or disposed of by Landlord, without accountability, in such manner as
Landlord shall determine, at Tenant's expense.
ARTICLE 13 Repairs and Maintenance
13.01. Tenant shall, at its expense, throughout the term of this Lease,
take good care of and maintain in good order and condition the Premises and the
fixtures and improvements therein including, without limitation, the property
which is deemed Landlord's pursuant to Section 12.01 hereof and Tenant's
Property, except as otherwise expressly provided in the last sentence of this
Section 13.01. Notwithstanding the foregoing, Tenant shall not be required to
make repairs the need for which arises out of defects in Landlord's Work (unless
such defect was caused by Tenant, its employees, agents or contractors). Tenant
shall be responsible for all repairs, interior and exterior, structural and
non-structural, ordinary and extraordinary, foreseen or unforeseen, in and to
the Premises, and shall be responsible for the cost of all repairs, interior and
exterior, structural and non-structural, ordinary and extraordinary, foreseen or
unforeseen, in and to the Building and the facilities and systems thereof, the
need for which arises out of (a) the performance or existence of Alterations,
(b) the installation, use or operation of the property which is deemed
Landlord's, pursuant to Sections 12.01 and 12.02 hereof and Tenant's Property,
(c) the moving of the property which is deemed Landlord's pursuant to Sections
12.01 and 12.02 hereof and Tenant's Property in or out of the Building, (d) the
act, omission, misuse or neglect of Tenant or any of its subtenants or its or
their employees, agents, contractors or invitees or (e) design flaws in any of
Tenant's plans and specifications regardless of the fact that such Tenant's
plans may have been approved by Landlord. Tenant, at its expense, shall promptly
replace all scratched, damaged or broken doors and glass (and the solar film, if
any, attached to the window glass) in and about the Premises, including, without
limitation, entrance doors and shall be responsible for all repairs, maintenance
and replacement of wall and floor coverings in the Premises and for all the
repair, maintenance and replacement of all horizontal portions of the systems
and facilities of the Building within or exclusively serving the Premises,
including without limitation the sanitary and electrical fixtures and equipment
therein. All repairs in or to the Premises for which Tenant is responsible shall
be promptly performed by Tenant in a manner which will not interfere with the
use of the Building by other occupants; provided, however, any repairs in and to
the Building and the facilities and systems thereof for which Tenant is
responsible shall be performed by Landlord at Tenant's expense which expense
shall be commercially reasonable; but Landlord may, at its option, before
commencing any such work or at any time thereafter, require Tenant to furnish to
Landlord such security, in form and amount as Landlord shall reasonably deem
necessary to assure the payment for such work by Tenant. Notwithstanding
anything contained in the preceding sentence to the contrary, with respect to
any repairs performed by Landlord on behalf of the Tenant named herein only,
Tenant shall in no event be required to furnish any such
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security in connection with repairs estimated by a reputable contractor
designated by Landlord to cost less than $100,000. The exterior walls of the
Building, the portions of any window sills outside the windows, and the windows
are not part of the premises demised by this Lease and Landlord reserves all
rights to such parts of the Building. Notwithstanding the foregoing provisions
of this Section 13.01, Tenant shall not be responsible for repairs to or
replacements of any structural elements of the Building, except to the extent
the need for such repairs or replacements arises from the matters set forth in
clauses (a), (c), (d) or (e) of the second sentence of this Section 13.01 or
from the negligence or willful misconduct of Tenant, its employees, agents or
contractors.
13.02. Tenant shall give Landlord prompt notice of any defective
condition in any plumbing, heating, air-conditioning or ventilation system or
electrical lines located in, servicing or passing through the Premises of which
it has actual knowledge. Following such notice, Landlord shall remedy the
conditions, but at the expense of Tenant if Tenant is responsible for same under
the provisions of this Article 13.
13.03. Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant, nor shall Tenant's covenants and obligations
under this Lease be reduced or abated in any manner whatsoever, by reason of any
inconvenience, annoyance, interruption or injury arising from Landlord's making
any repairs or changes which Landlord is required or permitted by this Lease, or
required by law, to make in or to the fixtures, equipment or appurtenances of
the Building or the Premises; provided, however, that Landlord shall use
reasonable efforts to the extent practicable to make such repairs and changes at
such times and in such manner as to minimize interference with the conduct of
Tenant's business in the Premises, provided that Landlord shall not be required
to perform any such work on an overtime or premium-pay basis.
13.04. To the extent same is not the obligation of Tenant under this
Article 13, Landlord shall, at its expense, but subject to the provisions of
this Lease, keep and maintain the public portions of the Building and Building
systems and facilities, to the extent that such systems and facilities affect
the Premises, in good working order and shall operate the Building as a
first-class office building in a manner which is consistent with the maintenance
and repair standards for other first-class office buildings in downtown
Manhattan similar to the Building.
ARTICLE 14 Electricity
14.01. For the purposes of this Article:
(a) The term "Electric Rate" shall mean at the time in
question 108% of the public utility rate schedule (including all surcharges,
taxes, fuel adjustments, taxes regularly passed on to consumers by the public
utility, and other sums payable in respect thereof) for the supply of electric
energy to Landlord for the Building. Notwithstanding the foregoing provisions of
this Section, if the public utility rate schedule (with such inclusions)
applicable to Landlord for the purchase of electric energy for the Building
shall be less than the public utility rate schedule applicable to Landlord, if
Landlord were to purchase electricity solely for the Premises, then the higher
rate schedule shall be used in determining the Electric Rate.
(b) The term "Base Electric Rate" shall mean the Electric Rate
in effect on the date of this Lease.
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(c) The term "Base Electric Charge" for each floor of the
Premises shall be as follows:
(i) for Floor 14, the sum of NINETY-NINE THOUSAND SIX
HUNDRED NINETY-FIVE AND 75/100 ($99,695.75) DOLLARS;
(ii) for Floor 14A, the sum of THIRTY-ONE THOUSAND SIX
HUNDRED TWENTY-FIVE AND 00/100 ($31,625.00) DOLLARS;
and
(iii) for Floor 15, the sum of FIFTY-FOUR THOUSAND NINE
HUNDRED EIGHTY-NINE AND 00/100 ($54,989.00) DOLLARS.
(d) The term "Electrical Consumption Charge" shall mean an
amount, included as a component of Fixed Rent, equal to the sum of the Base
Electric Charge plus all increases thereto pursuant to the provisions of this
Article.
14.02. Subject to the provisions of this Article, Landlord shall
furnish the electric energy that Tenant shall reasonably require in the Premises
for the purposes permitted under this Lease on a "rent inclusion" basis and
there shall be no separate charge to Tenant for such electric energy, such
electric energy being included in Landlord's services which are covered by the
Fixed Rent. Landlord and Tenant agree that the Base Electric Charge represents
the amount initially included in the annual Fixed Rent set forth in Section
1.04(a) hereof to cover the furnishing of such electric energy by Landlord on a
rent inclusion basis and that such Base Electric Charge component of Fixed Rent
shall in no event be subject to reduction, but shall be subject to being
increased as hereinafter provided. Landlord shall not be liable in any event to
Tenant for any failure, interruption or defect in the supply or character of
electric energy furnished to the Premises by reason of any requirement, act or
omission of the public utility serving the Building with electricity or for any
other reason not attributable solely to Landlord's willful misconduct or gross
negligence (but in no event shall Landlord be responsible for any consequential
damages). Landlord shall furnish and install all replacement lighting tubes,
lamps, bulbs and ballasts required in the Premises, and Tenant shall pay to
Landlord or its designated contractor upon demand the then established charges
therefor of Landlord or its designated contractor, as the case may be, provided
such charges are commercially reasonable.
14.03. Landlord will furnish electric energy to Tenant through
presently installed electric facilities for Tenant's reasonable use of such
lighting and other electrical fixtures, appliances and equipment based on
Tenant's approved plan for initial occupancy. At any time, and from time to
time, after Tenant shall have entered into possession of the Premises, or any
portion thereof, Landlord, its agent(s) and consultants may survey the
electrical fixtures, appliances and equipment in the Premises and Tenant's
consumption of electrical energy therein to (i) ascertain whether Tenant is
complying with its obligations under this Article; and (ii) determine whether
the then Electrical Consumption Charge included in Fixed Rent is less than the
Electrical Consumption Charge computed as a result of said survey and to adjust
the Electrical Consumption Charge component of Fixed Rent in accordance with
such computation, which computation and adjustment shall be made as follows:
(a) In the case of the first electric survey, if the product
of (i) the Electric Rate then in effect on the Initial Commencement Date of the
term hereof and (ii) the electric consumption shown by the survey on a kilowatt
and kilowatt hour basis shall exceed the Electrical Consumption Charge, then the
Electrical Consumption Charge component of the Fixed Rent shall be increased by
the amount of such excess, retroactive to the Initial Commencement Date.
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(b) In the event of the second and subsequent surveys, the
computation shall be made by (i) dividing the Electrical Consumption Charge in
effect immediately prior to such survey (the "Existing Electrical Consumption
Charge") for which the computation is being made, by the number of kilowatt
hours of electricity supplied to the Premises as determined by the last prior
survey made by Landlord's consultant, thus arriving at an electrical consumption
per kilowatt hour rate ("KWH Rate"); and (ii) multiplying the number of kilowatt
hours of consumption, as determined by the survey for which the computation is
being made, by the KWH Rate.
If such current survey determination shall show that the Existing
Electrical Consumption Charge is different from the Electrical Consumption
Charge computed in accordance with such survey, as above provided, then
effective as of the earlier of: (i) the date of such survey; or (ii) the earlier
date(s), if any, on which changes in the connected power load or changes in
electrical consumption occurred (as reasonably determined by Landlord"s electric
consultant), the Existing Electrical Consumption Charge included as a component
of Fixed Rent shall be adjusted by an amount equal to the difference between the
Existing Electrical Consumption Charge and the then Electrical Consumption
Charge but in no event shall the Electrical Consumption Charge be reduced below
the Base Electric Charge.
(c) All survey determinations to be made by Landlord's
electrical consultant shall take into account, among other things, any special
electric requirements of Tenant and whether Tenant is utilizing electric energy
at times other than Business Hours on Business Days (as such terms are defined
in Section 15.01) and if cleaning services are provided by Landlord, such survey
shall include Landlord's normal cleaning hours of five (5) hours per day for
lighting within the Premises and for electrical equipment normally used for such
cleaning. The findings of the consultant as to any adjustment in the Fixed Rent
based on such average monthly electric energy consumption shall be conclusive
and binding upon the parties (subject to subsection 14.03 (d) below). As
hereinbefore provided, any such increase resulting from the initial survey shall
be effective as of the Initial Commencement Date, and any such increase or
decrease resulting from a subsequent survey shall be effective as of the earlier
of: (i) the date of such subsequent survey; or (ii) the earlier date(s), if any,
on which changes in the connected power load or electric consumption occurred
(as determined by Landlord's electrical consultant). The initial unpaid amount
of each such adjustment shall be paid within ten (10) days after Landlord
furnishes Tenant with a statement thereof. Thereafter, the Fixed Rent shall be
appropriately adjusted but in no event shall the Fixed Rent be reduced below the
amount thereof set forth in Section 1.04(a).
(d) Tenant, within sixty (60) days after notification from
Landlord of the determination of Landlord's utility consultant (in accordance
with the provisions of 14.03 hereof), shall have the right to contest, at
Tenant's cost and expense, such determination by submitting to Landlord a like
survey determination prepared by a utility consultant of Tenant's selection
which will highlight the differences between Landlord's survey and Tenant's
survey. If the determination of Tenant's consultant does not vary from the
determination of Landlord's consultant by more than five percent (5%), then
Landlord's determination shall be deemed binding and conclusive. If the
determination of Tenant's consultant varies by more than five percent (5%) and
if Landlord's consultant and Tenant's consultant shall be unable to reach
agreement within thirty (30) days, then such two consultants shall designate a
third consultant to make the determination, and the determination of such third
consultant shall be binding and conclusive on both Landlord and Tenant. If the
determination of such third consultant shall substantially confirm the findings
of Landlord's consultant (i.e., within five percent (5%)), then Tenant shall pay
the cost of such third consultant. If such third consultant shall substantially
confirm the determination of Tenant's consultant (i.e., within five percent
(5%)), then Landlord shall pay the cost of such third consultant. If such third
consultant shall make a determination substantially different from that
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of both Landlord's and Tenant's consultants (or is within five percent (5%) of
both such determinations), then the cost of such third consultant shall be borne
equally by Landlord and Tenant. In the event that Landlord's consultant and
Tenant's consultant shall be unable to agree upon the designation of a third
consultant within thirty (30) days after Tenant's consultant shall have made its
determination (different from that of Landlord's
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consultant), then either party shall have the right to request The Real Estate
Board of New York, Inc. (or, upon their failure or refusal to act, the American
Arbitration Association in the City of New York) to designate a third consultant
whose decision shall be conclusive and binding upon the parties, and the costs
of such third consultant shall be borne as hereinbefore provided in the case of
a third consultant designated by the Landlord's and Tenant's consultants.
Pending the resolution of any contest pursuant to the terms hereof, Tenant shall
pay the Additional Charge on account of electricity determined by Landlord's
consultant, and upon the resolution of such contest, appropriate adjustment in
accordance with such resolution of such Additional Charge payable by Tenant on
account of electricity shall be made retroactive to the date of the
determination of Landlord's consultant.
14.04. If at any time during the term of this Lease the Electric Rate
shall exceed the Base Electric Rate or be changed so as to be decreased below
the previously existing Electric Rate(s) (as same may have been increased
pursuant to the provisions of this Article), then, effective as of the date of
each such change in the Electric Rate, the Electrical Consumption Charge
included in the Fixed Rent shall be increased or decreased in proportion to such
change in the Electric Rate (as determined by Landlord's electrical consultant
but in no event, however, shall the Electric Consumption Charge be reduced below
the Base Electric Charge.)
14.05. Landlord shall make available to the Premises from the base
Building electric closets serving the Premises, for distribution by Tenant, at
Tenant's cost, electrical energy with an average capacity of six (6) watts per
usable square foot demand load as recorded on submeters (exclusive of
electricity required for base Building HVAC systems servicing the Premises).
Tenant's use of electric energy in the Premises shall not at any time exceed the
capacity of any of the existing electrical conductors, distribution fuses and
equipment in or otherwise serving the Premises. In order to insure that such
capacity is not exceeded and to avert possible adverse effect upon the
Building's distribution of electricity via the Building's electric system,
Tenant shall not, without Landlord's prior consent in each instance (which shall
not be unreasonably withheld) connect any fixtures, appliances or equipment
(other than normal business machines which do not materially increase Tenant's
electrical consumption) to the Building's electric system or make any
alterations or additions to the electric system of the Premises existing on the
Commencement Date with respect to such floor of the Premises.
14.06. At Landlord's option, the parties shall execute, acknowledge and
deliver to each other a supplemental agreement in such form as Landlord shall
reasonably require to reflect each change in the Fixed Rent under this Article,
but any such change shall be effective as of the effective date described in the
Section under which such change is provided for, even if such agreement is not
executed and delivered.
14.07. Landlord reserves the right to discontinue furnishing electric
energy to Tenant in the Premises at any time upon not less than sixty (60) days'
notice to Tenant, provided that Landlord agrees that it shall not discontinue
furnishing electric energy to the Premises unless
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(x) Landlord is required to do so by Legal Requirements or by a regulation or
order of the utility company servicing the Building, and (y) Landlord is
concurrently discontinuing furnishing electric energy to other tenants in the
Building occupying in the aggregate not less than fifty (50%) percent of that
portion of the rentable area of the Building leased to Tenants. If Landlord
exercises such right, this Lease shall continue in full force and effect and
shall be unaffected thereby, except that from and after the effective date of
such termination Landlord shall not be obligated to furnish electric energy to
Tenant and the Fixed Rent payable under this Lease shall be reduced by an amount
equal to the Electrical Consumption Charge component of such Fixed Rent. If
Landlord so discontinues furnishing electric energy to Tenant, Tenant shall
arrange to obtain electric energy directly from the public utility company
furnishing electric energy to the Building. Such electric energy may be
furnished to Tenant by means of the then existing Building system feeders,
risers and wiring to the extent that the same are available, suitable and safe
for such purpose. All meters and additional panel boards, feeders, risers,
wiring and other conductors and equipment which may be required to obtain
electric energy directly from such public utility company shall be furnished and
installed by Landlord at Tenant's expense, but Landlord may, at its option,
before commencing any such work or at any time thereafter, require Tenant to
furnish to Landlord such security in form (including, without limitation, a bond
issued by a corporate surety licensed to do business in New York) and amount as
Landlord shall deem necessary to assure the payment for such work by Tenant.
14.08. If pursuant to any law, ruling, order or regulation, the amount
which Landlord is permitted to charge Tenant for the purchase of electricity
pursuant to this Article shall be reduced below that which Landlord would
otherwise be entitled to charge Tenant hereunder, then Tenant shall pay the
difference between such amounts to Landlord as an Additional Charge within ten
(10) days after being billed therefor by Landlord, as compensation for the use
and maintenance of the Building's electric distribution system.
14.09. Notwithstanding anything to the contrary contained herein,
Tenant may elect, by giving written notice to Landlord within the six (6) month
period following the occurrence of the Initial Commencement Date, to require
Landlord to discontinue furnishing electricity to the Premises on a "rent
inclusion" basis pursuant to Section 14.02 hereof, and in the event Tenant
timely gives such notice to Landlord, Tenant shall purchase from Landlord or
from a meter company reasonably designated by Landlord all electricity consumed,
used or to be used in the Premises, pursuant to the provisions of the alternate
electricity clause set forth on Exhibit F annexed hereto and made a part hereof.
In the event that Tenant makes the election set forth in this Section 14.09,
Landlord will install, at Tenant's expense, a submeter or submeters to measure
Tenant's electrical consumption in the Premises, and from and after the date
that such submeter or submeters are installed and operational, this Lease shall
be amended in the following respects:
(A) The provisions of this Article 14 shall no longer be
applicable and shall be deleted from this Lease and the
alternate electricity provision set forth on Exhibit F shall
be substituted therefor;
(B) Section 1.04(a) hereof shall be modified by deleting clauses
(i) through (iii) thereof and substituting the following
therefor:
"(i) For Floor 14:
(x) ONE MILLION EIGHTY-SEVEN THOUSAND FIVE
HUNDRED NINETY AND 00/100 ($1,087,590.00)
DOLLARS per annum, payable in equal monthly
installments of NINETY THOUSAND SIX HUNDRED
THIRTY-TWO AND 50/100 ($90,632.50) DOLLARS
per
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month during the period commencing on the
Floor 14 Commencement Date and ending on the
last day of the month preceding month in
which occurs the third (3rd) anniversary of
the Initial Commencement Date;
(y) ONE MILLION ONE HUNDRED SIXTY THOUSAND
NINETY-SIX AND 00/100 ($1,160,096.00)
DOLLARS per annum, payable in equal monthly
installments of NINETY-SIX THOUSAND SIX
HUNDRED SEVENTY-FOUR AND 67/100 ($96,674.67)
DOLLARS per month during the period
commencing on the first day of the month in
which occurs the third (3rd) anniversary of
the Initial Commencement Date and ending on
the last day of the month preceding the
month in which occurs the seventh (7th)
anniversary of the Initial Commencement
Date; and
(z) ONE MILLION TWO HUNDRED THIRTY-TWO THOUSAND
SIX HUNDRED TWO AND 00/100 ($1,232,602.00)
DOLLARS per annum, payable in equal monthly
installments of ONE HUNDRED TWO THOUSAND
SEVEN HUNDRED SIXTEEN AND 83/100
($102,716.83) DOLLARS per month during the
period commencing on the first day of the
month in which occurs the seventh (7th)
anniversary of the Initial Commencement Date
and ending on the Expiration Date;
(ii) For Floor 14A, ONE HUNDRED FIFTEEN THOUSAND AND
00/100 ($115,000.00) DOLLARS per annum, payable in
equal monthly installments of NINE THOUSAND FIVE
HUNDRED EIGHTY-THREE AND 33/100 ($9,583.33) DOLLARS
per month during the period commencing on the Floor
14A Commencement Date and ending on the Expiration
Date; and
(iii) For Floor 15:
(x) FIVE HUNDRED NINETY-NINE THOUSAND EIGHT
HUNDRED EIGHTY AND 00/100 ($599,880.00)
DOLLARS per annum, payable in equal monthly
installments of FORTY-NINE THOUSAND NINE
HUNDRED NINETY AND 00/100 ($49,990.00)
DOLLARS per month during the period
commencing on the Floor 15 Commencement Date
and ending on the last day of the month
preceding month in which occurs the third
(3rd) anniversary of the Initial
Commencement Date;
(y) SIX HUNDRED THIRTY-NINE THOUSAND EIGHT
HUNDRED SEVENTY-TWO AND 00/100 ($639,872.00)
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DOLLARS per annum, payable in equal monthly
installments of FIFTY-THREE THOUSAND THREE
HUNDRED TWENTY-TWO AND 67/100 ($53,322.67)
DOLLARS per month during the period
commencing on the first day of the month in
which occurs the third (3rd) anniversary of
the Initial Commencement Date and ending on
the last day of the month preceding the
month in which occurs the seventh (7th)
anniversary of the Initial Commencement
Date; and
(z) SIX HUNDRED SEVENTY-NINE THOUSAND EIGHT
HUNDRED SIXTY-FOUR AND 00/100 ($679,864.00)
DOLLARS per annum, payable in equal monthly
installments of FIFTY-SIX THOUSAND SIX
HUNDRED FIFTY-FIVE AND 33/100 ($56,655.33)
DOLLARS per month during the period
commencing on the first day of the month in
which occurs the seventh (7th) anniversary
of the Initial Commencement Date and ending
on the Expiration Date"; and
(C) Section 1.12 of this Lease shall be deleted in its entirety
and shall be replaced by the following new Section:
"Notwithstanding the provisions of Section 1.04(a) hereof to
the contrary, provided and on condition that Tenant is not in
default under any of the terms, provisions or conditions of
this Lease on Tenant's part to be performed, the Fixed Rent
payable hereunder shall be abated as follows:
(a) the Fixed Rent for Floor 14 shall be abated during the
period commencing on the first day of the month after the
month in which occurs the nineteenth (19th) month anniversary
of the Floor 14 Commencement Date and ending on the last day
of the month after the month in which occurs the twenty-first
(21st) month anniversary of the Floor 14 Commencement Date;
and
(b) the Fixed Rent for Floor 14A shall be abated during the
period commencing on the first day of the month after the
month in which occurs the nineteenth (19th) month anniversary
of the Floor 14A Commencement Date and ending on the last day
of the month after the month in which occurs the twenty-first
(21st) month anniversary of the Floor 14A Commencement Date;
and
(c) the Fixed Rent for Floor 15 shall be abated during the
period commencing on the first day of the month after the
month in which occurs the nineteenth (19th) month anniversary
of the Floor 15 Commencement Date and ending on the last day
of the month after the month in which occurs the twenty-first
(21st) month anniversary of the Floor 15 Commencement Date."
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ARTICLE 15 Landlord's Services
15.01. (a) Landlord will provide after the term of this Lease shall
have commenced provided Tenant shall have taken occupancy of the Premises for
the conduct of its business the following services to the Premises in the manner
hereinafter more particularly set forth: (i) heat, ventilation and air
conditioning; (ii) elevator service; (iii) domestic hot and cold water; and (iv)
cleaning.
(b) As used herein, the terms "Business Hours" shall mean the
hours between 8:00 a.m. and 6:00 p.m., and "Business Days" shall mean all days
except Saturdays, Sundays, New Year's Day, Washington's Birthday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, the day following Thanksgiving, and
Christmas, and any other days which shall be either (i) observed by both the
federal and the state governments as legal holidays or (ii) designated as a
holiday by the applicable Building Service Union Employee Service contract or by
the applicable Operating Engineers' contract.
15.02. (a) (i) Landlord shall furnish heat to the Premises during
Business Hours on Business Days when and as required by law (subject to the
design specifications of the systems, including occupancy and connected electric
load design criteria, and subject to energy conservation requirements of, and
voluntary energy conservation programs sponsored by, governmental authorities).
(ii) Landlord shall furnish ventilation and air conditioning
to the Premises during Business Hours on Business Days as may be required for
comfortable occupancy of the Premises (except as otherwise provided in this
Lease and except for any special requirements of Tenant arising from its
particular use of the Premises, and subject to the design specifications of the
systems, including occupancy and connected electric load design criteria, and to
energy conservation requirements of, and voluntary energy conservation programs
sponsored by, governmental authorities).
