<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 2000
REGISTRATION NO. 333-30652
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CYBER DIALOGUE INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 38-3140222
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------------
304 HUDSON STREET
NEW YORK, NEW YORK 10013
(212) 651-7000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------------
MARK ESIRI
CHIEF EXECUTIVE OFFICER AND PRESIDENT
CYBER DIALOGUE INC.
304 HUDSON STREET
NEW YORK, NEW YORK 10013
(212) 651-7000
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL P. ROGAN, ESQ. BABAK YAGHMAIE, ESQ.
Skadden, Arps, Slate, Meagher & Flom LLP NANCI I. PRADO, ESQ.
1440 New York Avenue, NW Brobeck, Phleger & Harrison LLP
Washington, DC 20005 1633 Broadway, 47(th) floor
(202) 371-7000 New York, New York 10019
(212) 581-1600
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act 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 statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share
(including the associated Rights to
purchase Series A Junior Participating
Preferred Stock)(4) 5,750,000 $12.00 $69,000,000 $18,216
</TABLE>
(1) Includes 750,000 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.
(3) A registration fee of $19,800 was paid, based on a Proposed Maximum
Aggregate Offering Price of $75,000,000. Since the Proposed Maximum
Aggregate Offering Price has been reduced to $69,000,000, the excess filing
fee of $1,584 previously paid will be applied to a future registration
statement.
(4) The Rights to purchase shares of our Series A Junior Participating Preferred
Stock initially are attached to and trade with the shares of our common
stock being registered hereby. Value attributed to such Rights, if any, is
reflected in the market price of our common stock.
------------------------------
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 7, 2000
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 WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
5,000,000 Shares
[CYBER DIALOGUE LOGO]
Common Stock
This is an initial public offering of shares of our common stock. We expect
that the public offering price of our common stock will be between $10.00 and
$12.00 per share.
We have applied for quotation and trading of our common stock on the Nasdaq
National Market under the symbol "CYDI."
Our business involves significant risks. These risks are described under the
caption "Risk Factors" beginning on page 7.
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.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to Cyber Dialogue................ $ $
</TABLE>
The underwriters may also purchase up to an additional 750,000 shares of
common stock from us to cover over-allotments.
The underwriters expect to deliver the shares to purchasers in New York, New
York on , 2000.
----------------------
SG COWEN BANC OF AMERICA SECURITIES LLC
ING BARINGS
, 2000
<PAGE>
[INSIDE FRONT COVER ART DESCRIPTION]
<TABLE>
<S> <C>
Title: Managing Customer Relationships by Integrating Databases for
Improved Customer Understanding.
Graphics: Two boxes with a downward pointing arrow under each box;
left box text: "Outbound Marketing"; right box text:
"Customer Interaction".
Text: "Operational Databases" followed by eleven cylinders with
the following captions, left to right: "Call Center",
"'Wireless", "Banner Ad", "Direct Mail", "Outbound e-mail",
"Survey", "Online Purchases", "Point of Sale", "Web Logs",
"Call Center", "Inbound e-mail".
A horizontal line with curved ends groups the cylinders, with a downward pointing
arrow in the center pointing to a large cylinder, divided into three sections,
labeled: "Clean", "Store", "Score". The top of the cylinder has the Arc 360 DEG.
logo.
To the far left of the cylinder, the text: "Marketing Analytical Database", to the
immediate left of the cylinder, a two-way arrow pointing to a box with the text:
"Customer Analysis" and the profile of a person thinking; to the right of the
cylinder is a one-way outbound arrow to a box with the title: "Reporting" and a
graph in the box.
Under the cylinder is a downward pointing arrow to a box with the text "Customer
Understanding".
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Forward-Looking Statements............ 16
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Selected Consolidated Financial
Data................................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Business.............................. 29
Management............................ 40
Principal Stockholders................ 54
Related Party Transactions............ 57
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 67
Underwriting.......................... 69
Legal Matters......................... 71
Experts............................... 71
Where You Can Find More Information... 71
Index to Financial Statements......... F-1
</TABLE>
------------------------
Until , 2000, which is 25 days after commencement of this offering,
all dealers that buy, sell or trade our common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligations to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE MORE DETAILED
INFORMATION REGARDING CYBER DIALOGUE, THE RISKS OF PURCHASING OUR COMMON STOCK
DISCUSSED IN ``RISK FACTORS" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND
RELATED NOTES, BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK.
We provide a comprehensive suite of products and services that enables
businesses to establish and maintain more profitable Internet customer
relationships. We have developed a technology, Arc 360 DEG., that allows us to
collect, clean and analyze large amounts of our clients' customer data from both
online and offline sources. By combining Arc 360 DEG. with our proprietary
Internet consumer trend data, analytical services and marketing expertise, we
help businesses tailor and target marketing initiatives, improve Web site design
and content and anticipate marketing opportunities. In addition, because it is
an outsourced solution, Arc 360 DEG. helps clients to reduce the costs and risks
associated with building and maintaining an in-house solution. We believe that
our Internet customer relationship management products and services enable our
clients to identify their most valuable customers, gain a better understanding
of customer preferences and improve the return on both online and offline
marketing investments.
We were founded in 1993 and were, we believe, the first firm in the United
States to conduct online market research. Since 1997, we have focused on
developing our Internet customer relationship management technology and related
services. Our technology was first commercially used in 1997 to profile Web site
visitors for America Online, CNN, Lycos and Salon.com. In 1999, we sold products
and services to over 250 clients, which consisted primarily of pharmaceutical
and health care companies, media and entertainment companies, financial services
firms, online communities, e-tailers and interactive agencies, including
Monsanto Life Sciences, AMFM Interactive, Warner Bros. Online, General Electric
Financial Assurance, About.com, IBM and Organic.
The Internet has fundamentally changed the way businesses interact with
their customers by creating a more competitive environment in which it is
increasingly difficult to maintain customer loyalty. Businesses are now more
aware of the importance of focusing their marketing strategies not only on
attracting customers, but also on building long-term, profitable relationships
with them. To compete effectively, businesses must gain a comprehensive
understanding of each individual customer and use this insight to personalize
interactive communications while maintaining respect for consumer privacy. These
challenges have heightened the need for businesses to find an effective way to
integrate, organize and analyze the online and offline data that they collect
and to extract the meaningful information required to build customer
relationships.
Our objective is to set the standard for Internet customer relationship
management by providing our clients with the high quality products and services
they need to improve customer targeting, acquisition, retention and up-selling.
The key elements of our strategy include:
- Expand and enhance our product and service offerings;
- Increase market penetration by expanding our sales and distribution
capabilities;
- Broaden relationships with existing clients;
- Expand vertical industry expertise; and
- Pursue strategic acquisitions and investments.
Our revenue increased from approximately $1.1 million in 1997 to $8.2
million in 1999. During that same period our net losses increased from $619,000
to $2.5 million. In 1999, we had negative cash flow from operations of $650,000.
As our business grows, we expect to continue to incur losses for the foreseeable
future.
3
<PAGE>
In February 2000, we acquired Applied Information Management
Marketing, Inc. for a total of $10.3 million in cash and stock. Applied
Information Management Marketing provides marketing database development and
sophisticated analytical services, including predictive modeling and market
segmentation.
Our predecessor company, BKG/Michigan Inc., was founded in 1993. In 1995,
BKG's name was changed to American Dialogue, Inc., and was merged in 1997 into a
newly formed Delaware corporation, Cyber Dialogue Inc. Our principal executive
offices are located at 304 Hudson Street, New York, New York 10013. Our
telephone number is (212) 651-7000. Our World Wide Web site is
www.cyberdialogue.com. INFORMATION CONTAINED ON OUR WEB SITE DOES NOT CONSTITUTE
PART OF THIS PROSPECTUS.
------------------------
CYBERCITIZEN and TELESCOPE are registered trademarks of Cyber Dialogue. Each
trademark, trade name or service mark of any other company appearing in this
prospectus belongs to its holder.
This prospectus includes statistical data regarding Cyber Dialogue, the
Internet and the industry in which we compete. This data is based on our records
or is taken or derived from information published or prepared by various
sources.
Unless otherwise indicated, all information in this prospectus is based on
the following assumptions:
- the filing of an amended and restated certificate of incorporation and
adoption of amended and restated by-laws upon the closing of this
offering; and
- no exercise of the underwriters' over-allotment option.
All share amounts and per-share prices appearing in this prospectus give
effect to the 200-for-1 stock split that occured on November 17, 1999.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY
SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THE
PROSPECTUS OR ANY SALE OF OUR COMMON STOCK.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock we are offering............................... 5,000,000 shares
Common stock to be outstanding after the offering.......... 25,031,876 shares
Use of proceeds............................................ We intend to use the net proceeds of this
offering for general corporate purposes,
principally working capital and capital
expenditures, as well as for potential
acquisitions. See "Use of Proceeds."
</TABLE>
Common stock to be outstanding after the offering is based on the number of
shares outstanding as of April 4, 2000 and excludes:
- 5,526,300 shares of common stock issuable upon the exercise of outstanding
options under our stock option plans, with a weighted average exercise
price of $2.90 per share;
- 1,703,200 shares of common stock issuable upon the exercise of outstanding
warrants, with a weighted average exercise price of $1.62 per share; and
- 1,089,044 shares of common stock available for future issuance under our
stock option and employee stock purchase plans, which will increase by an
amount equal to 25% of the number of shares issued in this offering.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data is derived from and
qualified in its entirety by our financial statements and the unaudited pro
forma combined financial statements. You should read this summary consolidated
financial data together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," our consolidated financial statements and
the unaudited pro forma combined financial statements appearing elsewhere in
this prospectus. The pro forma information below may not be indicative of the
results that actually would have occurred or which will be obtained in the
future.
The following information is presented:
- on an actual basis;
- on a pro forma basis to give effect to the acquisition of Applied
Information Management Marketing, including the issuance of 881,676 shares
of our stock, as if it had occurred on January 1, 1999 for the statement
of operations data and as of December 31, 1999 for the balance sheet data;
and
- on a pro forma as adjusted basis to give effect to the acquisition of
Applied Information Management Marketing and the sale of 5,000,000 shares
of common stock offered by us at an assumed initial public offering price
of $11.00 per share, less underwriting discounts and commissions and
estimated offering expenses.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ----------- ----------- -------------------------
PRO FORMA
ACTUAL (UNAUDITED)
----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue.......................... $416 $490 $1,094 $3,617 $8,227 $12,412
Cost of revenue.................. 191 497 748 2,789 5,067 9,096
---------- ---------- ----------- ----------- ----------- -----------
Gross profit (loss).............. 225 (7) 346 828 3,160 3,316
Operating expenses............... 505 362 943 2,276 5,567 10,354
---------- ---------- ----------- ----------- ----------- -----------
Loss from operations............. (280) (369) (597) (1,448) (2,407) (7,038)
Net loss......................... $(349) $(390) $(619) $(1,479) $(2,511) $(7,633)
========== ========== =========== =========== =========== ===========
Basic and diluted net loss per
share.......................... $(0.09) $(0.08) $(0.05) $(0.10) $(0.15) $(0.43)
========== ========== =========== =========== =========== ===========
Shares used to compute basic and
diluted net loss per share..... 3,912,900 4,701,900 11,357,707 14,838,916 16,928,274 17,809,950
========== ========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................................ $7,975 $5,002 $54,277
Working capital............................................. 6,064 3,073 52,348
Total assets................................................ 12,406 21,098 70,373
Long-term debt.............................................. -- -- --
Total stockholders' equity.................................. 7,583 14,907 64,182
</TABLE>
6
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE ALL OR PART OF THE
MONEY YOU PAID TO BUY OUR COMMON STOCK.
EVALUATING OUR BUSINESS AND ITS FUTURE PROSPECTS IS DIFFICULT BECAUSE WE ONLY
RECENTLY BEGAN OPERATIONS
We began to provide Internet customer relationship management products and
services in 1997, and we are still in the early stages of our development. For
example, we cannot forecast operating expenses based on our historical results
because they are limited, and we are required to forecast expenses in part on
future revenue projections. Moreover, due to our limited operating history, any
evaluation of our business and prospects must be made in light of the risks,
uncertainties, expenses and difficulties often encountered by early-stage
businesses in Internet-related markets, many of which are discussed in the other
risk factors set forth below.
WE HAVE A HISTORY OF LOSSES, EXPECT TO INCUR SUBSTANTIAL LOSSES AND MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE
We incurred net losses of approximately $619,000 in 1997, $1.5 million in
1998 and $2.5 million in 1999. As of December 31, 1999, we had an accumulated
deficit of $5.5 million. Although our revenue has grown in recent quarters, we
may not be able to sustain these growth rates or achieve profitability. We
expect to incur continuing losses for the foreseeable future due to significant
sales and marketing, research and development and general and administrative
expenses. As a result, we will need to generate significantly higher revenue to
achieve profitability, which we may be unable to do. Even if we do achieve
profitability, we may not be able to sustain or increase our profitability.
FLUCTUATIONS IN OUR RESULTS OF OPERATIONS MAKE IT DIFFICULT TO PREDICT OUR
FUTURE PERFORMANCE AND MAY RESULT IN VOLATILITY IN THE MARKET PRICE OF OUR
COMMON STOCK
Our quarterly operating results have fluctuated in the past and may
fluctuate significantly in the future. Most of our expenses are fixed in the
short-term, and we may not be able to reduce spending quickly if our revenue is
lower than expected. In addition, our ability to forecast revenue is limited. As
a result, our operating results are volatile and difficult to predict and you
should not rely on the results of one quarter as an indication of future
performance. Factors that may cause our operating results to fluctuate include
the risks discussed in this section as well as:
- costs related to customization of our products and services;
- the planned expansion of our operations, including opening new offices,
and the amount and timing of expenditures related to this expansion;
- announcements or introductions of new products and services by our
competitors;
- software defects and other product quality problems;
- the discretionary nature of our clients' purchasing and budgetary cycles;
- the varying size, timing, and contractual terms of orders for our products
and services;
- the mix of revenue from our products and services; and
- costs related to establishing our international operations.
It is likely that in some future quarter our operating results may fall below
the expectations of securities analysts and investors. In this event, the market
price of our common stock could fall significantly.
7
<PAGE>
THE LENGTH OF TIME IT TAKES US TO SELL OUR PRODUCTS AND SERVICES CAN VARY
SIGNIFICANTLY, WHICH MAKES IT DIFFICULT FOR US TO PLAN OUR EXPENSES AND FOR
INVESTORS TO FORECAST OUR RESULTS
It typically takes from two to five months for us to sell our products and
services to new clients. In some instances, it can take up to one year or
longer. It is therefore difficult to predict the quarter in which a particular
sale will occur and to plan our expenses accordingly. The period between our
initial contact with potential clients and their purchases of our products and
services varies due to several factors, including:
- the complex nature of our products and services;
- our need to educate clients about the uses and benefits of our products
and services;
- our clients' budget cycles;
- our clients' internal evaluation and approval requirements; and
- our clients' delays of purchases due to announcements or planned
introductions of new products or services by our competitors.
Any delay or failure to complete sales in a particular quarter could reduce
our revenue in that quarter, as well as subsequent quarters over which revenue
for the sale would likely be recognized. If our sales cycles unexpectedly
lengthen in general or for one or more large engagements, it would delay our
receipt of the related revenue. If we were to experience a delay of several
weeks on a large engagement, our operating results may fall below the
expectations of securities analysts and investors. In this event, the market
price of our common stock could fall significantly.
IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND FUTURE
CLIENTS, OUR REVENUE COULD DECLINE
Our success is dependent on the continued growth of our client base and the
retention of our clients. For the year ended December 31, 1999, approximately
72% of revenue was derived from clients that also purchased products and
services in 1998. We expect to continue to derive a significant amount of
revenue from our existing clients. Our ability to retain existing clients and to
attract new clients will depend on a variety of factors, including the accuracy,
scaleability, reliability and cost-effectiveness of our products and services,
our ability to effectively market our products and services, and our ability to
hire additional sales personnel. One essential element of our growth strategy is
to migrate existing clients to longer-term and higher value contracts. If we
fail to generate repeat and expanded business from our current and future
clients, including migrating these clients to longer-term and higher value
contracts, our revenue could decline.
IF ARC 360 DEG. FAILS TO ACHIEVE WIDESPREAD CUSTOMER ACCEPTANCE, OUR REVENUE
COULD DECLINE
We first implemented our customer relationship management technology, Arc
360 DEG., for clients in 1997. Arc 360 DEG. serves as the platform for our
Internet customer relationship management products and services, which account
for a substantial portion of our current revenue. We expect that a significant
portion of our future revenue will depend on sales of Arc 360 DEG. and related
services. If Arc 360 DEG. fails to achieve widespread customer acceptance, our
revenue could decline.
A LIMITED NUMBER OF CLIENTS ACCOUNT FOR A SIGNIFICANT PERCENTAGE OF OUR REVENUE
AND A LOSS OF ONE OR MORE OF THESE CLIENTS COULD CAUSE OUR REVENUE TO DECLINE
In the year ended December 31, 1999, AMFM Interactive, or AMFMi, represented
approximately 38% of our total revenue and our top 10 clients as a whole
represented 57% of revenue, with no client other than AMFMi accounting for more
than 10% of revenue. On a pro forma basis, giving effect to our acquisition of
Applied Information Management Marketing as if it had occurred on January 1,
8
<PAGE>
1999, AMFMi would have represented 25% of revenue, Roche Diagnostics
Corporation, a client of Applied Information Management Marketing, would have
represented 7% of revenue and our top 10 clients as a whole would have
represented 63% of revenue. On October 4, 1999, AMFM Inc., which owns a majority
of AMFMi, announced that it had agreed to merge with Clear Channel
Communications, Inc. It is unclear what effect, if any, this merger will have on
our relationship with AMFMi. Most clients are committed to contracts of no more
than one year. Our clients may choose not to renew their contracts or may
otherwise discontinue their relationships with us. The loss of one or more of
these clients could cause our revenue to decline.
THE EXPANSION OF OUR BUSINESS PLACES, AND WILL CONTINUE TO PLACE, A SIGNIFICANT
STRAIN ON OUR MANAGEMENT, OPERATING INFRASTRUCTURE AND RESOURCES, WHICH COULD
LIMIT OUR ABILITY TO COMPETE EFFECTIVELY
We have recently experienced a period of significant expansion of our
business that has placed, and continues to place, a significant strain on our
management, operating infrastructure and resources. A failure to properly manage
the continued expansion of our business could limit our ability to operate
effectively. To properly manage this growth, we must, among other measures,
implement and improve on a timely basis our operating infrastructure, including
our administrative, financial and operational systems, procedures and controls.
We have recently hired a significant number of employees and plan to further
increase our total head count. Our Vice President of eCRM solutions joined us in
January 2000 and she has limited exposure to our prior operations and the rest
of our management team. If we are unable to manage our growth effectively, or if
we fail to successfully integrate new officers and key employees, our expenses
may increase and our ability to generate revenue may suffer.
IF WE ARE UNABLE TO ATTRACT AND RETAIN DIRECT SALES PERSONNEL, OR IF WE ARE
UNABLE TO TRAIN OUR SALES PERSONNEL IN A TIMELY MANNER, OUR FUTURE REVENUE
GROWTH COULD SUFFER
We must substantially expand our direct sales operations and explore other
sales channels to increase our revenue. We have recently expanded our direct
sales force and plan to hire additional sales personnel. Competition for
qualified sales personnel is intense, and we may not be able to hire the kind
and number of sales personnel we are targeting. The inability to attract,
integrate and retain the necessary sales personnel could harm our ability to
generate revenue. New hires require extensive training and typically take two to
three months to achieve full productivity. Our recent or future hires may not be
as productive as we desire.
IF WE LOSE KEY PERSONNEL, OR ARE UNABLE TO ATTRACT AND RETAIN OTHER QUALIFIED
PERSONNEL, OUR FUTURE REVENUE GROWTH MAY SUFFER
Our performance and future success depend on the continued service of our
senior management and on our continuing ability to attract, hire, train and
retain a substantial number of highly skilled managerial, technical, sales,
marketing and client support personnel. Most of our key personnel, including our
Chief Executive Officer and President, Chief Financial Officer and Chief
Technology Officer, are not bound by employment agreements. We do not carry key
person life insurance on any of our senior management employees other than our
Chief Technology Officer. Furthermore, competition for qualified personnel in
our industry and geographical location is intense, particularly for technical
personnel. We may be unable to attract other highly qualified employees in the
future. The growth of our business would be seriously harmed if we are unable to
retain our key employees, or to attract, integrate or retain other highly
qualified personnel in the future.
9
<PAGE>
IF WE ARE UNABLE TO MAINTAIN AND ENHANCE AWARENESS OF THE CYBER DIALOGUE BRAND,
OUR FUTURE REVENUE GROWTH MAY SUFFER
Promoting and strengthening the Cyber Dialogue brand are critical to our
efforts to attract and retain clients for our products and services and to
continue to attract quality personnel. If we fail to effectively promote and
maintain the Cyber Dialogue brand, or incur excessive expenses attempting to
promote and maintain our brand, our business and financial results may suffer.
We believe that the importance of brand recognition will likely increase due to
the increasing number of competitors entering our markets. In order to promote
the Cyber Dialogue brand, in response to competitive pressures or otherwise, we
may find it necessary to increase our marketing budget, hire additional
marketing and public relations personnel or otherwise increase our financial
commitment to creating and maintaining brand awareness. If we expend additional
resources to build our brand and do not generate a corresponding increase in
revenue as a result of our branding efforts, or if we otherwise fail to promote
our brand successfully, our future revenue growth may suffer and we may incur
additional losses.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR COMPETITORS MAY
OBTAIN INFORMATION THAT WE REGARD AS PROPRIETARY
Our success is highly dependent upon our ability to protect the intellectual
property used in our products and services. We seek to protect our intellectual
property through a combination of copyright, trade secret and trademark laws.
Despite our efforts to protect our intellectual property rights, unauthorized
parties may attempt to obtain and use information that we regard as proprietary.
Policing unauthorized use of our products and services is difficult and our
means of protecting our intellectual property rights may not be adequate. In
addition, we may not have adequate remedies for any breach of confidentiality
agreements. As a result, valuable information could become available to our
competitors.
IF WE ARE UNABLE TO USE OUR TRADEMARKS, OUR COMPETITIVE POSITION COULD BE HARMED
We have not secured federal registration for the Cyber Dialogue mark and may
be limited in enforcing our rights against third parties for trademark
infringement. It is also possible that in the future third parties may claim
that our use of trademarks and domain names infringe their intellectual
property. These claims could be time-consuming, result in costly litigation and,
if successful, could result in an inability to use our trademarks, which could
seriously harm our competitive position.
WE FACE INTENSE COMPETITION AND, IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, WE
COULD EXPERIENCE LOSS OF MARKET SHARE, PRICE REDUCTIONS AND REDUCED GROSS
MARGINS FOR OUR PRODUCTS AND SERVICES
Even though the market for our products and services is in an early stage of
development, it is already intensely competitive, and we expect competition to
increase in the future. Increased competition could result in loss of market
share, price reductions and reduced gross margins for our products and services,
any of which could seriously harm us. We may not be able to compete successfully
against current and future competitors. We compete against other third-party
solution providers as well as in-house information technology and marketing
departments. Many competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of clients than we have. In
addition, many third-party competitors have well-established relationships with
our current and potential clients and have extensive knowledge of our target
markets. As a result, third-party competitors may be able to respond more
quickly to evolving industry standards and changes in client requirements, or to
devote greater resources to the development, promotion and sale of their
products and services than we can. Moreover, in-house information technology and
marketing departments may choose to develop
10
<PAGE>
solutions internally rather than purchase products and services from us. If we
are unable to compete successfully against existing or potential competitors,
our revenue and margins may decline.
INDUSTRY CONSOLIDATION COULD MAKE IT MORE DIFFICULT FOR US TO COMPETE
Companies offering Internet-related products and services are increasingly
consolidating. As a company with a limited operating history, we may not be able
to compete successfully with businesses that have combined, or will combine, to
produce companies with substantially greater financial, sales and marketing
resources, larger client bases, extended networks and infrastructures and more
established relationships with vendors, distributors and partners than us. In
addition, this consolidation trend could prevent or hinder our ability to
further grow our operations through acquisitions.
IT IS OUR INTENTION TO ACQUIRE OR MAKE STRATEGIC INVESTMENTS IN OTHER BUSINESSES
AND TECHNOLOGIES IN THE FUTURE, AND THESE COULD PROVE DIFFICULT TO INTEGRATE,
DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR
OPERATING RESULTS
We acquired Applied Information Management Marketing in February 2000 and
may be unable to successfully integrate the additional personnel, operations and
acquired technology into our business. In particular, we will need to integrate
and retain key personnel. We will continue our efforts to acquire or make
investments in complementary businesses and technologies in the future. However,
we may not be able to identify suitable acquisition or investment candidates.
Even if we do identify suitable candidates, we may not be able to enter into any
potential acquisitions or investments on commercially acceptable terms.
Moreover, we may have difficulty integrating any acquired businesses and
technologies into our operations. Any difficulties could disrupt our business,
distract our management and employees and increase our expenses. In addition, if
we conduct acquisitions using convertible debt or equity securities, existing
stockholders may be diluted, which could affect the market price of our stock.
IF WE ARE UNABLE TO SAFEGUARD THE INTEGRITY, SECURITY AND PRIVACY OF OUR DATA OR
OUR CLIENTS' DATA, OUR REVENUE MAY DECLINE, OUR BUSINESS COULD BE DISRUPTED AND
WE MAY BE SUED
We need to preserve and protect our data and our clients' data against loss,
corruption and misappropriation caused by system failures and unauthorized
access. We could be subject to liability claims by our online panelists and
other individuals whose data resides in our databases for misuse of personal
information, including unauthorized marketing purposes. These claims could
result in costly litigation. Periodically, we have experienced minor systems
errors and interruptions, including Internet disruptions, which we believe may
occur periodically in the future. A party who is able to circumvent our security
measures could misappropriate or destroy proprietary information or cause
interruptions in our operations. We may be required to make significant
expenditures to protect against systems failures or security breaches or to
alleviate problems caused by any failures or breaches. Any failure that causes
the loss or corruption of, or unauthorized access to, this data could reduce
client satisfaction, expose us to liability and, if significant, could cause our
revenue to decline.
FAILURE TO ADEQUATELY ADDRESS INTERNET USER PRIVACY CONCERNS MAY SUBJECT US TO
LIABILITY AND REDUCE OUR REVENUE
There is substantial public concern over the collection and use of Internet
user information. Arc 360 DEG. captures and uses information about the tastes
and preferences of Internet users each time a user visits a Web site or
volunteers information in response to survey questions. Privacy concerns may
cause Internet users to resist providing the personal data necessary to support
this data collection capability. Our technology currently uses small files of
information that are placed on a Web site user's hard drive, often without the
user's knowledge or consent, to collect information about an Internet user's
movement through the Internet or a Web site. Some Internet commentators and
privacy advocates have
11
<PAGE>
suggested limiting or eliminating the use of this kind of data collection. The
effectiveness of our technology could be limited by any reduction or limitation
in the use of this method of collecting data. More generally, even the
perception of privacy concerns may indirectly inhibit market acceptance of our
products and services. If customer privacy concerns are not adequately
addressed, we may face liability and our sales and ability to generate revenue
may suffer.
LEGISLATION OR REGULATIONS MAY BE ADOPTED OR OTHER GOVERNMENT ACTIONS MAY BE
TAKEN THAT COULD AFFECT OUR ABILITY TO GATHER, GENERATE OR USE INFORMATION FOR
PROFILES, HINDER OUR ABILITY TO CONDUCT BUSINESS AND EXPOSE US TO LIABILITY
The legal and regulatory environment governing the Internet and the use of
information about Internet users is uncertain and may change. Laws in the U.S.
and abroad protect Internet users' privacy in some respects. A recently-enacted
federal law prohibits financial institutions from disclosing to unaffiliated
third parties nonpublic personal information regarding consumers, subject to
certain exceptions, and requires those institutions to develop and disclose
consumer privacy policies. The European Union has also adopted a directive
addressing data privacy that may result in limitations on the collection and use
of specific personal information regarding Internet users. In addition, the
Federal Trade Commission and state government agencies have been investigating
Internet companies regarding their use of personal information. Federal and
state consumer protection laws prohibiting unfair or deceptive acts or practices
have been the basis for several enforcement actions against Internet companies
that allegedly violated consumer privacy. There is a substantial probability
that new U.S. and foreign legislative and regulatory requirements designed to
protect individual privacy could be imposed on businesses engaged in e-commerce.
These laws may subject us to liability and may restrict our ability to gather
information about the tastes and preferences of Internet users, which would
limit our ability to do business and generate revenue.
A FAILURE TO RENEW THIRD PARTY LICENSES FOR TECHNOLOGIES INCORPORATED INTO ARC
360 DEG. ON COMMERCIALLY REASONABLE TERMS, OR AT ALL, COULD ADVERSELY AFFECT OUR
GROSS MARGINS
We license technologies from third parties that are incorporated into Arc
360 DEG.. These technologies may not continue to be available on commercially
reasonable terms, if at all, and providers of these technologies may fail to
enhance them or respond to emerging industry standards. Any of these events
could result in substantial product development expenditures or delays in our
performance and could require us to redesign Arc 360 DEG.. In addition, even if
the licenses are renewed, any increase in royalty rates could adversely affect
our gross margins.
FUTURE EXPANSION OF OUR INTERNATIONAL OPERATIONS WILL REQUIRE SIGNIFICANT
MANAGEMENT ATTENTION AND FINANCIAL RESOURCES AND THE FAILURE TO DEVELOP
INTERNATIONAL OPERATIONS MAY HARM OUR COMPETITIVE POSITION AND REDUCE OUR MARKET
SHARE
An element of our growth strategy is to introduce our products and services
in international markets. We believe that we must engage in international sales
and marketing activities in order to be successful. Compliance with foreign laws
and regulations may be time consuming and expensive and may limit our ability to
effectively market our products and services in those countries. We have very
limited experience in marketing, selling and distributing our products and
services internationally. To successfully build international sales, we must
build international operations and recruit international sales, technology and
analytical personnel. In order to help us address the challenges associated with
introducing our products and services internationally, we believe it will be
necessary to establish strategic relationships with international partners. To
date, we have not entered into any strategic relationship with any international
partners. This strategy will require significant management attention and
financial resources. Any failure to develop our business internationally may
harm our competitive position and reduce our market share.
12
<PAGE>
FAILURE TO KEEP UP WITH CHANGING TECHNOLOGY AND CLIENT PREFERENCES MAY DECREASE
DEMAND FOR OUR PRODUCTS AND SERVICES AND ADVERSELY AFFECT OUR ABILITY TO
GENERATE REVENUE
The market for our products and services is characterized by rapidly
changing technologies. The rapid development of new technologies increases the
risk that current or new competitors could develop products or services that
would reduce the competitiveness of our products or services. Our success will
depend to a substantial degree upon our ability to respond to changes in
technology and to enhance our products and services to address the increasingly
sophisticated needs of our clients. This will require us to select, develop and
market new products or services and enhancements on a cost-effective basis and
in a timely fashion. The development of new, technologically advanced products
or services is a complex and uncertain process, requiring high levels of
innovation. If we are unsuccessful, or incur significant delays, in developing
and introducing new products, services or enhancements, or if these enhancements
do not satisfy our clients' preferences, demand for our products and services
could decrease and adversely affect our ability to generate revenue.
WE MAY SUFFER YEAR 2000 RELATED FAILURES, WHICH MAY ADVERSELY AFFECT OUR
BUSINESS AND OPERATING RESULTS
Many software applications, embedded computer chips and computer components
have been designed to determine the year based upon only the last two digits.
Accordingly, some of these systems may mistake the year 2000 for the year 1900,
resulting in miscalculations and potential system failures. Our efforts to
address the Year 2000 issue may not have been appropriate, adequate or complete.
We also depend on software and services from third parties that may have failed
to adequately address their Year 2000 issues and, accordingly, may cause our
information systems, products and services to experience system failures. If we
experience any significant system failures, our business and operating results
could be adversely affected.
OUR BUSINESS MAY NOT GROW IF THE USE OF THE INTERNET AS A COMMERCIAL MARKETPLACE
DOES NOT CONTINUE TO GROW
Because our company focuses primarily on Internet customer relationship
management, our future success depends on the continued development and
acceptance of the Internet as a viable commercial medium. However, the continued
development and acceptance of the Internet in the United States and
internationally as a widely-used medium for commerce and communication is
uncertain. A number of factors could prevent the continued development and
acceptance of the Internet, including the following:
- unwillingness of businesses and consumers to shift their purchasing from
traditional vendors to online vendors;
- security and authentication concerns with respect to the transmission of
confidential information over the Internet;
- termination of the current federal law moratorium on some forms of
taxation on electronic commerce; and
- significant uncertainty about the demand and market acceptance for
Internet advertising and the lack of standards to measure the
effectiveness of Internet advertising.
If Internet usage does not grow, or grows slower than we expect, due to any of
the above factors, our business may not grow.
13
<PAGE>
WE MAY ENGAGE IN TRANSACTIONS WITH ENTITIES AFFILIATED WITH OUR DIRECTORS, WHICH
MAY PRESENT CONFLICTS OF INTEREST AND MAY NOT BE IN THE BEST INTERESTS OF ALL OF
OUR STOCKHOLDERS
We have engaged in transactions with entities affiliated with our directors
and may do so again in the future. Although any future related party
transactions may receive board and stockholder approval, they may not be in the
best interests of all stockholders. In addition, Mark Esiri, our Chief Executive
Officer and President, is employed by Wand Partners Inc., which is an affiliate
of our majority stockholders. Mr. Esiri's work visa, and continuing ability to
work in the U.S., is contingent on him remaining an employee of Wand. We have
entered into an agreement with Wand Partners under which Wand Partners has
assigned Mr. Esiri's services to us and we reimburse them for his compensation.
As a result, Mr. Esiri may face conflicts of interest between Wand Partners and
Cyber Dialogue, which he may not resolve in a way beneficial to our other
stockholders.
OUR MANAGEMENT HAS BROAD DISCRETION AS TO THE USE OF PROCEEDS FROM THIS OFFERING
AND MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE OUR
MARKET VALUE OR IMPROVE OUR OPERATING RESULTS
The net proceeds from the sale of the common stock being sold in this
offering will be used for general corporate purposes, including working capital,
as well as for potential acquisitions. We have not reserved or allocated the net
proceeds for any specific purpose, and we cannot specify with certainty how we
will use the net proceeds. Accordingly, our management will have considerable
discretion in the application of the net proceeds, and you will not have the
opportunity, as part of your investment decision, to assess whether the proceeds
are being used appropriately. If our management does not apply the proceeds
effectively, our results of operations may not improve.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD CAUSE OUR STOCK PRICE
TO DECLINE
The availability of a large number of shares of our common stock for sale
will generally result in the need for sellers to accept a lower price in order
to complete a sale. This would result in a lower market price of our common
stock. After this offering, 25,031,876 shares of our common stock will be
outstanding, or 25,781,876 shares if the underwriters' over-allotment option is
exercised in full. Of these shares, the 5,000,000 shares sold in this offering
will be freely tradable except for any shares purchased by our affiliates, as
that term is defined in Rule 144 under the Securities Act. The remaining shares
of common stock held by our existing stockholders are subject to 180-day lock-up
agreements and are eligible for sale after that time only if registered or if
they qualify for an exemption from registration under Rule 144 or 701 under the
Securities Act. Subject to the provisions of Rule 144 or 701, 20,781,876 shares
of our common stock will be available for sale in the public market 180 days
after the date of this prospectus, subject in the case of shares held by
affiliates to compliance with volume restrictions. Existing holders of
20,026,876 of these shares of our common stock have demand registration rights
that could be exercised following the 180-day lockup period.
BECAUSE OUR STOCK HAS NOT TRADED PUBLICLY, THE LEVEL OF TRADING ACTIVITY AFTER
THIS OFFERING CANNOT BE PREDICTED AND IF THE TRADING LEVEL IS LOW, YOUR
INVESTMENT IN OUR COMMON STOCK COULD LOSE VALUE
A public market for trading our common stock has not existed prior to this
offering. The price of the common stock being sold in this offering will be
determined through negotiations between the underwriters and us and may not be
indicative of prices that will prevail in the market. Because there is no way to
predict the level of trading activity after this offering, you may not be able
to resell your stock at or above the price you paid.
14
<PAGE>
THE MARKET PRICE OF OUR COMMON STOCK, LIKE OTHER INTERNET-RELATED TECHNOLOGY
STOCKS, MAY BE VOLATILE
The stock markets have in general, and with respect to Internet-related
technology businesses in particular, recently experienced extreme stock price
and volume volatility. The stock markets may continue to experience volatility
that may adversely affect the market price and trading volume of our common
stock. Stock prices for many businesses in the technology and emerging growth
sectors have experienced wide fluctuations that have often been unrelated to
their financial performance. Similar fluctuations may affect the market price of
our common stock. In addition, if we fail to address any of the risks described
in this section, the market price of our common stock and the value of your
investment could decline significantly.
OUR DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS, WHOSE INTERESTS MAY DIFFER
FROM OTHER STOCKHOLDERS, WILL HAVE THE ABILITY TO EXERCISE SIGNIFICANT CONTROL
OVER US
Upon completion of this offering, our officers, directors and existing
stockholders who own greater than 5% of the outstanding common stock before this
offering, and entities affiliated with them, will, in the aggregate,
beneficially own approximately 72.2% of our common stock. In particular,
affiliates of Wand Partners Inc. will beneficially own approximately 45.6% of
our outstanding common stock. These stockholders, acting together, will be able
to exert substantial influence over all matters requiring approval by our
stockholders. These matters include the election and removal of directors and
any merger, consolidation or sale of all or substantially all of our assets. In
addition, they may dictate the management of our business and affairs. This
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control, or impeding a merger, consolidation, takeover or
other business combination even if the transaction might be beneficial to our
stockholders.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US, WHICH COULD DEPRESS OUR
STOCK PRICE
Provisions of our amended and restated certificate of incorporation, our
amended and restated bylaws and our stockholder rights plan, each of which will
become effective upon the closing of this offering, and Delaware corporate law
could make it more difficult for a third party to acquire us, even if doing so
might be beneficial to our stockholders. These provisions could also limit the
price that investors might be willing to pay in the future for shares of our
common stock.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on our
current expectations, assumptions, estimates and projections about us and our
industry. When used in this prospectus, the words "may," "will," "should,"
"potential," "continue," "expects," "anticipates," "estimates," "intends,"
"plans," "believes" and any similar expressions are intended to identify
forward-looking statements. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of other factors, as more fully
described in the "Risk Factors" section and elsewhere in this prospectus.
16
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 5,000,000 shares of
common stock in the offering will be approximately $49.3 million, assuming an
initial public offering price of $11.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $56.9 million.
The principal purposes of this offering are to increase our working capital,
to create a public market for our common stock and to facilitate our future
access to the public capital markets. The net proceeds will be used for general
corporate purposes. In addition, we may use a portion of the net proceeds to
acquire or invest in complementary businesses, products, services or
technologies. We cannot specify with certainty the particular uses for the net
proceeds. The amounts and timing of our actual expenditures will depend on
numerous factors, including the status of our technology development efforts,
sales and marketing activities, the amount of cash generated or used by our
operations and competition. We may find it necessary or advisable to use
portions of the proceeds for other purposes, and we will have broad discretion
in the application of the net proceeds. We have no current intentions to acquire
any businesses, products, services or technologies. Pending these uses, the
proceeds will be invested in short-term, investment grade, interest-bearing
securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently anticipate that we will retain future earnings, if any, for use in the
operation and expansion of our business. Accordingly, we do not anticipate
declaring or paying any cash dividends for the foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table presents our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to give effect to the acquisition of Applied
Information Management Marketing as if it had occurred as of December 31,
1999; and
- on a pro forma as adjusted basis to give effect to the acquisition of
Applied Information Management Marketing and the sale of 5,000,000 shares
of common stock offered by us at an assumed initial public offering price
of $11.00 per share, less the underwriting discounts and commissions and
estimated offering expenses.
This information should be read in conjunction with our financial statements
and the notes relating to these statements included elsewhere in this
prospectus, as well as "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL (UNAUDITED) (UNAUDITED)
-------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Total debt........................................... $ -- $ -- $ --
Stockholders' equity:
Common stock, $0.01 par value; 40,000,000 shares
authorized, 19,150,400 shares issued and
outstanding, actual and 20,031,876 shares
issued and outstanding, pro forma; 60,000,000
shares authorized, 25,031,876 shares issued and
outstanding, pro forma as adjusted............. 191 200 250
Preferred stock, $0.01 par value; no shares
authorized, actual and pro forma;
15,000,000 shares authorized, no shares issued
and outstanding, pro forma as adjusted.........
Additional paid-in capital....................... 14,123 21,438 70,663
Deferred compensation............................ (1,269) (1,269) (1,269)
Accumulated deficit.............................. (5,462) (5,462) (5,462)
------- ------- -------
Total stockholders' equity....................... $ 7,583 $14,907 $64,182
------- ------- -------
Total capitalization................................. $ 7,583 $14,907 $64,182
======= ======= =======
</TABLE>
Common stock outstanding as of December 31, 1999 excludes:
- 4,138,800 shares of common stock issuable upon the exercise of outstanding
options under our stock option plans with a weighted average exercise
price of $0.45 per share, of which options to purchase 2,148,810 shares
were exercisable;
- 1,703,200 shares of common stock issuable upon the exercise of outstanding
warrants with a weighted average exercise price of $1.62 per share, of
which warrants to purchase 769,800 shares of common stock were
exercisable; and
- 3,516,200 shares of common stock available for future issuance under our
stock option plans.
18
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999, after giving
effect to the acquisition of Applied Information Management Marketing as if it
had occurred on December 31, 1999, was approximately $5.3 million, or $0.26 per
share of common stock. Pro forma net tangible book value per share is determined
by dividing the amount of our total tangible assets less total liabilities by
the number of shares of common stock outstanding, on a pro forma basis, as of
that date. Dilution in net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of common stock
immediately after completion of this offering.
After giving effect to the issuance and sale of the shares of common stock
offered by us at an assumed initial public offering price of $11.00 per share
and after deducting 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 $54,563,000, or $ 2.18 per share. This
represents an immediate increase in pro forma net tangible book value to our
existing stockholders of $1.92 per share and an immediate dilution to purchasers
in this offering of $8.82 per share. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 11.00
Pro forma net tangible book value per share as of December
31, 1999................................................ $ 0.26
Pro forma increase per share attributable to new
investors............................................... 1.92
--------
Pro forma net tangible book value per share after this
offering.................................................. 2.18
--------
Pro forma dilution per share to new investors............... $ 8.82
========
</TABLE>
The following table summarizes the number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and new investors before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, on a pro forma basis as of December 31, 1999.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................... 20,031,876 80% $21,638,328 28% $ 1.08
New investors............................ 5,000,000 20 55,000,000 72 $11.00
---------- --- ----------- --- ------
Total.............................. 25,031,876 100% $76,638,328 100% $ 3.06
========== === =========== === ======
</TABLE>
If the underwriters exercise their over-allotment option in full, the number
of shares of common stock held by new investors will be increased to 5,750,000,
or 22.3%, of the total number of shares of common stock to be outstanding
immediately after this offering.
To the extent that any of these options or warrants are exercised, there
will be further dilution to new investors. See "Capitalization." The foregoing
discussion and tables are based upon the pro forma shares issued and outstanding
as of December 31, 1999 and excludes:
- 4,138,800 shares of common stock issuable upon the exercise of outstanding
options under our stock option plans with a weighted average exercise
price of $0.45 per share;
- 1,703,200 shares of common stock issuable upon the exercise of outstanding
warrants with a weighted average exercise price of $1.62 per share; and
- 3,516,200 shares of common stock available for future issuance under our
stock option plans.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
connection with our financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this prospectus. Financial data for the five years ended
December 31, 1999 are derived from our historical financial statements. The pro
forma financial data are derived from the unaudited pro forma combined financial
statements. The pro forma financial data give effect to our acquisition of
Applied Information Management Marketing as if it had occurred on January 1,
1999 for the statement of operations data and December 31, 1999 for the balance
sheet data.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1999
------------------------
PRO FORMA
1995 1996 1997 1998 ACTUAL (UNAUDITED)
--------- --------- ---------- ---------- ---------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................... $416 $490 $1,094 $3,617 $8,227 $12,412
Cost of revenue................... 191 497 748 2,789 5,067 9,096
--------- --------- ---------- ---------- ---------- ----------
Gross profit...................... 225 (7) 346 828 3,160 3,316
Operating expenses:
Sales and marketing............. -- 145 261 1,023 1,840 2,347
General and administrative...... 505 204 514 934 2,757 4,943
Depreciation and amortization... -- 13 67 166 475 2,569
Research and development........ -- -- 101 153 495 495
--------- --------- ---------- ---------- ---------- ----------
Total operating expenses.... 505 362 943 2,276 5,567 10,354
--------- --------- ---------- ---------- ---------- ----------
Loss from operations.............. (280) (369) (597) (1,448) (2,407) (7,038)
Interest income................... -- -- -- -- 114 114
Interest expense.................. (3) (21) (22) (31) (218) (709)
Extraordinary item................ (66) -- -- -- -- --
--------- --------- ---------- ---------- ---------- ----------
Net loss........................ $(349) $(390) $(619) $(1,479) $(2,511) $(7,633)
========= ========= ========== ========== ========== ==========
Basic and diluted net loss per
share........................... $(0.09) $(0.08) $(0.05) $(0.10) $(0.15) $(0.43)
========= ========= ========== ========== ========== ==========
Shares used to compute basic and
diluted net loss per share...... 3,912,900 4,701,900 11,357,707 14,838,916 16,928,274 17,809,950
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------
1999
------------------------
PRO FORMA
1995 1996 1997 1998 ACTUAL (UNAUDITED)
--------- --------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.............................. $1 $10 $16 $79 $7,975 $5,002
Total assets...................... 99 257 746 1,902 12,406 21,098
Long-term obligations............. -- -- 63 -- -- --
Working capital (deficit)......... (286) (235) (691) (1,317) 6,064 3,073
Total stockholders' equity
(deficit)....................... (285) (151) (435) (868) 7,583 14,907
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND
THE NOTES TO FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT OUR PLANS, ESTIMATES
AND BELIEFS.
OVERVIEW
We provide a comprehensive and integrated suite of products and services
that enables companies to manage and derive optimum value from their Internet
customer relationships. Our solution consists of Arc 360 DEG., our Internet
customer relationship management technology, combined with our related
analytical services and in-depth databases of Internet consumer information,
which we have been collecting since 1994. In 1999, we sold products and services
to over 250 clients, which consisted primarily of pharmaceutical and health care
companies, media and entertainment companies, financial services firms, online
communities, e-tailers and interactive agencies, including Monsanto Life
Sciences, AMFM Interactive, Warner Bros. Online, General Electric Financial
Assurance, About.com, IBM and Organic.
Our predecessor company, BKG/Michigan, Inc., was founded in 1993 to conduct
online market research. We believe that we were the first firm in the United
States to use the Internet to conduct market research and today we maintain a
research panel of over 80,000 online consumers. In 1995, BKG's name was changed
to American Dialogue, Inc. and, in 1997, was merged into a newly formed Delaware
corporation, Cyber Dialogue Inc. Since 1997, in addition to providing research
and analytical services to clients, our operating activities have focused on the
development of Arc 360 DEG. and related Internet customer relationship
management services. Arc 360 DEG. technology was first commercially used in 1997
to profile Web site visitors for America Online, CNN, Lycos and Salon.com.
In February 2000, we acquired Applied Information Management
Marketing, Inc. Applied Information Management Marketing provides marketing
database development and sophisticated analytical services, including predictive
modeling and market segmentation. Applied Information Management Marketing was a
wholly-owned subsidiary of Yankelovich Holdings Inc. Both Cyber Dialogue and
Yankelovich Holdings are majority owned by entities affiliated with Wand
Partners Inc. Under the terms of our purchase agreement with Yankelovich
Holdings, we acquired Applied Information Management Marketing for $3.0 million
in cash and 881,676 shares of our common stock for a purchase price of
$10.3 million. We have allocated $9.6 million of the purchase price to goodwill,
which will be amortized on a straight-line basis over a 5-year period.
Our products and services are organized into two groups: ECRM SOLUTIONS and
STRATEGIC AND ANALYTICAL SERVICES.
We generate eCRM solutions revenue from the sale of contracts for Arc
360 DEG. and from related analytical services. Historically, our clients have
entered into contracts for Arc 360 DEG. for terms ranging from two to four
months. In the last quarter of 1999, we began migrating clients to twelve month
contracts and, in the future, we intend to enter into twelve month contracts
with substantially all of our new clients. Clients are billed in advance and
this revenue is recognized ratably over the contract term. We also generate
revenue from the sale of related strategic consulting, data mining and systems
engineering services. We typically provide these services under custom contracts
with terms ranging from two to four months and this revenue is recognized as
services are provided.
We generate strategic and analytical services revenue through subscriptions
that entitle clients to access our research analysts and proprietary databases
of information about online consumer trends and receive our market research
reports. These subscriptions are non-cancellable and non-refundable, and revenue
is recognized ratably over the term of the contract, typically one to three
years. Clients are billed in advance annually and a substantial portion of our
billing is initially recorded as deferred
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revenue and amortized into revenue over the term of the contract. We also
generate revenue from the sale of custom market research projects and other
analytical services. Typically, these contracts last from one to three months
and this revenue is recognized as services are provided.
eCRM solutions revenue in the year ended December 31, 1999 included a charge
against revenue of $117,000. In August 1999, we entered into a services
agreement with AMFMi with an initial term of 16 months and a renewal term,
subject to the parties' mutual consent, of 44 months. In connection with this
contract, we granted AMFMi a warrant to purchase up to 1,000,000 shares of our
common stock at an exercise price of $1.55 per share. The warrant may only be
exercised to purchase vested shares. Of these shares, 200,000 will vest at
various dates over the course of the initial 16 month term, provided that the
contract remains in effect. The fair value of $470,000 ascribed to this right to
purchase 200,000 shares was measured using the Black-Scholes option pricing
model and the related charge is recorded against revenue as the services are
provided to AMFMi over the initial term. If the contract is extended for the 44
month renewal term, the remaining 800,000 shares will vest over the course of
that term. The fair value of this right to purchase additional shares will be
recorded against revenue as the services are provided.
Historically, our revenue has been generated primarily by strategic and
analytical services. In the future, we anticipate that a greater portion of our
revenue will be generated by eCRM solutions. eCRM solutions comprised 42% of
total revenue in the year ended December 31, 1999 as compared to 15% in the year
ended December 31, 1998.
To date, a substantial portion of expiring strategic and analytical services
subscriptions have been renewed for an equal or greater value. Of subscriptions
expiring during the year ended December 31, 1999, 68% were renewed.
Additionally, 72% of total revenue in 1999 was from clients that had also
purchased products and services in 1998. We believe that if these client renewal
rates continue, we will have a growing base of recurring revenue.
Cost of revenue consists of the personnel costs of our engineering and
analytical staff, the amortization of equipment, licensed technology and service
fees, the rental costs associated with our data center, the publishing costs
associated with producing written reports, and costs associated with data
collection, which is done by means of online and telephone interviews with
consumers.
In connection with the grant of stock options to our employees, we recorded
deferred compensation expenses of approximately $862,000 during 1999. Deferred
compensation represents the difference, at the grant date, between the fair
market value of the underlying stock and the exercise prices of the stock
options. The deferred compensation balance is being amortized over the vesting
period of the applicable options, which is typically four years. Approximately
$137,000 of compensation expense was recognized in 1999, and $725,000 of
deferred compensation expense will be recognized over the remaining vesting
period. In addition, as compensation for a consulting arrangement, we issued
warrants to acquire 295,400 shares of our common stock to eCom Partners Fund I
LLC. We used the Black-Scholes pricing model to determine the fair value of this
warrant on the date of grant and, in connection with the warrant, recorded
deferred compensation expense of approximately $340,000 in 1999. The deferred
compensation balance is being amortized over the consulting period, which
terminates upon the consummation of this offering. Approximately $149,000 of
compensation expense was amortized in 1999, and the balance remains to be
recognized over the remaining vesting period.
We have incurred operating losses since our inception, including net losses
of $2.5 million in the year ended December 31, 1999, $1.5 million in the year
ended December 31, 1998, and $619,000 in the year ended December 31, 1997. Our
accumulated deficit was $5.5 million at December 31, 1999. Moreover, we
anticipate that we will continue to incur losses on both a quarterly and an
annual basis for the foreseeable future, in part due to our plans to devote
substantial resources to expand our sales and marketing and research and
development activities. Although our revenue has increased in each of
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the last eight quarters, our revenue may not continue to grow and we may not
achieve or maintain profitability.
RESULTS OF OPERATIONS
The following table sets forth results of operations data expressed as a
percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue........................................... 100.0% 100.0% 100.0%
Cost of revenue................................... 68.4 77.1 61.6
----- ----- -----
Gross profit...................................... 31.6 22.9 38.4
Operating expenses:
Sales and marketing............................. 23.9 28.3 22.4
General and administrative...................... 47.0 25.8 33.5
Depreciation and amortization................... 6.1 4.6 5.8
Research and development........................ 9.2 4.2 6.0
----- ----- -----
Total operating expenses...................... 86.2 62.9 67.7
Loss from operations.............................. (54.6) (40.0) (29.3)
Interest expense.................................. (2.0) (0.9) (2.6)
Interest income................................... 0.0 0.0 1.4
----- ----- -----
Net loss.......................................... (56.6)% (40.9)% (30.5)%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUE. Revenue increased by 127% to $8.2 million in the year ended
December 31, 1999 from $3.6 million in the year ended December 31, 1998. This
increase was primarily due to an increase in the number of clients during the
year to 256 in 1999 from 160 in 1998 and an increase in the average contract
value.
COST OF REVENUE. Cost of revenue increased by 82% to $5.1 million in the
year ended December 31, 1999 from $2.8 million in the year ended December 31,
1998. As a percentage of revenue, cost of revenue decreased to 61.6% in the year
ended December 31, 1999 from 77.1% in the year ended December 31, 1998. The
absolute increase was primarily due to increased personnel costs of
$1.9 million associated with supporting a larger number of clients with a larger
number of products and services, as well as the increased costs of data
collection of $358,000. The decrease in cost of revenue as a percentage of
revenue was attributable to an increasing proportion of sales of higher margin
eCRM solutions.
SALES AND MARKETING. Sales and marketing expense consists primarily of
personnel costs for our direct sales force and marketing staff, as well as costs
related to trade shows and conferences, advertisements, promotional activities,
public relations and media events. Sales and marketing expense increased by 80%
to $1.8 million in the year ended December 31, 1999 from $1.0 million in the
year ended December 31, 1998. As a percentage of revenue, sales and marketing
expense decreased to 22.4% in the year ended December 31, 1999, from 28.3% in
the year ended December 31, 1998. The absolute increase was primarily
attributable to the costs of $318,000 associated with the hiring of additional
sales and marketing personnel, increased sales commissions of $202,000 resulting
from higher revenue, higher costs relating to trade shows and conferences of
$76,000 and increased advertising and
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promotion costs of $88,000. We expect our sales and marketing expenses to
increase significantly on an absolute basis in future periods as we continue to
expand our sales and marketing activities.
RESEARCH AND DEVELOPMENT. Research and development expense consists
primarily of personnel and related costs, consultants and outside contractor
costs, and software and hardware maintenance costs for our development efforts.
All research and development costs are expensed as incurred. Research and
development expense increased by 224% to $495,000 in the year ended
December 31, 1999 from $153,000 in the year ended December 31, 1998. As a
percentage of revenue, research and development expense increased to 6.0% in the
year ended December 31, 1999 from 4.2% in the year ended December 31, 1998. The
absolute increase in research and development expense and the increase in
expense as a percentage of revenue resulted from the hiring of additional
research and development personnel. We are continuing to invest substantially in
research and development, and we expect these costs to increase on an absolute
basis in future periods.
GENERAL AND ADMINISTRATIVE. General and administrative expense consists
primarily of personnel and related costs for corporate functions, including
information services, finance, accounting, human resources, facilities and
legal. General and administrative expense increased by 195% to $2.8 million in
the year ended December 31, 1999 from $934,000 in the year ended December 31,
1998. As a percentage of revenue, general and administrative expense increased
to 33.5% in the year ended December 31, 1999 from 25.8% in the year ended
December 31, 1998. The absolute increase in general and administrative expense
and the increase in expense as a percentage of revenue resulted from an increase
in payroll and associated costs of $751,000 due to hiring additional
administrative personnel, increases in accounting and legal costs of $211,000,
and increases in costs relating to our facilities of $215,000. We expect that
general and administrative expense will continue to increase on an absolute
basis as we expand our operations and incur additional costs related to being a
public company.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUE. Revenue increased by 231% to $3.6 million in the year ended
December 31, 1998 from $1.1 million in the year ended December 31, 1997. The
increase was primarily due to an increase in the number of clients during the
year to 160 in 1998 from 78 in 1997 and an increase in the average contract
value.
COST OF REVENUE. Cost of revenue increased by 273% to $2.8 million in the
year ended December 31, 1998 from $748,000 in the year ended December 31, 1997.
As a percentage of revenue, cost of revenue increased to 77.1% in the year ended
December 31, 1998 from 68.4% in the year ended December 31, 1997. The absolute
increase in cost of revenue and the increase in cost of revenue as a percentage
of revenue was primarily due to increased personnel costs of $1.0 million
associated with supporting a larger number of clients with a larger number of
products and services, as well as the increased costs of data collection of
$491,000.
SALES AND MARKETING. Sales and marketing expense increased by 292% to
$1.0 million in the year ended December 31, 1998 from $261,000 in the year ended
December 31, 1997. As a percentage of revenue, sales and marketing expense
increased to 28.3% in the year ended December 31, 1998 from 23.9% in the year
ended December 31, 1997. The absolute increase in sales and marketing expense
and the increase in expense as a percentage of revenue was primarily
attributable to the increased costs of $249,000 associated with the hiring of
additional sales and marketing personnel and increased sales commissions of
$201,000 resulting from higher revenue.
RESEARCH AND DEVELOPMENT. Research and development expense increased by 51%
to $153,000 in the year ended December 31, 1998 from $101,000 in the year ended
December 31, 1997. As a percentage of revenue, research and development expense
decreased to 4.2% in the year ended
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December 31, 1998 from 9.2% in the year ended December 31, 1997. The absolute
increase in research and development expense resulted from the hiring of
additional research and development personnel.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased by
82% to $934,000 in the year ended December 31, 1998 from $514,000 in the year
ended December 31, 1997. As a percentage of revenue, general and administrative
expense decreased to 25.8% in the year ended December 31, 1998 from 47.0% in the
year ended December 31, 1997. The absolute increase in general and
administrative expense resulted from an increase in payroll and associated costs
of $137,000 due to hiring additional administrative personnel, increases in
costs relating to our facilities of $64,000 and increases in accounting and
legal costs of $57,000.
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QUARTERLY RESULTS OF OPERATIONS
The following tables set forth unaudited quarterly statement of operations
data for the eight quarters ended December 31, 1999 in dollars and as a
percentage of revenue. This information has been prepared on the same basis as
the audited consolidated financial statements appearing elsewhere in this
prospectus, and, in the opinion of management, contains all necessary
adjustments, consisting only of normal recurring adjustments, to present fairly
the unaudited quarterly results of operations. The quarterly data should be read
in conjunction with our audited consolidated financial statements and the notes
to the financial statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................... $ 851 $ 879 $ 904 $ 983 $1,796 $1,866 $2,195 $ 2,370
Cost of revenue.............. 649 588 743 809 959 956 1,474 1,678
----- ----- ----- ----- ------ ------ ------ -------
Gross profit................. 202 291 161 174 837 910 721 692
Operating expenses:
Sales and marketing........ 229 255 264 275 315 334 495 696
General and
administrative........... 200 233 244 257 453 652 705 947
Depreciation and
amortization............. 43 42 42 39 61 98 143 173
Research and development... 28 33 38 54 68 86 123 218
----- ----- ----- ----- ------ ------ ------ -------
Total operating
expenses............. 500 563 588 625 897 1,170 1,466 2,034
Loss from operations:........ (298) (272) (427) (451) (60) (260) (745) (1,342)
Interest income (expense),
net........................ (8) (8) (8) (7) (37) (104) (63) 100
----- ----- ----- ----- ------ ------ ------ -------
Net loss..................... $(306) $(280) $(435) $(458) $ (97) $ (364) $ (808) $(1,242)
===== ===== ===== ===== ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF REVENUE:
Revenue...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.............. 76.3 66.9 82.2 82.3 53.4 51.2 67.2 70.8
----- ----- ----- ----- ----- ----- ----- -----
Gross profit................. 23.7 33.1 17.8 17.7 46.6 48.8 32.8 29.2
Operating expenses:
Sales and marketing........ 26.9 29.0 29.2 28.0 17.5 17.9 22.6 29.4
General and
administrative........... 23.5 26.5 27.0 26.1 25.2 34.9 32.1 40.0
Depreciation and
amortization............. 5.1 4.8 4.6 4.0 3.4 5.3 6.5 7.3
Research and development... 3.3 3.8 4.2 5.5 3.8 4.6 5.6 9.2
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............. 58.8 64.1 65.0 63.6 49.9 62.7 66.8 85.9
Loss from operations:........ (35.0) (30.9) (47.2) (45.9) (3.3) (13.9) (33.9) (56.7)
Interest income (expense),
net........................ (0.9) (0.9) (0.9) (0.7) (2.1) (5.6) (2.9) 4.2
----- ----- ----- ----- ----- ----- ----- -----
Net loss..................... (35.9)% (31.8)% (48.1)% (46.6)% (5.4)% (19.5)% (36.9)% (52.5)%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Our revenue increased in each of the last eight quarters, primarily due to
increases in the number of clients and in the average contract amount. In the
first quarter of 1999, revenue increased by 82.7%
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from the fourth quarter of 1998 as a result of a significant increase in revenue
from AMFMi. The increases in cost of revenue and total operating expenses
throughout 1999 reflect our continued investment in the growth of our business.
