<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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
TITLE OF EACH CLASS AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $0.01 per share..................... $75,000,000 $19,800
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933.
------------------------------
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 FEBRUARY 17, 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
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 $ and
$ per share.
We intend to apply for quotation 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 shares of
common stock from us to cover over-allotments.
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
----------------------
SG COWEN BANC OF AMERICA SECURITIES LLC
ING BARINGS
, 2000
<PAGE>
[INSIDE FRONT COVER ART DESCRIPTION]
[CYBER DIALOGUE LOGO]
Title: "Customer Relationships through Digital Media"
Graphic: Person's head (digitized) inside circle.
Text: Under circle: "MEET CUSTOMERS"; and "WEB SITE".
Graphic: Below text, arrow pointing down to circle with the profile of a
person's head (digitized) inside.
Text: Under circle: "REMEMBER CUSTOMERS"; and "DATABASE".
Graphic: Below text, three arrows in a circular motion.
Two circles below text; circle on the right is a profile of a person's head
(digitized).
Text: Under right circle: "UNDERSTAND CUSTOMERS"; and "DATA MINING".
Graphic: Circle on the left with a person's head (digitized) inside.
Text: Under left circle: "VALUE CUSTOMERS"; and "CAMPAIGN MANAGEMENT".
<PAGE>
[TWO PAGE FOLD-OUT FOLLOWING INSIDE FRONT COVER DESCRIPTION]
Graphic: Line across the page with an arrow pointing to the right.
Text: Above line are headings entitled "COLLECT"; "CLEAN & STORE";
"ANALYZE"; "DECISION SUPPORT"; and "TARGETED ACTION".
Graphic: Overlapping pictures of pages from web sites of "AMFM", "Netscape",
"About.com", "Entertaindom" and "Acme City" as well as a page from Cyber
Dialogue's members' website, online survey forms and a picture of a telephone.
Graphic: Large circle with a person's head (digitized) inside in the middle of
the page followed by 7 circles to the right at various angles each with a
person's head (digitized) inside circle.
Text: Above the 7 circles is text "Arc 360 DEG."; and "Providing each client
with a 360 DEG. view of its customers."
Text: Bottom of page includes 4 text blocks.
Text going from left to right: "Meet Customers: Data is collected from
individual client's Web sites."
Text: "Remember Customers: Collected data is cleaned, integrated with offline
data and efficiently stored in proprietory databases of each client's
customers."
Text: "Understand Customers: Data is analyzed to provide clients with an
understanding of their individual customers."
Text: "Value Customers: Targeted campaigns are executed."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Forward-Looking Statements............ 17
Use of Proceeds....................... 18
Dividend Policy....................... 18
Other Information..................... 18
Capitalization........................ 19
Dilution.............................. 20
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Business.............................. 30
Management............................ 41
Principal Stockholders................ 54
Related Party Transactions............ 56
Description of Capital Stock.......... 59
Shares Eligible for Future Sale....... 65
Underwriting.......................... 67
Legal Matters......................... 69
Experts............................... 69
Where You Can Find More Information... 69
Index to Financial Statements......... F-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH 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.
------------------------
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
BECAUSE THIS IS ONLY A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THE MORE DETAILED
INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING OUR CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES. OUR BUSINESS INVOLVES SIGNIFICANT RISKS. YOU
SHOULD CAREFULLY CONSIDER THE INFORMATION UNDER THE HEADING "RISK FACTORS."
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 hosted technology platform, 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
and improve Web site design and content. We believe that our Internet customer
relationship management solution enables 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 platform 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 portals, 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 Internet-based solution enables our clients to achieve a thorough
understanding of their customers and benefits our clients by helping them to:
- Build customer loyalty and strengthen relationships;
- Identify and acquire more profitable customers;
- Anticipate market opportunities;
- Integrate multiple data sources to gain comprehensive customer insight;
and
- Reduce costs and risks by implementing an outsourced solution.
Our objective is to be the leading provider of Internet customer
relationship management solutions. 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;
3
<PAGE>
- Expand vertical industry expertise; and
- Pursue strategic acquisitions and investments.
In February 2000, we acquired Applied Information Management
Marketing, Inc., which is known as AIM, for a total of $10.3 million in cash and
stock. AIM provides marketing database development and sophisticated analytical
services, including predictive modeling and market segmentation. AIM was a
wholly-owned subsidiary of Yankelovich Holdings Inc. Both Cyber Dialogue and
Yankelovich Holdings are majority owned by entities associated with Wand
Partners Inc.
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. References in this prospectus to "Cyber Dialogue,"
"we," "us," and "our" refer to Cyber Dialogue Inc. and, unless otherwise
indicated, "common stock" refers to the common stock, $0.01 par value per share,
of Cyber Dialogue.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock we are offering............................... shares
Common stock to be outstanding after the offering.......... 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."
Proposed Nasdaq National Market symbol..................... CYDI
</TABLE>
Common stock to be outstanding after the offering is based on the number of
shares outstanding as of February 16, 2000 and excludes:
- 4,368,800 shares of common stock issuable upon the exercise of outstanding
options under our stock option plans, with a weighted average exercise
price of $0.77 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
- 3,186,200 shares of common stock available for future issuance under our
stock option plans.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE 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 AIM acquisition, 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 AIM acquisition and
the sale of shares of common stock offered by us at an assumed
initial public offering price of $ 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)
----------- -----------
<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 2,774 5,023 9,052
---------- ---------- ----------- ----------- ----------- -----------
Gross profit (loss).............. 225 (7) 346 843 3,204 3,360
Operating expenses............... 505 362 943 2,291 5,611 10,398
---------- ---------- ----------- ----------- ----------- -----------
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..... 3,913,100 4,702,100 11,357,907 14,839,116 16,928,474 17,810,150
========== ========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
ACTUAL (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................................ $7,975 $5,002 $
Working capital............................................. 6,064 3,073
Total assets................................................ 12,406 21,098
Long-term debt.............................................. -- --
Total stockholders' equity.................................. 7,583 14,907
</TABLE>
6
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY
ONES WE MAY FACE. ADDITIONAL RISKS AND UNCERTAINTIES MAY ALSO IMPAIR OUR
BUSINESS OPERATIONS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR
BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD LIKELY SUFFER AND
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.
OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING AND EVALUATION OF OUR
BUSINESS DIFFICULT
We began to provide Internet customer relationship management solutions in
1997, and we are still in the early stages of our development. Our limited
operating history makes it difficult to evaluate our business, prospects and
future results of operations. 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
cannot assure you that we will be able to sustain these growth rates or that we
will 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. A number of factors are likely to cause
these fluctuations, some of which are outside our control. 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
7
<PAGE>
- 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.
OUR SALES CYCLES VARY SIGNIFICANTLY WHICH MAKES IT DIFFICULT TO PLAN OUR
EXPENSES AND FORECAST OUR RESULTS
Our sales cycles typically range from two to five months, but 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, it could harm our ability to meet our forecasts for
a given quarter.
SOME OF OUR PRODUCTS AND SERVICES ARE SUBSCRIPTION-BASED AND A DECLINE IN
SUBSCRIPTION RENEWALS MAY LIMIT OUR ABILITY TO GENERATE REVENUE
Some of our products and services are subscription-based. Historically, we
have derived a significant portion of our revenue from these products and
sevices. There can be no assurance that we will be able to sell annual contracts
to new clients or to maintain our current subscription renewal rate. If clients
choose not to renew their subscriptions, our business and ability to generate
revenue could be harmed.
IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND FUTURE
CLIENTS, OUR OPERATING RESULTS COULD BE HARMED
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 operating results could be harmed.
8
<PAGE>
WE INTRODUCED ARC 360 DEG. IN 1997 AND IT IS UNCERTAIN WHETHER IT WILL ACHIEVE
WIDESPREAD CUSTOMER ACCEPTANCE
We first implemented our hosted customer relationship management technology
platform, Arc 360 DEG., with clients in 1997. Arc 360 DEG. serves as the
platform for our Internet customer relationship management solution, which
accounts 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. There can be no assurance that Arc 360 DEG. or related
services will achieve widespread customer acceptance, and any failure to do so
could have a material adverse effect on our financial condition.
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 BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS TO SUFFER
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
AIM as if it had occurred on January 1, 1999, AMFMi would have represented 25%
of revenue, Roche Diagnostics Corporation, a client of AIM, 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 business, financial condition and results of
operations to suffer.
THE EXPANSION OF OUR BUSINESS PLACES, AND WILL CONTINUE TO PLACE, A SIGNIFICANT
STRAIN ON OUR MANAGEMENT, OPERATING INFRASTRUCTURE AND RESOURCES AND COULD HARM
OUR BUSINESS AND FINANCIAL RESULTS
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 seriously harm us. 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 business and
financial results 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 BUSINESS AND 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. We cannot be certain that our recent
or future hires will be as productive as we desire.
9
<PAGE>
IF WE LOSE KEY PERSONNEL, OR ARE UNABLE TO ATTRACT AND RETAIN OTHER QUALIFIED
PERSONNEL, OUR BUSINESS AND 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. The loss of the services of one or more
of our key personnel could result in reduced sales, decreased client
satisfaction and a diversion of management resources. Most of our key personnel,
including our Chief Executive Officer, Chief Financial Officer and Chief
Technology Officer, are not bound by employment agreements. Our Chief Executive
Officer and President, Mark Esiri, is employed by Wand Partners Inc., which is
an affiliate of our majority stockholders. 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. The loss of Mr. Esiri's
services would have a significant adverse effect on our ability to operate our
business. 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.
OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO MAINTAIN AND ENHANCE AWARENESS OF
THE CYBER DIALOGUE BRAND
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. We cannot assure you that we will be
successful in developing our brand. 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 business and results of operations would be harmed.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR BUSINESS AND
COMPETITIVE POSITION COULD BE HARMED
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. 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 infringes their intellectual property. These
claims, with or without merit, 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 business, financial condition and
results of operations.
10
<PAGE>
We currently hold the Internet domain names cyberdialogue.com,
dialogue360.com, closedloop.com and databasemining.com. The registration of
domain names generally is regulated by the Internet Corporation for Assigned
Names and Numbers, commonly known as ICANN, and the governments of countries,
and we anticipate that additional top-level domains will eventually be
authorized by ICANN 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 registrations may be
adopted at any time. As a result, we may not successfully register or maintain
our domain names in various countries in which we may conduct business.
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 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, ADVERSELY
AFFECTING OUR BUSINESS
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. If we are unable to compete
successfully with these combined companies, it could harm our business.
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 AIM in February 2000 and cannot assure you that we will be able
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,
11
<PAGE>
existing stockholders may be diluted, which could affect the market price of our
stock. Any of these acquisition-related risks or costs could harm our business
and operating results.
IF WE ARE UNABLE TO SAFEGUARD THE INTEGRITY, SECURITY AND PRIVACY OF OUR DATA OR
OUR CLIENTS' DATA, OUR BUSINESS MAY BE HARMED
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
results of operations to suffer.
THE FUNCTIONALITY OF OUR PRODUCTS AND SERVICES COULD BE SERIOUSLY LIMITED BY THE
PRIVACY CONCERNS OF INTERNET USERS
There is substantial public concern over the collection and use of Internet
user information. We are aware that another Internet marketing services company
is being sued regarding user privacy concerns. 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 profiling capability. For example, Web sites typically
place small files of information commonly known as "cookies" on a user's hard
drive, often without the user's knowledge or consent. Cookie information is
passed to the Web site through the Internet user's browser software. Although it
is possible to modify a user's browser software to prevent the placement of
cookies, few users currently choose to do so. Users can also delete cookies from
their hard drives at any time. Some Internet commentators and privacy advocates
have suggested limiting or eliminating the use of cookies. Our technology
currently uses cookies to collect information about an Internet user's movement
through the Internet or a Web site. The effectiveness of our technology could be
limited by any reduction or limitation in the use of cookies. 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, our business could be seriously harmed.