(iii) Any use of the Premises, or any part thereof, or
rearrangement of partitioning in a manner that interferes with normal operation
of the heat and air-conditioning systems servicing the same, may require changes
in such systems. Such changes, so occasioned, shall be made by Tenant, at its
expense, subject to Landlord's prior written approval of such changes, which
approval may be withheld for any reason. Tenant shall not make any change,
alteration, addition or substitution to the air-conditioning system without
Landlord's prior written approval, which approval may be withheld for any
reason.
(b) If Landlord shall make steam available for Tenant's use
within the Premises for any additional heating or permitted kitchen use, the
cost of such steam as well as the cost of piping and other equipment or
facilities required to supply steam to and distribute steam within the Premises
shall be paid by Tenant. Landlord may install and maintain at Tenant's expense,
meters to measure Tenant's consumption of steam and Tenant shall reimburse
Landlord, on demand, for the quantities of steam shown on such meters at
Landlord's reasonable charges.
(c) (i) Landlord shall provide passenger elevator service to
each floor of the Premises at all times during Business Hours of Business Days
and at least one of such passenger elevators shall be subject to call at all
other times. Landlord shall provide freight elevator service to the Premises on
a first come-first served basis (i.e., no advance scheduling) between the hours
of 8:00 A.M.
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and 11:30 A.M. and 1:00 P.M. and 4:30 P.M. on Business Days ("Freight Hours").
Freight elevator service shall also be provided to the Premises on a reserved
basis at all other times (subject to applicable union requirements regarding
minimum number of hours), upon the payment of Landlord's then established
charges therefor which shall be Additional Charges hereunder; Landlord's current
charge for such overtime freight elevator service is $94.50 per hour and
Landlord's current charge for the use of the loading dock is $63.00 per hour,
subject to increase from time to time. The use of all elevators and the loading
dock shall be on a non-exclusive basis and shall be subject to the Rules and
Regulations. Landlord shall permit Tenant to use the freight elevator, at no
charge to Tenant, on a first come-first served basis (i.e., no advance
scheduling) during Freight Hours for purposes of Tenant's move in to the
Premises.
(ii) At any time or times all or any of the elevators in the
Building may, at the option of Landlord, be manual and/or automatic elevators,
and Landlord shall be under no obligation to furnish an elevator operator for
any automatic elevator. If Landlord shall at any time or times furnish any
elevator operator for any automatic elevator, Landlord may discontinue
furnishing such elevator operator without any diminution, reduction or abatement
of rent.
(d) Landlord shall furnish reasonable quantities of hot and
cold water to the floor(s) on which the Premises are located for core lavatory
(and to the extent currently existing in the Premises as of the date hereof,
private lavatory), cleaning, pantry (as opposed to kitchen) and drinking
purposes only. If Tenant shall require water for any other purpose, Landlord
need only furnish cold water at the Building core riser through a capped outlet
located on the floor of the Premises, and the cost of heating such water as well
as piping and supplying such water to the Premises shall be paid by Tenant.
Landlord may install and maintain, at Tenant's expense, meters to measure
Tenant's consumption of such cold water and/or hot water for such other
purposes. Tenant shall pay to Landlord at Landlord's standard charges for the
quantities of cold water and hot water shown on such meters (including
Landlord's charge for the production of such hot water, if Landlord shall have
produced such hot water) on demand.
(e) (i) Except as otherwise provided below, Landlord shall
provide cleaning and janitorial services to the Premises on Business Days in
accordance with the provisions of Exhibit K attached hereto and made a part
hereof. Tenant shall pay to Landlord on demand the costs incurred by Landlord
for (x) extra cleaning work in the Premises required because of (i) misuse or
neglect on the part of Tenant or its subtenants or its or their employees or
visitors, (ii) interior glass partitions or unusual quantity of interior glass
surfaces (if cleaning thereof is requested by Tenant), and (iii) non-building
standard materials or finishes installed by Tenant or at its request (if
cleaning thereof is requested by Tenant), (y) removal from the Premises and the
Building of any refuse and rubbish of Tenant in excess of that ordinarily
accumulated in business office occupancy, including, without limitation, kitchen
refuse, or at times other than Landlord's standard cleaning times, and (z) the
use of the Premises by Tenant other than during Business Hours on Business Days,
to the extent that Landlord incurs actual increases in costs as a result of such
use. Notwithstanding the foregoing, Landlord shall not be required to clean any
portions of the Premises used for preparation, serving or consumption of food or
beverages, training rooms, data processing or reproducing operations, private
lavatories or toilets (other than the core bathrooms and ADA compliant toilet
facilities located on the floors on which the Premises are located) or other
special purposes requiring greater or more difficult cleaning work than office
areas and, if Tenant requires the cleaning of such areas, Tenant agrees, at
Tenant's expense, to retain Landlord's cleaning contractor to perform such
cleaning.
(ii) Landlord, its cleaning contractor and their respective
employees shall have access to the Premises after 6:00 p.m. and before 8:00 a.m.
and shall have the right to use, without charge therefor, all light, power and
water in the Premises reasonably required to clean the
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Premises as required under this subsection 15.02(e).
(iii) Tenant shall not clean, nor require, permit, suffer or
allow any windows in the Premises to be cleaned, from the outside in violation
of Section 202 of the Labor Law, or any other applicable law.
15.03. If Tenant shall require heat or air-conditioning services at any
time other than as set forth in subsection 15.02(a), Landlord shall furnish such
service for such times upon reasonable advance notice from Tenant, and Tenant
shall pay to Landlord upon demand as Additional Charges hereunder Landlord's
then established charges therefor. Landlord's current charge for overtime heat
service is $266.51 per hour and Landlord's current charge for overtime
air-conditioning service is $555.71 per hour and Landlord's current charge for
overtime ventilation service is $105.71 per hour, which rates are subject to
change in accordance with the Building schedule of charges. If any other tenant
or tenants in "Tenant's HVAC Zone" (as such term is hereinafter defined) shall
have requested overtime heat or air-conditioning services for one or more hours
that correspond to or overlap with one or more hours requested by Tenant, the
overtime rate for such period of overlap shall be equitably prorated among all
such tenants (including Tenant) in a manner reasonably determined by Landlord.
For purposes hereof, the term "Tenant's HVAC Zone" shall mean the HVAC zone of
the Building servicing floors two (2) through sixteen (16). Any such overtime
usage required by Tenant that is not required for a period of time ending
immediately before the commencement of a Business Day or immediately after the
close of a Business Day must be requested in minimum blocks of four (4) hours.
15.04. Except as otherwise expressly provided above, Landlord shall not
be required to provide any services to the Premises.
15.05. Subject to the provisions of Articles 19 and 20 and Section
35.04(b) hereof, Landlord reserves the right, without liability to Tenant and
without it being deemed a constructive eviction, to stop or interrupt any
heating, elevator, escalator, lighting, ventilating, air-conditioning, steam,
power, electricity, water, cleaning or other service and to stop or interrupt
the use of any Building facilities and systems at such times as may be necessary
and for as long as may reasonably be required by reason of accidents, strikes,
or the making of repairs, alterations or improvements, or inability to secure a
proper supply of fuel, gas, steam, water, electricity, labor or supplies, or by
reason of any other similar or dissimilar cause beyond the reasonable control of
Landlord. Subject to the provisions of Articles 19 and 20 and Section 35.04(b)
hereof, no such stoppage or interruption shall result in any liability from
Landlord to Tenant or entitle Tenant to any diminution or abatement of rent or
other compensation nor shall this Lease or any of the obligations of Tenant be
affected or reduced by reason of any such stoppage or interruption. Except in
emergency circumstances, Landlord shall give Tenant reasonable prior notice
(which notice need not be in writing) of its intention to make any repairs,
alterations or improvements referred to in this Section 15.05 or any other
stoppages of services of which Landlord has prior notice and shall use
reasonable efforts in making such repairs, alterations or improvements and in
dealing with such other stoppages of service so as to minimize interference with
Tenant's business operations, provided that Landlord shall not be required to
perform any such work on an overtime or premium-pay basis.
15.06. Only Landlord or persons approved by Landlord shall be permitted
to furnish or sell laundry, linen, towels, drinking water, ice, food, beverages,
bootblacking, barbering and other similar supplies and services to tenants.
Landlord may fix the circumstances under which such supplies and services are to
be furnished or sold. Landlord expressly reserves the right at any time to act
as or to designate an exclusive supplier of all or any one or more of said
supplies and services, provided that the quality thereof and the charges
therefor shall be reasonably comparable to that of other suppliers in the
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downtown area of Manhattan in the City of New York. Landlord expressly reserves
the right to exclude from the Building any person not so designated by Landlord.
However, Tenant, its regular office employees or invitees may personally bring
food or beverages into the Building for consumption within the Premises solely
by Tenant, its regular office employees or invitees.
15.07. In addition to any remedies which Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies contained elsewhere in this Lease, if there shall be a monetary default
hereunder by Tenant which shall not have been remedied within the applicable
grace period, Landlord shall not be obligated to furnish to Tenant or the
Premises any services outside of Business Hours on Business Days; and the
discontinuance of any one or more such services shall be without liability by
Landlord to Tenant and shall not reduce, diminish or otherwise affect any of
Tenant's covenants and obligations under this Lease.
15.08. If and for so long as Landlord maintains a Building directory,
Landlord, at Tenant's request, shall maintain listings on such directory of the
names of Tenant, or its permitted subtenants, assignees or affiliates and the
names of any of their officers and employees, provided that the names so listed
shall not use more than Tenant's Share of the space on the Building directory.
The actual cost to Landlord for making any changes in such listings requested by
Tenant shall be paid by Tenant to Landlord within thirty (30) days after
delivery of an invoice therefor.
ARTICLE 16 Access and Name of Building
16.01. Except for the space within the inside surfaces of all walls,
hung ceilings, floors, windows and doors bounding the Premises, all of the
Building, including, without limitation, exterior and atrium Building walls,
core corridor walls and doors and any core corridor entrance, any terraces or
roofs adjacent to the Premises, and any space in or adjacent to the 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 Premises for the purposes of operation, maintenance,
decoration and repair, are reserved to Landlord and persons authorized by
Landlord. Tenant acknowledges that Landlord has installed or is planning to
install in the Building on the inside of the windows thereof a film to reduce
the usage of energy in the Building. Tenant agrees that the foregoing provisions
of this Section 16.01 shall apply to the installation, maintenance or
replacement of such film.
16.02. Landlord reserves the right, and Tenant shall permit Landlord
and persons authorized by Landlord, to install, erect, use and maintain pipes,
ducts and conduits in and through the Premises; provided that (a) if installed
in or adjacent to the Premises then such installations shall be, at Landlord's
cost and expense, located in boxed enclosures and appropriately furred, (b) in
performing such installation work, Landlord shall use reasonable efforts not to
interfere with Tenant's use of the Premises without any obligation to employ
overtime services, and (c) the rentable square foot area of the Premises shall
not be reduced thereby, except to a de minimis extent (Landlord agreeing not to
reduce the rentable square foot area of the Premises by more than one (1%)
percent thereof). Any damage to the Premises resulting from Landlord's exercise
of the foregoing right shall be repaired promptly by Landlord, at Landlord's
expense.
16.03. Landlord and persons authorized by Landlord shall have the
right, upon reasonable advance notice, except in cases of emergency, to enter
and/or pass through the Premises at reasonable times provided Landlord shall use
reasonable efforts to minimize any interference with
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Tenant's business operations (without obligation to make such visits during
non-business hours) and shall be accompanied by a designated representative of
Tenant if Tenant shall have made such representative available to Landlord, (a)
to examine the Premises and to show them to actual and prospective Superior
Lessors, Superior Mortgagees, or prospective purchasers, mortgagees or lessees
of the Building, (b) to make such repairs, alterations, additions and
improvements in or to the Premises and/or in or to the Building or its
facilities and equipment as Landlord or persons authorized by Landlord is or are
required or desires to make, and (c) to read any utility meters located therein.
Landlord and such authorized persons shall be allowed to take all materials into
and upon the Premises that may be required in connection therewith, without any
liability to Tenant and without any reduction of Tenant's covenants and
obligations hereunder.
16.04. If at any time any windows of the Premises are either
temporarily darkened or obstructed by reason of any repairs, improvements,
maintenance and/or cleaning in or about the Building (or permanently darkened or
obstructed if required by law) or covered by any translucent material for the
purpose of energy conservation, or if any part of the Building, other than the
Premises, is temporarily or permanently closed or inoperable, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant's obligations under this Lease.
16.05. During the time period referred to in subsection 7.07 and during
the period of twelve (12) months prior to the expiration date of this Lease,
Landlord and persons authorized by Landlord may exhibit the Premises to
prospective tenants on reasonable advance notice to Tenant, which may be given
orally.
16.06. Intentionally omitted.
16.07. Landlord reserves the right, at any time, without it being
deemed a constructive eviction and without incurring any liability to Tenant
therefor, or affecting or reducing any of Tenant's covenants and obligations
hereunder, to make or permit to be made such changes, alterations, additions and
improvements in or to the Building and the fixtures and equipment thereof, as
well as in or to the street entrances, atrium, doors, halls, passages,
elevators, escalators and stairways thereof, and other public parts of the
Building, as Landlord shall deem necessary or desirable. Landlord agrees that
any changes, alterations, additions or improvements performed pursuant to this
Section shall not, when completed, unreasonably interfere with the access to or
use of the Premises by Tenant or materially diminish any services to be provided
by Landlord hereunder.
16.08. Landlord reserves the right to name the Building and to change
the name or address of the Building at any time and from time to time. Landlord
shall endeavor to give Tenant reasonable prior notice of any change in the
address of the Building. Neither this Lease nor any use by Tenant shall give
Tenant any easement or other right in or to the use of any door or any passage
or any concourse or any plaza connecting the Building with any subway or any
other building or to any public conveniences, and the use of such doors,
passages, concourses, plazas and conveniences may without notice to Tenant, be
regulated or discontinued at any time by Landlord.
16.09. If Tenant shall not be personally present to open and permit an
entry into the Premises at any time when for any reason an entry therein shall
be urgently necessary by reason of fire or other emergency, Landlord or
Landlord's agents may forcibly enter the same without rendering Landlord or such
agents liable therefor (if during such entry Landlord or Landlord's agents shall
accord reasonable care to Tenant's property) and without in any manner affecting
the obligations and covenants of this Lease.
16.10. Any damage to the Premises resulting from the exercise by
Landlord of its rights
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granted under this Article 16 shall be promptly repaired by Landlord at
Landlord's expense.
ARTICLE 17 Notice of Occurrences
17.01. Tenant shall give prompt notice to Landlord of (a) any
occurrence in or about the Premises for which Landlord might be liable, (b) any
fire or other casualty in the Premises, (c) any damage to or defect in the
Premises, including the fixtures, equipment and appurtenances thereof, for the
repair of which Landlord might be responsible, and (d) any damage to or defect
in any part or appurtenance of the Building's sanitary, electrical, heating,
ventilating, air-conditioning, elevator or other systems located in or passing
through the Premises or any part thereof, if and to the extent that Tenant shall
have knowledge of any of the foregoing matters.
ARTICLE 18 Non-Liability and Indemnification
18.01. Neither Landlord, any Superior Lessor or any Superior Mortgagee,
nor any partner, director, officer, shareholder, principal, agent, servant or
employee of Landlord, any Superior Lessor or any Superior Mortgagee (in any case
whether disclosed or undisclosed), shall be liable to Tenant for any loss,
injury or damage to Tenant or to any other person, or to its or their property,
irrespective of the cause of such injury, damage or loss, nor shall the
aforesaid parties be liable for any damage to property of Tenant or of others
entrusted to employees of Landlord nor for loss of or damage to any such
property by theft or otherwise except to the extent caused by or resulting from
the negligence of Landlord, its agents, servants, employees in the operation or
maintenance of the Premises or the Real Property. Further, neither Landlord, any
Superior Lessor or any Superior Mortgagee, nor any partner, director, officer,
principal, shareholder, agent, servant or employee of Landlord, any Superior
Lessor or any Superior Mortgagee, shall be liable (a) for any such damage caused
by other tenants or persons in, upon or about the Building or the Real Property,
or caused by operations in construction of any private, public or quasi-public
work; or (b) even if negligent, for consequential damages arising out of any
loss of use of the Premises or any equipment, facilities or other Tenant's
Property therein by Tenant or any person claiming through or under Tenant.
18.02. Tenant shall indemnify and hold harmless Landlord and all
Superior Lessors and Superior Mortgagees and its and their respective partners,
directors, officers, principals, shareholders, agents and employees from and
against any and all claims arising from or in connection with (a) the conduct or
management of the Premises or of any business therein, or any work or thing
whatsoever done, or any condition created (other than by Landlord, its agents,
or employees) in or about the Premises during the term of this Lease or during
the period of time, if any, prior to the Initial Commencement Date that Tenant
may have been given access to the Premises; (b) any act, omission or negligence
of Tenant or any of its subtenants or licensees or its or their partners,
directors, principals, shareholders, officers, agents, employees or contractors;
(c) any accident, injury or damage whatever (except to the extent caused by
Landlord's negligence or the negligence of Landlord's agents, employees, or
contractors) occurring in, at or upon the Premises; and (d) any breach or
default by Tenant in the full and prompt payment and performance of Tenant's
obligations under this Lease; together with all reasonable costs, expenses and
liabilities incurred in or in connection with each such claim or action or
proceeding brought thereon, including, without limitation, all reasonable
attorneys' fees and expenses. In case any action or proceeding be brought
against Landlord and/or any Superior Lessor
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or Superior Mortgagee and/or its or their partners, directors, officers,
principals, shareholders, agents and/or employees by reason of any such claim,
Tenant, upon notice from Landlord or such Superior Lessor or Superior Mortgagee,
shall resist and defend such action or proceeding (by counsel reasonably
satisfactory to Landlord or such Superior Lessor or Superior Mortgagee).
18.03. Subject to the terms of this Lease relating to waivers of
liability and subrogation (to the extent that such waiver shall be applicable in
any case), Landlord shall indemnify and hold harmless Tenant from and against
any and all claims relating to events which occur in public areas of the
Building located outside of the Premises to the extent arising from the
negligence or willful, wrongful act of Landlord, together with all reasonable
costs, expenses and liabilities incurred in or in connection with each such
claim or action or proceeding brought thereon, including, without limitation,
all attorneys' fees and expenses, provided, however, that in no event shall
Landlord be liable for any consequential damages in connection with any of the
aforesaid. In case any action or proceeding be brought against Tenant for which
Tenant claims indemnification from Landlord, Tenant shall give Landlord prompt
written notice thereof, and Landlord, upon such notice from Tenant, shall have
the right, but not the obligation, to resist and defend such action or
proceeding on behalf of Tenant by counsel for Landlord's insurer (if such claim
is covered by insurance) or otherwise by other counsel reasonably satisfactory
to Tenant.
ARTICLE 19 Damage or Destruction
19.01. If the Building or the Premises shall be partially or totally
damaged or destroyed by fire or other casualty (and if this Lease shall not be
terminated as in this Article 19 hereinafter provided), (a) Landlord shall
repair the damage to and restore and rebuild the Building and the Premises
(including Tenant's improvements and betterments but excluding the property
which is deemed Tenant's Property pursuant to Section 12.01 hereof) with
reasonable dispatch after notice to it of the damage or destruction and the
collection of the insurance proceeds attributable to such damage, and (b) Tenant
shall repair the damage to and restore and repair the property which is deemed
Tenant's Property pursuant to Section 12.01 hereof with reasonable dispatch
after such damage or destruction. Such work by Tenant shall be deemed
Alterations for the purposes of Article 11 hereof. The proceeds of policies
providing coverage for Tenant's improvements and betterments shall be paid to
Landlord. Concurrently with the collection of any insurance proceeds
attributable to the damage of Tenant's improvements and betterments, Tenant
shall pay to Landlord (i) the amount of any deductible under the policy insuring
Tenant's improvements and betterments and (ii) the amount, if any, by which the
cost of repairing and restoring Tenant's improvements and betterments as
estimated by a reputable contractor designated by Landlord exceeds the available
insurance proceeds therefor. The amounts due in accordance with subparagraphs
(i) and (ii) above shall be Additional Charges under this Lease and payable by
Tenant to Landlord upon demand. The proceeds of Tenant's insurance policies with
respect to Tenant's Property shall be payable to Tenant.
19.02. Subject to the provisions of Section 19.05 hereof, if all or
part of the Premises shall be damaged or destroyed or rendered completely or
partially untenantable on account of fire or other casualty, the Fixed Rent and
the Additional Charges under Article 3 hereof shall be abated in the proportion
that the untenantable area of the Premises bears to the total area of the
Premises, for the period from the date of the damage or destruction to (i) the
date the damage to the Premises shall be substantially repaired (provided,
however, that if such repairs would have been substantially completed at an
earlier date but for Tenant's having failed to reasonably cooperate with
Landlord in effecting such
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repair, then the Premises shall be deemed to have been repaired substantially on
such earlier date and any reduction or abatement shall cease) or (ii) if the
Building and not the Premises is so damaged or destroyed, the date on which the
Premises shall be made tenantable; provided, however, should Tenant or any of
its subtenants reoccupy a portion of the Premises during the period the repair
work is taking place and prior to the date that the Premises are substantially
repaired or made tenantable for the conduct of its or their business (which
shall not include entry upon and occupancy of the Premises with the prior
written consent of Landlord for the purpose of performing restoration and/or
repair to Tenant's Property, improvements and finish work), the Fixed Rent and
the Additional Charges allocable to such reoccupied portion, based upon the
proportion which the area of the reoccupied portion of the Premises bears to the
total area of the Premises, shall be payable by Tenant from the date of such
occupancy.
19.03. (a) If the Building shall be totally damaged or destroyed by
fire or other casualty, or if the Building shall be so damaged or destroyed by
fire or other casualty (whether or not the Premises are damaged or destroyed)
that its repair or restoration requires more than two hundred seventy (270) days
or the expenditure of more than thirty (30%) percent of the full insurable value
of the Building immediately prior to the casualty (as estimated in any such case
by a reputable contractor, registered architect or licensed professional
engineer designated by Landlord), and provided Landlord shall terminate leases
covering no less than 50% of the office space in the Building then leased to
tenants (including Tenant) in the Building, then in such case Landlord may
terminate this Lease by giving Tenant notice to such effect within one hundred
fifty (150) days after the date of the casualty. For the purpose of this Section
only, "full insurable value" shall mean replacement cost less the cost of
footings, foundations and other structures below the street and first floors of
the Building.
(b) If the Premises or any part thereof or the means of access
thereto or Building systems servicing same shall be damaged by fire or other
casualty, and Landlord is required to or elects to repair and restore the
Premises, Landlord shall, within one-hundred fifty (150) days after such damage
or destruction, provide Tenant with a written notice of the estimated date on
which the restoration of the Premises shall be substantially completed. If such
estimated date is more than twelve (12) months after the date of such damage or
destruction, Tenant may terminate this Lease by notice to Landlord, which notice
shall be given within thirty (30) days after the date Landlord provides the
notice required by the preceding sentence, and such termination shall be
effective upon the giving of Tenant's notice. Failure by Tenant to provide such
notice within such thirty (30) day period shall be deemed an election by Tenant
not to terminate this Lease. If Tenant elects not to terminate this Lease or is
deemed to have so elected, and if Landlord has not substantially completed the
required repairs and restored the Premises within the period originally
estimated by Landlord or within such period thereafter (not to exceed 3 months)
as shall equal the aggregate period Landlord may have been delayed in commencing
or completing such repairs by Force Majeure Causes, then Tenant shall have the
further right to elect to terminate this Lease upon written notice to Landlord
and such election shall be effective upon the expiration of thirty (30) days
after the date of such notice, unless Landlord substantially completes such
restoration within such thirty (30) day period.
19.04. Except as expressly provided in Section 19.03(b) hereof, Tenant
shall not be entitled to terminate this Lease and Landlord shall have no
liability to Tenant for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Premises or of the Building
pursuant to this Article 19. Landlord shall use reasonable efforts to make such
repair or restoration promptly and in such manner as not unreasonably to
interfere with Tenant's use and occupancy of the Premises, but Landlord shall
not be required to do such repair or restoration work except during Business
Hours of Business Days.