In the third and fourth quarters, we hired more analytical and engineering
personnel which resulted in an increase in cost of revenue, as a percentage of
revenue, from 51.2% for the quarter ended June 30, 1999 to 70.8% for the quarter
ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have funded our operations through the private sale of
our securities, resulting in aggregate gross proceeds to us of $12.5 million.
The net proceeds from these private placements have been, and continue to be,
used to expand our business operations, to hire additional personnel, to provide
additional services and for general corporate purposes related to the expansion
of our business. Our principal source of liquidity at December 31, 1999,
consisted of cash of $8.0 million, of which $3.0 million was used in the
purchase of Applied Information Management Marketing subsequent to year end.
Net cash used in operating activities was $650,000 in the year ended
December 31, 1999, compared to $496,000 in the year ended December 31, 1998. The
increase in cash used in operating activities resulted primarily from an
increase in the net loss from $1.5 million to $2.5 million, partially offset by
an increase in deferred revenue of $1.7 million.
Net cash used in investing activities was $1.6 million in the year ended
December 31, 1999, compared to $312,000 in the year ended December 31, 1998.
Capital expenditures were $1.3 million in the year ended December 31, 1999 and
$267,000 in the year ended December 31, 1998. These expenditures reflect our
investments in computer equipment and leasehold improvements, which were
required to support our business expansion. We anticipate increased capital
expenditures for the foreseeable future to fund the growth of our business.
Net cash provided by financing activities was $10.1 million in the year
ended December 31, 1999 compared to $871,000 in the year ended December 31,
1998. Net cash provided by financing activities for the year ended December 31,
1999 resulted primarily from the sale of common stock and from the issuance of
debt that was subsequently converted into common stock.
At December 31, 1999, we had rental obligations of approximately
$1.8 million. The majority of these rental obligations are made up of various
leases of approximately 20,000 square feet in New York, New York, which expire
in 2001 and 2004.
We believe that the net proceeds from this offering, together with our
current cash balances and cash equivalents, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months. However, we may need to raise additional funds sooner to
fund additional expansion, develop new or enhanced products and services,
respond to competitive pressures or make acquisitions. Additional financing may
not be available to us on favorable terms or at all. If adequate funds are not
available on acceptable terms or at all, our business may be harmed.
YEAR 2000 COMPLIANCE
Year 2000 computer problems may arise after the date of this prospectus. Our
business could be interrupted by any material year 2000-related failure of our
internal systems, the systems that carry data to Arc 360 DEG., the systems of
our clients and service providers, or the systems used by consumers to access
the Internet.
During 1999, we conducted a review of the year 2000 readiness of our
information technology systems. These systems include software that we have
developed internally and software and hardware that we have obtained from
third-party vendors and licensors. Our review identified a limited number of
remediation steps that we completed prior to January 1, 2000. In 1999, we
performed testing of key
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functions in a simulated operating environment to ensure that our systems
previously verified to be year 2000 compliant remained compliant as changes were
made to them.
The aggregate costs associated with our year 2000 review and remediation
were approximately $20,000 in 1999. We estimate that any costs related to year
2000 issues in 2000 will be immaterial. As of the date of this prospectus, we
have not experienced any year 2000-related systems failures and, subsequent to
January 1, 2000, we have received verbal assurances from all of our largest
service providers that they are year 2000 compliant and that they have not
experienced any year 2000-related systems failures in connection with the
January 1, 2000 date change. We intend to continue to monitor our own systems
for ongoing year 2000 compliance and conduct testing to confirm the compliance
of our system, as well as to confer with our clients and service providers about
their ongoing year 2000 compliance.
Based on our efforts to date, we believe that we will not experience any
material year 2000 problems. There are, however, possible scenarios under which
year 2000 problems, if they occur, could materially affect us. The most
reasonably likely worst cases among these scenarios, include: the temporary
inability of one or more of our key clients to access their data; the temporary
inability of our clients to direct their data to Arc 360 DEG.; and a failure of,
or a degradation in, the Internet infrastructure that reduces traffic to, or the
performance of, our clients' Web sites. We do not intend to develop contingency
plans to address these or other potential worst-case scenarios.
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BUSINESS
OVERVIEW
We provide a comprehensive suite of products and services that enables
businesses to manage and derive greater value from their Internet customer
relationships. Our Arc 360 DEG. technology allows us to collect, clean and
analyze large amounts of our clients' customer data from disparate sources. We
augment Arc 360 DEG. with our proprietary Internet consumer trend data,
engineering and analytical services and marketing expertise to help our clients
tailor and target marketing initiatives and improve Web site design and content.
Our Internet customer relationship management products and services help our
clients to identify their most valuable customers, gain a better understanding
of customer preferences and improve the return on both online and offline
marketing investments.
INDUSTRY BACKGROUND
INTERNET ADVERTISING AND E-COMMERCE
The Internet has emerged as a global medium that allows businesses and
consumers worldwide to gather information, communicate with one another and
engage in commerce electronically. In recent years, two principal business
models have emerged on the Internet: the advertising model and the e-commerce
model. In the advertising model, businesses primarily derive revenue from the
sale of advertising on their Web sites. In the e-commerce model, businesses
derive revenue from selling products or services. Statistics compiled by
independent Internet research firms suggest that the potential market for both
business models is substantial. Forrester Research, Inc. estimates that
worldwide spending for online advertising will reach $33 billion by 2004 and
that online retail sales will grow from an estimated $20 billion in 1999 to
approximately $184 billion in 2004. The common challenge faced in both the
Internet advertising and e-commerce models is to attract and retain an
increasing amount of visitor traffic to their Web sites.
INTERNET CUSTOMER RELATIONSHIP MANAGEMENT
The Internet has created a business environment where the competition is
only a mouse click away. By enabling consumers to reach an almost limitless
number of vendors to compare product, price and service information, the
Internet has weakened traditional barriers to entry and increased competition.
In addition, consumers are increasingly concerned with intrusive marketing
methods and the protection of their privacy. This increased consumer choice,
influence and sensitivity has forced businesses to redefine the way they
interact with their customers. As a result, businesses increasingly view
customer satisfaction as a critical differentiating factor and, therefore, seek
to gain a comprehensive understanding of each customer in order to respond to
their individual needs. This understanding enables businesses to increase
customer loyalty by personalizing the customer experience and managing targeted
marketing campaigns. It also enables businesses to increase customer
profitability by marketing complementary products and services, otherwise known
as cross-selling, and marketing higher-end products and services, otherwise
known as up-selling.
NEED TO DERIVE VALUE FROM CUSTOMER DATA
To personalize the customer experience, businesses must collect and analyze
large amounts of data. Many businesses already collect customer data offline
through call centers, point-of-sale systems, loyalty programs and other methods.
The growth of the Internet has further increased the amount of data with which
businesses must contend, since every action taken by a Web site visitor
generates data, whether it is filling out a registration form, purchasing a
product or service, personalizing a Web site or clicking on a banner
advertisement or link. The result is that many businesses have disparate stores
of data distributed across various systems within their organizations.
Furthermore, the information technology departments responsible for maintaining
company databases often fail to coordinate with the marketing
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departments responsible for attracting and retaining customers. This can prevent
businesses from extracting the value from their data that is required to
optimize customer relationships.
Many businesses have attempted to respond to these challenges by investing
in a variety of customer relationship software applications. While some of these
applications have enabled companies to collect or store large volumes of
customer data, most fall short of providing a comprehensive view of customers'
preferences and behaviors. Because these applications often only address narrow
problems, businesses seeking a complete solution are forced to install and
integrate multiple products and manage multiple vendors to combine and derive
value from online and offline data. Moreover, businesses must often incur large
expenditures to acquire and implement these systems and either allocate scarce
internal resources or hire and train qualified personnel to operate and maintain
them.
As a result, businesses are increasingly seeking a complete and
cost-effective solution to help them manage and derive optimum value from their
Internet customer relationships. This solution must integrate online and offline
data to provide a comprehensive view of each customer's preferences and
behaviors, while being mindful of personal privacy concerns. In addition,
customer information must be stored in a readily usable format from which
strategic action to improve customer relationships can be formulated. This
solution should also provide businesses with a deeper understanding of their
customers by taking into account Internet consumer trends that affect their
particular industries. Finally, it should minimize the risks and costs
associated with internally developing or maintaining a customer relationship
management solution.
THE CYBER DIALOGUE SOLUTION
Our solution enables our clients to effectively manage their Internet
customer relationships and to increase revenue-generating opportunities. Our
solution consists of our proprietary outsourced technology, Arc 360 DEG.,
combined with our related analytical services and in-depth databases of Internet
consumer information covering a variety of industries. We provide our clients
with a thorough understanding of their customers and enable our clients to
improve the return on their Internet and related marketing investments. By using
our solution, our clients can realize the following benefits:
BUILD CUSTOMER LOYALTY AND STRENGTHEN RELATIONSHIPS. We help our clients
develop and refine strategies for optimizing their Internet customer
relationships. By analyzing our clients' data and comparing the results
against our proprietary databases of Internet consumer information, we
provide clients with a comprehensive understanding of their customers. This
understanding is then used to assist our clients in the development of
targeted marketing campaigns, loyalty and affinity programs, and Web site
usability and content improvements.
IDENTIFY AND ACQUIRE MORE PROFITABLE CUSTOMERS. We leverage our extensive
data collection and analytical capabilities to build sophisticated database
models that help clients understand Internet consumer behavior and
preferences. By combining this information with our clients' existing
customer data, we are able to identify our clients' most profitable existing
customers. We can then assist our clients in cost-effectively targeting and
acquiring new customers with similar profiles.
ANTICIPATE MARKET OPPORTUNITIES. By analyzing trends in Internet consumer
behavior, we enable clients to identify new market opportunities and
forecast demand for new product and service offerings. This strategic
insight is gained by conducting customized research with our proprietary
panel of Internet users and comparing the results with behavioral and
attitudinal benchmarks from our Internet user databases.
INTEGRATE MULTIPLE DATA SOURCES TO GAIN COMPREHENSIVE CUSTOMER INSIGHT. Our
technology platform is based on open standards and can be integrated easily
with leading business applications, call center systems and other databases
that contain customer information. This allows our clients to
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combine and effectively use customer information from multiple data sources
to gain a more comprehensive understanding of their customers.
REDUCE COSTS AND RISKS BY IMPLEMENTING AN OUTSOURCED SOLUTION. Arc 360 DEG.
can be rapidly deployed and reduces investments in human and technological
resources, resulting in a lower total cost of ownership. Arc 360 DEG. is
fully scaleable, which allows our clients to collect more data and add more
sophisticated analytics as their businesses grow.
STRATEGY
Our objective is to set the standard for Internet customer relationship
management by providing our clients with the high quality products and services
they need to improve customer targeting, acquisition, retention and up-selling.
The key elements of our strategy include:
EXPAND AND ENHANCE OUR PRODUCT AND SERVICE OFFERINGS. We intend to leverage
our Internet strategy and marketing knowledge, as well as our technological
expertise, to expand and enhance our product and service offerings. To
achieve this objective, we intend to internally develop or acquire new
products, services and technologies that complement our current offerings.
For example, we have expended significant resources to develop Arc 360 DEG.
and we expect to continue to invest in our technological capabilities.
INCREASE MARKET PENETRATION BY EXPANDING OUR SALES AND DISTRIBUTION
CAPABILITIES. In order to broaden our client base, we intend to continue to
expand our direct sales force and related support staff. We plan to open new
offices in Boston, San Francisco and London in 2000. We believe that these
offices will provide us with an opportunity to expand into new geographic
markets and to better service our existing clients in these areas. We also
intend to enter into marketing and strategic relationships with consultants,
systems integrators and resellers to broaden our distribution. For example,
we recently announced that we are working with Real Media to implement a
joint audience management system that allows Web publishers to understand
their audiences and to sell targeted advertising based on that
understanding. We have also entered into a marketing alliance with Modem
Media and a co-branding agreement with Deloitte Consulting relating to its
health care practice.
BROADEN RELATIONSHIPS WITH EXISTING CLIENTS. We intend to increase the
amount of products and services provided to existing clients. We also intend
to migrate our clients to higher margin products and services with longer
contract durations. New clients typically purchase our strategic and
analytical services. By providing the information and analysis required to
make complex business strategy and marketing decisions, we gain credibility
and access to senior management within client organizations. This enhances
our ability to offer our eCRM solutions, which have higher profit margins.
Revenue from eCRM solutions as a percentage of total revenue has more than
doubled in the past year.
EXPAND VERTICAL INDUSTRY EXPERTISE We may further expand our client base by
broadening the range of vertical industries we cover. Historically, we have
hired professionals with relevant industry expertise to develop, launch and
manage our new vertical market efforts. This enables us to better understand
our clients' businesses and to provide solutions tailored to their specific
needs. This industry expertise increases our credibility when offering our
products and services to businesses within covered vertical markets and
reduces the time required to deploy our solutions.
PURSUE STRATEGIC ACQUISITIONS AND INVESTMENTS. We plan to continue to
evaluate acquisition and investment opportunities involving complementary
businesses, products, services and technologies. In February 2000, we
acquired Applied Information Management Marketing, a database marketing
company. We expect that this acquisition will strengthen our product and
service offerings and broaden our client base. We believe that our industry
is fragmented and provides significant
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consolidation opportunities to accelerate our growth, develop new
technologies, expand our industry expertise and penetrate new markets.
PRODUCTS AND SERVICES
Our offerings are comprised of eCRM solutions and strategic and analytical
services.
ECRM SOLUTIONS
ARC 360 DEG. TECHNOLOGY. The core of our eCRM solutions is Arc 360 DEG.,
which captures and cleans large quantities of raw client data from multiple
online and offline sources. Once collected and cleaned, customer data is
analyzed and segmented to provide clients with a better understanding of their
customers. This understanding is then used to develop and execute highly
personalized communications, including targeted marketing campaigns. The
following chart depicts the Arc 360 DEG. platform:
[GRAPHIC DESCRIPTION]
Graphic: Two boxes on top of page. One box entitled "ONLINE DATA SOURCES" with
three sections below entailed "Log Files"; "Registration & Transaction Data";
and "Survey & Ad Stream Responses".
Graphic: Second box entitled: "OFFLINE DATA SOURCES" with three sections below
entitled "Call Center"; "Direct Mail" and "Warranty Cards".
Text: Caption to the right of those two boxes: "DATA CAPTURE".
Graphic: Two arrows pointing downward to a cylinder; one arrow coming from each
box.
Text: Caption to the right of the arrows: "DATA HYGIENE & STORAGE".
Text: Below the cylinder: "DATA WAREHOUSE" and to the right of the cylinder is
the caption "DATA STORAGE".
Graphic: Arrow pointing downward from text below cylinder to a line with an
arrow pointing to the left and an arrow pointing to the right. There is a box to
the left and the right of the arrow.
Text: Box on left entitled "TARGETED ACTION" with four quadrants below entitled
"Email Campaign"; "Phone Campaign"; "Banner Ad Campaign"; and "Loyalty Program"
and below the box the caption "TARGETED ACTION".
Text: Box on right entitled "DECISION SUPPORT" with four quadrants below
entitled "Traffic Reports"; "Customer Values"; "Customer Segmentation"; and
"Cross & Up-sell Models" and below the box the caption "DATA ANALYSIS, VIEWING &
REPORTING".
Graphic: Line from "TARGETED ACTION" box up towards cylinder with right arrow
pointing to cylinder and the text "Update Database with Measured Customer
Responses".
Graphic: Line from "DECISION SUPPORT" box up towards cylinder with left arrow
pointing to cylinder and the text "Update Database with Results of Analysis".
DATA CAPTURE. Arc 360 DEG. captures client data by using proprietary
software tools that sample, intercept and track visitors to their Web sites,
append survey responses to transactional and behavioral data and build
control groups. Our survey and registration software also enables us to
conduct full-scale online market research studies for our clients.
DATA HYGIENE AND INTEGRATION. To be most useful, collected data must first
be cleaned to eliminate corrupt or extraneous data and then integrated with
related offline data. Our proprietary software imports data from multiple
online and offline sources, and cleans and translates it into a uniform
format so that it can be used and stored efficiently.
DATA STORAGE. The model in our data warehouse is optimized to catalog and
store information that will be analyzed for marketing purposes. The model's
core design can be leveraged across multiple clients and has the flexibility
to be customized for individual client needs.
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DATA ANALYSIS AND WEB-BASED REPORTING. Using Arc 360 DEG.'s browser-based
reporting tool, clients can analyze and query their customer data, and also
create customized management reports. In addition, clients can supplement
their analysis and derive further insight by comparing their own customer
data to our proprietary libraries of information regarding consumer trends
and behaviors.
TARGETED MARKETING. Arc 360 DEG.'s database scoring algorithms and software
enable clients to categorize customers by specific criteria. Our software
then enables clients to generate lists of customers based on these criteria.
This information can be exported to campaign management systems in order to
execute targeted marketing campaigns across multiple channels.
RELATED ECRM SERVICES. We also provide related strategic consulting, data
mining and systems engineering services. Our experienced database marketing
professionals work with clients to:
IDENTIFY OBJECTIVES AND EVALUATE CURRENT SYSTEMS. We work with our clients
to identify their Internet customer relationship management requirements and
the system and process shortcomings that impede their online initiatives. We
then create plans that detail the business processes and systems designs
required to meet these objectives.
PERFORM CUSTOM DATA INTEGRATION, MODELING AND DATA ENHANCEMENT. We perform a
wide range of custom services, including: the design and development of
custom interfaces to capture data from multiple client sources; the
development of models customized to the marketing needs of individual
clients; and the enhancement of a client's customer information with data
appended from our own proprietary databases or from third parties.
MINE DATA AND PRODUCE CUSTOMER PROFILES. Our data mining professionals and
statistical modelers analyze customer data to uncover hidden relationships
among the data. We segment and profile customer records and develop
predictive and descriptive models for understanding customers' attitudes and
values and for developing marketing strategies.
MANAGE AND EVALUATE MARKETING CAMPAIGNS. We use the intelligence from our
data analysis to develop and implement multichannel marketing campaigns for
our clients. As the campaign is being executed, we analyze the results, make
adjustments to increase its effectiveness, compile management reports and
recommend additional strategies to increase returns on future marketing
investments.
STRATEGIC AND ANALYTICAL SERVICES
Our strategic and analytical services are provided by our Internet
strategies group and our analytical group.
INTERNET STRATEGIES GROUP. We provide clients access to our proprietary
databases of Internet consumer information, which help them make complex
business strategy and marketing decisions. We believe that we have the most
comprehensive research databases of Internet user trends, attitudes, behaviors
and interests available in the marketplace today. In 1994, we conducted our
first interviews with both Internet users and non-users. Since that time, we
have executed increasingly frequent and in-depth studies to develop a richer
understanding of online consumers. The information in our databases is updated
and enhanced every 90 days to keep our clients abreast of rapidly developing
Internet consumer trends. Our vertical industry coverage now includes the
following sectors: pharmaceutical and health, media and entertainment, financial
services, online communities, small business and e-tailing. This data allows us
to provide clients with industry-specific consumer information and to recommend
Internet and e-commerce action plans. We offer industry-specific research on an
annual subscription basis. Subscribers receive regular industry briefs providing
insight into industry events and trends, monthly interactive newsletters
compiling useful primary data and a semi-annual report on Internet user trends.
Subscribers also gain access to our staff of expert analysts
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and our exclusive client Web site, which allows searchable, Internet-based
access to our historical published data.
ANALYTICAL GROUP. Our analytical group collects data from survey responses
obtained by conducting research with our own panel of over 80,000 Internet
users, analyzes the data using statistical and other methods and delivers
findings in the form of written reports, oral presentations, workshops and
mathematical algorithms or scores. Since 1994, the analytical group has
conducted over 400 online client projects. By conducting Web-based surveys and
online focus groups, we help clients forecast demand for new product and service
concepts, test Web site usability and navigability, assess our clients' Web site
performance in comparison to that of their competitors and develop the Web site
features and attributes that build customer loyalty.
CLIENTS
Our clients represent a broad spectrum of enterprises engaged in e-commerce,
including pharmaceutical and health care companies, media and entertainment
companies, financial services firms, online communities, e-tailers and
interactive agencies. We target Fortune 1000 companies and the leading Internet
brands. Our clients include 9 of the 10 Web properties that, according to Media
Metrix, had the highest volume of unique visitors in December 1999. Our clients
that purchased more than $50,000 of our products and services in 1999 include:
<TABLE>
<S> <C>
FINANCIAL SERVICES MEDIA AND ENTERTAINMENT
- ---------------- -----------------------
Bank One AMFMi
Capital One Financial Cartoon Network
First USA Bank Discovery Communications
The Garfield Group Global Sports Interactive
General Electric Financial Assurance International Masters Publishing
Lending Tree Real Media
Nasdaq Stock Market Showtime Networks
Wells Fargo Thomson Corporation
PHARMACEUTICAL AND HEALTH Time Warner
- ------------------------ Warner Bros. Online
California HealthCare Foundation E-TAILING
CareSoft -------
Deloitte Consulting (Health Care Group) CDNow
Monsanto Life Sciences Compaq Computer
ONLINE COMMUNITIES IBM
- ------------------ Trip.com
About.com INTERACTIVE AGENCIES
GTE Directories ------------------
Netscape Communications Arnold Ingalls Moranville
VerticalNet Modem Media
Women.com Multimedia Resources
Organic
</TABLE>
In the year ended December 31, 1999, AMFMi represented approximately 38% of
our total revenue and our top 10 clients as a whole represented 57% of revenue,
with no client other than AMFMi accounting for more than 10% of revenue. On a
pro forma basis, giving effect to our acquisition of Applied Information
Management Marketing as if it had occurred on January 1, 1999, AMFMi would have
represented 25% of our total revenue, Roche Diagnostic Corporation, a client of
Applied Information Management Marketing, would have represented 7% of our total
revenue and our top 10 clients as a whole would have represented 63% of revenue.
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CLIENT CASE STUDIES
The following client case studies illustrate how our products and services
are used by clients to build and strengthen their customer relationships and
optimize their e-commerce and Internet advertising potential.
ABOUT.COM. About.com is a network of Web sites comprising 650 interest
categories, each overseen by a professional guide. In 1999, in order to better
understand the attitudes and behaviors of the visitors to its sites, About.com
became an Internet strategies group subscriber and also entered into an
Arc 360 DEG. contract. By cleaning and analyzing About.com's large databases of
visitor information, including site usage patterns, site perceptions, e-commerce
potential and demographics, we were able to identify About.com's most valuable
visitors, and recommend personalization and e-commerce initiatives to increase
visitor retention, loyalty and revenue.
AMFMI. AMFMi is the consumer Internet subsidiary of AMFM Inc., the largest
radio broadcasting company in the U.S. as measured by listening audience and
revenue with a weekly listener base of 64 million. In July 1998, AMFMi asked us
to help develop an Internet strategy that would enhance shareholder value and
extend the radio franchises online. We conducted a data audit and determined the
need for a centralized platform to measure and respond to Web traffic. We also
recommended sticky applications and site content improvements based on survey
data and consumer research. In conjunction with AMFMi, we are now actively
building and managing its online customer relationships through targeted offers,
e-mail campaigns, and database analysis. We are currently integrating Arc
360 DEG. with AMFMi's user databases and content management systems. According
to AMFMi, traffic has been growing across its sites, driven by site re-designs
based on data mining, reporting and e-mail campaigns.
NETSCAPE. Netscape Communications Corporation launched the first widely
installed Web browser software and is now part of America Online. Netscape has
been an Internet strategies group subscriber since 1997. In 1999, Netscape
engaged us to analyze their portal visitor databases to help improve traffic
retention levels and identify new revenue opportunities. By analyzing Netscape
Netcenter's registration and behavioral data, we were able to build predictive
models that enabled Netcenter to identify and target their most valuable site
visitors. Netscape believes the resulting e-mail campaigns led to an increase in
site traffic, software downloads and campaign responses and, ultimately,
strengthened customer relationships and site loyalty. Since completion of this
project, Netscape has retained us to assist with visitor retention and to
measure how visitors use Netcenter services for a full year.
WARNER BROS. ONLINE. Warner Bros. Online is a division of Time Warner
Entertainment Co., L.P. Warner Bros. Online has been an Internet strategies
group subscriber since 1996. In 1999, Warner Bros. Online signed an
Arc 360 DEG. contract to track and analyze representative samples of Warner
Bros. Online visitors across 340 product and behavioral categories. The
resulting data, which can be queried by the client using the Arc 360 DEG.
reporting tool, provided Warner Bros. Online with specific information about
visitors to several sites within its network. According to Warner Bros., this
enabled its management to significantly increase the effectiveness of its
advertising sales efforts. We are now expanding our analysis to include Time
Warner's Entertaindom portal and the Acme City community site.
SALES AND MARKETING
We market our products and services primarily through our direct sales
force. As of March 31, 2000, our direct sales force consisted of 16 account
executives. Our sales force works in conjunction with our analysts to tailor
initial proposals and ongoing services to fit evolving client needs.
We support our sales force with a dedicated marketing services organization,
which was comprised of 13 marketing professionals as of March 31, 2000. Our
marketing services organization is responsible for continuously gathering
feedback from our clients and organizing this feedback to develop best
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practices in account management and service delivery and to identify and exploit
cross-selling and up-selling opportunities.
We use a variety of marketing programs to build brand awareness, generate
demand for our services and develop client leads. These marketing activities
include the distribution of our proprietary industry data and forecasts, public
relations, direct mail and out-bound prospecting by our account executives. We
plan to increase our advertising in trade publications in 2000. We also intend
to expand and complement our sales and marketing team in 2000 with additional
account executives and marketing professionals as well as dedicated account
managers who will be responsible for maintaining and improving existing client
relationships.
In addition, we are developing a sales channel strategy with leading
businesses in the Internet marketing services, Internet professional services
and strategy consulting fields to attain broader product and service
distribution. For example, we recently entered into a marketing alliance with
Modem Media and a co-branding agreement with Deloitte Consulting relating to its
health care practice. We believe that this strategy will speed penetration of
our target markets.
TECHNOLOGY
Arc 360 DEG. brings together sophisticated data management technology to
provide a robust and scaleable analytical platform for Internet customer
relationship management. Arc 360 DEG. may be scaled to handle increased loads
from both new and existing clients by adding bandwidth, servers and data
centers. A central repository of business rules, data models and transformations
enables us to easily add new clients to Arc 360 DEG.. Arc 360 DEG. is also
scaleable for each client because processors can be added to the hardware
systems and the software can utilize clusters of load-balanced servers to manage
high volumes of data. In addition, our data models use data compression
techniques and support flexible aggregation schemes to enable large quantities
of data to be queried in an acceptable amount of time.
Our proprietary software code integrates industry-leading software packages
with our own data collection tools to provide a hosted solution for key aspects
of data management related to Internet customer relationship management. In
addition to proprietary data transformations, data models, and report templates
created with third-party tools, we offer our data collection software to clients
for use on their Web sites. These data collection tools include server plug-ins
supporting a wide variety of Web server products, versions, and operating
environments, which aid clients in sampling and tracking their Web site
visitors. Additionally, we offer customer registration software tools and
libraries to our clients to help them collect cleaner, more useful data from
their customers.
We license third-party software in order to enhance our advanced customer
management and analysis system. Currently, we license Informatica's extract,
transform and load tool to enable scaleable processing of client data. Our data
staging environment combines proprietary data transformations built using this
tool with our own transformation software for cleaning, merging, and aggregating
data. The underlying relational database management system used in Arc 360 DEG.
is Oracle 8i running on Solaris 2.6. Proprietary data models are used to store
many types of data, including Web traffic, demographic, behavioral, e-commerce,
marketing promotion and customer service data. We license WebIntelligence
Business Objects which provides access to reports and ad-hoc queries through a
Web-based interface. We have developed standard reports to cover many aspects of
customer relationship management both online and off line. Software packages
from the SAS Institute and SPSS Inc. are used for our data mining and modeling
work. Our analysts use these packages to build descriptive and predictive models
from our strategic databases of Internet consumer behavior and from our clients'
customer databases.
Arc 360 DEG. is hosted on servers located at our data center at Global
Crossing in New York City. Global Crossing provides our data center with
uninterrupted Internet access via a high-speed connection. Additionally, Global
Crossing provides physical security, climate control, 24 hour a day monitoring
services, fire suppression systems and triple redundant power systems. We plan
to add
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another data center facility in California and one in the United Kingdom within
the next 12 months to provide increased capacity as well as geographic
redundancy. Full backups of all production systems run nightly.
Our data centers consist of Sun Microsystems- and Intel-based servers
running Solaris, Windows NT and Linux. These servers are connected to a high
speed network backbone. Our production and internal servers are protected by a
fault-tolerant firewall that filters all network communications. In addition,
client-accessible systems like Web servers and file transfer protocol servers
are segmented into a third network for high security. Our employees access the
data center through a direct, secure high-speed communications line from our
headquarters, without going over the public Internet.
PRIVACY STATEMENT
We believe a consumer-centric stance on privacy greatly enhances the
relationships our clients have with their customers. In order to maintain these
relationships, we uphold a strict policy to protect personally identifiable data
collected in our clients' customer databases. This data remains the property of
our individual clients. We advise our clients to adopt opt-in policies for the
data they collect, and we counsel against exchanging or selling customer
information to third parities.
COMPETITION
Our solution competes against both in-house and external software tools
designed to address specific elements of a complete customer relationship
management solution. We expect competition to increase both from existing
competitors and new market entrants. Many of our existing and potential
competitors have longer operating histories and substantially greater name
recognition, financial, technical and marketing resources than we have. We
believe that the principal competitive factors in our market are:
- existing client relationships;
- company reputation, proven case studies and client references;
- product features, including performance and scaleability;
- knowledge of Internet user trends and our clients' industries;
- plug-and-play capability with leading e-commerce hardware and software
applications; and
- client service and price.
We compete with the information technology and marketing departments of our
current and potential clients that wish to develop in-house capabilities. These
departments tend to license stand-alone software, develop in-house solutions or
both, making providers of these solutions and in-house technology and marketing
departments our competition in some segments of our market. We believe that none
of these competitors currently offers the comprehensive solution that we do. Our
competitors include:
- for data collection and analysis: Accrue, E.piphany, Net.Genesis and
WebTrends;
- for online customer communications: Digital Impact, eGain, Exactis.com,
Kana Communications and Seibel;
- for personalization: Art Technology Group, Broadvision, Net Perceptions
and Vignette; and
- for market research: Forrester Research and Jupiter Communications.
Additional competition may come from Internet business integrators,
including EDS and IBM; Internet professional service firms, including
Agency.com, iXL, Razorfish, Scient and Viant; traditional
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direct marketing and database companies, including Acxiom, Experian and
Harte-Hanks; traditional advertising agencies, including Omnicom Group and True
North; and ad serving providers, including 24/7 Media, DoubleClick and Engage
Technologies.
INTELLECTUAL PROPERTY RIGHTS
We regard our copyrights, service marks, trademarks, trade secrets and other
intellectual property as important to our success. To protect our intellectual
property rights, we rely primarily on:
- copyright, trade secret and trademark laws;
- confidentiality agreements with employees and third parties; and
- protective contractual agreements, including those contained in license
and other agreements with consultants, suppliers, strategic partners and
end-user clients.
We seek to avoid disclosure or infringement of our intellectual property by
requiring employees and consultants with access to our proprietary information
to execute confidentiality agreements and by restricting access to our
proprietary source code.
We have two registered trademarks and have applied for additional trademarks
in the United States. While we enjoy common law rights in our trademarks, we
have not secured federal registration for the Cyber Dialogue mark and may be
limited in enforcing our rights against third parties for trademark infringement
or third parties may claim that our use of trademarks infringes their
intellectual property.
We currently hold the Internet domain names cyberdialogue.com,
dialogue360.com, closedloop.com and databasemining.com. We also hold the
corresponding domain names in the United Kingdom. The registration of domain
names generally is regulated by the Internet Corporation for Assigned Names and
Numbers and the governments of countries. We anticipate that additional
top-level domains will eventually be authorized by the Internet Corporation for
Assigned Names and Numbers for introduction into the domain name registration
system, that the requirements for holding domain names may be modified, and that
new laws or regulations regarding domain names or domain name registrars may be
adopted at any time.
Our databases contain detailed information about online consumers and their
attitudes, values and behaviors. We believe we have all the necessary rights to
the content in these databases and to the records, technology and information
derived from the databases.
We have obtained licenses to use third-party software and computer systems
and services, including Web server and encryption technology. We intend to
continue to license technology from third parties. If we were to lose these
licenses, we believe that we could obtain licenses from other sources for
similar components.
EMPLOYEES
As of March 31, 2000, we had 119 full-time employees. Of these employees, 51
were analysts, 29 were in sales, marketing and publishing, 19 were technology
engineers and 20 were in finance and administration. None of our employees is
represented by a labor union or a collective bargaining agreement. We have never
experienced a work stoppage and consider our relations with our employees to be
good.
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FACILITIES
Our facilities are located in New York City, in approximately 20,000 square
feet of leased office space under leases that expire in 2001 and 2004, and in
Fairfield, Connecticut, in approximately 10,000 square feet of leased office
space under a lease that expires in 2002. We also lease smaller facilities in
various satellite locations. We believe that our facilities are adequate for our
current needs and that additional space can be obtained if needed.
LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings. We may,
from time to time, become a party to various legal proceedings in the ordinary
course of business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their positions and ages, as of
March 31, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Bruce W. Schnitzer..................... 55 Chairman of the Board
Mark Esiri............................. 35 Chief Executive Officer, President and Director
C. Andrew Watt......................... 36 Chief Financial Officer, Executive Vice President and
Treasurer
Elizabeth Melcher...................... 32 Executive Vice President, Strategic Alliances
C. Richard Vermillion, III............. 26 Chief Technology Officer
Kevin Mabley........................... 29 Vice President, Strategic and Analytical Services
Lynne Bolen-Dupnock.................... 37 Vice President, eCRM Solutions
Lopo Champalimaud...................... 27 Vice President, Key Account Management
David J. Callard....................... 61 Director
Matthew Doull (1)(2)................... 30 Director
Christopher P. Forester................ 49 Director
John Fullmer........................... 54 Director
Tim Toben (1)(2)....................... 41 Director
Mary Carter Warren (1)(2).............. 43 Director
</TABLE>
- ------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
BRUCE W. SCHNITZER has served as Chairman of our Board of Directors since
1996. From 1996 through March 2000, he also served as our Treasurer.
Mr. Schnitzer is the founder of Wand Partners Inc., a private equity investment
firm and an affiliate of Cyber Dialogue's largest stockholders, and has been its
Chairman of the Board since 1997. Mr. Schnitzer has been Chairman of the Board
of Wand Partners (S.C.) since 1987 and holds management positions with various
entities associated with Wand Partners. From 1977 to 1985, Mr. Schnitzer was
Chief Financial Officer of Marsh & McLennan Companies, Inc. and then President
and Chief Executive Officer of Marsh & McLennan, Inc. Mr. Schnitzer is a
director of PennCorp Financial Group, Amresco Inc., Nestor, Inc., and a number
of Wand portfolio companies. Mr. Schnitzer is the step-father of Lopo
Champalimaud, our Vice President, Key Account Management. Mr. Schnitzer has a
B.A. and an M.B.A. from the University of Texas, Austin.
MARK ESIRI has served as our Chief Executive Officer and President and as a
director since 1996. Mr. Esiri's temporary work visa is with Wand
Partners Inc., a private equity investment firm and an affiliate of Cyber
Dialogue's largest stockholders. As a result, Mr. Esiri is paid as an employee
of Wand Partners, and is assigned by Wand Partners as our Chief Executive
Officer and President. We reimburse Wand for Mr. Esiri's salary. Since 1998,
Mr. Esiri has served as an Operating Principal at Wand Partners, where he has
focused on investments in marketing and information services businesses, playing
an active role in the management of Yankelovich Partners, a market research
business owned by affiliates of Wand Partners, and working with KnowledgeBase
Marketing, Inc., a database marketing business in which affiliates of Wand
Partners had an investment but which is now a wholly-owned subsidiary of
Young & Rubicam Inc. From 1994 through 1998, Mr. Esiri was a Vice President of
Wand Partners. Mr. Esiri has a law degree from University College London and an
M.B.A. from the University of Greenwich in England.
C. ANDREW WATT has served as our Chief Financial Officer since 1996 and our
Executive Vice President and Treasurer since March 2000. Mr. Watt served as our
Chief Operating Officer from 1996 through February 2000 and our Secretary from
1996 through March 2000. Prior to joining Cyber
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Dialogue, Mr. Watt founded and operated a consumer services company based in
London. Mr. Watt has a B.A. from Durham University in England.
ELIZABETH MELCHER has served as our Executive Vice President since 1997 and
has been Executive Vice President, Strategic Alliances since 1999. From 1995 to
1997, Ms. Melcher was Director of Business Planning for The Gartner
Group, Inc., and was a Senior Analyst with The Gartner Group from 1992 to 1995.
Ms. Melcher has a B.A. from Columbia University and an M.Phil. from Cambridge
University in England.
C. RICHARD VERMILLION, III has served as our Chief Technology Officer since
1996. Prior to joining Cyber Dialogue, Mr. Vermillion worked at McKinsey & Co.,
where he focused on Internet security and application development.
Mr. Vermillion has a B.S.E. from Princeton University.
KEVIN MABLEY has served as our Vice President, Strategic and Analytical
Services since January 2000 and served as Director of Research from 1996 to the
present. Prior to joining Cyber Dialogue, Mr. Mabley was a project director at
Yankelovich Partners. Mr. Mabley has a B.A. from Muhlenberg College.
LYNNE BOLEN-DUPNOCK joined Cyber Dialogue in January 2000 as Vice President,
eCRM Solutions. From 1995 to 2000, Ms. Bolen-Dupnock worked at Digitas (formerly
Bronnercom) where she was the Vice President, Director of Database Marketing
Services for the AT&T and American Electric Power accounts. Ms. Bolen-Dupnock
has a B.A. from West Virginia University and an M.B.A. from the University of
South Carolina.
LOPO CHAMPALIMAUD has served as our Vice President, Key Account Management
since 1998 and served as our first sales professional and Director of Account
Services from 1995 to 1998. Mr. Champalimaud is the step-son of Bruce W.
Schnitzer, Chairman of our Board of Directors. Mr. Champalimaud has a B.A. from
McGill University in Canada.
DAVID J. CALLARD has served as a director since 1999. Mr. Callard has been
the President of Wand Partners Inc., a private equity investment firm and an
affiliate of Cyber Dialogue's largest stockholders, since 1997. Mr. Callard has
been President of Wand Partners (S.C.) since 1990 and holds management positions
with various entities associated with Wand Partners. From 1972 to 1989,
Mr. Callard was a General Partner, Managing Director and Director of Alex.
Brown & Sons. In addition to directorships of Wand portfolio companies,
Mr. Callard has been a director of Information Management Associates Inc. since
1992, a director of iGo Corporation since 1995, a director of Sky Mall, Inc.
since January 2000 and a Trustee of Panorama Trust. Mr. Callard has a B.A. from
Princeton University and a J.D. from New York University School of Law.
MATTHEW DOULL has served as a director since March 2000. Mr. Doull serves as
chairman of our audit committee and sits on our compensation committee.
Mr. Doull has served as President of Hollinger Digital Inc./Hollinger Ventures
since 1996. Hollinger Digital Inc./Hollinger Ventures is the corporate venture
capital program affiliated with Hollinger International Inc., a newspaper
publisher. From 1995 to 1996, Mr. Doull served as an associate publisher of
Wired Magazine. From 1994 through 1995, Mr. Doull served as a new media manager
for Telegraph Group, a European commercial website. Mr. Doull has a B.A. from
Brown University.
CHRISTOPHER P. FORESTER has served as a director since 1999. Mr. Forester
has served as a Partner of eCom Partners LLC since 1999. eCom Partners is a
venture capital firm specializing in Internet and e-commerce related investments
and is one of our principal stockholders. Mr. Forester was retired from 1996
through 1998. From 1994 to 1995, Mr. Forester managed Merrill Lynch's technology
practice. From 1977 to 1993, the last five years as a General Partner,
Mr. Forester worked in the Corporate Finance Department of Goldman, Sachs &
Co.'s Investment Banking Division. Mr. Forester was the head of various industry
groups while at Goldman, including high technology, specialty retailing and
healthcare. Mr. Forester also serves as a Director of Telex Corporation and
several of eCom Partner's
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portfolio companies. Mr. Forester has a B.S. from Yale University and an M.B.A.
from Stanford Business School.
JOHN FULLMER has served as a director since 1999. Mr. Fullmer has served as
a Partner of eCom Partners LLC since 1999. From 1980 through 1999, Mr. Fullmer
held various positions at Cendant Corporation and its predecessor, CUC
International, including Chief Marketing Officer and, ultimately,
Co-Chairman/CEO of Cendant Alliance Marketing, which was formed in 1998.
TIM TOBEN has served as a director since 1996. Mr. Toben serves as chairman
of our compensation committee and sits on our audit committee. Mr. Toben has
served as CEO of KnowledgeBase Marketing Inc. and its predecessor, Customer
Management Services, Inc. from 1991 to 1999 and as Chairman of KnowledgeBase
Marketing from October 1999 to January 2000. Mr. Toben has served as the
Worldwide Practice Leader--Database Marketing for Young & Rubicam Inc. from May
1999 to October 1999. Mr. Toben has a B.A. from the University of North
Carolina, Chapel Hill and an M.A. from the University of the Pacific.
MARY CARTER WARREN has served as a director since March 2000 and sits on our
audit and compensation committees. Ms. Warren serves as Executive Vice President
and Chief Marketing Officer of First USA Bank. Since 1995, Ms. Warren has held
various marketing positions with First USA. From 1985 through 1995, Ms. Warren
held various marketing positions with Citibank, N.A. including Group Product
Director. Ms. Warren has a B.A. from Mary Baldwin College.
COMPOSITION OF THE BOARD; CLASSIFIED BOARD
Our bylaws provide for up to thirteen members on the board of directors. Our
board of directors currently has eight members. Our current directors have been
elected by stockholders under the terms of a stockholders agreement in which
stockholders were obligated to elect specified nominees to our board. By its
terms, the stockholders agreement will terminate upon the consummation of this
offering. Our certificate of incorporation provides for a classified board of
directors consisting of three classes of directors, each serving staggered
three-year terms. Mark Esiri, Christopher P. Forester and Mary Carter Warren
have been designated Class I directors whose term expires at the 2001 annual
meeting of stockholders. David J. Callard, Matthew Doull and John Fullmer have
been designated Class II directors whose term expires at the 2002 annual meeting
of stockholders. Bruce W. Schnitzer and Tim Toben have been designated
Class III directors whose term expires at the 2003 annual meeting of
stockholders.
BOARD COMMITTEES
We have established an audit committee and a compensation committee. The
audit committee reviews our internal accounting procedures and considers and
reports to the board of directors with respect to other auditing and accounting
matters, including the selection of our independent auditors, the scope of
annual audits, fees to be paid to our independent auditors and the performance
of our independent auditors. The audit committee consists of Mr. Doull, as
Chairman, Mr. Toben and Ms. Warren. The compensation committee reviews and
recommends to the board of directors the salaries, benefits and stock option
grants of all employees, consultants, directors and other individuals
compensated by us. The compensation committee also administers our employee
benefits plans. The compensation committee consists of Mr. Toben, as Chairman,
Mr. Doull and Ms. Warren. Each committee member will serve until his or her
successor is elected or until his or her earlier resignation or removal.
DIRECTOR COMPENSATION
Directors do not currently receive any cash compensation for serving on the
board of directors, other than reimbursement for travel expenses. Each outside
director will automatically be granted stock
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options under our equity incentive plan. These grants are described under "Stock
Plans--2000 Stock Incentive Plan."
INDEMNIFICATION
In September 1999, we entered into indemnification agreements with
Christopher P. Forester and John Fullmer. The indemnification agreements provide
that we will indemnify them against all reasonable expenses incurred by reason
of their status as a director to the fullest extent permitted by Delaware law.
Our certificate of incorporation provides that our directors will not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability imposed by law, as in effect
from time to time.
The inclusion of this provision in the certificate of incorporation may have
the effect of reducing the likelihood of derivative litigation against directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefitted us and our stockholders.
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
On April 4, 2000, we entered into a confidentiality and non-competition
agreement with Mark Esiri. Under the terms of this agreement, during the period
that Mr. Esiri serves as our Chief Executive Officer and/or President, and for
one year following his termination, Mr. Esiri may not compete with Cyber
Dialogue. In addition, Mr. Esiri may not solicit our customers for a competitive
purpose or encourage any of our employees to become engaged in a competitive
business. In exchange for Mr. Esiri's agreement to refrain from competitive
activities, we granted to Mr. Esiri an option to purchase 200,000 shares of our
common stock with an exercise price equal to the initial public offering price.
Of these options, 40,004 vested on the date of grant and 26,666 vest on each six
month anniversary of the date of grant.
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EMPLOYMENT AND SEVERANCE AGREEMENTS
In December 1999, we entered into employment and non-compete agreements with
Lynne Bolen-Dupnock. Under these agreements, Ms. Bolen-Dupnock is an at-will
employee with a salary and guaranteed bonus of $220,000. Ms. Bolen-Dupnock has
agreed not to induce or attempt to induce any of our employees to leave the
company and not to induce or attempt to induce any of our clients to cease doing
business with us. In addition, Ms. Bolen-Dupnock has agreed not to engage in any
business with which we compete.
EXECUTIVE COMPENSATION
The following table sets forth all the compensation earned for services
rendered to Cyber Dialogue during our last completed fiscal year by our Chief
Executive Officer and our four other most highly compensated executive officers
serving at the end of our last completed fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDER-
---------------------- LYING
NAME AND PRINCIPAL POSITIONS SALARY BONUS OPTIONS
- ---------------------------- -------- -------- ------------
<S> <C> <C> <C>
Mark Esiri (1)........................................... $150,000 $160,345 --
Chief Executive Officer and President
C. Andrew Watt........................................... $130,000 $ 40,000 --
Chief Financial Officer, Executive Vice President and
Treasurer (2)
Elizabeth Melcher........................................ $100,000 $ 60,000 --
Executive Vice President, Strategic Alliances
C. Richard Vermillion, III............................... $115,000 $ 60,000 200,000
Chief Technology Officer
Lopo Champalimaud........................................ $161,048 (3) $ 25,000 140,000
Vice President, Key Account Management
</TABLE>
- ------------------------
(1) Mr. Esiri is an employee of Wand Partners Inc., a private equity investment
firm and an affiliate of our largest stockholders. Wand Partners has
assigned Mr. Esiri's services to Cyber Dialogue and continues to pay
Mr. Esiri's salary, for which we reimburse Wand Partners.
(2) During 1999, Mr. Watt served as our Chief Operating Officer, Chief Financial
Officer and Secretary.
(3) Includes $116,048 paid in sales commissions.
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<PAGE>
OPTION GRANTS IN 1999
The following table sets forth information regarding stock options granted
during the year ended December 31, 1999 to our executive officers named on the
Summary Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDER- GRANTED TO PRICE APPRECIATION FOR
LYING EMPLOYEES EXERCISE OPTION TERM (2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ----------------------
NAME GRANTED YEAR SHARE(1) DATE 5% 10%
- ---- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark Esiri...................... -- -- -- -- -- --
C. Andrew Watt.................. -- -- -- -- -- --
Elizabeth Melcher............... -- -- -- -- -- --
C. Richard Vermillion, III...... 100,000 (3) 8.5 $0.51 03/31/09 1,740,784 2,802,117
100,000 (3) 8.5 $0.60 03/31/09 1,731,784 2,793,116
Lopo Champalimaud............... 140,000 (4) 11.9 $0.51 03/31/09 2,437,098 3,922,963
</TABLE>
- ------------------------
(1) The exercise prices represent our board's determination of the fair market
value of the common stock on the grant date. The board considered many
factors in establishing such prices, including our financial condition and
business prospects, our operating results, the absence of a market for our
common stock and the risks normally associated with technology companies.
(2) These amounts represent assumed rates of appreciation in the price of our
common stock from an assumed initial public offering price of $11.00, during
the terms of the options, using rates specified in applicable federal
securities regulations. The 5% and 10% assumed annual rates of compounded
stock price appreciation do not represent our estimate or projection of our
future common stock prices. Actual gains, if any, on stock option exercises
will depend on the future price of the common stock. There is no
representation that the rates of appreciation reflected in this table will
be achieved.
(3) 100,000 of these options have an exercise price of $0.51 and vest over two
years, with 50,000 becoming exercisable on March 31, 2000 and 50,000
becoming exercisable on March 31, 2001. The other 100,000 of these options
have an exercise price of $0.60, which was $0.09 above the fair market value
on the grant date, and vest over four years, with 25,000 becoming
exercisable on each of March 31, 2000, March 31, 2001, March 31, 2002 and
March 31, 2003.
(4) 70,000 of these options vest over two years, with 35,000 becoming
exercisable on March 31, 2000 and 35,000 becoming exercisable on March 31,
2001. The other 70,000 of these options vest over four years, with 17,500
becoming exercisable on each of March 31, 2000, March 31, 2001,
March 31, 2002 and March 31, 2003.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth information concerning the number and value
at December 31, 1999 of unexercised options held by each of our executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark Esiri............................ -- -- -- -- -- --
C. Andrew Watt........................ -- -- 837,680 79,920 $6,789,753 $ 626,040
Elizabeth Melcher..................... -- -- 837,680 79,920 6,789,753 626,040
C. Richard Vermillion, III............ 31,000 $254,728 176,900 332,500 1,455,113 2,632,942
Lopo Champalimaud..................... -- -- 55,000 225,000 449,773 1,787,388
</TABLE>
- --------------------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the options as of December 31, 1999, which the
board of directors has determined to be $8.35 per share, and the exercise
price of the named executive officer's options. In determining the fair
market value of our common stock, the board of directors considered various
factors, including our financial condition and business prospects, our
operating results, the absence of a market for our common stock and the
risks normally associated with technology companies.
1996 STOCK OPTION PLAN
On December 1, 1996, we adopted and our stockholders approved our 1996 stock
option plan, effective as of the same date. On April 4, 2000, our board adopted
an amendment to the plan to conform certain provisions of the plan to our 2000
stock incentive plan. The amendments will apply to options currently outstanding
under the plan. The purpose of the plan is to afford an incentive to directors,
officers and key employees of us and our subsidiaries to acquire a proprietary
interest in us, to increase their efforts on behalf of us and to promote our
success.
GENERAL. A maximum of 2,620,000 shares of common stock are reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event.
The board of directors terminated the plan, effective April 4, 2000. The
termination of the plan does not affect any options previously granted under the
plan.
ADMINISTRATION. The plan is administered by our board of directors. In the
alternative, the board of directors may appoint a committee consisting of not
less than two members of the board of directors to administer the plan on behalf
of the board of directors, subject to such terms and conditions as the board of
directors may prescribe, and for this purpose, the body administering the plan
will be referred to as the committee. The committee will be organized in a
manner so as to satisfy the provisions of Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the
Internal Revenue Code, and the plan will be interpreted in a manner consistent
with the requirements of those rules and regulations.
The committee has full authority, subject to the provisions of the plan,
among other things, to determine the persons to whom awards will be granted, to
determine the type of award to be granted, the number of shares to be made
subject to awards, the exercise price and other terms and conditions of the
awards, and to interpret the plan and prescribe, amend and rescind rules and
regulations relating to the plan.
46
<PAGE>
ELIGIBILITY. Awards may be granted under the plan to our directors,
officers and key employees.
TERMS AND CONDITIONS OF OPTIONS. Options may be either incentive stock
options, as that term is defined in Section 422 of the Internal Revenue Code, or
nonqualified stock options. The exercise price of an option granted under the
plan is determined by the committee at the time the option is granted, but may
not be less than the fair market value of the common stock on the date of grant.
Unless otherwise determined by the committee, options become exercisable in
cumulative installments of 25% per year beginning on the first anniversary of
the date of grant of the stock option. Stock options are exercisable at the
times and upon the conditions that the committee may determine, as reflected in
the applicable option agreement. Generally, the exercise period of an option
will be determined by the committee, but may not exceed ten years from the date
of grant.
The option exercise price must be paid in full at the time of exercise, and
is payable by either of the following methods or a combination thereof:
- in cash or cash equivalents; or
- through a broker cashless exercise procedure approved by us.
TERMINATION OF EMPLOYMENT. Each unexercised option granted under the plan
will expire immediately on the date the optionee ceases to be employed by us or
our subsidiary for any reason other than death or disability, or on such other
date as may be prescribed by the committee and set forth in an option agreement.
If an optionee's employment or service terminates because of death or
disability, all options that are exercisable at the time of termination may be
exercised for a period of six months immediately following termination, or on a
later date as may be prescribed by the committee and set forth in an option
agreement, but in no case after the options expire in accordance with their
terms.
In the event that, within 18 months following a change in control, an
optionee's employment is terminated by us without cause or by the optionee for
good reason, the unvested portion of the optionee's options will become fully
vested and exercisable on the date of termination.
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
On December 1, 1996, we adopted, and on January 31, 1998, our stockholders
approved, our 1997 stock option plan, effective as of the same date. On
June 25, 1998, we adopted, and our stockholders approved, an amendment and
restatement of that plan, which was renamed the Cyber Dialogue Inc. amended and
restated 1997 stock option plan, effective as of the same date. On November 17,
1999, our board and stockholders approved an amendment to the plan increasing
the number of authorized shares. On April 4, 2000, our board adopted an
amendment to the plan to conform certain provisions of the plan to our 2000
stock incentive plan. The amendment will apply to options currently outstanding
under the plan. The purpose of the plan is to afford an incentive to directors,
officers and employees of our company and our subsidiaries to acquire a
proprietary interest in us, to increase their efforts on behalf of us and to
promote the success of our business.
GENERAL. A maximum of 4,971,000 shares of common stock are reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event.
The board of directors terminated the plan, effective April 4, 2000. The
termination of the plan does not affect any options previously granted under the
plan.
ADMINISTRATION. The plan is administered by a committee established by the
board of directors, the composition of which must at all times consist of three
individuals who are each members of the board
47
<PAGE>
of directors. The committee is organized in a manner so as to satisfy the
provisions of Rule 16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934 and Section 162(m) of the Internal Revenue Code, and the plan will
be interpreted in a manner consistent with the requirements of those rules and
regulations.
The committee has the authority in its discretion, subject to and not
inconsistent with the express provisions of the plan, to administer the plan and
to exercise all the powers and authorities either specifically granted it under
the plan or necessary or advisable in the administration of the plan, including,
without limitation, the authority to:
- interpret the plan;
- prescribe, amend and rescind rules and regulations relating to the plan;
and
- make all other determinations deemed necessary or advisable for the
administration of the plan.
The committee may delegate to one or more of its members any administrative
duties as it may deem advisable.
ELIGIBILITY. Awards may be granted under the plan to our directors,
officers and employees.
TERMS AND CONDITIONS OF OPTIONS. Options may be either incentive stock
options, as that term is defined in Section 422 of the Internal Revenue Code, or
nonqualified stock options. The exercise price of a stock option granted under
the plan is determined by the committee at the time the option is granted, but
may not be less than the fair market value per share of common stock on the date
of grant. Unless otherwise determined by the committee, options become
exercisable in cumulative installments of 25% per year beginning on the first
anniversary of the date of grant of the stock option. Stock options are
exercisable at the times and upon the conditions that the committee may
determine, as reflected in the applicable option agreement. Generally, the
exercise period will be determined by the committee, but the exercise period may
not exceed ten years from the date of grant.
The option exercise price must be paid in full at the time of exercise, and
is payable by any one of the following methods or a combination thereof:
- in cash or cash equivalents; or
- through a broker cashless exercise procedure approved by us.
TERMINATION OF EMPLOYMENT. Each unexercised option granted under the plan
will expire immediately on the date the optionee ceases to be employed by us or
any of our affiliates for any reason other than death or disability, or on such
other date as may be prescribed by the committee and set forth in an option
agreement. If an optionee's employment or service terminates because of death or
disability, all options that are exercisable at the time of termination may be
exercised for a period of six months immediately following termination, or on
such other later date as may be prescribed by the committee and set forth in an
option agreement, but in no case after the options expire in accordance with
their terms.
In the event that, within 18 months following a change in control, an
optionee's employment is terminated by us without cause or by the optionee for
good reason, the unvested portion of the optionee's options will become fully
vested and exercisable on the date of termination.
2000 STOCK INCENTIVE PLAN
Our 2000 stock incentive plan was adopted by our board of directors and
approved by our stockholders on April 4, 2000. The purpose of the plan is to
promote our long-term growth and profitability by providing key people with
incentives to improve stockholder value and to contribute to
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<PAGE>
our growth and financial success and by enabling us to attract, retain and
reward the best available persons for positions of substantial responsibility.
GENERAL. We have reserved for issuance that number of shares of common
stock representing 25% of the common stock outstanding from time to time, on a
fully diluted basis, less the number of shares subject to outstanding options
under our 1996 stock option plan and amended and restated 1997 stock option plan
on the date of the 2000 plan's adoption and less the number of shares reserved
for issuance from time to time under the employee stock purchase plan, subject
to equitable adjustment upon the occurrence of any stock dividend or other
distribution, stock split, merger, consolidation, combination, share repurchase
or exchange, or other similar corporate transaction or event. If an award
granted under the plan expires or is terminated for any reason, the shares of
common stock underlying the award will again be available for purposes of the
plan. No individual may be granted awards relating to more than 5% of the common
stock outstanding on a fully diluted basis, in any 12-month period.
TYPES OF AWARDS. The following awards may be granted under the plan:
- stock options, including incentive stock options and nonqualified stock
options;
- restricted stock;
- phantom stock;
- stock bonuses; and/or
- other stock-based awards.
ADMINISTRATION. The plan is administered by our board of directors. In the
alternative, the board of directors may appoint a committee consisting of not
less than two members of the board of directors to administer the plan on behalf
of the board of directors, subject to the terms and conditions as the board of
directors may prescribe, and for this purpose, the body administering the plan
will be referred to as the committee. The committee will be organized in a
manner so as to satisfy the provisions of Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934 and Section 162(m) of the
Internal Revenue Code, and the plan will be interpreted in a manner consistent
with the requirements of those rules and regulations.
The committee has full authority, subject to the provisions of the plan,
among other things, to determine the persons to whom awards will be granted, to
determine the type of award to be granted, the number of shares to be made
subject to awards, the exercise price and other terms and conditions of the
awards, and to interpret the plan and prescribe, amend and rescind rules and
regulations relating to the plan. The board of directors or the committee may
delegate to any of our senior management the authority to make grants of awards
to our employees who are not our executive officers or directors.
ELIGIBILITY. Awards may be granted under the plan to employees, directors,
including directors who are not employees, and consultants of our company or any
of our affiliates, as selected by the committee.
TERMS AND CONDITIONS OF OPTIONS. Options may be either incentive stock
options, as that term is defined in Section 422 of the Internal Revenue Code, or
nonqualified stock options. The exercise price of a stock option granted under
the plan is determined by the committee at the time the option is granted, but
the exercise price of an incentive stock option may not be less than the fair
market value per share of common stock on the date of grant. Stock options are
exercisable at the times and upon the conditions that the committee may
determine, as reflected in the applicable option agreement. Generally, the
exercise period will be determined by the committee, but in the case of an
incentive stock option, the exercise period may not exceed ten years from the
date of grant.
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The option exercise price must be paid in full at the time of exercise, and
is payable by any one of the following methods or a combination thereof:
- in cash or cash equivalents;
- the surrender of previously acquired shares of common stock that have been
held by the participant for at least six months prior to the date of
surrender;
- if so determined by the committee as of the grant date, authorization for
us to withhold a number of shares otherwise payable upon the exercise of
an option; or
- through a broker cashless exercise procedure approved by us.
The committee may, in its sole discretion, authorize us to make or guarantee
loans to a participant to assist the participant in exercising options.
The committee may provide at the time of grant of an option that the
participant may elect to exercise all or any part of the option before it
becomes vested and exercisable. If the participant elects to exercise all or
part of a non-vested option, the participant will be issued shares of restricted
stock which will become vested in accordance with the vesting schedule set forth
in the original option agreement. The stock will be subject to our repurchase
option if the optionee's employment or service terminates prior to its vesting.
OUTSIDE DIRECTOR OPTIONS. Outside directors, which are non-employee
directors who own, together with their affiliates, less than 1% of the voting
power of our company will be eligible for automatic grants of non-qualified
options under the plan. Each outside director has been granted an option to
purchase 25,000 shares of common stock. Following this offering, each outside
director will be granted upon his or her first election or appointment to the
board of directors, an option to purchase 25,000 shares of common stock. In
addition, immediately following each annual meeting of stockholders after the
initial public offering, each outside director then serving who has been
re-elected or re-appointed at such stockholder meeting may be granted, in the
sole discretion of our board, an option to purchase 25,000 shares of common
stock. Each option granted under the plan to an outside director will have an
exercise price equal to the fair market value of the common stock on the date of
grant and will become exercisable in three equal parts on the date of grant, the
first anniversary of the date of grant and the second anniversary of the date of
grant, provided that the director is still serving as an outside director as of
the date of vesting of the option. Each option granted to an outside director
will expire on the tenth anniversary of the date of grant of the option. The
other terms of the options granted to outside directors will be consistent with
the terms of options granted to employees.