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. 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. For example, currently in the United States,
there is legislation and regulation which limits the collection and use of
personally identifying information from children. Another 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. In addition, the European Union has 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, some countries have imposed
12
<PAGE>
their own laws protecting data that can become personally identifiable through
subsequent processing. Other countries may also enact limitations on the use of
personal data. Any of these developments could restrict our ability to gather
information about the tastes and preferences of Internet users and would limit
our ability to do business and generate revenue. 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. Failure to comply with the law and
regulatory requirements may result in, among other things, administrative
enforcement actions and fines, class action lawsuits, cease and desist orders,
and civil and criminal liability. The occurrence of one or more of these events
could materially harm our business, results of operation and financial
condition.
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
BUSINESS AND OPERATING RESULTS
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 our customer relationship
management platform. In addition, even if the licenses are renewed, any increase
in royalty rates could adversely affect our gross margins.
IF WE FAIL TO RESPOND TO CHANGING CLIENT PREFERENCES IN OUR MARKET, DEMAND FOR
OUR PRODUCTS AND SERVICES AND OUR ABILITY TO ENHANCE OR MAINTAIN OUR REVENUE
WILL SUFFER
We must continually improve the performance, features and reliability of our
products and services, particularly in response to competitive offerings. Our
success depends, in part, on our ability to enhance our existing products and
services and to develop new products and services that address the increasingly
sophisticated and varied needs of our clients. If we do not properly identify
the preferences of current and future clients, or if we fail to meet the
requirements of these clients, our ability to market our products and services
successfully and to increase or maintain our revenue could be impaired.
FUTURE EXPANSION OF OUR INTERNATIONAL OPERATIONS WILL REQUIRE SIGNIFICANT
MANAGEMENT ATTENTION AND FINANCIAL RESOURCES AND SUBJECT US TO ADDITIONAL
BUSINESS RISK
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. Our participation in
international markets will be subject to a number of risks, including foreign
government regulations, export license requirements, tariffs and taxes,
fluctuations in currency exchange rates and difficulties in managing foreign
operations. 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. In order to help us address some of the risks
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. Although we have not recognized
material amounts of revenue from products and services sold to clients located
outside of the United States, we expect to open an office in the United Kingdom
and revenue from our international operations is expected to account for an
increasing percentage of our total revenue in the future. To successfully build
international sales, we must build international operations and recruit
international sales, technology and analytical personnel. This strategy will
require significant management attention and financial resources. We have very
limited experience in marketing, selling and distributing our products and
13
<PAGE>
services internationally. We cannot assure you that we will be able to establish
international relationships, or that if established, they will be successful.
Any failure to develop our business internationally may harm our competitive
position and consequently our business, financial condition and results of
operations.
FAILURE TO KEEP UP WITH CHANGING TECHNOLOGY MAY ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 client requirements. This will require us to timely select,
develop and market new products or services and enhancements on a cost-effective
basis. The development of new, technologically advanced products or services is
a complex and uncertain process, requiring high levels of innovation. The
introduction of new and enhanced products or services also requires that we
manage transitions from older products or services in order to minimize
disruptions to our clients and within our business. In addition, we cannot
assure you that we will be successful in developing, introducing or managing the
transition to new or enhanced products or services. We cannot assure you that
these products or services will be responsive to technological changes or will
gain market acceptance. Our business, financial condition and results of
operations could be materially adversely affected if we are unsuccessful, or
incur significant delays, in developing and introducing new products, services
or enhancements.
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS, AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING IN THE FUTURE
We believe that the net proceeds from this offering together with our
existing cash 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 in the future to fund our operations, to
expand or enhance our products and services or to respond to competitive
pressures or perceived opportunities. We cannot assure you that additional
financing will be available on terms favorable to us, or at all. If adequate
funds are not available or not available on acceptable terms, our business and
financial results may suffer.
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. We cannot be certain
that our efforts to address the Year 2000 issue 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 SUFFER 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
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<PAGE>
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 and may suffer harm.
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 could suffer.
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, shares of our common stock will be
outstanding, or shares if the underwriters' over-allotment option is
exercised in full. Of these shares, the shares sold in this offering will
be freely tradable except for any shares purchased by our "affiliates" as
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, 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. In addition, existing holders
of 20,027,076 shares of our common stock have demand registration rights that
could be exercised following the 180-day lockup period.
FOLLOWING THE OFFERING, TRADING IN OUR COMMON STOCK MAY BE LIMITED AND YOU MUST
BE ABLE TO WITHSTAND A POSSIBLE LOSS OF YOUR INVESTMENT
A public market for trading our common stock has not existed prior to this
offering. Although this offering will result in a public trading market for our
common stock, we cannot assure you that an active market will develop or be
sustained or that the market price of our common stock will not decline. 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
15
<PAGE>
the market. If you purchase common stock in this offering, you may not be able
to resell your stock at or above the price you paid.
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 WILL EXERCISE SIGNIFICANT
CONTROL OVER US FOLLOWING THIS OFFERING
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 % of our common stock. In particular,
affiliates of Wand Partners Inc. will own approximately % 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.
WE HAVE ANTI-TAKEOVER PROVISIONS WHICH MAY MAKE IT DIFFICULT FOR A THIRD PARTY
TO ACQUIRE US
Provisions of our certificate of incorporation, our bylaws, our stockholder
rights plan and Delaware law could make it more difficult for a third party to
acquire us, even if doing so might be beneficial to our stockholders.
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<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.
17
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of
common stock in the offering will be approximately $ , assuming an
initial public offering price of $ 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 $ .
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.
OTHER INFORMATION
CYBERCITIZEN and TELESCOPE are registered trademarks of Cyber Dialogue Inc.