19.05. Notwithstanding any of the foregoing provisions of this Article
19, if by reason of
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some act or omission on the part of Tenant or any of its subtenants or its or
their partners, directors, officers, servants, employees, agents or contractors
of which Landlord shall have given Tenant notice and a reasonable opportunity to
cure either, Landlord or any Superior Lessor or any Superior Mortgagee shall be
unable to collect all of the insurance proceeds (including, without limitation,
rent insurance proceeds) applicable to damage or destruction of the Premises or
the Building by fire or other casualty, then, provided Landlord provides Tenant
with evidence reasonably satisfactory to Tenant that such non-collectability of
insurance proceeds is the result of an act or omission by Tenant or its
subtenants, or their partners, directors, officers, servants, employees, agents
or contractors, then without prejudice to any other remedies which may be
available against Tenant, there shall be no abatement or reduction of the Fixed
Rent or Additional Charges.
19.06. Landlord will not carry insurance of any kind on Tenant's
Property and improvements and betterments, and, except as provided by law or by
reason of Landlord's negligence or wilful misconduct or its breach of any of its
obligations hereunder, shall not be obligated to repair any damage to or replace
Tenant's Property. Tenant agrees to look first to its insurance for recovery of
any damage to or loss of Tenant's Property. If Tenant shall fail to maintain
such insurance, Landlord shall have the right to obtain insurance on Tenant's
Property and the cost thereof shall be Additional Charges under this Lease and
payable by Tenant to Landlord on demand.
19.07. The provisions of this Article 19 shall be deemed an express
agreement governing any case of damage or destruction of the 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.
ARTICLE 20 Eminent Domain
20.01. If the whole of the Building or the Premises shall be 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 terminate as of
the date of vesting of title on such taking (herein called "Date of the
Taking"), and the Fixed Rent and Additional Charges shall be prorated and
adjusted as of such date.
20.02. If more than forty (40%) percent of the Building shall be so
taken, this Lease shall be unaffected by such taking, except that (a) Landlord
may, at its option, provided that Landlord shall terminate leases of no less
than fifty (50%) percent of the office space then leased to tenants in the
Building upon which the effect of such taking shall have been substantially
similar to the effect of same upon the Premises, terminate this Lease by giving
Tenant notice to that effect within ninety (90) days after the Date of the
Taking, and (b) if fifteen (15%) percent or more of the Premises shall be so
taken and the remaining area of the Premises shall not be sufficient, in
Tenant's reasonable judgment, for Tenant to continue the operation of its
business, Tenant may terminate this Lease by giving Landlord notice to that
effect within 90 days after the Date of the Taking. This Lease shall terminate
on the date that such notice from Landlord or Tenant to the other shall be
given, and the Fixed Rent and Additional Charges shall be prorated and adjusted
as of such termination date, except that with respect to any portion of the
Premises which is the subject of the taking, if earlier, as of the Date of the
Taking. Upon such partial taking and this Lease continuing in force as to any
part of the Premises, the Fixed Rent and Additional Charges shall be adjusted
according to the rentable area remaining.
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20.03. Landlord shall be entitled to receive the entire award or
payment in connection with any taking 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 20. Tenant hereby
expressly assigns to Landlord all of its right, title and interest in and to
every such award or payment; provided, however, that Tenant shall have the right
to make a separate claim for its moving expenses and to the extent the award
otherwise payable to Landlord shall not be diminished thereby, for any of
Tenant's Property taken.
20.04. If the temporary use or occupancy of all or any part of the
Premises shall be 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
or payment for such taking which represents compensation for the use and
occupancy of the Premises, 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 Premises. This Lease
shall be and remain unaffected by such taking and Tenant shall continue to be
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 Charges when due. If the period of temporary use or occupancy shall
extend beyond the Expiration Date of this Lease, that part of the award which
represents compensation for the use and occupancy of the Premises (or a part
thereof) shall be divided between Landlord and Tenant so that Tenant shall
receive so much thereof as represents the period up to and including such
Expiration Date and Landlord shall receive so much thereof as represents the
period after such Expiration Date. All monies paid as, or as part of, an award
for temporary use and occupancy for a period beyond the date to which the Fixed
Rent and Additional Charges have been paid shall be received, held and applied
by Landlord as a trust fund for payment of the Fixed Rent and Additional Charges
becoming due hereunder.
20.05. In the event of a taking of less than the whole of the Building
and/or the Land which does not result in termination of this Lease, or in the
event of a taking for a temporary use or occupancy of all or any part of the
Premises which does not result in a termination of this Lease, (a) Landlord, at
its expense, and whether or not any award or awards shall be sufficient for the
purpose, shall proceed with reasonable diligence to repair the remaining parts
of the Building and the Premises (other than those parts of the Premises which
are deemed Landlord's property pursuant to Section 12.01 hereof [except that
Landlord shall repair the Base Building Work to the Premises] and Tenant's
Property), to substantially their former condition to the extent that the same
may be feasible (subject to reasonable changes which Landlord shall deem
desirable) and so as to constitute a complete and rentable Building and Premises
and (b) Tenant, at its expense, and whether or not any award or awards shall be
sufficient for the purpose, shall proceed with reasonable diligence to repair
the remaining parts of the Premises which are deemed Landlord's property
pursuant to Section 12.01 hereof and Tenant's Property, to substantially their
former condition to the extent that the same may be feasible, subject to
reasonable changes which shall be deemed Alterations.
ARTICLE 21 Surrender
21.01. On the Expiration Date or upon any earlier termination of this
Lease, or upon any reentry by Landlord upon the Premises, Tenant shall quit and
surrender the Premises to Landlord "broom-clean" and in good order, condition
and repair, except for ordinary wear and tear and such damage or destruction as
Landlord is required to repair or restore under this Lease, and Tenant shall
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remove all of the Tenant's Property therefrom except as otherwise expressly
provided in this Lease.
21.02. No act or thing done by Landlord or its agents shall be deemed
an acceptance of a surrender of the Premises, and no agreement to accept such
surrender shall be valid unless in writing and signed by Landlord and each
Superior Lessor and Superior Mortgagee whose lease or mortgage, as the case may
be, provides that no such surrender may be accepted without its consent.
ARTICLE 22 Conditions of Limitation
22.01. This Lease and the term and estate hereby granted are subject to
the limitation that whenever Tenant, or any guarantor of Tenant's obligations
under this Lease, shall make an assignment for the benefit of creditors, or
shall file a voluntary petition under any bankruptcy or insolvency law, or an
involuntary petition alleging an act of bankruptcy or insolvency shall be filed
against Tenant or such guarantor under any bankruptcy or insolvency law, or
whenever a petition shall be filed by or against Tenant or such guarantor under
the reorganization provisions of the United States Bankruptcy Code or under the
provisions of any law of like import, or whenever a petition shall be filed by
Tenant, or such guarantor, under the arrangement provisions of the United States
Bankruptcy Code or under the provisions of any law of like import, or whenever a
permanent receiver of Tenant, or such guarantor, or of or for the property of
Tenant, or such guarantor, shall be appointed, then Landlord (a) if such event
occurs without the acquiescence of Tenant, or such guarantor, as the case may
be, at any time after the event continues for ninety (90) days, or (b) in any
other case at any time after the occurrence of any such event, may give Tenant a
notice of intention to end the term of this Lease at the expiration of five days
from the date of service of such notice of intention, and upon the expiration of
said five-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 of this Lease, but Tenant shall
remain liable for damages as provided in Article 24 hereof.
22.02. This Lease and the term and estate hereby granted are subject to
the further limitations that:
(a) if Tenant shall default in the payment of any Fixed Rent
or Additional Charges, and such default shall continue for ten (10)
days after written notice thereof has been given to Tenant, or
(b) if Tenant shall, whether by action or inaction, be in
default of any of its obligations under this Lease (other than a
default in the payment of Fixed Rent or Additional Charges) and such
default shall continue and not be remedied as soon as practicable and
in any event within twenty (20) days after Landlord shall have given to
Tenant a notice specifying the same, or, in the case of a default which
cannot with due diligence be cured within a period of twenty (20) days
and the continuance of which for the period required for cure will not
(i) subject Landlord or any Superior Lessor or any Superior Mortgagee
to prosecution for a crime or any other fine or charge, (ii) subject
the Premises or any part thereof or the Building or Land, or any part
thereof, to being condemned or vacated, (iii) subject the Building or
Land, or any part thereof, to any lien or encumbrance which is not
removed or bonded within the time period required under this Lease , or
(iv) result in the termination of any Superior Lease or foreclosure of
any Superior Mortgage, if Tenant shall not (x) within said twenty (20)
day period advise
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Landlord of Tenant's intention to take all steps reasonably necessary
to remedy such default, (y) duly commence within said 20-day period,
and thereafter diligently prosecute to completion all steps reasonably
necessary to remedy the default and (z) complete such remedy within a
reasonable time after the date of said notice of Landlord, or
(c) if 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 or consented to under Article
7 hereof, or
(d) if Tenant shall abandon the Premises (except to the extent
required as a result of a casualty or condemnation), or
(e) if there shall be any default by Tenant under any other
lease with Landlord (or any person which, directly or indirectly,
controls, is controlled by, or is under common control with, Landlord)
covering space in the Building which shall not be remedied within the
applicable grace period, if any, provided therefor under such other
lease, or if Tenant holds over in the premises demised under such other
lease,
then in any of said cases Landlord may give to Tenant a notice of
intention to end the term of this Lease at the expiration of five days
from the date of the service of such notice of intention, and upon the
expiration of said five 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 was the day herein
definitely fixed for the end and expiration of this Lease, but Tenant
shall remain liable for damages as provided in Article 24 hereof.
22.03. (a) If Tenant shall have assigned its interest in this Lease,
and this Lease shall thereafter be disaffirmed or rejected in any proceeding
under the United States Bankruptcy Code or under the provisions of any Federal,
state or foreign law of like import, or in the event of termination of this
Lease by reason of any such proceeding, the assignor or any of its predecessors
in interest under this Lease, upon request of Landlord given within ninety (90)
days after such disaffirmance or rejection shall (a) pay to Landlord all Fixed
Rent and Additional Charges then due and payable to Landlord under this Lease to
and including the date of such disaffirmance or rejection and (b) enter into a
new lease as lessee with Landlord of the Premises for a term commencing on the
effective date of such disaffirmance or rejection and ending on the Expiration
Date, unless sooner terminated as in such lease provided, at the same Fixed Rent
and Additional Charges and upon the then executory terms, covenants and
conditions as are contained in this Lease, except that (i) the rights of the
lessee under the new lease, shall be subject to any possessory rights of the
assignee in question under this Lease and any rights of persons claiming through
or under such assignee, (ii) such new lease shall require all defaults existing
under this Lease to be cured by the lessee with reasonable diligence, and (iii)
such new lease shall require the lessee to pay all Additional Charges which, had
this Lease not been disaffirmed or rejected, would have become due after the
effective date of such disaffirmance or rejection with respect to any prior
period. If the lessee shall fail or refuse to enter into the new lease within
ten (10) days after Landlord's request to do so, then in addition to all other
rights and remedies by reason of such default, under this Lease, at law or in
equity, Landlord shall have the same rights and remedies against the lessee as
if the lessee had entered into such new lease and such new lease had thereafter
been terminated at the beginning of its term by reason of the default of the
lessee thereunder.
(b) If pursuant to the Bankruptcy Code Tenant is permitted to
assign this
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Lease in disregard of the restrictions contained in Article 7 hereof (or if this
Lease shall be assumed by a trustee), the trustee or assignee shall cure any
default under this Lease and shall provide adequate assurance of future
performance by the trustee or assignee including (a) of the source of payment of
rent and performance of other obligations under this Lease (for which adequate
assurance shall mean the deposit of cash security with Landlord in an amount
equal to the sum of one year's Fixed Rent then reserved hereunder plus an amount
equal to all Additional Charges payable under Article 3 for the calendar year
preceding the year in which such assignment is intended to become effective,
which deposit shall be held by Landlord, without interest, for the balance of
the term as security for the full and faithful performance of all of the
obligations under this Lease on the part of Tenant yet to be performed) and that
any such assignee of this Lease shall have a net worth exclusive of good will,
computed in accordance with generally accepted accounting principles, equal to
at least ten (10) times the aggregate of the annual Fixed Rent reserved
hereunder plus all Additional Charges for the preceding calendar year as
aforesaid and (b) that the use of the Premises shall in no way diminish the
reputation of the Building as a first-class office building or impose any
additional burden upon the Building or increase the services to be provided by
Landlord. If all defaults are not cured and such adequate assurance is not
provided within 60 days after there has been an order for relief under the
Bankruptcy Code, then this Lease shall be deemed rejected, Tenant or any other
person in possession shall vacate the Premises, and Landlord shall be entitled
to retain any rent or security deposit previously received from Tenant and shall
have no further liability to Tenant or any person claiming through Tenant or any
trustee. If Tenant receives or is to receive any valuable consideration for such
an assignment of this Lease, such consideration, after deducting therefrom (a)
the brokerage commissions, if any, and other expenses reasonably incurred by
Tenant for such assignment and (b) any portion of such consideration reasonably
designed by the assignee as paid for the purchase of Tenant's Property in the
Premises, shall be and become the sole exclusive property of Landlord and shall
be paid over to Landlord directly by such assignee. If Tenant's trustee, Tenant
or Tenant as debtor-in-possession assumes this Lease and proposes to assign the
same (pursuant to Title 11 U.S.C. Section 365, as the same may be amended) to
any person, including, without limitation, any individual, partnership or
corporate entity, who shall have made a bona fide offer to accept an assignment
of this Lease on terms acceptable to the trustee, Tenant or Tenant as
debtor-in-possession, then notice of such proposed assignment, setting forth (x)
the name and address of such person, (y) all of the terms and conditions of such
offer, and (z) the adequate assurance to be provided Landlord to assure such
person's future performance under this Lease, including, without limitation, the
assurances referred to in Title 11 U.S.C. Section 365(b)(3) (as the same may be
amended), shall be given to Landlord by the trustee, Tenant or Tenant as
debtor-in-possession no later than twenty (20) days after receipt by the
trustee, Tenant or Tenant as debtor-in-possession of such offer, but in any
event no later than ten (10) days prior to the date that the trustee, Tenant or
Tenant as debtor-in-possession shall make application to a court of competent
jurisdiction for authority and approval to enter into such assignment and
assumption, and Landlord shall thereupon have the prior right and option, to be
exercised by notice to the trustee, Tenant or Tenant as debtor-in- possession,
given at any time prior to the effective date of such proposed assignment, to
accept an assignment of this Lease upon the same terms and conditions and for
the same consideration, if any, as the bona fide offer made by such person, less
any brokerage commissions which may be payable out of the consideration to be
paid by such person for the assignment of this Lease.
ARTICLE 23 Reentry by Landlord
23.01. If Tenant shall default in the payment of any Fixed Rent or
Additional Charges, and such default shall continue for ten (10) days after
written notice thereof has been given to Tenant, or if this Lease shall
terminate as provided in Article 22 hereof, Landlord or Landlord's agents and
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employees may immediately or at any time thereafter reenter the Premises, or any
part thereof, either by summary dispossess proceedings or by any suitable action
or proceeding at law, or otherwise as permitted by law (but in no event by
force), without being liable to indictment, prosecution or damages therefor, and
may repossess the same, and may remove any person therefrom, to the end that
Landlord may have, hold and enjoy the Premises. The word "reenter," as used
herein, is not restricted to its technical legal meaning. If this Lease is
terminated under the provisions of Article 22, or if Landlord shall reenter the
Premises under the provisions of this article, or in the event of the
termination of this Lease, or of reentry, by or under any summary dispossess or
other proceeding or action or any provision of law by reason of default
hereunder on the part of Tenant, Tenant shall thereupon pay to Landlord the
Fixed Rent and Additional Charges payable up to the time of such termination of
this Lease, or of such recovery of possession of the Premises by Landlord, as
the case may be, and shall also pay to Landlord damages as provided in Article
24 hereof.
23.02. In the event of a breach or threatened breach by Tenant of any
of its obligations under this Lease, Landlord 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 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.
23.03. If this Lease shall terminate under the provisions of Article 22
hereof, or if Landlord shall reenter the Premises under the provisions of this
Article 23, or in the event of the termination of this Lease, or of reentry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
advance rent, security or otherwise, but such monies shall be credited by
Landlord against any Fixed Rent or Additional Charges due from Tenant at the
time of such termination or reentry or, at Landlord's option, against any
damages payable by Tenant under Article 24 hereof or pursuant to law.
ARTICLE 24 Damages
24.01. If this Lease is terminated under the provisions of Article 22
hereof, or if Landlord shall reenter the Premises under the provisions of
Article 23 hereof, or in the event of the termination of this Lease, or of
reentry, by or under any summary dispossess or other proceeding or action or any
provision of law by reason of default hereunder on the part of Tenant, 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 reentry by Landlord, as the case may be,
represents the then value of the excess, if any (assuming a discount at
a rate per annum equal to the interest rate then applicable to 7-year
Federal Treasury Bonds), of (i) the aggregate amount of the Fixed Rent
and the Additional Charges under Article 3 hereof which would have been
payable by Tenant (conclusively presuming the average monthly
Additional Charges under Article 3 hereof to be the same as were
payable for the last 12 calendar months, or if less than 12 calendar
months have then elapsed since the Initial Commencement Date, all of
the calendar months immediately preceding such termination or reentry)
for the period commencing with such earlier termination of this Lease
or the date of any such reentry, as the case may be, and ending with
the date contemplated as the expiration
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date hereof if this Lease had not so terminated or if Landlord had not
so reentered the Premises, over (ii) the aggregate fair market rental
value of the Premises for the same period, or
(b) sums equal to the Fixed Rent and the Additional Charges
under Article 3 hereof which would have been payable by Tenant had this
Lease not so terminated, or had Landlord not so reentered the Premises,
payable upon the due dates therefor specified herein following such
termination or such reentry and until the date contemplated as the
expiration date hereof if this Lease had not so terminated or if
Landlord had not so reentered the Premises, provided, however, that if
Landlord shall relet the 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
reentering the Premises and in securing possession thereof, as well as
the expenses of reletting, including, without limitation, altering and
preparing the Premises for new tenants, brokers' commissions,
reasonable legal fees, and all other expenses properly chargeable
against the 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 subdivision 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 Premises or
any part thereof should be relet in combination with other space, then
proper apportionment on a square foot basis shall be made of the rent
received from such reletting and of the expenses of reletting.
If the 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 Premises, or part thereof, so relet during the term of the
reletting. Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Premises or any part thereof, or if the Premises or any
part thereof are relet, for its failure to collect the rent under such
reletting, and no such refusal or failure to relet or failure to collect rent
shall release or affect Tenant's liability for damages or otherwise under this
Lease.
24.02. 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 22 hereof, or had
Landlord not reentered the 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.
Nothing herein contained shall be construed to limit or prejudice the right of
Landlord to prove for and obtain as damages by reason of the termination of this
Lease or reentry on the 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 than any of the sums referred to in
Section 24.01 hereof.
24.03. In addition, if this Lease is terminated under the provisions of
Article 22 hereof,
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or if Landlord shall, reenter the Premises under the provisions of Article 23
hereof, Tenant agrees that:
(a) the Premises then shall be in the condition in which
Tenant has agreed to surrender the same to Landlord at the expiration of the
term hereof;
(b) Tenant shall have performed prior to any such termination
any covenant of Tenant contained in this Lease for the making of any Alterations
or for restoring or rebuilding the Premises or the Building, or any part
thereof; and
(c) for the breach of any covenant of Tenant set forth above
in this Section 24.03, Landlord shall be entitled immediately, without notice or
other action by Landlord, to recover, and Tenant shall pay, as and for
liquidated damages therefor, the cost of performing such covenant (as estimated
by an independent contractor selected by Landlord).
24.04. In addition to any other remedies Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies under Article 22, if any Fixed Rent, Additional Charges or damages
payable hereunder by Tenant to Landlord are not paid within seven (7) days after
the due date thereof, the same shall bear interest at the Interest Rate (as
defined in Article 35 hereof) plus two (2%) percent or the maximum rate
permitted by law, whichever is less, from the due date thereof until paid, and
the amount of such interest shall be an Additional Charge hereunder. For the
purposes of this Section 24.04, a rent bill sent by first class mail, to the
address to which notices are to be given under this Lease, shall be deemed a
proper demand for the payment of the amounts set forth therein.
ARTICLE 25 Affirmative Waivers
25.01. Tenant, on behalf of itself and any and all persons claiming
through or under Tenant, does hereby waive and surrender all right and privilege
which it, they or any of them might have under or by reason of any present or
future law, to redeem the Premises or to have a continuance of this Lease 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 provided in this Lease.
25.02. If Tenant is in arrears in payment of Fixed Rent or Additional
Charges, Tenant waives Tenant's right, if any, to designate the items to which
any payments made by Tenant are to be credited, and Tenant agrees that Landlord
may apply any payments made by Tenant to such items as Landlord sees fit,
irrespective of and notwithstanding any designation or request by Tenant as to
the items which any such payments shall be credited.
25.03. 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 Premises,
including, without limitation, any claim of injury or damage, and any emergency
and other statutory remedy with respect thereto.
25.04. Tenant shall not interpose any counterclaim of any kind in any
action or proceeding commenced by Landlord to recover possession of the Premises
(other than compulsory counterclaims).
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ARTICLE 26 No Waivers
26.01. 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, and
such right to insist upon strict performance shall continue and remain in full
force and effect with respect to any subsequent breach, act or omission. The
receipt by Landlord of Fixed Rent or partial payments thereof or Additional
Charges or partial payments thereof with knowledge of breach by Tenant of any
obligation of this Lease shall not be deemed a waiver of such breach.
26.02. If there be any agreement between Landlord and Tenant providing
for the cancellation of this Lease upon certain provisions or contingencies
and/or an agreement for the renewal hereof at the expiration of the term, the
right to such renewal or the execution of a renewal agreement between Landlord
and Tenant prior to the expiration of the term shall not be considered an
extension thereof or a vested right in Tenant to such further term so as to
prevent Landlord from canceling this Lease and any such extension thereof during
the remainder of the original term; such privilege, if and when so exercised by
Landlord, shall cancel and terminate this Lease and any such renewal or
extension; any right herein contained on the part of Landlord to cancel this
Lease shall continue during any extension or renewal hereof; any option on the
part of Tenant herein contained for an extension or renewal hereof shall not be
deemed to give Tenant any option for a further extension beyond the first
renewal or extended term.
ARTICLE 27 Curing Tenant's Defaults
27.01. If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, Landlord, any Superior Lessor or any Superior
Mortgagee 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 the applicable notice and cure periods, if
any. If Landlord effects such cure by bonding any lien which Tenant is required
to bond, Tenant shall obtain and substitute a bond for Landlord's bond at its
sole cost and expense and reimburse Landlord for the cost of Landlord's bond.
27.02. Bills for any expenses incurred by Landlord or any Superior
Lessor or any Superior Mortgagee in connection with any such performance by it
for the account of Tenant, and bills for all 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 Charges or
any part thereof or enforcing or endeavoring to enforce any rights against
Tenant or Tenant's obligations hereunder, under or in connection with this Lease
or pursuant to law, including any such cost, expense and disbursement involved
in instituting and prosecuting summary proceedings or in recovering possession
of the Premises after default by Tenant or upon the expiration or sooner
termination of this Lease, and interest on all sums advanced by Landlord or such
Superior Lessor or Superior Mortgagee under this Section 27.02 and/or Section
27.01 (at the Interest Rate or the maximum rate permitted by law, whichever is
less) may be sent by Landlord or such Superior Lessor or Superior Mortgagee to
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Tenant monthly, or immediately, at its option, and such amounts shall be due and
payable as Additional Charges in accordance with the terms of such bills within
twenty (20) days of Tenant's receipt of such bills. Notwithstanding anything to
the contrary contained in this Section, Tenant shall have no obligation to pay
Landlord's costs, expenses, or disbursements in any proceeding in which there
shall have been rendered a final judgment against Landlord, and the time for
appealing such final judgment shall have expired.
27.03. Notwithstanding anything to the contrary contained in this
Lease, with respect to "Non-Payment Proceedings" (as such term is hereinafter
defined), Tenant shall reimburse Landlord upon demand for all reasonable costs
and expenses (including reasonable attorneys' fees and disbursements and court
costs) incurred by Landlord in connection with such Non-Payment Proceedings. All
such amounts shall be deemed to be Additional Charges and shall be collectible
in the same manner as provided in Section 1.04 hereof. With respect to any legal
proceedings or actions other than Non-Payment Proceedings which shall be
commenced by either Landlord or Tenant as a result of a breach by the other
party of its covenants under this Lease, the party which shall prevail in any
such proceeding or action shall be entitled to collect from the non-prevailing
party reasonable attorneys' fees incurred by the prevailing party in any such
action or proceeding. For the purposes of this Section 27.03, the term
"Non-Payment Proceedings" shall mean a summary proceeding commenced by Landlord
against Tenant for non-payment of Fixed Rent or Additional Charges.