RESTRICTED STOCK. The plan provides for awards of common stock that are
subject to restrictions on transferability and other restrictions imposed by the
committee. Except to the extent restricted under the award agreement relating to
the restricted stock, a participant granted restricted stock will have all of
the rights of a stockholder.
PHANTOM STOCK. The plan provides for the award of phantom stock which, upon
vesting, entitles the participant granted the award to receive an amount in cash
equal to the fair market value of the number of shares subject to the award.
Vesting of all or a portion of a phantom stock award may be subject to various
conditions established by the committee.
STOCK BONUSES; OTHER AWARDS. The plan provides that awards of shares of
common stock may be made to employees in the discretion of the committee. In
addition, other awards valued in whole or in part by reference to, or otherwise
based on, common stock may be granted either alone or in addition to other
awards under the plan, in the committee's discretion.
TERMINATION OF EMPLOYMENT. Unless otherwise determined by the committee,
the unvested portion of awards granted under the plan will immediately be
cancelled upon termination of a participant's
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employment or service with us. If a participant's employment or service
terminates other than for cause or because of death, disability or retirement,
all options that are exercisable at the time of termination may be exercised by
the participant for no longer than 90 days after the date of termination. If a
participant's employment or service terminates for cause, all options held by
the participant will immediately terminate. If a participant's employment or
service terminates as a result of death, all options that are exercisable at the
time of death may be exercised by the participant's heirs or distributees for
one year. If a participant's employment or service terminates because of
disability or retirement, all options that are exercisable at the time of
termination may be exercised for a period of one year immediately following
termination. In no case may an option be exercised after it expires in
accordance with its terms.
In the event that, within 18 months following a change in control, an
optionee's employment is terminated by us without cause or by the optionee for
good reason, the unvested portion of the optionee's options will become fully
vested and exercisable on the date of termination.
AMENDMENT, TERMINATION OF PLAN. The board of directors may modify or
terminate the plan or any portion of the plan at any time, except that an
amendment that requires stockholder approval in order for the plan to continue
to comply with any law, regulation or stock exchange requirement will not be
effective unless approved by the requisite vote of our stockholders. Amendment
or termination of the plan cannot adversely affect an outstanding award without
the award holder's consent. No options may be granted under the plan after the
day immediately preceding the tenth anniversary of its adoption date.
Since the amount of benefits to be received by any plan participant who is
our employee or an employee of any of our affiliates is determined by the
committee, the amount of future benefits to be allocated to any employee or
group of employees under the plan in any particular year is not determinable.
EMPLOYEE STOCK PURCHASE PLAN
On April 4, 2000, our board of directors adopted, and our stockholders
approved, the employee stock purchase plan. The employee stock purchase plan is
designed to encourage the purchase by our employees of shares of our common
stock.
GENERAL. The employee stock purchase plan is intended to comply with the
requirements of Section 423 of the Internal Revenue Code, and to assure the
participants of the tax advantages provided under Section 423 and other related
provisions of the Internal Revenue Code. The employee stock purchase plan will
be administered by a committee established by the board of directors comprised
solely of non-employee directors who are not eligible to participate in the
employee stock purchase plan. The committee may make rules and regulations and
establish procedures for the administration of the employee stock purchase plan
as it deems appropriate.
SHARES AVAILABLE. The board has authorized for issuance under the plan a
total of 350,000 shares of common stock subject to adjustment by the committee
in the event of a recapitalization, stock split, stock dividend or similar
corporate transaction, plus an additional number of shares to be added on the
first day of each fiscal year during the plan beginning in 2001 equal to the
lesser of:
- 500,000 shares,
- 2% of the outstanding shares on that date, or
- a lesser amount determined by the committee.
ELIGIBILITY. For the plan's initial offering period, any person who is
employed by us or any of our subsidiaries on or before April 4, 2000 and who
works more than 20 hours per week will be eligible to
51
<PAGE>
participate. Subsequently, any person who is employed by us or any of our
subsidiaries and who has at least six months of service at the beginning of the
offering period and works more than 20 hours per week will be eligible to
participate in the offering. However, the committee will have the sole
discretion to determine that any person whose compensation exceeds $150,000 in
the calendar year immediately preceding any offering period will not be eligible
to participate in that offering.
STOCK PURCHASES. Under the employee stock purchase plan, each eligible
employee will be permitted to purchase shares of our common stock through
regular payroll deductions and/or cash payments in an amount equal to 1% to 15%
of the employee's compensation for each payroll period. The fair market value of
the shares of common stock which may be purchased by any employee under this or
any of our other plans that is intended to comply with Section 423 of the
Internal Revenue Code during any calendar year may not exceed $25,000.
The employee stock purchase plan provides for a series of consecutive,
overlapping offering periods. The first offering period will begin on the first
trading day following the initial public offering and end on December 31, 2000.
Each subsequent offering period will have a duration of 12 months, beginning on
January 1 and July 1 of each year during the term of the plan. Successive
six-month purchase periods will run during each offering period.
During each offering period, participating employees will be able to
purchase shares of common stock with payroll deductions at a purchase price
equal to 85% of the fair market value of the common stock at either the
beginning of each offering period or the end of each purchase period within the
offering period, whichever price is lower.
To the extent permitted by applicable laws, regulations, or stock exchange
rules, if the fair market value of the shares at the end of any purchase period
is lower than the fair market value of the shares on the date the related
offering period began, then all participants in that offering period will be
automatically withdrawn from the offering period immediately after the exercise
of their option on the date the purchase period ends. The participants will
automatically be re-enrolled in the immediately following offering period when
that offering period begins.
The options granted to a participant under the employee stock purchase plan
are not transferable otherwise than by will or the laws of descent and
distribution, and are exercisable, during the participant's lifetime, only by
the participant.
AMENDMENT, TERMINATION OF PLAN. The plan and all offering periods under the
plan will automatically terminate on the tenth anniversary of the first offering
period under the plan. The board of directors may from time to time amend or
terminate the employee stock purchase plan; provided, that any amendment or
termination not adversely affect the rights of any participant without the
consent of the participant and, to the extent required by Section 423 of the
Internal Revenue Code or any other law, regulation or stock exchange rule, no
amendment will be effective without the approval of stockholders entitled to
vote thereon. Additionally, the committee may make any amendments it deems
necessary to comply with applicable laws, rules and regulations.
Since the amount of benefits to be received by each participant in the
employee stock purchase plan is determined by his or her elections, the amount
of future benefits to be allocated to any individual or group of individuals
under the plan in any particular year is not determinable.
MANAGEMENT INCENTIVE PLAN
Our management incentive plan was adopted by our board of directors on
April 4, 2000. The purposes of the management incentive plan are to reinforce
corporate business goals and to promote the achievement of annual and long-range
financial, business and other objectives by providing for the payment of cash
bonuses to our officers and other key employees. The plan will be administered
by the compensation committee of our board of directors. The compensation
committee will have the
52
<PAGE>
authority to determine who will participate in the plan and to determine the
terms and conditions of incentive awards granted under the plan. The payment of
bonuses under the management incentive plan will be based on the achievement
during a performance period determined by the compensation committee of specific
performance goals set by the compensation committee, which may include any or
all or none of the following:
- pre-tax income or after-tax income;
- operating profits;
- return on equity, assets, capital or investments;
- earnings or book value per share;
- sales or revenue;
- operating expenses;
- increases in the market price of common stock;
- implementation or completion of critical projects or processes;
- comparison of actual performance during a performance period against
budget for that period;
- growth of revenue; or
- reductions in expenses.
Minimum bonuses will be based on achievement of 80% of the performance
goals, target bonuses will be based on the achievement of 100% of the
performance goals and maximum bonuses will be based on achievement of 150% of
the performance goals. A bonus will be paid only if the participant is employed
by us or our affiliates on the day the bonus is to be paid. Under the plan, no
payment may be made to one of our executive officers that exceeds 150% of the
officer's annual base salary. Any successor to Cyber Dialogue will be required
to assume the plan at the time of a change in control, and will be obligated to
honor the terms of the plan during the performance period during which the
change in control occurs.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 4, 2000, and as adjusted to
reflect the sale of the shares of common stock offered by this prospectus,
information with respect to the beneficial ownership of common stock as to:
- each person or entity known by us to own beneficially more than 5% of our
stock;
- our named executive officers;
- our directors; and
- all executive officers and directors as a group.
Except as otherwise indicated, and subject to applicable community property
laws, the persons named below have sole voting and investment power with respect
to all shares of common stock held by them.
Applicable percentage ownership in the table is based on 20,031,876 shares
of common stock outstanding as of April 4, 2000. Beneficial ownership is
determined in accordance with the rules of the SEC. Shares of common stock
subject to options or warrants that are presently exercisable or exercisable
within 60 days of April 4, 2000, are deemed outstanding for the purpose of
computing the percentage ownership of the person or entity holding the options
or warrants, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person or entity.
Unless otherwise indicated below, each person or entity named below has an
address in care of our principal executive offices.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------
PERCENT
-------------------
BEFORE AFTER
NUMBER OFFERING OFFERING
---------- -------- --------
<S> <C> <C> <C>
5% Stockholders:
Entities associated with Wand Partners Inc. (1)(2)........ 11,605,222 56.8% 45.6%
Young & Rubicam Inc. (3).................................. 2,494,600 12.5 10.0
Named executive officers and directors:.....................
Mark Esiri (4)............................................ 1,243,804 6.2 5.0
C. Andrew Watt (5)........................................ 1,468,080 7.0 5.7
Elizabeth Melcher (6)..................................... 1,097,680 5.3 4.2
C. Richard Vermillion, III (7)............................ 551,900 2.7 2.2
Lopo Champalimaud (8)..................................... 127,500 * *
Bruce W. Schnitzer (1) (9)................................ 11,605,222 56.8 45.6
David J. Callard (1) (10)................................. 11,605,222 56.8 45.6
Matthew Doull (11)........................................ 8,250 * *
Christopher P. Forester (12) (13)......................... 1,181,400 5.8 4.7
John Fullmer (12) (13).................................... 1,181,400 5.8 4.7
Tim Toben (14)............................................ 8,250 * *
Mary Carter Warren (15)................................... 8,250 * *
All directors and officers as a group (14 persons).......... 17,434,836 75.7 62.2
</TABLE>
- ------------------------
* Represents less than 1%.
(1) The address for the entities associated with Wand Partners Inc., Bruce W.
Schnitzer and David J. Callard is in care of Wand Partners Inc., 630 Fifth
Avenue, Suite 2435, New York, New York 10111.
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<PAGE>
(2) Consists of:
- 4,664,200 shares held by Wand/Yankelovich Investments L.P.;
- 3,936,000 shares held by Wand Equity Portfolio II L.P. and includes
385,200 shares issuable under warrants exercisable within 60 days of
April 4, 2000;
- 1,264,600 shares held by Wand Partners L.P.;
- 828,622 shares held by Yankelovich Holdings Inc.;
- 848,200 shares held by Wand Partners (S.C.) Inc.; and
- 63,600 shares held by Wand Affiliates Fund L.P. and includes 22,600 shares
issuable under warrants exercisable within 60 days of April 4, 2000.
Wand/Yankelovich Investments L.P., Wand Equity Portfolio II L.P., Wand
Partners L.P., Yankelovich Holdings Inc., Wand Partners (S.C.) Inc. and Wand
Affiliates Fund L.P. are part of an affiliated group of entities referred
to, collectively, as entities associated with Wand Partners Inc.
(3) The address for Young & Rubicam Inc. is 285 Madison Avenue, New York, New
York 10017.
(4) Includes 40,004 shares issuable under stock options exercisable within
60 days of April 4, 2000. Mr. Esiri owns a limited partnership interest in
Wand/Yankelovich Investments L.P. Mr. Esiri is a member of Wand Partners
LLC, the general partner of Wand Equity Portfolio II L.P. and is a
stockholder of Wand Partners Inc., which provides management services to
Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P. Except for those
shares held by him directly, Mr. Esiri disclaims beneficial ownership of any
shares of common stock, including any of the 11,605,222 shares held by the
entities associated with Wand Partners Inc., as described in note (2) above.
(5) Includes 837,680 shares issuable under stock options exercisable within
60 days of April 4, 2000.
(6) Includes 837,680 shares issuable under stock options exercisable within 60
days of April 4, 2000.
(7) Includes 291,900 shares issuable under stock options exercisable within 60
days of April 4, 2000.
(8) Includes 127,500 shares issuable under stock options exercisable within 60
days of April 4, 2000.
(9) Mr. Schnitzer is the majority stockholder and Chairman of the Board of Wand
Partners (S.C.) Inc., which is the general partner of Wand/Yankelovich
Investments L.P. and Wand Partners L.P. Mr. Schnitzer owns a limited
partnership interest in Wand/Yankelovich Investments L.P. Mr. Schnitzer is
also a managing member of Wand Partners LLC, the general partner of Wand
Equity Portfolio II L.P., and a member of Wand AF LLC, the general partner
of Wand Affiliates Fund L.P. Mr. Schnitzer is a significant stockholder of
Wand Partners Inc., which provides managements services to Wand Equity
Portfolio II L.P. and Wand Affiliates Fund L.P. Mr. Schnitzer may be deemed
to beneficially own all of the 11,605,222 shares held by the entities
associated with Wand Partners Inc., as described in note (2) above.
(10) Mr. Callard is a minority stockholder and director of Wand Partners
(S.C.) Inc., which is the general partner of Wand/Yankelovich Investments
L.P. and Wand Partners L.P. Mr. Callard owns a limited partnership interest
in Wand/Yankelovich Investments L.P. Mr. Callard is also a managing member
of Wand Partners LLC, the general partner of Wand Equity Portfolio II L.P.
and a member of Wand AF LLC, the general partner of Wand Affiliates Fund
L.P. Mr. Callard is a stockholder of Wand Partners Inc., which provides
management services to Wand Equity Portfolio II L.P. and Wand Affiliates
Fund L.P. Mr. Callard disclaims beneficial ownership of any of the
11,605,222 shares held by the entities associated with Wand Partners Inc.,
as described in note (2) above.
55
<PAGE>
(11) Includes 8,250 shares issuable under stock options exercisable within
60 days of April 4, 2000. The address for Matthew Doull is in care of
Hollinger Ventures, 270 Lafayette Street, Suite 600, New York, New York
10012.
(12) The address for Christopher P. Forester and John Fullmer is in care of eCom
Partners Fund I LLC, 101 Merritt 7, Norwalk, Connecticut 06851.
(13) Consists of 886,000 shares of common stock and 295,400 shares issuable
under a warrant exercisable within 60 days of April 4, 2000 held by eCom
Partners. As partners of eCom Partners, Messrs. Forester and Fullmer may be
deemed to beneficially own all of the 1,181,400 shares held by eCom
Partners.
(14) Includes 8,250 shares issuable under stock options exercisable within
60 days of April 4, 2000. The address for Tim Toben is 208 W. Franklin
Street, Chapel Hill, North Carolina 27516.
(15) Includes 8,250 shares issuable under stock options exercisable within
60 days of April 4, 2000. The address for Mary Carter Warren is in care of
First USA Bank, 201 North Walnut Street, Wilmington, Delaware 19801.
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<PAGE>
RELATED PARTY TRANSACTIONS
AMFMI
AMFMi is the Internet subsidiary of AMFM Inc. In August 1999, we entered
into an agreement with AMFMi. Affiliates of Wand Partners Inc. are minority
investors in AMFMi and are also affiliates of our majority stockholders.
Mr. Esiri, our Chief Executive Officer and President, Mr. Schnitzer, our
Chairman of the Board and Mr. Callard, one of our directors, have indirect
equity interests in those affiliates of Wand Partners Inc. Under the agreement,
we assist AMFMi in planning and implementing its consumer e-commerce and
affinity marketing business and are the exclusive provider of customer
relationship management services to AMFMi. In return, AMFMi pays us for these
services. In 1999, net revenue recognized from AMFMi was $3.1 million. The
agreement expires in December 2000 and is renewable for an additional 44-month
period. In connection with the agreement, we granted to AMFMi a warrant to
purchase 1,000,000 shares of our common stock at an exercise price equal to
$1.55 per share. The warrant may only be exercised to purchase vested shares and
expires on August 30, 2005. The warrant provides a vesting schedule as follows:
- 66,600 shares vested as of August 30, 1999;
- 66,600 shares vested as of February 29, 2000; and
- 66,800 shares will vest on August 30, 2000.
If the agreement is renewed by AMFMi for the additional 44-month term,
400,000 shares will vest on the first day of the renewal term and 200,000 shares
will vest on the second anniversary of that day. The remaining 200,000 shares
will vest if AMFMi renews the agreement at the end of the additional 44-month
term. The warrant is subject to adjustment if we pay a stock dividend or effect
a stock split or a reverse stock split. The warrant is also subject to
adjustment upon a reclassification, consolidation, merger or share exchange.
Wand Partners' minority investment in AMFMi is held principally by Wand
Equity Portfolio II L.P. Mr. Esiri, our Chief Executive Officer and President,
Mr. Schnitzer, our Chairman of the Board, and Mr. Callard, one of our directors,
hold equity interests in Wand Partners LLC, which is the general partner of Wand
Equity Portfolio II L.P. and which has a 20% interest in the profits of Wand
Equity Portfolio II L.P.
CD/AMFMi LLC was formed to provide our employees an indirect opportunity to
participate in the AMFMi investment. CD/AMFMi LLC purchased from Wand Partners
LLC a 3% interest in Wand Partners LLC's interest in Wand Equity Portfolio II
L.P. relating to the AMFMi investment. As of August 30, 1999, our employees,
including Messrs. Esiri, Watt, Vermillion, Mabley and Champalimaud and
Ms. Melcher, were given, in proportion to their fully diluted stockholdings, an
aggregate of 89% of the equity interest in CD/AMFMi LLC. We retain an 11%
interest in CD/AMFMi LLC.
MANAGEMENT SERVICES AGREEMENT WITH WAND PARTNERS INC.
Since 1999, we have had an oral agreement with Wand Partners Inc. under
which Wand Partners provides us with financial and management advisory services
in exchange for an annual fee of $200,000. Mr. Esiri, our Chief Executive
Officer and President, Mr. Schnitzer, our Chairman of the Board, and
Mr. Callard, one of our directors, have ownership interests in Wand Partners
Inc. We paid $200,000 to Wand Partners under this agreement in 1999. In
February 2000, this oral agreement was formalized and superseded by a written
management services agreement. Under this agreement, Wand Partners will continue
to provide financial and management advisory services in connection with our
business and operations in exchange for an annual fee of $200,000, which amount
is subject to adjustment in the discretion of our board of directors. The
agreement has a three-year term and automatically renews for additional one-year
terms unless we cancel it. In addition to the annual fee, we must reimburse Wand
Partners for its reasonable out-of-pocket expenses and indemnify it against
specified liabilities.
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<PAGE>
Under the terms of Mr. Esiri's visa, he must continue to be an employee of
Wand Partners Inc. Under the earlier oral agreement and the current, written
management services agreement, Wand Partners has assigned Mr. Esiri to serve as
our Chief Executive Officer and President. We reimburse Wand Partners for
compensation paid by it to Mr. Esiri, for so long as he continues to serve in
that capacity and provided that this reimbursement may not exceed the amounts
approved by our board of directors. We paid $13,000 in 1997, $60,000 in 1998 and
$310,345 in 1999 to Wand Partners as reimbursement for Mr. Esiri's services
under this agreement.
As part of our relationship with Wand Partners and its affiliates, we are
provided with insurance coverage under a group insurance policy purchased by
Wand Partners. We reimburse Wand for our proportionate share of the premium
expense, which amounted to $225,000 for 1999.
ACQUISITION OF APPLIED INFORMATION MANAGEMENT MARKETING
On February 3, 2000, we acquired Applied Information Management Marketing
from Yankelovich Holdings Inc. Applied Information Management Marketing was a
wholly-owned subsidiary of Yankelovich Holdings. Both Cyber Dialogue and
Yankelovich Holdings are majority owned by entities associated with Wand
Partners Inc. Mr. Esiri, our Chief Executive Officer and President,
Mr. Schnitzer, our Chairman of the Board, and Mr. Callard, one of our directors,
have indirect equity interests in those entities associated with Wand
Partners Inc. In addition, Messrs. Callard and Schnitzer are directors of
Yankelovich Holdings. In the merger, we paid Yankelovich Holdings $3.0 million
in cash and issued to Yankelovich Holdings 881,676 shares of our common stock,
which amounted to approximately 4.4% of our outstanding common stock. The
consideration that we paid to Yankelovich Holdings was based on valuations of
both Applied Information Management Marketing and our company by our management.
Based on our initial valuation of our company, the consideration paid to
Yankelovich Holdings had a total value of approximately $6.6 million. Based on a
subsequent valuation of our company for financial reporting purposes that was
conducted after the consummation of the Applied Information Management Marketing
aquisition, the consideration paid to Yankelovich Holdings had a total value of
approximately $10.3 million. Yankelovich Holdings Inc. acquired Applied
Information Management Marketing in March 1998 for an aggregate price of
$6.75 million. Our board of directors, including the non-Wand directors,
unanimously approved the merger under these terms.
In connection with the merger, we also entered into a services agreement
with Yankelovich Holdings Inc. under which, until June 2, 2000, we, Yankelovich,
and our new subsidiary, Applied Information Management Marketing, each agreed to
make personnel available to complete previously contracted projects, regardless
of whether those personnel will become employees of Cyber Dialogue and
regardless of whether the project was at Cyber Dialogue or at Yankelovich. The
purpose of this agreement is to ensure the smooth transition of clients and
personnel from Applied Information Management Marketing to Cyber Dialogue and
allow all parties to the transaction to minimize the disruption to their
respective clients. We each agreed to perform these services at a discount to
our usual billing rates. We do not expect expenses under this agreement to be
material.
SALE OF SECURITIES
Since May 1997 through March 2000, we have issued common stock in the
following private placement transactions:
<TABLE>
<CAPTION>
DATE OF ISSUANCE NUMBER OF SHARES PRICE PER SHARE TOTAL PRICE
- ---------------- ---------------- --------------- -------------
<S> <C> <C> <C>
May 1997......................................... 3,033,000 $ 0.1055 $ 319,981.50
November 1997.................................... 260,000 $ 0.1050 $ 27,300.00
April 1998....................................... 142,000 $ 0.1055 $ 14,981.00
April 1998....................................... 2,853,400 $ 0.3505 $ 999,974.03
September 1999................................... 2,289,000 $ 3.3859 $7,750,325.10
</TABLE>
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<PAGE>
The purchasers of more than $60,000 of these securities include, among
others, the following executive officers, directors and holders of more than 5%
of our outstanding stock and their affiliates:
<TABLE>
<CAPTION>
COMMON TOTAL
EXECUTIVE OFFICERS, DIRECTORS AND 5% STOCKHOLDERS STOCK CONSIDERATION
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
Mark Esiri.................................................. 1,203,800 $ 91,777.90
Entities associated with Wand Partners Inc. ................ 4,852,400 $1,370,234.00
Young & Rubicam Inc. ....................................... 2,494,600 $ 263,180.30
MV Partners L.P. III, L.P.(1) .............................. 517,000 $1,750,484.45
</TABLE>
- ------------------------
(1) C. Richard Vermillion, Jr., president of the general partner of MV Partners,
is the father of C. Richard Vermillion, III, our Chief Technology Officer.
The share issuances described above do not include shares or warrants issued
in the AMFMi, Applied Information Management Marketing or debt and related
warrant transactions described elsewhere in this section. For additional
information regarding the ownership of securities by executive officers,
directors and stockholders who beneficially own 5% or more of our outstanding
common stock, please see "Principal Stockholders."
DEBT AND RELATED WARRANT TRANSACTIONS
In September 1996, we borrowed an aggregate of $218,293.32 from
Wand/Yankelovich Investments L.P., Wand Partners L.P. and Wand Partners
(S.C.) Inc. at an interest rate of 10.25%. In March 1999, we borrowed an
aggregate of $2.5 million from Wand Equity Portfolio II L.P. and Wand Affiliates
Fund L.P. at an interest rate of 9% and issued promissory notes and executed a
warrant to each of Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P.
Under the terms of the warrant issued to Wand Equity Portfolio II L.P., Wand
Equity is entitled to purchase 385,200 shares of common stock at the purchase
price of $0.51 per share at any time before March 31, 2007. Under the terms of
the warrant issued to Wand Affiliates Fund L.P., Wand Affiliates is entitled to
purchase 22,600 shares of common stock at the purchase price of $0.51 per share
at any time before March 31, 2007. The warrants are subject to adjustment if, at
any time prior to March 31, 2007, we issue or sell additional shares of common
stock without consideration or for a consideration per share less than the
lesser of the moving average market price and the warrant exercise price. The
warrants are also subject to adjustment upon a stock-split, reclassification,
merger or other, similar transaction.
In March 1999, we repaid the September 1996 debt owed to Wand/Yankelovich
Investments L.P., Wand Partners L.P. and Wand Partners (S.C.) Inc. by converting
that debt into 394,400 shares of our common stock at a conversion rate of $0.51
per share. And in September 1999, under the terms of the promissory notes issued
to Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P., the notes were
converted into 738,400 shares of our common stock at a conversion rate of $3.39
per share.
In connection with the September 1999 equity financing, we entered into a
consulting agreement with eCom Partners Fund I LLC. Under this agreement, we
engaged eCom Partners to provide specified consulting services in exchange for a
warrant. We have estimated the value of these consulting services and this
warrant to be $340,000 as of September 1999. The agreement will terminate upon
this offering. The termination of the agreement does not affect eCom Partners'
rights, or our obligations, under the warrant. Under the terms of the warrant,
eCom Partners is entitled to purchase:
- 295,400 shares of our common stock at an exercise price of $3.39 per share
if the warrant is exercised on or before September 14, 2000;
- 229,800 shares of our common stock at an exercise price of $4.35 per share
if the warrant is exercised between September 14, 2000 and before
September 14, 2001; or
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<PAGE>
- 188,200 shares of our common stock at an exercise price of $5.31 per share
if the warrant is exercised between September 14, 2001 and before
September 14, 2002.
The warrant expires on September 14, 2002. The warrant is subject to
adjustment if, at any time prior to expiration, we issue or sell additional
shares of common stock without consideration or for a consideration per share
less than the lesser of the moving average market price and the warrant exercise
price. The warrant is also subject to adjustment upon a stock-split,
reclassification, merger or other, similar transaction.
REGISTRATION RIGHTS AGREEMENT WITH WAND ENTITIES, ECOM PARTNERS, YOUNG & RUBICAM
INC. AND SOME OF OUR OFFICERS, DIRECTORS AND OTHER STOCKHOLDERS
Under the terms of our registration rights agreement, dated as of
September 14, 1999, between us and some of our stockholders, including named
Wand entities, eCom Partners, Young & Rubicam Inc. and some of our officers and
directors, they will be entitled to rights with respect to the registration of
some or all of their shares of common stock under the Securities Act. See
"Shares Eligible for Future Sale--Registration Rights."
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the offering, we will have:
- 60,000,000 shares of common stock authorized, of which 25,031,876 shares
of common stock will be issued and outstanding or 25,781,876 shares if the
underwriters' over-allotment option is exercised in full; and
- 15,000,000 shares of preferred stock authorized, of which none will be
issued and outstanding.
The following summarizes the terms of our capital stock that are contained
in our amended and restated certificate of incorporation and our amended and
restated bylaws, which will become effective before the closing of the offering.
Forms of our restated certificate of incorporation and amended and restated
bylaws are filed as exhibits to the registration statement that includes this
prospectus.
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available for this purpose
at the times and in the amounts as the board of directors may from time to time
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not provided for in our certificate of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The common stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon the occurrence of a liquidation, dissolution or winding-up of
our business, the holders of shares of common stock would be entitled to share
ratably in the distribution of all of our assets remaining available for
distribution after satisfaction of all our liabilities and the payment of the
liquidation preference of any outstanding preferred stock.
PREFERRED STOCK
The board of directors has the authority, within the limitations and
restrictions stated in our certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, in one or more classes
or series, and to fix the rights, preferences, privileges and restrictions of
this preferred stock, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and the number of shares
constituting any series or the designation of any series. The issuance of
preferred stock could have the effect of decreasing the market price of the
common stock and could adversely affect the voting and other rights of the
holders of common stock.
The certificate of incorporation specifically authorizes a series of
preferred stock designated Series A Junior Participating Preferred Stock,
consisting of 1,000,000 shares, in connection with the rights plan. For a
description of the rights plan and the Series A Junior Participating Preferred
Stock, See "--Anti-takeover Effects of Provisions of Delaware Law and Our
Certificate of Incorporation, Bylaws and Rights Agreement."
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OPTIONS
As of April 4, 2000, we have granted options to purchase 5,526,300 shares of
common stock to our officers, directors and employees under our stock option
plans. See "Management--Executive Compensation."
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW, OUR CERTIFICATE OF
INCORPORATION, BYLAWS AND RIGHTS AGREEMENT
Some provisions of Delaware General Corporation Law and our certificate of
incorporation and bylaws, which provisions are summarized in the following
paragraphs, may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in its best interest, including those attempts that might result in a premium
over the market price for the shares held by stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to Section 203 of the Delaware General Corporation Law, which
generally 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 stockholder became an interested stockholder unless:
- prior to the time the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by the board of
directors and authorized by the affirmative vote of at least 66 2/3% of
the outstanding voting stock that is not owned by the interested
stockholder.
For purposes of Section 203 of the Delaware General Corporation Law, a
business combination includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder.
In general, Section 203 defines an interested stockholder as a person who,
together with affiliates and associates, owns 15% or more of the outstanding
voting stock of the corporation.
Since the entities associated with Wand Partners Inc. beneficially owned
more than 15% of our voting stock before we become a public company in this
offering, Section 203 of the Delaware General Corporation Law, by its terms,
will not be applicable to business combinations with the entities associated
with Wand Partners Inc. even though they own 15% or more of our outstanding
stock. If any other person, however, acquires 15% or more of our outstanding
stock, such person will be subject to the provisions of Section 203 of the
Delaware General Corporation Law.
SUPER MAJORITY VOTE REQUIRED FOR BUSINESS COMBINATIONS
Our certificate of incorporation requires that a business combination be
approved by the affirmative vote of the holders of at least 80% of our voting
stock, voting together as a single class, excluding voting stock beneficially
owned by any interested stockholder. Thus, our certificate of incorporation may
make acquisition of control of our company more difficult. The 80% vote does not
apply if the business combination is approved by a majority of the continuing
directors or, in the case
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of a business combination involving the payment of consideration to the holders
of our capital stock, specific conditions are satisfied, including:
- conditions relating generally to the fairness of the price to be received
by our stockholders in the business combination;
- the maintenance of dividends;
- the mailing of a proxy statement to our stockholders containing the
recommendation of the continuing directors; and
- the absence of any major changes to our business or capital structure.
Under our certificate of incorporation, a business combination includes:
- any merger or consolidation of us or any of our subsidiaries with any
interested stockholder;
- any sale, lease, exchange or other disposition or arrangement with or for
the benefit of any interested stockholder involving any assets, securities
or commitments having an aggregate fair market value or involving
aggregate commitments of $10,000,000 or more or constituting more than 5%
of the book value of the total assets or 5% of the stockholders' equity of
the relevant entity;
- any plan or proposal for our liquidation or dissolution that is voted for
or consented to by any interested stockholder; and
- transactions involving us that have the effect of increasing the
proportionate share of the stock of any class or series of stock that is
owned by any interested stockholder.
Under our certificate of incorporation, an interested stockholder generally
is:
- any person that beneficially owns 10% or more of our outstanding voting
stock; or
- any person that is an affiliate or associate of ours and was the
beneficial owner of 10% or more of our outstanding voting stock within the
two-year period immediately prior to the date in question.
However, Wand Partners Inc. and its affiliates and associates are
specifically excluded from the definition of interested stockholder.
Under our certificate of incorporation, a continuing director is:
- any member of our board of directors who is not an affiliate, associate or
representative of an interested stockholder and who was a member of the
board before the interested stockholder became an interested stockholder;
and
- any successor to a continuing director who is not an affiliate, associate
or representative of an interested stockholder and who is recommended or
elected to succeed the continuing director by a majority of continuing
directors.
Our certificate of incorporation requires the affirmative vote of the
holders of at least 80% of our voting stock, voting together as a single class,
excluding voting stock beneficially owned by an interested stockholder, to amend
or repeal or adopt any provision inconsistent with the business combination
super majority provisions described above, unless any amendment, repeal or
adoption is unanimously recommended by our board of directors if all of those
directors would constitute continuing directors.
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STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our certificate of incorporation eliminates the ability of stockholders to
act by written consent. It further provides that special meetings of our
stockholders may be called only by the chairman of the board of directors, the
president or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS' NOMINATIONS
Our bylaws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide timely notice in
writing. To be timely, a stockholder's notice must be delivered to or mailed and
received at our principal executive offices not less than 60 days nor more than
90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, that in the event that the annual meeting is
called for a date that is not within 30 days before or after the anniversary
date, notice by the stockholder in order to be timely must be received not later
than the close of business on the 10th day following the date on which notice of
the date of the annual meeting was mailed to stockholders or made public,
whichever first occurs. In the case of a special meeting of stockholders called
for the purpose of electing directors, notice by the stockholder in order to be
timely must be received not later than the close of business on the 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. Our bylaws also specify requirements as to the form and content of
a stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
directors at an annual or special meeting of stockholders.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board of
directors will be elected each year. These provisions, when coupled with the
provision of our certificate of incorporation and bylaws authorizing the board
of directors to fill vacant directorships or increase the size of the board of
directors, may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the board of directors by filling the
vacancies created by that removal with its own nominees.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
AMENDMENTS; SUPER MAJORITY VOTE REQUIREMENTS
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or bylaws, unless a
corporation's certificate of incorporation or bylaws, as the case may be,
requires a greater percentage. Our certificate of incorporation imposes super
majority vote requirements in connection with business combination transactions
and the amendment of specified provisions of our certificate of incorporation,
including those provisions relating to the action by written consent and the
ability of stockholders to call special meetings.
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RIGHTS AGREEMENT
Under Delaware law, every corporation may create and issue rights entitling
the holders of these rights to purchase from the corporation shares of its
capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of these shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.
We have entered into a rights agreement. Since this is only a summary, we
recommend that you carefully read our rights agreement, which has been filed as
an exhibit to the registration statement of which this prospectus forms a part.
Our rights agreement provides that each share of its prospective common
stock outstanding will have one right to purchase one one-hundredth of a
preferred share attached to it. The purchase price per one one-hundredth of a
preferred share under the rights agreement is four times the average closing
price of our common stock for the first five days of trading after the
consummation of this offering.
Initially, the rights under our rights agreement are attached to outstanding
certificates representing our common stock and no separate certificates
representing the rights will be distributed. The rights will separate from our
common stock and be represented by separate certificates approximately 10 days
after someone acquires or commences a tender offer for 15% of our outstanding
common stock, except in the case of a person whose beneficial ownership of our
common stock exceeds 15% upon completion of this offering unless that person
acquires an additional 5% or more of our common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of the common stock. Once
distributed, the rights certificates alone will represent rights.
All shares of our common stock issued before the date the rights separate
from the common stock will be issued with the rights attached. The rights are
not exercisable until the date the rights separate from the common stock. The
rights will expire on the tenth anniversary of the date of the completion of
this offering unless earlier redeemed or exchanged by us.
If an acquirer obtains or has the rights to obtain 15% or more of our common
stock, then each right will entitle the holder to purchase a number of shares of
our common stock equal to twice the purchase price of each right.
Each right will entitle the holder to purchase a number of shares of common
stock of the acquirer having a then current market value of twice the purchase
price if an acquirer obtains 15% or more of our common stock and any of the
following occurs:
- we merge into another entity;
- an acquiring entity merges into us; or
- we sell more than 50% of our assets, cash flow or earning power.
Under our rights agreement, any rights that are or were owned by an acquirer
of more than 15% of our outstanding common stock will be null and void.
Our rights agreement contains exchange provisions which provide that after
an acquirer obtains 15% or more, but less than 50%, of our respective
outstanding common stock, our board of directors may, at its option, exchange
all or part of the then outstanding and exercisable rights for common shares. In
the event of this exchange the exchange ratio is one common share per right,
adjusted to reflect any stock split, stock dividend or similar transaction.
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Our board of directors may, at its option, redeem all of the outstanding
rights under the rights agreement before the earlier of the time that an
acquirer obtains 15% or more of our outstanding common stock or the final
expiration date of the rights agreement. The redemption price under our rights
agreement is $0.01 per right, subject to adjustment. The right to exercise the
rights will terminate upon the action of our board ordering the redemption of
the rights and the only right of the holders of the rights will be to receive
the redemption price.
Holders of rights will have no rights as our stockholders, including the
right to vote or receive dividends, simply by virtue of holding the rights.
Our rights agreement provides that the provisions of the rights agreement
may be amended by the board of directors, without the approval of the holders of
the rights within the ten-day period after someone acquires or commences a
tender offer for 15% of our outstanding common stock. After this ten-day period,
however, the rights agreement may not be amended in any manner which would
adversely affect the interests of the holders of the rights, excluding the
interests of an acquirer. In addition, our rights agreement provides that no
amendment may be made to adjust the time period governing redemption at a time
when the rights are not redeemable.
Our rights agreement contains rights that have antitakeover effects. The
rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. Accordingly, the existence of the rights may deter acquirer from
making takeover proposals or tender offers. Nevertheless, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquirer on behalf of all of our stockholders.
In addition, the rights should not interfere with a proxy contest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock and preferred stock is
American Stock Transfer & Trust Company.
LISTING
We have applied for quotation and trading of our common stock on the Nasdaq
National Market under the trading symbol "CYDI."
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
25,031,876 shares of our common stock, assuming no exercise of the underwriter's
over-allotment option and no exercise of outstanding options and warrants. Of
these shares, all shares sold in this offering will be freely tradeable without
restriction or further registration under the Securities Act, unless these
shares are purchased by affiliates as that term is defined in Rule 144 under the
Securities Act. The remaining shares of common stock held by existing
stockholders are restricted securities as that term is defined in Rule 144 under
the Securities Act.
Restricted securities may be sold in the public market only if registered or
if they qualify for an exemption from registration under Rule 144 or Rule 701
promulgated under the Securities Act, which rules are summarized below. As a
result of the provisions of Rule 144 and 701, the restricted securities will be
available for sale in the public market subject to the volume limitations and
other conditions of Rule 144 and 701.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares of our common stock for at least one year would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 250,319 shares immediately after this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to a sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, 144(k) shares may be sold immediately upon the
completion of this offering.
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with various restrictions,
including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
Under the terms of our registration rights agreement, dated as of
September 14, 1999, between us and some of our stockholders, some of our
stockholders will be entitled to rights with respect to the registration of some
or all of their shares of common stock under the Securities Act as described
below. Holders of these registration rights have agreed not to exercise their
piggyback registration
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rights in connection with this offering and not to exercise their demand
registration rights during the 180 day period after the closing date of this
offering.
DEMAND REGISTRATION RIGHTS. At any time after this offering, the holders of
not less than 25% of the outstanding shares of common stock held by all parties
to the registration rights agreement together as a group or the holders of a
majority of the shares of common stock held by eCom Partners Fund I LLC,
NIG-Cyber Dialogue, Ltd., MV Partners L.P. III, L.P. and Young & Rubicam Inc.
can request by written notice that we register the number of shares of common
stock requested to be registered. Until we are eligible to use Form S-3 for
registration under the Securities Act, we will only be required to file two
registration statements in response to their demands. Thereafter, we will only
be required to file one additional demand registration statement each year. We
may postpone the filing of a registration statement for up to 90 days if we
determine that the filing would adversely affect or interfere with our bona fide
financing plans or would require disclosure of information, the premature
disclosure of which could adversely affect us or any transaction under
consideration by us.
PIGGYBACK REGISTRATION RIGHTS. If we register any securities for public
sale, other than registrations on Form S-4, Form S-8 or any successor forms or
registrations filed solely in connection with an exchange offer or any employee
benefit or dividend reinvestment plan, the stockholders party to the
registration rights agreement will, subject to specified limitations, have the
right to include their shares in the registration statement. The managing
underwriter will have the right to limit the number of shares registered by
those holders due to marketing reasons.
LOCKUP AGREEMENTS
Each of our current stockholders and each holder of options to purchase our
common stock that are vested or that will vest within 180 days after the date of
this prospectus has signed a lock-up agreement. Each of these entities has
agreed not to transfer or dispose of any shares of our common stock or any
securities convertible into or exercisable or exchangeable for shares of our
common stock for 180 days after the date of this prospectus. Transfers can be
made sooner with the prior written consent of SG Cowen Securities Corporation,
in the case of some transfers to affiliates.
STOCK PLANS
Following the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering 6,615,344 shares of
common stock reserved for issuance under our stock option and employee stock
purchase plans. The registration statement on Form S-8 will become effective
automatically upon filing. As of the date of this prospectus, 5,526,300 options
to purchase shares of common stock were granted under our stock option plans and
issued and outstanding. Accordingly, shares registered under the registration
statement on Form S-8 will, subject to vesting provisions and Rule 144 volume
limitations applicable to our affiliates, be available for sale immediately in
the open market. See "Description of Capital Stock--Options."
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
, 2000, the underwriters named below, through their representatives SG
Cowen Securities Corporation, Banc of America Securities LLC and ING Barings
LLC, have severally agreed to purchase from us the number of shares of common
stock set forth opposite their names at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- -----------
<S> <C>
SG Cowen Securities Corporation.............................
Banc of America Securities LLC..............................
ING Barings LLC.............................................
-----------
Total: .................................................
===========
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are conditional and may be terminated at their discretion based on their
assessment of the state of the financial markets and may also be terminated upon
the occurrence of the events specified in the underwriting agreement, which
events would materially and adversely affect the investment quality of the
offering and make it impractical or inadvisable to proceed with the offering.
The underwriters are severally committed to purchase all of the common stock
being offered by Cyber Dialogue if any of these shares are purchased, other than
those covered by the over-allotment option described below.
The underwriters propose to offer the common stock directly to the public at
the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to some dealers at that price less a
concession not in excess of $ per share. Dealers may reallow a concession
not in excess of $ per share to some other dealers. After the shares of
common stock are released for sale to the public, the underwriters may vary the
offering price and other selling terms.
We have granted to the underwriters an option, exercisable for up to
30 days after the date of this prospectus, to purchase up to 750,000 additional
shares of common stock at the public offering price set forth on the cover of
this prospectus to cover over-allotments, if any. If the underwriters exercise
their over-allotment option, the underwriters have severally agreed, subject to
limited conditions, to purchase approximately the same percentage that the
number of shares of common stock to be purchased by each of them, as shown in
the foregoing table, bears to the common stock covered by this prospectus.
At our request, the underwriters have reserved up to 5% of the shares of
common stock for sale at the initial public offering price to our employees,
directors, specific existing stockholders, specific clients and third party
vendors. The number of shares of common stock available for sale to the general
public will be reduced to the extent that these persons purchase the reserved
shares. Any reserved shares which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other shares offered
hereby.
We have agreed to indemnify the underwriters against some liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect thereof.
Cyber Dialogue and all of our directors, officers and other existing
stockholders have agreed that for a period of at least 180 days following the
date of this prospectus, without the prior written consent of SG Cowen
Securities Corporation, they will not offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, other than by operation of law, any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock, including, without limitation, common stock which
may be deemed to be beneficially owned in accordance with rules and regulations
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promulgated under the Securities Act. All holders of demand or incidental
registration rights have waived these rights with respect to this offering and
for 180 days after closing.
The following table shows the underwriting discounts and commissions we will
pay to the underwriters in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
PAID BY CYBER DIALOGUE
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and passive market making 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 in
order to cover syndicate short positions. 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 syndicate
covering transaction to cover syndicate short positions. Penalty bids may have
the effect of deterring syndicate members from selling to people who have a
history of quickly selling their shares. In passive market making, market makers
in the common stock who are underwriters or prospective underwriters may,
subject to some limitations, make bids for or purchases of the common stock
until the time, if any, at which a stabilizing bid is made. These stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the common stock to be higher than it would otherwise be in the absence
of these transactions. These transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
The underwriters have advised us that they do not intend to confirm sales in
excess of 5% of the common stock offered to any account over which they exercise
discretionary authority.
Prior to this offering, there has been no public market of the common stock.
Consequently, the initial public offering price will be determined by
negotiations between us and the underwriters. Among the factors considered in
these negotiations will be prevailing market conditions, the market
capitalizations and the stages of development of other companies that we and the
underwriters believe to be comparable to us, estimates of our business
potential, our results of operations in recent periods, the present state of our
development and other factors deemed relevant.
We estimate that our out of pocket expenses for this offering will be
approximately $1.9 million.
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LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, Washington, D.C. Other
legal matters in connection with this offering will be passed upon for the
underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The consolidated financial statements of Cyber Dialogue Inc. at
December 31, 1999 and 1998, and for each of the two years in the period ended
December 31, 1999, appearing in this prospectus and registration statement have
been audited by Ernst & Young LLP, independent auditors, and for the year ended
December 31, 1997, by Kamler, Lewis & Noreman LLP, independent auditors, as set
forth in their respective reports thereon appearing elsewhere in this
prospectus, and are included in reliance upon their reports given on the
authority of these firms as experts in accounting and auditing.
The financial statements of Applied Information Management Marketing, Inc.
at December 31, 1998 and 1999, and for each of the two years in the period ended
December 31, 1999, 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, and are included in reliance on their
report given on the authority of this firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission in Washington,
D.C., a registration statement on Form S-1 under the Securities Act with respect
to the common stock covered under this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules filed with the registration statement. Some items are
omitted in accordance with the rules and regulations of the SEC. For further
information with respect to Cyber Dialogue and the common stock covered under
this prospectus, reference is made to the registration statement and the
exhibits filed as a part of the registration statement. Statements contained in
this prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily complete, and, in each
instance, we refer you to the copy of the contract or other document filed as an
exhibit to the registration statement. Upon completion of the offering, we will
be subject to the informational requirements of the Securities Exchange Act of
1934, and in accordance with the Exchange Act, will file reports and other
information with the SEC. The registration statement, including exhibits, as
well as reports and other information that we filed with the SEC, may be
inspected without charge at the Public Reference Room of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at Seven
World Trade Center, 13th Floor, New York, NY 10048, and Citicorp Center, 500
West Madison Street, Chicago, IL 60661. Copies of these materials can also be
obtained at prescribed rates from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Electronic filings made through the
Electronic Data Gathering Analysis and Retrieval System are publicly available
through the SEC's Web site at http://www.sec.gov. You can obtain information on
the operation of the public reference facility by calling 1-800-SEC-0330.
We will issue to our stockholders annual reports and, upon request, will
make available unaudited quarterly reports for the first three quarters of each
fiscal year. Annual reports will include audited financial statements and
reports of our independent accountants with respect to the examination of these
financial statements.
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INDEX TO FINANCIAL STATEMENTS
CYBER DIALOGUE INC.
<TABLE>
<S> <C>
Report of Ernst & Young LLP................................. F-2
Report of Kamler, Lewis & Noreman LLP....................... F-3
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-5
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the Years Ended December 31, 1997, 1998 and
1999...................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-7
Notes to Consolidated Financial Statements.................. F-8
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
Report of Ernst & Young LLP................................. F-19
Balance Sheets.............................................. F-20
Statements of Operations and Shareholder's Net Investment... F-21
Statements of Cash Flows.................................... F-22
Notes to Financial Statements............................... F-23
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Unaudited Pro Forma Combined Balance Sheet as of
December 31, 1999......................................... F-29
Unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1999.............................. F-30
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Cyber Dialogue Inc.
We have audited the consolidated balance sheets of Cyber Dialogue Inc. (the
"Company") as of December 31, 1998 and 1999 and the related consolidated
statements of operations, stockholders' equity (deficit) 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
consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Cyber Dialogue Inc. at December 31, 1998 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
January 14, 2000
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and
Stockholders of Cyber Dialogue Inc.
We have audited the accompanying consolidated statements of operations, changes
in stockholders' deficit and cash flows of Cyber Dialogue Inc. for the year
ended December 31, 1997. These consolidated 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 audits to obtain reasonable
assurance about whether the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the results of consolidated operations and
cash flows of Cyber Dialogue Inc. for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Kamler, Lewis & Noreman LLP
Great Neck, New York
June 11, 1998
F-3
<PAGE>
CYBER DIALOGUE INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 79 $ 7,975
Accounts receivable, less allowance for doubtful accounts
of $21 and $100 in 1998 and 1999, respectively (includes
$76 and $249 of unbilled amounts in 1998 and 1999,
respectively)........................................... 1,064 2,387
Due from related parties (Note 11)........................ 224 374
Prepaid expenses and other current assets................. 86 151
------- -------
Total current assets........................................ 1,453 10,887
Property and equipment, net................................. 344 1,374
Goodwill--net of accumulated amortization of $54 and $232 in
1998 and 1999, respectively............................... 54 --
Deferred computer software costs--net of accumulated
amortization of $29 and $55 in 1998 and 1999,
respectively.............................................. 26 --
Other assets................................................ 25 145
------- -------
Total assets................................................ $ 1,902 $12,406
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 386 $ 597
Due to related parties (Note 11).......................... 525 74
Accrued expenses and other current liabilities............ 576 762
Accrued compensation...................................... 261 914
Deferred revenue.......................................... 750 2,476
Current portion of long-term debt......................... 62 --
Notes payable--stockholders............................... 210 --
------- -------
Total current liabilities................................... 2,770 4,823
Commitments
Stockholders' equity (deficit):
Common stock, $.01 par value, 40,000,000 shares
authorized, 15,692,400 and 19,150,200 shares issued and
outstanding in 1998 and 1999, respectively.............. 157 191
Additional paid-in capital................................ 1,937 14,123
Stock subscription receivable............................. (11) --
Deferred compensation..................................... -- (1,269)
Accumulated deficit....................................... (2,951) (5,462)
------- -------
Total stockholders' equity (deficit)........................ (868) 7,583
------- -------
Total liabilities and stockholders' equity (deficit)........ $ 1,902 $12,406
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
CYBER DIALOGUE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Revenue............................................... $ 1,094 $ 3,617 $ 8,227
Cost of revenue (including $90, $611 and $11 from
affiliates)......................................... 748 2,789 5,067
---------- ----------- -----------
Gross profit.......................................... 346 828 3,160
Operating expenses:
Sales and marketing................................. 261 1,023 1,840
General and administrative (including $56, $186 and
$735 from affiliates)............................. 514 934 2,757
Depreciation and amortization....................... 67 166 475
Research and development............................ 101 153 495
---------- ----------- -----------
Total operating expenses.............................. 943 2,276 5,567
---------- ----------- -----------
Loss from operations.................................. (597) (1,448) (2,407)
Interest expense...................................... (22) (31) (218)
Interest income....................................... -- -- 114
---------- ----------- -----------
Net loss.............................................. $ (619) $ (1,479) $ (2,511)
========== =========== ===========
Basic and diluted net loss per share.................. $ (0.05) $ (0.10) $ (0.15)
========== =========== ===========
Shares used in the calculation of basic and diluted
net loss per share.................................. 11,357,707 14,838,916 16,928,274
========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
CYBER DIALOGUE INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCK
------------------------ PAID-IN DEFERRED SUBSCRIPTION
SHARES AMOUNT CAPITAL COMPENSATION RECEIVABLE
---------- -------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996.............. 9,404,000 $ 94 $ 637 $ -- $(29)
Sale of common stock...................... 3,293,000 33 315 (42)
Repayment of stock subscription
receivable.............................. -- -- -- -- 29
Net loss.................................. -- -- -- --
---------- ---- ------- ------- ----
Balance at December 31, 1997.............. 12,697,000 127 952 (42)
Sale of common stock...................... 2,995,400 30 985 -- --
Repayment of stock subscription
receivable.............................. -- -- -- 31
Net loss.................................. -- -- -- --
---------- ---- ------- ------- ----
Balance at December 31, 1998.............. 15,692,400 157 1,937 -- (11)
Sale of common stock...................... 2,289,000 23 7,727 -- --
Issuance of warrant in connection with
bridge loan (NOTE 5).................... -- -- 93 (93) --
Amortization of deferred interest expense
in connection with the warrant issued
with bridge loan........................ -- -- -- 93 --
Conversion of bridge loan to common
stock................................... 738,400 7 2,493 -- --
Deferred non-cash employee compensation... -- -- 862 (862) --
Amortization of non-cash deferred employee
compensation............................ -- -- 137 --
Exercise of employee stock option......... 36,000 -- 4 -- --
Conversion of Notes Payable--stockholders
to common stock......................... 394,400 4 197 -- --
Repayment of stock subscription
receivable.............................. -- -- -- 11
Warrant issued to AMFMi (NOTE 11)......... -- 470 (470) --
Amortization of deferred revenue in
connection with the warrant issued to
AMFMi................................... -- -- -- 117 --
Warrant issued to eCom (NOTE 11).......... -- -- 340 (340) --
Amortization of deferred consulting
expense in connection with the warrant
issued to eCom (NOTE 11)................ -- -- 149 --
Net loss.................................. -- -- -- --
---------- ---- ------- ------- ----
Balance at December 31, 1999.............. 19,150,200 $191 $14,123 $(1,269) $ --
========== ==== ======= ======= ====
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------ --------
<S> <C> <C>
Balance at December 31, 1996.............. $ (853) $ (151)
Sale of common stock...................... -- 306
Repayment of stock subscription
receivable.............................. -- 29
Net loss.................................. (619) (619)
------- -------
Balance at December 31, 1997.............. (1,472) (435)
Sale of common stock...................... -- 1,015
Repayment of stock subscription
receivable.............................. -- 31
Net loss.................................. (1,479) (1,479)
------- -------
Balance at December 31, 1998.............. (2,951) (868)
Sale of common stock...................... -- 7,750
Issuance of warrant in connection with
bridge loan (NOTE 5).................... -- --
Amortization of deferred interest expense
in connection with the warrant issued
with bridge loan........................ -- 93
Conversion of bridge loan to common
stock................................... -- 2,500
Deferred non-cash employee compensation... -- --
Amortization of non-cash deferred employee
compensation............................ -- 137
Exercise of employee stock option......... -- 4
Conversion of Notes Payable--stockholders
to common stock......................... -- 201
Repayment of stock subscription
receivable.............................. -- 11
Warrant issued to AMFMi (NOTE 11).........
Amortization of deferred revenue in
connection with the warrant issued to
AMFMi................................... -- 117
Warrant issued to eCom (NOTE 11).......... --
Amortization of deferred consulting
expense in connection with the warrant
issued to eCom (NOTE 11)................ -- 149
Net loss.................................. (2,511) (2,511)
------- -------
Balance at December 31, 1999.............. $(5,462) $ 7,583
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
CYBER DIALOGUE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(619) $(1,479) $(2,511)
Adjustments to reconcile net loss to cash used in operating
activities:
Depreciation and amortization............................. 72 180 519
Provision for doubtful accounts........................... -- 21 79
Expenses satisfied by common stock and debt............... 54 -- --
Amortization of non-cash deferred expenses................ -- -- 496
Changes in assets and liabilities:
Due from related parties................................ -- (224) (150)
Accounts receivable..................................... (255) (673) (1,402)
Prepaid expenses and other current assets............... 6 (86) (65)
Due to related parties.................................. -- 413 (392)
Accounts payable........................................ 202 59 211
Accrued expenses and other current liabilities.......... 104 652 839
Deferred revenue........................................ 109 641 1,726
----- ------- -------
Net cash used in operating activities....................... (327) (496) (650)
----- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment......................... (83) (267) (1,346)
Additions to deferred computer software costs............... (37) (18) --
Royalties paid to FIND/SVP.................................. (6) (32) (123)
Security deposits........................................... (9) 5 (120)
----- ------- -------
Net cash used in investing activities....................... (135) (312) (1,589)
----- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft.............................................. 73 (73) --
Proceeds from stock subscription receivable................. 19 32 11
Increase (decrease) in due to stockholders.................. 125 (40) (59)
Proceeds from bridge loan................................... -- -- 2,500
Repayment of long-term debt................................. -- (63) (62)
Repayment of notes payable--stockholders.................... (10) -- (9)
Proceeds from issuing common stock.......................... 261 1,015 7,754
----- ------- -------
Net cash provided by financing activities................... 468 871 10,135
----- ------- -------
Net increase in cash........................................ 6 63 7,896
Cash, beginning of year..................................... 10 16 79
----- ------- -------
Cash, end of year........................................... $ 16 $ 79 $ 7,975
===== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid during the year for:
Income taxes.............................................. $ 210 $ - $ --
===== ======= =======
Interest.................................................. $ 2 $ 11 $ 182
===== ======= =======
NON-CASH FINANCING ACTIVITIES
Common stock issued for stock subscription receivable....... $ 42 $ -- $ --
===== ======= =======
Issuance of note payable for acquisition of operating assets
of software business...................................... $ 125 $ -- $ --
===== ======= =======
Conversion of bridge loan to common stock................... $ -- $ -- $ 2,500
===== ======= =======
Conversion of notes payable--stockholders to common stock... $ -- $ -- $ 201
===== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-7
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
1. NATURE OF BUSINESS AND ORGANIZATION
Cyber Dialogue Inc. (the "Company") was organized as a Delaware corporation
on September 25, 1996. American Dialogue, Inc. was organized as a Michigan
corporation on October 20, 1993 as BKG/ Michigan, Inc. The two companies merged
on March 24, 1997. The merger was a tax free exchange with all American
Dialogue, Inc. stockholders receiving one share of Cyber Dialogue Inc.'s stock
in exchange for each share of American Dialogue, Inc.'s stock. The merger was
accounted for as a pooling of interests. Wand Partners Inc. and its affiliated
entities own approximately 54% of the Company's common stock.
The Company provides a comprehensive suite of products and services that
enable businesses to establish and maintain more profitable Internet customer
relationships.
On November 17, 1999, the stockholders approved a 200-for-one split of the
outstanding shares of common stock and the Company filed an amended and restated
certificate of incorporation increasing the number of authorized shares of
common stock from 20,000,000 to 40,000,000. All share amounts included in the
accompanying consolidated financial statements have been adjusted to reflect the
stock spilt.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Cyber Dialogue Limited. All significant
intercompany accounts and transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue derived from custom market research projects, database marketing
services, strategic consulting and system engineering services, hosted customer
relationship management services, and other analytical services is recognized
ratably over the term of the contract as services are rendered. Anticipated
losses are provided for in total regardless of the percentage of completion.
Revisions in anticipated contract profits or losses due to changes in contract
prices or estimated costs are reflected in the consolidated financial statements
in the accounting period in which the changes occur.
The Company's newsletters and publications are sold on a subscription basis.
Revenues derived from subscriptions are recognized ratably over the subscription
term.
Billings rendered in advance of products or services being provided are
recorded as deferred revenues in the accompanying consolidated balance sheets.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life of the assets ranging
from two to ten years. Amortization of leasehold improvements is computed using
the straight-line method over the shorter of the lease term or the estimated
useful life of the asset.
F-8
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs are expensed as incurred. For the years ended
December 31, 1997, 1998 and 1999, advertising expense amounted to approximately
$54, $50 and $90, respectively, and is included in sales and marketing expenses.
DEFERRED COMPUTER SOFTWARE COSTS
Costs related to research, design and development of computer software are
charged to expense as incurred. In accordance with Statement of Financial
Standards No. 86, costs to complete a product once technological feasibility has
been established are capitalized and amortized over the estimated economic life
of the product, generally two years. Software development costs capitalized in
1997 and 1998 amounted to $37 and $18, respectively. There were no software
development costs capitalized in 1999. Amortization expense amounted to $22 and
$26, in 1998 and 1999, respectively.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities. At December 31,
1998 and 1999, the fair value of these instruments approximate their financial
statement carrying amount because of the short term maturity of these
instruments.
The notes payable to stockholders bore interest at market rates and,
therefore, their carrying values approximated their fair values.
The Company's sales are primarily to companies located in the United States.
The Company performs periodic credit evaluations of its customers' financial
condition and does not require collateral. Accounts receivable are due
principally from large U.S. companies under stated contract terms. The Company
provides for estimated credit losses, which have not been significant to date,
as required. One customer accounted for approximately 38% of revenues for the
year ended December 31, 1999 (see Note 11). Three customers accounted for
approximately 33% (11% each) of revenues for the year ended December 31, 1998.
No one customer accounted for more than 10% of revenues in 1997.
STOCK-BASED COMPENSATION
The Company accounts for its stock-based employee compensation agreements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and complies with the disclosure
provisions of Statement of Financial Accounting Standards No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION ("SFAS 123").
The Company accounts for equity securities granted to non-employees in
accordance with FAS 123 and EITF 96-18.
F-9
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." As of December 31, 1999, management has
concluded that the Company operates in one business segment. Operations outside
of the United States are not significant.
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 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.
LONG-LIVED ASSETS
The Company assesses long-lived assets for impairment in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF". If this review indicates that the carrying value of assets will not be
recoverable, as determined based on the estimated undiscounted cash flows,
impairment is measured by comparing the carrying value of these assets to fair
value. Fair value is determined based on quoted market values, discounted cash
flow or appraisals."
INCOME TAXES
The Company uses the liability method of accounting for income taxes. Under
this method, deferred income tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
RECLASSIFICATIONS
Certain reclassifications have been made to conform prior years' data to
current presentation.
INTERNAL USE SOFTWARE
The Company accounts for the costs of computer software developed or
obtained for internal use in accordance with SOP 98-1.