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.
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<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 AIM acquisition as if it had
occurred as of December 31, 1999; and
- on a pro forma as adjusted basis to give effect to the AIM acquisition and
the sale of shares of common stock offered by us at an assumed
initial public offering price of $ 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, on an actual
basis; 20,032,076 shares issued and
outstanding, on a pro forma basis;
shares issued and outstanding, on
a pro forma as adjusted basis.......... 191 200
Additional paid-in capital............... 14,123 21,438
Deferred contra revenue.................. (353) (353)
Deferred compensation.................... (916) (916)
Accumulated deficit...................... (5,462) (5,462)
------- ------- -------
Total stockholders' equity............... $ 7,583 $14,907 $
------- ------- -------
Total capitalization......................... $ 7,583 $14,907 $
======= ======= =======
</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.
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DILUTION
Our pro forma net tangible book value as of December 31, 1999, after giving
effect to the AIM acquisition 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 $ 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 $ , or $ per share. This represents
an immediate increase in pro forma net tangible book value to our existing
stockholders of $ per share and an immediate dilution to purchasers in this
offering of $ per share. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of December
31, 1999................................................ $ 0.26
Pro forma increase per share attributable to new
investors...............................................
--------
Pro forma net tangible book value per share after this
offering..................................................
--------
Pro forma dilution per share to new investors............... $
========
</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.................... 20,032,076 % $21,638,328 % $ 1.08
New investors............................
---------- --- ----------- --- ------
Total.............................. 100% $ 100% $
========== === =========== === ======
</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 or
% 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.
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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 AIM
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,
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
----------------------------------------------------------------------------
1999
------------------------
PRO FORMA
1995 1996 1997 1998 ACTUAL (UNAUDITED)
--------- --------- ----------- ----------- ---------- -----------
<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 2,774 5,023 9,052
--------- --------- ----------- ----------- ---------- ----------
Gross profit.................... 225 (7) 346 843 3,204 3,360
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 67 181 519 2,613
Research and development...... -- -- 101 153 495 495
--------- --------- ----------- ----------- ---------- ----------
Total operating
expenses.................. 505 362 943 2,291 5,611 10,398
--------- --------- ----------- ----------- ---------- ----------
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.... 3,913,100 4,702,100 11,357,907 14,839,116 16,928,474 17,810,150
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS)
----------------------------------------------------
1999
------------------------
PRO FORMA
1997 1998 ACTUAL (UNAUDITED)
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 16 $ 79 $ 7,975 $ 5,002
Total assets......................................... 746 1,902 12,406 21,098
Long-term obligations................................ 63 -- -- --
Working capital (deficit)............................ (691) (1,317) 6,064 3,073
Total stockholders' equity (deficit)................. (435) (868) 7,583 14,907
</TABLE>
21
<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. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS.
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 hosted
Internet customer relationship management technology platform, combined with our
database marketing skills, analytical services and in-depth databases of
Internet consumer information, which we have been collecting since 1994. We
believe our deep knowledge of online consumer trends coupled with our
technological and marketing expertise helps our clients to develop a more
complete understanding of their customers and maximize the returns on online and
related offline marketing investments.
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., which is known as AIM. AIM provides marketing database
development and sophisticated analytical services, including predictive modeling
and market segmentation. AIM 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 AIM 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 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 on a
percentage of completion basis.
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
22
<PAGE>
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 on a percentage of completion basis.
eCRM Solutions revenue in the year ended December 31, 1999 included a
contra-revenue charge 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 as contra-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 as contra-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, 64% 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, and 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 the last eight quarters, we cannot assure
you that our revenue will continue to grow or that we will ever achieve or
maintain profitability.
23
<PAGE>
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 76.7 61.1
----- ----- -----
Gross profit...................................... 31.6 23.3 38.9
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 5.0 6.3
Research and development........................ 9.2 4.2 6.0
----- ----- -----
Total operating expenses...................... 86.2 63.3 68.2
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>
24
<PAGE>
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 81% to $5.0 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 61.1% in the year
ended December 31, 1999 from 76.7% in the year ended December 31, 1998. The
absolute increase was primarily due to increased personnel costs 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. 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 hiring of additional sales and marketing personnel,
increased sales commissions resulting from higher revenue, higher costs relating
to trade shows and conferences and increased advertising and promotion costs. 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 due to hiring additional administrative
personnel, increases in accounting and legal costs, and increases in costs
relating to our facilities. 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.
25
<PAGE>
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 271% 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 76.7% 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 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.
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 hiring of additional sales and marketing personnel,
increased sales commissions resulting from higher revenue, and increased
advertising and promotion expenses.
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 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
due to hiring additional administrative personnel, increases in accounting and
legal costs, and increases in costs relating to our facilities.
26
<PAGE>
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.............. 646 584 739 805 954 948 1,459 1,662
----- ----- ----- ----- ------ ------ ------ -------
Gross margin................. 205 295 165 178 842 918 736 708
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............. 46 46 46 43 66 106 158 189
Research and development... 28 33 38 54 68 86 123 218
----- ----- ----- ----- ------ ------ ------ -------
Total operating
expenses............. 503 567 592 629 902 1,178 1,481 2,050
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.............. 75.9 66.4 81.7 81.9 53.1 50.8 66.5 70.1
----- ----- ----- ----- ----- ----- ----- -----
Gross margin................. 24.1 33.6 18.3 18.1 46.9 49.2 33.5 29.9
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............. 5.4 5.2 5.1 4.4 3.7 5.7 7.2 8.0
Research and development... 3.3 3.8 4.2 5.5 3.8 4.6 5.6 9.2
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............. 59.1 64.5 65.5 64.0 50.2 63.1 67.5 86.6
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% 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% for the
quarter ended June 30, 1999 to 70% for the quarter ended December 31, 1999.
27
<PAGE>
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 AIM 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. We cannot be certain that
additional financing will 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 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,
28
<PAGE>
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.