ARTICLE 28 Broker
28.01. Tenant covenants, warrants and represents that no broker except
for The Lansco Corporation and Newmark & Company Real Estate, Inc. (herein
collectively called the "Broker") was instrumental in bringing about or
consummating this Lease and that Tenant had no conversations or negotiations
with any broker except the Broker concerning the leasing of the Premises. Tenant
agrees to indemnify and hold harmless Landlord against and from any claims for
any brokerage commissions and all costs, expenses and liabilities in connection
therewith, including, without limitation, reasonable attorneys' fees and
expenses, arising out of any conversations or negotiations had by Tenant with
any broker other than the Broker. Landlord agrees to indemnify and hold harmless
Tenant against and from any claims for any brokerage commissions and all costs,
expenses and liabilities in connection therewith, including, without limitation,
reasonable attorneys' fees and expenses, arising out of conversations or
negotiations had by Landlord with any broker purporting to represent Tenant and
with whom Tenant shall have had no dealings. Landlord shall pay the Broker such
commission to which it may be entitled in connection with this Lease pursuant to
separate agreements between Landlord and the Broker.
ARTICLE 29 Notices
29.01. Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to this Lease or pursuant to any applicable law or requirement of public
authority (collectively, "notices") 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 only if sent by (i) a nationally recognized overnight courier
service (e.g., Federal Express) requiring receipt for delivery, or (ii)
registered or certified mail, return receipt
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requested, posted in a United States post office station or letter box in the
continental United States, and addressed to the other party as follows:
If to Landlord:
59 Maiden Lane Associates, LLC
c/o AmTrust Realty Corp.
250 Broadway
New York, New York 10007
Attention: Mr. Nathan Aber
with a copy to:
Bachner Tally & Polevoy LLP
380 Madison Avenue
New York, New York 10017
Attention: Martin D. Polevoy, Esq.
and if to Tenant as follows:
Medsite.Com, Inc.
60 East 13th Street, 3rd Floor
New York, New York 10005
Attention: Mr. James G. Gallagher
and after the Initial Commencement Date at the
Premises, to the attention of
Mr. James G. Gallagher
with a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
New York, New York 10177
Attention: Stephen E. Friedberg, Esq.
with a further copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Jeffrey D. Saper, Esq.
(except that after the Initial Commencement Date, Tenant's address, unless
Tenant shall give notice to the contrary, shall be the Building), and shall be
deemed to have been given, rendered or made (x) one Business Day following the
date sent if sent by nationally recognized overnight courier service (e.g.,
Federal Express), or (y) two (2) Business Days following the day so mailed if
mailed by certified or registered mail, unless mailed to a location outside of
the State of New York, in which case it shall be
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deemed to have been given, rendered or made three (3) Business Days after the
day so mailed. Either party may, by notice as aforesaid, designate a different
address or addresses for notices intended for it. Notwithstanding the foregoing,
with respect to an occurrence presenting imminent danger to the health or safety
of persons or damage to property in, on or about the Building or during a postal
strike, notices may be hand delivered to a party at the address to which notices
to that party are to be sent, provided that the same notice is also sent in the
manner set forth above.
29.02. Notices hereunder from Landlord may be given by Landlord's
managing agent, if one exists, or by Landlord's attorney. Notices hereunder from
Tenant may be given by Tenant's attorney.
29.03. In addition to the foregoing, either Landlord or Tenant may,
from time to time, request in writing that the other party serve a copy of any
notice on one other person or entity designated in such request, such service to
be effected as provided in Section 29.01 or 29.02 hereof.
ARTICLE 30 Estoppel Certificates
30.01 Each party agrees, at any time and from time to time, as
requested by the other party with not less than 10 days' prior notice, to
execute and deliver to the other a statement certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), certifying the dates to which the Fixed Rent and Additional
Charges have been paid, 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
shall have knowledge, and stating whether or not, to the best knowledge of the
signer, any event has occurred which with the giving of notice or passage of
time, or both, would constitute such a default, and, if so, specifying each such
event, it being intended that any such statement delivered pursuant hereto shall
be deemed a representation and warranty to be relied upon by the party
requesting the certificate and by others with whom such party may be dealing,
regardless of independent investigation. Tenant also shall include in any such
statement such other information concerning this Lease as Landlord may
reasonably request.
ARTICLE 31 Memorandum of Lease
31.01. Tenant shall not record this Lease or any memorandum thereof.
ARTICLE 32 No Representations by Landlord
32.01. 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
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execution and delivery of this Lease and shall expressly refer to this Lease.
All understandings and agreements heretofore had between the parties are merged
in this Lease and any other written agreement(s) made concurrently herewith,
which alone fully and completely express the agreement of the parties and which
are entered into after full investigation, neither party relying upon any
statement or representation not embodied in this Lease or any other written
agreement(s) made concurrently herewith.
ARTICLE 33 Industrial and Commercial Incentive Program
33.01. For purposes of this Article 33, the term "Project" shall mean,
collectively, (x) the performance by Landlord of certain improvements in and to
the common areas and facilities of the Building, as determined by Landlord in it
sole discretion, and (y) the performance by Tenant of any Alterations in the
Premises or the Building which, when aggregated with other Alterations performed
or to be performed by Tenant within twelve (12) months of such Alterations,
shall cost more than $100,000. All other terms used herein, unless otherwise
defined in this Lease, shall have the meanings ascribed to them in Sections
11-256 through 11-267 of the Administrative Code of the City of New York,
authorized by Title 2-D of Article 4 of the New York Real Property Tax Law and
all rules and regulations promulgated thereunder (herein collectively called the
"Industrial and Commercial Incentive Program" or the "ICIP Program") and Article
2-I of the General City Law and all rules and regulations promulgated thereunder
(herein collectively called the "LMEP Program").
33.02. Landlord hereby notifies Tenant that Landlord may seek the
benefits and entitlements provided by (x) Section 489-bbbb, Subdivision 5 of the
ICIP Program and (y) Section 25-bb(a), Subdivision 1 of the Lower Manhattan
Energy Program. In the event that Landlord shall file applications for such
benefits with the appropriate governmental authorities, Landlord shall give
Tenant notice of such filing and, in such event, with respect to the Project
only, the following provisions of this Article 33 shall thereafter be applicable
and Tenant shall thereafter comply (and, with respect to any contractors and
subcontractors performing work on the Project, to include or require, as the
case may be, provisions in their contracts and subcontracts requiring such
contractors and subcontractors to comply, and promptly following receipt of
notice of any failure of such contractors or subcontractors to comply, to use
reasonable efforts to enforce such contractual obligations to comply, including,
without limitation, by way of the termination of such contracts and/or
subcontracts) with all applicable provisions, regulations and requirements of
the ICIP Program and the LMEP Program so that the Building will receive the
benefits and entitlements provided by the ICIP Program (the "ICIP Benefits") and
the LMEP Program (the "LMEP Benefits"; the ICIP Benefits and the LMEP Benefits
being herein sometimes collectively referred to as the "ICIP/LMEP Benefits").
Landlord makes no representation or warranty to Tenant that the ICIP Benefits or
the LMEP Benefits shall be received in whole or in part.
33.03. (a) Tenant shall, prior to the performance of any Alterations in
or to the Premises or the Building, or the issuance of any building permits or
award of any construction contracts in connection therewith, notify Landlord of
its intent to perform such Alterations and the estimated cost thereof in order
to enable Landlord to include such Alterations in the Building's applications
for ICIP Benefits and LMEP Benefits.
(b) Tenant hereby agrees that it will submit any proofs of
expenditure, plans, reports, certificates of continuing use and other
submissions that may be required to qualify for the ICIP/LMEP Benefits that may
be available in connection with the Project (the "ICIP/LMEP Submissions") as and
within the time periods required by the applicable rules and regulations of the
City of New York
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and as more particularly hereinafter set forth, including without limitation any
ICIP/LMEP Submissions required to be made to the New York City Department of
Finance ("DOF"), the New York City Department of Business Services ("DBS") or
the New York City Office of Labor Services ("OLS"), and will attend any meetings
required by the DOF, DBS or OLS or any other governmental agency charged with
administration or enforcement of the ICIP Program or LMEP Program, and if
Landlord receives reasonable prior written notice of such meetings, Landlord
will provide Tenant with reasonable prior written notice of such meetings.
33.04. (a) Tenant acknowledges that the ICIP Program imposes certain
requirements with respect to the hiring and training practices, among other
matters, of construction managers, contractors and subcontractors (collectively
herein called "Tenant's Contractors") engaged to perform work in the Building
for Building tenants. Accordingly, in order to ensure that no actions taken by
Tenant's Contractors will cause the Building to fail to qualify for or to lose
the ICIP/LMEP Benefits, Tenant shall use only such Tenant's Contractors that
qualify under and otherwise satisfy the requirements of the ICIP Program for
performance of work comprising part of the Project.
(b) (1) All of Tenant's Contractors employed in connection
with the Project shall be contractually required by Tenant to comply with the
provisions of the ICIP Program, including without limitation the OLS
requirements applicable to construction projects benefitting from the ICIP
Program. Such compliance, as of the date hereof, includes without limitation the
following: the submission and approval of Construction Employment Report(s), and
other periodic reports, attendance at a pre-construction conference and other
conferences with representatives of the OLS and adherence to the provisions of
Article 22 of the ICIP Rules and Regulations, the provisions of New York City
Charter Chapter 13-B and the provisions of Executive Order No. 50 (1980) and the
rules and regulations promulgated thereunder. With respect to the Project only,
Tenant hereby agrees that it shall indemnify and hold harmless Landlord and its
partners, directors, officers, agents and employees from and against any and all
claims, loss, damage, liability, cost or expense arising from or in connection
with any failure by Tenant or Tenant's Contractors to comply with the provisions
of the ICIP Program. If Landlord is notified of any violation of the ICIP
Program by Tenant's Contractors, Landlord shall promptly advise Tenant thereof
and send a copy of such notice to Tenant, and Tenant will take all appropriate
diligent steps to cause Tenant's Contractors to cure such violations.
(2) At Landlord's reasonable prior written request, to the
extent required to enable Landlord to file annual certificates of continuing use
as required by the ICIP Program and/or to continue to receive the ICIP/LMEP
Benefits, Tenant shall (i) report to Landlord the use of the Premises, the
number of workers permanently engaged in employment in the Premises, the nature
of each worker's employment, the number of such workers who reside in New York
City and the New York City residency of each worker, (ii) provide access to the
Premises by employees and agents of any governmental agency enforcing the ICIP
Program (including, without limitation, the DOF) at all reasonable times, upon
reasonable notice when requested by Landlord and (iii) enforce the contractual
obligations of Tenant's Contractors to comply with the OLS requirements.
33.05. Without limiting Tenant's rights under this Article 33, Tenant
shall not be required to pay any real estate taxes or charges which may become
due because of the willful neglect or fraud by Landlord in connection with the
ICIP Program, or otherwise relieve or indemnify Landlord from any personal
liability which may arise under Section 11-265 of the Administrative Code of the
City of New York, unless the imposition of such real estate taxes or charges, or
liability, resulted from any actions of Tenant in violation of this Lease or
Tenant's failure to comply with the ICIP Regulations.
33.06. With respect to the Project only, Tenant hereby agrees that it
shall indemnify
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and hold harmless Landlord and its partners, directors, officers, agents and
employees from and against any and all claims, loss, damage, liability, cost or
expense arising from the Building's failure to qualify for or the loss of the
ICIP/LMEP Benefits as a result of Tenant's failure to comply with its
obligations set forth in this Article 33 or any requirement of the ICIP Program
or the LMEP Program, or as a result of Tenant's Contractors failure to comply
with any requirement of the ICIP Program, and if Landlord receives reasonable
prior written notice of such requirements, Landlord will provide Tenant with
reasonable prior written notice thereof.
ARTICLE 34 Holdover
34.01. (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 Premises in the manner permitted by law
(or shall not have given written notice to Tenant that Tenant must vacate the
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 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 each month of the holdover period as
Fixed Rent, an amount equal to the higher of (i) an amount equal to one and
one-half times one-twelfth of the sum of: (a) the Fixed Rent and Additional
Charges payable by Tenant during the last year of the term of this Lease (i.e.,
the year immediately prior to the holdover period) or (ii) an amount equal to
the then market rental value for the Premises as shall be established by
Landlord giving notice to Tenant of Landlord's good faith estimate of such
market rental value. Tenant may dispute such market rental value for the
Premises as estimated by Landlord by giving notice to Landlord within but in no
event after twenty (20) 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 the
written 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 market
rental value of the Premises. If Tenant and Landlord are unable to resolve any
such dispute as to the market rental value for the 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
American Arbitration Association (or any successor thereto) 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 American Arbitration
Association (or any successor thereto) shall be conclusively presumed to have
been selected by both Landlord and Tenant and the decision of such arbitrator
shall be conclusive and binding upon the parties as to the market rental value
for the Premises. Pending the determination of the market rental value of the
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 34.01(a) (as Landlord shall then elect), and upon
determination of the market rental value of the Premises in accordance with the
preceding provisions hereof appropriate adjustments and payments shall be
effected. Further, Landlord shall not be required to perform any work, furnish
any materials or make any repairs within the Premises during the holdover
period. 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 Premises as a holdover,
the Fixed Rent for the use and occupancy of the Premises during any holdover
period shall be calculated in the same manner as set forth above. In addition to
the
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foregoing, Landlord shall be entitled to recover from Tenant any losses or
damages arising from such holdover as provided in Section 34.01(c) hereof.
(b) Notwithstanding anything to the contrary contained in this
Lease, the acceptance of any rent paid by Tenant pursuant to subsection 34.01(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 223-c of
the Real Property Law of the State of New York.
(c) If Tenant shall hold-over or remain in possession of any
portion of the Premises beyond the Expiration Date, Tenant shall be subject not
only to summary proceeding and all damages related thereto, but, if such holding
over exceeds sixty (60) days, also to any damages arising out of any lost
opportunities (and/or new leases) by Landlord to re-let the Premises (or any
part thereof). All damages to Landlord by reason of such holding over by Tenant
may be the subject of a separate action and need not be asserted by Landlord in
any summary proceedings against Tenant.
ARTICLE 35 Miscellaneous Provisions and Definitions
35.01. No agreement shall be effective to change, modify, waive,
release, discharge, terminate or effect an abandonment of this Lease, in whole
or in part, including, without limitation, this Section 35.01, unless such
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, termination or effectuation of the abandonment is sought. If Tenant
shall at any time request Landlord to sublet the Premises for Tenant's account,
Landlord or its agent is authorized to receive keys for such purposes without
releasing Tenant from any of its obligations under this Lease, and Tenant hereby
releases Landlord of any liability for loss or damage to any of the Tenant's
Property in connection with such subletting unless caused by or resulting from
the negligence or willful act of Landlord, its agents, servants, contractors, or
employees.
35.02. Except as otherwise expressly provided in this Lease, the
obligations of this Lease shall bind and benefit the successors and assigns of
the parties hereto with the same effect as if mentioned in each instance where a
party is named or referred to; provided, however, that (a) no violation of the
provisions of Article 7 shall operate to vest any rights in any successor or
assignee of Tenant and (b) the provisions of this Article 35 shall not be
construed as modifying the conditions of limitation contained in Article 22.
35.03. Tenant shall look only to Landlord's estate and property in the
Land and the Building 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 Landlord or its partners, officers, directors,
shareholders or principals, 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 Premises.
35.04. (a) Except as expressly provided in Articles 19 and 20 and
Section 34.04(b) hereof, the obligations of Tenant hereunder shall be in no wise
affected, impaired or excused, nor shall Landlord have any liability whatsoever
to Tenant, nor shall it be deemed a constructive eviction because
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(a) Landlord is unable to fulfill, or is delayed in fulfilling, any of its
obligations under this Lease by reason of strike, lock-out or other labor
trouble, governmental preemption of priorities or other controls in connection
with a national or other public emergency or shortages of fuel, supplies or
labor resulting therefrom, or any other cause, whether similar or dissimilar,
beyond Landlord's reasonable control; or (b) of any failure or defect in the
supply, quantity or character of electricity or water furnished to the Premises,
by reason of any requirement, act or omission of the public utility or others
serving the Building with electric energy, steam, oil, gas or water, or for any
other reason whether similar or dissimilar, beyond Landlord's reasonable control
(the foregoing circumstances described in this Section 35.04 being herein called
"Force Majeure Causes").
(b) Notwithstanding anything to the contrary contained in this
Lease, but subject to the provisions of Article 19 and 20 hereof to the extent
applicable, if for a period of seven (7) consecutive Business Days (i) Landlord
fails to provide services required under this Lease to be provided to the
Premises or (ii) Landlord fails to make the repairs required under this Lease to
be made by Landlord, and (w) the cause of such failure shall not be Force
Majeure Causes or the act or omission of Tenant, its agents, representatives,
contractors or employees, and (x) the entire Premises or any affected portion
thereof, as the case may be, shall be rendered untenantable for the conduct of
Tenant's business and (y) Tenant shall vacate the Premises or such affected
portion thereof which is untenantable for the conduct of Tenant's business and
(z) Tenant shall concurrently therewith give notice of such fact to Landlord,
then, in such event, the portion of the Fixed Rent and Additional Charges
allocable to the Premises or such affected portion thereof, as the case may be,
payable by Tenant pursuant to this Lease shall be abated for the period
commencing on the day immediately succeeding the expiration of such seven (7)
consecutive Business Day period and ending on the date that the Premises or such
affected portion thereof shall be rendered tenantable (or such earlier date, if
any, as Tenant shall reoccupy the Premises or such affected portion thereof for
the conduct of its business).
35.05. For the purposes of this Lease, the following terms have the
meanings indicated:
(a) The term "mortgage" shall include a mortgage and/or a deed
of trust, and the term "holder of a mortgage" or "mortgagee" or words of similar
import shall include a mortgagee of a mortgage or a beneficiary of a deed of
trust.
(b) The term "laws and requirements of any public authorities"
and "Legal Requirements" and words of a similar import shall mean laws and
ordinances of any or all of the federal, state, city, town, county, borough and
village governments including, without limitation, The Americans with
Disabilities Act of 1990, as amended, and rules, regulations, orders and
directives of any and all departments, subdivisions, bureaus, agencies or
offices thereof, and of any other governmental, public or quasi-public
authorities having jurisdiction over the Building and/or the Premises, and the
direction of any public officer pursuant to law, whether now or hereafter in
force.
(c) The term "requirements of insurance bodies" and words of
similar import shall mean rules, regulations, orders and other requirements of
the New York Board of 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 over the Building and/or the
Premises, whether now or hereafter in force.
(d) The term "Tenant" shall mean the Tenant herein named or
any assignee or other successor in interest (immediate or remote) of the Tenant
herein named, which at the time in question is the owner of the Tenant's estate
and interest granted by this Lease; but the foregoing provisions of this
subsection shall not be construed to permit any assignment of this Lease or to
relieve
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the Tenant herein named or any assignee or other successor in interest (whether
immediate or remote) of the Tenant herein named from the full and prompt
payment, performance and observance of the covenants, obligations and conditions
to be paid, performed and observed by Tenant under this Lease.
(e) The term "Landlord" shall mean only the owner at the time
in question of Landlord's interest in the Land or a lease of the Land and the
Building or a lease thereof so that in the event of any transfer or transfers of
Landlord's interest in the Land or a lease thereof or the Building the
transferor shall be and hereby is relieved and freed of all obligations of
Landlord under this Lease accruing after such transfer, and it shall be deemed,
without further agreement that such transferee has assumed and agreed to perform
and observe all obligations of Landlord herein during the period it is the
holder of Landlord's interest under this Lease.
(f) The terms "herein," hereof" and "hereunder," and words of
similar import, shall be construed to refer to this Lease as a whole, and not to
any particular article or section, unless expressly so stated.
(g) The term "and/or" when applied to one or more matters or
things shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
(h) The term "person" shall mean any natural person or
persons, a partnership, a corporation, and any other form of business or legal
association or entity.
(i) The terms "Landlord shall have no liability to Tenant" or
"the same shall be without liability to Landlord" or "without incurring any
liability to Tenant therefor", or words of similar import shall mean that Tenant
is not entitled to terminate this Lease, or to claim actual or constructive
eviction, partial, or total, or to receive any abatement or diminution of rent,
or to be relieved in any manner of any of its other obligations hereunder, or to
be compensated for loss or injury suffered or to enforce any other right or kind
of liability whatsoever against Landlord under or with respect to this Lease or
with respect to Tenant's use or occupancy of the Premises.
(j) The term "Interest Rate," when used in this Lease, shall
mean an interest rate equal to two percent (2%) above the so-called annual "Base
Rate" of interest established and approved by Citibank, N.A., New York, New
York, from time to time, as its interest rate charged for unsecured loans to its
corporate customers, but in no event greater than the highest lawful rate from
time to time in effect.
35.06. Upon the expiration or other termination of this Lease neither
party shall have any further obligation or liability to the other except as
otherwise expressly provided in this Lease and except for such obligations as by
their nature or under the circumstances can only be, or by the provisions of
this Lease, may be, performed after such expiration or other termination; and,
in any event, unless otherwise expressly provided in this Lease, any liability
for a payment (including, without limitation, Additional Charges under Article
3) which shall have accrued to or with respect to any period ending at the time
of expiration or other termination of this Lease shall survive the expiration or
other termination of this Lease.
35.07. (a) If Tenant shall request Landlord's consent and Landlord
shall fail or refuse to give such consent, Tenant shall not be entitled to any
damages for any withholding by Landlord of its consent, it being intended that
Tenant's sole remedy shall be an action for specific performance or injunction,
and that such remedy shall be available only in those cases where Landlord has
expressly agreed in writing not to unreasonably withhold its consent or where as
a matter of law Landlord may not
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unreasonably withhold its consent.
(b) If Tenant desires to determine any dispute between
Landlord and Tenant as to the reasonableness of Landlord's decision to refuse to
consent or approve any item as to which Landlord has specifically agreed that
its consent or approval shall not be unreasonably withheld, such dispute shall
be settled and finally determined by arbitration in The City of New York in
accordance with the following provisions of this subsection 35.07(b). Within ten
(10) Business Days next following the giving of any notice by Tenant stating
that it wishes such dispute to be so determined, Landlord and Tenant shall each
give notice to the other setting forth the name and address of an arbitrator
designated by the party giving such notice. If the two arbitrators shall fail to
agree upon the designation of a third arbitrator within five (5) Business Days
after the designation of the second arbitrator then either party may apply to
the American Arbitration Association in New York City for the designation of
such arbitrator and if he is unable or refuses to act within ten (10) Business
Days, then either party may apply to the Supreme Court in New York County or to
any other court having jurisdiction for the designation of such arbitrator. The
three arbitrators shall conduct such hearings as they deem appropriate, making
their determination in writing and giving notice to Landlord and Tenant of their
determination as soon as practicable, and if possible, within five (5) Business
Days after the designation of the third arbitrator; the concurrence of or, in
the event no two of the arbitrators shall render a concurring determination,
then the determination of the third arbitrator designated, shall be binding upon
Landlord and Tenant. Judgment upon any decision rendered in any arbitration held
pursuant to this subsection 35.07(b) shall be final and binding upon Landlord
and Tenant, whether or not a judgment shall be entered in any court. Each party
shall pay its own counsel fees and expenses, if any, in connection with any
arbitration under this subsection 35.07(b), including the expenses and fees of
any arbitrator selected by it in accordance with the provisions of this
subsection 35.07(b), and the parties shall share all other expenses and fees of
any such arbitration. The arbitrators shall be bound by the provisions of this
Lease, and shall not add to, subtract from or otherwise modify such provisions.
The sole remedy which may be awarded by the arbitrators in any proceeding
pursuant to this Section 35.07 is an order compelling Landlord to consent to or
approve the matter in dispute, and the arbitrators may not award damages or
grant any monetary award or any other form of relief.
35.08. If any Superior Mortgagee shall require any modification(s) of
this Lease, Tenant shall, at Landlord's request, promptly execute and deliver to
Landlord such instruments effecting such modification(s) as Landlord shall
require, provided that such modification(s) do not (i) decrease any of Tenant's
rights under this Lease or increase any of Tenant's obligations under this
Lease, in either case beyond a de minimis extent, or (ii) increase any of
Landlord's rights or decrease any of Landlord's obligations under this Lease,
and further provided that in no event shall any such modification increase the
amount of Fixed Rent or Additional Charges payable hereunder.