F-10
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1999
-------- --------
<S> <C> <C>
Computer equipment.......................................... $287 $ 792
Computer software........................................... 114 453
Leasehold improvements...................................... 41 500
Furniture and fixtures...................................... 6 49
---- ------
448 1,794
Less accumulated depreciation and amortization.............. 104 420
---- ------
$344 $1,374
==== ======
</TABLE>
Depreciation expense was $11, $45 and $136 for the years ended December 31,
1997, 1998 and 1999, respectively.
4. ACQUISITION
In November 1997, the Company purchased certain operating assets from
FIND/SVP Published Products, Inc. ("FIND/SVP") for $125. In addition, the
Company assumed certain liabilities amounting to $46 and paid royalties to the
seller for all sales on certain products, as defined in the asset purchase and
sale agreement (the "agreement") for a two year period.
The acquisition has been accounted for as a purchase and the operations of
FIND/SVP have been included in the accompanying consolidated financial
statements from the date of acquisition. The excess of the total acquisition
cost over the fair value of the net assets acquired and liabilities assumed has
been amortized on the straight-line basis over two years.
In 1997, 1998 and 1999, the Company paid the seller $6, $32 and $123,
respectively, for royalties, according to the agreement. Such amounts were
recorded as additional costs of the acquisition.
The acquisition was financed by a note payable to the seller in the amount
of $125. The note provided interest at 10% and was fully repaid in 1999. The
note was secured by certain assets included in the purchase of FIND/SVP.
5. NOTES PAYABLE--STOCKHOLDERS
During March 1999, the Company entered into a $2,361 Senior Convertible
Promissory Note with Wand Equity Portfolio II L.P. and a $139 Senior Convertible
Promissory Note with Wand Affiliates Fund L.P. (collectively the "Bridge Loan").
The Bridge Loan provided interest at 9%. In connection with the Bridge Loan, the
Company granted warrants to acquire 407,800 shares of the Company's common stock
at an exercise price of $0.51 per share. The fair value of such warrants was
estimated to be approximately $93. This amount has been recorded as interest
expense.
F-11
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
5. NOTES PAYABLE--STOCKHOLDERS (CONTINUED)
The fair value of the warrants of $93 was measured at the grant date using
the Black-Scholes option pricing model. The assumptions utilized by the Company
in determining the fair value of these warrants were as follows: dividend yield
0%, risk free interest rate 4.92%, expected volatility 1.204, and expected life
of 12 months.
The Bridge Loan had a maturity date of September 30, 1999 and was
convertible (i) after September 30, 1999 at a conversion price of $0.51 per
share and (ii) upon the sale of the Company's common stock, to a third party, on
or before September 30, 1999, which resulted in total proceeds to the Company of
an amount greater than $5 million, at a conversion price equal to the same price
per share. On September 14, 1999, the Company sold common stock at approximately
$3.39 per share with aggregated proceeds of approximately $7,750 (see Note 7).
On the same date, the Bridge Loan was converted to common stock at a conversion
price of approximately $3.39 and 738,400 shares of the Company's common stock
were issued accordingly.
During March 1999, $201 of the notes payable to stockholders were converted
into an aggregate of 394,400 shares of common stock at a conversion price of
approximately $0.51 per share. The remaining balance of notes payable to
stockholders was fully repaid during 1999.
6. BASIC AND DILUTED NET LOSS PER SHARE
The Company computes net loss per share in accordance with the provisions of
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("SFAS 128"), and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provisions of SFAS 128 and SAB 98, basic and diluted net loss per share is
computed by dividing the net loss for the period by the weighted average number
of common shares outstanding for the period. The calculation of diluted net loss
per share excludes shares of common stock issuable upon exercise of employee
stock options and warrants, as the effect of such exercises would be
antidilutive.
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted loss
per share--net loss............... $ (619) $ (1,479) $ (2,511)
=========== =========== ===========
Denominator:
Denominator for basic and dilutive
loss per share--weighted average
shares............................ 11,357,707 14,838,916 16,928,274
----------- ----------- -----------
Basic and diluted net loss per
share............................... $ (0.05) $ (0.10) $ (0.15)
=========== =========== ===========
</TABLE>
F-12
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
6. BASIC AND DILUTED NET LOSS PER SHARE (CONTINUED)
The following securities are not included in the diluted loss per share
computation as they are antidilutive:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Options to purchase common stock............ 2,445,600 3,009,800 4,138,800
Warrants to purchase common stock........... -- -- 1,703,200
--------- --------- ---------
Total................................. 2,445,600 3,009,800 5,842,000
========= ========= =========
</TABLE>
7. COMMON STOCK
In September 1999, the Company sold 2,289,000 shares of its common stock at
$3.39 per share, for aggregate proceeds of $7,750.
During 1998, the Company sold 2,995,400 shares of its common stock at $0.34
per share, for aggregate proceeds of $1,015.
During 1997, the Company sold 3,293,000 shares of common stock at $0.11 per
share, for aggregate proceeds of $348. The Company received $262 and canceled
$44 of the Company's liability to certain stockholders. The balance of $42 was
due from stockholders at December 31, 1997 and was paid during 1998 and in 1999.
F-13
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
8. STOCK OPTIONS
In December 1996, the Company adopted the 1996 Stock Option Plan. The 1996
Plan provides for the authorization of 2,620,000 shares. In January 1997, the
Company adopted the 1997 Stock Option Plan, which was amended and restated on
June 25, 1998 and amended on November 17, 1999. The 1997 Plan provides for the
authorization of 4,971,000 shares. The Plans provides for the granting of
incentive stock options or nonqualified stock options to purchase common stock
to eligible participants.
The following table summarizes the activity in stock options:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE
---------------- ----------------
<S> <C> <C>
Balance, December 31, 1996.................... 110,400 $0.07
Granted during 1997........................... 2,335,200 0.23
---------
Balance, December 31 1997..................... 2,445,600 0.23
Granted during 1998........................... 564,200 0.29
---------
Balance, December 31, 1998.................... 3,009,800 0.24
Granted during 1999........................... 1,295,000 0.94
Options exercised............................. (36,000) 0.11
Options forfeited............................. (130,000) 0.49
---------
Balance, December 31, 1999.................... 4,138,800 0.45
=========
</TABLE>
140,200, 1,158,200 and 2,148,810 options were exercisable at December 31, 1997,
1998 and 1999, respectively. Options outstanding at December 31, 1999 have
exercise prices ranging from $0.07 to $3.39.
The following table summarizes information about outstanding options at
December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE OPTIONS REMAINING OPTIONS
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- -------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.07................................... 79,400 6.4 79,400
0.11................................... 1,517,400 7.6 1,160,750
0.20................................... 200,000 7.9 200,000
0.35................................... 372,000 8.5 93,000
0.40................................... 480,000 7.9 413,400
0.51................................... 890,000 9.3 --
0.60................................... 410,000 8.3 194,260
3.39................................... 190,000 9.9 8,000
--------- ---------
4,138,800 2,148,810
========= =========
</TABLE>
In connection with the granting of certain stock options to employees during
1999, the Company recorded deferred compensation of $862. This deferred
compensation is being amortized over the
F-14
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
8. STOCK OPTIONS (CONTINUED)
expected service periods of the grantees, generally four years. Amortization of
deferred compensation for the year ended December 31, 1999 was $137.
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123 and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
ASSUMPTIONS 1997 1998 1999
- ----------- ----------- ----------- -----------
<S> <C> <C> <C>
Expected volatility................... 0% 0% 0%
Risk-free interest rate............... 5.5% to 5.6% 5.8% to 6.1% 5.2% to 6.2%
Expected dividend yield............... 0% 0% 0%
Expected life of the option........... 4 years 4 years 4 years
</TABLE>
The weighted average fair value of options granted was $0.01, $0.05 and $0.20 in
1997, 1998 and 1999, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the 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 stock options.
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Pro forma net loss.................... $ (623) $ (1,495) $ (2,548)
Pro forma weighted average shares
outstanding......................... 11,357,707 14,838,916 16,928,274
Pro forma basic and diluted net loss
per share........................... $ (0.05) $ (0.10) $ (0.15)
</TABLE>
F-15
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
9. INCOME TAXES
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 955 $ 1,860
Allowance for doubtful accounts......................... 9 43
Accrued expenses........................................ 112 --
Excess of book over tax amortization.................... 56 142
Deferred compensation................................... -- 59
Other................................................... -- 113
Valuation allowance..................................... (1,132) (2,217)
------- -------
Net deferred taxes........................................ $ -- $ --
======= =======
</TABLE>
The Company has net operating loss carryforwards at December 31, 1999 of
approximately $4,468, which will expire in the years 2008 through 2019. The full
utilization of these losses in the future is dependent upon the Company's
ability to generate taxable income and could be limited due to ownership changes
as defined under the provisions of Section 382 of the Internal Revenue Code;
accordingly, a valuation allowance of an equal amount has been established.
The reconciliation of the effective tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
U.S. statutory tax rate......................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal income tax
benefits...................................... (8.6) (8.8) (8.8)
Other........................................... 0.3 0.3 0.2
Change in valuation allowance................... 42.3 42.5 42.6
-------- -------- --------
--% --% --%
======== ======== ========
</TABLE>
10. COMMITMENTS
The Company leases office space under non-cancelable operating leases. Rent
expense charged to operations was approximately $32, $46 and $285 in 1997, 1998
and 1999, respectively.
Future minimum annual lease payments, exclusive of escalation charges, at
December 31, 1999 are approximately as follows:
<TABLE>
<S> <C>
2000........................................................ $ 624
2001........................................................ 382
2002........................................................ 269
Thereafter.................................................. 541
------
Total minimum lease payments................................ $1,816
======
</TABLE>
F-16
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
11. RELATED PARTY TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Expenses incurred from related parties:
Cost of revenue--research services................. $ 90 $ 611 $ 11
===== ====== ======
General and administrative:
Insurance costs.................................. 39 122 225
Salary reimbursement............................. 13 60 310
Management fee................................... -- -- 200
Other............................................ 4 4 --
----- ------ ------
$ 56 $ 186 $ 735
===== ====== ======
DUE FROM RELATED PARTIES
Stockholders....................................... $ -- $ 14 $ 63
Affiliates......................................... -- 210 311
----- ------ ------
$ -- $ 224 $ 374
===== ====== ======
DUE TO RELATED PARTIES
Stockholders....................................... $ 152 $ 525 $ 74
===== ====== ======
</TABLE>
12. CONSULTING AGREEMENT
On September 14, 1999, the Company engaged eCom Partners Fund I LLC
("eCom"), a stockholder, to provide various consulting services to the Company
over the next three years. A warrant to purchase common stock of the Company was
issued to eCom in full consideration for the consulting services. The number of
shares and exercise price attributable to such warrant is dependent upon when
the warrant is exercised as follows: (i) 295,400 shares at an exercise price of
$3.39, if it is exercised on or before September 14, 2000, (ii) 229,800 shares
at an exercise price of $4.35, if it is exercised between September 15, 2000 and
September 14, 2001, (iii) 188,200 shares at an exercise price of $5.31, if it is
exercised between September 15, 2001 and September 14, 2002. The warrant expires
on September 14, 2002. The consulting agreement may be terminated at any time by
eCom. The Company has estimated the value of the warrant to be $340 and has
recorded consulting expenses of $149 for the year ended December 31, 1999. The
measurement date has been determined to be the grant date of September 14, 1999
since the terms of the warrant provided that it vested immediately and was
non-forfeitable.
The related expense is being recognized over the term of the contract with
the counterparty which is deemed to be from inception to anticipated IPO date.
The fair value of the warrants of $340 was measured at the grant date using
the Black-Scholes option pricing model. The assumptions utilized by the Company
in determining the fair value of these warrants were as follows: dividend yield
0%, risk free interest rate 5.14%, expected volatility 1.212, and expected life
of 6 months.
F-17
<PAGE>
CYBER DIALOGUE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1999
13. SIGNIFICANT SALES CONTRACT
On August 30, 1999, the Company entered into a service agreement with AMFM
Interactive Inc. ("AMFMi") to provide various services, including technology
development and strategic planning, to AMFMi over a 16-month initial term. The
agreement may be extended for an additional 44 months thereafter. Affiliates of
Wand Partners Inc. own a minority interest in the outstanding common stock of
AMFMi. The fee for services is based upon costs incurred plus a stipulated
profit percentage, as defined. Upon execution of the service agreement, the
Company granted AMFMi a warrant for 1,000,000 shares of common stock at an
exercise price of $1.55 per share as a sales inducement. The warrant provides a
vesting schedule as follows: (i) 66,600 shares vested upon signing the
agreement, (ii) 66,600 shares vest after six months, (iii) 66,800 shares vest
after 12 months, and (iv) the remaining 800,000 shares vest over the extended
period and thereafter, if the agreement is extended by AMFMi. The warrants
expire on August 30, 2005. The Company estimates the value of the warrant to be
$470. The Company will offset this amount against revenue derived from AMFMi
over the period of the contract. During 1999, $117 was netted against AMFMi
revenue, as shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue recognized from AMFMi........................ $ -- $ 229 $3,251
Contra revenue due to warrants issued.............. -- (117)
----- ------ ------
Net AMFMi revenue.................................... -- 229 3,134
----- ------ ------
</TABLE>
The fair value of the warrants of $470 was measured at the grant date using
the Black-Scholes option pricing model. The assumptions utilized by the Company
in determining the fair value of these warrants were as follows: dividend yield
0%, risk free interest rate 5.22%, expected volatility 1.168, and expected life
of 1.3 years.
During May 1999, CD/AMFMi was formed to provide eligible employees of the
Company with an opportunity to indirectly participate in the appreciation of
Wand Equity Portfolio II L.P.'s investment in AMFMi. CD/AMFMi purchased a 3%
interest in the general partner's interest in the Wand Equity Portfolio
investment. Employees of the Company were granted LLC interests aggregating to
89% of
CD/AMFMi. Compensation expense amounting to $7, representing the cost of
investment, was recognized by the Company related to the interests granted to
employees.
The Company retained 11% of the outstanding LLC units of CD/AMFMi LLC. The
11% investment is accounted for at cost.
14. SUBSEQUENT EVENT
On February 3, 2000, the Company acquired Applied Information Management
Marketing, Inc. ("AIM") for $3 million in cash and 881,676 shares of Cyber
Dialogue common stock. AIM is a database marketing company that provides
marketing database development and high-end analytical services.
F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Applied Information Management Marketing, Inc.
We have audited the accompanying balance sheets of Applied Information
Management Marketing, Inc. (the "Company") as of December 31, 1998 and 1999, and
the related statements of operations and shareholder's net investment 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 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 financial position of Applied Information Management
Marketing, Inc. at December 31, 1998 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 9, 2000
F-19
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ -- $ 27
Accounts receivable, net of allowance of $115 and $306
(includes $136 and $25 of unbilled amounts in 1998 and
1999, respectively)................................... 967 1,350
Prepaid expenses and other current assets............... 31 --
------ ------
Total current assets........................................ 998 1,377
Furniture and equipment, net................................ 524 696
Goodwill, net of accumulated amortization of $855 and
$1,986.................................................... 4,841 3,710
------ ------
Total assets................................................ $6,363 $5,783
====== ======
LIABILITIES AND SHAREHOLDER'S NET INVESTMENT
Current liabilities:
Accounts payable and accrued expenses................... $ 502 $ 609
Deferred revenue........................................ 303 759
------ ------
Total current liabilities................................... 805 1,368
------ ------
Shareholder's net investment................................ 5,558 4,415
Total liabilities and shareholder's net investment.......... $6,363 $5,783
====== ======
</TABLE>
SEE ACCOMPANYING NOTES.
F-20
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
STATEMENTS OF OPERATIONS AND SHAREHOLDER'S NET INVESTMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
Revenue..................................................... $ 4,561 $ 4,185
Cost of revenue............................................. 2,738 4,029
------- -------
Gross profit................................................ 1,823 156
Operating expenses:
General and administrative.............................. 2,110 2,186
Depreciation and amortization........................... 945 1,301
Sales and marketing..................................... 385 507
------- -------
Total operating expenses.................................... 3,440 3,994
------- -------
Loss from operations........................................ (1,617) (3,838)
Interest expense............................................ 134 491
------- -------
Net loss.................................................... $(1,751) $(4,329)
======= =======
Shareholder's net investment at beginning of year........... $ 6,126 $ 5,558
Net loss.................................................... (1,751) (4,329)
Funding from parent, net.................................... 1,183 3,186
------- -------
Shareholder's net investment at end of year................. $ 5,558 $ 4,415
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-21
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1998 1999
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(1,751) $(4,329)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 945 1,301
Changes in working capital:
Accounts receivable................................... (245) (383)
Prepaid expenses and other assets..................... 115 31
Accounts payable and accrued expenses................. (218) 107
Deferred revenue...................................... 164 456
------- -------
Net cash used in operating activities....................... (990) (2,817)
INVESTING ACTIVITIES
Purchases of furniture and equipment........................ (463) (342)
FINANCING ACTIVITIES
Funding from parent, net.................................... 1,183 3,186
------- -------
Net increase (decrease) in cash............................. (270) 27
Cash and cash equivalents at beginning of year.............. 270 --
------- -------
Cash and cash equivalents at end of year.................... $ -- $ 27
======= =======
</TABLE>
SEE ACCOMPANYING NOTES
F-22
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
1. BUSINESS AND BASIS OF PRESENTATION
Yankelovich Marketing Services Inc. ("YMSI") was incorporated as a Delaware
corporation on February 26, 1998 for the purpose of acquiring Applied
Information Management Marketing, Inc. ("AIM"). YMSI is a wholly-owned
subsidiary of Yankelovich Holdings Inc. ("YHI") which is a subsidiary of
Wand/Yankelovich Investments L.P. ("Wand"). Subsequent to the acquisition on
March 25, 1998, the acquiree was merged into YMSI and the name YMSI changed to
Applied Information Management Marketing, Inc. (the "Company") (see Note 2). The
Company provides database mining and analysis and related services to customers
primarily throughout the United States and operates in one business segment.
On February 3, 2000, Cyber Dialogue Inc. ("Cyber Dialogue") acquired the
Company from Yankelovich Holdings Inc., subject to YHI retaining certain
liabilities, for $3,000 in cash and 881,676 shares of Cyber Dialogue common
stock. Affiliates of Wand own 54% of the outstanding common stock of Cyber
Dialogue. These financial statements present the operations of the Company and
its predecessor. The financial statements also reflect push-down accounting in
accordance with SEC Staff Accounting Bulletin No. 55 with respect to certain YHI
transactions (see Note 6). All equity and intercompany activity with the current
and predecessor shareholders is presented under the caption "Shareholder's net
investment."
2. ACQUISITION OF AIM BY YMSI
The acquisition of AIM, in March 1998 was accounted for as a purchase by
YMSI pursuant to Accounting Principle's Board Opinion No. 16, "Business
Combinations". Accordingly, the assets and liabilities of AIM were adjusted to
their fair values at the date of acquisition. The Statements of Operations for
periods subsequent to March 25, 1998 reflect the operating results of the
Company, including the effects of the aforementioned purchase accounting; the
period prior to this date represents the predecessor company's operating results
and do not include the effect of any purchase accounting.
The cost of the acquisition aggregated $6,432, including: i) cash at closing
of $1,750; ii) 1,804,124 shares of YHI's Common Stock at closing valued at
$1,750; iii) cash consideration of $1,750 payable on July 31, 2000; iv) stock
consideration of 1,804,124 shares of the YHI's Common Stock valued at $1,750 to
be issued on July 31, 2000; v) options on shares of YHI Common Stock valued at
$50; and vi) acquisition costs aggregating $382; less vii) $1 million of the
contingent consideration which may be reduced in the event the former principals
of AIM are not employed by the YHI through March 25, 2000, and which is
therefore accounted for as compensation expense over the related two-year period
($375 and $500 accrued and expensed in 1998 and 1999, respectively). The
contingent consideration may be accelerated in the event of a change of control,
as defined. The merger agreement also included a provision whereby 143,187
options on the YHI Common Stock were issued to AIM employees in exchange for
options held by them on AIM common stock. The purchase price was primarily
allocated to intangibles of $5.6 million, accounts receivable of $616, and cash
of $306.
The financial statements reflect push-down accounting in accordance with SEC
Staff Accounting Bulletin No. 55 with respect to certain YHI transactions. Such
transactions include: i) all goodwill and related amortization expense
corresponding to the YMSI acquisition of AIM; ii) an estimation of the portion
of YHI's total long-term debt attributable to the financing needs of the Company
based on the net assets of the Company in relation to the net assets of YHI
overall, and the related interest expense
F-23
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
2. ACQUISITION OF AIM BY YMSI (CONTINUED)
based on the rates charged to YHI; and iii) an estimation of the portion of
YHI's corporate general and administrative expense attributable to the Company
based on revenues of the Company in relation to revenue of YHI. Accordingly, the
statements of operations for 1998 and 1999, respectively, reflect amortization
expense of $855 and $1,131, interest expense of $134 and $491, and YHI corporate
general and administrative expense of $173 and $404.
Management believes that the basis used for recording the amounts above is
reasonable. However, the terms of these transactions may differ from terms
negotiated with an unrelated party. As a result, the accompanying financial
statements may not be indicative of results that would have been achieved had
the Company been operated as an unaffiliated company.
See also Notes 7 and 8.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE AND COST RECOGNITION
Revenue is recorded as services are rendered. Anticipated losses are
provided for in total regardless of the percentage-of-completion. Revisions in
anticipated contract profits or losses due to changes in contract price or in
estimated costs are reflected in the financial statements of the accounting
period in which the change occur.
In 1999, a dispute arose between the Company and a customer. As a result of
the settlement with the customer, the Company recorded additional expenses
amounting to $1,230. This contract was terminated on December 15, 1999.
Three customers account for approximately 70% of the Company's revenue
(exclusive of revenue from an affiliate--see note 6) in 1999. Four customers
accounted for approximately 52% of the Company's revenue for 1998.
The amounts by which contract costs incurred to date, plus estimated earned
contract profits or less anticipated losses, exceed amounts billed to customers
are accounted for as "revenue in excess of billings." Such amounts are billable
as work on the contracts progresses. The amounts by which contract costs
incurred to date, plus estimated earned contract profits or less anticipated
losses, are less than amounts billed to customers are accounted for as "billings
in excess of revenue." Such amounts are earned as work on the contracts
progresses.
LONG-LIVED ASSETS
The Company assesses long-lived assets for impairment in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF ". If this review indicates that the carrying value of assets will not be
recoverable, as determined based on the estimated undiscounted cash flows,
impairment is measured
F-24
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
by comparing the carrying value of these assets to fair value. Fair value is
determined based on quoted market values, discounted cash flow or appraisals.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets on the straight-line basis.
GOODWILL
Goodwill relates to the acquisition of AIM in March 1998 by YMSI and is
amortized on the straight-line basis over five years.
The Company periodically evaluates the carrying value of intangible assets
in relation to the estimated cash flows of the underlying business. An
impairment loss may be recognized if the expected undiscounted cash flows are
less than book value.
CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of three
months or less when purchased to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, accounts receivable, revenue in excess of billings, billings in
excess of revenues, accounts payable and accrued expenses approximate fair value
due to the short maturity of those items.
4. FURNITURE AND EQUIPMENT AND LEASE COMMITMENTS
Furniture and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
1998 1999 LIVES
-------- -------- ---------
<S> <C> <C> <C>
Furniture and equipment............................ $423 $719 7
Software........................................... 175 214 3-7
---- ----
598 933
Less: accumulated depreciation..................... (74) (237)
---- ----
$524 $696
==== ====
</TABLE>
F-25
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
4. FURNITURE AND EQUIPMENT AND LEASE COMMITMENTS (CONTINUED)
The Company leases its office space from third parties. This lease provides
for monthly rental payments and contains escalation clauses covering taxes and
other operating charges. At December 31, 1999, the future minimum rental
commitments under this non-cancelable operating lease are as follows:
<TABLE>
<S> <C>
2000 $154
2001 160
2002 27
----
$341
====
</TABLE>
Rent expense for this above lease aggregated $76 and $98 for the years ended
December 31, 1998 and 1999, respectively.
5. DEBT AND INTEREST EXPENSE
Since the acquisition of AIM by YMSI, all financing required by the Company
has been provided by YHI. Interest expense included in the Company's 1998 and
1999 statements of operations is based upon an estimation of the portion of
YHI's total debt outstanding attributable to the financing needs of the Company.
Such interest expense totaled approximately $134 and $491 in 1998 and 1999,
respectively, based upon YHI's average borrowing rate of approximately 9.5% and
9.4% for each respective period. Management believes that the basis used for
recording the amounts above is reasonable. However, the terms of these
transactions may differ from terms that would have been negotiated if the
Company entered into its own financing arrangements separate and apart from YHI.
As a result, the accompanying financial statements may not be indicative of
results that would have been achieved had the Company been operated as an
unaffiliated company.
6. STOCK OPTION PLAN
Prior to the March 1998 acquisition, employees of the Company were granted
options in AIM. These were cancelled in conjunction with the acquisition, and
the employees received an aggregate of 143,187 options to purchase stock of YHI
pursuant to YHI's 1996 Stock Option Plan. These options have an exercise price
of $1.03, ten-year terms, vest annually and become fully exercisable at the end
of four years of continued employment. The YHI stock options were valued at $50
and have been accounted for as a cost of the acquisition. There have been no
additional options subsequently granted. In connection with the sale of AIM, all
outstanding YHI options held by AIM employees will be cancelled and the
employees will receive options to acquire Cyber Dialogue stock.
The stock options granted by the predecessor company have been accounted for
pursuant to Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related Interpretations. Under APB 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized. The impact on net loss of applying FASB Statement No. 123,
"Accounting for Stock-Based Compensation," would not be material.
7. EMPLOYEE BENEFIT PLANS
The Company participates in a defined contribution plan which is sponsored
by YHI covering substantially all employees. Under the plan, eligible employees
may contribute amounts through payroll
F-26
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
deductions for investment in various funds established by the plan. Employee
contributions are matched by the Company at a rate of 20% up to a maximum of 4%
of salary. Contributions for the years ended December 31, 1998 and 1999 were
approximately $0 and $45, respectively.
AIM sponsored a qualified defined contribution profit sharing plan covering
substantially all full-time employees meeting certain eligibility requirements.
There were no expenses incurred by AIM in 1999 or 1998 in connection with this
plan.
8. INCOME TAXES
The Company's operations are included in the Federal and certain State
returns of YHI. The Company accounts for income taxes under the liability
method. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Income tax provisions
have been presented on a separate-company basis for purposes of financial
statement presentation.
Significant components of the Company's deferred tax assets at December 31,
are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Net operating losses........................................ $171 $ 1,192
Compensation payable........................................ 147 344
Allowance for doubtful accounts............................. 32 104
---- -------
Deferred tax assets......................................... 350 1,640
Valuation allowance......................................... (350) (1,640)
---- -------
Net deferred tax assets..................................... $ -- $ --
==== =======
</TABLE>
The difference between the actual tax rate and the statutory rate is due to
goodwill amortization that is not deductible for tax purposes and increases in
the valuation allowance.
At December 31, 1999, the Company had net loss carryforwards for federal tax
purposes of approximately $3,000 which expire in 2018 through 2019. The
utilization of carryforward losses will be limited in certain circumstances.
9. YEAR 2000 ISSUE--UNAUDITED
The Company developed a plan to modify its information technology to be
ready for the Year 2000 and has completed converting critical data processing
systems. As of December 31, 1999, no significant expenses were incurred. In
addition, the Company has substantially completed its survey of customers and
critical vendors as to their Year 2000 readiness.
A failure by its critical vendors or any third party with which the Company
interacts, to resolve a material Year 2000 issue could result in the
interruption in, or failure of, certain normal business activities and could
materially effect the Company's financial condition, results of operations and
cash flows. The Company anticipates that is will develop contingency plans, as
deemed appropriate, designed to deal with such scenarios. The Company did not
experience any significant year 2000 related problems through February 9, 2000.
Based on current plans and assumptions, the Company does not expect that the
Year 2000 issue will have a material adverse impact on the Company as a whole.
F-27
<PAGE>
CYBER DIALOGUE INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
CYBER
DIALOGUE AIM CYBER DIALOGUE
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
-------- -------- ----------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,975 $ 27 $(3,000)(1) $ 5,002
Accounts receivable, less allowance for doubtful
accounts................................................ 2,387 1,325 -- 3,712
Due from related parties.................................. 374 -- -- 374
Prepaid expenses and other current assets................. 151 25 -- 176
------- ------ ------- -------
Total current assets........................................ 10,887 1,377 (3,000) 9,264
Property and equipment, net................................. 1,374 696 -- 2,070
Goodwill.................................................... -- 3,710 5,909 (2) 9,619
Other assets................................................ 145 -- -- 145
------- ------ ------- -------
Total assets................................................ $12,406 $5,783 $ 2,909 $21,098
======= ====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 597 $ 496 $ -- $ 1,093
Due to related parties.................................... 74 -- -- 74
Accrued compensation...................................... 914 -- -- 914
Accrued expenses and other current liabilities............ 762 113 -- 875
Deferred revenue.......................................... 2,476 759 -- 3,235
------- ------ ------- -------
Total current liabilities................................... 4,823 1,368 -- 6,191
------- ------ ------- -------
Stockholders equity:
Common stock, $.01 par value, 40,000,000 shares
authorized, 19,150,200 actual shares and 20,031,876 pro
forma shares issued and outstanding..................... 191 -- 9 (3) 200
Additional paid-in capital................................ 14,123 -- 7,315 (3) 21,438
Shareholder's net investment.............................. -- 4,415 (4,415)(4) 0
Deferred compensation..................................... (1,269) -- -- (1,269)
Accumulated deficit....................................... (5,462) -- -- (5,462)
------- ------ ------- -------
Total stockholders' equity.................................. 7,583 4,415 2,909 14,907
------- ------ ------- -------
Total liabilities and stockholders' equity.................. $12,406 $5,783 $ 2,909 $21,098
======= ====== ======= =======
</TABLE>
- ------------------------------
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET:
(1) Reflects reduction of balance by cash paid as partial consideration for the
Company's acquisition of AIM.
(2) Reflects (i) the elimination of AIM's goodwill of $3,710 related to the 1998
acquisition of AIM by YMSI and (ii) the Company's recognition of goodwill of
$9,619 resulting from the acquisition. The Company paid $3.0 million in cash
and issued 881,676 shares of common stock to purchase AIM, which aggregated
to a total value of $10.3 million. The goodwill will be amortized over 5
years.
(3) Reflects 881,676 additional shares issued as partial consideration for the
Company's acquisition of AIM. The value of the shares issued was $8.31 and
was determined as being the fair market value at the date of acquisition.
(4) Reflects elimination of YMSI's net investment in AIM, as required by
application of the purchase method of accounting for business combinations.
F-28
<PAGE>
CYBER DIALOGUE INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
CYBER
DIALOGUE AIM CYBER DIALOGUE
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
----------- -------- ----------- --------------
<S> <C> <C> <C> <C>
Revenue....................................... $ 8,227 $ 4,185 $ -- $ 12,412
Cost of revenue (including $11 from
affiliates)................................. 5,067 4,029 -- 9,096
----------- ------- ----- -----------
Gross profit.................................. 3,160 156 -- 3,316
Operating expenses
Sales and marketing......................... 1,840 507 -- 2,347
General and administrative (including $735
from affiliates).......................... 2,757 2,186 -- 4,943
Depreciation and amortization............... 475 1,301 793(1) 2,569
Research and development.................... 495 -- -- 495
----------- ------- ----- -----------
Total operating expenses...................... 5,567 3,994 793 10,354
----------- ------- ----- -----------
Loss from operations.......................... (2,407) (3,838) (793) (7,038)
Interest income............................. 114 -- -- 114
Interest expense............................ (218) (491) -- (709)
----------- ------- ----- -----------
Net loss...................................... $ (2,511) $(4,329) $(793) $ (7,633)
=========== ======= ===== ===========
Actual and pro forma net loss................. $ (2,511) $ (7,633)
Actual and pro forma basic and diluted net
loss per share.............................. $ (0.15) $ (0.43)
Actual and pro forma weighted average shares
outstanding................................. 16,928,274 17,809,950
</TABLE>
- ------------------------------
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS:
(1) Reflects (i) the elimination of AIM's amortization of goodwill of $1,131
related to the 1998 acquisition of AIM by YMSI and (ii) the Company's
recognition of amortization of goodwill of $1,924 resulting from the
acquisition.
(2) Reflects 881,676 additional shares issued as partial consideration for the
Company's acquisition of AIM.
F-29
<PAGE>
[Logo: Cyber Dialogue]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 Shares
[CYBER DIALOGUE LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
SG COWEN
BANC OF AMERICA SECURITIES LLC
ING BARINGS
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses to be incurred in connection with
the offering described in this Registration Statement, all of which will be paid
by Cyber Dialogue. All amounts are estimates, other than the Commission
registration fee, the NASD fee, and the Nasdaq listing fee.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 19,800.00
NASD fee.................................................... $ 8,000.00
Nasdaq listing fee.......................................... $ 95,000.00
Accounting fees and expenses................................ $ 250,000.00
Legal fees and expenses..................................... $ 750,000.00
Director and officer insurance expenses..................... $ 450,000.00
Printing and engraving...................................... $ 278,500.00
Transfer Agent fees and expenses............................ $ 3,500.00
Blue sky fees and expenses.................................. $ 10,000.00
Miscellaneous expenses...................................... $ 10,200.00
-------------
Total..................................................... $1,875,000.00
=============
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law ("DGCL"), as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL provides, among other things, that Cyber Dialogue
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding (other
than an action by or in the right of Cyber Dialogue) by reason of the fact that
the person is or was a director, officer, agent or employee of Cyber Dialogue or
is or was serving at Cyber Dialogue's request as a director, officer, agent, or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgment, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding. The power to indemnify applies
(a) if such person is successful on the merits or otherwise in defense of any
action, suit or proceeding, or (b) if such person acted in good faith and in a
manner he reasonably believed to be in the best interest, or not opposed to the
best interest, of Cyber Dialogue, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
power to indemnify applies to actions brought by or in the right of Cyber
Dialogue as well, but only to the extent of defense expenses (including
attorneys' fees but excluding amounts paid in settlement) actually and
reasonably incurred and not to any satisfaction of judgment or settlement of the
claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence or
misconduct in the performance of his duties to Cyber Dialogue, unless the court
believes that in light of all the circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director, who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to such
actions to be entered in the books containing the minutes of the meetings of the
board of directors at the time such action occurred or immediately after such
absent director receives notice of the unlawful acts.
II-1
<PAGE>
Our certificate of incorporation includes a provision that eliminates the
personal liability of our directors for monetary damages for breach of fiduciary
duty as a director, to the fullest extent permitted under Delaware law as it now
exists and as it might be later amended. Such a provision is permitted under
Delaware law.
Our bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law;
- we may indemnify our other employees and agents to the same extent that we
indemnify our officers and directors, unless otherwise determined by our
board of directors; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law.
The indemnification provisions contained in our certificate of incorporation
and bylaws are not exclusive of any other rights to which a person may be
entitled by law, agreement, vote of stockholders or disinterested directors or
otherwise. In addition, Cyber Dialogue maintains insurance on behalf of its
directors and executive officers insuring them against any liability asserted
against them in their capacities as directors or officers or arising out of such
status.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the last three years, the registrant has not sold or issued any
securities other than (all amounts have been adjusted to reflect the
registrant's 200-for-1 stock split that occurred on November 17, 1999):
In May 1997, the registrant issued and sold an aggregate of 3,033,000 shares
of common stock to nine investors for $.1055 per share, or an aggregate of
$319,981.50.
In November 1997, the registrant issued and sold 260,000 shares of common
stock to one investor for $.105 per share, or an aggregate of $27,300.00.
Also in 1997, the registrant granted stock options to its employees under
its stock option plans as follows: (a) options to purchase 1,375,200 shares at
an exercise price of $0.11 per share, (b) options to purchase 200,000 shares at
an exercise price of $0.20 per share, (c) options to purchase 480,000 shares at
an exercise price or $0.40 per share, (d) options to purchase 280,000 shares at
an exercise price of $0.60 per share.
In April 1998, the registrant issued and sold 142,000 shares of common stock
to one investor for $.1055 per share, or an aggregate of $14,981.00.
Also in April 1998, the registrant issued and sold 2,853,400 shares of
common stock to one investor for $.35045 per share, or an aggregate of
$999,974.03.
Also in 1998, the registrant granted stock options to its employees and a
director under its stock option plans as follows: (a) options to purchase
142,000 shares at $0.11 per share, (b) options to purchase 372,000 shares at
$0.35 per share, and (c) options to purchase 30,000 shares at $0.60 per share.
In March 1999, the registrant repaid $200,975.00 of indebtedness owed to
three investors by issuing an aggregate of 394,400 shares of common stock valued
at $.5098 per share, or an aggregate of $200,975.00. Also in March 1999, in
connection with a $2.5 million loan from two investors, the registrant issued
warrants to purchase an aggregate of 407,800 shares of common stock at an
exercise price of $.5098 per share.
In August 1999, the registrant issued a warrant to an investor to purchase
1,000,000 shares of common stock for $1.55 per share.
In September 1999, the registrant issued and sold an aggregate of 2,289,000
shares of common stock to three investors for $3.3859 per share, or an aggregate
of $7,750,325.10.
II-2
<PAGE>
Also in September 1999, by its terms, the $2.5 million loan from March 1999
was converted into 738,400 shares of common stock at an exchange ratio of
$3.3859 per share.
In August 1999, the registrant issued a warrant to an investor to purchase
1,000,000 shares of common stock for $1.55 per share.
Also in September 1999, the registrant issued a warrant to an investor to
purchase 295,000 shares of common stock for $3.386 per share if the warrant is
exercised before September 14, 2000; 229,800 shares of common stock for $4.35
per share if the warrant is exercised on or after September 14, 2000 and before
September 14, 2001; or 188,200 shares of common stock at $5.314 per share if the
warrant is exercised on or after September 14, 2001 and before September 14,
2002.
Also in 1999, the registrant granted stock options to its employees under
its stock option plans as follows: (a) options to purchase 890,000 shares at
$0.51 per share, (b) options to purchase 100,000 shares at $0.60 per share, and
(c) options to purchase 190,000 shares at $3.39 per share.
From January 1, 2000 through April 4, 2000, the registrant granted stock
options to its employees under its stock option plans as follows: (a) options to
purchase 100,000 shares at $3.39 per share, (b) options to purchase 20,000
shares at $6.00 per share, (c) options to purchase 145,000 shares at $8.06 per
share, (d) options to purchase 10,000 shares at $8.69 per share, and
(e) options to purchase 1,137,500 at the initial public offering price.
The sales of the above securities were deemed to be exempt from registration
pursuant to either Section 4(2) of the Securities Act of 1933, as amended, or
Rule 701 promulgated under the Securities Act of 1993, as amended. The
recipients of securities in each of these transactions represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their relationship
with the registrant, to information about the registrant.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
1.1 Form of underwriting agreement.
2.1 Agreement and Plan of Merger by and among Cyber Dialogue,
AIM Acquisition I Inc., Applied Information Management
Marketing, Inc. and Yankelovich Holdings Inc. relating to
the merger of Applied Information Management Marketing, Inc.
with and into AIM Acquisition I Inc. dated as of February 3,
2000.+
3.1 Restated certificate of incorporation.+
3.2 Form of amended and restated certificate of incorporation to
be in effect upon the closing of the offering.
3.3 Bylaws, as amended through March 28, 2000.
3.4 Form of amended and restated bylaws to be in effect upon the
closing of the offering.
4.1 Specimen common stock certificate.
4.2 See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the
certificate of incorporation and bylaws defining the rights
of holders of common stock.
4.3 Registration Rights Agreement dated September 14, 1999.+
4.4 Form of Rights Agreement between Cyber Dialogue and American
Stock Transfer and Trust Company.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Cyber Dialogue Inc. 1996 Stock Option Plan.
10.2 Form of Cyber Dialogue Inc. 1996 Stock Option Plan
Nonqualified Stock Option Agreement.
10.3 Cyber Dialogue Inc. Amended and Restated 1997 Stock Option
Plan, as amended through April 4, 2000.
10.4 Form of Cyber Dialogue Inc. Amended and Restated 1997 Stock
Option Plan Nonqualified Stock Option Agreement.+
10.5 Cyber Dialogue Inc. 2000 Stock Incentive Plan.
10.6 Cyber Dialogue Inc. Employee Stock Purchase Plan.
10.7 Cyber Dialogue Inc. Management Incentive Plan.
10.8 Leases between Cyber Dialogue and the Rector, Church Wardens
and Vestrymen of Trinity Church in the City of New York.+
10.9+ Services Agreement dated as of August 30, 1999 by and
between Cyber Dialogue and AMFM Interactive Inc., a Delaware
corporation.+
10.10+ Annual Database Services Agreement with Roche Diagnostics
Corporation dated as of September 29, 1999.+
10.11 Warrant No. 1 to purchase common stock of Cyber Dialogue
issued to AMFM Interactive Inc., dated August 30, 1999.+
10.12 Warrant to purchase common stock of Cyber Dialogue issued to
Wand Equity Portfolio II L.P. on March 1, 1999.+
10.13 Warrant to purchase common stock of Cyber Dialogue issued to
Wand Affiliates Fund L.P. on March 1, 1999.+
10.14 Warrant to purchase common stock of Cyber Dialogue issued to
eCom Partners Fund I LLC, dated as of September 14, 1999.+
10.15 Employment letter agreement between Lynne Bolen and Cyber
Dialogue, dated December 21, 1999.+
10.16 Indemnification Agreement, dated September 14, 1999, between
Cyber Dialogue and Christopher P. Forester.+
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
10.17 Indemnification Agreement, dated September 14, 1999, between
Cyber Dialogue and John Fullmer.+
10.18 Management Services Agreement, dated as of February 16,
2000, between Cyber Dialogue and Wand Partners Inc.
10.19 Confidentiality and Non-Competition Agreement between Cyber
Dialogue and Mark Esiri dated as of April 4, 2000.
21.1 Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Kamler, Lewis & Noreman LLP.
23.3 Consent of Ernst & Young LLP.
23.4* Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Power of attorney (please see Signature Page).
27.1 Financial Data Schedule.
99.1 Consent of About.com.
99.2 Consent of AMFMi.
99.3 Consent of Entertaindom.
99.4 Consent of Netscape.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
(b) Financial Statement Schedules.
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 provisions described in Item 14, or otherwise, the
registrant has been informed 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 pubic 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 purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on April 6, 2000.
<TABLE>
<S> <C> <C>
CYBER DIALOGUE INC.
BY: /S/ C. ANDREW WATT
-----------------------------------------
Name: C. Andrew Watt
Title: Chief Financial Officer, Executive
Vice President and Treasurer
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints C. Andrew Watt, Mark Esiri and each of them with
full power to act without the other, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities (unless
revoked in writing) to sign any and all amendments (including post-effective
amendments thereto) to this Registration Statement to which this power of
attorney is attached, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting to such attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully as to all intents and purposes as
he or she might or could do in person, hereby ratifying and confirming all that
such attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board of
------------------------------------------- Directors April 6, 2000
Bruce W. Schnitzer
* Chief Executive Officer,
------------------------------------------- President and Director April 6, 2000
Mark Esiri
* Chief Financial Officer,
------------------------------------------- Executive Vice President April 6, 2000
C. Andrew Watt and Treasurer
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director
------------------------------------------- April 6, 2000
David J. Callard
/s/ MATTHEW DOULL Director
------------------------------------------- April 6, 2000
Matthew Doull
* Director
------------------------------------------- April 6, 2000
Christopher P. Forester
* Director
------------------------------------------- April 6, 2000
John Fullmer
* Director
------------------------------------------- April 6, 2000
Tim Toben
/s/ MARY CARTER WARREN Director
------------------------------------------- April 6, 2000
Mary Carter Warren
</TABLE>
<TABLE>
<S> <C> <C>
/s/ C. ANDREW WATT
--------------------------------------
C. Andrew Watt
ATTORNEY-IN-FACT
*By:
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
1.1 Form of underwriting agreement.
2.1 Agreement and Plan of Merger by and among Cyber Dialogue,
AIM Acquisition I Inc., Applied Information Management
Marketing, Inc. and Yankelovich Holdings Inc. relating to
the merger of Applied Information Management Marketing, Inc.
with and into AIM Acquisition I Inc. dated as of February 3,
2000.+
3.1 Restated certificate of incorporation.+
3.2 Form of amended and restated certificate of incorporation to
be in effect upon the closing of the offering.
3.3 Bylaws, as amended through March 28, 2000.
3.4 Form of amended and restated bylaws to be in effect upon the
closing of the offering.
4.1 Specimen common stock certificate.
4.2 See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the
certificate of incorporation and bylaws defining the rights
of holders of common stock.
4.3 Registration Rights Agreement dated September 14, 1999.+
4.4 Form of Rights Agreement between Cyber Dialogue and American
Stock Transfer and Trust Company.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Cyber Dialogue Inc. 1996 Stock Option Plan.
10.2 Form of Cyber Dialogue Inc. 1996 Stock Option Plan
Nonqualified Stock Option Agreement.
10.3 Cyber Dialogue Inc. Amended and Restated 1997 Stock Option
Plan, as amended through April 4, 2000.
10.4 Form of Cyber Dialogue Inc. Amended and Restated 1997 Stock
Option Plan Nonqualified Stock Option Agreement.+
10.5 Cyber Dialogue Inc. 2000 Stock Incentive Plan.
10.6 Cyber Dialogue Inc. Employee Stock Purchase Plan.
10.7 Cyber Dialogue Inc. Management Incentive Plan.
10.8 Leases between Cyber Dialogue and the Rector, Church Wardens
and Vestrymen of Trinity Church in the City of New York.+
10.9+ Services Agreement dated as of August 30, 1999 by and
between Cyber Dialogue and AMFM Interactive Inc., a Delaware
corporation.+
10.10+ Annual Database Services Agreement with Roche Diagnostics
Corporation dated as of September 29, 1999.+
10.11 Warrant No. 1 to purchase common stock of Cyber Dialogue
issued to AMFM Interactive Inc., dated August 30, 1999.+
10.12 Warrant to purchase common stock of Cyber Dialogue issued to
Wand Equity Portfolio II L.P. on March 1, 1999.+
10.13 Warrant to purchase common stock of Cyber Dialogue issued to
Wand Affiliates Fund L.P. on March 1, 1999.+
10.14 Warrant to purchase common stock of Cyber Dialogue issued to
eCom Partners Fund I LLC, dated as of September 14, 1999.+
10.15 Employment letter agreement between Lynne Bolen and Cyber
Dialogue, dated December 21, 1999.+
10.16 Indemnification Agreement, dated September 14, 1999, between
Cyber Dialogue and Christopher P. Forester.+
10.17 Indemnification Agreement, dated September 14, 1999, between
Cyber Dialogue and John Fullmer.+
10.18 Management Services Agreement, dated as of February 16,
2000, between Cyber Dialogue and Wand Partners Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
10.19 Confidentiality and Non-Competition Agreement between Cyber
Dialogue and Mark Esiri dated as of April 4, 2000.
21.1 Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Kamler, Lewis & Noreman LLP.
23.3 Consent of Ernst & Young LLP.
23.4* Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Power of attorney (please see Signature Page).
27.1 Financial Data Schedule.
99.1 Consent of About.com.
99.2 Consent of AMFMi.
99.3 Consent of Entertaindom.
99.4 Consent of Netscape.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
<PAGE>
Exhibit 1.1
SHARES
CYBER DIALOGUE INC.
Common Stock
UNDERWRITING AGREEMENT
___________, 2000
SG COWEN SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
ING BARINGS LLC
As Representatives of the several Underwriters
c/o SG Cowen Securities Corporation
Financial Square
New York, New York 10005
Dear Sirs and Mesdames:
1. INTRODUCTORY. Cyber Dialogue Inc., a Delaware corporation (the "Company"),
proposes to sell, pursuant to the terms of this Agreement, to the several
underwriters named in Schedule A hereto (the "Underwriters," or, each, an
"Underwriter"), an aggregate of ____ shares of Common Stock, $.01 par value (the
"Common Stock") of the Company. The aggregate of ____ shares so proposed to be
sold is hereinafter referred to as the "Firm Stock." The Company also proposes
to sell to the Underwriters, upon the terms and conditions set forth in Section
3 hereof, up to an additional ______ shares of Common Stock (the "Optional
Stock"). The Firm Stock and the Optional Stock are hereinafter collectively
referred to as the "Stock." SG Cowen Securities Corporation ("SG Cowen") is and
Banc of America Securities LLC and ING Barings LLC are acting as representatives
of the several Underwriters and in such capacity are hereinafter referred to as
the "Representatives."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to, and agrees with, the several
Underwriters that:
a. A registration statement on Form S-1 (File No. 333-30652) (the
"Initial Registration Statement") in respect of the Stock has been filed with
the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you, and, excluding exhibits thereto, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration Statement"),
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of
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the Commission thereunder, which became effective upon filing, no other document
with respect to the Initial Registration Statement has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the Rules and Regulations, is hereinafter
called a "Preliminary Prospectus"); the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including the information contained in the
form of final prospectus filed with the Commission pursuant to Rule 424(b) under
the Securities Act and deemed by virtue of Rule 430A under the Securities Act to
be part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial Registration
Statement became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are hereinafter
collectively called the "Registration Statements"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Securities Act, is
hereinafter called the "Prospectus." No document has been or will be prepared or
distributed in reliance on Rule 434 under the Securities Act. No order
preventing or suspending the use of any Preliminary Prospectus has been issued
by the Commission.
b. The Registration Statement conforms (and the Rule 462(b)
Registration Statement, if any, the Prospectus and any amendments or supplements
to either of the Registration Statements or the Prospectus, when they become
effective or are filed with the Commission, as the case may be, will conform) in
all material respects to the requirements of the Securities Act and the Rules
and Regulations and do not and will not, as of the applicable effective date (as
to the Registration Statements and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or supplement
thereto) contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing representations
and warranties shall not apply to information contained in or omitted from the
Registration Statements or the Prospectus or any such amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
c. The Company and each of its subsidiaries (as set forth in Section
2(d)) have been duly incorporated and are validly existing as corporations in
good standing under the laws of their respective jurisdictions of incorporation,
are duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership or lease
of property or the conduct of their respective businesses requires such
qualification, and have all power and authority necessary to own or hold their
respective properties and to conduct the businesses in which they are engaged,
except where the failure to so qualify or have such power or authority would not
have, singularly or in the aggregate, a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). The
Company owns or
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controls, directly or indirectly, only the following corporations, associations
or other entities: [___].
d. This Agreement has been duly authorized executed and delivered by
the Company.
e. The Stock to be issued and sold by the Company to the Underwriters
hereunder has been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued,
fully paid and nonassessable and free of any preemptive or similar rights and
will conform to the description thereof contained in the Prospectus.
f. The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company, have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description thereof contained in the Prospectus.
g. All the outstanding shares of capital stock of each subsidiary of
the Company have been duly authorized and validly issued, are fully paid and
nonassessable and, except to the extent set forth in the Prospectus, are owned
by the Company directly or indirectly through one or more wholly-owned
subsidiaries, free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third party.
h. The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets.
i. Except for the registration of the Stock under the Securities Act
and such consents, approvals, authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the Underwriters,
no consent, approval, authorization or order of, or filing or registration with,
any court or governmental agency or body is required for the execution,
delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.
j. Ernst & Young LLP, who have expressed their opinions on the audited
financial statements and related schedules included in the Registration
Statements and the Prospectus are independent public accountants as required by
the Securities Act and the Rules and Regulations.
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<PAGE>
k. The financial statements, together with the related notes and
schedules, included in the Prospectus and in each Registration Statement fairly
present the financial position and the results of operations and changes in
financial position of the Company and its consolidated subsidiaries at the
respective dates or for the respective periods therein specified. Such
statements and related notes and schedules have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis except as
may be set forth in the Prospectus.
l. Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements included in the Prospectus,
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since such date, there has not
been any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole, otherwise than
as set forth or contemplated in the Prospectus.
m. Except as set forth in the Prospectus, there is no legal or
governmental proceeding pending to which the Company or any of its subsidiaries
is a party or of which any property or assets of the Company or any of its
subsidiaries is the subject which, singularly or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, might have a Material
Adverse Effect or would prevent or adversely affect the ability of the Company
to perform its obligations under this Agreement; and to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
n. Neither the Company nor any of its subsidiaries (i) is in violation
of its charter or by-laws, (ii) is in default in any respect, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or to
which any of its property or assets is subject or (iii) is in violation in any
respect of any law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject, except any violations or
defaults which, singularly or in the aggregate, would not have a Material
Adverse Effect.
o. The Company and each of its subsidiaries possess all licenses,
certificates, authorizations and permits issued by, and have made all
declarations and filings with, the appropriate state, federal or foreign
regulatory agencies or bodies which are necessary or desirable for the ownership
of their respective properties or the conduct of their respective businesses as
described in the Prospectus except where any failures to possess or make the
same, singularly or in the aggregate, would not have a Material Adverse Effect,
and the Company has not received notification of any revocation or modification
of any such license, authorization or
4
<PAGE>
permit and has no reason to believe that any such license, certificate,
authorization or permit will not be renewed.
p. Neither the Company nor any of its subsidiaries is or, after giving
effect to the offering of the Stock and the application of the proceeds thereof
as described in the Prospectus will become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
q. Neither the Company nor any of its officers, directors or affiliates
has taken or will take, directly or indirectly, any action designed or intended
to stabilize or manipulate the price of any security of the Company, or which
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company.
r. The Company and its subsidiaries own or possess the right to use all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them for the conduct of
their respective businesses, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company and
its subsidiaries with respect to the foregoing. The Company's business as now
conducted and as proposed to be conducted does not and will not infringe or
conflict with any patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses or other intellectual property or franchise right of any
person. Except as described in the Prospectus, no claim has been made against
the Company alleging the infringement by the Company of any patent, trademark,
service mark, trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person.
s. The Company and each of its subsidiaries have good and marketable
title in fee simple to, or have valid rights to lease or otherwise use, all
items of real or personal property which are material to the business of the
Company and its subsidiaries taken as a whole, in each case free and clear of
all liens, encumbrances, claims and defects that may result in a Material
Adverse Effect.
t. No labor disturbance by the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is imminent
which might be expected to have a Material Adverse Effect. The Company is not
aware that any key employee or significant group of employees of the Company or
any subsidiary plans to terminate employment with the Company or any such
subsidiary.
u. No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the
"Code")), or "accumulated funding deficiency" (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice requirement under Section 4043 of
ERISA has been waived) has occurred with respect to any employee benefit plan
which could have a
5
<PAGE>
Material Adverse Effect; each employee benefit plan is in compliance in all
material respects with applicable law, including ERISA and the Code; the Company
has not incurred and does not expect to incur liability under Title IV of ERISA
with respect to the termination of, or withdrawal from, any "pension plan"; and
each "pension plan" (as defined in ERISA) for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which could cause the loss of such qualification.
v. There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances by, due to, or caused by the
Company or any of its subsidiaries (or, to the best of the Company's knowledge,
any other entity for whose acts or omissions the Company or any of its
subsidiaries is or may be liable) upon any of the property now or previously
owned or leased by the Company or any of its subsidiaries, or upon any other
property, in violation of any statute or any ordinance, rule, regulation, order,
judgment, decree or permit or which would, under any statute or any ordinance,
rule (including rule of common law), regulation, order, judgment, decree or
permit, give rise to any liability, except for any violation or liability which
would not have, singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Effect; there has been no disposal, discharge,
emission or other release of any kind onto such property or into the environment
surrounding such property of any toxic or other wastes or other hazardous
substances with respect to which the Company or any of its subsidiaries have
knowledge, except for any such disposal, discharge, emission, or other release
of any kind which would not have, singularly or in the aggregate with all such
discharges and other releases, a Material Adverse Effect.
w. The Company and its subsidiaries each (i) have filed all necessary
federal, state and foreign income and franchise tax returns, (ii) have paid all
federal state, local and foreign taxes due and payable for which it is liable,
and (iii) do not have any tax deficiency or claims outstanding or assessed or,
to the best of the Company's knowledge, proposed against it which could
reasonably be expected to have a Material Adverse Effect.
x. The Company and each of its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar businesses in similar
industries.
y. The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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<PAGE>
z. The minute books of the Company and each of its subsidiaries have
been made available to the Underwriters and counsel for the Underwriters, and
such books (i) contain a complete summary of all meetings and actions of the
directors and shareholders of the Company and each of its subsidiaries since the
time of its respective incorporation through the date of the latest meeting and
action, and (ii) accurately in all material respects reflect all transactions
referred to in such minutes.
aa. There is no franchise, lease, contract, agreement or document
required by the Securities Act or by the Rules and Regulations to be described
in the Prospectus or to be filed as an exhibit to the Registration Statements
which is not described or filed therein as required; and all descriptions of any
such franchises, leases, contracts, agreements or documents contained in the
Registration Statements are accurate and complete descriptions of such documents
in all material respects.
bb. No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required to be described in
the Prospectus and which is not so described.
cc. No person or entity has the right to require registration of shares
of Common Stock or other securities of the Company because of the filing or
effectiveness of the Registration Statements or otherwise, except for persons
and entities who have expressly waived such right or who have been given proper
notice and have failed to exercise such right within the time or times required
under the terms and conditions of such right.
dd. Neither the Company nor any of its subsidiaries owns any "margin
securities" as that term is defined in Regulations G and U of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), and none
of the proceeds of the sale of the Stock will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security, for the purpose
of reducing or retiring any indebtedness which was originally incurred to
purchase or carry any margin security or for any other purpose which might cause
any of the Securities to be considered a "purpose credit" within the meanings of
Regulation G, T, U or X of the Federal Reserve Board.
ee. Neither the Company nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person that would give rise to a
valid claim against the Company or the Underwriters for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of the
Stock.
ff. No forward-looking statement (within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act) contained in the
Prospectus has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.
gg. The Stock has been approved for listing subject to notice of
issuance on the NASDAQ Stock Market's National Market.
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<PAGE>
hh. The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which the
business or operations of the Company or any of its subsidiaries will be
affected by the Year 2000 Problem. As a result of such review, the Company has
no reason to believe, and does not believe that the Year 2000 Problem will have
a Material Adverse Effect. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval, retransmission or
other utilization of data or in the operation of mechanical or electrical
systems of any kind will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000.
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Company that number of shares of Firm Stock (rounded up or down, as
determined by SG Cowen in its discretion, in order to avoid fractions) obtained
by multiplying shares of Firm Stock by a fraction, the numerator of which is the
number of shares of Firm Stock set forth opposite the name of such Underwriter
in Schedule A hereto and the denominator of which is the total number of shares
of Firm Stock.
The purchase price per share to be paid by the Underwriters to the
Company for the Stock will be $_____ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York time, on the second full business day preceding the
First Closing Date (as defined below)) against payment of the aggregate Purchase
Price therefor by wire transfer to an account at a bank acceptable to SG Cowen,
payable to the order of the Company, all at the offices of Brobeck, Phleger &
Harrison LLP, 1633 Broadway, 47th Floor, New York, New York 10019. Time shall be
of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligations of each Underwriter
hereunder. The time and date of the delivery and closing shall be at 10:00 A.M.,
New York time, on , 2000, in accordance with Rule 15c6-1 of the Exchange Act.
The time and date of such payment and delivery are herein referred to as the
"First Closing Date." The First Closing Date and the location of delivery of,
and the form of payment for, the Firm Stock may be varied by agreement between
the Company and SG Cowen.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters in New York, New
York at least twenty-four hours prior to the First Closing Date.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Underwriters may purchase all or
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<PAGE>
less than all of the Optional Stock. The price per share to be paid for the
Optional Stock shall be the Purchase Price. The Company agrees to sell to the
Underwriters the number of shares of Optional Stock specified in the written
notice by SG Cowen described below and the Underwriters agree, severally and not
jointly, to purchase such shares of Optional Stock.
Such shares of Optional Stock shall be purchased from the Company for
the account of each Underwriter in the same proportion as the number of shares
of Firm Stock set forth opposite such Underwriter's name bears to the total
number of shares of Firm Stock (subject to adjustment by SG Cowen to eliminate
fractions). The option granted hereby may be exercised as to all or any part of
the Optional Stock at any time, and from time to time, not more than thirty (30)
days subsequent to the date of this Agreement. No Optional Stock shall be sold
and delivered unless the Firm Stock previously has been, or simultaneously is,
sold and delivered. The right to purchase the Optional Stock or any portion
thereof may be surrendered and terminated at any time upon notice by SG Cowen to
the Company.
The option granted hereby may be exercised by written notice given to
the Company by SG Cowen setting forth the number of shares of the Optional Stock
to be purchased by the Underwriters and the date and time for delivery of and
payment for the Optional Stock. Each date and time for delivery of and payment
for the Optional Stock (which may be the First Closing Date, but not earlier) is
herein called the "Option Closing Date" and shall in no event be earlier than
two (2) business days nor later than five (5) business days after written notice
is given. (The Option Closing Date and the First Closing Date are herein called
the "Closing Dates.")
The Company will deliver the Optional Stock to the Underwriters (in the
form of definitive certificates, issued in such names and in such denominations
as the Representatives may direct by notice in writing to the Company given at
or prior to 12:00 Noon, New York time, on the second full business day preceding
the Option Closing Date) against payment of the aggregate Purchase Price
therefor in federal (same day) funds by certified or official bank check or
checks or wire transfer to an account at a bank acceptable to SG Cowen payable
to the order of the Company. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligations of each Underwriter hereunder. The Company shall make the
certificates for the Optional Stock available to the Representatives for
examination on behalf of the Underwriters in New York, New York not later than
10:00 A.M., New York Time, on the business day preceding the Option Closing
Date. The Option Closing Date and the location of delivery of, and the form of
payment for, the Optional Stock may be varied by agreement between the Company
and SG Cowen.