29
<PAGE>
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 hosted technology platform, Arc 360 DEG., 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 solution helps
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. 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
portals, e-tailers and interactive agencies, including Monsanto Life Sciences,
AMFM Interactive, Warner Bros. Online, General Electric Financial Assurance,
About.com, IBM and Organic.
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
30
<PAGE>
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 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 platform, combined
with our database marketing skills, 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.
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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 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.,
our hosted technology platform, 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 be the leading provider of Internet customer
relationship management solutions. 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 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.
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. We currently focus on
the pharmaceutical and health, media and entertainment, financial services,
online portals and e-tailing industries. 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 AIM, a database marketing company. We expect that this
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acquisition will strengthen our product and service offerings and broaden
our client base. We believe that our industry is fragmented and provides
significant 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 PLATFORM. The core of our eCRM Solutions is our Arc
360 DEG. technology platform. Arc 360 DEG. is a hosted solution that 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.
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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.
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 list
generation software then enables clients to select groups 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. Once a campaign has been developed, we identify and measure
relevant campaign metrics. 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 portals, small business and e-tailing. This data allows us to
provide clients with industry-specific consumer information and to
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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 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 portals, 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>
<CAPTION>
FINANCIAL SERVICES MEDIA AND ENTERTAINMENT
- ------------------ -----------------------
<S> <C>
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
Time Warner
Warner Bros. Online
</TABLE>
<TABLE>
<CAPTION>
PHARMACEUTICAL AND HEALTH E-TAILING
- ------------------------- ---------
<S> <C>
California HealthCare Foundation CDNOW
CareSoft Compaq Computer
Deloitte Consulting (Health Care Group) IBM
Monsanto Life Sciences Trip.com
</TABLE>
<TABLE>
<CAPTION>
ONLINE PORTALS INTERACTIVE AGENCIES
- -------------- --------------------
<S> <C>
About.com Arnold Ingalls Moranville
GTE Directories Modem Media.Poppe Tyson
Netscape Communications Multimedia Resources
VerticalNet Organic
Women.com
</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
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AMFMi accounting for more than 10% of revenue. On a pro forma basis, giving
effect to our acquisition of AIM as if it had occurred on January 1, 1999, AMFMi
would have represented 25% of our total revenue, Roche Diagnostic Corporation, a
client of AIM, would have represented 7% of our total revenue and our top 10
clients as a whole would have represented 63% of revenue.
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 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 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. Site
traffic has been growing across AMFMi 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. We believe 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. 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 the Acme City community site.
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SALES AND MARKETING
We market our products and services primarily through our direct sales
force. As of February 16, 2000, our direct sales force consisted of 13 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 11 marketing professionals as of February 16, 2000. Our
marketing services organization is responsible for continuously gathering
feedback from our clients and organizing this feedback to develop best 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. We believe that this strategy will speed penetration of our target
markets.
TECHNOLOGY
We believe that Arc 360 DEG. brings together best-of-breed 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 provide a best-of-breed platform
for customer relationship management to our clients. We continually evaluate our
choice of tools to maintain an 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 historical
Web traffic, impression, demographic, psychographic, e-commerce, marketing
promotion and
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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 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 Internet 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
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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 and
Kana Communications;
- 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 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. The registration of
domain names generally is regulated by the Internet Corporation for Assigned
Names and Numbers, commonly known as ICANN, and the governments of countries. We
anticipate that additional top-level domains will eventually be authorized by
ICANN 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.
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EMPLOYEES
As of February 16, 2000, we had 99 full-time employees. Of these employees,
42 were analysts, 24 were in sales, marketing and publishing, 18 were technology
engineers and 15 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.
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
February 16, 2000, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Bruce W. Schnitzer..................... 55 Chairman of the Board and Treasurer
Mark Esiri............................. 35 Chief Executive Officer, President and Director
C. Andrew Watt......................... 35 Chief Financial Officer and Secretary
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-Dupnok..................... 37 Vice President, eCRM Solutions
Lopo Champalimaud...................... 27 Vice President, Key Account Management
David J. Callard....................... 61 Director
Christopher P. Forester................ 48 Director
John Fullmer........................... 54 Director
Tim Toben (1)(2)....................... 41 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 and
Treasurer since 1996. 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 then owned by affiliates of Wand
Partners but now a wholly-owned subsidiary of Young & Rubicam. 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 and Secretary since
1996. Mr. Watt served as our Chief Operating Officer from 1996 through
mid-February 2000. Prior to joining Cyber 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
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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-DUPNOK joined Cyber Dialogue in January 2000 as Vice President,
eCRM Solutions. From 1995 to 2000, Ms. Bolen 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 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 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.
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 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 sits on our audit
and compensation committees. Mr. Toben has served as CEO of KnowledgeBase
Marketing Inc. and its predecessor, Customer Management Services, Inc. since
1991 and as its Chairman since 1999. Mr. Toben has been the Worldwide Practice
Leader--Database Marketing for Young & Rubicam, Inc. since 1999. Mr. Toben holds
a B.A. from the University of North Carolina, Chapel Hill and an M.A. in from
the University of the Pacific.
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COMPOSITION OF THE BOARD
Our bylaws provide for up to seven members on the board of directors. Our
board of directors currently has six 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. After this offering, directors will be elected by the majority vote of
the holders of common stock each year at our annual meeting of stockholders.
Once elected, directors serve until the following annual meeting of stockholders
or until their respective successors have been elected and qualified.
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. Prior to the completion of this offering, the audit
committee will consist of Mr. Toben and . 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. Prior to the completion of this offering, the
compensation committee will consist of Mr. Toben and .
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 options under our equity incentive
plan. These grants are described under "Stock Plans--2000 Equity 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, officers and
agents 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:
- for any breach of the director's, officers and agents, duty of loyalty to
us or our stockholders;
- for any act or omission not in good faith or which involved intentional
misconduct or a knowing violation of law;
- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation
Law; or
- for any transaction from which the director derived an improper personal
benefit.