35.09. If an excavation shall be made upon land adjacent to or under
the Building, or shall be authorized to be made, Tenant shall afford to the
person causing or authorized to cause such excavation, license to enter the
Premises for the purpose of performing such work as said person shall deem
necessary or desirable to preserve and protect the Building from injury or
damage to support the same by proper foundations, without any claim for damages
or liability against Landlord and without reducing or otherwise affecting
Tenant's obligations under this Lease.
35.10. Tenant shall not place a load upon any floor of the Premises
which violates applicable law or the certificate of occupancy of the Building or
which exceeds the floor load per square foot which such floor was designed to
carry. All heavy material and/or equipment must be placed by Tenant, at Tenant's
expense, so as to distribute the weight. Business machines and mechanical
equipment shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient in
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Landlord's reasonable judgment to absorb and prevent vibration, noise and
annoyance. If the Premises be or become infested with vermin as a result of the
use or any misuse or neglect of the Premises by Tenant, its agents, employees,
visitors or licensees, Tenant shall at Tenant's expense cause the same to be
exterminated from time to time to the reasonable satisfaction of Landlord and
shall employ such exterminators and such exterminating company or companies as
shall be reasonably approved by Landlord.
35.11. The submission by Landlord of this Lease in draft form shall be
deemed submitted solely for Tenant's consideration and not for acceptance and
execution. Such submission shall have no binding force or effect and shall
confer no rights nor impose any obligations, including brokerage obligations, on
either party unless and until both Landlord and Tenant shall have executed this
Lease and duplicate originals thereof shall have been delivered to the
respective parties.
35.12. Irrespective of the place of execution or performance, this
Lease shall be governed by and construed in accordance with the laws of the
State of New York. If any provisions of this Lease or the application thereof to
any person or circumstance shall, for any reason and to any extent, be invalid
or unenforceable, the remainder of this Lease and the application of that
provision to other persons or circumstances shall not be affected but rather
shall be enforced to the extent permitted by law. The table of contents,
captions, headings and titles in this Lease are solely for convenience of
references and shall not affect its interpretation. This Lease shall be
construed without regard to any presumption or other rule requiring construction
against the party causing this Lease to be drafted. Each covenant, agreement,
obligation or other provision of this Lease on Tenant's part to be performed,
shall be deemed and construed as a separate and independent covenant of Tenant,
not dependent on any other provision of this Lease. All terms and words used in
this Lease, shall be deemed to include any other number and any other gender as
the context may require.
35.13. If under the terms of this Lease Tenant is obligated to pay
Landlord a sum in addition to the Fixed Rent under this Lease and no payment
period therefor is specified, Tenant shall pay Landlord the amount due within
twenty (20) days after being billed.
35.14. Notwithstanding anything to the contrary contained in this
Lease, during the continuance of any default by Tenant after the giving of
notice and the expiration of any applicable grace periods hereunder, Tenant
shall not be entitled to exercise any rights or options, or to receive any funds
or proceeds being held, under or pursuant to this Lease.
35.15. Tenant represents and warrants that this Lease has been duly
authorized, executed and delivered by Tenant.
35.16. Tenant acknowledges that it has no rights to any development
rights, "air rights" or comparable rights appurtenant to the Real Property, and
consents, without further consideration, to any utilization of such rights by
Landlord and agrees 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 35.16 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 Real Property.
35.17. If any sales or other tax is payable with respect to any
cleaning or other services which Tenant obtains or contracts for directly from
any third party or parties, Tenant shall file any required tax returns and shall
pay any such tax, and Tenant shall indemnify and hold Landlord harmless
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from and against any loss, damage or liability suffered or incurred by Landlord
on account thereof.
35.18. If the Premises or any additional space to be included within
the 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 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 Premises or such additional space shall be
available for occupancy by Tenant, and Tenant shall not be entitled to
possession of the additional space until the same are available for occupancy by
Tenant; provided, however, Tenant shall have no claim against Landlord, and
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 Premises or such additional space available for occupancy by Tenant on
said specific date or on the Commencement Date for the floor in question shall
in no way affect the obligations of Tenant hereunder nor shall the same be
construed in any way to extend the Term. This Section 35.18 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.
35.19. In connection with any examination by Tenant of Landlord's books
and records, Tenant agrees to treat, and to instruct its employees, accountants
and agents to treat, all information as confidential and not disclose it to any
other person, except as may be required (i) by applicable legal requirements or
(ii) by a court of competent jurisdiction or arbitrator or in connection with
any action or proceeding before a court of competent jurisdiction or arbitrator,
or (iii) to Tenant's attorneys, accountants and other professionals in
connection with any dispute between Landlord and Tenant; and Tenant will confirm
or cause its agents and accountants to confirm such agreement in a separate
written agreement if requested by Landlord.
35.20. Tenant shall not cause or permit "Hazardous Materials" (as
defined below) to be used, transported, stored, released, handled, produced or
installed in, on or from, Tenant's 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; provided, however,
nothing in this Section 35.20 shall be deemed to require Tenant to treat, remove
or otherwise abate any Hazardous Materials contained in the Premises prior to
the Initial Commencement Date of this Lease (except to the extent that Tenant,
its agents, employees or contractors shall have introduced such Hazardous
Materials into the Premises prior to such Initial Commencement Date). In the
event of a breach of the provisions of this Section 35.20, 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 Premises in the
manner prescribed for such removal by Legal Requirements. The provisions of this
Section 35.20 shall survive the termination of this Lease.
35.21. Notwithstanding anything to the contrary contained in this
Lease, in the event that this Lease shall grant to Tenant any option or right to
extend or renew the original term of this Lease and/or any option or right to
add additional space to the Premises originally demised hereunder (the foregoing
options and rights are herein collectively called "Tenant's Options"), any such
Tenant's Options shall inure exclusively to the benefit of the Tenant named
herein and shall be exercisable only by the Tenant named herein.
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ARTICLE 36 Partnership Tenant
36.01. If Tenant is a partnership (or is comprised of two (2) or more
persons, individually and/or as co-partners of a partnership) or if Tenant's
interest in this Lease shall be assigned to a partnership (or to two (2) or more
persons, individually and/or as co-partners of a partnership) pursuant to this
Article 36 (any such partnership and such persons are referred to in this
Article 36 as "Partnership Tenant"), the following provisions of this Article 36
shall apply to such Partnership Tenant: (a) the liability of each of the parties
comprising Partnership Tenant shall be joint and several, (b) each of the
parties comprising Partnership Tenant hereby consents in advance to, and agrees
to be bound by, any written instrument which may hereafter be executed,
changing, modifying or discharging this Lease, in whole or in part, or
surrendering all or any part of the Premises to Landlord or renewing or
extending this Lease and by any notices, demands, requests or other
communications which may hereafter be given, by Partnership Tenant or by any of
the parties comprising Partnership Tenant, (c) any bills, statements, notices,
demands, requests or other communications given or rendered to Partnership
Tenant or to any of the parties comprising Partnership Tenant shall be deemed
given or rendered to Partnership Tenant and to all such parties and shall be
binding upon Partnership Tenant and all such parties, (d) if Partnership Tenant
shall admit new partners, all of such new partners shall, by their admission to
Partnership Tenant, be deemed to have assumed performance of all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed, (e) Partnership Tenant shall give prompt notice to Landlord of the
admission of any partner or partners, and upon demand of Landlord, shall cause
each such partner to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner shall assume performance
of all of the terms, covenants and conditions of this Lease on Tenant's part to
be observed and performed (but neither Landlord's failure to request any such
agreement nor the failure of any such new partner to execute or deliver any such
agreement to Landlord shall vitiate the provisions of subdivision (d) of this
section) and (f) on each anniversary of the Initial Commencement Date,
Partnership Tenant shall deliver to Landlord a list of all partners together
with their current residential addresses.
ARTICLE 37 Extension of Term
37.01. (a) Subject to the provisions of Section 37.04 hereof, Tenant,
at Tenant's sole option, shall have the right to extend the term of this Lease
for an additional term of five (5) years commencing on the day following the
last day of the initial term of this Lease (hereinafter referred to as the
"Commencement Date of the Extension Term") and ending on the last day of the
month in which the fifth (5th) anniversary of the day preceding the Commencement
Date of the Extension Term occurs (such additional term is hereinafter called
the "Extension Term") provided that:
(i) Tenant shall give Landlord notice (hereinafter called the
"Extension Notice") of its election to extend the term of the Lease not later
than twelve (12) months prior to the Expiration Date, and
(ii) Tenant shall not be in default under this Lease either as of the
time of the giving of the Extension Notice or the Commencement Date of the
Extension Term (which requirement Landlord may waive in its sole and absolute
discretion), and
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(iii) The Tenant named herein shall, as of the date of the giving of
the Extension Notice and as of the Commencement Date of the Extension Term, be
in actual occupancy of not less than ninety (90%) percent of the rentable square
foot area of the Premises, provided that such occupancy requirement may be
waived by Landlord in its sole discretion at any time.
(b) The Fixed Rent payable by Tenant to Landlord during the
Extension Term shall be the fair market rent for the Premises as determined by
Landlord and set forth in a written notice to Tenant, which determination shall
be as of the date (hereinafter called the "Determination Date") occurring six
(6) months prior to the Commencement Date of the Extension Term and which
determination shall be made by Landlord and given in writing to Tenant within a
reasonable period of time after the occurrence of the Determination Date, but in
no event shall such Fixed Rent be less than an amount equal to twelve (12) times
the sum of the monthly Fixed Rent, Operating Payment, and Tax Payment payable by
Tenant with respect to the Premises for the last full month of the initial term
of this Lease computed on an annualized basis, without giving effect to any
abatement, credit or offset then in effect (hereinafter called the "Original
Term Escalated Rent").
For the purposes of determining the fair market rent for the Premises
during the Extension Term pursuant to this Article 37, the determination shall
take into account all then-relevant factors.
Effective as of the Commencement Date of the Extension Term, (1) the
Base Operating Amount shall be the Operating Expenses for the calendar year
immediately preceding the calendar year in which occurs the Commencement Date of
the Extension Term; and (2) the Base Tax Amount shall be the Taxes for the last
complete Tax Year ending immediately prior to the occurrence of the Commencement
Date of the Extension Term, as finally determined.
37.02. (a) In the event Tenant gives the Extension Notice in accordance
with the provisions of Section 37.01 hereof and Tenant disputes the fair market
rent as determined by Landlord pursuant to Section 37.01(b) hereof, then at any
time on or before the date occurring thirty (30) days after Tenant has been
notified by Landlord of Landlord's determination of the fair market rent, Tenant
may initiate the arbitration process provided for herein by giving notice to
that effect to Landlord, and if Tenant so initiates the arbitration process such
notice shall specify the name and address of the person designated to act as an
arbitrator on its behalf. If Tenant fails to initiate the arbitration process as
provided above, time being of the essence, then Landlord's determination of the
Fixed Rent during the Extension Term shall be conclusive. Within thirty (30)
days after the Landlord's receipt of notice of the designation of Tenant's
arbitrator, Landlord shall give notice to Tenant specifying the name and address
of the person designated to act as an arbitrator on its behalf. If Landlord
fails to notify Tenant of the appointment of its arbitrator within the time
above specified, then Tenant shall provide an additional notice to Landlord
requiring Landlord's appointment of an arbitrator within twenty (20) days after
Landlord's receipt thereof. If Landlord fails to notify Tenant of the
appointment of its arbitrator within the time specified by the second notice,
the appointment of the second arbitrator shall be made in the same manner as
hereinafter provided for the appointment of a third arbitrator in a case where
the two arbitrators appointed hereunder and the parties are unable to agree upon
such appointment. The two arbitrators so chosen shall meet within ten (10) days
after the second arbitrator is appointed, and if, within sixty (60) days after
the second arbitrator is appointed, the two arbitrators shall not agree upon a
determination of the Fixed Rent for the Extension Term, they shall together
appoint a third arbitrator. In the event of their being unable to agree upon
such appointment within eighty (80) days after the appointment of the second
arbitrator, the third arbitrator shall be selected by the parties themselves if
they can agree thereon within a further period of fifteen (15) days. If the
parties do not so agree, then
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either party, on behalf of both and on notice to the other, may request such
appointment by the American Arbitration Association (or any organization
successor thereto) in accordance with its rules then prevailing or if the
American Arbitration Association (or such successor organization) shall fail to
appoint said third arbitrator within fifteen (15) days after such request is
made, then either party may apply, on notice to the other, to the Supreme Court,
New York County, New York (or any other court having jurisdiction and exercising
functions similar to those now exercised by said Court) for the appointment of
such third arbitrator. The majority of the arbitrators shall determine the fair
market rent of the Premises for the Extension Term and render a written
certified report of their determination to both Landlord and Tenant within sixty
(60) days of the appointment of the first two arbitrators or sixty (60) days
from the appointment of the third arbitrator, if such third arbitrator is
appointed pursuant to this Section 37.02; and the fair market rent, so
determined, shall be applied to determine the Fixed Rent for the Premises during
the Extension Term; provided, however that in no event shall the Fixed Rent for
the Extension Term be less than the Original Term Escalated Rent.
(b) Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the fees and
expenses of the third arbitrator and all other expenses (not including the
attorneys fees, witness fees and similar expenses of the parties which shall be
borne separately by each of the parties) of the arbitration shall be borne by
the parties equally.
(c) Each of the arbitrators selected as herein provided shall
have at least ten (10) years experience in the leasing and renting of office
space in first class office buildings in New York County.
(d) In the event the Tenant initiates the aforesaid
arbitration process and as of the Commencement Date of the Extension Term the
amount of the fair market rent has not been determined, Tenant shall pay the
amount determined by Landlord to be the fair market rent for the Premises and
when the determination has actually been made, an appropriate retroactive
adjustment shall be made as of the Commencement Date of the Extension Term. In
the event that such determination shall result in an overpayment by Tenant of
any Fixed Rent, such overpayment shall be paid by Landlord to Tenant promptly
after such determination.
37.03. Except as provided in Section 37.01 hereof, Tenant's occupancy
of the Premises during the Extension Term shall be on the same terms and
conditions as are in effect immediately prior to the expiration of the initial
term of this Lease; provided, however, Tenant shall have no further right to
extend the term of this Lease pursuant to this Article 37.
37.04. If Tenant does not timely send the Extension Notice pursuant to
provisions of Section 37.01 hereof, this Article 37 shall have no force or
effect and shall be deemed deleted from this Lease. Time shall be of the essence
with respect to the giving of the Extension Notice. The termination of this
Lease during the initial term hereof shall also terminate and render void any
option or right on Tenant's part to extend the term of this Lease pursuant to
this Article 37 whether or not such option or right shall have theretofore been
exercised. None of Tenant's options or elections set forth in this Article 37
may be severed from this Lease or separately sold, assigned or transferred.
37.05. If Tenant exercises its right to extend the term of this Lease
for the Extension Term pursuant to this Article 37, the phrases "the term of
this lease" or "the term hereof" as used in this Lease, shall be construed to
include the Extension Term, and the Expiration Date shall be construed to be the
date of the expiration of the Extension Term.
37.06. If this Lease is renewed for the Extension Term, then Landlord
or Tenant can
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request the other party hereto to execute, acknowledge and deliver an instrument
in form for recording setting forth the exercise of Tenant's right to extend the
term of this Lease and the last day of the Extension Term.
ARTICLE 38 Additional Space Option
38.01. Tenant acknowledges that the balance of the rentable area of the
fifteenth (15th) floor of the Building which is not included within the Premises
(such balance being hereinafter called the "Additional Space") as shown
cross-hatched on the plan annexed hereto as Exhibit H contains 14,548 rentable
square feet and is currently leased or is to be leased by Landlord to another
tenant for occupancy (such lease covering the Additional Space is hereinafter
called the "Prior Additional Space Lease"). Landlord shall give notice to Tenant
of the Prior Additional Space Lease promptly after the commencement of the term
thereof (which notice shall state the date for the expiration of the term
thereof).
38.02. Provided that Tenant is not then in default of any of the terms,
provisions and conditions of this Lease on the part of Tenant to be performed
either as of the "Inclusion Date" or as of the giving of "Tenant's Notice" (as
such terms are hereinafter defined), then upon expiration of the Prior
Additional Space Lease, Tenant shall have the option to include the entire
Additional Space within the Premises as of the Inclusion Date upon the terms and
subject to the conditions of this Lease (including without limitation the
provisions of Article 3 and the Base Operating Amount and Base Tax Amount set
forth therein) and to such additional terms and conditions as are hereinafter
set forth. Any such option shall be effected by a written notice (hereinafter
called "Tenant's Notice") from Tenant to Landlord, given no later than August 1,
2000. In the event Tenant shall send a Tenant's Notice to Landlord, the
Additional Space shall be added to and included in the Premises effective on the
later to occur of (i) the expiration of the term or earlier termination of the
Prior Additional Space Lease, or (ii) the earlier of (x) the Landlord's Work to
be performed by Landlord in the Additional Space as described in Article 2
hereof and on Exhibit C attached hereto shall be substantially completed or
shall be deemed substantially completed in accordance with Article 2, (y) the
date Tenant or anyone claiming under or through Tenant, first occupies the
Additional Space, or any part thereof, for the conduct of its business or for
any other purpose (such effective date for the inclusion of the Additional Space
in the Premises pursuant to this Article 38 is hereinafter referred to as the
"Inclusion Date"). In the event that Tenant shall give Tenant's Notice to
Landlord prior to August 1, 2000, then Tenant shall be deemed to have
irrevocably agreed to have the Additional Space added to and included in the
Premises effective as of the Inclusion Date. Promptly following the Inclusion
Date, at the request of Landlord, Landlord and Tenant shall enter into a
supplementary agreement with respect thereto, but their failure to do so shall
not affect any of the rights and obligations of the parties hereunder.
Notwithstanding anything to the contrary contained herein, and in the event that
(1) Tenant shall give Tenant's Notice to Landlord prior to August 1, 2000 and
(2) the Inclusion Date shall have not occurred on or before July 31, 2001
("Additional Space Outside Inclusion Date"), which Additional Space Outside
Inclusion Date shall be extended by one day for each day that Landlord is
delayed in substantially completing Landlord's Work to the Additional Space by
Force Majeure Causes and/or Tenant Delay, then, in such event, the portion of
Fixed Rent allocable to the Additional Space shall be abated by one (1) day for
each day that Landlord is so delayed in the substantial completion of Landlord's
Work to the Additional Space by the number of days occurring during the period
beginning on the Additional Space Outside Inclusion Date (as such date may have
been extended) and ending on the Inclusion Date, which abatement shall commence
upon the Inclusion Date.
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38.03. Effective as of the Inclusion Date:
(i) the Fixed Rent hereunder shall be increased by the following
amounts during the following periods:
(x) FOUR HUNDRED SEVENTY-SIX THOUSAND FOUR HUNDRED
FORTY-SEVEN AND 00/100 ($476,447.00) DOLLARS per
annum (which amount includes a component equal to the
Base Electric Charge, as defined in Section 38.03(vi)
hereof), payable in equal monthly installments of
THIRTY-NINE THOUSAND SEVEN HUNDRED THREE AND 92/100
($39,703.92) DOLLARS per month during the period
commencing on the Inclusion Date and ending on the
last day of the month preceding month in which occurs
the third (3rd) anniversary of the Initial
Commencement Date;
(y) FIVE HUNDRED FIVE THOUSAND FIVE HUNDRED FORTY-THREE
AND 00/100 ($505,543.00) DOLLARS per annum (which
amount includes a component equal to the Base
Electric Charge, as defined in Section 38.03(vi)
hereof), payable in equal monthly installments of
FORTY-TWO THOUSAND ONE HUNDRED TWENTY-EIGHT AND
58/100 ($42,128.58) DOLLARS per month during the
period commencing on the first day of the month in
which occurs the third (3rd) anniversary of the
Initial Commencement Date and ending on the last day
of the month preceding the month in which occurs the
seventh (7th) anniversary of the Initial Commencement
Date; and
(z) FIVE HUNDRED THIRTY-FOUR THOUSAND SIX HUNDRED
THIRTY-NINE AND 00/100 ($534,639.00) DOLLARS per
annum (which amount includes a component equal to the
Base Electric Charge, as defined in Section 38.03(vi)
hereof), payable in equal monthly installments of
FORTY-FOUR THOUSAND FIVE HUNDRED FIFTY-THREE AND
25/100 ($44,553.25) DOLLARS per month during the
period commencing on the first day of the month in
which occurs the seventh (7th) anniversary of the
Initial Commencement Date and ending on the
Expiration Date;
(ii) the Fixed Rent for the Additional Space during the Extension
Term shall be determined in the same manner and under the same
conditions as the Fixed Rent shall be determined for the
Premises pursuant to Article 37 hereof;
(iii) Notwithstanding the provisions of Section 38.03(i) hereof to
the contrary, provided and on condition that Tenant is not in
default under any of the terms, provisions or conditions of
this Lease on Tenant's part to be performed, the Fixed Rent
payable by Tenant for the Additional Space shall be abated
during the Partial Abatement Period, so that Tenant's monthly
installment of Fixed Rent during the Partial Abatement Period
shall be increased by THREE THOUSAND THREE HUNDRED
THIRTY-THREE AND 92/100 ($3,333.92) DOLLARS, which amount
represents the monthly installment of the "Base Electric
Charge" (as that term is defined in Section 14.01(c) hereof)
for the Additional Space, and which
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amount is subject to adjustment as provided in Article 14
hereof;
(iv) Tenant's Share, as defined in Section 3.01(j) hereof, shall be
increased by 1.45%, which represents the fraction, expressed
as a percentage, the numerator of which is 14,548, reflecting
the number of rentable square feet deemed by the parties
hereto to comprise the rentable square footage of the
Additional Space, and the denominator of which is 1,000,904,
reflecting the number of rentable square feet deemed by the
parties hereto to comprise the rentable square footage of the
Building;
(v) the security required to be maintained by Section 4.01 hereof
and the Additional Security required to be maintained by
Section 4.04 hereof shall both be increased by $225,000.00;
and
(vi) electricity shall be provided to the Additional Space in
accordance with the terms and provisions of Article 14 hereof,
except that the Base Electric Charge for the Additional Space,
which is included in the Fixed Rent amounts set forth in
Section 38.03(i), shall be the sum of FORTY THOUSAND SEVEN AND
00/100 ($40,007.00) DOLLARS.
38.04. Tenant shall accept the Additional Space in its condition and
state of repair existing as of the Inclusion Date and understands and agrees
that Landlord shall perform no work and incur no expenses in connection with the
preparation of the Additional Space for Tenant's occupancy, except that prior to
the Inclusion Date, Landlord, at Landlord's expense, shall prepare the
Additional Space for Tenant's occupancy by substantially completing Landlord's
Work in the Additional Space, all in the same manner and under the same
conditions as Landlord shall perform Landlord's Work to the Premises in
accordance with the terms and provisions of Article 2 hereof and Exhibit C
attached hereto and made a part hereof.
38.05. The provisions of this Article 38 shall be effective only if on
the Inclusion Date, the named Tenant herein shall be in actual occupancy of
ninety (90%) percent of any floor of the Premises after the Commencement Date
thereof.
38.06. The termination of this Lease during the term of this Lease
shall also terminate and render void all of Tenant's options or elections under
this Article 38 whether or not the same shall have been exercised; and nothing
contained in this Article shall prevent Landlord from exercising any right or
action granted to or reserved by Landlord in this Lease to terminate this Lease.
None of Tenant's options or elections set forth in this Article 38 may be
severed from this Lease or separately sold, assigned or transferred.
38.07. If Tenant within the applicable time period, time being of the
essence, does not send Tenant's Notice pursuant to the provisions of this
Article 38, then this Article 38 shall have no further force and effect and
shall be deemed deleted from this Lease, and Tenant shall have forever waived
and relinquished its right to the Additional Space and Landlord shall at any and
all times thereafter be entitled to lease such Additional Space to others at
such rental and upon such terms and conditions as Landlord in its sole
discretion may desire.
ARTICLE 39 Condition to Lease
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39.01 Tenant agrees that it has been advised that (i) portions of the
fourteenth (14th) and fifteenth (15th) floors of the Premises are currently
demised to Federal Reserve Bank of New York (herein called "Federal Reserve")
pursuant to that certain lease dated as of September 9, 1977 between Landlord
and Federal Reserve (such lease, as amended, is herein called the "Federal
Reserve Lease") and (ii) Federal Reserve has signed an agreement (the "Surrender
Agreement") to surrender such portions of the Premises. Subject to Subsection
2.01(b) hereof, Landlord and Tenant agree that this Lease is conditioned upon
and shall not be effective unless and until the Surrender Agreement is
unconditionally effective.