The several Underwriters propose to offer the Stock for sale upon the
terms and conditions set forth in the Prospectus.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters that:
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<PAGE>
a. The Company will prepare the Rule 462(b) Registration Statement, if
necessary, in a form approved by the Representatives and file such Rule 462(b)
Registration Statement with the Commission on the date hereof; prepare the
Prospectus in a form approved by the Representatives and file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than the second
business day following the execution and delivery of this Agreement; make no
further amendment or any supplement to the Registration Statements or to the
Prospectus to which the Representatives shall reasonably object by notice to the
Company after a reasonable period to review; advise the Representatives,
promptly after it receives notice thereof, of the time when any amendment to
either Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and to
furnish the Representatives with copies thereof; advise the Representatives,
promptly after it receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the qualification
of the Stock for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statements or
the Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such qualification,
use promptly its best efforts to obtain its withdrawal.
b. If at any time prior to the expiration of nine months after the
effective date of the Initial Registration Statement when a prospectus relating
to the Stock is required to be delivered any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Securities Act, the Company will promptly notify the
Representatives thereof and upon their request will prepare an amended or
supplemented Prospectus which will correct such statement or omission or effect
such compliance. The Company will furnish without charge to each Underwriter and
to any dealer in securities as many copies as the Representatives may from time
to time reasonably request of such amended or supplemented Prospectus; and in
case any Underwriter is required to deliver a prospectus relating to the Stock
nine months or more after the effective date of the Initial Registration
Statement, the Company upon the request of the Representatives and at the
expense of such Underwriter will prepare promptly an amended or supplemented
Prospectus as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Securities Act.
c. The Company will furnish promptly to each of the Representatives and
to counsel for the Underwriters a signed copy of each of the Registration
Statements as originally filed with the Commission, and each amendment thereto
filed with the Commission, including all consents and exhibits filed therewith.
d. The Company will deliver promptly to the Representatives in New York
City such number of the following documents as the Representatives shall
reasonably request: (i) conformed copies of the Registration Statements as
originally filed with the Commission and
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each amendment thereto (in each case including exhibits), (ii) each Preliminary
Prospectus, and (iii) the Prospectus (not later than 10:00 A.M., New York time,
of the business day following the execution and delivery of this Agreement) and
any amended or supplemented Prospectus (not later than 10:00 A.M., New York City
time, on the business day following the date of such amendment or supplement).
e. The Company will make generally available to its stockholders as
soon as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Securities Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Securities Act
and the Rules and Regulations (including, at the option of the Company, Rule
158).
f. The Company will promptly take from time to time such actions as the
Representatives may reasonably request to qualify the Stock for offering and
sale under the securities or Blue Sky laws of such jurisdictions as the
Representatives may designate and to continue such qualifications in effect for
so long as required for the distribution of the Stock; provided that the Company
and its subsidiaries shall not be obligated to qualify as foreign corporations
in any jurisdiction in which they are not so qualified or to file a general
consent to service of process in any jurisdiction;
g. During the period of five years from the date hereof, the Company
will deliver to the Representatives and, upon request, to each of the other
Underwriters, (i) as soon as they are available, copies of all reports or other
communications furnished to shareholders and (ii) as soon as they are available,
copies of any reports and financial statements furnished or filed with the
Commission pursuant to the Exchange Act or any national securities exchange or
automatic quotation system on which the Stock is listed or quoted.
h. The Company will not directly or indirectly offer, sell, assign,
transfer, pledge, contract to sell, or otherwise dispose of any shares of Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock for a period of 180 days from the date of the Prospectus without the prior
written consent of SG Cowen other than the Company's sale of the Stock hereunder
and the issuance of shares pursuant to employee benefit plans, qualified stock
option plans or other employee compensation plans existing on the date hereof or
pursuant to currently outstanding options, warrants or rights. The Company will
cause each officer, director and shareholder listed in Schedule B to furnish to
the Representatives, prior to the First Closing Date, a letter, substantially in
the form of Exhibit I hereto, pursuant to which each such person shall agree not
to directly or indirectly offer, sell, assign, transfer, pledge, contract to
sell, or otherwise dispose of any shares of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock for a period of
180 days from the date of the Prospectus, without the prior written consent of
SG Cowen.
i. The Company will supply the Representatives with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Stock under the Securities Act.
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j. Prior to each of the Closing Dates the Company will furnish to the
Representatives, as soon as they have been prepared, copies of any unaudited
interim consolidated financial statements of the Company for any periods
subsequent to the periods covered by the financial statements appearing in the
Registration Statement and the Prospectus.
k. Prior to each of the Closing Dates, the Company will not issue any
press release or other communication directly or indirectly or hold any press
conference with respect to the Company, its condition, financial or otherwise,
or earnings, business affairs or business prospects (except for routine oral
marketing communications in the ordinary course of business and consistent with
the past practices of the Company and of which the Representatives are
notified), without the prior written consent of the Representatives, unless in
the judgment of the Company and its counsel, and after notification to the
Representatives, such press release or communication is required by law.
l. In connection with the offering of the Stock, until SG Cowen shall
have notified the Company of the completion of the resale of the Stock, the
Company will not, and will cause its affiliated purchasers (as defined in
Regulation M under the Exchange Act) not to, either alone or with one or more
other persons, bid for or purchase, for any account in which it or any of its
affiliated purchasers has a beneficial interest, any Stock, or attempt to induce
any person to purchase any Stock; and not to, and to cause its affiliated
purchasers not to, make bids or purchase for the purpose of creating actual, or
apparent, active trading in or of raising the price of the Stock.
m. The Company will not take any action prior to the Option Closing
Date which would require the Prospectus to be amended or supplemented pursuant
to Section 4(b);
n. The Company will apply the net proceeds from the sale of the Stock
as set forth in the Prospectus under the heading "Use of Proceeds."
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the
several Underwriters hereunder are subject to the accuracy, when made and on
each of the Closing Dates, of the representations and warranties of the Company
contained herein, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of their obligations hereunder, and to each of the following additional
terms and conditions:
a. No stop order suspending the effectiveness of either of the
Registration Statements shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the Commission, and any
request for additional information on the part of the Commission (to be included
in the Registration Statements or the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of the Representatives. The Rule
462(b) Registration Statement, if any, and the Prospectus shall have been timely
filed with the Commission in accordance with Section 4(a).
b. None of the Underwriters shall have discovered on or prior to the
Closing Date that the Registration Statement or the Prospectus or any amendment
or supplement thereto contains
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an untrue statement of a fact which, in the opinion of counsel for the
Underwriters, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein not misleading.
c. All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the Stock, the
Registration Statement and the Prospectus and all other legal matters relating
to this Agreement and the transactions contemplated hereby shall be reasonably
satisfactory in all material respects to counsel for the Underwriters, and the
Company shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
d. Skadden, Arps, Slate, Meagher & Flom LLP shall have furnished to the
Representatives such counsel's written opinion, as counsel to the Company,
addressed to the Underwriters and dated the Closing Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that:
(i) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, and have all
power and authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure to so
qualify or have such power or authority would not have, singularly or in the
aggregate, a Material Adverse Effect.
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the Company,
including the Stock being delivered on the Closing Date, have been duly and
validly authorized and issued, are fully paid and non-assessable and conform to
the description thereof contained in the Prospectus.
(iii) All the outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and, except to the extent set forth in the
Prospectus, are owned by the Company directly or indirectly through one or more
wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance,
security interest, restriction upon voting or transfer or any other claim of any
third party.
(iv) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of, any shares
of the Stock pursuant to the Company's charter or by-laws or any agreement or
other instrument known to such counsel.
(v) This Agreement has been duly authorized, executed and
delivered by the Company.
(vi) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not conflict
with or result in a breach or violation of any of the terms or provisions of, or
constitute a default under any indenture,
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mortgage, deed of trust, loan agreement or other agreement or instrument known
to such counsel after reasonable investigation to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the properties or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation of
the Charter or by-laws of the Company or of any of its subsidiaries or any
statute or any order, rule or regulation of any court or governmental agency or
body or court having jurisdiction over the Company or any of its subsidiaries or
any of their properties or assets.
(vii) Except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable state
securities laws in connection with the purchase and distribution of the Stock by
the Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.
(viii) The statements in the Prospectus under the heading
"Risk Factors - We have anti-takeover provisions which may make it difficult for
a third party to acquire us," "Business - Legal Proceedings," "Description of
Capital Stock," "Shares Eligible for Future Sale" and "Underwriting" in the
Prospectus and Items 14 and 15 of Part II of the Registration Statement, to the
extent that they constitute summaries of matters of law or regulation or legal
conclusions, have been reviewed by such counsel and fairly summarize the matters
described therein in all material respects.
(ix) The description in the Registration Statement and
Prospectus of statutes, legal or governmental proceedings and contracts and
other documents are accurate in all material respects; and to the best of such
counsel's knowledge, there are no statutes, legal or governmental proceedings,
contracts or other documents of a character required to be described in the
Registration Statement or Prospectus or to be filed as exhibits to the
Registration Statement which are not described or filed as required.
(x) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries (i) is in violation of its charter or
by-laws, (ii) is in default, and no event has occurred, which, with notice or
lapse of time or both, would constitute a default, in the due performance or
observance of any term, covenant or condition contained in any agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject or (iii) is in violation of any law, ordinance,
governmental rule, regulation or court decree to which it or its property or
assets may be subject or has failed to obtain any license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business except, in the case
of clauses (ii) and (iii), for those defaults, violations or failures which,
either individually or in the aggregate, would not have a Material Adverse
Effect.
(xi) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or
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any of its subsidiaries is a party or of which any property or asset of the
Company or any of its subsidiaries is the subject which, singularly or in the
aggregate, if determined adversely to the Company or any of its subsidiaries,
might have a Material Adverse Effect or would prevent or adversely affect the
ability of the Company to perform its obligations under this Agreement; and, to
the best of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(xii) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such opinion, the Rule
462(b) Registration Statement, if any, was filed with the Commission on the date
specified therein, the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) of the Rules and Regulations specified in such
opinion on the date specified therein and no stop order suspending the
effectiveness of the Registration Statement has been issued and, to the
knowledge of such counsel, no proceeding for that purpose is pending or
threatened by the Commission.
(xiii) The Registration Statements, as of the respective
effective dates and the Prospectus, as of its date, and any further amendments
or supplements thereto, as of their respective dates, made by the Company prior
to the Closing Date (other than the financial statements and other financial
data contained therein, as to which such counsel need express no opinion)
complied as to form in all material respects with the requirements of the
Securities Act and the Rules and Regulations (other than the financial
statements and related schedules therein, as to which such counsel need express
no opinion), when they were filed with the Commission.
(xiv) To the best of such counsel's no person or entity has
the right to require registration of shares of Common Stock or other securities
of the Company because of the filing or effectiveness of the Registration
Statements or otherwise, except for persons and entities who have expressly
waived such right or who have been given proper notice and have failed to
exercise such right within the time or times required under the terms and
conditions of such right.
(xv) Neither the Company nor any of its subsidiaries is an
"investment company" within the meaning of the Investment Company Act and the
rules and regulations of the Commission thereunder.
Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and dated the
Closing Date, in form and substance satisfactory to the Representatives, to the
effect that (x) such counsel has acted as counsel to the Company in connection
with the preparation of the Registration Statements (y) based on such counsel's
examination of the Registration Statements and such counsel's investigations
made in connection with the preparation of the Registration Statements and
"conferences with certain officers and employees of and with auditors for and
counsel to the Company", such counsel has no reason to believe that the
Registration Statements, as of the respective effective dates, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, or that the Prospectus contains any untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
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circumstances under which they were made, not misleading when they were filed
with the Commission any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; it being
understood that such counsel need express no opinion as to the financial
statements or other financial data contained in the Registration Statement or
the Prospectus.
The foregoing opinion and statement may be qualified by a statement to
the effect that such counsel has not independently verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus and takes no responsibility therefor except to the
extent set forth in the opinion described in clauses (viii) and (ix) above.
e. The Representatives shall have received from Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to such matters as the Underwriters may reasonably
require, and the Company shall have furnished to such counsel such documents as
they request for enabling them to pass upon such matters.
f. At the time of the execution of this Agreement, the Representatives
shall have received from Ernst & Young a letter, addressed to the Underwriters
and dated such date, in form and substance satisfactory to the Representatives
(i) confirming that they are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the Securities
Act and the Rules and Regulations and (ii) stating the conclusions and findings
of such firm with respect to the financial statements and certain financial
information contained or incorporated by reference in the Prospectus.
g. On the Closing Date, the Representatives shall have received a
letter (the "bring-down letter") from Ernst & Young LLP addressed to the
Underwriters and dated the Closing Date confirming, as of the date of the
bring-down letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given
in the Prospectus as of a date not more than three business days prior to the
date of the bring-down letter), the conclusions and findings of such firm with
respect to the financial information and other matters covered by its letter
delivered to the Representatives concurrently with the execution of this
Agreement pursuant to Section 6(f).
h. The Company shall have furnished to the Representatives a
certificate, dated the Closing Date, of its President and Chief Executive
Officer and its Chief Financial Officer stating that (i) such officers have
carefully examined the Registration Statements and the Prospectus and, in their
opinion, the Registration Statements as of their respective effective dates and
the Prospectus, as of each such effective date, did not include any untrue
statement of a material fact and did not omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) since the effective date of the Initial Registration Statement no event has
occurred which should have been set forth in a supplement or amendment to the
Registration Statements or the Prospectus, (iii) to the best of their knowledge
after reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct and the Company
has complied with all
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agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and (iv) subsequent to the date of
the most recent financial statements included in the Prospectus, there has been
no material adverse change in the financial position or results of operation of
the Company and its subsidiaries, or any change, or any development including a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of the Company and its subsidiaries
taken as a whole, except as set forth in the Prospectus.
i. Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the business, general affairs, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Representatives, so material and adverse as to
make it impracticable or inadvisable to proceed with the sale or delivery of the
Stock on the terms and in the manner contemplated in the Prospectus.
j. No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency or
body which would, as of the Closing Date, prevent the issuance or sale of the
Stock; and no injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance or sale of the Stock.
k. Subsequent to the execution and delivery of this Agreement (i) no
downgrading shall have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it has under surveillance or review (other than an announcement
with positive implications of a possible upgrading), its rating of any of the
Company's debt securities.
l. Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter market,
shall have been suspended or minimum prices shall have been established on any
such exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state authorities, (iii) the
United States shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall have been a
declaration of a national emergency or war by the United States or (iv) there
shall have occurred such a material adverse change in general economic,
political or financial
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conditions (or the effect of international conditions on the financial markets
in the United States shall be such) as to make it, in the judgment of the
Representatives, impracticable or inadvisable to proceed with the sale or
delivery of the Stock on the terms and in the manner contemplated in the
Prospectus.
m. The Nasdaq National Market system shall have approved the Stock for
inclusion, subject only to official notice of issuance and evidence of
satisfactory distribution.
n. SG Cowen shall have received the written agreements, substantially
in the form of Exhibit I hereto, of the officers, directors and shareholders of
the Company listed in Schedule C to this Agreement.
o. All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
6. INDEMNIFICATION AND CONTRIBUTION.
a. The Company shall indemnify and hold harmless each Underwriter, its
officers, employees, representatives and agents and each person, if any, who
controls any Underwriter within the meaning of the Securities Act (collectively
the "Underwriter Indemnified Parties" and each an "Underwriter Indemnified
Party") against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which that Underwriter Indemnified Party may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus, either of the Registration Statements or the Prospectus
or in any amendment or supplement thereto, (ii) the omission or alleged omission
to state in any Preliminary Prospectus, either of the Registration Statements or
the Prospectus or in any amendment or supplement thereto a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any act or failure to act, or any alleged act or failure to
act, by any Underwriter in connection with, or relating in any manner to, the
Stock or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i) or (ii) above, (provided that the
Company shall not be liable in the case of any matter covered by this clause
(iii) to the extent that it is determined in a final judgement by a court of
competent jurisdiction that such loss, claim, damage, liability or action
resulted directly from any such act or failure to act undertaken or omitted to
be taken by such Underwriter through its gross negligence or wilful misconduct)
and shall reimburse each Underwriter Indemnified Party promptly upon demand for
any legal or other expenses reasonably incurred by that Underwriter Indemnified
Party in connection with investigating or preparing to defend or defending
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon (i) an untrue statement or alleged untrue statement in or omission or
alleged omission from the Preliminary Prospectus, either of the Registration
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Statements or the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company through
the Representatives by or on behalf of any Underwriter specifically for use
therein, which information the parties hereto agree is limited to the
Underwriter's Information (as defined in Section 15). This indemnity agreement
is not exclusive and will be in addition to any liability which the Company
might otherwise have and shall not limit any rights or remedies which may
otherwise be available at law or in equity to each Underwriter Indemnified
Party.
b. Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company its officers, employees, representatives and agents,
each of its directors and each person, if any, who controls the Company within
the meaning of the Securities Act (collectively the "Company Indemnified
Parties" and each a "Company Indemnified Party") against any loss, claim, damage
or liability, joint or several, or any action in respect thereof, to which the
Company Indemnified Parties may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of or is based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Prospectus, either of the
Registration Statements or the Prospectus or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company through
the Representatives by or on behalf of that Underwriter specifically for use
therein, and shall reimburse the Company Indemnified Parties for any legal or
other expenses reasonably incurred by such parties in connection with
investigating or preparing to defend or defending against or appearing as third
party witness in connection with any such loss, claim, damage, liability or
action as such expenses are incurred; provided that the parties hereto hereby
agree that such written information provided by the Underwriters consists solely
of the Underwriter's Information. This indemnity agreement is not exclusive and
will be in addition to any liability which the Underwriters might otherwise have
and shall not limit any rights or remedies which may otherwise be available at
law or in equity to the Company Indemnified Parties.
c. Promptly after receipt by an indemnified party under this Section 6
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 6 except to the extent it has been materially
prejudiced by such failure; and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 6. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
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the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in writing by SG Cowen, if the
indemnified parties under this Section 6 consist of any Underwriter Indemnified
Party, or by the Company if the indemnified parties under this Section 6 consist
of any Company Indemnified Parties. Each indemnified party, as a condition of
the indemnity agreements contained in Sections 6(a) and 6(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. Subject to the provisions of Section 6(d) below, no
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
d. If at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by this Section 6 effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the request for reimbursement, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
e. If the indemnification provided for in this Section 6 is unavailable
or insufficient to hold harmless an indemnified party under Section 6(a) or
6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by
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the Company on the one hand and the Underwriters on the other from the offering
of the Stock or if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other with respect to
the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other with respect to such offering shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Stock purchased under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters with respect to the Stock purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission; provided that the parties hereto
agree that the written information furnished to the Company through the
Representatives by or on behalf of the Underwriters for use in any Preliminary
Prospectus, either of the Registration Statements or the Prospectus consists
solely of the Underwriter's Information. The Company and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
Section 6(e) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 6(e) shall be deemed to include, for purposes
of this Section 6(e), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 6(e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Stock underwritten by it and distributed to the public
were offered to the public less the amount of any damages which such Underwriter
has otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
f. The Underwriters' obligations to contribute as provided in
Section 6(e) are several in proportion to their respective underwriting
obligations and not joint.
7. TERMINATION. The obligations of the Underwriters hereunder may be terminated
by SG Cowen, in its absolute discretion by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 5(i), 5(k) or 5(l) have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
21
<PAGE>
8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) this Agreement shall have
been terminated pursuant to Section 7 or 9, (b) the Company shall fail to tender
the Stock for delivery to the Underwriters for any reason permitted under this
Agreement, or (c) the Underwriters shall decline to purchase the Stock for any
reason permitted under this Agreement the Company shall reimburse the
Underwriters for the fees and expenses of their counsel and for such other
out-of-pocket expenses as shall have been reasonably incurred by them in
connection with this Agreement and the proposed purchase of the Stock, and upon
demand the Company shall pay the full amount thereof to SG Cowen. If this
Agreement is terminated pursuant to Section 10 by reason of the default of one
or more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriter on account of those expenses.
9. SUBSTITUTION OF UNDERWRITERS
a. If any Underwriter or Underwriters shall default in its or their
obligations to purchase shares of Stock hereunder and the aggregate number of
shares which such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed ten percent (10%) of the total number of shares
underwritten, the other Underwriters shall be obligated severally, in proportion
to their respective commitments hereunder, to purchase the shares which such
defaulting Underwriter or Underwriters agreed but failed to purchase. If any
Underwriter or Underwriters shall so default and the aggregate number of shares
with respect to which such default or defaults occur is more than ten percent
(10%) of the total number of shares underwritten and arrangements satisfactory
to the Representatives and the Company for the purchase of such shares by other
persons are not made within forty-eight (48) hours after such default, this
Agreement shall terminate.
b. If the remaining Underwriters or substituted Underwriters are
required hereby or agree to take up all or part of the shares of Stock of a
defaulting Underwriter or Underwriters as provided in this Section 9, (i) the
Company shall have the right to postpone the Closing Dates for a period of not
more than five (5) full business days in order that the Company may effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees promptly to file any amendments to the Registration Statement or
supplements to the Prospectus which may thereby be made necessary, and (ii) the
respective numbers of shares to be purchased by the remaining Underwriters or
substituted Underwriters shall be taken as the basis of their underwriting
obligation for all purposes of this Agreement. Nothing herein contained shall
relieve any defaulting Underwriter of its liability to the Company or the other
Underwriters for damages occasioned by its default hereunder. Any termination of
this Agreement pursuant to this Section 10 shall be without liability on the
part of any non-defaulting Underwriter or the Company, except expenses to be
paid or reimbursed pursuant to Sections 5 and 9 and except the provisions of
Section 7 shall not terminate and shall remain in effect.
10. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the several Underwriters, the
Company and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or
22
<PAGE>
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person; except that the representations,
warranties, covenants, agreements and indemnities of the Company contained in
this Agreement shall also be for the benefit of the Underwriter Indemnified
Parties, and the indemnities of the several Underwriters shall also be for the
benefit of the Company Indemnified Parties.
11. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the several Underwriters, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any Underwriter, the Company or any person controlling any of them and shall
survive delivery of and payment for the Stock.
12. NOTICES. All statements, requests, notices and agreements hereunder shall be
in writing, and:
a. if to the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission to SG Securities Corporation Attention: [ ] (Fax:
212-[ ]).
13. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, (a) "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. UNDERWRITERS' INFORMATION. The parties hereto acknowledge and agree that,
for all purposes of this Agreement, the Underwriters' Information consists
solely of the following information in the Prospectus: (i) the last paragraph on
the front cover page concerning the terms of the offering by the Underwriters;
and (ii) the statements concerning the Underwriters contained in the first
paragraph, second paragraph and ninth paragraph under the heading
"Underwriting."
16. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement, you
will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by the Representatives, will be binding on all the
Underwriters.
17. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section,
paragraph or provision of this Agreement shall not affect the validity or
enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
23
<PAGE>
18. GENERAL. This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. In this Agreement, the masculine, feminine and neuter genders and
the singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representatives.
19. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
If the foregoing is in accordance with your understanding of the
agreement between the Company and the several Underwriters, kindly indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
CYBER DIALOGUE, INC.
By: ______________________________
Name:
Title:
Accepted as of
the date first above written:
SG COWEN SECURITIES CORPORATION
BANC OF AMERICA SECURITIES LLC
ING BARINGS LLC
Acting on their own behalf and as
Representatives of several Underwriters
referred to in the foregoing Agreement.
By: SG COWEN SECURITIES CORPORATION
By:______________________________
Name:
Title:
24
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Number of
Firm Shares Optional
to be Shares to be
Name Purchased Purchased
----
<S> <C> <C> <C>
SG Cowen Securities Corporation
----------- ------------
Banc Of America Securities LLC
ING Barings LLC
Total
=========== ============
</TABLE>
25
<PAGE>
EXHIBIT I
LOCK-UP AGREEMENT
___________, 2000
SG Cowen Securities Corporation
Banc of America Securities LLC
ING Barings LLC
As representatives of the
several Underwriters
c/o SG Cowen Securities Corporation
Financial Square
New York, New York 10005
Re: Cyber Dialogue Inc. Shares of Common Stock
Dear Sirs:
In order to induce SG Cowen Securities Corporation
("SG Cowen"), Banc of America Securities LLC and ING Barings LLC (together with
SG Cowen, the "Representatives"), to enter in to a certain underwriting
agreement with Cyber Dialogue Inc., a Delaware corporation (the "Company"), with
respect to the public offering of shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), the undersigned hereby agrees that for a
period of 180 days following the date of the final prospectus filed by the
Company with the Securities and Exchange Commission in connection with such
public offering, the undersigned will not, without the prior written consent of
SG Cowen, directly or indirectly, offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any shares of Common Stock
(including, without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares, the "Beneficially Owned
Shares")) or securities convertible into or exercisable or exchangeable in
Common Stock.
Anything contained herein to the contrary notwithstanding, any person
to whom shares of Common Stock or Beneficially Owned Shares are transferred from
the undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date hereof until
the expiration of 180-day period following the date of the Company's final
Prospectus, any and all rights, if any, to request or demand registration
pursuant to the Securities Act of any shares of Common Stock that are registered
in the name of the undersigned or that are Beneficially Owned Shares. In
26
<PAGE>
order to enable the aforesaid covenants to be enforced, the undersigned hereby
27
<PAGE>
consents to the placing of legends and/or stop-transfer orders with the transfer
agent of the Common Stock with respect to any shares of Common Stock or
Beneficially Owned Shares.
By:___________________________________
Name:
Title:
28
<PAGE>
Exhibit 3.2
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
-------------------------------------------------
Pursuant to Sections 242 and 245 of the
Delaware General Corporation Law
-------------------------------------------------
Cyber Dialogue Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the "GCL"),
does hereby certify as follows:
(1) The name of the Corporation is Cyber Dialogue Inc. The
Corporation was originally incorporated under the name Cyber Dialogue Inc. The
original certificate of incorporation of the Corporation was filed with the
office of the Secretary of State of the State of Delaware on September 25, 1996.
(2) This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors of the Corporation (the "Board of
Directors") and by the stockholders of the Corporation in accordance with
Sections 228, 242 and 245 of the GCL.
(3) This Amended and Restated Certificate of Incorporation
restates and integrates and further amends the certificate of incorporation of
the Corporation, as heretofore amended or supplemented.
<PAGE>
(4) The text of the Certificate of Incorporation is amended
and restated in its entirety as follows:
FIRST: The name of the Corporation is Cyber Dialogue Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware (the "GCL").
FOURTH: (a) AUTHORIZED CAPITAL STOCK. The total number of shares of
stock which the Corporation shall have authority to issue is seventy-five
million (75,000,000) shares of capital stock, consisting of (i) sixty million
(60,000,000) shares of common stock, par value $0.01 per share (the "Common
Stock") and (ii) fifteen million (15,000,000) shares of preferred stock, par
value $0.01 per share (the "Preferred Stock").
(b) COMMON STOCK. The powers, preferences and rights, and the
qualifications, limitations and restrictions, of the Common Stock are as
follows:
2
<PAGE>
(1) NO CUMULATIVE VOTING. The holders of shares of
Common Stock shall not have cumulative voting rights.
(2) DIVIDENDS; STOCK SPLITS. Subject to the rights of
the holders of Preferred Stock, and subject to any other provisions of this
Amended and Restated Certificate of Incorporation, as it may be amended from
time to time, holders of shares of Common Stock shall be entitled to receive
such dividends and other distributions in cash, stock or property of the
Corporation when, as and if declared thereon by the Board of Directors from
time to time out of assets or funds of the Corporation legally available
therefor.
(3) LIQUIDATION, DISSOLUTION, ETC. In the event of
any liquidation, dissolution or winding up (either voluntary or involuntary) of
the Corporation, the holders of shares of Common Stock shall be entitled to
receive the assets and funds of the Corporation available for distribution after
payments to creditors and to the holders of any Preferred Stock of the
Corporation that may at the time be outstanding, in proportion to the number of
shares held by them.
(4) NO PREEMPTIVE OR SUBSCRIPTION RIGHTS. No holder
of shares of Common Stock shall be entitled to preemptive or subscription
rights.
(c) PREFERRED STOCK. The Board of Directors is hereby
expressly authorized to provide for the issuance of all or any shares of the
Preferred Stock in one or
3
<PAGE>
more classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series, including, without
limitation, the authority to provide that any such class or series may be (i)
subject to redemption at such time or times and at such price or prices; (ii)
entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions, and at such times, and payable in preference to,
or in such relation to, the dividends payable on any other class or classes or
any other series; (iii) entitled to such rights upon the dissolution of, or upon
any distribution of the assets of, the Corporation; or (iv) convertible into,
or exchangeable for, shares of any other class or classes of stock, or of any
other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.
(d) POWER TO SELL AND PURCHASE SHARES. Subject to the
requirements of applicable law, the Corporation shall have the power to issue
and sell all or any part of any shares of any class of stock herein or hereafter
authorized to such persons, and for such consideration, as the Board of
Directors shall from time to time, in its discretion,
4
<PAGE>
determine, whether or not greater consideration could be received upon the issue
or sale of the same number of shares of another class, and as otherwise
permitted by law. Subject to the requirements of applicable law, the Corporation
shall have the power to purchase any shares of any class of stock herein or
hereafter authorized from such persons, and for such consideration, as the Board
of Directors shall from time to time, in its discretion, determine, whether or
not less consideration could be paid upon the purchase of the same number of
shares of another class, and as otherwise permitted by law.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(b) The number of directors shall be as from time to time
fixed by, or in the manner provided in, the Bylaws of the Corporation. Election
of directors need not be by written ballot unless the By-Laws so provide.
(c) The directors shall be divided into three classes,
designated Class I, Class II and Class III. 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. The initial division of the Board of Directors
into classes shall be made by the decision of the
5
<PAGE>
affirmative vote of a majority of the entire Board of Directors. The term of the
initial Class I directors shall terminate on the date of the 2001 annual
meeting; the term of the initial Class II directors shall terminate on the date
of the 2002 annual meeting; and the term of the initial Class III directors
shall terminate on the date of the 2003 annual meeting. At each succeeding
annual meeting of stockholders beginning in 2001, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. 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.
(d) A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
(e) Subject to the terms of any one or more classes or series
of Preferred Stock, any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office,
6
<PAGE>
provided that a quorum is present, and any other vacancy occurring on the Board
of Directors may be filled by a majority of the Board of Directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director of any class elected to fill a vacancy resulting from an increase in
the number of directors of such class shall hold office for a term that shall
coincide with the remaining term of that class. Any director elected to fill a
vacancy not resulting from an increase in the number of directors shall have the
same remaining term as that of his predecessor. Subject to the rights, if any,
of the holders of shares of Preferred Stock then outstanding, any or all of the
directors of the Corporation 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 Corporation's then outstanding capital stock entitled
to vote generally in the election of directors. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of Preferred Stock
issued by the Corporation shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Amended and Restated
Certificate of Incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Article FIFTH unless
otherwise expressly provided by the terms of such class or series of Preferred
Stock.
7
<PAGE>
(f) In addition to the powers and authority herein or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the GCL,
this Amended and Restated Certificate of Incorporation, and the By-Laws;
PROVIDED, HOWEVER, that no By-Law hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if such
By-Law had not been adopted.
SIXTH: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL as the same exists or may hereafter be
amended. If the GCL is amended hereafter to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent authorized
by the GCL, as so amended. Any repeal or modification of this Article SIXTH by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
SEVENTH: The Corporation shall indemnify its directors and
officers to the fullest extent authorized or permitted by law, as now or
hereafter in effect, and such right to
8
<PAGE>
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. The
right to indemnification conferred by this Article SEVENTH shall include the
right to be paid by the Corporation the expenses incurred in defending or
otherwise participating in any proceeding in advance of its final disposition.
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 SEVENTH to directors and officers of the
Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Amended and Restated
Certificate of Incorporation, the By-Laws of the Corporation, any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
9
<PAGE>
Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer
of the Corporation existing at the time of such repeal or modification with
respect to any acts or omissions occurring prior to such repeal or
modification.
EIGHTH: (a) In addition to any affirmative vote required by law or
this Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation, and except as otherwise expressly provided in Section (b) of
this Article EIGHTH, a Business Combination (as hereinafter defined) shall
require the affirmative vote of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all the then outstanding shares
of Voting Stock (as hereinafter defined), voting together as a single-class,
excluding Voting Stock beneficially owned by any Interested Stockholder (as
hereinafter defined). Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage or
separate class vote may be specified, by law or in any agreement with any
national securities exchange or otherwise.
(b) The provisions of Section (a) of this Article EIGHTH
shall not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote, if any, as is
required by law or by any other provision of this Amended and Restated
Certificate of Incorporation or the By-Laws of the
10
<PAGE>
Corporation, or any agreement with any national securities exchange, if all of
the conditions specified in either of the following Paragraphs (1) or (2) are
met or, in the case of a Business Combination not involving the payment of
consideration to the holders of the Corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following Paragraph (1)
is met:
(1) The Business Combination shall have been approved
by a majority (whether such approval is made prior to or subsequent to the
acquisition of beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined).
(2) All of the following conditions shall have been
met:
a. The aggregate amount of cash and the Fair
Market Value (as hereinafter defined), as of the date of the consummation of the
Business Combination, of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the highest amount determined under clauses (i), (ii), (iii) and (iv) below:
(i) (if applicable) the highest per share
price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of Common Stock in connection with the acquisition by the Interested Stockholder
of beneficial ownership of shares of
11
<PAGE>
Common Stock (x) within the two-year period immediately prior to the first
public announcement of the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to Common Stock;
(ii) the Fair Market Value per share of
Common Stock on the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the "Determination Date"),
whichever is higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to Common
Stock;
(iii) (if applicable) the price per share
equal to the Fair Market Value per share of Common Stock determined pursuant to
the immediately preceding clause (ii), multiplied by the ratio of (x) the
highest per share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for
any share of Common Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of Common Stock within the
two-year period immediately prior to the Announcement Date, as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification with
respect to Common Stock to (y) the Fair Market Value per share of Common Stock
12
<PAGE>
on the first day in such two-year period on which the Interested Stockholder
acquired beneficial ownership of any share of Common Stock, as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification with
respect to Common Stock; and
(iv) the Corporation's net income per share
of Common Stock for the four full consecutive fiscal quarters immediately
preceding the Announcement Date, multiplied by the higher of the then
price/earnings multiple (if any) of such Interested Stockholder or the highest
price/earnings multiple of the Corporation within the two-year period
immediately preceding the Announcement Date (such price/earnings multiples being
determined as customarily computed and reported in the financial community).
b. The aggregate amount of cash and the Fair
Market Value, as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock, other than Common Stock, shall
be at least equal to the highest amount determined under clauses (i), (ii),
(iii) and (iv) below:
(i) (if applicable) the highest per share
price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of such class or series of Capital Stock in connection with the acquisition by
the Interested Stockholder of beneficial
13
<PAGE>
ownership of shares of such class or series of Capital Stock (x) within the
two-year period immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Stockholder, whichever is higher,
in either case as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of Capital
Stock;
(ii) the Fair Market Value per share of such
class or series of Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock;
(iii) (if applicable) the price per share
equal to the Fair Market Value per share of such class or series of Capital
Stock determined pursuant to the immediately preceding clause (ii), multiplied
by the ratio of (x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf
of the Interested Stockholder for any share of such class or series of Capital
Stock in connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of such class or series of Capital Stock within
the two-year period immediately prior to the Announcement Date, as adjusted for
any subsequent stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock to (y) the Fair Market Value
per share of such class or series of Capital
14
<PAGE>
Stock on the first day in such two-year period on which the Interested
Stockholder acquired beneficial ownership of any share of such class or series
of Capital Stock, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of Capital
Stock; and
(iv) (if applicable) the highest preferential
amount per share to which the holders of shares of such class or series of
Capital Stock would be entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation
regardless of whether the Business Combination to be consummated constitutes
such an event.
The provisions of this Paragraph (2) shall be required to be
met with respect to every class or series of outstanding Capital Stock, whether
or not the Interested Stockholder has previously acquired beneficial ownership
of any shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders
of a particular class or series of outstanding Capital Stock shall be in cash or
in the same form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect acquisition of beneficial
ownership of shares of such class or series of Capital Stock. If the
consideration so paid for shares of any class or series of Capital Stock varied
as to form, the form of consideration for such class or series of
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Capital Stock shall be either cash or the form used to acquire beneficial
ownership of the largest number of shares of such class or series of Capital
Stock previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the
consummation of such Business Combination: (i) except as approved by a
majority of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) payable in accordance with the terms of any
outstanding Capital Stock; (ii) there shall have been no reduction in the annual
rate of dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors; (iii) there shall have been
an increase in the annual rate of dividends paid on the Common Stock as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has the effect
of reducing the number of outstanding shares of Common Stock, unless the failure
so to increase such annual rate is approved by a majority of the Continuing
Directors; and (iv) such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Capital Stock except as part of the
transaction that results in such Interested Stockholder becoming an Interested
Stockholder and except in a transaction that, after giving effect thereto, would
not result in
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any increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
e. After the Determination Date, such Interested
Stockholder shall not have received the benefit, directly or indirectly (except
proportionately as a stockholder of the Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
f. A proxy or information statement describing
the proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (the
"Act") (or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all stockholders of the Corporation at least thirty (30) days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the advisability
(or inadvisability) of the Business Combination that the Continuing Directors,
or any of them, may choose to make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment banking firm selected by a
majority
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of the Continuing Directors as to the fairness (or not) of the terms of the
Business Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested Stockholder and
its Affiliates or Associates (as hereinafter defined), such investment banking
firm to be paid a reasonable fee for its services by the Corporation.
g. Such Interested Stockholder shall not have
made any major change in the Corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.
(c) The following definitions shall apply with respect to this
Article EIGHTH:
(1) The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation
or any Subsidiary (as herein after defined) with (i) any Interested Stockholder
or (ii) any other company (whether or not itself an Interested Stockholder)
which is or after such merger or consolidation would be an Affiliate or
Associate of an Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge,
transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of
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any Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder involving any assets, securities or commitments of the Corporation,
any Subsidiary or any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder having an aggregate Fair Market Value and/or
involving aggregate commitments of $10,000,000 or more or constituting more than
5 percent of the book value of the total assets (in the case of transactions
involving assets or commitments other than capital stock) or 5 percent of the
stockholders' equity (in the case of transactions in capital stock) of the
entity in question (the "Substantial Part"), as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the stockholders of the Corporation would be required to approve or authorize
the Business Combination involving the assets, securities and/or commitments
constituting any Substantial Part; or
c. the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation which is voted for or consented to
by any Interested Stockholder; or
d. any reclassification of securities (including
any reverse stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or
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any securities convertible into Capital Stock or into equity securities of any
Subsidiary, that is beneficially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
e. any agreement, contract or other arrangement
providing for any one or more of the actions specified in the foregoing clauses
(a) to (d).
(2) The term "Capital Stock" shall mean all capital
stock of the Corporation authorized to be issued from time to time under Article
FOURTH of this Certificate of Incorporation, and the term "Voting Stock" shall
mean all Capital Stock which by its terms may be voted on all matters submitted
to stockholders of the Corporation generally.
(3) The term "person" shall mean any individual,
firm, company or other entity and shall include any group comprised of any
person and any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
(4) The term "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with respect to any
such plan when acting in such capacity and
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other than Wand Partners Inc. and any Affiliate or Associate of Wand Partners
Inc.) who (a) is the beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the
Corporation and at any time within the two-year period immediately prior to the
date in question was the beneficial owner of Voting Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock.
(5) A person shall be a "beneficial owner" of any
Capital Stock (a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (b) which such person or any of its
Affiliates or Associates has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Stockholder pursuant to Paragraph
(4) of this Section (c), the number of shares
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of Capital Stock deemed to be outstanding shall include shares deemed
beneficially owned by such person through application of this Paragraph (5) of
Section (c), but shall not include any other shares of Capital Stock that may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
(6) The terms "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in
effect on the date that this Article EIGHTH is approved by the Board (the term
"registrant" in said Rule 12b-2 meaning in this case the Corporation).
(7) The term "Subsidiary" means any company of which
a majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph (4) of this Section (c), the term
"Subsidiary" shall mean only a company of which a majority of each class of
equity security is beneficially owned by the Corporation.
(8) The term "Continuing Director" means any member
of the Board of Directors of the Corporation (the "Board of Directors"), while
such person is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and was a member of
the Board of Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and any successor of a
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Continuing Director while such successor is a member of the Board of Directors,
who is not an Affiliate or Associate or representative of the Interested
Stockholder and is recommended or elected to succeed the Continuing Director by
a majority of Continuing Directors.
(9) The term "Fair Market Value" means (a) in the
case of cash, the amount of such cash; (b) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Act on which such stock is listed, or, if such stock is not listed on any
such exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
similar system then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (c) in the case of
property other than cash or stock, the fair market value of such property on the
date in question as determined in good faith by a majority of the Continuing
Directors.
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(10) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other than cash to be
received" as used in Paragraphs (2)a. and (2)b. of Section (b) of this Article
EIGHTH shall include the shares of Common Stock and/or the shares of any other
class or series of Capital Stock retained by the holders of such shares.
(d) A majority of the Continuing Directors shall have the
power and duty to determine for the purposes of this Article EIGHTH, on the
basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Capital Stock
or other securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the assets that are the subject
of any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value of $10,000,000 or more,
and (5) whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
(e) Nothing contained in this Article EIGHTH shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
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(f) The fact that any Business Combination complies with the
provisions of Section (b) of this Article EIGHTH shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination or
recommend its adoption or approval to the stockholders of the Corporation, nor
shall such compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to evaluations of or
actions and responses taken with respect to such Business Combination.
(g) Notwithstanding any other provisions of this Amended and
Restated Certificate of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class vote may be
specified by law, this Amended and Restated Certificate of Incorporation or the
By-Laws of the Corporation), the affirmative vote of the holders of not less
than eighty percent (80%) of the votes entitled to be cast by the holders of
all the then outstanding shares of Voting Stock, voting together as a single
class, excluding Voting Stock beneficially owned by any Interested Stockholder,
shall be required to amend or repeal, or adopt any provisions inconsistent
with, this Article EIGHTH; provided, however, that this Section (g) shall
not apply to, and such eighty percent (80%) vote shall not be required for, any
amendment, repeal or adoption unanimously recommended by the Board of Directors
if all of such
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directors are persons who would be eligible to serve as Continuing Directors
within the meaning of Section (c), Paragraph (8) of this Article EIGHTH.
NINTH: Unless otherwise required by law, special meetings of
stockholders, for any purpose or purposes may be called by either (i) the
Chairman of the Board of Directors, if there be one, (ii) the President, or
(iii) the Board of Directors. The ability of the stockholders to call a special
meeting is hereby specifically denied.
TENTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation, and the ability of the stockholders to
consent in writing to the taking of any action is hereby specifically denied.
ELEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside 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 By-Laws of the Corporation.
TWELFTH: In furtherance and not in limitation of the powers conferred
upon it by the laws of the State of Delaware, the Board of Directors shall have
the power to adopt, amend, alter or repeal the Corporation's By-Laws. The
affirmative vote of at least a majority of the entire Board of Directors shall
be required to adopt, amend, alter or
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repeal the Corporation's By-Laws. The Corporation's By-Laws also may be adopted,
amended, altered or repealed by the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of the shares entitled to vote at an
election of directors.
THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed in this Amended and
Restated Certificate of Incorporation, the Corporation's By-Laws or the GCL, and
all rights herein conferred upon stockholders are granted subject to such
reservation; PROVIDED, HOWEVER, that, notwithstanding any other provision of
this Amended and Restated Certificate of Incorporation (and in addition to any
other vote that may be required by law), the affirmative vote of the holders of
at least eighty percent (80%) of the voting power of the shares entitled to vote
at an election of directors shall be required to amend, alter, change or repeal,
or to adopt any provision as part of this Amended and Restated Certificate of
Incorporation inconsistent with the purpose and intent of Articles FIFTH,
EIGHTH, NINTH, TENTH and TWELFTH of this Amended and Restated Certificate of
Incorporation or this Article THIRTEENTH.
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IN WITNESS WHEREOF, the Corporation has caused this Amended
and Restated Certificate of Incorporation to be executed on its behalf this ___
day of ______, 2000.
CYBER DIALOGUE INC.
By:________________________________
Name: Mark Esiri
Title: Chief Executive Officer and
President
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Exhibit 3.3
BY-LAWS
OF
CYBER DIALOGUE INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
<PAGE>
Section 2. Annual Meetings. The Annual Meetings of Stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or
by the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
or (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary or (v) any Assistant Secretary, if there be one. In addition, Special
Meetings shall be called by any such officer at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
owning a majority of the capital stock of the Corporation issued and outstanding
and entitled to vote. Such re-
2
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quest shall state the purpose or purposes of the proposed meeting. Written
notice of a Special Meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the
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adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of Stockholders of
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the Corporation, may be taken without a meeting, without prior notice and
without a vote, in a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten 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. 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 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified
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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 of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 7 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall consist of not less than one nor more than eight members.
Except as provided in Section 2 of this Article, directors shall be elected
by a plurality of the votes cast at Annual Meetings of Stockholders, and each
director so elected shall hold office until the next Annual Meeting and until
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his successor is duly elected and qualified, or until his earlier resignation or
removal. Any director may resign at any time upon notice to the Corporation.
Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next Annual Meeting and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from
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time to time be determined by the Board of Directors. Special meetings of the
Board of Directors may be called by the Chairman, if there be one, the
President, or any directors. Notice thereof stating the place, date and hour of
the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or telegram
on twenty-four (24) hours notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these By-Laws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
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Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors
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of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of 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 he 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 absent or disqualified member. Any committee, to the
extent allowed 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.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
Section 9. Compensation. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall
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preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 10. 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 his or their votes are
counted for such purpose if (i) the material facts as to his or their
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
his or their relationship or
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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
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The officers of the Corporation
need
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not be stockholders of the Corporation nor, except in the case of the Chairman
of the Board of Directors, need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting
held after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may,
13
<PAGE>
in the name of and on behalf of the Corporation, take all such action as any
such officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any corporation in which the Corporation may own securities
and at any such meeting shall possess and may exercise any and all rights and
power incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like powers upon
any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be the Chief Executive
Officer of the Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board
14
<PAGE>
of Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall execute all bonds, mortgages, contracts and other instruments
of the Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute documents
when so authorized by these By-Laws, the Board of Directors or the President. In
the absence or disability of the Chairman of the Board of Directors, or if there
be none, the President shall preside at all meetings of the stockholders and the
Board of Directors. If there be no Chairman of the Board of Directors, the
President shall be the Chief Executive Officer of the Corporation. The President
shall also perform such other duties and may exercise such other powers as from
time to
15
<PAGE>
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in
his absence or in the event of his inability or refusal to act (and if there
be no Chairman of the Board of Directors), the Vice President or the Vice
Presidents, if there is more than one (in the order designated by the Board
of Directors) it shall perform 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. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform 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.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings
16
<PAGE>
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or president, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose another officer to
cause such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to
17
<PAGE>
be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and
18
<PAGE>
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in
19
<PAGE>
such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 11. Other officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secre-
20
<PAGE>
tary of the Corporation, certifying the number of shares owned by him in the
Corporation.
Section 2. Signatures. Any or all of the signatures on a 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 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 were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond
21
<PAGE>
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine,
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to express consent to corporate action
in writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such
22
<PAGE>
meeting, nor more than sixty days prior to any other 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; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee
23
<PAGE>
or stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as
24
<PAGE>
the Board of Directors from time to time in its absolute discretion, deems
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any proper purpose, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
25
<PAGE>
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
Than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, 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 he 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 him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea
26
<PAGE>
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person (a) did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, (b) with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, 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 judgement in its favor by reason of
the fact that he 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
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not op-
27
<PAGE>
posed 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.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (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 he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (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) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opin-
28
<PAGE>
ion, or (iii) by the stockholders. To the extent, however, that a 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, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he 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 his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him 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
29
<PAGE>
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 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 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 Sections 1 or 2 of this
Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. 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 he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this
30
<PAGE>
Article VIII, as the case may be. Neither a contrary determination in the
specific case under Section 3 of this Article VIII 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 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.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
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 he is not entitled to be indemnified by
the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and
31
<PAGE>
advancement of expenses provided by or granted pursuant to this Article VIII
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, contract, vote of stockholders or disinterested directors or pursuant
to the direction (howsoever embodied) of any court of competent jurisdiction or
otherwise, both as to action in his 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 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII 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.
Section 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,
32
<PAGE>
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability under the provisions of this
Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
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 VIII with respect to the
resulting or surviving corporation as he
33
<PAGE>
would have with respect to such constituent corporation if its separate
existence had continued. For purposes of this Article VIII, 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 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 he
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
VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall 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.
34
<PAGE>
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 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.
Section 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 VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors, provided, however, that notice of
35
<PAGE>
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case may
be. 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
entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
LAST AMENDED: March 28, 2000
36
<PAGE>
Exhibit 3.4
AMENDED AND RESTATED
BY-LAWS
of
CYBER DIALOGUE INC.
A Delaware Corporation
Effective _______ ___, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I OFFICES.............................................................1
SECTION 1. REGISTERED OFFICE.......................1
SECTION 2. OTHER OFFICES...........................1
ARTICLE II MEETINGS OF STOCKHOLDERS...........................................1
SECTION 1. PLACE OF MEETINGS.......................1
SECTION 2. ANNUAL MEETINGS.........................2
SECTION 3. SPECIAL MEETINGS........................2
SECTION 4. QUORUM..................................3
SECTION 5. PROXIES.................................3
SECTION 6. VOTING..................................5
SECTION 7. NATURE OF BUSINESS AT MEETINGS OF
STOCKHOLDERS.......................5
SECTION 8. LIST OF STOCKHOLDERS ENTITLED TO VOTE...8
SECTION 9. STOCK LEDGER............................8
SECTION 10. RECORD DATE. .........................9
SECTION 11. INSPECTORS OF ELECTION................10
ARTICLE III DIRECTORS........................................................11
SECTION 1. NUMBER AND ELECTION OF DIRECTORS.......11
SECTION 2. NOMINATION OF DIRECTORS................11
SECTION 3. VACANCIES..............................14
SECTION 4. DUTIES AND POWERS......................15
SECTION 5. ORGANIZATION...........................15
SECTION 6. RESIGNATIONS AND REMOVALS OF DIRECTORS.15
SECTION 7. MEETINGS...............................16
SECTION 8. QUORUM.................................16
SECTION 9. ACTIONS OF BOARD.......................17
SECTION 10. MEETINGS BY MEANS OF CONFERENCE
TELEPHONE.........................17
SECTION 11. COMMITTEES............................18
SECTION 12. COMPENSATION..........................18
SECTION 13. INTERESTED DIRECTORS..................19
i
<PAGE>
Page
----
ARTICLE IV OFFICERS..........................................................20
SECTION 1. GENERAL................................20
SECTION 2. ELECTION...............................20
SECTION 3. VOTING SECURITIES OWNED BY THE
CORPORATION.......................21
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS.....22
SECTION 5. CHIEF EXECUTIVE OFFICER................22
SECTION 6. PRESIDENT..............................23
SECTION 7. VICE PRESIDENTS........................24
SECTION 8. SECRETARY..............................24
SECTION 9. TREASURER..............................25
SECTION 10. ASSISTANT SECRETARIES.................26
SECTION 11. ASSISTANT TREASURERS..................27
SECTION 12. OTHER OFFICERS........................27
ARTICLE V STOCK..............................................................28
SECTION 1. FORM OF CERTIFICATES...................28
SECTION 2. SIGNATURES.............................28
SECTION 3. LOST, DESTROYED, STOLEN OR MUTILATED
CERTIFICATES......................28
SECTION 4. TRANSFERS..............................29
SECTION 5. TRANSFER AND REGISTRY AGENTS...........29
SECTION 6. BENEFICIAL OWNERS......................30
ARTICLE VI NOTICES...........................................................30
SECTION 1. NOTICES................................30
SECTION 2. WAIVERS OF NOTICE......................31
ARTICLE VII GENERAL PROVISIONS...............................................32
SECTION 1. DIVIDENDS..............................32
SECTION 2. DISBURSEMENTS..........................32
SECTION 3. FISCAL YEAR............................32
SECTION 4. CORPORATE SEAL.........................33
ARTICLE VIII INDEMNIFICATION.................................................33
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS
OR PROCEEDINGS OTHER THAN THOSE
BY OR IN THE RIGHT OF THE
CORPORATION.......................33
ii
<PAGE>
Page
----
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS
OR PROCEEDINGS BY OR IN THE RIGHT
OF THE CORPORATION................34
SECTION 3. AUTHORIZATION OF INDEMNIFICATION.......35
SECTION 4. GOOD FAITH DEFINED.....................36
SECTION 5. INDEMNIFICATION BY A COURT.............37
SECTION 6. EXPENSES PAYABLE IN ADVANCE............38
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND
ADVANCEMENT OF EXPENSES...........38
SECTION 8. INSURANCE..............................39
SECTION 9. CERTAIN DEFINITIONS....................39
SECTION 10. SURVIVAL OF INDEMNIFICATION AND
ADVANCEMENT OF EXPENSES...........40
SECTION 11. LIMITATION ON INDEMNIFICATION.........40
SECTION 12. INDEMNIFICATION OF EMPLOYEES AND
AGENTS............................41
ARTICLE IX AMENDMENTS........................................................41
SECTION 1. AMENDMENTS.............................41
iii
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
CYBER DIALOGUE INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have
offices at such other places, both within and without the State of Delaware, as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the
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Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The annual meetings of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect directors, and transact
such other business as may properly be brought before the meeting. Written
notice of the annual meeting stating the place, date and hour of the meeting
shall be given to each stockholder entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the date of the meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by
law or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), special
meetings of stockholders, for any purpose or purposes, may be called by either
(i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer,
(iii) the President, or (iv) the Board of Directors. Such request shall state
the purpose or purposes of the proposed meeting. At a special meeting of the
stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the
meeting is called shall be given not less than ten (10)
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nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at such meeting.
SECTION 4. QUORUM. Except as otherwise required by law or by
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder entitled to vote at the meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
SECTION 5. PROXIES. Any stockholder entitled to vote may do so
in person or by his or her proxy appointed by an instrument in writing
subscribed by such stockhold-
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er or by his or her attorney thereunto authorized, delivered to the Secretary of
the meeting; PROVIDED, HOWEVER, that no proxy shall be voted or acted upon after
three years from its date, unless said proxy provides for a longer period.
Without limiting the manner in which a stockholder may authorize another person
or persons to act for him or her as proxy, either of the following shall
constitute a valid means by which a stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another
person or persons to act for such stockholder as proxy.
Execution may be accomplished by the stockholder or such
stockholder's authorized officer, director, employee or agent
signing such writing or causing such person's signature to be
affixed to such writing by any reason able means, including,
but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or persons to
act for such stockholder as proxy by transmitting or
authorizing the transmission of a telegram or other means of
electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the
person who will be the holder of the proxy to receive such
transmission, provided that any such telegram or other means
of electronic transmission must either set
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forth or be submitted with information from which it can be
determined that the telegram or other electronic transmission
was authorized by the stockholder.
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission authorizing another person or persons to act as proxy
for a stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used; PROVIDED that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
SECTION 6. VOTING. At all meetings of the stockholders at
which a quorum is present, except as otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the total number of votes of the capital stock present in person or
represented by proxy and entitled to vote on such question, voting as a single
class. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his or her discretion,
may require that any votes cast at such meeting shall be cast by written ballot.
SECTION 7. NATURE OF BUSINESS AT MEETINGS OF STOCKHOLDERS. No
business may be transacted at an annual meeting of stockholders, other than
business that is either
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(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (c) otherwise properly brought before the annual meeting by any stockholder
of the Company (i) who is a stockholder of record on the date of the giving of
the notice provided for in this Section 7 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 7.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Company.
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
Company not less than sixty (60) days nor more 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
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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.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) 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, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the Company
which are owned beneficially or of record by such stockholder, (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
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 7, PROVIDED, HOWEVER, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 7 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before
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the annual meeting in accordance with the foregoing procedures, the Chairman
shall declare to the meeting that the business was not properly brought before
the meeting and such business shall not be transacted.
SECTION 8. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer
of the Corporation who has charge of the stock ledger of the 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 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 of the Corporation who is
present.
SECTION 9. STOCK LEDGER. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 8 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
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SECTION 10. RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
record date: (1) in the case of determination of stockholders entitled to vote
at any meeting of stockholders or adjournment thereof, shall not be more than
sixty (60) nor less than ten (10) days before the date of such meeting; and (2)
in the case of any other action, shall not be more than sixty (60) days prior to
such other action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (2) the record
date for determining stockholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to
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any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of Directors
may fix a new record date for the adjourned meeting.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting
of stockholders, the Board by resolution or the Chairman, Chief Executive
Officer or President shall appoint one or more inspectors of election to act at
the meeting and make a written report thereof. One or more other persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is present, ready and willing to act at a meeting
of stockholders, the Chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Unless otherwise required by law, inspectors
may be officers, employees or agents of the Corporation. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspector shall have the duties
prescribed by law and shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote taken and of such
other facts as may be required by law.
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ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. The Board of
Directors shall consist of not fewer than three (3) nor more than thirteen (13)
members, the exact number of which shall be determined from time to time by
resolution adopted by the Board of Directors. Except as provided in Section 3 of
this Article III, directors shall be elected by the stockholders at the annual
meetings of stockholders, and each director so elected shall hold office until
such director's successor is duly elected and qualified, or until such
director's death, or until such director's earlier resignation or removal.
Directors need not be stockholders.
SECTION 2. NOMINATION OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Company, except as may be otherwise provided in the
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. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders, or at any special
meeting of stockholders called for the purpose of electing directors, (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Company (i) who is a stockholder of
record on the date of the
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giving of the notice provided for in this Section 2 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.
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 Company.
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
Company (a) in the case of an annual meeting, not less than sixty (60) days nor
more 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.
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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 Company 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 Company 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 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
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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
Company unless nominated in accordance with the procedures set forth in this
Section 2. 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.
SECTION 3. VACANCIES. Subject to the terms of any one or more
classes or series of preferred stock, any vacancy on the Board of Directors that
results from an increase in the number of directors may be filled by a majority
of the directors then in office, provided that a quorum is present, and any
other vacancy occurring on the Board of Directors may be filled by a majority of
the Board of Directors then in office, even if less than a quorum, or by a sole
remaining director. Notwithstanding the foregoing, whenever the holders of any
one or more class or classes or series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
Certificate of Incorporation.
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SECTION 4. DUTIES AND POWERS. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-Laws required to be exercised or done by the stockholders.
SECTION 5. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board of Directors, or, in his or her absence, a
director chosen by a majority of the directors present, shall act as Chairman.
The Secretary of the Corporation shall act as Secretary at each meeting of the
Board of Directors. In case the Secretary shall be absent from any meeting of
the Board of Directors, an Assistant Secretary shall perform the duties of
Secretary at such meeting; and in the absence from any such meeting of the
Secretary and all the Assistant Secretaries, the Chairman of the meeting may
appoint any person to act as Secretary of the meeting.
SECTION 6. RESIGNATIONS AND REMOVALS OF DIRECTORS. Any
director of the Corporation may resign at any time by giving written notice to
the Chairman of the Board of Directors, the Chief Executive Officer, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time therein specified or, if no time is specified, immediately;
and, unless otherwise specified in such notice, the acceptance of such
resignation shall not be necessary to make it effective. Except as otherwise
required
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by law and subject to the rights, if any, of the holders of shares of preferred
stock then outstanding, 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 in voting power of the issued and
outstanding capital stock of the Corporation entitled to vote in the election of
directors.
SECTION 7. MEETINGS. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware. Regular meetings of the Board of Directors may be
held at such time and at such place as may from time to time be determined by
the Board of Directors and, unless required by resolution of the Board of
Directors, without notice. Special meetings of the Board of Directors may be
called by the Chairman of the Board of Directors, the Vice Chairman, if there be
one, or a majority of the directors then in office. Notice thereof stating the
place, date and hour of the meeting shall be given to each director either by
mail not less than forty-eight (48) hours before the date of the meeting, by
telephone, facsimile or telegram on twenty-four (24) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 8. QUORUM. Except as may be otherwise required by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of
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business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present.
SECTION 9. ACTIONS OF BOARD. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 10. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 10 shall
constitute presence in person at such meeting.
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SECTION 11. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a commit tee, and in the absence of a
designation by the Board of 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 director or
directors 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. Each committee shall keep regular
minutes and report to the Board of Directors when required.
SECTION 12. COMPENSATION. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary, or such other emoluments as the Board of Directors shall
from time to time determine. No such payment
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shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
SECTION 13. 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 such person's or their
votes are counted for such purpose if (i) the material facts as to such person's
or their 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 such person's or their 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
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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
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chief Executive Officer,
President, a Secretary and a Treasurer. The Board of Directors, in its
discretion, may also choose a Chairman of the Board of Directors (who must be a
director) and one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these By-Laws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as
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shall be determined from time to time by the Board of Directors; and all
officers of the Corporation shall hold office until their successors are chosen
and qualified, or until their earlier resignation or removal. Any officer
elected by the Board of Directors may be removed at any time by the affirmative
vote of a majority of the Board of Directors. Any vacancy occurring in any
office of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the Chief Executive Officer, the
President or any Vice President and any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of
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the Board of Directors. Except where by law the signature of the Chief Executive
Officer or the President is required, the Chairman of the Board of Directors
shall possess the same power as either the Chief Executive Officer or the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of both of the President and the Chief Executive Officer,
the Chairman of the Board of Directors shall exercise all the powers and
discharge all the duties of the President and the Chief Executive Officer. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him or her by
these By-Laws or by the Board of Directors.
SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall, subject to the control of the Board of Directors and, if there be
one, the Chairman of the Board of Directors, have general supervision of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. The Chief Executive Officer shall
execute all bonds, mortgages, contracts and other instruments of the Corporation
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents when so authorized
by these By-Laws, the Board of Directors or the Chief Executive Officer. In the
absence or
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disability of the Chairman of the Board of Directors, or if there be none, the
Chief Executive Officer shall preside at all meetings of the stockholders and
the Board of Directors. The Chief Executive Officer shall also perform such
other duties and may exercise such other powers as from time to time may be
assigned to him or her by these By-Laws or by the Board of Directors.
SECTION 6. PRESIDENT. The President shall, subject to the
control of the Board of Directors and, the Chairman of the Board of Directors
and the Chief Executive Officer, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these By-Laws,
the Board of Directors or the President. In the absence or disability of the
Chairman of the Board of Directors and the Chief Executive Officer, or if there
be none, the President shall preside at all meetings of the stockholders and
the Board of Directors. The President shall also perform such other duties and
may exercise such other powers as from time to time may be assigned to him or
her by these By-Laws or by the Board of Directors.
23
<PAGE>
SECTION 7. VICE PRESIDENTS. At the request of the President
or in his or her absence or in the event of his or her inability or refusal to
act (and if there be no Chairman of the Board of Directors or Chief Executive
Officer), the Vice President or the Vice Presidents if there is more than one
(in the order designated by the Board of Directors) shall perform 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. Each Vice President shall perform
such other duties and have such other powers as the Board of Directors from time
to time may prescribe. If there be no Chairman of the Board of Directors, no
Chief Executive Officer and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
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.
SECTION 8. SECRETARY. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors, Chief
Executive Officer or President, under whose supervision the Secretary shall be.
If the
24
<PAGE>
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of Directors, the
Chief Executive Officer or the President may choose another officer to cause
such notice to be given. The Secretary shall have custody of the seal of the
Corporation and the Secretary or any Assistant Secretary, if there be one, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his or her signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
SECTION 9. TREASURER. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President, the Chief Executive Officer
and the
25
<PAGE>
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all transactions as Treasurer and of the financial
condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of the office of Treasurer and for the restoration to
the Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under control of the Treasurer
belonging to the Corporation.
SECTION 10. ASSISTANT SECRETARIES. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned to
them by the Board of Directors, the Chief Executive Officer, the President, any
Vice President, if there be one, or the Secretary, and in the absence of the
Secretary or in the event of his or her disability or refusal to act, shall
perform the duties of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary.
SECTION 11. ASSISTANT TREASURERS. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the Chief Executive
Officer, the President, any Vice President, if there be one, or the Treasurer,
and in the absence of the Treasurer or in the event
26
<PAGE>
of the Treasurer's disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of the office of Assistant Treasurer and
for the restoration to the Corporation, in case of the Assistant Treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the Assistant Treasurer's
possession or under control of the Assistant Treasurer belonging to the
Corporation.
SECTION 12. OTHER OFFICERS. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
27
<PAGE>
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation, (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such holder of stock in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on a
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
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 such person were such officer, transfer agent or registrar at the date of
issue.
SECTION 3. LOST, DESTROYED, STOLEN OR MUTILATED CERTIFICATES.
The Board of Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may,
28
<PAGE>
in its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate, or such person's legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 4. TRANSFERS. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, properly endorsed for transfer
and payment of all necessary transfer taxes; PROVIDED, HOWEVER, that such
surrender and endorsement or payment of taxes shall not be required in any case
in which the officers of the Corporation shall determine to waive such
requirement. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by the
Secretary or Assistant Secretary of the Corporation or the transfer agent
thereof. No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
29
<PAGE>
SECTION 5. TRANSFER AND REGISTRY AGENTS. The Corporation may
from time to time maintain one or more transfer offices or agencies and registry
offices or agencies at such place or places as may be determined from time to
time by the Board of Directors.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE XII
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written
30
<PAGE>
notice may also be given personally or by telegram, facsimile, telex, cable, or
in the case of any director or member of a committee, by electronic mail.
SECTION 2. WAIVERS OF NOTICE.
(a) Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at
a meeting, present by person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the 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.
(b) 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 unless so required by law, the Certificate of Incorporation or these
By-Laws.
31
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to the requirements of the GCL
and the provisions of the Certificate of Incorporation, dividends upon the
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors, and may be paid in
cash, in property, or in shares of the Corporation's capital stock. Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for purchasing any of the shares of capital
stock, warrants, rights, options, bonds, debentures, notes, scrip or other
securities or evidences of indebtedness of the Corporation, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any other proper purpose, and the Board of Directors may modify or abolish
any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
32
<PAGE>
SECTION 4. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of
this Article VIII, 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
33
<PAGE>
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, such person had no reasonable cause to
believe his or her 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
such 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 his or her conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS
BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article
VIII, 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 op-
34
<PAGE>
posed 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.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any
indemnification under this Article VIII (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 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (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) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders. To
the extent, however, that a 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)
35
<PAGE>
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED. For purposes of any
determination under Section 3 of this Article VIII, 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
his or her 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 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 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 1 or
2 of this Article VIII, as the case may be.
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<PAGE>
SECTION 5. INDEMNIFICATION BY A COURT. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery of the State of Delaware
or any other court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. 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 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII 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
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.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by
a director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such
37
<PAGE>
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 VIII.
SECTION 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any By-Law, agreement,
contract, vote of stockholders or disinterested directors or pursuant to the
direction (howsoever embodied) of any court of competent jurisdiction 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 Section 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
SECTION 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 Corpora-
38
<PAGE>
tion 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 VIII.
SECTION 9. CERTAIN DEFINITIONS. For purposes of this Article
VIII, 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 VIII 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 VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
refer-
39
<PAGE>
ences 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 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 VIII.
SECTION 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII 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.
SECTION 11. LIMITATION ON INDEMNIFICATION. Notwithstanding any
thing contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer (or
his or her heirs, executors or personal or legal representatives) or advance
expenses 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.
40
<PAGE>
SECTION 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 VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENTS. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the Board of
Directors or by the stockholders as provided in the Certificate of
Incorporation.
41
<PAGE>
EXHIBIT 4.1
(LOGO OF CYBER DIALOGUE INC.)
CYBER DIALOGUE INC.
NUMBER
CDI SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 23244M 10 9
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
$.01 PAR VALUE, OF CYBER DIALOGUE INC.
(the "Corporation") transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all of the terms and conditions contained in the
Certificate of Incorporation and all amendments thereto. Upon request, the
Corporation will furnish without charge to the holder hereof of a statement of
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
as may be established, from time to time, by the Certificate of Incorporation of
the Corporation and by any certificate of designation, the number of shares
constituting each class and series, and the designations thereof. This
Certificate is not valid unless counter signed and registered by the Transfer
Agent and Registrar.
WITNESS the facsimile signatures of the duly authorized officers of the
Corporation.
Dated: Corporate Seal of Cyber Dialogue Inc.
/s/ C. Andrew Watt /s/ Mark Esiri
- --------------------------- -----------------------
Chief Financial Officer Chief Executive Officer
and Treasurer and President
<PAGE>
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
BY TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
[REVERSE SIDE OF CERTIFICATE]
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in common
UNIF GIFT MIN ACT - Custodian
--------------------------------------------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
----------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received,__________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
____________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
____________________________________________________________________________
______________________________________ Shares of the Common Stock represented
by the within Certificate, and do hereby irrevocably constitute and appoint
______________________________________ Attorney to transfer the said stock on
the books of the within named Corporation with full power of substitution in
the premises.
Dated
--------------------------------------
2
<PAGE>
--------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between Cyber Dialogue Inc. (the
"Corporation") and the Rights Agent thereunder (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal offices of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Corporation will mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the date of mailing, without charge,
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder, may
become null and void.
Signature(s) Guaranteed
By
---------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION
TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
3
<PAGE>
Exhibit 4.4
RIGHTS AGREEMENT
Between
CYBER DIALOGUE INC.
And
AMERICAN STOCK TRANSFER
& TRUST COMPANY,
AS RIGHTS AGENT
Dated as of ________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. Certain Definitions...................................................................... 1
2. Appointment of Rights Agent.............................................................. 7
3. Issuance of Rights Certificates.......................................................... 7
4. Form of Rights Certificates.............................................................. 9
5. Countersignature and Registration........................................................ 10
6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates............................................ 11
7. Exercise of Rights; Purchase Price; Expiration Date of Rights............................ 12
8. Cancellation and Destruction of Rights
Certificates............................................................................. 15
9. Reservation and Availability of Capital Stock............................................ 15
10. Preferred Stock Record Date.............................................................. 17
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Shares.............. 18
12. Certificate of Adjusted Purchase Price or Number of Shares............................... 28
13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power.......... 28
14. Fractional Rights and Fractional Shares.................................................. 32
i
<PAGE>
15. Rights of Action......................................................................... 33
16. Agreement of Rights Holders.............................................................. 34
17. Rights Certificate Holder Not Deemed a Stockholder....................................... 34
18. Concerning the Rights Agent.............................................................. 35
19. Merger or Consolidation or Change of Name of Rights Agent................................ 35
20. Duties of Rights Agent................................................................... 36
21. Change of Rights Agent................................................................... 39
22. Issuance of New Rights Certificates...................................................... 40
23. Redemption and Termination............................................................... 40
24. Exchange................................................................................. 41
25. Notice of Certain Events................................................................. 43
26. Notices.................................................................................. 44
27. Supplements and Amendments............................................................... 45
28. Successors............................................................................... 45
29. Determinations and Action by the Board, etc.............................................. 45
30. Benefits of this Agreement............................................................... 46
31. Severability............................................................................. 46
32. Governing Law............................................................................ 47
33. Counterparts............................................................................. 47
34. Descriptive Headings..................................................................... 47
</TABLE>
ii
<PAGE>
EXHIBITS
Exhibit A -- Form of Certificate of Designation,
Preferences and Rights
Exhibit B -- Form of Rights Certificates
Exhibit C -- Form of Summary of Rights
iv
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of ________, 2000 (the
"Agreement"), between Cyber Dialogue Inc., a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company, a _______ corporation
(the "Rights Agent").
W I T N E S S E T H
WHEREAS, on March 28, 2000 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared, effective
upon filing the Company's Amended and Restated Certificate of Incorporation with
the Secretary of State of the State of Delaware, a dividend distribution of one
Right (as hereinafter defined) for each share of common stock, par value $0.01
per share, of the Company (the "Common Stock") outstanding at the close of
business on the date of the consummation of the initial public offering of the
Common Stock of the Company (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereinafter be adjusted pursuant to the
provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the Distribution Date (as hereinafter defined),
each Right initially representing the right to purchase one one-hundredth of a
share of Series A Junior Participating Preferred Stock of the Company (the
"Preferred Stock") having the rights, powers and preferences set forth in the
form of Certificate of Designation, Preferences and Rights attached hereto as
Exhibit A, upon the terms and subject to the conditions hereinafter set forth
(the "Rights");
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be,
following the consummation of the initial public offering, the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company, or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Com-
<PAGE>
pany for or pursuant to the terms of any such plan, (iv) any Person who becomes
the Beneficial Owner of fifteen percent (15%) or more of the shares of Common
Stock then outstanding as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of shares of Common Stock by the
Company unless and until such Person, after becoming aware that such Person has
become the Beneficial Owner of fifteen percent (15%) or more of the then
outstanding shares of Common Stock, acquires beneficial ownership of additional
shares of Common Stock representing one percent (1%) or more of the shares of
Common Stock then outstanding, (v) any Person who, together with such Person's
Affiliates and Associates, owns 15% or more of the then outstanding shares of
Common Stock upon the consummation of the initial public offering of the Common
Stock of the Company, unless and until such Person acquires beneficial ownership
of additional shares of Common Stock representing five percent (5%) or more of
the shares of Common Stock then outstanding, or (vi) any such Person who has
reported or is required to report such ownership (but less than 20%) on Schedule
13G under the Securities and Exchange Act of 1934, as amended and in effect on
the date of the Agreement (the "Exchange Act"), (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the Company or
engage in any of the actions specified in Item 4 of such schedule (other than
the disposition of the Common Stock) and, within ten (10) Business Days of being
requested by the Company to advise it regarding the same, certifies to the
Company that such Person acquired shares of Common Stock in excess of 14.9%
inadvertently or without knowledge of the terms of the Rights and who, together
with all Affiliates and Associates, thereafter does not acquire additional
shares of Common Stock while the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding; PROVIDED, HOWEVER, that if the Person
requested to so certify fails to do so within ten (10) Business Days, then such
Person shall become an Acquiring Person immediately after such 10-Business-Day
period.
(b) "Act" shall mean the Securities Act of 1933.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities:
2
<PAGE>
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or
any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of
a Triggering Event (as hereinafter defined), or (C) securities issuable
upon exercise of Rights from and after the occurrence of a Triggering
Event which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date (as hereinafter
defined) or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in connection
with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has "beneficial ownership" of (as determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing; PROVIDED, HOWEVER, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act, and (B) is not reportable by
such Person on Schedule 13D under the Exchange Act (or any comparable
or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with
3
<PAGE>
which such Person (or any of such Person's Affiliates or Associates)
has any agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)) or disposing of any voting
securities of the Company;
PROVIDED, HOWEVER, that nothing in this paragraph (d) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition, and then only if
such securities continue to be owned by such Person at such expiration of forty
days and PROVIDED FURTHER, HOWEVER, that any stockholder of the Company, with
affiliate(s), associate(s) or other person(s) who may be deemed representatives
of it serving as director(s) of the Company, shall not be deemed to beneficially
own securities held by other Persons as a result of (i) persons affiliated or
otherwise associated with such stockholder serving as directors or taking any
action in connection therewith, (ii) discussing the status of its shares with
the Company or other stockholders of the Company similarly situated or (iii)
voting or acting in a manner similar to other stockholders similarly situated,
absent a specific finding by the Board of Directors of an express agreement
among such stockholders to act in concert with one another as stockholders so as
to cause, in the good faith judgment of the Board of Directors, each such
stockholder to be the Beneficial Owner of the shares held by the other
stockholder(s).
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean
5:00 P.M., New York City time, on such date; PROVIDED, HOWEVER, that if such
date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the
next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par
value $0.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
4
<PAGE>
(h) "Common Stock Equivalents" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the meaning set
forth in Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set
forth in Section 3(a) hereof.
(l) "Equivalent Preferred Stock" shall have the
meaning set forth in Section 11(b) hereof.
(m) "Exchange Act" shall mean the Securities and
Exchange Act of 1934.
(n) "Exchange Ratio" shall have the meaning set forth
in Section 24 hereof.
(o) "Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(p) "Final Expiration Date" shall have the meaning
set forth in Section 7(a) hereof.
(q) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(r) "Preferred Stock" shall mean shares of Series A
Junior Participating Preferred Stock, par value $0.01 per share, of the Company,
and, to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of preferred stock of the Company designated for
such purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.
5
<PAGE>
(s) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning set forth
in Section 4(a) hereof.
(u) "Qualified Offer" shall have the meaning set
forth in Section 11(a)(ii) hereof.
(v) "Record Date" shall have the meaning set forth in
the WHEREAS clause at the beginning of this Agreement.
(w) "Rights" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(x) "Rights Agent" shall have the meaning set forth
in the parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning set
forth in Section 3(a) hereof.
(z) "Rights Dividend Declaration Date" shall have the
meaning set forth in the WHEREAS clause at the beginning of this Agreement.
(aa) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii) hereof.
(bb) "Section 13 Event" shall mean any event
described in clauses (x), (y) or (z) of Section 13(a) hereof.
(cc) "Spread" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(dd) "Stock Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed or amended pursuant to Section 13(d)
under the Exchange Act) by the
6
<PAGE>
Company or an Acquiring Person that an Acquiring Person has become such other
than pursuant to a Qualified Offer.
(ee) "Subsidiary" shall mean, with reference to any
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
(ff) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(gg) "Summary of Rights" shall have the meaning set
forth in Section 3(b) hereof.
(hh) "Trading Day" shall have the meaning set forth
in Section 11(d)(i) hereof.
(ii) "Triggering Event" shall mean any Section
11(a)(ii) Event or any Section 13 Event.
Section 2 APPOINTMENT OF RIGHTS AGENT. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable.
Section 3 ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the close of business on
the tenth Business Day after the Stock Acquisition Date (or, if the tenth
Business Day after the Stock Acquisition Date occurs before the Record Date, the
close of business on the Record Date), or (ii) the close of business on the
tenth Business Day (or such later date as the Board shall determine) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
7
<PAGE>
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would become an Acquiring Person, in either instance other
than pursuant to a Qualified Offer (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage-prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more right certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the number of
Rights per share of Common Stock has been made pursuant to Section 11(p) hereof,
at the time of distribution of the Rights Certificates, the Company shall make
the necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) The Company will make available, as promptly as
practicable following the Record Date, a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights") to
any holder of Rights who may so request from time to time prior to the
Expiration Date (as such term is defined in Section 7(a) hereof). With respect
to certificates for the Common Stock outstanding as of the Record Date, until
the Distribution Date, the Rights will be evidenced by such certificates for the
Common Stock and the registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date, the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been issued
shall also constitute the transfer of the Rights associated with such shares of
Common Stock.
(c) Rights shall be issued in respect of all shares
of Common Stock which are issued (whether originally issued or from the
Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date.
8
<PAGE>
Certificates representing such shares of Common Stock shall also be deemed to be
certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between Cyber
Dialogue Inc. (the "Company") and the Rights Agent thereunder (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge, promptly after receipt
of a written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4 FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be
9
<PAGE>
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price equal to the product of four times the
average closing price of the Common Stock for the first five days of trading
subsequent to the consummation of the initial public offering of the Common
Stock, per one one-hundredth of a share (the "Purchase Price"), but the amount
and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially
owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section 7(e) hereof, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of the Rights Agreement.
Section 5 COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a
10
<PAGE>
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep, or cause to be kept, at its principal office or offices designated as
the appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6 TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF
RIGHTS CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b),
Section 7(e) and Section 14 hereof, at any time after the close of business on
the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates (other than Rights
Certificates representing Rights that may have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitles such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certi-
11
<PAGE>
ficates to be transferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e), Section 14 hereof and Section 24 hereof, countersign
and deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7 EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
OF RIGHTS.
(a) Subject to Section 7(e) hereof, at any time after
the Distribution Date the registered holder of any Rights Certificate may
exercise the Rights evidenced thereby (except as otherwise provided herein
including, without limitation, the restrictions on exercisability set forth in
Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part
upon surrender of the Rights Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i) 5:00
P.M., New York City time, on the tenth anniversary of the date of the
consummation of the initial public offering of the Common Stock of the Company,
or such
12
<PAGE>
later date as may be established by the Board of Directors prior to the
expiration of the Rights (such date, as it may be extended by the Board, the
("Final Expiration Date"), or (ii) the time at which the Rights are redeemed or
exchanged as provided in Section 23 and Section 24 hereof (the earlier of (i)
and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of
a share of Preferred Stock pursuant to the exercise of a Right shall initially
be the amount equal to the product of four times the average daily closing price
of the Common Stock for the first five days of trading subsequent to the
consummation of the initial public offering of the Common Stock, and shall be
subject to adjustment from time to time as provided in Section 11 and Section
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-hundredths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company shall have elected
to deposit the total number of shares of Preferred Stock issuable upon exercise
of the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one one-hundredths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or, upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
13
<PAGE>
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company. In the event that
the Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
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(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8 CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9 RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
out of its authorized and unissued shares of Common Stock and/or other
securities or out of its authorized and issued shares held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement including Section 11(a)(iii) hereof, will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the
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Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after the first
occurrence of a Section 11(a)(ii) Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement under the
Act, with respect to the securities purchasable upon exercise of the Rights on
an appropriate form, (ii) cause such registration statement to become effective
as soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension has been rescinded. In addition, if
the Company shall determine that a registration statement is required following
the Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been declared
effective. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law, or a registration statement
shall not have been declared effective.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all one one-hundredths
of a share of Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable.
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(e) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for a number of one one-hundredths
of a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10 PREFERRED STOCK RECORD DATE. Each person in whose
name any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
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Section 11 ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after the
Rights Dividend Declaration Date, become an Acquiring Person, unless
the event causing such Person to become an Acquiring Person is a
transaction set forth in Section 13(a) hereof, or is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common Stock at a price and on terms
determined by at least a majority of the members of the Board of
Directors who are not
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officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person, after receiving advice
from one or more investment banking firms, to be (a) at a price which
is fair to stockholders and not inadequate (taking into account all
factors which such members of the Board deem relevant, including,
without limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize
maximum value) and (b) otherwise in the best interests of the Company
and its stockholders (a "Qualified Offer"), then, promptly following
the occurrence of such event, proper provision shall be made so that
each holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of a number of one one-hundredths of a share
of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a
share of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall
thereafter be referred to as the "Purchase Price" for each Right and
for all purposes of this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d) hereof) per share of Common Stock
on the date of such first occurrence (such number of shares, the
"Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's certificate of incorporation, but
which are not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights, are not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall (A)
determine the value of the Adjustment Shares issuable upon the exercise
of a Right (the "Current Value"), and (B) with respect to each Right
(subject to Section 7(e) hereof), make adequate provision to substitute
for the Adjustment Shares, upon the exercise of a Right and payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the
Company (including, without limitation,
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shares, or units of shares, of preferred stock, such as the Preferred
Stock, which the Board has deemed to have essentially the same value or
economic rights as shares of Common Stock (such shares of preferred
stock being referred to as "Common Stock Equivalents")), (4) debt
securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having an aggregate value equal to the Current Value
(less the amount of any reduction in the Purchase Price), where such
aggregate value has been determined by the Board based upon the advice
of a nationally recognized investment banking firm selected by the
Board; PROVIDED, HOWEVER, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first occurrence of a
Section 11(a)(ii) Event and (y) the date on which the Company's right
of redemption pursuant to Section 23(a) expires (the later of (x) and
(y) being referred to herein as the "Section 11(a)(ii) Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over (ii) the
Purchase Price. If the Board determines in good faith that it is likely
that sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek shareholder approval for the
authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the "Substitution Period"). To
the extent that action is to be taken pursuant to the first and/or
third sentences of this Section 11(a)(iii), the Company (1) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (2) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek such shareholder approval for such
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been tempo-
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rarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of each Adjustment Share shall be the current
market price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per share or per unit value of any Common Stock
Equivalent shall be deemed to equal the current market price per share
of the Common Stock on such date.
(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or Equivalent Preferred Stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration, part or all of
which may be in a form other than cash, the value of such consideration shall be
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
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(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in stock
other than Preferred Stock) or evidences of indebtedness, or of subscription
rights or warrants (excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Current Market Price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock, and the denominator of which
shall be such Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d)(i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
Current Market Price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days immediately
prior to such date, and for purposes of computations made pursuant to
Section 11(a)(iii) hereof, the Current Market Price per share of Common
Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; PROVIDED,
HOWEVER, that in the event that the Current Market Price per share of
the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such Common Stock (other
than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have
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occurred prior to the commencement of the requisite thirty (30) Trading
Day or ten (10) Trading Day period, as set forth above, then, and in
each such case, the Current Market Price shall be properly adjusted to
take into account ex-dividend trading. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as
reported by the Nasdaq National Market ("Nasdaq") or such other system
then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board. If on any such date
no market maker is making a market in the Common Stock, the fair value
of such shares on such date as determined in good faith by the Board
shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, a Business Day. If the
Common Stock is not publicly held or not so listed or traded, Current
Market Price per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the Current
Market Price per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last sentence thereof). If the
Current Market Price per share of Preferred Stock cannot be determined
in the manner provided above or if the Preferred Stock is not publicly
held or listed or traded in a manner described in clause (i) of this
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Section 11(d), the Current Market Price per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 100 (as such
number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded,
Current Market Price per share of the Preferred Stock shall mean the
fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. For all purposes of
this Agreement, the Current Market Price of a Unit (as defined in
Exhibit C) shall be equal to the Current Market Price of one share of
Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share or one-millionth of a share of Preferred Stock,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock other
than Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
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(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders
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of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-hundredth of a share and the number of one one-hundredth of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated value, if any, of
the number of one one-hundredths of a share of Preferred Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable such number of one
one-hundredths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date the number of one one-hundredths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one one-hundredths of a share of Preferred
Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
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(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at less than the Current Market Price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets, cash
flow or earning power aggregating more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
if (x) at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
shareholders of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend
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Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate
and (c) if a Distribution Date has occurred, mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 27 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS, CASH FLOW OR EARNING POWER.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its
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Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets, cash flow or earning power aggregating more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case (except as may
be contemplated by Section 13(d) hereof), proper provision shall be made so
that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
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(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets, cash flow or earning
power transferred pursuant to such transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
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practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) take all such other action as may be necessary to enable
the Principal Party to issue the securities purchasable upon exercise
of the Rights, including but not limited to the registration or
qualification of such securities under all requisite securities laws of
jurisdictions of the various states and the listing of such securities
on such exchanges and trading markets as may be necessary or
appropriate; and
(iii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which is a Qualified Offer as such term is defined in Section
11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or Persons),
(ii) the price per share of Common Stock offered in such transaction is not less
than the price per share of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such tender offer or exchange
offer and (iii) the form of consideration being offered to the remaining holders
of shares of Common Stock pursuant to such transaction is the same as the form
of consideration paid pursuant to such tender offer or exchange offer. Upon
consummation of any such transaction contemplated by this Section 13(d), all
Rights hereunder shall expire.
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Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, the Company shall pay to
the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights, selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock). In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-hundredth of a share
of Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one
one-hundredth of a share of Preferred Stock. For purposes of this Section 14(b),
the current market value of one one-
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hundredth of a share of Preferred Stock shall be one one-hundredth of the
closing price of a share of Preferred Stock (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of a Triggering Event,
the Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
Section 15. RIGHTS OF ACTION. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
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Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof,
the Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable
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on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, its directors,
officers, employees and agents for, and to hold each of them harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent or any other indemnified party in connection with the
acceptance and administration of this Agreement or the performance of the Rights
Agent's duties hereunder, including the costs and expenses of defending against
any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement or the performance of
the Rights Agent's duties hereunder in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
RIGHTS AGENT.
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(a) Any corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust, stock transfer or other shareholder services
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
but only if such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such advice or opinion.
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(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person and the determination of Current Market Price) be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
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(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; PROVIDED, HOWEVER, the Rights Agent was not
grossly negligent in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
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(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a legal business entity organized and doing business under the laws of the
United States or of the State of New York or of any other state of the United
States, in good standing, having an office in the State of New York, which is
authorized under such laws to exercise corporate trust or stock transfer or
shareholder services powers and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an
affiliate of a legal business entity described in clause (a) of this sentence.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appoint-
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ment, the Company shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Stock and the Preferred
Stock, and, if such appointment occurs after the Distribution Date, mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the close of business on the
tenth Business Day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth Business Day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all of the then outstanding Rights
at a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the
40
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date hereof (such redemption price being hereinafter referred to as the
"Redemption Price"). Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event until such time as the Company's right of redemption
hereunder has expired. The Company may, at its option, pay the Redemption Price
in cash, shares of Common Stock (based on the Current Market Price, as defined
in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or
any other form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary,
any entity holding Common Stock for or pursuant to the terms of any such plan,
or any Person who, together with such Person's Affiliates and Associates, owned
15% or more of the then outstanding shares of
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Common Stock upon the consummation of the initial public offering of the Common
Stock of the Company), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common Stock then
outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; PROVIDED, HOWEVER, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute Preferred Stock (or Equivalent Preferred
Stock, as such term is defined in paragraph (b) of Section 11 hereof) for Common
Stock exchangeable for Rights, at the initial rate of one one-hundredth of a
share of Preferred Stock (or Equivalent Preferred Stock) for each share of
Common Stock, as appropriately adjusted to reflect stock splits, stock dividends
and other similar transactions after the date hereof.
(d) In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute certificates which evidence
fractional shares of
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Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to effect
the liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Preferred Stock, if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of
43
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any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Preferred Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section
11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as
soon as practicable thereafter give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing by the Rights Agent with the Company) as follows:
Cyber Dialogue Inc.
304 Hudson Street
New York, New York 10013
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:
American Stock Transfer & Trust Company
---------------------------------------
---------------------------------------
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Rights Certificate
(or, if prior to the Distribution Date, to the holder of certificates
representing shares of Common Stock) shall
44
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be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the
Distribution Date, and subject to the last sentence of this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
PROVIDED, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable,
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock. Notwithstanding anything herein to the contrary, this
Agreement may not be amended at a time when the Rights are not redeemable.
Section 28. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding shares
of Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board of
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Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board, or
any of the directors on the Board to any liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
PROVIDED, HOWEVER, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth Business Day following the date of such determination by the Board of
Directors. Without limiting the foregoing, if any provision requiring a specific
group of Directors of the Company to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be made by the Board of Directors of the Company in
accordance with applicable law and the Company's certificate of incorporation
and by-laws.
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Section 32. GOVERNING LAW. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
Attest: CYBER DIALOGUE INC.
By: _________________________ By: __________________________
Name: C. Andrew Watt Name: Mark Esiri
Title: Chief Financial Officer Title: Chief Executive Officer and
and Secretary President
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:__________________________ By: __________________________
Name: Name:
Title: Title:
48
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
of
CYBER DIALOGUE INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Mark Esiri, Chief Executive Officer and President, and C.
Andrew Watt, Chief Financial Officer and Secretary, of Cyber Dialogue Inc., a
corporation organized and existing under the General Corporation Law of the
State of Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the said Corporation,
the said Board of Directors on March __, 2000, adopted the following resolution
creating, effective upon the filing of the Amended and Restated Certificate of
Incorporation, a series of 1,000,000 shares of Preferred Stock designated as
Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Amended and Restated Certificate of Incorporation, a series of Preferred Stock
of the Corporation be and it hereby is created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
A-1
<PAGE>
Section 1. DESIGNATION AND AMOUNT. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be 1,000,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
par value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after March __, 2000 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the
A-2
<PAGE>
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share on the Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
A-3
<PAGE>
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A
Junior Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
all holders of Preferred Stock (including holders of the Series A
Junior Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2)
directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of
any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect directors to fill such vacancies, if any,
in the Board of Directors as may then exist up to two (2) directors or,
if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect directors in any default period and
during the continuance of such period, the number of directors shall
not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or PARI PASSU with the Series A
Junior Participating Preferred Stock.
A-4
<PAGE>
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of a
special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the President, a Vice-President or the Secretary
of the Corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to this
Paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 20 days and not later than 60 days
after such order or request or in default of the calling of such
meeting within 60 days after such order or request, such meeting may be
called on similar notice by any stockholder or stockholders owning in
the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding. Notwithstanding the provisions
of this Paragraph (C)(iii), no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed
for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right
to elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining directors theretofore elected by the holders of the
class of stock which elected the director whose office shall have
become vacant. References in this Paragraph (C) to directors elected by
the holders of a particular class of stock shall include directors
elected by such directors to fill vacancies as provided in clause (y)
of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and (z) the
number of directors shall be such number as may be provided
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for in the certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of Paragraph (C)(ii) of this
Section 3 (such number being subject, however, to change thereafter in
any manner provided by law or in the certificate of incorporation or
by-laws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Participating Preferred Stock, except dividends paid
ratably on the Series A Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Participating Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
A-6
<PAGE>
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares
of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $100 per share of Series A Participating
Preferred Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph (C) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the
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<PAGE>
"Adjustment Number"). Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the
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<PAGE>
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. AMENDMENT. At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Amended and
Restated Certificate of Incorporation of the Corporation nor this Certificate of
Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
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<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this day of March 2000.
By: ______________________________
Name: Mark Esiri
Title: Chief Executive Officer and
President
Attest:
By: ________________________________
Name: C. Andrew Watt
Title: Chief Financial Officer and Secretary
A-10
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER _________ __, 2010 (THE TENTH ANNIVERSARY OF THE DATE OF
THE CONSUMMATION OF THE INITIAL PUBLIC OFFERING OF THE COMMON STOCK OF THE
COMPANY) UNLESS EXTENDED PRIOR THERETO BY THE BOARD OF DIRECTORS OR EARLIER IF
REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]**
Rights Certificate
CYBER DIALOGUE INC.
This certifies that , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of _________, 2000 (the "Rights Agreement"), between Cyber
Dialogue Inc., a Delaware corporation (the "Company"),
- ----------
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
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<PAGE>
and American Stock Transfer & Trust Company, a banking corporation (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York
City time) on _______, __, 2010 (the tenth anniversary of the date of the
consummation of the initial public offering of the Common Stock) (unless such
date is extended prior thereto by the Board of Directors) at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series
A Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $_____ (the amount equal to the product of four times the
average closing price of the Common Stock for the first five days of trading
subsequent to the consummation of the initial public offering of the Common
Stock) per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of _________ __,
2000 (the close of business on the fifth day of trading subsequent to the
consummation of the initial public offering of the Common Stock), based on the
Preferred Stock as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights
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<PAGE>
include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Rights Agent and are
also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hundredths
of a share of Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earlier of the close
of business on (i) the tenth Business Day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and (ii)
the Final Expiration Date. In addition, under certain circumstances following
the Stock Acquisition Date, the Rights may be exchanged, in whole or in part,
for shares of the Common Stock, or shares of preferred stock of the Company
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement. The Company, at its election, may require that a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give consent
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<PAGE>
to or withhold consent from any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
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<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _________ __, ____
Attest: CYBER DIALOGUE INC.
By: ___________________________ By: ________________________
Name: Name:
Title: Secretary Title:
Countersigned:
[Name of Rights Agent]
By: ___________________________
Authorized Signature
B-5
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ___________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: __________________, _____
----------------------------
Signature
Signature Guaranteed:
B-6
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _______________, _____ _________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-7
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: CYBER DIALOGUE INC.:
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Rights Certificate to purchase the shares
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
B-8
<PAGE>
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated: _______________, _____
__________________________________
Signature
Signature Guaranteed:
B-9
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [
] are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________, _____ _________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
B-10
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On March 28, 2000, the Board of Directors of Cyber Dialogue
Inc. (the "Company") declared, subject to receipt of the requisite approval by
the Company's stockholders of the Company's Amended and Restated Certificate of
Incorporation, a dividend distribution of one Right for each outstanding share
of the Company's Common Stock to stockholders of record at the close of business
on _______ , 2000 (the date of the consummation of the initial public offering
of the Common Stock) (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company a unit consisting of one one-hundredth of a
share (a "Unit") of Series A Junior Participating Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock") at a Purchase Price of $ per
Unit (the amount equal to the product of four times the average closing price of
the Common Stock for the first five days of trading subsequent to the
consummation of the initial public offering of the Common Stock), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Company, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in the
Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), other than
persons who acquire 15% beneficial ownership of the Company as a result of
repurchases of stock by the Company or certain inadvertent actions by
institutional or certain other stockholders or persons who upon consummation of
the initial public offering, together with their affiliates and associates, are
beneficial owners of 15% or more of the Company, unless such persons acquire
additional shares constituting 5% or more of the Company, or (ii) 10 business
days (or such later date as the Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or
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group becoming an Acquiring Person. Until the Distribution Date, (i) the Rights
will be evidenced by the Common Stock certificates and will be transferred with
and only with such Common Stock certificates, (ii) new Common Stock certificates
issued after the Record Date will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
for Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. Pursuant to
the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.
The Rights are not exercisable until the Distribution Date and
will expire at 5:00 P.M. (New York City time) on , 2010 (the tenth anniversary
of the date of the consummation of the initial public offering of the Common
Stock), unless such date is extended or the Rights are earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate to and otherwise
be in the best interests of the Company and its stockholders, after receiving
advice from one or more investment banking firms (a "Qualified Offer"), each
holder of a Right will thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a value equal to two times the exercise price of the
Right. Notwithstanding any of the foregoing, following the occurrence of the
event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of the event set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $80.00 per Right, each
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in
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<PAGE>
the preceding paragraph would entitle its holder to purchase $160.00 worth of
Common Stock (or other consideration, as noted above) for $80.00. Assuming that
the Common Stock had a per share value of $20.00 at such time, the holder of
each valid Right would be entitled to purchase 8 shares of Common Stock for
$80.00.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than
with an entity which acquired the shares pursuant to a Qualified Offer), (ii)
the Company engages in a merger or other business combination transaction in
which the Company is the surviving corporation and the Common Stock of the
Company is changed or exchanged, or (iii) 50% or more of the Company's assets,
cash flow or earning power is sold or transferred, each holder of a Right
(except Rights which have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the second preceding
paragraph are referred to as the "Triggering Events."
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding Common Stock, the Board may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock, or one one-hundredth of
a share of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
At any time until ten business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board of Directors ordering redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $.01 redemption price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for
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<PAGE>
common stock of the acquiring company or in the event of the redemption of the
Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing notwithstanding, no amendment
may be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form S-1 dated
________________ __, 2000. A copy of the Rights Agreement is available free of
charge from the Rights Agent. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by reference.
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<PAGE>
Exhibit 10.1
CYBER DIALOGUE INC.
1996 STOCK OPTION PLAN
As Amended through April 4, 2000
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION
The purpose of the Cyber Dialogue Inc. 1996 Stock Option Plan
(the "Plan") is to afford an incentive to directors, officers and key employees
of Cyber Dialogue Inc. (the "Company") or any subsidiary of the Company which
now exists or hereafter is organized or acquired by the Company, to acquire a
proprietary interest in the Company, to increase their efforts on behalf of the
Company and to promote the success of the Company's business. The Committee (as
defined in Section 3 hereof) may grant options which shall constitute either
"nonqualified stock options" ("Nonqualified Stock Options") or "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1996, as amended (the "Code").
2. DEFINITIONS
As used in this Plan, the following words and phrases shall
have the meanings indicated:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Common Stock" shall mean shares of common stock,
par value $.01 per share, of the Company.
(c) "Disability" shall mean the Optionee's incapacity
due to physical or mental illness, as a result of which the Optionee shall have
been absent from his duties of employment with the Company on a full-time basis
for the entire period of three (3) consecutive months, and within thirty (30)
days after written notice of termination is given by the Company (which notice
may be given within thirty (30) days before or at any time after the end of such
three month period) shall not have returned to the performance of such duties on
a full-time basis.
(d) "Fair Market Value" per share as of a particular
date shall mean (i) the closing sales price per share of Common Stock on the
national securities exchange on which the Common Stock is principally traded,
for the last preceding date on which there was a sale of such Common Stock on
such exchange, or (ii) if the shares of Common Stock are then traded in an
over-the-counter market, the average of the closing bid and asked prices for the
shares of Common Stock in such over-the-counter market for the last preceding
date on which there was a sale of such Common Stock in such market, or (iii) if
the shares of Common Stock are not then listed on a national securities exchange
or traded in an over-the-counter market, such value as the Committee, in its
sole discretion, shall determine.
(e) "Option" or "Options" shall mean a grant to an
Optionee of an option or options to purchase shares of Common Stock. Options
granted by the committee pursuant to the Plan shall constitute either
Nonqualified Stock Options or Incentive Stock Options, as determined by the
Committee.
(f) "Parent Corporation" shall mean any corporation
(other than the Company) in an unbroken chain of corporations ending with the
employer corporation if, at the time of granting an Option, each of the
corporations other than the employer corporation owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
(g) "Subsidiary Corporation" shall mean any corporation
(other than the Company) in an unbroken chain of corporations beginning with the
employer corporation if, at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(h) "Ten Percent Stockholder" shall mean an Optionee
who, at the time an Incentive Stock Option is granted, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of its Parent or Subsidiary Corporations.
(i) "Cause" shall mean, unless an Optionee is a party
to a written employment agreement with the Company or a Subsidiary
Corporation which contains a definition of "cause," "termination for cause"
or any other similar term or phrase, in which case "Cause" shall have the
meaning set forth in such agreement: (i) an Optionee engaging in acts or
omissions that would reasonably be expected to cause injury to the business
and affairs of the Company or an Affiliate, monetarily or otherwise; (ii) the
chronic use of alcohol, drugs or other similar substances affecting an
Optionee's work performance; or (iii) an Optionee being convicted of, or
pleading guilty or no lo contendere to a felony or other crime involving
theft, fraud or moral turpitude. The good faith determination by the
Committee of whether an Optionee's employment or service relationship was
terminated by the Company for `Cause' shall be final and binding for all
purposes hereunder.
(j) A "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following clauses shall
have occurred: (i) any Person is or becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities Beneficially Owned
by such Person any securities acquired directly from the Company)
representing 35% or more of the voting power of the Company's then
outstanding securities, excluding any one, or any group or more than one of
the Wand Entities or any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (1) of clause (iii) below;
(ii) the following individuals cease for any reason to constitute a majority
of the number of directors then serving: individuals who, on the effective
date of the Plan, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the effective date of the Plan or whose appointment, election or
nomination for election was previously so approved or recommended; (iii)
there is consummated a merger or consolidation of the Company with any other
corporation other than (1) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or any parent thereof) at least 50% of the combined voting power of
the voting securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or (2) a
merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person other than any one, or
any group of more than one of the Wand Entities is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any securities acquired
directly from the Company) representing 35% or more of the combined voting
power of the Company's then outstanding securities; or (iv) the stockholders
of the Company approve a plan of complete liquidation or dissolution of the
Company or there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets, other than a
sale or disposition by the Company of all or substantially all of the
Company's assets to an entity at least 50% of the combined voting power of
the voting securities of which are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to such sale.
(k) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
<PAGE>
(l) "Good Reason" shall mean, unless an Optionee is a
party to a written employment agreement with the Company or a Subsidiary
Corporation which contains a definition of "good reason," "constructive
termination" or any other similar term or phrase, in which case "Good Reason"
shall have the meaning set forth in such agreement: the occurrence, on or
after the date of a Change in Control and without an Optionee's written
consent, of (i) a material reduction by the Company or any successor to the
Company of an Optionee's annual base salary, other than as part of a general
reduction applicable to the business, function or location with which the
Optionee is affiliated; (ii) a substantial adverse change in the nature or
scope of an Optionee's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions or duties
exercised by the Optionee immediately prior to the Change in Control; or
(iii) the relocation of an Optionee's principal place of employment to a
location more than fifty (50) miles from the Optionee's principal place of
employment.
(m) "Initial Public Offering" shall mean the initial
public offering of shares of Common Stock, as registered with the Securities
and Exchange Commission.
(n) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include: (i) the Company or any of
its subsidiaries; (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its Affiliates; (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(o) "Wand Entities" shall mean collectively
Wand/Yankelovich Investments LP, Wand Equity Portfolio II LP, Wand Partners
LP, Yankelovich Holdings Inc., Wand Partners (S.C.) Inc. and Wand Affiliates
Fund, LP.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board; PROVIDED,
HOWEVER, that the Board may establish one or more committees (the
"Committee") which may, to the extent set forth in the resolutions
establishing such Committee or Committees, be authorized to grant Awards to,
and administer such Awards with respect to, those Optionees who are subject
to Section 16 of the Exchange Act with respect to the Company ("Section 16
Optionees") or who are executive officers of the Company. Any such Committee
that is authorized to grant Awards to Section 16 Optionees (a "Section 16
Committee") shall, to the extent necessary to comply with Rule 16b-3
promulgated under the Exchange Act, be comprised of two or more "non-employee
directors" within the meaning of such Rule, and any such Committee that is
authorized to grant Awards to executive officers of the Company (which may or
may not be the same Committee as the Section 16 Committee) shall, to the
extent necessary to comply with Section 162(m) of the Code, be comprised of
two or more "outside directors" within the meaning of such Section.
4. ELIGIBILITY
Awards may be granted to directors, officers and key employees
of the Company. In determining the persons to whom awards shall be granted and
the number of shares to be covered by each award, the Committee shall take into
account the duties of the respective persons, their present and potential
contributions to the success of the Company and such other factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan.
5. COMMON STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock reserved for the
grant of Options shall be 13,100 subject to adjustment as provided in Section 9
hereof. Such shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by the Company.
If any outstanding award under the Plan should, for any reason
expire, be cancelled or be terminated, without having been exercised in full,
the shares of Common Stock allocable to the unexercised, cancelled or terminated
portion of such award shall (unless the Plan shall have been terminated) become
available for subsequent grants of awards under the Plan.
<PAGE>
6. INCENTIVE STOCK OPTIONS
Options granted pursuant to this Section 6 are intended to
constitute Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions specified
in Section 8 hereof.
(a) VALUE OF SHARES. The aggregate Fair Market Value
(determined as of the date that Incentive Stock Options are granted) of the
shares of Common Stock with respect to which Options granted under this Plan and
all other option plans of the Company and any Parent or Subsidiary Corporation
become exercisable for the first time by an Optionee during any calendar year
shall not exceed $100,000.
(b) TEN PERCENT STOCKHOLDERS. In the case of an
Incentive Stock Option granted to a Ten Percent Stockholder, (i) the Option
Price shall not be less than one hundred ten percent (110%) of the Fair Market
Value of the shares of Common Stock on the date of grant of such Incentive Stock
Option, and (ii) the exercise period shall not exceed five (5) years from the
date of grant of such Incentive Stock Option.
7. NONQUALIFIED STOCK OPTIONS
Options granted pursuant to this Section 7 are intended to
constitute Nonqualified Stock Options and shall be subject only to the general
terms and conditions specified in Section 8 hereof.
8. TERMS AND CONDITIONS OF OPTIONS
Each Option granted pursuant to the Plan shall be evidenced by
a written agreement between the Company and the Optionee in such form as the
Committee shall from time to time approve (the "Option Agreement"), which Option
Agreement shall be subject to and set forth the following terms and conditions:
(a) NUMBER OF SHARES. Each Option Agreement shall state
the number of shares of Common Stock to which the option relates.
(b) TYPE OF OPTION. Each Option Agreement shall
specifically state whether the Option constitutes a Nonqualified Stock Option or
an Incentive Stock Option.
(c) OPTION PRICE. Each Option Agreement shall state the
Option Price which shall not be less than the Fair Market Value of the shares of
Common Stock covered by the Option on the date of grant. The Option Price shall
be subject to adjustment as provided in Section 9 hereof. The date on which the
Committee adopts a resolution expressly granting an Option shall be considered
the day on which such Option is granted, except to the extent any such
resolution provides otherwise.
(d) METHOD AND TIME OF PAYMENT. An Option shall be
exercised by delivering notice to the Company's principal office, to the
attention of its Secretary. Such notice shall be accompanied by the applicable
Option Agreement, shall specify the number of shares of Common Stock with
respect to which the Option is being exercised and the effective date of the
proposed exercise and shall be signed by the Optionee or other person then
having the right to exercise the Option. Payment for shares of Common Stock
purchased upon the exercise of an Option shall be made on the effective date
of such exercise by one or a combination of the following means: (A) in cash
(or cash equivalents acceptable to the Committee) or (B) following an Initial
Public Offering, if so determined by the Committee prior to exercise, through
a "broker cashless exercise" procedure established by the Company from
time to time. The Committee shall have sole discretion to disapprove of an
election pursuant to clause (B) and in the case of an Optionee who is subject
to Section 16 of the Exchange Act, the Company may require that the method of
making such payment be in compliance with Section 16 and the rules and
regulations thereunder.
(e) TERM AND EXERCISABILITY OF OPTIONS. Except as
otherwise provided in this Section 8 or Section 9 hereof or unless otherwise
determined by the Committee and set forth in the Option Agreement, each
outstanding Option shall become exercisable in cumulative installments of
twenty-five percent (25%) per year beginning on the first anniversary of the
date of grant of the Option or such other date as the Committee may determine,
as reflected in the Option Agreement; PROVIDED, HOWEVER, that, the Committee
shall have the authority to accelerate the exercisability of any outstanding
Option at such time and under such circumstances as it, in its sole discretion,
deems appropriate. Except as specifically provided in Sections 8(f) and 8(g)
hereof, all Options shall expire ten (10) years from the date of grant of such
Option (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) or on such earlier date as may be prescribed by the
Committee and set forth in the Option Agreement. An Option may be exercised, as
to any or all full shares of Common Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Committee or its
designated agent; PROVIDED, HOWEVER, that an Option may not be exercised at any
one time as to fewer than 100 shares (or such number of shares as to which the
Option is then exercisable if such number of shares is less than 100).
<PAGE>
(f) TERMINATION OF EMPLOYMENT. Except as provided in
this Section 8(f) and in Sections 8(e) and (g) hereof, each Option granted
hereunder shall expire, to the extent not theretofore exercised, immediately
upon the date that the Optionee ceases to be employed by the Company or any of
its Parent or Subsidiary Corporations (or on such other date as may be
prescribed by the Committee and set forth in any Option Agreement). In addition,
if an Optionee ceases to be an employee of the Company or any of its Parent or
Subsidiary Corporations, but becomes or remains an employee of another entity
affiliated with Wand Partners Inc. or an entity in which Wand Partners Inc.
invests ("Related Employment"), the Committee may, in its sole discretion,
continue to treat such Optionee as an employee of the Company for purposes of
the Plan and any outstanding Options granted thereunder for the duration of such
Related Employment.
(g) DEATH OR DISABILITY OF OPTIONEE. If an Optionee
shall die while employed by the Company or a Parent or Subsidiary Corporation
(or within such longer period as the Committee may have provided pursuant to
Section 8(f) hereof), or if the Optionee's employment shall terminate by
reason of Disability, all Options theretofore granted to such Optionee (to
the extent otherwise exercisable) may, unless earlier terminated in accordance
with their terms, be exercised by the Optionee or by the Optionee's estate or
by a person who acquired the right to exercise such Options by bequest or
inheritance or otherwise by reason of the death or Disability of the Optionee,
at any time within six (6) months after the date of death or Disability of the
Optionee; PROVIDED, HOWEVER, that the Committee may, in any Option Agreement,
extend such period of exercisability. In the event that an Option granted
hereunder shall be exercised by the legal representatives of a deceased or
former Optionee, written notice of such exercise shall be accompanied by a
certified copy of letters testamentary or equivalent proof of the right of
such legal representative to exercise such option.
(h) OTHER PROVISIONS. The Option Agreements evidencing
Options under the Plan shall contain such other terms and conditions, not
inconsistent with the Plan, as the committee may determine.
(i) EXERCISE PRIOR TO VESTING. The Committee may in its
sole discretion provide that the Optionee may elect at any time during both (1)
the term of such Option and (2) the period during which such Optionee is
employed by or providing services to the Company, that the Optionee may exercise
all or any portion of such Option, including the unvested portion of such
Option; PROVIDED, HOWEVER, that (i) a partial exercise of such Option shall be
deemed to cover first vested shares and then the earliest vesting installment of
unvested shares; (ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to a repurchase option in
favor of the Company, the terms of which shall be set forth in the Option
Agreement evidencing such Option; (iii) the Optionee shall enter into a form of
early exercise stock purchase agreement with a vesting schedule that will result
in the same vesting as if no early exercise had occurred; and (iv) if such
Option is an Incentive Stock Option, then, the maximum vesting provisions of
Section 6(a) shall continue to apply with respect to such shares.
9. EFFECT OF CERTAIN CHANGES
(a) In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Common
Stock or other property), recapitalization, Common Stock split, reverse
Common Stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event, affects the Common Stock such that an adjustment is
appropriate in order to prevent dilution or enlargement of the rights of
Optionees under the Plan, then the Committee shall make such equitable
changes or adjustments as it deems necessary or appropriate to any or all of
(1) the number and kind of shares of Common Stock which may thereafter be
issued in connection with Options, (2) the number and kind of shares of
Common Stock issued or issuable in respect of outstanding Options, (3) the
exercise price, grant price or purchase price relating to any Option, and (4)
the maximum number of shares subject to Options which may be awarded to any
employee during any tax year of the Company; PROVIDED, HOWEVER, that, with
respect to Incentive Stock Options, such adjustment shall be made in
accordance with Section 424 of the Code.
(b) In the event the Optionee's employment is
terminated by the Company without Cause or by the Optionee for Good Reason
within 18 months following the occurrence of a Change in Control, that
portion of such Optionee's outstanding Option that is not then vested and/or
exercisable shall become fully vested and exercisable as of the date of such
termination of employment.
<PAGE>
10. PERIOD DURING WHICH OPTIONS MAY BE GRANTED
Awards may be granted pursuant to the Plan from time to time
within a period of ten (10) years from the date the Plan is adopted by the
Board, or the date the Plan is approved by the stockholders of the Company,
whichever is earlier.
11. NONTRANSFERABILITY OF AWARDS
Awards granted under the Plan shall not be transferable
otherwise than by will or by the laws of descent and distribution, and awards
may be exercised or otherwise realized, during the lifetime of the Optionee,
only by the Optionee or by his guardian or legal representative.
12. BENEFICIARY
An Optionee may file with the Committee a written designation
of a beneficiary on such form as may be prescribed by the Committee and may,
from time to time, amend or revoke such designation. If no designated
beneficiary survives the Optionee, the executor or administrator of the
Optionee's estate shall be deemed to be the Optionee's beneficiary.
13. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES
If the Committee shall so require, as a condition of exercise
of an Option granted hereunder, each Optionee shall agree that no later than the
date of exercise, the Optionee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state or local
taxes of any kind required by law to be withheld upon the exercise of an Option.
To the extent provided in the applicable Option Agreement, such payment may be
made by the Optionee with shares of Common Stock (whether previously owned by,
or issuable upon the exercise of an Option awarded to, such Optionee) having a
Fair Market Value equal to the amount of such taxes. Alternatively, the
Committee may provide that an Optionee may elect, to the extent permitted or
required by law, to have the Company deduct federal, state and local taxes of
any kind required by law to be withheld upon the exercise of an Option from any
payment of any kind due to the Optionee.
14. RIGHTS AS A STOCKHOLDER
An Optionee or a transferee of an award shall have no rights
as a stockholder with respect to any shares of Common Stock covered by the
Option until the date of the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions of other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 9 hereof. Upon the issuance of a stock
certificate, all shares of Common Stock covered by such certificate shall be
subject to the terms of the Stockholder Agreement attached as Exhibit A hereto
and made a part hereof.
15. NO RIGHTS TO EMPLOYMENT
Nothing in the Plan or in any Option granted hereunder or
Option Agreement entered into pursuant hereto shall confer upon any Optionee the
right to continue in the employ of the Company or to be entitled to any
remuneration or benefits not set forth in the Plan or such Option Agreement or
to interfere with or limit in any way the right of the Company to terminate such
Optionee's employment.
<PAGE>
16. APPROVAL OF STOCKHOLDERS
The Plan, and any grants of Options thereunder, shall be
subject to approval by the holder(s) of a majority of the issued and outstanding
shares of the Company's capital stock which are entitled to vote on the subject
matter thereof and are present in person or represented by proxy at a
duly-called meeting of the stockholders of the Company which approval must occur
within one year after the date that the Plan is adopted by the Board. In the
event that the stockholders of the Company do not approve the Plan at a meeting
of the stockholders at which such issue is considered and voted upon, then, upon
such event, this Plan and all rights hereunder or under any Option Agreement
entered into in connection herewith shall immediately terminate and no Optionee
(or any permitted transferee thereof) shall have any remaining rights under the
Plan.
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board at any time and from time to time may suspend,
terminate, modify or amend the Plan; PROVIDED, HOWEVER, that any amendment that
would materially increase the aggregate number of shares of Common Stock as to
which awards may be granted under the Plan or materially increase the benefits
accruing to Optionees under the Plan or materially modify the requirements as to
eligibility for participation in the Plan shall be subject to the approval of
the holders of a majority of the Common Stock issued and outstanding, except
that any such increase or modification that may result from adjustments
authorized by Section 9 hereof shall not require such approval. Except as
provided in Section 9 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any award previously granted,
without the express written consent of the Optionee.
18. GOVERNING LAW
The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware without
giving effect to the conflict of laws principles thereof.
19. EFFECTIVE DATE AND DURATION OF THE PLAN
This Plan shall, subject to Section 16 hereof, be effective
as of December 1, 1996, the date of its adoption by the Board of Directors,
and shall terminate on the later of (a) the tenth anniversary of the date so
determined or (b) the last expiration of awards granted hereunder.
<PAGE>
Exhibit 10.2
CYBER DIALOGUE INC.
1996 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT ("Option Agreement"),
dated as of December 31, 1996 by and between Cyber Dialogue Inc. (the "Company")
and XXXXXXXXX an employee of the Company or a division or subsidiary of the
Company (the "Optionee").
WHEREAS, pursuant to the Cyber Dialogue Inc., 1996 Stock
Option Plan (the "Plan"), the committee duly appointed by the Board of Directors
of the Company (the "Committee") has determined that the Optionee is to be
granted on the terms and conditions set forth herein, an option (the "Option")
to purchase shares of the common stock, par value $.01 per share, of the Company
(the "Common Stock') and hereby grants such Option; and
WHEREAS, it is the intention of the Committee that the Option
be a nonqualified option which is not intended to constitute an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1. NUMBER OF SHARES AND OPTION PRICE. The Option represents the
right on the terms and conditions set forth herein, to
purchase 800 shares of Common Stock (the "Shares") at a price
(the "Option Price") of $21.10 per share, which is not less
than the Fair Market Value (as defined in the Plan) per share
of the shares of Common Stock as of the dated hereof.
2. TERM OF OPTION AND CONDITIONS OF EXERCISE.
a. TERM OF OPTION. Unless the Option is previously
terminated pursuant to this Option Agreement, the term of
the Option and of this Option Agreement shall commence on
the date hereof (the "Date of Grant") and terminate upon
the expiration of ten (10) years from the Date of Grant.
Upon the termination of the Option, all rights of the
Optionee hereunder shall cease.
b. CONDITIONS OF EXERCISE. The Option shall be exercisable
as follows:
i. the Option becomes exercisable for twenty-five
percent (25%) of the Shares commencing on the first
anniversary of the Date of Grant; and
ii. the Option becomes exercisable for an additional
twenty-five percent (25%) of the Shares commencing
on the second anniversary of the Date of Grant; and
iii. the Option becomes exercisable for an additional
twenty-five percent (25%) of the Shares commencing
on the third anniversary of the Date of Grant; and
iv. the Option becomes exercisable for an additional
twenty-five percent (25%) of the Shares commencing
on the fourth anniversary of the Date of Grant;
PROVIDED, HOWEVER, that the Option may be exercised
only to purchase whole Shares and in no case may a
fraction of a Share be purchased. The right of the
Optionee to purchase any or all full Shares with
respect to which this Option has become exercisable
as herein provided may be exercised in whole or in
part at any one time, or from time to time, prior to
the tenth anniversary of the Date of Grant; PROVIDED
FURTHER, HOWEVER, that the Option may not be
exercised at any one time as to fewer than 100
Shares unless the remaining number of Shares as to
which the Option is exercisable prior to such
exercise is less than 100 and such exercise is for
all such remaining Shares.
c. ACCELERATION. The Committee may, in its discretion,
accelerate the exercisability of the Option or any part
thereof, upon such circumstances and subject to such
terms and conditions as the Committee deems appropriate.
3. RIGHTS UPON TERMINATION OF EMPLOYMENT.
a. Except as provided in this Section 3, the Option may not
be exercised after the Optionee has ceased to be employed
by the Company or its Parent or Subsidiary Corporations
(each as defined in the Plan).
b. If the Optionee ceases to be employed by the Company or a
Parent or Subsidiary Corporation by reason of death or
disability prior to the expiration of the Option, the
Optionee or his or her legal representative may exercise
the Option at any time within a period of six months
after such cessation of employment to the extent that the
Option was exercisable on the date of his or her
cessation of employment.
c. Notwithstanding anything to the contrary in this Section
3, the Option shall not be exercisable later than ten
years from the Date of Grant.
4. NONTRANSFERABILITY OF OPTION. The Option and this Option
Agreement shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution; and
the Option may be exercised, during the lifetime of the
Optionee, only by the Optionee or by the Optionee's legal
representative.
5. EXERCISE OF OPTION. The Option shall be exercised in the
following manner; the Optionee, or the person(s) having the
right to exercise the Option upon the death or Disability of
the Optionee, shall deliver to the Company written notice
specifying the number of Shares which the Optionee elects to
purchase, together with cash in an amount equal to the price
to be paid upon such exercise of the Option; PROVIDED,
HOWEVER, that such purchase may be effected in whole or in
part with monies received from the Company at the time of
exercise as a compensatory cash payment, or with monies
borrowed from the Company pursuant to terms and conditions
determined by the Committee, in its discretion, separately
with respect to each exercise of an Option and each Optionee;
PROVIDED FURTHER, HOWEVER, that, each such method and time for
payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with
applicable law. In either such event, the Company shall issue
or cause to be issued, and deliver as promptly as possible to
the Optionee, certificates representing the appropriate number
of Shares which certificates shall be registered in the name
of the Optionee.
6. NOTICES. Any notice required or permitted under this Option
Agreement shall be deemed given when delivered personally, or
when deposited in a United States Post Office, postage
prepaid, addressed, as appropriate, to the Optionee either at
the Optionee's address as last known by the Company or such
other address as the Optionee may designate in writing to the
Company.
7. FAILURE TO ENFORCE NOT A WAIVER. The failure of the Company to
enforce at any time any provision of this Option Agreement
shall in no way be construed to be a waiver of such provision
or of any other provision hereof.