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.
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EMPLOYMENT AND SEVERANCE AGREEMENTS
In December 1999, we entered into an employment and non-compete agreement
with Lynn Bolen-Dupnok. Under these agreements, Ms. Bolen-Dupnok is an at-will
employee with a salary and guaranteed bonus of $220,000. Ms. Bolen-Dupnok 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-Dupnok 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 and Secretary (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 also served as our Chief Operating Officer.
(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. The term of each option is 10 years from the date of
grant.
<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) 15.0 $0.51 03/31/09 $32,073 $ 81,288
100,000 (3) 15.0 $0.60 03/31/09 $23,073 $ 72,288
Lopo Champalimaud................ 140,000 (4) 10.5 $0.51 03/31/09 $44,903 $113,793
</TABLE>
- ------------------------
(1) The exercise prices represent our board's estimate 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 the market
for Internet-related stocks.
(2) These amounts represent assumed rates of appreciation in the price of our
common stock during the terms of the options in accordance with 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 OPTION 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 $6,736,980 $ 621,005
Elizabeth Melcher..................... -- -- 837,680 79,920 6,736,980 621,005
C. Richard Vermillion, III............ 31,000 $254,728 176,900 332,500 1,443,974 2,612,005
Lopo Champalimaud..................... -- -- 55,000 225,000 446,308 1,773,213
</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 $8.27 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. 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 extraordinary dividends, stock dividends, a recapitalization, stock splits,
combinations or exchanges, or in the event of a sale of substantially all of our
assets, or the merger or consolidation of us into another corporation, or in the
event of other similar transactions. If an 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 underlying the award will
again be available for subsequent grants of awards under the plan.
The board of directors terminated this plan, effective , 2000.
Shares reserved for issuance under the plan that have not been made subject to
options, plus any shares subject to options that are cancelled or forfeited,
will be available for awards under the 2000 Equity Incentive Plan, described
below. 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 will at all times consist of three
individuals who are each members of the board of directors. At least two members
of the committee will satisfy the requirements 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 these rules and regulations.
The committee has the authority in its discretion, subject to and not
inconsistent with the express provisions of the plan, to interpret the plan and
to prescribe, amend and rescind rules and regulations relating to the plan. The
committee may delegate to one or more of its members administrative duties
46
<PAGE>
as it may deem advisable, and the committee or any person to whom it has
delegated duties may employ one or more persons to render advice with respect to
any responsibility the committee or any person may have under the plan.
ELIGIBILITY. Awards may be granted under the plan to directors, officers
and employees of Cyber Dialogue.
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.
However, the committee has the authority to accelerate the exercisability of any
outstanding option at the time and under the circumstances as it, in its sole
discretion, deems appropriate. 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,
in cash, by certified or cashier's check.
EFFECT OF CORPORATE TRANSACTIONS. In the event of a sale of all or
substantially all of our assets or the merger or consolidation of us with or
into another corporation, any option outstanding under the plan may be assumed
or an equivalent option may be substituted by the successor corporation or a
parent or subsidiary of the successor corporation. If the successor corporation
does not agree to assume the option or substitute an equivalent option, our
board of directors may, in lieu of the assumption or substitution, provide that
the optionee will have the right to exercise his options, to the extent
exercisable, and/or each option granted under the plan will terminate on a date
fixed by the committee. Not less than 30 days' notice of the option termination
date will be given to each optionee, who will have the right to exercise his
options to the extent exercisable, during the notice period.
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.
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. 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 is reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any extraordinary dividends, stock dividends, a recapitalization, stock splits,
combinations or exchanges, or in the event of a sale of substantially all of our
assets, or the merger or consolidation of us into another corporation, or in the
event of other similar transactions. If an outstanding award under the plan
should, for any reason,
47
<PAGE>
expire, be canceled or be terminated, without having been exercised in full, the
shares of common stock underlying the award will again be available for
subsequent grants of awards under the plan.
The board of directors terminated the plan, effective , 2000.
Shares reserved for issuance under the plan that have not been made subject to
options, plus any shares subject to options that are cancelled or forfeited,
will be available for awards under the 2000 Equity Incentive Plan, described
below. 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 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; to prescribe, amend and
rescind rules and regulations relating to the plan; 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 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. Stock 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.
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, in cash or by certified or cashier's check.
EFFECT OF CORPORATE TRANSACTIONS. In the event of a sale of substantially
all of our assets or the merger or consolidation of us with or into another
corporation, any award outstanding under the plan may be assumed or an
equivalent award may be substituted by the successor corporation or a parent or
subsidiary of the successor corporation. If the successor corporation does not
agree to assume the award or substitute an equivalent award, our board of
directors may, in lieu of the assumption or substitution, provide that the
optionee will have the right to exercise his options to the extent exercisable,
and/or each option granted under the plan will terminate as of a date fixed by
the committee. Not less than 30 days' notice of the option termination date will
be given to each optionee, who will have the right to exercise his options, to
the extent exercisable, during the notice period.
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
48
<PAGE>
committee and set forth in an option agreement), but in no case after the
options expire in accordance with their terms.
2000 EQUITY INCENTIVE PLAN
Our 2000 Equity Incentive Plan was adopted by our board of directors on
, 2000 and was approved by our stockholders on , 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 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 20% of the common stock outstanding, on a fully diluted
basis, on the date of the plan's adoption and at the beginning of any fiscal
year during the term of 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. 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. In addition, shares that were not
made subject to awards under the 1996 Stock Option Plan or the Amended and
Restated 1997 Stock Option Plan, or shares that are subject to awards under
those plans that are cancelled or forfeited, will be available for awards under
the 2000 Equity Incentive Plan. No individual may be granted awards relating to
more than 5% of the outstanding shares of common stock 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.
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<PAGE>
TERMS AND CONDITIONS OF OPTIONS. Stock 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.