ARTICLE 40 Temporary Premises
40.01. Tenant shall be permitted to occupy temporarily the entire
rentable area of the seventeenth (17th) floor of the Building shown on the floor
plan annexed hereto as Exhibit I (the "Temporary Premises") for the period
commencing as of December 13, 1999 and terminating on the Final Commencement
Date. Tenant acknowledges and agrees that the Temporary Premises contains 16,368
rentable square feet. Tenant's occupancy of the Temporary Premises shall be upon
all of the following terms and conditions:
a. Tenant has examined and agrees to accept the Temporary
Premises in their condition existing as of the date same are
made available for Tenant's occupancy, and understands that no
work is to be performed by Landlord in connection therewith;
b. The annual charge (including electric) for use by Tenant of
the Temporary Premises shall be TWO HUNDRED TWELVE THOUSAND
SEVEN HUNDRED EIGHTY-FOUR AND 00/100 ($212,784.00) DOLLARS.
Such charge shall be payable monthly in the same manner as is
payable the Fixed Rent under this Lease;
c. Except as otherwise herein provided, Tenant's obligations
hereunder with respect to the Temporary Premises shall be
governed by the terms and conditions of, and this permission
shall be subject to the limitations contained in, this Lease;
d. Upon the later to occur of the Final Commencement Date, or
(ii) the earlier termination of this Lease, Tenant will
surrender and vacate the Temporary Premises and remove
therefrom and in the event of Tenant's failure to do so
Landlord shall be entitled to all the rights and remedies
against Tenant which are available to a landlord against a
tenant holding over after the expiration of the term of the
lease; and e. Tenant acknowledges that time is of the essence
with respect to Tenant's surrender, vacating and removal from
the Temporary Premises as set forth in Section 40.01 (d)
hereof. Tenant covenants and agrees to pay $2,200.00 per day
(or a fraction thereof) as and for liquidated damages for each
day after the date set forth in Section 40.01(d) hereof, that
Tenant fails to surrender, vacate and remove from the
Temporary Premises. Nothing contained in this Section 40.01(e)
shall in any way be deemed or construed to
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limit Landlord's rights pursuant to Section 40.01(d).
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
as of the day and year first above written.
59 MAIDEN LANE ASSOCIATES, LLC, Landlord
By: __________________________
Nathan Aber
Manager
MEDSITE.COM, INC., Tenant
By: _____________________________
Tenant's Federal Identification Number:
_______________________________________
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LANDLORD
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the __ day of ________ in the year 1999, before me, the undersigned, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person(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
person(s) or the entity upon behalf of which the person(s) acted, executed the
instrument.
_______________________________
Notary Public
TENANT
STATE OF NEW YORK )
) ss.:
COUNTY OF )
On the __ day of ________ in the year 1999, before me, the undersigned, a Notary
Public in and for said state, personally appeared ___________________________,
personally known to me or proved to me on the basis of satisfactory evidence to
be the person(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
person(s) or the entity upon behalf of which the person(s) acted, executed the
instrument.
_______________________________
Notary Public
EXHIBIT A
Description of Land
ALL that certain plot, 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 John
Street and the westerly side of William Street;
RUNNING THENCE Southerly along the westerly side of William Street, 260 feet
5-1/2 inches to the
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northerly side of Maiden Lane;
RUNNING THENCE Westerly along the northerly side of Maiden Lane, 286 feet 4
inches to a point, distant 128 feet 8 inches easterly from Nassau Street which
point lies in the westerly line of the westerly wall of the building on premises
No. 41 Maiden Lane;
RUNNING THENCE Northerly along said westerly line of the westerly wall of said
building and along a line forming an interior angle of 106 degrees 59 minutes 40
seconds with the northerly side of Maiden Lane, 127 feet 8-1/2 inches to a
point;
RUNNING THENCE Southeasterly along a line forming an interior angle of 78
degrees 22 minutes 20 seconds with the last mentioned course, 41 feet 3-1/2
inches to a point;
RUNNING THENCE still southeasterly along a line forming an exterior angle of 178
degrees 56 minutes 30 seconds with the last mentioned course, 17 feet -1/2 inch
to a point;
RUNNING THENCE Northerly along a line forming an exterior angle of 80 degrees 00
minutes with the last mentioned course, 86 feet 7-5/8 inches to the southerly
side of John Street;
RUNNING THENCE Easterly along the southerly side of John Street, 217 feet 1/4
inch to the point or place of BEGINNING.
Said property is the same as that bounded and described as follows:
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 John
Street and the westerly side of William Street;
RUNNING THENCE Southerly along the westerly side of William Street, 260 feet
5-1/2 inches to the northerly side of Maiden Lane;
RUNNING THENCE Westerly along the northerly side of Maiden Lane, 286 feet 4
inches;
RUNNING THENCE Northerly along a line forming an interior angle of 106 degrees
59 minutes 40 seconds with the northerly side of Maiden Lane, 127 feet 8-1/2
inches to a point;
RUNNING THENCE Southeasterly along a line forming an interior angle of 78
degrees 22 minutes 20 seconds with the last mentioned course, 41 feet 31/2
inches to a point;
RUNNING THENCE Still southeasterly along a line forming an exterior angle of 178
degrees 56 minutes 30 seconds with the last mentioned course, 17 feet -1/2 inch
to a point;
RUNNING THENCE Northerly along a line forming an exterior angle of 80 degrees 00
minutes with the last mentioned course, 86 feet 7-5/8 inches to the southerly
side of John Street;
RUNNING THENCE Easterly along the southerly side of John Street, 217 feet 1/4
inch to the point or place of BEGINNING.
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Being the property located at and known as 59 Maiden Lane, New York, New York
and also being Section 1, Block 67, Lot 1 on the Tax Assessment Map of the
County of New York.
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EXHIBIT B
Floor Plan of Premises
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EXHIBIT C
Work Letter
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EXHIBIT D
Rules and Regulations
1. The rights of each tenant in the entrances, corridors, elevators and
escalators servicing the Building are limited to ingress to and egress from such
tenant's premises for the tenant and its employees, licensees and invitees, and
no tenant shall use, or permit the use of, the entrances, corridors, escalators
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 plazas,
entrances, corridors, escalators, elevators and other facilities of the Building
by any 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, plazas, entrances,
corridors, escalators, elevators, fire exits or stairways of the Building.
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 in its reasonable judgment deems
best for the benefit of the tenants generally.
2. Landlord may refuse admission to the Building outside of Business
Hours on Business Days to any person not known to the security guard 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 Landlord may require all
persons admitted to or leaving the Building outside of Business Hours on
Business Days to provide appropriate identification. Tenant shall be responsible
for all persons for whom it issues any such pass and shall be liable to Landlord
for all acts or omissions of such persons. Any person whose presence in the
Building at any time shall, in the judgment of Landlord, be prejudicial to the
safety, character or reputation of the Building or of its tenants may be denied
access to the Building or may be ejected therefrom. During any invasion, riot,
public excitement or other commotion, Landlord may prevent all access to the
Building by closing the doors or otherwise for the safety of the tenants and
protection of property in the Building.
3. No tenant shall obtain or accept for use in its premises ice,
drinking water, food, beverage, towel, barbering, bootblacking, floor polishing,
cleaning or other similar services from any persons reasonably prohibited by
Landlord in writing from furnishing such services. Such services shall be
furnished only at such hours, and under such reasonable regulations, as may be
fixed by Landlord from time to time.
4. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or its employees, agents, contractors, licensees or
invitees, shall be paid by such tenant.
5. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens which are
different from the standards adopted by Landlord for the Building shall be
attached to or hung in, or used in connection with, any exterior window or door
of the premises of any tenant, without the prior written consent of Landlord.
Such curtains, blinds, shades or screens must be of a quality, type, design and
color, and attached in the manner approved by Landlord, provided that all such
curtains, blinds or shades shall be white.
6. No lettering, sign, advertisement, notice or object shall be
displayed in or on the exterior 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, without the prior written consent of
Landlord.
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In the event of the violation of the foregoing by any tenant, Landlord may
remove the same without any liability, and may charge the expense incurred in
such removal to the tenant violating this rule. Interior signs, elevator cab
designations and lettering on doors and the Building directory shall, if and
when approved by Landlord, be inscribed, painted or affixed for each tenant by
Landlord at the expense of such tenant, and shall be of a size, color and style
acceptable to Landlord. The foregoing expense shall include (A) a fee (the
"Signage General Conditions Fee") equal to ten (10%) percent of the
out-of-pocket cost to Landlord (the "Signage Out-Of-Pocket Cost") of any work
associated with inscribing, painting or affixing such signs, designations or
lettering (the "Signage Work") to reimburse Landlord for the estimated general
conditions costs incurred by Landlord in connection with the Signage Work and
(B) a fee equal to ten (10%) percent of the sum of (x) the Signage Out-Of-Pocket
Cost and (y) the Signage General Conditions Fee, representing Landlord's profit
and reimbursement of Landlord for its additional overhead costs incurred in
connection with such Signage Work.
7. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by any tenant, nor shall any
bottles, parcels or other articles be placed on the window sills or on the
peripheral air conditioning enclosures, if any.
8. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the halls, corridors
or vestibules.
9. No bicycles, vehicles, animals, fish or birds of any kind shall be
brought into or kept in or about the premises of any tenant or the Building.
10. No noise, including, but not limited to, music or the playing of
musical instruments, recordings, radio or television, which, in the judgment of
Landlord, might disturb other tenants in the Building, shall be made or
permitted by any tenant. Nothing shall be done or permitted in the premises of
any tenant which would impair or interfere with the use or enjoyment by any
other tenant of any other space in the Building.
11. No tenant, nor any tenant's contractors, employees, agents,
visitors or licensees, shall at any time bring into or keep upon the premises or
the Building any flammable, combustible, explosive or otherwise dangerous fluid,
chemical or substance.
12. Additional locks or bolts of any kind which shall not be operable
by the Grand Master Key for the Building shall not be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in locks or the
mechanism thereof which shall make such locks inoperable by said Grand Master
Key or Building standard keying system. Additional keys for a tenant's premises
and toilet rooms shall be procured only from Landlord who may make a reasonable
charge therefor. Each tenant shall, upon the termination of its tenancy, turn
over to Landlord all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such tenant, and in the event of the loss of any
keys furnished by Landlord, such tenant shall pay to Landlord the cost thereof.
13. All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place during such hours and in such elevators, and in such
manner as Landlord or its agent may determine from time to time. The persons
employed to move safes and other heavy objects shall be reasonably acceptable to
Landlord and, if so required by law, shall hold a Master Rigger's license.
Arrangements will be made by Landlord with any tenant for moving large
quantities of furniture and equipment into or out of the Building. All labor and
engineering costs incurred by Landlord in connection with any moving specified
in this rule shall be paid
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by tenant to Landlord on demand. The foregoing costs shall include (A) a fee
(the "Moving General Conditions Fee") equal to ten (10%) percent of the
out-of-pocket cost to Landlord (the "Moving Out-Of-Pocket Cost") of such moving
to reimburse Landlord for the estimated general conditions costs incurred by
Landlord in connection therewith, and (B) a fee equal to ten (10%) percent of
the sum of (x) the Moving Out-Of-Pocket Cost and (y) the Moving General
Conditions Fee, representing Landlord's profit and reimbursement of Landlord for
its additional overhead costs incurred in connection with such moving.
14. Landlord reserves the right to inspect all objects and matter to be
brought into the Building and to exclude from the Building all objects and
matter which violate any of these Rules and Regulations or the lease of which
this Exhibit is a part. Landlord may require any person leaving the Building
with any package or other object or matter to submit a pass, listing such
package or object or matter, from the tenant from whose premises the package or
object or matter is being removed, but the establishment and enlargement 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 such tenant.
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 premises
or the Building under the provisions of this Rule or of Rule 2 hereof.
15. No tenant shall occupy or permit any portion of its premises to be
occupied as an office for a public stenographer or public typist, or for the
possession, storage, manufacture, or sale of liquor, narcotics, dope, tobacco in
any form, or as a barber, beauty or manicure shop, or as a school. No tenant
shall use or permit its premises or any part thereof to be used, for
manufacturing, or the sale at retail or auction (except over the Internet) of
merchandise, goods, or as a school.
16. Landlord shall have the right to prohibit any advertising or
identifying sign by any tenant which, in Landlord's reasonable judgment, tends
to impair the reputation of the Building or its desirability as a building for
others, and upon written notice from Landlord, such tenant shall refrain from
and discontinue such advertising or identifying sign.
17. 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 any 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
the tenant and in such manner as Landlord shall determine.
18. No machinery or mechanical equipment other than ordinary portable
business machines may be installed or operated in any tenant's premises without
Landlord's prior written consent which consent shall not be unreasonably
withheld or delayed, and in no case (even where the same are of a type so
excepted or as so consented to by Landlord) shall any machines or mechanical
equipment be so placed or operated as to disturb other tenants; but machines and
mechanical equipment which may be permitted to be installed and used in a
tenant's premises shall be 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.
19. Landlord, its contractors, and their respective employees, shall
have the right to use, without charge therefor, all light, power and water in
the premises of any tenant while cleaning or making repairs or alterations in
the premises of such tenant. Landlord, its contractors, and their respective
employees shall be responsible to turn-off the lights when their work is
completed.
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20. No premises of any tenant shall be used for lodging or sleeping or
for any immoral or illegal purpose.
21. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
22. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
23. No tenant shall cause or permit any unusual or objectionable odors
to emanate from its premises which would annoy other tenants or create a public
or private nuisance. No cooking shall be done in the premises of any tenant
except as is expressly permitted in such tenant's lease.
24. 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's services or the proper and
economic heating, ventilating, air conditioning, 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
reasonable judgment of Landlord, might cause any such impairment or
interference.
25. 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. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same. Any cuspidors or containers or receptacles used as such in the
premises of any tenant or for garbage or similar refuse, shall be emptied, cared
for and cleaned by and at the expense of such tenant.
26. 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. Each tenant,
before closing and leaving its premises at any time, shall turn out all lights.
27. Hand trucks not equipped with rubber tires and side guards shall
not be used within the Building.
28. All windows in each tenant's premises shall be kept closed, and all
blinds therein above the ground floor shall be lowered as reasonably required
because of the position of the sun, during the operation of the Building
air-conditioning system to cool or ventilate the tenant's premises. If Landlord
shall elect to install any energy saving film on the windows of the Premises or
to install energy saving windows in place of the present windows tenant shall
cooperate with the reasonable requirements of Landlord in connection with such
installation and thereafter the maintenance and replacement of the film and/or
windows and permit Landlord to have access to the tenant's premises at
reasonable times during Business Hours to perform such work.
29. No "Hazardous Materials" (as defined below) shall be used,
transported, stored,
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released, handled, produced or installed in, on or from, Tenant's 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.
30. Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed for the Building when, in its reasonable
judgment, it deems it necessary, desirable or proper for its best interest and
for the best interests of the tenants generally, 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. 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. Landlord shall
not discriminate against Tenant in the enforcement of the rules and regulations
prescribed for the Building.
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EXHIBIT E
Tenant Construction Approval Procedures
Unless the tenant's lease specifically provides otherwise, all tenant
construction (including initial tenant construction), renovation and/or refinish
work must first be approved by 59 Maiden Lane Associates, LLC ("Owner") and
Owner's Building Manager or Managing Agent, as directed by Owner. The procedure
to obtain approval is as follows:
I. Construction or Renovation Work
A. The scope of all the work must be clearly delineated in three
(3) complete sets of architectural, electrical, mechanical,
plumbing and structural drawings as applicable. These drawings
must be prepared and stamped by a licensed architect and/or
engineer, as applicable.
B. The tenant must make a specific written request to Owner to
allow the implementation of the work.
C. The tenant's written request must be accompanied by the
following:
1. Original insurance certificates for each contractor
to be employed by the tenant. The limits of
liability, names of the certificate holder, and names
of the additional insureds must comply with or exceed
the requirements specified elsewhere in this Exhibit
E, including the Hold Harmless Clause.
2. Three complete sets of sepias and three complete sets
of blue-line drawings of the project must be
submitted. If the tenant intends to install heavy
office furniture, safes, filing cabinets, electrical
switch gear, mechanical equipment, or any other type
of equipment, which might be in excess of the live
load capacity of the floor, a fourth set of sepias
will be required. Similarly if the tenant wishes to
install any type of equipment which might require
acoustical attenuation, a fifth set of drawings and
equipment specifications would also be required.
D. Owner will forward the sepias of the proposed work, as
applicable, to:
1. Owner's architect;
2. Owner's mechanical, electrical, plumbing and fire and
life safety engineer;
3. Owner's structural engineer, if necessary;
4. Owner's acoustical engineer if necessary.
E. Owner's consultants will review the proposed work for
compliance with prevailing codes and building standards. The
consultants will mark up the drawings appropriately and
forward comments to Owner.
Owner's consultants, after discussing any minor changes, if
necessary, with tenant's
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architect/engineer, may approve the drawings "As Noted."
However, if the scope of the changes are major, Owner will
require resubmission of the drawings for further review by
Owner's consultants. The tenant must re-submit the corrected
drawings reflecting the required changes. This submittal must
be in the same format as the original submittal.
F. The Building Manager will retain one set of blue lines in the
Building office, and forward one blue line set to Owner's
Office. The marked up sepias and one set of the blue lines
will be sent to the tenant with a cover letter approving the
project or giving the tenant other specific appropriate
direction or requirements. Approval does not constitute a
waiver of Department of Buildings approval and/or approval of
other jurisdictional agencies.
G. All costs for Owner's review of the plans including any
proposed tenant changes will be borne by the tenant. The cost
to the tenant of any such review by Owner shall include (A) a
fee (the "Review General Conditions Fee") equal to ten (10%)
percent of the out-of-pocket cost to Owner (the "Review
Out-Of-Pocket Cost") of such review to reimburse Owner for the
estimated general conditions costs incurred by Owner in
connection therewith, and (B) a fee equal to ten (10%) percent
of the sum of (x) the Review Out-Of-Pocket Cost and (y) the
Review General Conditions Fee, representing Owner's profit and
reimbursement of Owner for its additional overhead costs
incurred in connection with such review.
H. Notwithstanding Owner's right to review all tenant
construction, the full responsibility for compliance with
prevailing codes and/or building standards rests with the
tenant without any cost or liability whatsoever on the part of
Owner.
II. Refinish Work:
Most often finishing or refinishing work, such as painting, does not
require a permit. In such cases, the tenant must still request
permission to perform such work, and must furnish the required
insurance certificates for each contractor employed by the tenant to
Owner. Construction rules and regulations of the building must be
observed by the tenant and tenant's contractors at all times.
INTRODUCTION:
The following Rules and Regulations for construction work at 59 Maiden Lane
apply to new tenant construction as well as tenant remodeling and renovation
work. They have been formulated for the following purposes:
1. To assist the tenants in understanding the proper method of performing
construction work in the Building;
2. To maintain the architectural, structural, mechanical and electrical
integrity of the Building;
3. To insure that all work is performed legally and safely;
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4. To assist the tenant in understanding its rights and obligations with
respect to construction requirements under its respective lease; and,
5. To protect Owner's interests, and the rights of other tenants.
Any questions concerning these rules and regulations should be directed to:
Newmark and Company Real Estate, Inc.
125 Park Avenue
New York, NY 10017
Attention: Rhonda Panensky
Telephone: 212-372-2345
Fax: 212-372-2412
With a copy to:
John Cavaliere AmTrust Realty Corp.
Building Manager 250 Broadway, 30th Floor
59 Maiden Lane New York, NY 10007
New York, NY 10038 Telephone: 212-619-6919
Telephone: 212-422-3870 Facsimile: 212-619-6933
Fax: 212-509-6539
Owner and/or the Building Manager reserves the right to modify these rules from
time to time as they may, in their sole judgement, be required to preserve the
integrity of the physical construction of the Property, and the safety and quiet
enjoyment of the tenants of the Building.
Owner, its Managing Agent and the Office of the Building (including, without
limitation, the Building Manager) assume no liability whatsoever for anything
contained in any plans and specifications prepared for or on behalf of any
tenant of the Building or for the manner in which any of the work is executed by
or on behalf of any tenant, notwithstanding Owner's or its Building Manager or
Managing Agent's review, revision and/or approval of the same. In the event of
any inconsistency between the construction-related lease terms and provisions of
these Rules and Regulations, the terms and provisions of the Lease shall prevail
unless the same shall not be in accordance with law, in which event, tenant
shall be obligated in all respects to comply with law.
RULES AND REGULATIONS FOR CONSTRUCTION:
1. All construction will be performed in strict compliance with all
governing codes, ordinances, and local laws, (including ACP filings as
required with respect to asbestos-containing materials). It is the
obligation of the tenant to ensure that all construction takes place
legally as noted above. Owner reserves the right to stop any
construction activities which are not in strict conformance with all
prevailing codes, ordinance, and local laws.
2. All construction will be documented by architectural and/or engineering
drawings prepared for the tenant by and stamped by a qualified licensed
architect and/or professional engineer acceptable to Owner. These
drawings are subject to review for conformance to the Lease and/or
Building Standards by Owner's consultants, at the tenant's expense.
Three complete blue line sets of drawings and three sets of sepias must
be submitted to Owner for such reviews, except to the extent that
additional sets of sepias are required pursuant to Section I(C)(2)
above. One
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complete set of sepias will be returned to the tenant or the tenant's
architect and/or engineer as appropriate with the comments and/or
requirements of Owner's and its consultant(s) noted on the drawings.
This review process requires a minimum of ten (10) Business Days to
complete depending upon the complexity of the work.
3. All applicable permits must be obtained, posted at the job site, and
also filed with the Building Office prior to the commencement of any
construction work, in compliance with Local Law 55/88. Copies of
controlled inspection reports must be submitted to the Building Manager
at the conclusion of the work.
4. Any contractor and/or sub-contracting firm, which the tenant wishes to
employ in the Building, will submit a current original insurance
certificate in the limits acceptable to Owner (See Attachment A
-Contractor's Insurance Requirements) at least ten (10) days prior to
the proposed construction commencement date.
5. All construction work will be performed by licensed contractors and/or
subcontractors acceptable to Owner.
6. In the event tenant shall employ any contractor or subcontractor to do
any work in the Premises permitted by the tenant's lease, such
contractor and subcontractor shall agree to employ only such labor as
will not result in jurisdictional disputes or strikes or result in
causing disharmony with other workers employed at the Building. Tenant
shall inform Owner in writing of the names of any contractor or
subcontractor tenant proposes to use in the Premises at least ten (10)
days prior to the beginning of work by such contractor or subcontractor
for Owner's review and approval.
7. Any modifications to the existing fire and life safety systems in the
Building occasioned by reason of the tenant's construction will be
designed by Owner's Engineer, at the tenant's expense, which expense
shall include (A) a fee (the "Modification Design General Conditions
Fee") equal to ten (10%) percent of the out-of-pocket cost to Owner
(the "Modification Design Out-Of-Pocket Cost") of such design to
reimburse Owner for the estimated general conditions costs incurred by
Owner in connection therewith, and (B) a fee equal to ten (10%) percent
of the sum of (x) the Modification Design Out-Of-Pocket Cost and (y)
the Modification Design General Conditions Fee, representing Owner's
profit and reimbursement of Owner for its additional overhead costs
incurred in connection with such design. This includes existing
standpipe and the Class E Fire Alarm System. Any additions, adoptions,
and/or modifications to the Class E System to accommodate any tenant
change, or to comply with any existing or future prevailing code,
ordinance, and/or local law, will be performed by or under the
supervision of Owner's Class E System maintenance contractor, at the
tenant's expense, which expense shall include (A) a fee (the "Class E
Work General Conditions Fee") equal to ten (10%) percent of the
out-of-pocket cost to Owner (the "Class E Work Out-Of-Pocket Cost") of
performing such addition, adoption or modification (the "Class E Work")
to reimburse Owner for the estimated general conditions costs incurred
by Owner in connection with the Class E Work, and (B) a fee equal to
ten (10%) percent of the sum of (x) the Class E Work Out-Of-Pocket Cost
and (y) the Class E Work General Conditions Fee, representing Owner's
profit and reimbursement of Owner for its additional overhead costs
incurred in connection with such Class E Work.
8. For security purposes, general contractors are responsible to instruct
all tradesmen to sign in and out each day at the security console or by
the loading dock office, in the contractor log provided for this
purpose. Contractors and/or subcontractors not complying with this
regulation will be
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banned from working in the Building.