8. INCORPORATION OF PLAN. The Plan is hereby incorporated herein
by reference and made a part hereof, and the Option and this
Option Agreement are subject to all terms and conditions of
the Plan.
9. GENERAL RESTRICTIONS. This award of an Option shall be subject
to the requirement that, if at any time the Committee shall
determine that (i) the listing, registration or qualification
of the shares of Common Stock subject or related thereto upon
any securities exchange or under any state or federal law, or
(ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the recipient of an award with
respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition or, or in connection
with, the granting of such Option or the issue or purchase of
shares of Common Stock thereunder, such award or issue or
purchase of shares of Common Stock thereunder, as the case may
be, may not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee. In connection
therewith, the Optionee agrees to be bound by the terms of the
Stockholder's Agreement; (as defined in the Plan) with respect
to any Shares issued to the Optionee upon exercise, in whole
or in part, of this Option and to execute such documents as
shall be provided by the Company to evidence same.
10. RIGHTS OF A STOCKHOLDER. The Optionee shall have no rights as
a stockholder with respect to any Shares unless and until
stock certificates for such Shares are issued to the Optionee.
Upon the issuance of a stock certificate, all Shares covered
by such certificate shall be subject to the terms of the
Stockholder's Agreement.
11. RIGHTS TO TERMINATE EMPLOYMENT. Nothing in the Plan or in this
Option Agreement; shall confer upon the Optionee the right to
continue in the employment of the Company or its Parent or
Subsidiary Corporations or affect any right which the company
or its Parent or Subsidiary Corporations may have to terminate
the employment of the Optionee.
12. WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer Shares under this Option Agreement, the
Company shall have the right to require the Optionee or his or
her legal representative to remit to the Company an amount
sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares.
13. EFFECT OF CERTAIN CHANGES. The Option granted under this
Option Agreement is subject to the adjustments specified in
Section 9 of the Plan.
14. GOVERNING LAW. This Option Agreement shall be governed by and
construed according to the laws of the State of Delaware,
without regard to the conflicts of law rules thereof.
15. AMENDMENT AND TERMINATION. The Committee may amend or
terminate the Plan at any time; PROVIDED, HOWEVER, that the
amendment or termination of the Plan shall not without the
consent of the Optionee or his or her legal representative,
affect the Optionee's rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Option Agreement; as of the date and year set forth first above.
CYBER DIALOGUE INC.
By
----------------------------------
The undersigned hereby
accepts and agrees to all
the terms and provisions
of the foregoing Option
Agreement and to all of
the terms and provisions
of the Cyber Dialogue Inc.
1996 Stock Option Plan
incorporated herein by
reference.
By
----------------------------------
Optionee
<PAGE>
Exhibit 10.3
CYBER DIALOGUE INC.
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
As Amended through April 4, 2000
1. Purpose; Types of Awards; Construction
The purpose of the Cyber Dialogue Inc. Amended and Restated 1997 Stock
Option Plan (the "Plan") is to afford an incentive to directors, officers
and employees of Cyber Dialogue Inc. (the "Company") or any subsidiary of
the Company which now exists or hereafter is organized or acquired by the
Company, to acquire a proprietary interest in the Company, to increase
their efforts on behalf of the Company and to promote the success of the
Company's business. The Plan is intended to permit the Committee (as
defined in Section 3 hereof) to issue options totaling up to twenty
percent (20%) of the total equity of the Company on a fully diluted basis.
The Committee may grant options which shall constitute either
"nonqualified stock options" ("Nonqualified Stock Options") or "incentive
stock options" ("Incentive Stock Options") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Definitions
As used in this Plan, the following words and phrases shall have the
meanings indicated:
a) "Board" shall mean the Board of Directors of the Company.
b) "Common Stock" shall mean shares of common stock, par value $.01 per
share, of the Company.
c) "Disability" shall mean the Optionee's incapacity due to physical or
mental illness, as a result of which the Optionee shall have been
absent from his duties of employment with the Company on a full-time
basis for the entire period of three (3) consecutive months, and
within thirty (30) days after written notice of termination is given
by the Company (which notice may be given within thirty (30) days
before or at any time after the end of such three month period)
shall not have returned to the performance of such duties on a
fulltime basis.
d) "Fair Market Value" per share as of a particular date shall mean (i)
the closing sales price per share of Common Stock on the national
securities exchange on which the Common Stock is principally traded,
for the last preceding date on which there was a sale of such Common
Stock on such exchange, or (ii) if the shares of Common Stock are
then traded in an over-the-counter market, the average of the
closing bid and asked prices for the shares of Common Stock in such
over-the-counter market for the last preceding date on which there
was a sale of such Common Stock in such market, or (iii) if the
shares of Common Stock are not then listed on a national securities
exchange or traded in an over-the-counter market, such value as the
Committee, in its sole discretion, shall determine.
e) "Option" or "Options" shall mean a grant to an Optionee of an option
or options to purchase shares of Common Stock. Options granted by
the Committee pursuant to the Plan shall constitute either
Nonqualified Stock Options or Incentive Stock Options, as determined
by the Committee.
f) "Parent Corporation" shall mean any corporation (other than the
Company) in an unbroken chain of corporations ending with the
employer corporation if, at the time of granting an Option, each of
the corporations other than the employer corporation owns stock
possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in
such chain.
g) "Subsidiary Corporation" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
employer corporation if, at the time of granting an Option, each of
the corporations other than the last corporation in the unbroken
chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
h) "Ten Percent Stockholder" shall mean an Optionee who, at the time an
Incentive Stock Option is granted,
i) "Cause" shall mean, unless an Optionee is a party to a written
employment agreement with the Company or a Subsidiary Corporation
which contains a definition of "cause," "termination for cause"
or any other similar term or phrase, in which case "Cause" shall
have the meaning set forth in such agreement: (i) an Optionee
engaging in acts or omissions that would reasonably be expected
to cause injury to the business and affairs of the Company or an
Affiliate, monetarily or otherwise; (ii) the chronic use of
alcohol, drugs or other similar substances affecting an
Optionee's work performance; or (iii) an Optionee being convicted
of, or pleading guilty or no lo contendere to a felony or other
crime involving theft, fraud or moral turpitude. The good faith
determination by the Committee of whether an Optionee's
employment or service relationship was terminated by the Company
for `Cause' shall be final and binding for all purposes hereunder.
j) A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following clauses shall have
occurred: (i) any Person is or becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company) representing 35% or more of
the voting power of the Company's then outstanding securities,
excluding any one, or any group or more than one of the Wand
Entities or any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (1) of clause
(iii) below; (ii) the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the effective date of the Plan, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on
the effective date of the Plan or whose appointment, election or
nomination for election was previously so approved or
recommended; (iii) there is consummated a merger or consolidation
of the Company with any other corporation other than (1) a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at
least 50% of the combined voting power of the voting securities
of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person other than any one, or any group of more than one of
the Wand Entities is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company) representing 35% or more of
the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least
50% of the combined voting power of the voting securities of
which are owned by Persons in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
l) "Good Reason" shall mean, unless an Optionee is a party to a
written employment agreement with the Company or a Subsidiary
Corporation which contains a definition of "good reason,"
"constructive termination" or any other similar term or phrase,
in which case "Good Reason" shall have the meaning set forth in
such agreement: the occurrence, on or after the date of a Change
in Control and without an Optionee's written consent, of (i) a
material reduction by the Company or any successor to the Company
of an Optionee's annual base salary, other than as part of a
general reduction applicable to the business, function or
location with which the Optionee is affiliated; (ii) a
substantial adverse change in the nature or scope of an
Optionee's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions
or duties exercised by the Optionee immediately prior to the
Change in Control; or (iii) the relocation of an Optionee's
principal place of employment to a location more than fifty (50)
miles from the Optionee's principal place of employment.
m) "Initial Public Offering" shall mean the initial public offering
of shares of Common Stock, as registered with the Securities and
Exchange Commission.
n) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include: (i) the Company
or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its Affiliates; (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
o) "Wand Entities" shall mean collectively Wand/Yankelovich
Investments LP, Wand Equity Portfolio II LP, Wand Partners LP,
Yankelovich Holdings Inc., Wand Partners (S.C.) Inc. and Wand
Affiliates Fund, LP.
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<PAGE>
owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of
its Parent or Subsidiary Corporations.
3. Administration
The Plan shall be administered by a committee (the "Committee")
established by the Board, the composition of which shall at all times
consist of three individuals who are each members of the Board. If no
Committee is appointed by the Board, the functions of the Committee shall
be carried out by the Board, provided, however, that if at any time the
Corporation has outstanding a class of equity securities required to be
registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Corporation shall not grant, designate or
amend any Options hereunder except through a committee consisting solely
of two or more persons, each of whom shall qualify as (i) a "Non-Employee
Director", as that term is defined in subparagraph (b)(3)(i) of Rule 16b-3
("Rule 16b-3") promulgated under the 1934 Act, and (ii) an "outside
director", within the meaning of Section 162(m) of the Code.
The Committee shall have the authority in its discretion, subject to and
not inconsistent with the express provisions of the Plan, to administer
the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority
to grant Options; to determine the purchase price of the shares of Common
Stock covered by each Option (the "Option Price"); to determine the
persons to whom, and the time or times at which awards shall be granted,
(such persons are referred to herein as "Optionees"); to determine the
number of shares to be covered by each award; to interpret the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan;
to determine the terms and provisions of the agreements (which need not be
identical) entered into in connection with awards granted under the Plan;
to cancel or suspend awards, as necessary; and to make all other
determinations deemed necessary or advisable for the administration of the
Plan. The Committee may delegate to one or more of its members or to one
or more agents such administrative duties as it may deem advisable,
provided, however, that if at any time the Corporation has outstanding a
class of equity securities required to be registered under Section 12 of
the 1934 Act, the Committee may not delegate any of its responsibilities
hereunder to any person who is not both a "Non-Employee Director", as that
term is defined in subparagraph (b)(3)(i) of Rule 16b-3, and an "outside
director", within the meaning of Section 162(m) of the Code. The Committee
or any person to whom it has delegated duties as aforesaid may employ one
or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All decisions,
determinations and interpretations of the Committee shall be final and
binding on all Optionees.
The Board shall fill all vacancies, however caused.
No member of the Board or Committee shall be liable for any action taken
or determination made in good faith with respect to the Plan or any award
granted hereunder.
4. Eligibility
Awards may be granted to directors, officers and employees of the Company.
In determining the persons to whom awards shall be granted and the number
of shares to be covered by each award, the Committee shall take into
account the duties of the respective persons, their present and potential
contributions to the success of the Company and such other factors as the
Committee shall deem relevant in connection with accomplishing the
purposes of the Plan.
5. Common Stock Subject to the Plan
The maximum number of shares of Common Stock reserved for the grant of
Options shall be 4,971,000 subject to adjustment as provided in Section 9
hereof. Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or may be reacquired by the Company.
If any outstanding award under the Plan should, for any reason expire, be
canceled or be terminated, without having been exercised in full, the
shares of Common Stock allocable to the unexercised, canceled or
terminated portion of such award shall (unless the Plan shall have been
terminated) become available for subsequent grants of awards under the
Plan.
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<PAGE>
6. Incentive Stock Options
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special
terms and conditions, in addition to the general terms and conditions
specified in Section 8 hereof.
a) Value of Shares. The aggregate Fair Market Value (determined as of
the date that Incentive Stock Options are granted) of the shares of
Common Stock with respect to which Options granted under this Plan
and all other option plans of the Company and any Parent or
Subsidiary Corporation become exercisable for the first time by an
Optionee during any calendar year shall not exceed $100,000.
b) Ten Percent Stockholders. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not
be less than one hundred ten percent (110%) of the Fair Market Value
of the shares of Common Stock on the date of grant of such Incentive
Stock Option, and (ii) the exercise period shall not exceed five (5)
years from the date of grant of such Incentive Stock Option.
7. Nonqualified Stock Options
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms
and conditions specified in Section 8 hereof.
8. Terms and Conditions of Options
Each Option granted pursuant to the Plan shall be evidenced by a written
agreement between the Company and the Optionee in such form as the
Committee shall from time to time approve (the "Option Agreement"), which
Option Agreement shall be subject to and set forth the following terms and
conditions:
a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the option relates.
b) Type of Option. Each Option Agreement shall specifically state
whether the Option constitutes a Nonqualified Stock Option or an
Incentive Stock Option.
c) Option Price. Each Option Agreement shall state the Option Price
which shall not be less than the Fair Market Value of the shares of
Common Stock covered by the Option on the date of grant. The Option
Price shall be subject to adjustment as provided in Section 10
hereof. The date on which the Committee adopts a resolution
expressly granting an Option shall be considered the day on which
such Option is granted, except to the extent any such resolution
provides otherwise.
d) Method and Time of Payment. An Option shall be exercised by
delivering notice to the Company's principal office, to the
attention of its Secretary. Such notice shall be accompanied by
the applicable Option Agreement, shall specify the number of
shares of Common Stock with respect to which the Option is being
exercised and the effective date of the proposed exercise and
shall be signed by the Optionee or other person then having the
right to exercise the Option. Payment for shares of Common Stock
purchased upon the exercise of an Option shall be made on the
effective date of such exercise by one or a combination of the
following means: (A) in cash (or cash equivalents acceptable to
the Committee) or (B) following an Initial Public Offering, if so
determined by the Committee prior to exercise, through a "broker
cashless exercise" procedure established by the Company from time
to time. The Committee shall have sole discretion to disapprove
of an election pursuant to clause (B) and in the case of an
Optionee who is subject to Section 16 of the Exchange Act, the
Company may require that the method of making such payment be in
compliance with Section 16 and the rules and regulations
thereunder.
e) Term and Exercisability of Options. Except as otherwise provided in
this Section 8 or Section 9 hereof or unless otherwise determined by
the Committee and set forth in the Option Agreement, each
outstanding Option shall become exercisable in cumulative
installments of twenty-five percent (25%) per year beginning on the
first anniversary of the date of grant of the Option or such other
date as the Committee may determine, as reflected in the Option
Agreement; provided, however, that, the Committee shall have the
authority to accelerate the exercisability of any outstanding Option
at such time and under such circumstances as it, in its sole
discretion, deems appropriate. Except as specifically provided in
Sections 8(f) and 8(g) hereof, all Options shall expire ten (10)
years from the date of grant of such Option (five (5) years in the
case of an Incentive Stock Option granted to a Ten Percent
Stockholder) or on such earlier date as may be prescribed by the
Committee and set forth in the Option Agreement. An Option may be
exercised, as to any or all full shares of Common Stock as to which
the Option has become exercisable, by giving written notice of such
exercise to the Committee or its designated agent; provided,
however, that an Option may not be exercised at any one time as to
fewer than 100 shares (or such number of shares as to which the
Option is then exercisable if such number of shares is less than
100).
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<PAGE>
f) Termination of Employment. Except as provided in this Section 8(f)
and in Sections 8(e) and (g) hereof, each Option granted hereunder
shall expire, to the extent not theretofore exercised, immediately
upon the date that the Optionee ceases to be employed by the Company
or any of its Parent or Subsidiary Corporations (or on such other
date as may be prescribed by the Committee and set forth in any
Option Agreement). In addition, if an Optionee ceases to be an
employee of the Company or any of its Parent or Subsidiary
Corporations, but becomes or remains an employee of another entity
affiliated with Wand Partners Inc. or an entity in which Wand
Partners Inc. invests ("Related Employment"), the Committee may, in
its sole discretion, continue to treat such Optionee as an employee
of the Company for purposes of the Plan and any outstanding Options
granted thereunder for the duration of such Related Employment.
g) Death or Disability of Optionee. If an Optionee shall die while
employed by the Company or a Parent or Subsidiary Corporation (or
within such longer period as the Committee may have provided
pursuant to Section 8(f) hereof), or if the Optionee's employment
shall terminate by reason of Disability, all Options theretofore
granted to such Optionee (to the extent otherwise exercisable) may,
unless earlier terminated in accordance with their terms, be
exercised by the Optionee or by the Optionee's estate or by a person
who acquired the right to exercise such Options by bequest or
inheritance or otherwise by reason of the death or Disability of the
Optionee, at any time within six (6) months after the date of death
or Disability of the Optionee; provided, however, that the Committee
may, in any Option Agreement, extend such period of exercisability.
In the event that an Option granted hereunder shall be exercised by
the legal representatives of a deceased or former Optionee, written
notice of such exercise shall be accompanied by a certified copy of
letters testamentary or equivalent proof of the right of such legal
representative to exercise such option.
h) Other Provisions. The Option Agreements evidencing Options under the
Plan shall contain such other terms and conditions, not inconsistent
with the Plan, as the Committee may determine.
9. Effect of Certain Changes
a) In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Common Stock,
or other property), recapitalization, Common Stock split, reverse
Common Stock split, reorganization, merger, consolidation,
spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Common Stock
such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of Optionees under the
Plan, then the Committee shall make such equitable changes or
adjustments as it deems necessary or appropriate to any or all of
(1) the number and kind of shares of Common Stock which may
thereafter be issued in connection with Options, (2) the number
and kind of shares of Common Stock issued or issuable in respect
of outstanding Options, (3) the exercise price, grant price or
purchase price relating to any Option, and (4) the maximum number
of shares subject to Options which may be awarded to any employee
during any tax year of the Company; PROVIDED, HOWEVER, that, with
respect to Incentive Stock Options, such adjustment shall be made
in accordance with Section 424 of the Code.
b) In the event the Optionee's employment is terminated by the
Company without Cause or by the Optionee for Good Reason within
18 months following the occurrence of a Change in Control, that
portion of such Optionee's outstanding Option that is not then
vested and/or exercisable shall become fully vested and
exercisable as of the date of such termination of employment.
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<PAGE>
10. Period During Which Options May Be Granted
Awards may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board,
or the date the Plan is approved by the stockholders of the Company,
whichever is earlier.
11. Nontransferability of Awards
Awards granted under the Plan shall not be transferable otherwise than by
will or by the laws of descent and distribution, and awards may be
exercised or otherwise realized, during the lifetime of the Optionee, only
by the Optionee or by his guardian or legal representative.
12. Beneficiary
An Optionee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may,
from time to time, amend or revoke such designation. If no designated
beneficiary survives the Optionee, the executor or administrator of the
Optionee's estate shall be deemed to be the Optionee's beneficiary.
13. Agreement by Optionee Regarding Withholding Taxes
If the Committee shall so require, as a condition of exercise of an Option
granted hereunder, each Optionee shall agree that no later than the date
of exercise, the Optionee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state or
local taxes of any kind required by law to be withheld upon the exercise
of an Option. To the extent provided in the applicable Option Agreement,
such payment may be made by the Optionee with shares of Common Stock
(whether previously owned by, or issuable upon the exercise of an Option
awarded to, such Optionee) having a Fair Market Value equal to the amount
of such taxes. Alternatively, the Committee may provide that an Optionee
may elect, to the extent permitted or required by law, to have the Company
deduct federal, state and local taxes of any kind required by law to be
withheld upon the exercise of an Option from any payment of any kind due
to the Optionee.
14. Rights as a Stockholder
An Optionee or a transferee of an award shall have no rights as a
stockholder with respect to any shares of Common Stock covered by the
Option until the date of the issuance of a stock certificate to him for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distributions of other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Section 9
hereof. Upon the issuance of a stock certificate, all shares of Common
Stock covered by such certificate shall be subject to the terms of the
Stockholder Agreement attached as Exhibit A hereto and made a part hereof.
15. No Rights to Employment
Nothing in the Plan or in any Option granted hereunder or Option Agreement
entered into pursuant hereto shall confer upon any Optionee the right to
continue in the employ of the Company or to be entitled to any
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<PAGE>
remuneration or benefits not set forth in the Plan or such Option
Agreement or to interfere with or limit in any way the right of the
Company to terminate such Optionee's employment.
16. Approval of Stockholders
The Plan, and any grants of Options thereunder, shall be subject to
approval by the holder(s) of a majority of the issued and outstanding
shares of the Company's capital stock which are entitled to vote on the
subject matter thereof and are present in person or represented by proxy
at a duly-called meeting of the stockholders of the Company which approval
must occur within one year after the date that the Plan is adopted by the
Board. In the event that the stockholders of the Company do not approve
the Plan at a meeting of the stockholders at which such issue is
considered and voted upon, then, upon such event, this Plan and all rights
hereunder or under any Option Agreement entered into in connection
herewith shall immediately terminate and no Optionee (or any permitted
transferee thereof) shall have any remaining rights under the Plan.
17. Amendment and Termination of the Plan
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that any amendment that would
materially increase the aggregate number of shares of Common Stock as to
which awards may be granted under the Plan or materially increase the
benefits accruing to Optionees under the Plan or materially modify the
requirements as to eligibility for participation in the Plan shall be
subject to the approval of the holders of a majority of the Common Stock
issued and outstanding, except that any such increase or modification that
may result from adjustments authorized by Section 9 hereof shall not
require such approval. Except as provided in Section 9 hereof, no
suspension, termination, modification or amendment of the Plan may
adversely affect any award previously granted, without the express written
consent of the Optionee.
18. Compliance with Section 16(b)
In the case of Optionees who are or may be subject to Section 16 of the
1934 Act, it is the intent of the Company that the Plan and any award
granted hereunder satisfy and be interpreted in a manner that satisfies
the applicable requirements of Rule 16b-3 so that such persons will be
entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the 1934 Act and will not be subjected to liability
thereunder. If any provision of the Plan or any award would otherwise
conflict with the intent expressed herein, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such
conflict. To the extent of any remaining irreconcilable conflict with such
intent, such provision shall be deemed void as applicable to Optionees who
are or may be subject to Section 16 of the 1934
19. Governing Law
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware without giving
effect to the conflict of laws principles thereof.
20. Effective Date and Duration of the Plan
This Plan shall, subject to Section 16 hereof, be effective as of December
1, 1996, the date of its adoption by the Board of Directors, and shall
terminate on the later of (a) the tenth anniversary of the date so
determined or (b) the last expiration of awards granted hereunder.
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<PAGE>
CYBER DIALOGUE INC. 2000 STOCK INCENTIVE PLAN
1. PURPOSE AND TYPES OF AWARDS.
The purpose of the Cyber Dialogue Inc. 2000 Stock Incentive Plan (the
"Plan") is to promote the long-term growth and profitability of Cyber Dialogue
Inc. (the "Company") by (i) providing key people with incentives to improve
stockholder value and to contribute to the growth and financial success of the
Company, and (ii) enabling the Company to attract, retain and reward the best
available persons for positions of substantial responsibility.
The Plan permits the granting of Options (including Incentive Stock
Options), Restricted Stock, Phantom Stock, Stock Bonuses and Other Awards.
2. DEFINITIONS.
Under the Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter
existing, that controls, is controlled by, or is under common
control with, the Company (including, but not limited to, joint
ventures, limited liability companies, and partnerships). For
this purpose, "control" shall mean ownership of 50% or more of
the voting power of the entity.
(b) "Award" shall mean any Option, Restricted Stock, Phantom Stock,
Stock Bonus or Other Award granted under the Plan.
(c) "Award Agreement" shall mean the written agreement between the
Company and a Grantee evidencing an Award.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Cause" shall mean, unless a Grantee is a party to a written
employment agreement with the Company or an Affiliate which
contains a definition of "cause," "termination for cause" or any
other similar
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term or phrase, in which case "Cause" shall have the meaning set
forth in such agreement: (i) a Grantee engaging in acts or
omissions that would reasonably be expected to cause injury to
the business and affairs of the Company or an Affiliate,
monetarily or otherwise; (ii) the chronic use of alcohol, drugs
or other similar substances affecting a Grantee's work
performance; or (iii) a Grantee being convicted of, or pleading
guilty or no lo contendere to a felony or other crime involving
theft, fraud or moral turpitude. The good faith determination by
the Committee of whether a Grantee's employment or service
relationship was terminated by the Company for 'Cause' shall be
final and binding for all purposes hereunder.
(f) "Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following clauses shall have
occurred: (i) any Person is or becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company) representing 35% or more of
the voting power of the Company's then outstanding securities,
excluding any one, or any group or more than one of the Wand
Entities or any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (1) of clause
(iii) below; (ii) the following individuals cease for any reason
to constitute a majority of the number of directors then serving:
individuals who, on the Effective Date, constitute the Board and
any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the Effective Date or whose
appointment, election or nomination for election was previously
so approved or recommended; (iii) there is consummated a merger
or consolidation of the Company with any other corporation other
than (1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to
such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into
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voting securities of the surviving entity or any parent thereof)
at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person other than any one, or any group
of more than one of the Wand Entities is or becomes the
Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities Beneficially Owned by
such Person any securities acquired directly from the Company)
representing 35% or more of the combined voting power of the
Company's then outstanding securities; or (iv) the stockholders
of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity at least 50% of the combined voting
power of the voting securities of which are owned by Persons in
substantially the same proportions as their ownership of the
Company immediately prior to such sale.
(g) "Charitable Organization" shall have the meaning set forth in
Section 501(c)(3) of the Code.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(i) "Committee" shall have the meaning set forth in Section 3 hereof.
(j) "Company" shall mean Cyber Dialogue Inc. and its successors.
(k) "Common Stock" shall mean the common stock of the Company, par
value $.01 per share.
(l) "Disability" shall mean: (i) any physical or mental condition
that would qualify a Grantee for a disability benefit under the
long-term disability plan maintained by the Company and
applicable to him or her; (ii) when used in connection with the
exercise of an Incentive Stock Option following
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termination of employment, disability within the meaning of
Section 22(e)(3) of the Code, or (iii) such other condition as
may be determined in the sole discretion of the Committee to
constitute Disability.
(m) "Effective Date" shall have the meaning set forth in Section 31
hereof.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(o) "Fair Market Value" of a share of the Common Stock for any
purpose on a particular date shall be determined in a manner such
as the Committee shall in good faith determine to be appropriate;
PROVIDED, HOWEVER, that in the case of Incentive Stock Options,
the determination of Fair Market Value shall be made by the
Committee in good faith in conformance with the Treasury
Regulations under Section 422 of the Code; and PROVIDED, FURTHER,
that with respect to Awards granted on the date of the
consummation of the Initial Public Offering, the "Fair Market
Value" of a share of Common Stock on such date shall be the
initial price to the public as set forth in the final prospectus
included within the registration statement on form S-1 filed with
the Securities and Exchange Commission for the Initial Public
Offering.
(p) "Good Reason" shall mean, unless a Grantee is a party to a
written employment agreement with the Company or an Affiliate
which contains a definition of "good reason", "constructive
termination" or any other similar term or phrase, in which
case "Good Reason" shall have the meaning set forth in such
agreement: the occurrence, on or after the date of a Change in
Control and without a Grantee's written consent, of (i) a
material reduction by the Company or any successor to the
Company of a Grantee's annual base salary, other than as part
of a general reduction applicable to the business, function or
location with which the Grantee is affiliated; (ii) a
substantial adverse change in the nature or scope of a
Grantee's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers,
functions or duties exercised by the Grantee immediately prior
to the Change in Control; or (iii) the relocation of a
Grantee's principal place of employment to a location more
than fifty (50) miles from the Grantee's principal place of
employment.
(q) "Grant Date" shall mean the date on which the Committee formally
acts to grant an Award to a Grantee or such other date as the
Committee shall so designate at the time of taking such formal
action.
(r) "Grantee" shall mean a person granted an Award pursuant to the
Plan.
(s) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of the
Code, or any successor provision, and that is designated by the
Board as an Incentive Stock Option.
(t) "Initial Public Offering" shall mean the initial public offering
of shares of Common Stock, as registered with the Securities and
Exchange Commission.
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(u) "Issue Date" shall mean the date established by the Company on
which certificates representing shares of Restricted Stock shall
be issued by the Company pursuant to the terms of Section 8(e).
(v) "Non-Qualified Stock Option" shall mean an Option other than an
Incentive Stock Option.
(w) "Option" shall mean an option to purchase shares of Common Stock
granted pursuant to Section 7.
(x) "Outside Director" shall mean each director who is not an
employee or executive officer of the Company and who is, as of
the date of consummation of the Initial Public Offering, the
beneficial owner (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of less than one percent of
the combined voting power of the Company.
(y) "Other Award" shall mean an award granted pursuant to Section 11
hereof.
(z) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent
corporation" provided in Section 424(e) of the Code, or any
successor thereto of similar import.
(aa) "Partial Exercise" shall mean an exercise of an Award for less
than the full extent permitted at the time of such exercise.
(ab) "Performance Goals" shall mean performance goals determined by
the Committee in its sole discretion. Such goals may be based on
one or more or none of the following criteria: (i) pre-tax income
or after-tax income, (ii) operating profit, (iii) return on
equity, assets, capital or investment, (iv) earnings or book
value per share, (v) sales or revenues, (vi) operating expenses,
(vii) Common Stock price appreciation; (viii) implementation or
completion of critical projects or processes; (ix) comparison of
actual performance during a performance period against budget for
such period; (x) growth of revenue, which growth may be expressed
in terms of absolute numbers and/or as a percentage increase; or
(xi) reductions in expenses, which reductions may be expressed in
terms of absolute
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numbers and/or as a percentage decrease; provided that with
respect to clauses (x) and (xi), such achievement may be measured
against budget for the same period. Where applicable, the
Performance Goals may be expressed in terms of attaining a
specified level of the particular criteria or the attainment of a
percentage increase or decrease in the particular criteria, and
may be applied to one or more of the Company, a Subsidiary or
Affiliate, or a division or strategic business unit of the
Company, or may be applied to the performance of the Company
relative to a market index, a group of other companies or a
combination thereof, all as determined by the Committee. The
Performance Goals may include a threshold level of performance
below which no vesting will occur, levels of performance at which
specified vesting will occur, and a maximum level of performance
at which full vesting will occur. Each of the foregoing
Performance Goals shall be determined in accordance with
generally accepted accounting principles and shall be subject to
certification by the Committee; PROVIDED, HOWEVER, that the
Committee shall have the authority to make equitable adjustments
to the Performance Goals in recognition of unusual or
non-recurring events affecting the Company or any Subsidiary or
Affiliate or the financial statements of the Company or any
Subsidiary or Affiliate in response to changes in applicable laws
or regulations, or to account for items of gain, loss or expense
determined to be extraordinary or unusual in nature or infrequent
in occurrence or related to the disposal of a segment of a
business or related to a change in accounting principles.
(ac) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include: (i) the Company
or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its Affiliates; (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
(ad) "Phantom Stock" shall mean the right, granted pursuant to Section
9, to receive in cash or shares the Fair Market Value of a share
of Common Stock.
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(ae) "Restricted Stock" shall mean a share of Common Stock which is
granted pursuant to the terms of Section 8 hereof and which is
subject to the restrictions set forth in Section 8(c).
(af) "Retirement" shall mean termination of a Grantee's employment or
service, other than for Cause, on or after attainment of age 65.
(ag) "Rule 16b-3" shall mean the Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time.
(ah) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(ai) "Stock Bonus" shall mean a bonus payable in shares of Common
Stock granted pursuant to Section 10.
(aj) "Subsidiary" and "Subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the
meaning of the definition of "subsidiary corporation" provided in
Section 424(f) of the Code, or any successor thereto of similar
import.
(ak) "Vesting Date" shall mean the date established by the Board on
which a share of Restricted Stock or Phantom Stock may vest.
(al) "Wand Entities" shall mean collectively Wand/Yankelovich
Investments LP, Wand Equity Portfolio II LP, Wand Partners LP,
Yankelovich Holdings Inc., Wand Partners (S.C.) Inc. and Wand
Affiliates Fund, LP.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board; PROVIDED, HOWEVER, that the
Board may establish one or more committees (the "Committee") which may, to the
extent set forth in the resolutions establishing such Committee or Committees,
be authorized to grant Awards to, and administer such Awards with respect to,
those Grantees who are subject to Section 16 of the Exchange Act with respect to
the Company ("Section 16 Grantees") or who are executive officers of the
Company. Any such Committee that is authorized to grant Awards to Section 16
Grantees (a "Section 16 Committee") shall, to the extent
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necessary to comply with Rule 16b-3 promulgated under the Exchange Act, be
comprised of two or more "non-employee directors" within the meaning of such
Rule, and any such Committee that is authorized to grant Awards to executive
officers of the Company (which may or may not be the same Committee as the
Section 16 Committee) shall, to the extent necessary to comply with Section
162(m) of the Code, be comprised of two or more "outside directors" within the
meaning of such Section. The Committee shall have the authority in its sole
discretion, subject to and not inconsistent with the express provisions of the
Plan, to administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the authority to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the type and number of Awards to be
granted, the number of shares of Common Stock to which an Award may relate and
the terms, conditions, restrictions and Performance Goals relating to any Award;
to determine whether, to what extent, and under what circumstances an Award may
be settled, cancelled, forfeited, exchanged, or surrendered; to make adjustments
in the Performance Goals in recognition of unusual or non-recurring events
affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles;
to construe and interpret the Plan and any Award; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements; and to make all other determinations deemed
necessary or advisable for the administration of the Plan. In the event that the
Board is the administrator of the Plan in lieu of a Committee, the term
"Committee" as used herein shall be deemed to mean the Board.
The Committee may, in its absolute discretion, without amendment to
the Plan (a) accelerate the date on which any Option granted under the Plan
becomes exercisable; (b) waive or amend the operation of Plan provisions
respecting exercise after termination of employment or otherwise adjust any
of the terms of such Option; (c) accelerate the Vesting Date or Issue Date,
or waive any condition imposed hereunder, with respect to any share of
Restricted Stock, Phantom Stock or Other Award; or (d) otherwise adjust any
of the terms applicable to any such Award; PROVIDED, HOWEVER, in each case,
that in the event of the occurrence of a Change in Control, the provisions of
Section 12 hereof shall govern vesting and exercisability schedule of any
Award granted hereunder.
No member of the Board or the Committee shall be liable for any action,
omission or determination relating to the Plan, and the Company shall indemnify
(to the extent permitted under Delaware law and the bylaws of the Company) and
hold harmless each
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member of the Board, the Committee and each other employee of the Company to
whom any duty or power relating to the administration or interpretation of the
Plan has been delegated against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Board or the Committee) arising out of any action, omission or determination
relating to the Plan, unless, in either case, such action, omission or
determination was taken or made by such director or employee in bad faith and
without reasonable belief that it was in the best interests of the Company.
4. STOCK SUBJECT TO THE PLAN.
(a) SHARES AVAILABLE FOR AWARDS.
The maximum number of shares of Common Stock reserved for
issuance under the Plan shall be equal to the following (subject
to adjustment as provided herein): (i) 20% of the number of
shares of Common Stock of the Company outstanding from time to
time on a fully diluted basis, MINUS (ii) the number of shares of
Common Stock subject to outstanding awards under the Company's
1996 Stock Option Plan and 1997 Stock Option Plan that have not
been exercised as of the Effective Date, MINUS (iii) shares of
Common Stock reserved for issuance from time to time under the
Company's Employee Stock Purchase Plan. Following an Initial
Public Offering, the maximum number of shares of Common Stock
that may be made subject to Options with respect to any executive
officer of the Company with respect to any 12-month period during
the term of the Plan shall be 5% of the number of shares of
Common Stock of the Company outstanding from time to time on a
fully diluted basis (subject to adjustment as provided herein).
Such shares may be authorized but unissued Common Stock or
authorized and issued Common Stock held in the Company's
treasury. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a legend
setting forth such restrictions on transferability as may apply
to such shares pursuant to the Plan.
(b) ADJUSTMENT FOR CHANGE IN CAPITALIZATION.
In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Common Stock,
or other property),
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recapitalization, Common Stock split, reverse Common Stock split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate
transaction or event, affects the Common Stock such that an
adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Grantees under the Plan, then the
Committee shall make such equitable changes or adjustments as it
deems necessary or appropriate to any or all of (1) the number
and kind of shares of Common Stock which may thereafter be issued
in connection with Awards, (2) the number and kind of shares of
Common Stock issued or issuable in respect of outstanding Awards,
(3) the exercise price, grant price or purchase price relating to
any Award, and (4) the maximum number of shares subject to Awards
which may be awarded to any employee during any tax year of the
Company; PROVIDED, HOWEVER, that, with respect to Incentive Stock
Options, such adjustment shall be made in accordance with
Section 424 of the Code.
(c) RE-USE OF SHARES.
Any shares of Common Stock subject to an Award that remain
unissued upon the cancellation, surrender, exchange or
termination of such award for any reason whatsoever, and any
shares of Restricted Stock that are forfeited shall again become
available for Awards.
5. ELIGIBILITY.
The persons who shall be eligible to receive Awards pursuant to the Plan
shall be such directors, officers, consultants and other employees of the
Company, or any Affiliate of the Company, as may be selected by the Committee
from time to time.
6. AWARDS UNDER THE PLAN; AWARD AGREEMENT.
The Committee may grant Options, shares of Restricted Stock, shares of
Phantom Stock, Stock Bonuses and Other Awards in such amounts and with such
terms and conditions as the Committee shall determine, subject to the provisions
of the Plan.
Each Award granted under the Plan (except an unconditional Stock Bonus)
shall be evidenced by an Award Agreement which shall contain such provisions as
the
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Committee may in its sole discretion deem necessary or desirable. By accepting
an Award, a Grantee thereby agrees that the Award shall be subject to all of the
terms and provisions of the Plan and the applicable Award Agreement.
7. OPTIONS.
(a) IDENTIFICATION OF OPTIONS.
Each Option shall be clearly identified in the applicable Award
Agreement as either an Incentive Stock Option or a Non-Qualified
Stock Option.
(b) EXERCISE PRICE.
Each Award Agreement with respect to an Option shall set forth
the amount (the "option exercise price") payable by the Grantee
to the Company upon exercise of the Option. The option exercise
price per share shall be determined by the Committee; PROVIDED,
HOWEVER, that in the case of an Incentive Stock Option, the
option exercise price shall in no event be less than the Fair
Market Value of a share of Common Stock on the Grant Date.
(c) TERM AND EXERCISE OF OPTIONS.
(1) Unless earlier terminated pursuant to the provisions of
the Plan or Award Agreement, each Option shall become
vested in accordance with the vesting schedule specified
in the Award Agreement, which vesting schedule shall be
determined by the Committee in its sole discretion. The
Committee shall determine the expiration date of each
Option; PROVIDED, HOWEVER, that no Option shall be
exercisable more than ten years after the Grant Date.
(2) Notwithstanding the provisions of subsection (1) above,
the exercisability of Options granted pursuant to this
Section 7 may be subject to the attainment by the Company
of Performance Goals pre-established by the Committee.
The exercisability of Options (or portions thereof) under
this subsection (2) shall not be effective
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unless the attainment of such Performance Goals has been
certified by the Committee.
(3) An Option may be exercised for all or any portion of the
shares as to which it is exercisable; PROVIDED, HOWEVER,
that no Partial Exercise of an Option shall be for less
than 100 shares of Common Stock unless such lesser amount
of shares is the remaining number of shares of Common
Stock subject to such Option.
(4) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its
Secretary. Such notice shall be accompanied by the
applicable Award Agreement, shall specify the number of
shares of Common Stock with respect to which the Option
is being exercised and the effective date of the proposed
exercise and shall be signed by the Grantee or other
person then having the right to exercise the Option.
Payment for shares of Common Stock purchased upon the
exercise of an Option shall be made on the effective date
of such exercise by one or a combination of the following
means: (A) in cash (or cash equivalents acceptable to the
Committee); (B) the surrender of previously acquired
shares of Common Stock having a Fair Market Value less
than or equal to the aggregate exercise price, which
shares shall have been held by the Grantee for at least
six months prior to the date of such surrender; (C) if so
determined by the Committee as of the Grant Date and set
forth in the applicable Award Agreement, authorization
for the Company to withhold a number of shares otherwise
payable pursuant to the exercise of an Option having a
Fair Market Value less than or equal to the aggregate
exercise price; or (D) following an Initial Public
Offering, if so determined by the Committee prior to
exercise, through a "broker cashless exercise" procedure
established by the Company from time to time. The
Committee may, in its sole discretion, authorize the
Company to make or guarantee loans to Grantees to assist
Grantees in exercising Options. The Committee shall have
sole discretion to disapprove of an election pursuant to
any of clauses (B) - (D) and in the case of
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a Grantee who is subject to Section 16 of the Exchange
Act, the Company may require that the method of making
such payment be in compliance with Section 16 and the
rules and regulations thereunder. Any payment in shares
of Common Stock shall be effected by the delivery of such
shares to the Secretary of the Company, duly endorsed in
blank or accompanied by stock powers duly executed in
blank, together with any other documents and evidences as
the Secretary of the Company shall require.
(5) Certificates for shares of Common Stock purchased upon
the exercise of an Option shall be issued in the name of
the Grantee or other person entitled to receive such
shares, and delivered to the Grantee or such other person
as soon as practicable following the effective date on
which the Option is exercised.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS.
(1) Incentive Stock Options shall only be granted to
employees of the Company, or a Parent or Subsidiary of
the Company.
(2) To the extent that the aggregate Fair Market Value of
shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by a
Grantee during any calendar year under the Plan and any
other stock option plan of the Company shall exceed
$100,000, such Options shall be treated as Non-Qualified
Stock Options. Such Fair Market Value shall be determined
as of the date on which each such Incentive Stock Option
is granted.
(3) No Incentive Stock Option may be granted to an individual
if, at the time of the proposed grant, such individual
owns (or is deemed to own under the Code) stock
possessing more than ten percent of the total combined
voting power of all classes of stock of the Company
unless (i) the option exercise price of such Incentive
Stock Option is at least 110% of the Fair Market Value
of a share of Common Stock at the time such Incentive
Stock Option is granted and (ii) such Incentive Stock
Option is not exercisable
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after the expiration of five years from the date such
Incentive Stock Option is granted.
(e) TANDEM AWARDS PROHIBITED.
An Incentive Stock Option may not be granted in tandem with any
other Award in such a manner that the exercise of one affects a
Grantee's right under the other.
(f) EFFECT OF TERMINATION OF EMPLOYMENT.
(1) Unless the applicable Award Agreement provides otherwise,
in the event that the employment of a Grantee with the
Company shall terminate for any reason other than Cause,
Retirement, Disability or death, (A) Options granted to
such Grantee, to the extent that they are exercisable at
the time of such termination, shall remain exercisable
until the date that is 90 days after such termination, on
which date they shall expire, and (B) Options granted to
such Grantee, to the extent that they were not
exercisable at the time of such termination, shall expire
at the close of business on the date of such termination.
The 90-day period described in this Section 7(f)(1) shall
be extended to one year after the date of such
termination in the event of the Grantee's death during
such 90-day period. Notwithstanding the foregoing, no
Option shall be exercisable after the expiration of its
term.
(2) Unless the applicable Award Agreement provides otherwise,
in the event that the employment of a Grantee with the
company shall terminate on account of the Retirement,
Disability or death of the Grantee, (A) Options granted
to such Grantee, to the extent that they were exercisable
at the time of such termination, shall remain exercisable
until the date that is one year after such termination,
on which date they shall expire, and (B) Options granted
to such Grantee, to the extent that they were not
exercisable at the time of such termination, shall expire
at the close of business on the date of such termination.
Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term.
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(3) In the event of the termination of a Grantee's employment
for Cause, all outstanding Options granted to such
Grantee shall expire at the commencement of business on
the date of such termination.
(4) Notwithstanding anything in the Plan to the contrary, in
the event the Grantee becomes an employee of any of the
Wand Entities or any Charitable Organization, the
Committee in its sole discretion may determine that there
has not been a termination of the Grantee's employment
with the Company for purposes of this Section 7(f).
(g) EXERCISE PRIOR TO VESTING.
The Committee may in its sole discretion provide at the time of
grant of any Option that the Grantee may elect at any time during
both (1) the term of such Option and (2) the period during which
such Grantee is employed by or providing services to the Company
or any of its Affiliates, that the Grantee may exercise all or
any portion of such Option, including the unvested portion of
such Option; PROVIDED, HOWEVER, that (i) a partial exercise of
such Option shall be deemed to cover first vested shares and then
the earliest vesting installment of unvested shares; (ii) any
shares so purchased from installments which have not vested as of
the date of exercise shall be subject to a repurchase option in
favor of the Company, the terms of which shall be set forth in
the Award Agreement evidencing such Option; (iii) the Grantee
shall enter into a form of early exercise stock purchase
agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and (iv) if such
Option is an Incentive Stock Option, then, the maximum vesting
provisions of Section 7(d)(2) shall continue to apply with
respect to such shares.
(h) OUTSIDE DIRECTOR PROGRAM.
Outside Directors shall be entitled to grants of Options under
the terms and conditions set forth in this Section 7(h) and
otherwise in accordance with the terms and conditions of the
Plan.
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(1) IDENTIFICATION OF OPTIONS.
Each Option granted under this Section 7(h) shall be
designated a Non-Qualified Stock Option in the Award
Agreement evidencing such Option.
(2) INITIAL GRANT OF OPTIONS.
Each Outside Director serving as of the Initial Public
Offering shall be granted, without further action on the
part of the Board or the Committee, an Option to purchase
25,000 shares of Common Stock.
(3) GRANT UPON ELECTION OR APPOINTMENT.
Following the Initial Public Offering, at the time of the
initial election or appointment of an Outside Director to
the Board, such Outside Director shall be granted,
without further action on the part of the Board or the
Committee, an Option to purchase 25,000 shares of Common
Stock.
(4) GRANT UPON RE-ELECTION OR RE-APPOINTMENT.
Immediately following each annual meeting of the
Company's stockholders, each Outside Director then
serving who has been re-elected or re-appointed at such
stockholders meeting may be granted, in the sole
discretion of the Board, an Option to purchase up to
25,000 shares of Common Stock.
(5) EXERCISE PRICE.
Each Award Agreement with respect to an Option granted
under this Section 7(h) shall set forth the option
exercise price per share of Common Stock payable by the
Grantee to the Company upon exercise of the Option. The
option exercise price per share of Common Stock shall be
the Fair Market Value of a share of Common Stock on the
date the Option is granted.
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(6) TERM AND EXERCISE OF OPTIONS.
(A) Each Option granted under this Section 7(h) shall
have a term of ten years.
(B) Each Option granted under this Section 7(h) shall
become exercisable in full on the second
anniversary of the date such Option was granted,
provided that the Grantee is serving as an Outside
Director as of such vesting date.
(C) Each Option granted under this Section 7(h) may be
exercised, in whole or in part, with respect to
whole shares of Common Stock, to the extent then
exercisable; PROVIDED, HOWEVER, that no Partial
Exercise of an Option shall be for less than 100
shares of Common Stock unless such lesser amount
of shares is the remaining number of shares of
Common Stock subject to such Option.
(D) Each Option granted under this Section 7(h) shall
be exercised by delivering notice to the Company's
principal office, to the attention of its
Secretary. Such notice shall be accompanied by the
applicable Award Agreement, shall specify the
number of whole shares of Common Stock with
respect to which the Option is being exercised and
the effective date of the proposed exercise and
shall be signed by the Grantee or other person
then having the right to exercise the Option. The
methods of payment with respect to the exercise
price of Options granted under this Section 7(h)
shall be consistent with Section 7(c)(4).
(i) RESTRICTIONS ON TRANSFER.
The Committee may in its sole discretion provide at the time of
grant of any Option that, upon its exercise, the shares of Common
Stock to be issued to the Grantee shall be subject to such
restrictions on transfer as the Committee may determine are
advisable.
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8. RESTRICTED STOCK.
(a) ISSUE DATE AND VESTING DATE.
At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a
Vesting Date or Vesting Dates with respect to such shares. The
Committee may divide such shares into classes and assign a
different Issue Date and/or Vesting Date for each class. If the
Grantee is employed by the company on an Issue Date (which may
be the date of grant), the specified number of shares of
Restricted Stock shall be issued in accordance with the
provisions of Section 8(e). Provided that all conditions to the
vesting of a share of Restricted Stock imposed pursuant to
Section 8(b) are satisfied, and except as provided in Section
8(g), upon the occurrence of the Vesting Date with respect to a
share of Restricted Stock, such share shall vest and the
restrictions of Section 8(c) shall lapse.
(b) CONDITIONS TO VESTING.
At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion, deems
appropriate.
(c) RESTRICTIONS ON TRANSFER PRIOR TO VESTING.
Prior to the vesting of a share of Restricted Stock, no transfer
of a Grantee's rights with respect to such share, whether
voluntary or involuntary, by operation of law or otherwise, shall
be permitted. Immediately upon any attempt to transfer such
rights, such share, and all of the rights related thereto, shall
be forfeited by the Grantee.
(d) DIVIDENDS ON RESTRICTED STOCK.
The Committee in its discretion may require that any dividends
paid on shares of Restricted Stock be held in escrow until all
restrictions on such shares have lapsed.
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(e) ISSUANCE OF CERTIFICATES.
(1) Reasonably promptly after the Issue Date with respect to
shares of Restricted Stock, the Company shall cause to be
issued a stock certificate, registered in the name of
the Grantee to whom such shares were granted, evidencing
such shares; provided that the Company shall not cause
such a stock certificate to be issued unless it has
received a stock power duly endorsed in blank with
respect to such shares. Each such stock certificate shall
bear the following legend:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF
STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS,
TERMS AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS
AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE CYBER
DIALOGUE INC. 2000 STOCK INCENTIVE PLAN AND AN AWARD
AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF
SUCH SHARES AND THE COMPANY. A COPY OF THE PLAN AND AWARD
AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF
THE COMPANY, 304 HUDSON STREET, NEW YORK, NEW YORK 10013.
Such legend shall not be removed until such shares vest
pursuant to the terms hereof.
(2) Each certificate issued pursuant to this Section 8(e),
together with the stock powers relating to the shares of
Restricted Stock evidenced by such certificate, shall be
held by the Company unless the Committee determines
otherwise.
(f) CONSEQUENCES OF VESTING.
Upon the vesting of a share of Restricted Stock pursuant to the
terms hereof, the restrictions of Section 8(c) shall lapse with
respect to such share. Reasonably promptly after a share of
Restricted Stock vests, the Company shall cause to be delivered
to the Grantee to whom such shares
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<PAGE>
were granted, a certificate evidencing such share, free of the
legend set forth in Section 8(e).
(g) EFFECT OF TERMINATION OF EMPLOYMENT.
Subject to such other provision as the Committee may set forth in
the applicable Award Agreement, and to the Committee's amendment
authority pursuant to Section 3, upon the termination of a
Grantee's employment for any reason, any and all shares to which
restrictions on transferability apply shall be immediately
forfeited by the Grantee and transferred to, and reacquired by,
the Company. In the event of a forfeiture of shares pursuant to
this Section 8(g), the Company shall repay to the Grantee (or the
Grantee's estate) any amount paid by the Grantee for such shares.
In the event that the Company requires a return of shares, it
shall also have the right to require the return of all dividends
paid on such shares, whether by termination of any escrow
arrangement under which such dividends are held or otherwise.
Notwithstanding anything in the Plan to the contrary, in the
event the Grantee becomes an employee of any of the Wand Entities
or any Charitable Organization, the Committee in its sole
discretion may determine that there has not been a termination of
the Grantee's employment for purposes of this Section 8(g).
(h) SPECIAL PROVISIONS REGARDING RESTRICTED STOCK.
Notwithstanding anything to the contrary contained herein,
Restricted Stock granted pursuant to this Section 8 may be based
on the attainment of Performance Goals. Such shares of
Restricted Stock shall be released from restrictions only after
the attainment of such Performance Goals has been certified by
the Committee.
9. PHANTOM STOCK.
(a) VESTING DATE.
At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with
respect to such shares. The Committee may divide such shares into
classes and assign a different
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Vesting Date for each class. Provided that all conditions to the
vesting of a share of Phantom Stock imposed pursuant to Section
9(c) are satisfied, and except as provided in Section 9(d), upon
the occurrence of the Vesting Date with respect to a share of
Phantom Stock, such share shall vest.
(b) BENEFIT UPON VESTING.
Upon the vesting of a share of Phantom Stock, the Grantee shall
be entitled to receive, within 30 days of the date on which such
share vests, an amount, in cash and/or shares of Common Stock, as
determined by the Committee, equal to the sum of (1) the Fair
Market Value of a share of Common Stock on the date on which such
share of Phantom Stock vests and (2) the aggregate amount of cash
dividends paid with respect to a share of Common Stock during the
period commencing on the date on which the share of Phantom
Stock was granted and terminating on the date on which such share
vests.
(c) CONDITIONS TO VESTING.
At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions to the
vesting of such shares as it, in its absolute discretion, deems
appropriate.
(d) EFFECT OF TERMINATION OF EMPLOYMENT.
Subject to such other provision as the Committee may set forth in
the applicable Award Agreement, and to the Committee's amendment
authority pursuant to Section 3, shares of Phantom Stock that
have not vested, together with any dividends credited on such
shares, shall be forfeited upon the Grantee's termination of
employment for any reason. Notwithstanding anything in the Plan
to the contrary, in the event the Grantee becomes an employee of
any of the Wand Entities or any Charitable Organization, the
Committee in its sole discretion may determine that there has not
been a termination of the Grantee's employment for purposes of
this Section 9(d).
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(e) SPECIAL PROVISIONS REGARDING AWARDS.
Notwithstanding anything to the contrary contained herein, the
vesting of Phantom Stock granted pursuant to this Section 9 may
be based on the attainment by the Company of one or more
Performance Goals. No payment in respect of any such Phantom
Stock award will be paid until the attainment of the respective
performance measures have been certified by the Committee.
10. STOCK BONUSES.
In the event that the Committee grants a Stock Bonus, a certificate
for the shares of Common Stock comprising such Stock Bonus shall be issued in
the name of the Grantee to whom such grant was made and delivered to such
Grantee as soon as practicable after the date on which such Stock Bonus is
payable.
11. OTHER AWARDS.
Other forms of Awards ("Other Awards") valued in whole or in part by
reference to, or otherwise based on, Common Stock may be granted either alone
or in addition to other Awards under the Plan. Subject to the provisions of
the Plan, the Committee shall have sole and complete authority to determine
the persons to whom and the time or times at which such Other Awards shall be
granted, the number of shares of Common Stock to be granted pursuant to such
Other Awards and all other conditions of such Other Awards.
12. CHANGE IN CONTROL.
In the event the Grantee's employment is terminated by the Company
without Cause or by the Grantee for Good Reason within 18 months following
the occurrence of a Change in Control, that portion of such Grantee's
outstanding Award that is not then vested and/or exercisable shall become
fully vested and exercisable as of the date of such termination of employment.
13. RIGHTS AS A STOCKHOLDER.
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Award until the date of
issuance of a stock certificate with respect to such shares. Except as
otherwise expressly provided in Section 4(b), no adjustment to any Award
shall be made for dividends or other rights for which the record date occurs
prior to the date such stock certificate is issued.
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<PAGE>
14. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO AWARD.
Nothing contained in the Plan or any Award Agreement shall confer
upon any Grantee any right with respect to the continuation of employment by
the Company or interfere in any way with the right of the Company, subject to
the terms of any separate employment agreement to the contrary, at any time
to terminate employment or to increase or decrease the compensation of the
Grantee.
No person shall have any claim or right to receive an Award
hereunder. The Board's granting of an Award to a Grantee at any time shall
neither require the Board to grant any other Award to such Grantee or other
person at any time or preclude the Board from making subsequent grants to
such Grantee or any other person.
15. SECURITIES MATTERS.
(a) The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of any interests in
the Plan or any shares of Common Stock to be issued hereunder or
to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company
shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Common Stock pursuant to the
Plan unless and until the Company is advised by its counsel that
the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authority
and the requirements of any securities exchange on which shares
of Common Stock are traded. The Committee may require, as a
condition of the issuance and delivery of certificates evidencing
shares of Common Stock pursuant to the terms hereof, that the
recipient of such shares make such agreements and
representations, and that such certificates bear such legends,
as the Committee, in its sole discretion, deems necessary or
desirable.
(b) The transfer of any shares of Common Stock hereunder shall be
effective only at such time as counsel to the Company shall have
determined that the issuance and delivery of such shares is in
compliance with all applicable
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<PAGE>
laws, regulations of governmental authority and the requirements
of any securities exchange on which shares of Common Stock are
traded. The Committee may, in its sole discretion, defer the
effectiveness of any transfer of shares of Common Stock hereunder
in order to allow the issuance of such shares to be made pursuant
to registration or an exemption from registration or other
methods for compliance available under federal or state
securities laws. The Committee shall inform the Grantee in
writing of its decision to defer the effectiveness of a transfer.
During the period of such deferral in connection with the
exercise of an Option, the Grantee may, by written notice,
withdraw such exercise and obtain the refund of any amount paid
with respect thereto.
16. WITHHOLDING TAXES.
Whenever cash is to be paid pursuant to an Award, the Company shall
have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.
Whenever shares of Common Stock are to be delivered pursuant to an Award, the
Company shall have the right to require the Grantee to remit to the Company
in cash an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. With the approval of the
Committee, a Grantee may satisfy the foregoing requirement by electing to
have the Company withhold from delivery shares of Common Stock having a value
equal to the amount of tax to be withheld or by agreeing to surrender to the
Company shares of Common Stock owned by the Grantee for at least six months
having a value equal to the amount of tax to be withheld; PROVIDED, HOWEVER,
that if shares of Common Stock are to be withheld by the Company for purposes
of satisfying such withholding obligations, the number of shares of Common
Stock to be so withheld shall be calculated using the minimum statutory
withholding rates for federal and state tax purposes, including payroll
taxes, that are applicable to any Option, its exercise, or any payment or
transfer in respect thereof. Such shares shall be valued at their Fair Market
Value on the date on which the amount of tax to be withheld is determined
(the "Tax Date"). Fractional share amounts shall be settled in cash. Such a
withholding election may be made with respect to all or any portion of the
shares to be delivered pursuant to an Award. The Committee may, in its sole
discretion, authorize the Company to make or guarantee full recourse loans to
Grantees to assist Grantees in satisfying such withholding obligation.
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<PAGE>
17. NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE.
If any Grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under Section 83(b)
of the Code, such Grantee shall notify the Company of such election within
ten days of filing notice of the election with the Internal Revenue Service.
18. NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(b) OF THE
CODE.
Each Award Agreement with respect to an Incentive Stock Option shall
require the Grantee to notify the Company of any disposition of shares of
Common Stock issued pursuant to the exercise of such Option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within ten days of such disposition.
19. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may, at any time, suspend or terminate the Plan or revise
or amend it in any respect whatsoever; PROVIDED, HOWEVER, that stockholder
approval shall be required if and to the extent the Board determines that
such approval is appropriate for purposes of satisfying applicable laws and
regulations, including but not limited to Sections 162(m) or 422 of the Code
or Rule 16b-3. Awards may be granted under the Plan prior to the receipt of
such stockholder approval but each such grant shall be subject in its
entirety to such approval and no award may be exercised, vested or otherwise
satisfied prior to the receipt of such approval. Nothing herein shall
restrict the Board's ability to exercise its discretionary authority pursuant
to Section 3, which discretion may be exercised without amendment to the
Plan. No action hereunder may, without the consent of a Grantee, reduce the
Grantee's rights under any outstanding Award.
20. TRANSFERS OF AWARDS.
Except as otherwise determined by the Committee, and in any event in
the case of an Incentive Stock Option, no Award granted under the Plan shall
be transferable by a Grantee otherwise than by will or the laws of descent
and distribution. Unless otherwise determined by the Committee in accord with
the provisions of the immediately preceding sentence, an Option may be
exercised during the lifetime of the Grantee, only by the Grantee or, during
the period the Grantee is under a legal disability, by the Grantee's guardian
or legal representative.
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21. EXPENSES AND RECEIPTS.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Award will be used for general
corporate purposes.
22. FAILURE TO COMPLY.
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Grantee (or beneficiary) to comply with any of the terms
and conditions of the Plan or the applicable Award Agreement, unless such
failure is remedied by such Grantee (or beneficiary) within ten days after
notice of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Award, in whole or in part, as the
Committee, in its absolute discretion, may determine.
23. APPLICABLE LAW.
Except to the extent preempted by any applicable federal law, the
Plan will be construed and administered in accordance with the laws of the
State of Delaware, without reference to its principles of conflicts of law.
24. PLAN SUBJECT TO CHARTER AND BYLAWS.
The Plan is subject to the Charter and By-Laws of the Company, as
they may be amended from time to time.
25. GRANTEE RIGHTS.
No Grantee shall have any claim to be granted any award under the
Plan, and there is no obligation for uniformity of treatment for Grantees.
Except as provided specifically herein, a Grantee or a transferee of an Award
shall have no rights as a stockholder with respect to any shares covered by
any award until the date of the issuance of a Common Stock certificate to him
or her for such shares.
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26. UNFUNDED STATUS OF AWARDS.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
Grantee pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give any such Grantee any rights that are greater than those
of a general creditor of the Company.
27. NO FRACTIONAL SHARES.
No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Board shall determine whether cash, other Awards,
or other property shall be issued or paid in lieu of such fractional shares
or whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
28. BENEFICIARY.
A Grantee may file with the Committee a written designation of a
beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the Grantee's estate
shall be deemed to be the grantee's beneficiary.
29. INTERPRETATION.
The Plan is designed and intended to comply with Rule 16b-3 and, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply.
30. SEVERABILITY.
If any provision of the Plan is held to be invalid or unenforceable,
the other provisions of the Plan shall not be affected but shall be applied
as if the invalid or unenforceable provision had not been included in the
Plan.
31. EFFECTIVE DATE AND TERM OF PLAN.
The Plan is effective as of the date on which the Plan is approved by
the Board, or such other date as the Board may specify as the effective date,
subject to approval of the
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stockholders within twelve months before or after such date. No Award shall
be granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan. Subject to
other applicable provisions of the Plan, all Awards made under the Plan prior
to such termination of the Plan shall remain in effect until such Awards have
been satisfied or terminated in accordance with the Plan and the terms of
such Awards.