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. Non-employee directors who own, together with
their affiliates, less than 1% of the voting power of our company, or outside
directors will be eligible for automatic grants of non-qualified options under
the plan. Each outside director who holds, together with its affiliates, less
than 1% of the common stock as of the closing of the offering will be granted an
option to purchase 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 shares of common stock. In
addition, immediately following each annual meeting of stockholders after the
initial public offering, each outside director (other than an outside director
who is first elected at that annual meeting) will be granted an option to
purchase 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 full on the
second anniversary of the date of grant of the option, 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
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<PAGE>
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.
CHANGE IN CONTROL. In the event of a change in control, all awards
outstanding at the time of the change in control will become fully vested and/or
exercisable.
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 employment or service with us. If
a participant's employment or service terminates other than 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.
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 , 2000, our board of directors adopted, and on
, 2000 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 comprising
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 committee has authorized for issuance under the plan
a total of shares of common stock subject to adjustment by the
committee in the event of a recapitalization, stock
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<PAGE>
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:
- shares,
- % of the outstanding shares on that date, or
- a lesser amount determined by the committee.
ELIGIBILITY. Subject to procedural requirements, all of our employees who
have at least six months of service, work more than 20 hours per week and who
are not "highly compensated employees" within the meaning of Section 414(q) of
the Internal Revenue Code will be eligible to participate in the employee stock
purchase plan, except that employees who own 5% or more of our common stock or
any of our subsidiaries will not be eligible to participate. All our full-time
employees will be eligible to participate in the first offering period under the
plan.
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
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 that generally will be 24 months long. Successive
six-month purchase periods will run during each offering period. Offering
periods generally will commence on January 1 and July 1 of each year during the
term of the plan, and purchase periods will run from January 1 to June 30 and
from July 1 to December 31 if the first offering period will commence on the
first day of regular trading and end on the last trading day on or before
December 31, 2001.
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.
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<PAGE>
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 on , 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 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;
- 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 % of the performance
goals and maximum bonuses will be based on achievement of % of the
performance goals. A bonus will be paid only if the participant is employed by
us or its 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 % of the
officer's annual base salary. In the event of a change in control, the
performance period in effect at the time of the change in control will be deemed
to have been completed, the maximum targets will be deemed to have been
attained, and a pro rata portion of the award will be paid in cash to the
participant.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 16, 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 20,032,076 shares
of common stock outstanding as of February 16, 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 February 16, 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%
Young & Rubicam, Inc. (3)................................. 2,494,600 12.5
Named executive officers and directors:.....................
Bruce W. Schnitzer (1) (4)................................ 11,605,422 56.8
David J. Callard (1) (5).................................. 11,605,222 56.8
Christopher P. Forester (6) (7)........................... 1,181,400 5.8
John Fullmer (6) (7)...................................... 1,181,400 5.8
Tim Toben (8) (9)......................................... 2,494,600 12.5
Mark Esiri (10)........................................... 1,203,800 6.0
C. Andrew Watt (11)....................................... 1,468,080 7.0
Elizabeth Melcher (11).................................... 1,097,680 5.3
C. Richard Vermillion, III (12)........................... 551,900 2.7
Lopo Champalimaud (13).................................... 127,500 *
All directors and officers as a group (12 persons).......... 19,842,182 86.5
</TABLE>
- ------------------------
* Represents less than 1%.
(1) The address for Bruce W. Schnitzer, David J. Callard, and the entities
associated with Wand Partners Inc. is in care of Wand Partners Inc., 630
Fifth Avenue, Suite 2435, New York, New York 10111.
(2) Consists of (a) 4,664,200 shares held by Wand/Yankelovich Investments L.P.;
(b) 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
February 16, 2000; (c) 1,264,600 shares held by Wand Partners L.P.;
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<PAGE>
(d) 828,622 shares held by Yankelovich Holdings Inc.; (e) 848,200 shares
held by Wand Partners (S.C.) Inc.; and (f) 63,600 shares held by Wand
Affiliates Fund, L.P. and includes 22,600 shares issuable under warrants
exercisable within 60 days of February 16, 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 is 285 Madison Avenue, New York, New York
10017.
(4) Mr. Schnitzer (a) 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., (b) owns a limited partnership
interest in Wand/Yankelovich Investments L.P., (c) is a managing member of
Wand Partners LLC, the general partner of Wand Equity Portfolio II L.P.,
(d) is a member of Wand AF LLC, the general partner of Wand Affiliates Fund
L.P. and (e) 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.
(5) Mr. Callard (a) 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., (b) owns a limited partnership interest in
Wand/Yankelovich Investments L.P., (c) is a managing member of Wand Partners
LLC, the general partner of Wand Equity Portfolio II L.P. (d) is a member of
Wand AF LLC, the general partner of Wand Affiliates Fund L.P. and (e) 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.
(6) The address for Christopher P. Forester and John Fullmer is in care of eCom
Partners, 101 Merritt 7, Norwalk, Connecticut 06851.
(7) Consists of 886,000 shares of common stock and 295,400 shares issuable under
a warrant exercisable within 60 days of February 16, 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.
(8) The address for Tim Toben is 208 W. Franklin Street, Chapel Hill, North
Carolina 27516.
(9) As an executive officer of Young & Rubicam, Inc., Mr. Toben may be deemed to
beneficially own all of the 2,494,600 shares held by Young & Rubicam.
(10) Mr. Esiri (a) owns a limited partnership interest in Wand/Yankelovich
Investments L.P., (b) is a member of Wand Partners LLC, the general partner
of Wand Equity Portfolio II L.P. and (c) 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.
(11) Includes 837,680 shares issuable under stock options exercisable within 60
days of February 16, 2000.
(12) Includes 291,900 shares issuable under stock options exercisable within 60
days of February 16, 2000.
(13) Includes 127,500 shares issuable under stock options exercisable within 60
days of February 16, 2000.
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<PAGE>
RELATED PARTY TRANSACTIONS
AMFMI
In August 1999, we entered into an agreement with AMFMi, the Internet
subsidiary of AMFM Inc. Affiliates of Wand Partners Inc., which are also
affiliates of our majority stockholders, are minority investors in AMFMi.