9. A minimum of twenty-four hours written notice will be given to the
Building Manager for any after-hours work. This includes evenings or
weekends. The current building hours are 8 AM through 6 PM which are
subject to change by Owner. The freight car is open 8 AM to 4:50 PM. It
is available at other times if pre-arranged at the building rates to be
paid by the contractor or tenant.
10. Tenant will make provisions for contractor's use of the freight
elevator. These services will, subject to availability, be arranged
with the Building Manager, a minimum of forty-eight (48) hours in
advance. The tenant will be responsible for all costs associated with
such service. No equipment will be carried on top of, or below the
elevators.
11. Construction debris will be removed from building at the time it is
brought to the loading dock and will be removed before 8:00 AM or after
5:00 PM or on weekends and will be coordinated with the Building
Manager to prevent conflicts with the janitorial operation.
12. It shall be the responsibility of the general contractor to see that
these rules are carried out by their own personnel and by their
subcontractors.
13. Demolition, chopping, core drilling, shooting track, or other noise
generating activity will be allowed only before 8:00 AM or after 6:00
PM, or on weekends. Channeling of the floors is not allowed.
14. All patch work and ceiling tile replacement or removal will be done by
the contractor, unless prior arrangement is made with the Building
Manager.
15. Lay in ceiling tiles will be replaced at the end of every workday by
the contractor while working in common areas. To assist in maintaining
comfort conditions, the tenants are encouraged to minimize the time
that hung ceilings are open in their premises during construction.
16. Time schedules will be supplied to the Building Manager showing the
anticipated completion date. Any delay of the completion date will be
documented in writing to the Building Manager.
17. Common areas will be protected at all times during demolition and
construction. Doors to construction areas will be closed at all times.
Contractors will supply dampened carpets at exits of construction areas
to help remove dust and construction grit from bottom of shoes before
entering common areas of the Building.
18. No storage of construction materials, construction debris, waste
containers, scaffolding, ladders or other construction-related items
will be allowed in the common areas, roofs, loading docks, sidewalks of
the Building or freight corridors.
19. No playing of radios will be allowed by construction personnel in the
common areas of the Building (i.e.: corridors, stairwells, loading
docks, and main lobby). Noise must be minimized in the work areas to
minimize interference with other tenants in the Building.
20. The contractor's employees will use only restrooms or lavatories within
the tenant's area or as designated by the Building Manager.
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21. Only UL, BSA, and MEA approved material and equipment will be used in
any construction at the Building.
SUPERVISION:
1. General contractors must provide sufficient supervision (English
speaking supervisor required) on premises at all times, during the day
and after hours when work is in progress, to insure the orderly, safe
progression of the work without disturbance or disruption to the normal
operation of the Building.
2. All jobs are to be policed at all times - laborers will continually
keep the work space orderly. If necessary, common areas on the floor(s)
where construction is taking place are to be vacuumed, dusted, or
otherwise cleaned on an ongoing basis as required.
3. Contractors will be responsible for cleanliness of all parts of the
construction area including common areas, elevators, and lobbies. The
Building will charge tenant for any cleaning made necessary due to
construction operations.
ELECTRICAL SYSTEM INTEGRITY:
I. 3/4" approved electrical pipes, conduit, or greenfield will be the
minimum size used in the Building. Conduits to be supported by
stand-offs, not wired to ceiling supports. Conduits located in hung
ceiling will be run north/south or east/west. No diagonal runs will be
allowed.
II. All power wiring will be #12 awg or larger.
III. All unused wiring, conduit, or electrical devices must be removed.
IV. Only aluminum or galvanized pipe will be used to enter circuit breaker
panels or disconnects, and must be extended at least into the ceiling.
V. All wiring in walls and partitions will be in hard circuit or an
approved raceway.
VI. All low voltage wiring will be run in rigid pipe; or approved teflon
cord wire will be used.
VII. All panels of any type will be properly dressed and tied; wires will be
properly tagged showing circuit number. Directory boards will be
brought up to date showing circuit number and approximate location. A
typewritten letter will be supplied to the Building Office listing:
A. Floor where change has taken place;
B. Panel number;
C. Switch number;
D. Tenant area where change was made; and
E. New switch gear designation.
VIII. Electrical load shall at all times not exceed the maximum limitations
of the Building. Tenant will provide any necessary documentation to
Owner as proof that the work is in compliance with the lease in this
regard. Such documentation will be subject to review by Owner's
engineer at the tenant's expense, which expense shall include (A) a
Review General Conditions Fee equal to ten (10%) percent of the Review
Out-Of-Pocket Cost in connection with such review to reimburse Owner
for the estimated general conditions costs incurred by Owner in
connection therewith, and
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(B) a fee equal to ten (10%) percent of the sum of (x) such Review
Out-Of-Pocket Cost and (y) such Review General Conditions Fee,
representing Owner's profit and reimbursement of Owner for its
additional overhead costs incurred in connection with such review.
IX. In no case will the connected load exceed the code limitations of the
risers or distribution system. Any increase in capacity or change in
electrical requirements, will be the responsibility of the tenant.
Owner's Utility Consultant must review and approve any electrical
changes at the tenant's expense, which expense shall include (A) a
Review General Conditions Fee equal to ten (10%) percent of the Review
Out-Of-Pocket Cost in connection with such review to reimburse Owner
for the estimated general conditions costs incurred by Owner in
connection therewith, and (B) a fee equal to ten (10%) percent of the
sum of (x) such Review Out-Of-Pocket Cost and (y) such Review General
Conditions Fee, representing Owner's profit and reimbursement of Owner
for its additional overhead costs incurred in connection with such
review.
X. If the tenant space is submetered, power for any tenant work must be
taken from the load side of the tenant's meter. No power shall be taken
from another tenant or floor.
XI. Electrical load not to exceed electrical load limitations of Building;
Electrical heaters are not allowed.
XII. Complete, updated, as-built electrical drawings and proper sign-offs
will be provided to the Building Manager at the conclusion of the work.
XIII. All Class "E" wiring and fire alarm devices must be protected during
construction/demolition.
MECHANICAL SYSTEM INTEGRITY:
1. Air and/or water balancing or rebalancing will be required as
appropriate, where HVAC systems will be affected or modified, by reason
of tenant's construction. Balancing will be performed by a qualified,
certified balancing firm approved for work in the Building by Owner. A
full certified balancing report will be submitted to Owner at the
conclusion of the work.
2. As-built drawings will be provided to the Building Office reflecting
any change or addition to any component of any HVAC system.
3. Only equipment which is UL, BSA, and/or MEA approved will be used in
the Building.
4. Contractors are to block off return grills or ducts to keep dust from
entering into operating building air conditioning systems during
construction.
5. At the conclusion of the work, the contractor will install a clean set
of filters for all packaged air handling systems servicing the floor
which has been under construction or renovation. The filters will match
the existing filters, also clean fan coils or induction units..
6. All outside louvers must match color of existing aluminum window
frames. Sketches and samples must be submitted prior to installation
for review and approval. Louvers for supplemental HVAC systems will be
permitted only upon prior written consent of Landlord and the location
of louvers to be determined by Landlord.
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7. No outside louvre or ductwork shall be installed in such a manner as to
interfere with the cleaning of windows or replacement of glass.
8. All periphery fan coil unit or radiation system shut-off valves must be
accessible at all times. Ground floor tenants will provide clear access
at all times to perimeter radiation and secondary water system riser
and drain valves located within their premises or within the hung
ceilings of their premises. Installation of ceiling or boxing in of
columns without such access will not be permitted. New partitions must
be located a minimum of eighteen (18) inches away from the periphery
units on horizontal runs and eighteen (18) inches from periphery
enclosures on vertical lines. All connections to risers requiring a
shutdown will be done on an overtime basis with related costs borne by
the tenant, which costs shall include (A) a fee (the "Shutdown General
Conditions Fee") equal to ten (10%) percent of the Out-of-Pocket cost
to Owner (the "Shutdown Out-Of-Pocket Cost") of any work associated
with such connections and/or such shutdown (the "Shutdown Work") to
reimburse Owner for the estimated general conditions costs incurred by
Owner in connection with the Shutdown Work, and (B) a fee equal to ten
(10%) percent of the sum of (x) the Shutdown Out-Of-Pocket Cost and (y)
the Shutdown General Conditions Fee, representing Owner's profit and
reimbursement of Owner for its additional overhead costs incurred in
connection with such Shutdown Work. This work must be arranged in
advance with the Building Manager.
9. All unused ductwork must be removed from the hung ceilings.
10. All unused equipment, such as air handling units, or air conditioning
units must be removed from the tenant's premises and from the Building.
11. All exhaust fan systems designed to remove overstandard heating loads
must be discharged to the atmosphere, not into ceilings or existing
building return air systems.
12. All ductwork shall be installed in a neat and workmanlike manner. All
ducts are to be installed as high as possible. The air conditioning
contractor is to blank off all openings in the existing ductwork caused
by removals. All blank offs shall be sealed air tight, with rivets,
caulking compound, duct tape or high pressure sealants as required. All
new ductwork is to be inspected and sealed wherever required, in the
same manner.
13. Manual volume dampers are to be installed in all branch or sub-branch
ducts and elsewhere as required for balancing and control of all duct
systems whether or not shown on drawings.
14. Duct hangers shall be attached to steel or concrete slab as required.
15. Access doors are to be provided adjacent to all fan dampers and
locations to be shown on ductwork shop drawings.
16. All supplementary air conditioning systems must be reviewed and
approved with the Owner's engineer prior to installation.
17. All condensate lines are-to be rigid copper tubing with a direct drain
to waste lines, not into the building service sinks or other sinks.
18. As-Built duct drawings are to be submitted to the Building Office upon
the completion of the job.
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19. Pneumatic tubing is to be copper, or type FR polyethylene. Type-L hard
copper tubing is to be installed in all exposed locations where damage
may occur.
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20. All valves are to have a 2" square brass tag stamped with designating
number, 1" high, filled in with black enamel. Tags must be fastened to
valve spindle with brass chain. All valve numbers to correspond to
valve identification numbers on tenant's drawings.
21. All connections of new ductwork on main building HVAC system will be
done after main building system is shut down or before start up. This
will entail overtime work and must be arranged with the Building
Manager in advance with costs to be borne by tenant. Such costs shall
include (A) a fee (the "Ductwork General Conditions Fee") equal to ten
(10%) percent of the out-of-pocket cost to Owner (the "Ductwork
Out-Of-Pocket Cost") of any work associated with such connections (the
"Ductwork Work") to reimburse Owner for the estimated general
conditions costs incurred by Owner in connection with the Ductwork
Work, and (B) a fee equal to ten (10%) percent of the sum of (x) the
Ductwork Out-Of-Pocket Cost and (y) the Ductwork General Conditions
Fee, representing Owner's profit and reimbursement of Owner for its
additional overhead costs incurred in connection with such Ductwork
Work.
PLUMBING SYSTEM INTEGRITY:
1. No water risers are to be shut down during Building operating hours.
2. No exposed plumbing will be permitted.
3. All unused fixtures and piping must be removed and all unused piping
must be capped at its respective riser.
4. Building engineering staff must supervise all riser shutdowns, at the
tenant's expense, which expense shall include (A) a Shutdown General
Conditions Fee equal to ten (10%) percent of the Shutdown Out-Of-Pocket
Cost in connection with such shutdown to reimburse Owner for the
estimated general conditions costs incurred by Owner in connection
therewith and (B) a fee equal to ten (10%) percent of the sum of (x)
such Shutdown Out-Of-Pocket Cost and (y) such Shutdown General
Conditions Fee, representing Owner's profit and reimbursement of Owner
for its additional overhead costs incurred in connection with such
shutdown.
5. All valves are to have a 2" square brass tag stamped with designating
number, 1" high, filled in with black enamel. Tags must be fastened to
valve spindle with brass chain. All valve numbers to correspond to
valve identification numbers on tenant's drawings.
6. Lead or fiber shields must be provided between hangers and clamps for
copper pipe.
7. All pipe hangers and supports shall be connected to the building
structure by means of approved fastening methods (e.g., threaded rods);
no chain straps, perforated bars, or wire hangers will be permitted; no
hanging from work of another trade will be permitted and no plastic
pipe permitted.
8. Sleeves are to be provided for each pipe passing through walls,
partitions, floors, and slabs. Sleeves passing through rated walls,
floors or ceiling slabs will be packed with an approved fire retardant
material.
9. All fixtures installed must have a local shutoff valve, and where two
or more fixtures are in the same area, a common local valve to control
all fixtures as well as shutoff valve at the riser must be installed.
All shutoff valves will be ball valves with proper pressure rating.
10. All hot and cold water piping must be insulated.
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INSTALLATION OF CEILINGS:
1. No ceiling tiles shall be installed until the Building Manager has had
an opportunity to inspect the areas to ascertain that all ductwork,
plumbing, electrical, etc., has been properly installed, and further
that all fireproofing has been reinstalled on any exposed steel if
applicable.
2. All ceilings are to be installed in strict accordance with the
manufacturer's specifications, and all applicable codes.
3. Access panels are to be provided wherever necessary for inspection,
maintenance and/or repair of equipment or controls relating to air
conditioning, plumbing or other building services.
STRUCTURAL INTEGRITY:
1. Updated, as-built partitions, and reflected ceiling plans will be
submitted at the conclusion of all renovations and new construction
work.
2. Updated, as-built structural drawings will be submitted to the Building
Office at the conclusion of any work requiring modification to the
existing structural support system's framing, exterior or interior load
bearing walls, or roofs. Where roofs have been penetrated, complete
as-built waterproofing details must be provided.
LIEN RELEASES AND GENERAL RELEASES:
At the conclusion of any construction, the tenant will provide the Building
Manager with AIA document G706A, Contractor's Affidavit of Release of Liens and
a General (Blumberg) Release properly completed by the contractor and
sub-contractor as appropriate.
GENERAL:
1. The Building Office will periodically review the work to ensure that
the Building requirements, quality of materials and workmanship are in
conformity with Building standards. Building personnel are to monitor
demolition of ceiling, walls or partitions and/or plumbing or
electrical disconnects or new tie-ins, in order to represent the
interest of the Building or prevent interruption of services to the
other tenants or the Building. The Building Office will assign
supervisory personnel at its discretion and the tenant will be charged
for the standby service, which charge shall include (A) a fee (the
"Standby Service General Conditions Fee") equal to ten (10%) percent of
the out-of-pocket cost to Owner (the "Standby Service Out-Of-Pocket
Cost") of providing such personnel to reimburse Owner for the estimated
general conditions costs incurred by Owner in connection such standby
service and (B) a fee equal to ten (10%) percent of the sum of (x) the
Standby Service Out-Of-Pocket Cost and (y) the Standby Service General
Conditions Fee, representing Owner's profit and reimbursement of Owner
for its additional overhead costs incurred in connection with such
standby service.
ATTACHMENT A
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CONTRACTOR'S INSURANCE REQUIREMENTS
FOR
59 MAIDEN LANE
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CONTRACTOR'S INSURANCE REQUIREMENTS
The Contractor shall maintain and show proof of being insured by a company or
companies licensed to do business in the State of New York and have a Best's
rating at least A-XV.
The Contractor shall name as the Certificate Holder the following:
1. Newmark & Company Real Estate, Inc.
as agent for 59 Maiden Lane Associates, LLC
2. 59 Maiden Lane Associates, LLC
3. AmTrust Realty Corp.
LIMITS OF LIABILITY
The insurance required herein shall be written for not less than the limits of
liability defined hereinafter, or required by law, whichever is greater.
I. Worker's Compensation
A. State: Statutory
B. Applicable Federal: Statutory
C. Employer's Liability: $500,000
D. Benefits Required by Law
E. Union Labor Contracts: As Applicable
II. Comprehensive General Liability (including Premises-Operations;
Independent Contractors' Protective; Products and Completed Operations;
Broad Form Property Damage);
A. Combined single limits for bodily injury and property damage.
$3,000,000 Each Occurrence
$3,000,000 Annual Aggregate
B. Products and Completed Operations Insurance shall be
maintained for a minimum of two years after final payment and
Contractor shall continue to provide evidence of such coverage
to Owner on an annual basis during the aforementioned period.
C. Property Damage Liability Insurance shall include coverage for
X (Explosion) (Collapse) and U (Underground) hazards.
D. Contractual Liability (Hold Harmless Coverage):
1. Bodily Injury:
$3,000,000 Each Occurrence
2. Property Damage:
$3,000,000 Each Occurrence
$3,000,000 Annual Aggregate
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E. Personal Injury, with Employment Exclusion deleted:
$3,000,000 Annual Aggregate
III. Comprehensive Automobile Liability (owned, non-owned, hired):
A. Combined single limits for bodily injury and property damage:
$3,000,000 Each Occurrence
$3,000,000 Annual Aggregate
B. The State of New York has a no-fault automobile insurance
requirement. The Contractor shall be certain coverage is
provided which conforms to any specific stipulation in the
law.
IV. Umbrella Excess Liability: $2,000,000 - over primary
V. Notices: Certificate must provide that Certificate Holder will receive
advance notice of a minimum of thirty (30) days of cancellation, or any
other amendments to the coverage. If a cancellation notice is received,
Owner may stop all work until a new Certificate is received by Owner.
Furnish one original of each of Certificates of Insurance herein
required which shall specifically set forth evidence of all coverage
required by paragraphs one through four above. The form of the
Certificate shall be "Accord 25-S (7-97)", Certificate of Insurance,
most recent edition. Furnish to Owner copies of any endorsements that
are subsequently issued amending coverage or limits. Certificates shall
be filed with Owner at least ten (10) days prior to the commencement of
work. Required notices shall be sent to Owner by hand delivery or
recognized overnight delivery service which has a receipt or by
registered or certified mail, return receipt requested, postage
prepaid, addressed to Owner at the address of Owner set forth on the
first page of this Lease (or to such other address or addresses as may
from time to time hereafter be designated by Owner by notice to Tenant
given in accordance with Article 29 of the Lease), Attention: Nathan
Aber. All such notices shall be deemed to have been served on the date
of actual receipt (in the case of hand delivery) or one (1) Business
day after such notice shall have been deposited with an overnight
delivery service (in the case of mailing by recognized overnight
delivery service as aforesaid) or three (3) Business Days after such
notice shall have been deposited in the United States mails within the
continental United States (in the case of mailing by registered or
certified mail as aforesaid).
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EXHIBIT F
Alternate Electricity Provision
"Article 14
14.01. If and to the extent the Premises is comprised of an
entire floor or floors, Tenant agrees to purchase from Landlord or from a meter
company designated by Landlord all electricity consumed, used or to be used in
such entire floor(s). The amount to be paid by Tenant for electricity consumed
shall be determined by meter or meters and related equipment installed (or, if
existing, retrofitted) by Landlord at Tenant's expense and billed separately
according to each meter. Bills for electricity consumed by Tenant, which Tenant
hereby agrees to pay, shall be rendered by Landlord or the meter company to
Tenant at such time as Landlord may elect, and shall be payable as an Additional
Charge, within fifteen (15) days after rendition of any such bill. Tenant shall
make no material changes or additions to the electrical equipment, wiring and/or
appliances in the Premises (beyond that on Tenant's approved plans for initial
occupancy) without submission of plans for the prior written consent of
Landlord.
14.02. The amount to be charged to Tenant by Landlord per "KW"
and "KWHR" pursuant to this Article for electricity consumed within the
Premises, whether shown on the meters measuring Tenant's consumption of
electricity or determined by survey as herein elsewhere provided, shall be 108%
of the amount at which Landlord from time to time purchases each KW and KWHR of
electricity for the same period from the utility company, which amount (herein,
as adjusted from time to time, called "Landlord's Rate") shall be determined by
dividing the cost established by said utility company (averaged separately for
KWs and KWHRs) during each respective billing period by the number of KWs and
KWHRs consumed by the Building appearing on the utility company invoice for such
period. In no event shall the Additional Charge made to Tenant pursuant to this
Article 14 for submetered electricity supplied to the Premises (or the charge
pursuant to Section 14.04 hereof in the event electricity is supplied on a rent
inclusion basis) be less than Landlord's actual cost therefor. If Tenant shall
occupy the Premises for business purposes (including, without limitation, the
testing or operation of its computers) and consume electricity prior to the
installation of meters in the Premises, then Tenant agrees to pay Landlord the
sum of $2.75 per rentable square foot per annum for electricity pursuant to
Section 14.04 hereof until such time as said meters are installed. During the
period of Tenant's construction occurring prior to the installation of said
meters, Tenant will pay to Landlord a flat charge of $2.75 per rentable square
foot per annum.
14.03. In the event that the "submetering" of electricity in
the Building is hereafter prohibited by any law hereafter enacted, or by any
order or ruling of the Public Service Commission of the State of New York, or by
any judicial decision of any appropriate court, at the request of Landlord,
Tenant shall, unless Tenant elects to require Landlord to provide electricity
pursuant to Section 14.04 hereof, apply within five (5) Business Days to the
appropriate public utility company servicing the Building for direct electric
service and bear all costs and expenses necessary to comply with all rules and
regulations of such public utility company pertinent thereto, and Landlord
and/or the meter company theretofore designated by Landlord shall be relieved of
any further obligation to furnish electricity to Tenant pursuant to this Article
14, except Landlord shall permit its wires, conduits and electrical equipment,
to the extent available and safely capable, to be used for such purpose. Any
additional riser or risers or feeders or service, to the extent available and
reasonably feasible, to supply Tenant's electrical requirements will be
installed by Landlord, at the sole cost and expense of Tenant, if in
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Landlord's reasonable judgment the same are necessary and will not cause
permanent damage or injury to the Building or the Premises or cause or create a
dangerous or hazardous condition or unreasonably interfere with or disturb other
tenants or occupants. In addition to the installation of such riser or risers,
Landlord will also, at the sole cost and expense of Tenant, install at
reasonably competitive rates all other equipment proper and necessary in
connection therewith, subject to the aforesaid terms and conditions, and subject
to Landlord's prior approval of Tenant's plans therefor which shall not be
unreasonably withheld or delayed.
14.04. (a) If (i) submetering of electricity is prohibited as
described in Section 14.03 hereof and Tenant does not elect to obtain
electricity from the public utility company, or (ii) if and to the extent that
the Premises or any portion of Tenant's electric consumption (KW and KWHR) is
measured on a meter that also measures the electric consumption of another
tenant occupying space in the Building, then in any such case Landlord shall
furnish electricity to Tenant on the basis that Tenant's consumption (KW and
KWHR) of electricity shall be measured by electric survey made from time to time
by Landlord's consultant. Pending an initial survey made by Landlord's
consultant, effective as of the date when Landlord has commenced furnishing
electricity to Tenant pursuant to this Section 14.04 (with suitable proration
for any period of less than a full calendar month), the Fixed Rent specified in
Section 1.04(a) hereof shall be increased by an amount (the "Initial Charge")
which shall be at the rate of $2.75 per rentable square foot per annum, or in
the event the reason is (i) above, then, if there has been twelve (12) months
charges of submetered electric, an amount equal to the average of the prior
twelve (12) months' charges for submetered electric. After completion of the
electrical survey made by Landlord's consultant of Tenant's consumption (KW and
KWHR) of electricity, said consultant shall apply Landlord's Rate as provided in
Section 14.02 hereof to arrive at an amount (herein called the "Actual Charge")
and the Fixed Rent shall be appropriately adjusted retroactively to reflect any
amount by which the Actual Charge exceeds the Initial Charge. Tenant shall pay
that portion of such amount which would have been paid to the date of the
determination of the Actual Charge within ten (10) days after being billed
therefor. Thereafter and from time to time during the term of this Lease,
Landlord may cause additional surveys of Tenant's electrical usage to be made by
Landlord's consultant. Tenant from time to time may request Landlord to have a
survey made of Tenant's electrical usage, and the fees of Landlord's consultant
making such survey(s) at Tenant's request shall be paid by Tenant. In the event
any of the foregoing surveys shall determine that there has been an increase or
decrease in Tenant's usage of electricity, then effective as of the date of such
change in usage the then current Actual Charge to Tenant by reason of the
furnishing of electricity to Tenant, as same may have been previously increased
pursuant to the terms hereof, shall be increased or decreased (subject to the
last sentence of subsection 14.04(b) hereof) in accordance with such survey
determination with appropriate credit allowed to Tenant in the event of a
decrease in usage and in the event of an increase in such usage Tenant shall pay
the increased amount therefor from the date of such change in usage to the date
of such survey determination within ten (10) days after being billed therefor
and thereafter as part of the increased monthly charge for electricity by reason
of such survey determination.