Date Approved by the Board: April 4, 2000.
Date Approved by the Shareholders: April 4, 2000.
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<PAGE>
CYBER DIALOGUE INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The Cyber Dialogue Inc. Employee Stock Purchase Plan
(the "Plan") is being established for the benefit of employees of Cyber Dialogue
Inc., a Delaware corporation (the "Company"), and its Designated Subsidiaries.
The Plan is intended to provide the employees of the Employer with an
opportunity to purchase common shares, par value $.01 per share, of the Company
(the "Shares"). It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" within the meaning of Section 423 of the Code,
and the provisions of the Plan shall be construed in a manner consistent with
the requirements of such Section of the Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Change in Capitalization" shall mean any increase,
reduction, or change or exchange of Shares for a different number or kind of
shares or other securities of the Company by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, share dividend, share
split or reverse share split, combination or exchange of shares, repurchase of
Shares, change in corporate structure or otherwise.
(c) "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following clauses shall have occurred: (i)
any Person is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities Beneficially Owned by such Person any securities
acquired directly from the Company) representing 35% or more of the voting power
of the Company's then outstanding securities, excluding any one or group of more
than one of the Wand Entities or any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (1) of clause (iii) below;
(ii) the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on the Effective Date,
constitute the Board and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating to the
election of directors of the Company) whose appointment
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or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the Effective
Date or whose appointment, election or nomination for election was previously so
approved or recommended; (iii) there is consummated a merger or consolidation of
the Company with any other corporation other than (1) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 50% of the combined voting
power of the voting securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or consolidation, or
(2) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person other than any one or any
group of more than one of the Wand Entities is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Company) representing 35% or more of the combined voting power of the
Company's then outstanding securities; or (iv) the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity at
least 50% of the combined voting power of the voting securities of which are
owned by Persons in substantially the same proportions as their ownership of the
Company immediately prior to such sale.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" shall mean the Compensation Committee or any
other committee of members of the Board appointed by the Board to administer the
Plan and to perform the functions set forth herein.
(f) "Company" shall mean Cyber Dialogue Inc. and its
successors.
(g) "Compensation" shall mean the fixed salary, wages,
commissions, overtime pay and bonuses paid by an Employer to an Employee as
reported by the Employer to the United States government for Federal income tax
purposes, including an Employee's portion of compensation deferral contributions
pursuant to Section 401(k) of
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the Code, any amount excludable pursuant to Section 125 of the Code and/or any
non-qualified compensation deferral, but excluding any foreign service
allowance, commissions, severance pay, expense reimbursement or any credit or
benefit under any employee plan maintained by the Employer.
(h) "Continuous Status as an Employee" shall mean the
absence of any interruption or termination of service as an Employee. Continuous
Status as an Employee shall not be considered interrupted in the case of a leave
of absence agreed to in writing by the Employee's Employer, if such leave is for
a continuous period of not more than one year or re-employment upon the
expiration of such leave is guaranteed by contract or statute.
(i) "Designated Subsidiaries" shall mean the subsidiaries of
the Company which have been designated by the Board from time to time in its
sole discretion as eligible to participate in the Plan, which may include
corporations which become subsidiaries of the Company after the adoption of the
Plan.
(j) "Employee" shall mean any person, including an officer,
who as of an Offering Date has been regularly employed by the Company, a wholly
owned Subsidiary of the Company or a Designated Subsidiary of the Company for at
least six months and works more than 20 hours per week; PROVIDED, HOWEVER, that
with respect to the first Offering Period, an Employee shall mean any person,
including an officer, who is regularly employed by the Company, a wholly owned
Subsidiary of the Company or a Designated Subsidiary of the Company, in any
case, for more than 20 hours per week, on or before April 4, 2000.
Notwithstanding the forgoing, the Committee shall have the sole discretion to
determine that any person whose Compensation exceeded $150,000 in the calendar
year immediately preceding any Offering Date shall not be Employee for purposes
of the Offering Period to which such Offering Date relates.
(k) "Employer" shall mean, as to any particular Employee,
the corporation which employs such Employee, whether it is the Company, a wholly
owned Subsidiary of the Company or a Designated Subsidiary of the Company.
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
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(m) "Exercise Date" shall mean the last business day of each
Purchase Period, except as the Committee may otherwise provide.
(n) "Fair Market Value" per Share as of a particular date
shall mean (i) the closing sales price per Share on such date, as reported by
the Composite Transactions reporting system or if not so reported, as reported
by the New York Stock Exchange or (ii) in the event the Shares are not traded on
such date, the closing price per Share, as so reported in the immediately
preceding date on which trading occurred, or if not so reported, as reported by
any national securities exchange on which the Shares are listed; PROVIDED,
HOWEVER, that for purposes of the first offering Period, the "Fair Market Value"
of a Share shall be the initial price to the public as set forth in the final
prospectus included within the registration statement on form S-1 filed with the
Securities and Exchange Commission for the initial public offering of Shares.
(o) "Offering Date" shall mean the first Trading Day of each
Offering Period of the Plan, except with respect to the Offering Date coinciding
with the Company's initial public offering, in which case "Offering Date" shall
mean the date the Company's registration statement filed in connection with the
initial public offering is declared effective by the Securities and Exchange
Commission. The Offering Date of an Offering Period is the grant date for the
options offered in such Offering Period.
(p) "Offering Period" shall mean a period as described in
Section 4 hereof.
(q) "Parent" shall mean a corporation, whether now or
hereafter existing, within the meaning of the definition of "parent corporation"
provided in Section 424(e) of the Code, or any successor thereto of similar
import.
(r) "Participant" shall mean an Employee who participates in
the Plan.
(s) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include: (i) the Company or any of its
subsidiaries; (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates; (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities; or (iv) a corporation owned, directly or indirectly, by the
stockholders of the
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Company in substantially the same proportions as their ownership of stock of the
Company.
(t) "Plan" shall mean the Cyber Dialogue Inc. Employee Stock
Purchase Plan, as amended from time to time.
(u) "Plan Year" shall mean the calendar year, except that
the first Plan Year shall begin the date the Company's registration statement
filed in connection with the initial public offering is declared effective by
the Securities and Exchange Commission and shall end on the next December 31.
(v) "Purchase Period" shall mean each approximately
six-month period, within an Offering Period, commencing on the Trading Day next
following the last previous Exercise Date in such Offering Period and ending
with the next Exercise Date in such Offering Period, except that the first
Purchase Period of any Offering Period shall commence on the first Trading Day
of such Offering Period and end with the next Exercise Date.
(w) "Shares" shall mean shares of the common stock, par
value $.01 per share, of the Company.
(x) "Subsidiary" and "Subsidiaries" shall mean only a
corporation or corporations, whether now or hereafter existing, within the
meaning of the definition of "subsidiary corporation" provided in Section 424(f)
of the Code, or any successor thereto of similar import.
(y) "Trading Day" shall mean a day on which national stock
exchanges and the NASDAQ system are open for trading.
(z) "Year of Service" shall mean each successive period of
twelve consecutive months (from an Employee's original employment date) during
which the Employee's hours of employment are 1,000 hours or more.
(aa) "Wand Entities" shall mean collectively
Wand/Yankelovich Investments LP, Wand Equity Portfolio II LP, Wand Partners LP,
Yankelovich Holdings Inc., Wand Partners (S.C.) Inc. and Wand Affiliates Fund,
LP.
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3. ELIGIBILITY.
(a) Subject to the requirements of Section 4(b) hereof, any
person who is an Employee as of an Offering Date shall be eligible to
participate in the Plan and be granted an option for the Offering Period
commencing on such Offering Date.
(b) Notwithstanding any provisions of the Plan to the
contrary, no Employee shall be granted an option under the Plan (i) if,
immediately after the grant, such Employee (or any other person whose shares
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own shares and/or hold outstanding options to purchase shares possessing
five percent or more of the total combined voting power or value of all classes
of shares of the Company or of any Subsidiary or Parent of the Company, or (ii)
which permits such Employee's right to purchase shares under all employee stock
purchase plans (as described in Section 423 of the Code) of the Company and any
Subsidiary or Parent of the Company to accrue at a rate which exceeds $25,000 of
Fair Market Value of such shares (determined at the time such option is granted)
for any calendar year in which such option would be outstanding at any time. Any
amounts received from an Employee which cannot be used to purchase Shares as a
result of this limitation will be returned as soon as possible to the Employee
without interest.
4. OFFERING PERIODS. The Plan shall be implemented by a series of
consecutive, overlapping Offering Periods. The first such Offering Period shall
commence on the first Trading Day on or after the date on which the Securities
and Exchange commission declares the Company's registration statement on form
S-1 to be effective and ending on the last Trading Day on or before December 31,
2000. Unless otherwise determined by the Committee, each subsequent Offering
Period shall have a duration of one year, commencing on the first Trading Day on
or after January 1 and July 1 of each year. The Plan shall continue until
terminated in accordance with Section 19 hereof. Subject to Section 19 hereof,
the Committee shall have the power to change the duration and/or the frequency
of Offering Periods and/or Purchase Periods with respect to future offerings and
shall use its best efforts to notify Employees of any such change at least 15
days prior to the scheduled beginning of the first Offering Period to be
affected. In no event shall any option granted hereunder be exercisable more
than 27 months from its date of grant.
To the extent permitted by any applicable laws, regulations, or
stock exchange rules, if the Fair Market Value of the Shares on any Exercise
Date in an Offering
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Period is lower than the Fair Market Value of the Shares on the Offering 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.
5. GRANT OF OPTION; PARTICIPATION; PRICE.
(a) On each Offering Date the Company shall commence an
offering by granting each eligible Employee an option to purchase Shares,
subject to the limitations set forth in Sections 3(b) and 11 hereof. Each option
so granted shall be exercisable for the number of Shares described in Section 8
hereof and shall be exercisable only on the Exercise Date.
(b) Each eligible Employee may elect to become a Participant
in the Plan with respect to an Offering Period, by filing a subscription
agreement with his or her Employer authorizing payroll deductions in accordance
with Section 6 hereof and filing it with the Company or the Employer in
accordance with the form's instructions at least ten business days prior to the
applicable Offering Date, unless a later time for filing the subscription
agreement is set by the Committee for all Employees with respect to a given
offering. Such authorization will remain in effect for subsequent Offering
Periods, until modified or terminated by the Participant by giving written
notice to his or her Employer prior to the next occurring Exercise Date.
Additionally, a Participant may participate to a greater extent by authorizing
reinvestment of dividends on the Shares held in his or her account (by giving
written notice to the Company) or by making cash payments to be credited to his
or her account under the Plan in accordance with Section 6 hereof.
(c) The option price per Share subject to an offering shall
be 85% of the Fair Market Value of a Share on (i) the Offering Date or (ii) the
Exercise Date, whichever is lower.
6. PAYROLL DEDUCTIONS AND CASH PAYMENTS.
(a) Subject to Section 5(b) hereof, a Participant may, in
accordance with rules and procedures adopted by the Committee, authorize a
payroll deduction of any whole percentage from 1% to 15% of such Participant's
Compensation each pay period (the permissible range within such percentages to
be determined by the Committee
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from time to time). A Participant may increase or decrease such payroll
deduction (including a cessation of payroll deductions) at any time but not more
frequently than once each Offering Period, by filing a new authorization form
with his or her Employer. All payroll deductions made by a Participant shall be
credited to such Participant's account under the Plan.
(b) 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 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 9 hereof.
(c) A Participant may withdraw from the Plan as provided in
Section 9, which will terminate his or her payroll deductions for the Purchase
Period in which such withdrawal occurs. A Participant may increase or decrease
the rate of his or her payroll deductions during an Offering Period by
completing and filing with the Employer a new subscription agreement authorizing
a change in payroll deduction rate. The Committee may, in its discretion, limit
the number of rate changes by a Participant during an Offering Period. A change
in rate shall be effective as of the next payroll period following the date of
filing of the new subscription agreement.
7. EXERCISE OF OPTION.
(a) Unless a Participant withdraws from the Plan as provided
in Section 9 hereof, or unless the Committee otherwise provides, such
Participant's election to purchase Shares shall be exercised automatically on
the Exercise Date, and the maximum number of Shares (including any fractional
Share) subject to such option will be purchased for such Participant at the
applicable option price with (i) the accumulated payroll deductions, (ii) cash
dividends paid on Shares which have been credited to the Participant's account
under the Plan pursuant to Section 10 hereof, and (iii) any additional cash
payments made by the Participant and credited to the Participant's account under
the Plan in accordance with Section 6 hereof.
(b) Any cash balance remaining in a Participant's account
after the termination of an Offering Period will be carried forward to the
Participant's account for
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the purchase of Shares during the next Offering Period if the Participant has
elected to continue to participate in the Plan. Otherwise the Participant will
receive a cash payment equal to the cash balance of his or her account.
(c) The Shares purchased upon exercise of an option
hereunder shall be credited to the Participant's account under the Plan as of
the Exercise Date and shall be deemed to be transferred to the Participant on
such date (except that no Shares purchased during the first Offering Period
hereunder shall be credited to the Participant's account until payment of the
aggregate option price has been completed within the Offering Period). Except
as otherwise provided herein, the Participant shall have all rights of a
shareholder with respect to such Shares upon their being credited to the
Participant's account.
8. DELIVERY OF SHARES.
(a) As promptly as practicable after receipt by the Company
of a written request for withdrawal of Shares from any Participant, the Company
shall arrange the delivery to such Participant of a share certificate
representing the Shares in the Participant's account which the Participant
requests to withdraw (any fractional Share being paid in cash). Subject to
Section 8(b) hereof, withdrawals may be made no more frequently than once each
Offering Period. Shares received upon share dividends or share splits shall be
treated as having been purchased on the Exercise Date of the Shares to which
they relate.
(b) Notwithstanding anything in Section 8(a) hereof to the
contrary, Shares may be withdrawn by a Participant more than once during an
Offering Period under the following circumstances: (i) within 60 days following
a Change in Control of the Company or (ii) upon the approval of the Committee,
in its sole discretion.
9. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A Participant may withdraw at any time all, but not less
than all, cash amounts in his or her account under the Plan that have not been
used to purchase Shares (including, without limitation, the payroll deductions,
cash dividends and cash payments credited to such Participant's account) by
giving written notice to the Company prior to the next occurring Exercise Date.
All such payroll deductions, cash dividends and cash payments credited to such
Participant's account shall be paid to such Participant
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<PAGE>
promptly after receipt of such Participant's notice of withdrawal and such
Participant's option for the Offering Period in which the withdrawal occurs
shall be automatically terminated. No further payroll deductions for the
purchase of Shares will be made for such Participant during such Offering
Period, and any additional cash dividends during the Offering Period shall be
distributed to the Participant.
(b) Upon termination of a Participant's Continuous Status as
an Employee during the Offering Period for any reason, including voluntary
termination, retirement or death, the payroll deductions, cash dividends and
cash payments credited to such Participant's account that have not been used to
purchase Shares (and, as to the first Offering Period, any such amounts credited
to the account for partial payment for Shares as to which payment has not been
completed) shall be returned (and any future cash dividends shall be
distributed) to such Participant or, in the case of such Participant's death, to
the person or persons entitled thereto under Section 13 hereof, and such
Participant's option will be automatically terminated.
(c) A Participant's withdrawal from an offering will not
have any effect upon such Participant's eligibility to participate in a
succeeding offering or in any similar plan which may hereafter be adopted by the
Company.
10. DIVIDENDS AND INTEREST.
(a) Cash dividends paid on Shares held in a Participant's
account shall be credited to such Participant's account and used in addition to
payroll deductions (and cash contributions, if any) to purchase Shares on the
Exercise Date. Dividends paid in Shares or share splits of the Shares shall be
credited to the accounts of Participants. Dividends paid in property other than
cash or Shares shall be distributed to Participants as soon as practicable.
(b) No interest shall accrue on or be payable with respect
to the payroll deductions or credited cash dividends of a Participant in the
Plan.
11. SHARES.
(a) Subject to adjustment as provided in Section 17 hereof,
the maximum number of Shares which shall be reserved for sale under the Plan
shall be 350,000 Shares, plus an annual increase to be added on the first day of
the Company's
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<PAGE>
fiscal year beginning in 2001 equal to the lesser of (i) 500,000 Shares, (ii) 2%
of the outstanding Shares on such date or (iii) a lesser amount determined by
the Committee. Such Shares shall be either authorized and unissued Shares or
Shares which have been reacquired by the Company. If the total number of Shares
which would otherwise be subject to options granted pursuant to Section 5(a)
hereof on an Offering Date exceeds the number of Shares then available under the
Plan (after deduction of all Shares for which options have been exercised or are
then outstanding), the Committee shall make a pro rata allocation of the Shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Committee shall give written notice to each Participant of such reduction of the
number of option Shares affected thereby and shall similarly reduce the rate of
payroll deductions, if necessary.
(b) Shares to be delivered to a Participant under the Plan
will be registered in the name of the Participant or, at the election of the
Participant, in the name of the Participant and another person as joint tenants
with rights of survivorship.
12. ADMINISTRATION. The Plan shall be administered by the
Committee, and the Committee may select administrator(s) to whom its duties
and responsibilities hereunder may be delegated. The Committee shall have full
power and authority, subject to the provisions of the Plan, to promulgate such
rules and regulations as it deems necessary for the proper administration of
the Plan, to interpret the provisions and supervise the administration of the
Plan, and to take all action in connection therewith or in relation thereto as
it deems necessary or advisable. Any decision reduced to writing and signed by a
majority of the members of the Committee shall be fully effective as if it had
been made at a meeting duly held. Except as otherwise provided by the Committee,
each Employer shall be charged with all expenses incurred in the administration
of the Plan with respect to such Employer's Employees. No member of the
Committee shall be personally liable for any action, determination, or
interpretation made in good faith with respect to the Plan, and all members of
the Committee shall be fully indemnified by the Company with respect to any such
action, determination or interpretation. All decisions, determinations and
interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
13. DESIGNATION OF BENEFICIARY.
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(a) A Participant may file with the Company, on forms
supplied by the Company, a written designation of a beneficiary who is to
receive any Shares and cash remaining in such Participant's account under the
Plan in the event of the Participant's death.
(b) Such designation of beneficiary may be changed by the
Participant at any time by written notice to the Company, on forms supplied by
the Company. 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 in
accordance with the applicable laws of descent and distribution, or if no
spouse, dependent or relative is known to the Company, then to such other person
as the Company may designate.
14. TRANSFERABILITY. Neither payroll deductions, dividends,
dividend reinvestments or cash payments 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 by the Participant (other than by will, the laws of descent and distribution
or as provided in Section 13 hereof). 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 in accordance with Section 9
hereof.
15. USE OF FUNDS. All payroll deductions, dividends, reinvested
dividends and additional cash payments 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 funds.
16. REPORTS. Individual accounts will be maintained for each
Participant in the Plan. Statements of account will be given to Participants as
soon as practicable following each Offering Period, which statements will set
forth the amounts of payroll deductions, dividends, dividend reinvestments and
additional cash payments, the per Share purchase price, the number of Shares
purchased, the aggregate Shares in the Participant's account and the remaining
cash balance, if any.
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17. EFFECT OF CERTAIN CHANGES. In the event of a Change in
Capitalization or the distribution of an extraordinary dividend, the Committee
shall conclusively determine the appropriate equitable adjustments, if any, to
be made under the Plan, including without limitation adjustments to the number
of Shares which have been authorized for issuance under the Plan but have not
yet been placed under option, as well as the price per Share covered by each
option under the Plan which has not yet been exercised. In the event of a Change
in Control of the Company, the Offering Period shall terminate unless otherwise
provided by the Committee.
18. TERM OF PLAN. Subject to the Board's right to discontinue the
Plan (and thereby end its Term) pursuant to Section 19 hereof, the Term of the
Plan (and its last Offering Period) shall end on the tenth anniversary of the
commencement of the first Offering Period. Upon any discontinuance of the Plan,
unless the Committee shall determine otherwise, any assets remaining in the
Participants' accounts under the Plan shall be delivered to the respective
Participant (or the Participant's legal representative) as soon as practicable.
19. AMENDMENT TO AND DISCONTINUANCE OF PLAN. The Board may at
any time amend, suspend or discontinue the Plan. Except as provided in Section
17 hereof, no such suspension or discontinuance may adversely affect options
previously granted and no amendment may make any change in any option
theretofore granted which adversely affects the rights of any Participant which
accrued prior to the date of effectiveness of such amendment without the consent
of such Participant. No amendment shall be effective unless it receives the
requisite approval of the shareholders of the Company if such shareholder
approval of such amendment is required to comply with Rule 16b-3 under the
Exchange Act or Section 423 of the Code or to comply with any other applicable
law, regulation or stock exchange rule.
20. 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.
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<PAGE>
21. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Delaware without giving effect to the choice of law principles thereof,
except to the extent that such law is preempted by federal law.
(b) The obligation of the Company to sell or deliver Shares
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(c) To the extent applicable hereto, the Plan is intended to
comply with Rule 16b-3 under the Exchange Act, and the Committee shall interpret
and administer the provisions of the Plan in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
22. WITHHOLDING OF TAXES. If the Participant makes a disposition,
within the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to such Participant pursuant to such
Participant's exercise of an option, and such disposition occurs within the
two-year period commencing on the day after the Offering Date or within the
one-year period commencing on the day after the Exercise Date, such Participant
shall, within ten days of such disposition, notify the Company thereof and
thereafter immediately deliver to the Company any amount of Federal, state or
local income taxes and other amounts which the Company informs the Participant
the Company is required to withhold.
23. EFFECTIVE DATE. The Plan shall be effective as of the date of
the completion of the initial public offering of the Shares, subject to the
approval of the Plan by the shareholders of the Company within twelve months
before or after the date the Plan is adopted.
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CYBER DIALOGUE INC.
MANAGEMENT INCENTIVE PLAN
1. PURPOSE.
The purpose of the Cyber Dialogue Inc. Management Incentive Plan
is to reinforce corporate, organizational and business-development goals; to
promote the achievement of year-to-year and long-range financial and other
business objectives; and to reward the performance of individual officers and
other key employees in fulfilling their personal responsibilities for long-range
achievements.
2. DEFINITIONS.
The following terms, as used herein, shall have the following
meanings:
(a) "Affiliate" shall mean any entity, whether now or hereafter
existing, that controls, is controlled by, or is under common
control with, the Company (including, but not limited to, joint
ventures, limited liability companies, and partnerships). For
this purpose, "control" shall mean ownership of 50% or more of
the voting power of the entity.
(b) "Annual Base Salary" shall mean the base salary paid to a
Participant during any Performance Period.
(c) "Award" shall mean an annual incentive compensation award,
granted pursuant to the Plan, which is contingent upon the
attainment of Performance Goals with respect to a Performance
Period.
(d) "Award Agreement" shall mean any written agreement, contract, or
other instrument or document between the Company and a
Participant evidencing an Award.
(e) "Board" shall mean the Board of Directors of the Company.
<PAGE>
(f) "Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following clauses shall have
occurred: (i) any Person is or becomes the "Beneficial Owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company) representing 35% or more of
the voting power of the Company's then outstanding securities,
excluding any one or group of more than one of the Wand Entities
or any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (1) of clause (iii) below;
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals
who, on the Effective Date, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the Effective Date or whose
appointment, election or nomination for election was previously
so approved or recommended; (iii) there is consummated a merger
or consolidation of the Company with any other corporation other
than (1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior to
such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at
least 50% of the combined voting power of the voting securities
of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person other than any one or group of more than one of the
Wand Entities is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company) representing 35% or more of
the combined voting power of the Company's then outstanding
securities; or (iv) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or
there is consummated an agreement for the sale or disposition by
the Company of all or substantially all of the Company's
assets other than a sale or disposition by the Company of all
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or substantially all of the Company's assets to an entity at
least 50% of the combined voting power of the voting
securities of which are owned by Persons in substantially the
same proportions as their ownership of the Company immediately
prior to such sale.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Committee" shall mean the Compensation Committee of the Board.
(i) "Common Stock" shall mean shares of common stock, par value $.01
per share, of the Company.
(j) "Company" shall mean Cyber Dialogue Inc. and its successors.
(k) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Executive Officer" shall mean those employees of the Company who
are its executive officers for purposes of Section 16 of the
Exchange Act.
(n) "Participant" shall mean an officer or other key employee of the
Company who is, pursuant to Section 4 of the Plan, selected to
participate herein.
(o) "Performance Goals" shall mean performance goals determined by
the Committee in its sole discretion. Such goals may be based on
one or more or none of the following criteria: (i) pre-tax income
or after-tax income, (ii) operating profit, (iii) return on
equity, assets, capital or investment, (iv) earnings or book
value per share, (v) sales or revenues, (vi) operating expenses,
(vii) Common Stock price appreciation; (viii) implementation or
completion of critical projects or processes; (ix) comparison of
actual performance during a performance period against budget for
such period; (x) growth of revenue, which growth may be expressed
in terms of absolute numbers and/or as a percentage increase; or
(xi) reductions in expenses, which reductions may be expressed
in terms of absolute numbers and/or as a percentage decrease;
provided that with respect to clauses (x) and (xi), such
achievement may be measured against budget for the same
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the same period. Where applicable, the Performance Goals may be
expressed in terms of attaining a specified level of the
particular criteria or the attainment of a percentage increase
or decrease in the particular criteria, and may be applied to one
or more of the Company, a Subsidiary or Affiliate, or a division
or strategic business unit of the Company, or may be applied to
the performance of the Company relative to a market index, a
group of other companies or a combination thereof, all as
determined by the Committee. The Performance Goals may include a
threshold level of performance below which no vesting will
occur, levels of performance at which specified vesting will
occur, and a maximum level of performance at which full vesting
will occur. Each of the foregoing Performance Goals shall be
determined in accordance with generally accepted accounting
principles and shall be subject to certification by the
Committee; PROVIDED, HOWEVER, that the Committee shall have the
authority to make equitable adjustments to the Performance Goals
in recognition of unusual or non-recurring events affecting the
Company or any Subsidiary or Affiliate or the financial
statements of the Company or any Subsidiary or Affiliate in
response to changes in applicable laws or regulations, or to
account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or
related to the disposal of a segment of a business or related to
a change in accounting principles.
(p) "Performance Period" shall mean the Company's fiscal year.
(q) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include: (i) the Company
or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its Affiliates; (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
(r) "Plan" shall mean the Cyber Dialogue Inc. Management Incentive
Plan, as amended from time to time.
(s) "Subsidiary" and "Subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the
meaning of the definition of "subsidiary corporation"
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provided in Section 424(f) of the Code, or any successor thereto
of similar import.
(t) "Wand Entities" shall mean collectively Wand/Yankelovich
Investments LP, Wand Equity Portfolio II LP, Wand Partners LP,
Yankelovich Holdings Inc., Wand Partners (S.C.) Inc. and Wand
Affiliates Fund, LP.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee
shall have the authority in its sole discretion, subject to and not inconsistent
with the express provisions of the Plan, to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the Plan
or necessary or advisable in the administration of the Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the terms,
conditions, restrictions and performance criteria, including Performance Goals,
relating to any Award; to determine whether, to what extent, and under what
circumstances an Award may be settled, cancelled, forfeited, or surrendered; to
make adjustments in the Performance Goals in recognition of unusual or
non-recurring events affecting the Company or the financial statements of the
Company, or in response to changes in applicable laws, regulations, or
accounting principles; to construe and interpret the Plan and any Award; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of Award Agreements; and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The Committee shall consist of two or more persons, each of whom
shall be an "outside director" within the meaning of Section 162(m) of the Code.
The Committee may appoint a chairperson and a secretary and may make such rules
and regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. All determinations of the Committee shall be
made by a majority of its members either present in person or participating by
conference telephone at a meeting or by written consent. The Committee may
delegate to one or more of its members or to one or more agents such
administrative duties as it may deem advisable, and the Committee or any person
to whom it has delegated duties as aforesaid may employ one or more persons to
render advice with respect to any responsibility the Committee or such person
may have under the Plan. All decisions, determinations and interpretations of
the Committee shall be final and binding on all persons, including the Company,
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<PAGE>
the Participant (or any person claiming any rights under the Plan from or
through any Participant) and any shareholder.
No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or any
Award granted hereunder.
4. ELIGIBILITY.
Awards may be granted to officers and other key employees of the
Company selected by the Committee in its sole discretion. Subject to Section
5(b) below, in determining the persons to whom Awards shall be granted and the
Performance Goals relating to each Award, the Committee shall take into account
such factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan.
5. TERMS OF AWARDS.
Awards granted pursuant to the Plan shall be evidenced by an
Award Agreement in such form as the Committee shall from time to time approve.
(a) IN GENERAL. The Committee shall specify with respect to a
Performance Period the Performance Goals applicable to each Award and minimum,
target and maximum levels applicable to each Performance Goal. The minimum level
reflects the level of performance at which 80% of the performance goal is
achieved and below which no payment shall be made; the target level reflects the
level of performance at which 100% of the Performance Goal is achieved; and the
maximum level reflects the level of performance at which 150% of the Performance
Goal is achieved. Awards for any Performance Period may be expressed as a dollar
amount or as a percentage of the Participant's Annual Base Salary. Unless
otherwise provided by the Committee in connection with specified terminations of
employment, or except as set forth in Section 6(f) hereof, payment in respect of
Awards shall be made only if and to the extent the Performance Goals with
respect to such Performance Period are attained.
(b) SPECIAL PROVISIONS REGARDING AWARDS. Notwithstanding
anything to the contrary contained in this Section 5, in no event shall payment
in respect of Awards granted for a Performance Period be made to a Participant
who is a Covered Employee in an amount that exceeds 150% of such Participant's
Annual Base Salary.
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<PAGE>
(c) TIME AND FORM OF PAYMENT. Unless otherwise determined by the
Committee, all payments in respect of Awards granted under this Plan shall be
made, in cash, within a reasonable period after the end of the Performance
Period; PROVIDED, HOWEVER, that in order to receive such payment, a Participant
must be employed by the Company or one of its affiliates on the day such payment
is to be made. In addition, in the case of Participants who are Covered
Employees, unless otherwise determined by the Committee, such payments shall be
made only after achievement of the Performance Goals has been certified by the
Committee.
6. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan and the
granting and payment of Awards, and the other obligations of the Company under
the Plan and any Award Agreement or other agreement shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required.
(b) NONTRANSFERABILITY. Awards shall not be transferable by a
Participant except by will or the laws of descent and distribution.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in
any Award granted or any Award Agreement or other agreement entered into
pursuant hereto shall confer upon any Participant the right to continue in the
employ of the Company or to be entitled to any remuneration or benefits not set
forth in the Plan or such Award Agreement or other agreement or to interfere
with or limit in any way the right of the Company to terminate such
Participant's employment.
(d) WITHHOLDING TAXES. The Company shall have the right to
withhold the amount of any taxes that the Company may be required to withhold
before delivery of payment of an Award to the Participant or other person
entitled to such payment, or to make such other arrangements for the withholding
of taxes that the Company deems satisfactory.
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<PAGE>
(e) AMENDMENT, TERMINATION AND DURATION OF THE PLAN. The Board
or the Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; PROVIDED, HOWEVER, that, no amendment
that requires share holder approval in order for the Plan to continue to comply
with Code Section 162(m) shall be effective unless the same shall be approved by
the requisite vote of the share holders of the Company. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of any
Participant, without such Participant's consent, under any Award theretofore
granted under the Plan.
(f) PARTICIPANT RIGHTS. No Participant shall have any claim to
be granted any Award under the Plan, and there is no obligation for uniformity
of treatment among Participants.
(g) UNFUNDED STATUS OF AWARDS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company.
(h) SUCCESSOR TO THE COMPANY. Any successor to the Company
shall be required to (i) expressly assume the Company's obligations under the
Plan in connection with a Change in Control and (ii) honor the Company's
obligations under the Plan and any Award granted thereunder, without adverse
alteration to the rights of any Participant, with respect to the Performance
Period during which such Change in Control occurs.
(i) GOVERNING LAW. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles thereof.
(j) BENEFICIARY. A Participant may file with the Committee a
written designation of a beneficiary on such form as may be prescribed by the
Committee and may, from time to time, amend or revoke such designation. If no
designated beneficiary survives the Participant, the executor or administrator
of the Participant's estate shall be deemed to be the grantee's beneficiary.
(k) INTERPRETATION. The Plan is designed and intended to comply,
to the extent applicable, with Section 162(m) of the Code, and all provisions
hereof shall be construed in a manner to so comply.
(l) EFFECTIVE DATE. The Plan shall take effect upon its adoption
by the Board.
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<PAGE>
MANAGEMENT SERVICES AGREEMENT
MANAGEMENT SERVICES AGREEMENT, dated as of February 16, 2000 (the
"Agreement"), between CYBER DIALOGUE INC., a Delaware corporation (the
"Company"), and WAND PARTNERS INC., a Delaware corporation ("Wand"):
WHEREAS certain limited partnerships and a corporation affiliated with
Wand own, in the aggregate, a majority of the outstanding shares of common
stock, par value $.01 per share, of the Company; and
WHEREAS the Company and such partnerships and corporation have
requested that Wand provide certain financial and management advisory services
in connection with the business and operations of the Company;
NOW, THEREFORE, in consideration of the services to be rendered by Wand
to the Company and to evidence the obligations of the Company to Wand and the
mutual covenants contained herein, the parties hereby agree as follows:
1. ENGAGEMENT OF WAND. Wand will provide financial and management
advisory services to the Company and its subsidiaries as requested by the
Company's Board of Directors during the term of this Agreement.
2. TERM. The initial term of this Agreement shall begin on the date
hereof and end on the third anniversary of the date hereof. The term of this
Agreement shall be renewed automatically thereafter for subsequent one-year
terms, subject to termination by the Company's Board of Directors upon written
notice delivered to Wand at least 60 days prior to any renewal date.
3. COMPENSATION. As compensation for Wand's services pursuant to
Section 1, the Company shall pay Wand a fee (the "Fee") of $200,000.00 per
fiscal year, payable in four equal installments due on March 31, June 30,
September 30 and December 31 of each year. On each anniversary of the date of
this Agreement during the term hereof, the amount of the Fee for the next
succeeding year shall be reviewed by and may be adjusted in the discretion of
the Company's Board of Directors.
4. REIMBURSEMENT OF EXPENSES; CHIEF EXECUTIVE OFFICER. In addition to
the compensation to be paid pursuant to Section 3 hereof, the Company agrees to
<PAGE>
reimburse Wand promptly for all reasonable out-of-pocket expenses (including,
without limitation, all reasonable attorneys' fees and expenses) incurred by
Wand in connection with the performance by it of the services contemplated by
Section 1 hereof. In addition, for so long as the Company's Board of Directors
shall desire that Mark Esiri serve as the Company's Chief Executive Officer and
Mark Esiri is employed by Wand and agrees to serve as the Company's Chief
Executive Officer, his compensation shall be paid by Wand, and the Company
agrees to reimburse Wand promptly for such expense; PROVIDED, HOWEVER, that the
Company shall not reimburse Wand for compensation paid by Wand to Mr. Esiri in
excess of such amounts approved by the Company's Board of Directors.
5. INDEMNIFICATION. The Company hereby agrees to indemnify Wand and
certain related persons and entities as provided in EXHIBIT A attached hereto
and incorporated herein. The indemnity provisions contained in EXHIBIT A shall
remain operative and in full force and effect notwithstanding termination of
this Agreement.
6. CONFIDENTIAL INFORMATION. Wand shall, and shall cause its
subsidiaries and affiliates and the officers, directors, employees, and agents
of each of the foregoing to hold confidential and not to use in any manner
detrimental to the Company all information it may have or obtain concerning the
Company and its assets, business, operations, and prospects; PROVIDED, HOWEVER,
that the foregoing shall not apply to (a) information that is or becomes
generally available to the public other than as a result of a disclosure by Wand
or any of its subsidiaries or affiliates and the officers, directors, employees,
legal counsel, or other representatives of any of the foregoing, (b) information
that is or becomes available to Wand or any of its officers, directors,
employees, legal counsel, or other representatives on a nonconfidential basis
prior to its disclosure by the Company or its employees, agents, accountants,
legal counsel, or other representatives, and (c) information that is required to
be disclosed by Wand or its officers, directors, employees, and agents as a
result of any applicable law, rule, or regulation of any governmental authority
or stock exchange.
7. GOVERNING LAW. This Agreement shall be construed, interpreted, and
enforced in accordance with the laws of the State of Delaware, excluding any
conflicts-of-laws provisions thereof.
8. ASSIGNMENT. This Agreement and all provisions contained herein shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any
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of the rights, interests, or obligations hereunder shall be assigned by any of
the parties without the prior written consent of the other party.
9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
10. AMENDMENT, MODIFICATION OR WAIVER. This Agreement may be amended,
modified or waived only by an instrument in writing signed by all the parties
hereto.
11. NOT A RETAINER. The Fee paid to Wand pursuant to this Agreement is
for general advice and monitoring services only. Any additional services
requested to be provided by Wand to the Company, including, but not limited to,
merchant banking services and financial advice with respect to a specific
transaction will be provided by Wand in exchange for additional fees pursuant to
agreements to be negotiated on an arm's length basis among the parties at or
prior to the time such services or advice is required.
12. OTHER UNDERSTANDINGS. All discussions, understanding, and
agreements heretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the Company and Wand have executed and delivered
this Agreement as of the date first above written.
CYBER DIALOGUE INC.
By: /s/ Andrew Watt
------------------------
Name: Andrew Watt
Title: Chief Operating Officer and
Chief Financial Officer
WAND PARTNERS INC.
By: /s/ David J. Callard
------------------------
Name: David J. Callard
Title: President
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<PAGE>
EXHIBIT A
The Company and its successors (collectively, the "Indemnitor"), hereby
agrees to indemnify and hold harmless Wand, its affiliates and stockholders, and
their respective directors, officers, agents, employees, and affiliates
(collectively, the "Wand Group") from and against any claims, actions,
proceedings, demands, liabilities, damages, judgments, assessments, losses, and
costs, including fees and expenses, arising out of or in connection with the
services rendered by Wand under this Agreement, and will reimburse the Wand
Group for all such fees and expenses, including reasonable fees and expenses of
counsel for the Wand Group, as they are incurred by the Wand Group in connection
with investigating, preparing, or defending any such claims, actions,
proceedings, demands, or assessments, whether or not in connection with any
pending or threatened investigation, litigation, or other proceeding in which
the Wand Group is a party. The Indemnitor will not, however, be responsible for
any claims, liabilities, losses, damages, or expenses that have been reimbursed
under other agreements or that are determined by final judgment of a court of
competent jurisdiction to have resulted primarily from the Wand Group's gross
negligence, bad faith, or willful breach of its obligations under this
Agreement. The Indemnitor also agrees that the Wand Group shall have no
liability for claims, liabilities, damages, losses, or expenses, including legal
fees, incurred by the Indemnitor unless they are determined by final judgment of
a court of competent jurisdiction to result primarily from the Wand Group's
gross negligence, bad faith, or willful breach of its obligations under this
Agreement.
In case any action shall be brought against the Wand Group with respect
to which indemnification may be sought against the Indemnitor under this
Agreement, the Wand Group shall promptly notify the Indemnitor in writing, and
the Indemnitor shall, if requested by Wand, assume the defense thereof,
including the employment of counsel and payment of all fees and expenses. The
Wand Group shall have the right to employ separate counsel in such action and
participate in the defense thereof, but the fees and expenses of such separate
counsel shall be at the expense of the Wand Group, unless (i) the Indemnitor
shall have failed to assume the defense and employ counsel or (ii) the named
parties to any such action (including any impleaded parties) included the Wand
Group and any of the Indemnitor, and the Wand Group shall have been advised by
such separate counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor;
PROVIDED, HOWEVER, that the Indemnitor shall not in such event be responsible
hereunder for the fees and expenses of more than one such firm of
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separate counsel, in addition to any local counsel. The Indemnitor shall not be
liable for any settlement of any such action effected without the written
consent of the Indemnitor (which shall not be unreasonably withheld) and, except
as provided above, the Indemnitor agrees to indemnify and hold harmless the Wand
Group from and against any loss or liability by reason of settlement of any
action effected with the consent of the Indemnitor.
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<PAGE>
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT, dated as of
April 4, 2000 (the "Effective Date"), by and between Cyber Dialogue, Inc.
(together with its subsidiaries, the "Company") and Mark Esiri ("Esiri").
WHEREAS, Esiri is an employee of Wand Partners Inc. ("Wand");
and
WHEREAS, the Company and Wand have entered into a Management
Services Agreement dated as of February 16, 2000 (the "Management Services
Agreement"), pursuant to which Esiri will serve as Chief Executive Officer
and/or President of the Company (the "Executive Position"), Esiri's compensation
for such services will be paid by Wand and the Company agrees to reimburse Wand
promptly for such expense; and
WHEREAS, concurrently with entering into this Confidentiality
and Non-Competition Agreement, the Company has granted to Esiri an option under
the Company's Amended and Restated 2000 Stock Incentive Plan to purchase 200,000
shares of Company common stock (the "Stock Option Grant"), at an exercise price
equal to the initial public offering price of the common stock; and
WHEREAS, the execution, delivery and performance of this Confi
dentiality and Non-Competition Agreement by Esiri is a material inducement to
the Company and Wand to enter into the Management Services Agreement and a
material inducement to the Company to make the Stock Option Grant.
NOW THEREFORE, in consideration of the foregoing and of the
mutual promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. NON-COMPETITION; NON-SOLICITATION.
(a) During the period beginning on the Effective Date and
continuing while Esiri is serving in the Executive Position and for one (1) year
following the termination of Esiri from the Executive Position for any reason
whatsoever (the "Noncompetition Period"), Esiri will not, in any country or geo
graphical region in which the Company conducts or targets business, engage in
"Competition" with the Company.
<PAGE>
For purposes of this Confidentiality and Non-Competition Agreement, Competition
by Esiri shall mean Esiri's:
(i) engaging in, including without limitation
consulting or start-up activities for Esiri's own account or any third
party, the business of providing or developing outsourced data
management platforms for manag ing customer data for marketing purposes
(such business referred to herein as a "Competing Business"); or
(ii) becoming interested in, or otherwise directly or
indirectly being employed by or acting as a consultant or lender to, or
render any services to, or being a director, officer, employee,
principal, agent, stock holder, manager, member, owner or partner of,
employer of, or permitting his name to be used in connection with the
activities of any Competing Business; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, it shall not be a violation of this
Section 1(a) for Esiri to become the registered or beneficial owner of
up to two percent (2%) of any class of the capital stock of a Com
peting Business registered under the Securities Exchange Act of 1934,
as amended, provided that Esiri does not otherwise participate in the
business of such corporation; and PROVIDED, FURTHER, that, upon the
termination of Esiri from the Executive Position, Esiri may be
employed, act as a consultant and provide other services to any Wand
portfolio company that is not a Compet ing Business; and PROVIDED,
FURTHER, that Esiri's ownership interest in Wand and entities
affiliated with Wand shall not alone constitute a violation of this
Section 1(a).
(b) during the Noncompetition Period, Esiri will not in any
manner, directly or indirectly:
(i) solicit (or cause, or authorize, to be
solicited), divert or otherwise attempt to obtain the business of any
person who is, or has at any time within one year prior to the date of
such action been, a customer, supplier, licensee or business relation
of the Company for any purpose which is competitive with the Company's
business;
(ii) intentionally disturb or attempt to disturb in
any adverse respect any business relationship between any person and
the Company;
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<PAGE>
(iii) solicit from any customer of the Company, or
from any known potential customer of the Company, business which is in
competition with the Company's business as conducted or as proposed to
be conducted prior to Esiri's termination from the Executive Position;
(iv) seek or attempt to persuade, induce or encourage
any director, officer, employee, consultant, advisor or other agent of
the Company to discontinue his or her status or employment therewith or
to become employed or otherwise engaged in a Competing Business; and
(v) solicit or employ, or otherwise hire or engage as
an employee, independent contractor, consultant, advisor or otherwise,
any person who has been employed or otherwise engaged by the Company at
any time within the six (6) month period prior to the date of such
solicitation, employment, hiring or engagement by Esiri.
SECTION 2. CONFIDENTIALITY; INTELLECTUAL PROPERTY; DISCLOSURE.
(a) Except as otherwise provided in this Confidentiality and
Non- Competition Agreement, at all times hereafter, Esiri shall keep secret and
retain in strictest confidence, any and all Confidential Information (as
hereinafter defined) relating to the Company, and shall use such Confidential
Information only in furtherance of the performance by him of his duties in the
Executive Position and not for personal benefit or the benefit of any interest
adverse to the interests of the Company. For purposes of this Confidentiality
and Non-Competition Agreement, "Confidential Information" shall mean any
confidential or proprietary information including, without limitation, plans,
specifications, models, samples, data, customer lists and customer information,
computer programs and documentation, and other technical and/or business
information, in whatever form, tangible or intangible, printed, electronic or
magnetic, that can be communicated by whatever means available at such time,
that relates to the Company's current business or future business contemplated
during the period Esiri serves in the Executive Position, products, services
and/or developments, or information received from others that the Company is
obligated to treat as confidential or proprietary, and Esiri shall not disclose
such Confidential Information to any person other than the Company, except as
may be required by law or court or administrative order (in which event Esiri
shall so notify the Company as promptly as practicable). Upon the termination of
Esiri from the Executive Position for any reason, Esiri shall promptly return to
the Company (in the case of termination
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<PAGE>
by the Company without cause, at the Company's expense) or destroy all copies,
reproductions and summaries of Confidential Information in his possession or
control and erase the same from all media in his possession or control, and, if
the Company so requests, shall certify in writing that he has done so. All
Confidential Information is and shall remain the property of the Company, or in
the case of information that the Company receives from a third party which it is
obligated to treat as confidential, then the property of such third party. For
purposes of this Confidentiality and Non-Competition Agreement, Confidential
Information shall not include information which (i) is or becomes generally
known or available to the public through no intentional wrongdoing, reckless
conduct or gross negligence by Esiri, (ii) is generally disclosed to third
parties by the Company without restriction on such parties (excluding
disclosures by Esiri designed to circumvent this Section 2(a)), (iii) is
approved for release by written authorization of the Chief Financial Officer or
General Counsel of the Company, (iv) is disclosed to Esiri by a third party who
is bound by no obligation of confidentiality to the Com pany and who Esiri has
no reason to believe acquired the information improperly or (v) is independently
developed by Esiri or third parties without the use of Confiden tial
Information. Disclosure of Confidential Information to Wand during the term of
the Management Services Agreement shall not constitute a violation of this
Section 2(a).
(b) All Intellectual Property (as hereinafter defined)
created, developed, co-developed or obtained by Esiri during the period Esiri
serves in the Executive Position, other than Esiri's general knowledge, skills
and experience, and all business opportunities presented to Esiri while he is in
the Executive Position, shall be owned by and belong exclusively to the Company,
provided that they reasonably relate to any of the business of the Company on
the date of such creation, development or obtaining, and Esiri shall (i)
promptly disclose any such Intellectual Property or business opportunity to the
Company, and (ii) promptly execute and deliver to the Company, without
additional compensation, such instruments as the Company may require from time
to time to evidence its ownership of any such Intellectual Property or business
opportunity. For purposes of this Confidentiality and Non-Competition Agreement,
the term "Intellectual Property" means any and all of the following and all
statutory and/or common law rights throughout the world in, arising out of, or
associated therewith: (i) all patents and applications therefor, including
docketed patent disclosures awaiting filing, reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof; (ii)
all inventions (whether patentable or not), inventions disclosures and
improvements, all trade secrets, confidential business information (including
ideas, research and development, know-how, compositions, designs,
specifications, pricing and cost information and business and market
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<PAGE>
plans and proposals), proprietary information, manufacturing, engineering and
technical drawings and specifications, processes, designs and technology; (iii)
all works of authorship, "moral rights," copyrights (including derivative works
thereof), mask works, copyright and mask work registra tions and applications
therefor; (iv) all trade names, trade dress, logos, product names, collective
marks, collective membership marks, trademarks certification marks and service
marks, trademark and service mark registrations and applications together with
the goodwill of the business symbolized by the names and the marks; (v) all data
and related documents, object code, databases, passwords, encryption technology,
firmware, development tools, files, records and data, and all media on which any
of the foregoing is recorded; (vi) any similar, corresponding or equivalent
rights to any of the foregoing; (vii) all documentation related to any of the
foregoing; and (viii) all goodwill associated with any of the foregoing.
SECTION 3. COVENANTS REASONABLE.
Esiri hereby acknowledges that the business of the Company is
highly competitive. Esiri further acknowledges that this Confidentiality and
Non-Competi tion Agreement is being entered into in connection with the
Management Services Agreement and the Stock Option Grant, that his service to
the Company will be of a special and unique character, and that he will continue
to be identified personally with the Company. Esiri also acknowledges that
service in the Executive Position will require that he have access to some of
the Company's most highly confidential business information, trade secrets and
proprietary information. The parties therefore acknowledge that the restrictions
contained in Sections 1 and 2 hereof are a reason able and necessary protection
of the immediate interests of the Company, and any violation of these
restrictions would cause substantial injury to the Company and that the Company
would not have entered into the Management Services Agreement, the Stock Option
Grant and this Confidentiality and Non-Competition Agreement without receiving
the additional consideration offered by Esiri in binding himself to any of these
restrictions.
SECTION 4. GOVERNING LAW; CONSENT TO JURISDICTION; INJUNCTIVE
RELIEF.
This Confidentiality and Non-Competition Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, without regard to its conflict of laws provisions. In the
event of a breach or threatened breach by Esiri of any of these restrictions,
the Company shall be entitled to apply to any court of competent jurisdiction
for an injunction restraining Esiri from such breach or threatened breach;
PROVIDED, HOWEVER, that the right to apply for an injunction shall not be
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<PAGE>
construed as prohibiting the Company from pursuing any other available remedies
for such breach or threatened breach.
SECTION 5. NOTICES.
Unless otherwise provided herein, any notice, exercise of
rights or other communication required or permitted to be given hereunder shall
be in writing and shall be given by overnight delivery service such as Federal
Express, telecopy (or like transmission) or personal delivery against receipt,
or mailed by registered or certified mail (return receipt requested), to the
party to whom it is given at such party's address set forth below such party's
name on the signature page or such other address as such party may hereafter
specify by notice to the other party hereto. Any notice or other communication
shall be deemed to have been given as of the date so personally delivered or
transmitted by telecopy or like transmission or on the next business day when
sent by overnight delivery service.
SECTION 6. AMENDMENT.
This Confidentiality and Non-Competition Agreement may be
amended, modified, superseded or canceled, and the terms and covenants hereof
may be waived, only by a written instrument executed by both of the parties
hereto, or in the case of a waiver, by the party waiving compliance. The failure
of either party at any time or times to require performance of any provision
hereof shall in no manner affect the right at a later time to enforce the same.
SECTION 7. BINDING EFFECT.
This Confidentiality and Non-Competition Agreement is not
assign able by Esiri. This Confidentiality and Non-Competition Agreement shall
be binding upon and inure to the benefit of the Company and any successor
organiza tions which shall succeed to the Company by merger or consolidation or
operation of law or otherwise, or by acquisition of all or substantially all of
the assets of the Company.
SECTION 8. SEVERABILITY.
Esiri acknowledges and agrees that the restrictive covenants
and agreements contained herein are reasonable and valid in geographic and
temporal scope and in
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<PAGE>
all other respects, and do not impose limitations greater than that are
necessary to protect the goodwill, the confidential information and any other
busi ness interests of the Company, or any of its successors or assigns. If,
however, any court subsequently determines that any of such covenants or
agreements, or any part thereof, is invalid or unenforceable, the remainder of
such covenants and agreements shall not thereby be affected and shall be given
full effect without regard to the invalid portions thereof. In addition, if any
court construes any of the Restrictive Covenants, or any part thereof, to be
unenforceable because of the duration of such provision or the area covered
thereby, such court shall have the power to reduce the duration or area of such
provision and, in its reduced form, such provision shall then be enforceable and
shall be enforced.
SECTION 9. EXECUTION IN COUNTERPARTS.
This Confidentiality and Non-Competition Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original and all of which shall constitute one and the same instrument.
SECTION 10. ENTIRE AGREEMENT.
This Confidentiality and Non-Competition Agreement sets forth
the entire agreement, and supersedes all prior agreements and any other
agreement between the parties and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
SECTION 11. TITLES AND HEADINGS.
Titles and headings to Sections herein are for purposes of
reference only, and shall in no way limit, define or otherwise affect the
meaning or interpreta tion of any of the provisions of this Confidentiality and
Non-Competition Agreement.
SECTION 12. CONFLICTS OF INTEREST; REPRESENTATIONS AND
WARRANTIES.
Esiri specifically covenants, warrants and represents to the
Company that he has the full, complete and entire right and authority to enter
into this Confi dentiality and Non-Competition Agreement, that he has no
agreement, duty, commit ment or responsibility or obligation of any kind or
nature whatsoever with any corporation, partnership, firm, company, joint
venture or other person which would conflict in any manner whatsoever
7
<PAGE>
with any of his duties, obligations or responsibili ties to the Company pursuant
to this Confidentiality and Non-Competition Agree ment or which could interfere
with Esiri's performance under this Confidentiality and Non-Competition
Agreement, that he is not in possession of any document or other tangible
property of any other person of a confidential or proprietary nature which would
conflict in any manner whatsoever with any of his duties, obligations or
responsibilities to the Company pursuant to this Confidentiality and Non-Competi
tion Agreement and Esiri's performance of his obligations to the Company will
not breach any agreement by which Esiri is bound not to disclose any proprietary
information, and that he is fully ready, willing and able to perform each and
all of his duties, obligations and responsibilities pursuant to this
Confidentiality and Non- Competition Agreement. It is understood that Esiri's
ownership interest in and/or employment by Wand shall not constitute a violation
of the terms of this Section 12.
IN WITNESS WHEREOF, the undersigned have executed this
Confidentiality and Non-Competition Agreement.
/S/ MARK ESIRI
------------------------------------
Name: Mark Esiri
Address: Cyber Dialogue, Inc.
304 Hudson Street
New York, NY 10013
CYBER DIALOGUE, INC.
By:/S/ ANDREW WATT
---------------------------------
Name: Andrew Watt
Title:Chief Financial Officer,
Executive Vice President and
Treasurer
Address: Cyber Dialogue, Inc.
304 Hudson Street
New York, NY 10013
8
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Cyber Dialogue Limited, a United Kingdom private limited company
Applied Information Management Marketing, Inc., a Delaware corporation
<PAGE>
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 report dated January 14, 2000, with respect to the financial
statements of Cyber Dialogue Inc. included in the Registration Statement
(Form S-1 No. 333-30652) and related Prospectus of Cyber Dialogue Inc. for
the registration of 5,000,000 shares of its common stock.
/s/ Ernst & Young LLP
New York, New York
April 4, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated June 11, 1998, with respect to the financial
statements of Cyber Dialogue Inc. included in the Registration Statement
(Form S-1 No. 333-30652) and related Prospectus of Cyber Dialogue Inc. for
the registration of 5,000,000 shares of its common stock.
/s/ Kamler, Lewis & Noreman LLP
Great Neck, New York
April 4, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 9, 2000, with respect to the financial
statements of Applied Information Management Marketing, Inc. included in the
Registration Statement (Form S-1 No. 333-30652) and related Prospectus of
Cyber Dialogue Inc. for the registration of 5,000,000 shares of its common
stock.
/s/ Ernst & Young LLP
Stamford, Connecticut
April 4, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1999 FINANCIAL INFORMATION OF CYBER DIALOGUE INC.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 7,975 79
<SECURITIES> 0 0
<RECEIVABLES> 2,487 1,085
<ALLOWANCES> (100) (21)
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,887 1,453
<PP&E> 1,794 448
<DEPRECIATION> (420) (104)
<TOTAL-ASSETS> 12,406 1,902
<CURRENT-LIABILITIES> 4,823 2,770
<BONDS> 0 0
0 0
0 0
<COMMON> 191 157
<OTHER-SE> 7,392 (1,025)
<TOTAL-LIABILITY-AND-EQUITY> 7,583 (868)
<SALES> 8,227 3,617
<TOTAL-REVENUES> 8,227 3,617
<CGS> 5,067 2,789
<TOTAL-COSTS> 5,067 2,789
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 79 21
<INTEREST-EXPENSE> (218) (31)
<INCOME-PRETAX> (2,511) (1,479)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,511) (1,479)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,511) (1,479)
<EPS-BASIC> (0.15) (0.10)
<EPS-DILUTED> (0.15) (0.10)
</TABLE>
<PAGE>
Exhibit 99.1
CONSENT OF ABOUT.COM
About.com hereby consents to the description of its use of products of Cyber
Dialogue Inc. substantially in the form attached hereto as EXHIBIT A and
appearing in the Prospectus constituting part of the Registration Statement
on Form S-1 of Cyber Dialogue, Inc. (the "Registration Statement"). About.com
also explicitly waives any restriction on the use of its name and logo in
connection with the Registration Statement.
About.com
By: /s/ John Caplan
--------------------------------
Name:
Title: GM, CMO
<PAGE>
Exhibit A
ABOUT.COM
About.com is a leading network of Web sites comprising 650 interest
categories, each overseen by a professional guide. In 1999, in order to
better understand the attitudes and behaviors of their visitors, they became
an Internet Strategies Group subscriber and also licensed our Arc 360
platform. By cleaning and analyzing About.com's very large databases of
visitor information (including site usage patterns, site perceptions,
e-commerce potential and demographics) we were able to identify About.com's
most valuable visitors, and recommend personalization and e-commerce
initiatives to increase visitor retention, loyalty and revenue.
<PAGE>
Exhibit 99.2
CONSENT OF [Company]
[Company] hereby consents to the description of its use of products of Cyber
Dialogue Inc. substantially in the form attached hereto as EXHIBIT A and
appearing in the Prospectus constituting part of the Registration Statement
on Form S-1 of Cyber Dialogue, Inc. (the "Registration Statement"). [Company]
also explicitly waives any restriction on the use of its name and logo in
connection with the Registration Statement.
[Company] AMFM Interactive Inc.
By: /s/ James E. Burton
--------------------------------
Name: James E. Burton
Title: Executive Vice President
<PAGE>
EXHIBIT A
AMFM INTERACTIVE INC.
AMFMi is the consumer Internet subsidiary of AMFM Inc., the largest radio
broadcasting company in the U.S. [as measured by listening audience and
revenue] with a weekly listener base of 65 million. In July 1998, AMFMi asked
us to help develop an Internet strategy that would enhance shareholder value
and extend the radio franchises online. We conducted a data audit and
determined the need for a centralized platform to measure and respond to Web
traffic. We also recommended "sticky" applications and site content
improvements based on survey data and consumer research. In conjunction with
AMFMi, we are now actively building and managing the company's online
customer relationships through data analysis, targeted offers, e-mail
campaigns and decision support. We are currently integrating Arc 360 with
user databases and content management systems designed to scale across more
than 440 station Web sites. Site traffic has been growing across AMFMi sites,
driven by site re-designs based on data mining, reporting and e-mail
campaigns.
<PAGE>
Exhibit 99.3
CONSENT OF ENTERTAINDOM
[Company] hereby consents to the description of its use of products of Cyber
Dialogue Inc. substantially in the form attached hereto as EXHIBIT A and
appearing in the Prospectus constituting part of the Registration Statement
on Form S-1 of Cyber Dialogue, Inc. (the "Registration Statement"). [Company]
also explicitly waives any restriction on the use of its name and logo in
connection with the Registration Statement.
Entertaindom
By: /s/ John Moloshuk
--------------------------------
Name:
Title: CEO & President
<PAGE>
EXHIBIT A
Warner Bros. Online.
Warner Bros. Online is an Internet subsidiary of Time Warner. Time Warner has
been an Internet Strategies Group subscriber since 1996. In 1999, Warner Bros.
Online licensed Arc 360 to track and analyze representative samples of Warner
Bros. Online visitors across 340 product and behavioral categories. The
resulting data, which the client can query using the Arc 360 reporting tool,
provided Warner Bros. Online with specific information about visitors to
several sites within its network. This enabled Warner Bros. management to
significantly increase the effectiveness of its advertising sales efforts. We
are now expanding our analysis to include Time Warner's Entertaindom portal
and Acme City community site.
<PAGE>
Exhibit 99.4
CONSENT OF NETSCAPE COMMUNICATIONS CORPORATION
NETSCAPE COMMUNICATIONS CORPORATION ("Netscape") hereby consents to the
description of its use of services of Cyber Dialogue Inc. substantially in
the form attached hereto as EXHIBIT A and appearing in the Prospectus
constituting part of the Registration Statement on Form S-1 of Cyber
Dialogue Inc. (the "Registration Statement").
Netscape Communications Corporation
By: /s/ Sheila A. Clark
---------------------------------
Name: Sheila A. Clark
Title: Vice President
<PAGE>
EXHIBIT A
NETSCAPE
Netscape launched the first widely installed Web browser software and is now
part of America Online. Netscape has been an Internet Strategies Group
subscriber since March 1997. In 1999, Netscape asked us to analyze the
Netcenter portal visitor databases to uncover insights that would enable them
to improve traffic retention and identify new revenue opportunities. By
analyzing Netcenter's registration and behavioral data, we were able to build
predictive models that enabled Netcenter to identify and target their most
valuable site visitors. The resulting e-mail campaigns led to an increase in
site traffic, software downloads and campaign responses, and ultimately worked
to strengthen customer relationships and site loyalty. Since completion of
this project, Netscape has asked Cyber Dialogue to assist with visitor
retention, and to measure for a year how users adopt Netcenter services.