(b) In the event from time to time after the initial survey or
a subsequent survey any additional electrically operated equipment is installed
in the Premises by Tenant, or if Tenant shall increase its hours of operation,
or if the charges by the utility company supplying electric current to Landlord
are increased or decreased after the date thereof, then and in any of such
events the monthly charge shall be increased or decreased accordingly on account
of such additional electricity consumed by such newly installed electrically
operated equipment and/or increase in Tenant's hours of operation and/or on
account of such increased or decreased Landlord's Rate. The amount of such
increase or decrease in the monthly charge shall be determined in the first
instance by Landlord's consultant. In addition, the monthly rate will be
increased or decreased quarterly in accordance with calculations by Landlord's
consultant to reflect changes in the fuel adjustment component of the utility
company charge.
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Tenant shall pay the amount of any increase in the monthly charge retroactively
(subject to Tenant's right to contest in the same manner as in Section 14.06
hereof provided) from the date of the installation of all newly installed
electrically operated equipment and/or from the date when the increased charges
to Landlord from the utility company become effective and/or from the date of
any increase in Tenant's hours of operation, as the case may be, such amount to
be paid promptly upon billing therefor by Landlord. Notwithstanding anything to
the contrary contained in Section 14.04, in no event shall the Actual Charge be
decreased to an amount which is less than the Initial Charge per rentable square
foot per annum.
14.05. All survey determinations (including the first survey
made by Landlord's consultant) shall be subject to contest by Tenant as provided
in Section 14.06 hereof. Surveys made of Tenant's electrical consumption shall
be based upon the use of electricity between the hours of 8:00 a.m. to 6:00
p.m., Mondays through Fridays, on Saturdays and such other days and hours when
Tenant (or Tenant's agents, employees and/or contractors) uses electricity for
lighting and for the operation of the machinery, appliances and equipment used
by Tenant in the Premises; and if cleaning services are provided by Landlord,
such survey shall include Landlord's normal cleaning hours of five (5) hours per
day (which shall not be subject to reduction) for lighting within the Premises
and for electrical equipment normally used for such cleaning.
14.06. In the event electricity shall be furnished to Tenant
as contemplated in Section 14.04 hereof, then Tenant, within sixty (60) days
after notification from Landlord of the determination of Landlord's utility
consultant (in accordance with the provisions of Section 14.04 hereof), shall
have the right to contest, at Tenant's cost and expense, such determination by
submitting to Landlord a like survey determination prepared by a utility
consultant of Tenant's selection, which will highlight the differences between
Landlord's survey and Tenant's survey. If the determination of Tenant's
consultant does not vary from the determination of Landlord's consultant by more
than five percent (5%), then Landlord's determination shall be deemed binding
and conclusive. If the determination of Tenant's consultant varies by more than
five percent (5%) and if Landlord's consultant and Tenant's consultant shall be
unable to reach agreement within thirty (30) days, then such two consultants
shall designate a third consultant to make the determination, and the
determination of such third consultant shall be binding and conclusive on both
Landlord and Tenant. If the determination of such third consultant shall
substantially confirm the findings of Landlord's consultant (i.e., within five
percent (5%)), then Tenant shall pay the cost of such third consultant. If such
third consultant shall substantially confirm the determination of Tenant's
consultant (i.e., within five percent (5%)), then Landlord shall pay the cost of
such third consultant. If such third consultant shall make a determination
substantially different from that of both Landlord's and Tenant's consultants
(or is within five percent (5%) of both such determinations), then the cost of
such third consultant shall be borne equally by Landlord and Tenant. In the
event that Landlord's consultant and Tenant's consultant shall be unable to
agree upon the designation of a third consultant within thirty (30) days after
Tenant's consultant shall have made its determination (different from that of
Landlord's consultant), then either party shall have the right to request The
Real Estate Board of New York, Inc. (or, upon their failure or refusal to act,
the American Arbitration Association in the City of New York) to designate a
third consultant whose decision shall be conclusive and binding upon the
parties, and the costs of such third consultant shall be borne as hereinbefore
provided in the case of a third consultant designated by the Landlord's and
Tenant's consultants. Pending the resolution of any contest pursuant to the
terms hereof, Tenant shall pay the Additional Charge on account of electricity
determined by Landlord's consultant, and upon the resolution of such contest,
appropriate adjustment in accordance with such resolution of such Additional
Charge payable by Tenant on account of electricity shall be made retroactive to
the date of the determination of Landlord's consultant."
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EXHIBIT G
Form of Letter of Credit
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EXHIBIT H
Floor Plan of Additional Space
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EXHIBIT I
Floor Plan of Temporary Premises
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EXHIBIT J
Form of SNDA Agreement
STANDARD FORM
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is made as of this ___ day of ____________, 1999 by and
among CAPACITY FUNDING COMPANY, LLC, a New York limited liability company having
an office at 131 Richmond Place, Lawrence, New York 11559 ("Lender"), 59 MAIDEN
LANE ASSOCIATES, LLC, a New York limited liability company, having an office c/o
AmTrust Realty Corp., 250 Broadway, New York, New York 10007 ("Landlord"), and
MEDSITE.COM, INC., a Delaware corporation, having an office at 60 East 13th
Street, New York, New York 10003 ("Tenant").
WITNESSETH
WHEREAS, Tenant has entered into a certain lease (the "Lease") dated as
of December __, 1999 with Landlord covering premises (the "Premises") within a
certain building known as 59 Maiden Lane, located in New York, New York (a
conformed copy of said Lease has been delivered to Lender); and
WHEREAS, Lender has made a certain loan to Landlord, which loan is
secured by the mortgages (the "Mortgages") more particularly described in
Exhibit A annexed hereto and affecting the premises known as 59 Maiden Lane, in
the Borough of Manhattan, City, County and State of New York; and
WHEREAS, Lender has been requested by Tenant and by Landlord to enter
into a non-disturbance agreement with Tenant;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease and any extensions, renewals, replacements or
modifications thereof, and all of the right, title and interest of Tenant
thereunder in and to the Premises are and shall be subject and subordinate to
the Mortgages and to all of the terms and conditions, contained therein, and to
any renewals, modifications, replacements, consolidations and extensions
thereof.
2. Lender consents to the Lease and, in the event Lender comes into
possession of or acquires title to the Premises as a result of the foreclosure
or other enforcement of the Mortgages or the notes secured by the Mortgages, or
as a result of any other means, Lender agrees that, so long as Tenant is not
then in default under the Lease after the expiration of any applicable notice
and/or cure periods and so long as Tenant is then in possession of the Premises,
Lender will recognize Tenant, will not include Tenant in any foreclosure or
enforcement action, and will not disturb Tenant in its possession of the
Premises for any reason other than one which would entitle Landlord to terminate
the Lease under its terms or would cause, without any further action by
Landlord, the termination of the Lease or would entitle Landlord to dispossess
Tenant from the Premises.
3. Tenant agrees with Lender that if the interest of Landlord in the
Premises shall be
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transferred to and owned by Lender by reason of foreclosure or other proceedings
brought by it, or any other manner, or shall be conveyed thereafter by Lender or
shall be conveyed pursuant to a foreclosure sale of the Premises, Tenant shall
be bound to Lender under all of the terms, covenants and conditions of the Lease
for the balance of the term thereof remaining and any extensions or renewals
thereof which may be effected in accordance with any option therefor in the
Lease, with the same force and effect as if Lender were the landlord under the
Lease, and Tenant does hereby attorn to Lender as its landlord, said attornment
to be effective and self-operative without the execution of any further
instruments on the part of any of the parties hereto immediately upon Lender
succeeding to the interest of Landlord in the Premises. Tenant agrees, however,
upon the election of and written demand by Lender within twenty (20) days after
Lender receives title to the Premises, to execute an instrument in confirmation
of the foregoing provisions, satisfactory to Lender, in which Tenant shall
acknowledge such attornment and agree to be bound to Lender under all of the
terms, covenants and conditions of the Lease for the balance of the term thereof
remaining and any extensions or renewals thereof which may be effected in
accordance with any option therefor in the Lease, with the same force and effect
as if Lender were the landlord under the Lease.
4. Tenant agrees with Lender that if Lender shall succeed to the
interest of Landlord under the Lease, Lender shall not be (a) liable for any
action or omission of any prior landlord under the Lease (provided that this
clause 4(a) shall not be deemed to preclude Lender from being liable for any
action or omission of Lender under the Lease that occurs after the date Lender
succeeds to the interest of Landlord under the Lease, notwithstanding that said
action or omission first occurred prior to the date Lender succeeds to the
interest of Landlord under the Lease), or (b) subject to any offsets, defenses
or counterclaims which Tenant might have against any prior landlord, or (c)
bound by any rent or additional rent which Tenant might have paid for more than
the current month to any prior landlord, or (d) bound by any security deposit
which Tenant may have paid to any prior landlord, unless such deposit is in an
escrow fund available to Lender (provided that for so long as Lender is an
"Affiliate of Landlord" [as such term is defined in the Lease], Lender shall be
bound by any security deposit which Tenant may have paid to any prior landlord),
or (e) bound by an amendment or modification of the Lease (including any
agreement to terminate the Lease) made without Lender's written consent, or (f)
bound by any provision in the Lease which obligates the landlord to erect or
complete any building or to perform any construction work or to make any
improvements to the Premises or to expand or rehabilitate any existing
improvements or to restore any improvements following any casualty or taking
(provided that for so long as Lender is an Affiliate of Landlord, Lender shall
(i) be obligated to complete the "Landlord's Work" [as such term is defined in
the Lease] if such work has not yet been completed, and (ii) restore the
Premises after any casualty or taking in accordance with the provisions of
Articles 19 and/or 20 of the Lease, as applicable), or (g) bound by any notice
of termination given by Landlord to Tenant without Lender's written consent
thereto, or (h) personally liable under the Lease and Lender's liability under
the Lease shall be limited to the ownership interest of Lender in the Premises.
Tenant further agrees with Lender that Tenant will not voluntarily subordinate
the Lease to any lien or encumbrance without Lender's written consent.
5. In the event that Landlord shall default in the performance or
observance of any of the terms, conditions or agreements in the Lease, Tenant
shall give written notice thereof to Lender and Lender shall have the right (but
not the obligation) to cure such default. Tenant shall not take any action with
respect to such default under the Lease, including, without limitation, any
action in order to terminate, rescind or void the Lease or to withhold any
rental thereunder, for a period of 10 days after receipt of such written notice
by Lender with respect to any such default capable of being cured by the payment
of money and for a period of 30 days after receipt of such written notice by
Lender with respect to any other such default (provided, that in the case of any
default which cannot be cured by the payment of money and cannot with diligence
be cured within such 30-day period because of the nature of such
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default or because Lender requires time to obtain possession of the Premises in
order to cure the default, if Lender shall proceed promptly to attempt to obtain
possession of the Premises, where possession is required, and to cure the same
and thereafter shall prosecute the curing of such default with diligence and
continuity, then the time within which such default may be cured shall be
extended for such period as may be necessary to complete the curing of the same
with diligence and continuity).
6. Landlord has agreed in the Mortgages that the rentals payable under
the Lease shall be paid directly by Tenant to Lender upon the occurrence of a
default by Landlord under the Mortgages. Accordingly, after notice is given by
Lender to Tenant that the rentals under the Lease should be paid to Lender,
Tenant shall pay to Lender, or in accordance with the directions of Lender, all
rentals and other moneys due and to become due to Landlord under the Lease, or
amounts equal thereto. Tenant shall have no responsibility to ascertain whether
such demand by Lender is permitted under the Mortgages. Landlord hereby waives
any right, claim or demand it may now or hereafter have against Tenant by reason
of such payment to Lender, and any such payment to Lender shall discharge the
obligations of Tenant to make such payment to Landlord. Notwithstanding any of
the foregoing to the contrary, in the event that a cure of any such default is
thereafter accepted by Lender, Lender shall, promptly thereafter, give notice to
Tenant of such cure, directing Tenant to resume paying the rentals under the
Lease to Landlord. In the event that Lender shall give such notice to Tenant,
Tenant shall thereafter resume payment directly to Landlord of all rentals and
other moneys due and to become due to Landlord under the Lease.
7. Tenant declares, agrees and acknowledges that it intentionally and
unconditionally waives, relinquishes and subordinates the Lease and its
leasehold interest thereunder in favor of the lien or charge of the Mortgages.
8. This Agreement shall bind and inure to the benefit of the parties
hereto, their successors and assigns. As used herein the term "Tenant" shall
include Tenant, its successors and assigns; the words "foreclosure" and
"foreclosure sale" as used herein shall be deemed to include the acquisition of
Landlord's estate in the Premises by voluntary deed (or assignment) in lieu of
foreclosure; and the word "Lender" shall include the Lender herein specifically
named and any of its successors, participants and assigns, including anyone who
shall have succeeded to Landlord's interest in the Premises by, through or under
foreclosure of the Mortgage.
9. All notices, consents and other communications pursuant to the
provisions of this Agreement shall be in writing and shall be sent by registered
or certified mail, return receipt requested, or by a reputable commercial
overnight carrier that provides a receipt, such as Federal Express or Airborne,
and shall be deemed given when postmarked and addressed as follows:
If to Lender: Capacity Funding Company, LLC
131 Richmond Place
Lawrence, New York 11559
With a copy to: Bachner Tally & Polevoy LLP
380 Madison Avenue
New York, New York 10017
Attn: Martin D. Polevoy, Esq.
If to Tenant: Wolf, Block, Schorr and Solis-Cohen LLP
250 Park Avenue
124
<PAGE> 125
New York, New York 10177
Attention: Stephen E. Friedberg, Esq.
with a further copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Jeffrey D. Saper, Esq.
If to Landlord: 59 Maiden Lane Associates, LLC
c/o AmTrust Realty Corp.
250 Broadway
New York, New York 10007
Attn: Mr. Nathan Aber
With a copy to: Bachner Tally & Polevoy LLP
380 Madison Avenue
New York, New York 10017
Attn: Martin D. Polevoy, Esq.,
or to such other address as shall from time to time have been designated by
written notice by such party to the other parties as herein provided.
10. This Agreement shall be the whole and only agreement between the
parties hereto with regard to the subordination of the Lease and the leasehold
interest of Tenant thereunder to the lien or charge of the Mortgages in favor of
Lender, and shall supersede and control any prior agreements as to such, or any
subordination, including, but not limited to, those provisions, if any,
contained in the Lease, which provide for the subordination of the Lease and the
leasehold interest of Tenant thereunder to a deed or deeds of trust or to a
mortgage or mortgages to be thereafter executed, and shall not be modified or
amended and no provision herein shall be waived except in writing by the party
against whom enforcement of any such modification or amendment is sought.
The use of the neuter gender in this Agreement shall be deemed to
include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires. In the event any one or more of the
provisions of this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Notwithstanding anything to the contrary contained herein, in the event
that the Mortgages are assigned to any party which is not an Affiliate of
Landlord, then this Agreement shall be deemed null and void and of no further
force and effect.
125
<PAGE> 126
IN WITNESS WHEREOF the parties hereto have placed their hands and seals
the day and year first above written.
Signed and acknowledged in
the presence of us: TENANT:
MEDSITE.COM, INC.
_______________________ By: __________________________
Name:
Title:
LANDLORD:
59 MAIDEN LANE ASSOCIATES, LLC
_______________________ By: __________________________
Name:
Title:
LENDER:
126
<PAGE> 127
CAPACITY FUNDING COMPANY, LLC
_______________________ By: __________________________
Name:
Title:
127
<PAGE> 128
LANDLORD
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of ____________ in the year 1999, before me, the
undersigned, a Notary Public in and for said state, personally appeared
________________________ personally known to me or proved to me on the basis of
satisfactory evidence to be the person(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 person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
___________________________________
Notary Public
TENANT
STATE OF NEW YORK )
):ss
COUNTY OF NEW YORK )
On the ____ day of ____________ in the year 1999, before me, the
undersigned, a Notary Public in and for said state, personally appeared
________________________ personally known to me or proved to me on the basis of
satisfactory evidence to be the person(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 person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument, and that such individual made such appearance
before the undersigned in the _______________
___________________________________
Notary Public
128
<PAGE> 129
LENDER
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of ____________ in the year 1999, before me, the
undersigned, a Notary Public in and for said state, personally appeared
________________________ personally known to me or proved to me on the basis of
satisfactory evidence to be the person(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 person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
___________________________________
Notary Public
EXHIBIT K
Cleaning Specifications
GENERAL CLEANING
All stone, ceramic tile, marble, terrazzo and other unwaxed or untreated
flooring to be swept nightly, using approved dust-down preparation; wash such
flooring as necessary, but at least once a month.
All linoleum, rubber, asphalt tile and other similar types of flooring (that may
be waxed or treated) to be swept nightly, using approved dust-down preparation.
All carpeting and rugs to be carpet swept or vacuum cleaned nightly, as may be
required.
Hand dust and wipe clean with damp or treated cloth all furniture, files,
fixtures, window sills and convector enclosure tops nightly; wash said sills and
tops when necessary. Horizontal surfaces of window frames to be hand dusted
nightly. Dust all chair rails, trim and baseboards nightly.
Empty all waste receptacles nightly.
Clean all unpainted metal and remove fingerprints nightly, treat as necessary.
Damp wipe all waste receptacles nightly.
Wash clean all water fountains and coolers nightly.
Dust all door and other ventilating louvers within reach nightly.
Dust all telephones as necessary.
Check all private stairwells nightly and keep in clean condition.
129
<PAGE> 130
Wash all windows, both inside and out, a minimum of three times a year.
LAVATORIES
Sweep and wash all lavatory and rest room floors nightly, using proper approved
disinfectants. Wash and polish all mirrors, powder shelves, bright work and
enameled surfaces in all lavatories and rest rooms nightly. Machine scrub rest
room floors with proper disinfectants once a week.
Scour, wash and disinfect all basins, bowls, and urinals throughout all
lavatories nightly; odorless disinfectants to be used.
Wash all toilet seats both sides nightly.
Hand dust and clean, washing where necessary, all partitions, tile walls,
dispensers and receptacles in all lavatories and rest rooms nightly.
Empty paper towel receptacles and sanitary disposal receptacles in lavatories
and rest room nightly.
Fill all toilet tissue holders nightly.
Wash waste cans and receptacles in lavatories and rest rooms as necessary, but
at least once a week, to keep waste receptacles clean and odor free.
Thorougly wash and polish all wall tile and stall surfaces of lavatories and
rest rooms as often as necessary but in no event less than once every week.
Fill soap dispensers and paper towel dispensers nightly as required (soap and
paper towels to be furnished by the Contractor or such tenant at no expense to
the Owner).
HIGH DUSTING
DO ALL DUSTING QUARTERLY.
Dust all pictures, frames, charts, graphs, and similar wall hangings
not reached in nightly cleaning.
Dust clean all vertical surfaces, such as walls, partitions, doors and
bucks and other surfaces not reached in nightly cleaning except as
otherwise herein provided.
Dust clean all pipes, ventilating and air-conditioning louvers, ducts
high moldings and other high areas not reached in nightly cleaning.
Dust all exterior surfaces of light fixtures, including glass and
plastic enclosures.
Dust and inspect all venetian blinds.
130
<PAGE> 131
EXHIBIT L
Floor Plans of Bathrooms
131
<PAGE> 132
LEASE
between
59 MAIDEN LANE ASSOCIATES, LLC
Landlord
and
MEDSITE.COM, INC.,
Tenant
December __, 1999
PREMISES:
59 Maiden Lane
New York, New York 10038
Floors 14, 14A and Part of 15
132
<PAGE> 133
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 Term and Fixed Rent 1
ARTICLE 2 Delivery and Use of Premises 8
ARTICLE 3 Escalations 17
ARTICLE 4 Security 28
ARTICLE 5 Subordination, Notice to Superior Lessors and Mortgagees 33
ARTICLE 6 Quiet Enjoyment 36
ARTICLE 7 Assignment, Subletting and Mortgaging 37
ARTICLE 8 Compliance with Laws 48
ARTICLE 9 Insurance 49
ARTICLE 10 Rules and Regulations 52
ARTICLE 11 Alterations 52
ARTICLE 12 Landlord's and Tenant's Property 56
ARTICLE 13 Repairs and Maintenance 58
ARTICLE 14 Electricity 59
ARTICLE 15 Landlord's Services 67
ARTICLE 16 Access and Name of Building 72
ARTICLE 17 Notice of Occurrences 74
ARTICLE 18 Non-Liability and Indemnification 74
ARTICLE 19 Damage or Destruction 76
ARTICLE 20 Eminent Domain 78
ARTICLE 21 Surrender 80
ARTICLE 22 Conditions of Limitation 80
ARTICLE 23 Reentry by Landlord 84
ARTICLE 24 Damages 85
ARTICLE 25 Affirmative Waivers 87
ARTICLE 26 No Waivers 88
ARTICLE 27 Curing Tenant's Defaults 89
ARTICLE 28 Broker 90
ARTICLE 29 Notices 90
ARTICLE 30 Estoppel Certificates 92
ARTICLE 31 Memorandum of Lease 93
ARTICLE 32 No Representations by Landlord 93
ARTICLE 33 Industrial and Commercial Incentive Program 93
ARTICLE 34 Holdover 96
ARTICLE 35 Miscellaneous Provisions and Definitions 97
ARTICLE 36 Partnership Tenant 104
ARTICLE 37 Extension of Term 105
ARTICLE 38 Additional Space Option 108
ARTICLE 39 Condition to Lease 112
ARTICLE 40 Temporary Premises 112
</TABLE>
133
<PAGE> 134
Exhibit A: Description of Land
Exhibit B-1: Floor Plan of Premises - Floor 14
Exhibit B-2: Floor Plan of Premises - Floor 14A
Exhibit B-3: Floor Plan of Premises - Floor 15
Exhibit C: Work Letter
Exhibit D: Rules and Regulations
Exhibit E: Tenant Construction Approval Procedures
Exhibit F: Alternate Electricity Provision
Exhibit G: Form of Letter of Credit
Exhibit H: Floor Plan of Additional Space
Exhibit I: Floor Plan of Temporary Premises
Exhibit J: SNDA Agreement
Exhibit K: Cleaning Specifications
Exhibit L: Floor Plans for Bathrooms
134
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 9, 2000 with respect to the consolidated
financial statements of Medsite.com, Inc. and subsidiary and our report dated
February 11, 2000, with respect to the financial statements of Total Health
Products, Inc. included in the Registration Statement (Form S-1) and related
Prospectus of Medsite.com, Inc. dated February 17, 2000.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
New York, New York
February 17, 2000
<PAGE> 1
EXHIBIT 23.1A
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this registration statement on Form S-1 and related
prospectus of Medsite.com, Inc. of our report dated August 13, 1999, with
respect to the financial statements of Total Health Products, Inc. as of
December 31, 1998 and December 31, 1997 and for the years then ended.
Edison, New Jersey
February 17, 2000
/s/ Amper, Politziner & Mattia P.A.
-----------------------------------
Amper, Politziner & Mattia P.A.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
This template is intended to allow you to record information that will
subsequently be entered into a Financial Data Schedule (Exhibit 27.1). Check
that this is the correct template for the filing being made and then fill out
the information as indicated (See Appendix E of the Filer Manual if you need
more specific instructions on each field.)
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<EXCHANGE-RATE> 1 1
<CASH> 32,298,253 29,353
<SECURITIES> 1,415,802 0
<RECEIVABLES> 4,262,924 118,609
<ALLOWANCES> (217,000) (32,000)
<INVENTORY> 813,294 0
<CURRENT-ASSETS> 41,348,801 227,386
<PP&E> 2,939,817 98,099
<DEPRECIATION> (248,972) (23,834)
<TOTAL-ASSETS> 57,392,202 309,081
<CURRENT-LIABILITIES> 10,426,342 1,765,664
<BONDS> 0 0
55,500,428 0
0 0
<COMMON> 876 675
<OTHER-SE> (8,706,272) (1,592,595)
<TOTAL-LIABILITY-AND-EQUITY> 57,392,202 309,081
<SALES> 8,892,617 1,416,872
<TOTAL-REVENUES> 8,892,617 1,416,872
<CGS> 8,882,732 1,299,384
<TOTAL-COSTS> 8,882,732 1,299,384
<OTHER-EXPENSES> 17,995,168 2,014,625
<LOSS-PROVISION> 184,625 22,869
<INTEREST-EXPENSE> (336,729) (14,141)
<INCOME-PRETAX> (17,648,554) (1,935,508)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (17,648,554) (1,935,508)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (17,648,554) (1,935,508)
<EPS-BASIC> (1.10) (0.15)
<EPS-DILUTED> (1.10) (0.15)
</TABLE>