Mr. Esiri, our Chief Executive Officer and President, Mr. Schnitzer, our
Chairman of the Board and Treasurer, 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. 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: (1) 66,600 shares vested as
of August 30, 1999; (2) 66,600 shares will vest on February 29, 2000; and
(3) 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 Treasurer, 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 and
received an assignment from the equity holders of Wand Partners LLC of a 3%
interest in Wand Partners LLC. As of August 30, 1999, our employees, including
Messrs. Esiri, Watt, Vermillion, Mabley and Champalimaud and Ms. Melcher, were
given, on a pro rata basis in relation 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 management 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 Treasurer, 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.
Also under the earlier oral agreement and the current, written management
services agreement, we have agreed to reimburse Wand Partners for compensation
paid by it to Mark Esiri, our Chief Executive Officer and President, for so long
as he continues to serve in that capacity. Under this agreement, we must
reimburse Wand Partners for all compensation paid by it to Mr. Esiri, provided
that this reimbursement may not exceed the amounts approved by our board of
directors. We paid
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$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.
ACQUISITION OF AIM
On February 3, 2000, we acquired AIM from Yankelovich Holdings Inc. AIM 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 Treasurer, and Mr. Callard, one of
our directors, have indirect equity interests in those entities associated with
Wand Partners Inc. 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, for a
total value of approximately $10.3 million. Yankelovich Holdings Inc. acquired
AIM in March 1998 for an aggregate price of $6.75 million. The consideration
that we paid to Yankelovich Holdings was based on a valuation of both AIM and
our company by our management. Our board of directors, including the non-Wand
directors, 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, AIM, each agreed to continue performing services that
had been contracted for prior to the merger. We each agreed to perform these
services at a discount to our usual billing rates. We do not expect our expenses
to Yankelovich pursuant to the services agreement to be material.
SALE OF SECURITIES
Since May 1997 through February 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>
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., 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
acquired in the AMFMi, AIM 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."
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<PAGE>
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., Wand Partners
(S.C.) Inc. and one of our other stockholders. In March 1999, we borrowed an
aggregate of $2.5 million from Wand Equity Portfolio II L.P. and Wand Affiliates
Fund L.P. 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. 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.
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. 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 $3.386 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
- 188,200 shares of our common stock at an exercise price of $5.314 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, KNOWLEDGEBASE
MARKETING 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, KnowledgeBase Marketing and some of our officers
and directors, 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:
- 40,000,000 shares of common stock authorized, of which shares of
common stock will be issued and outstanding or shares if the
underwriters' over-allotment option is exercised in full; and
- shares of preferred stock authorized, of which none will be issued
and outstanding.
The following summary of our capital stock is qualified by reference to 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. Each outstanding
share of common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.
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 preferred stock, consisting of
shares, in connection with the rights plan. For a description of the rights plan
and the 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 February 16, 2000, we have granted options to purchase 4,368,800
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" and, in the
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case of a business combination involving the payment of consideration to the
holders of our capital stock, these 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.
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.
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.
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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 meeting of stockholders.
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 provisions of our certificate of incorporation and bylaws,
including those provisions relating to the action by written consent and the
ability of stockholders to call special meetings.
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. As with most rights agreements, the
terms of our rights agreement are complex and not easily summarized,
particularly as they relate to the acquisition of our common stock and to
exercisability. This summary may not contain all of the information that is
important to you. Accordingly, you should 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.
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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.
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 or earning power;
provided, however, that the foregoing will not include any transaction or series
of transactions by which Wand Partners, Inc., Wand/Yankelovich Investments L.P.,
Wand Equity Portfolio II L.P., Wand Affiliates Fund L.P., Wand Partners LLC,
Wand AF LLC, Wand Partners L.P., Yankelovich Holdings Inc. or Wand Partners
(S.C.) Inc. sells, exchanges or otherwise disposes of all or any portion of our
common stock of Cyber Dialogue, including, but not limited to, any public
offering of our common stock by any of the entities named above or a disposition
of common stock by means of a spin-off or other distribution to any of these
entities' equity owners.
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.
Our board of directors may, at its option, redeem all of the outstanding
rights under its rights agreement before the earlier of (1) the time that an
acquirer obtains 15% or more of our outstanding common stock or (2) 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
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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 acquirers on behalf of all its 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 is American Stock
Transfer & Trust Company.
LISTING
We intend to apply for quotation 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
shares of our common stock, assuming no exercise of the underwriter's
over-allotment option and no exercise of outstanding options. 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 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 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. and MV Partners L.P. III, L.P. 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, directly or indirectly, 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, or if made
as a bona fide gift.
STOCK OPTIONS
Following the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering shares of
common stock reserved for issuance under our stock option plans. The
registration statement on Form S-8 will become effective automatically upon
filing. As of the date of this prospectus, options to purchase shares of
common stock were granted under our 1997 Stock Option Plan 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. 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 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 directly or indirectly, 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 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.
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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 $ .
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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, in each case, qualified in all
respects by reference to that exhibit. 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.
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, 15,692,600 and 19,150,400 shares issued and
outstanding in 1998 and 1999, respectively.............. 157 191
Additional paid-in capital................................ 1,937 14,123
Stock subscription receivable............................. (11) --
Deferred contra revenue................................... -- (353)
Deferred compensation..................................... -- (916)
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>
Revenues.............................................. $ 1,094 $ 3,617 $ 8,227
Cost of revenues...................................... 748 2,774 5,023
---------- ----------- -----------
Gross profit.......................................... 346 843 3,204
Operating expenses:
Sales and marketing................................. 261 1,023 1,840
General and administrative.......................... 514 934 2,757
Depreciation and amortization....................... 67 181 519
Research and development............................ 101 153 495
---------- ----------- -----------
Total operating expenses.............................. 943 2,291 5,611
---------- ----------- -----------
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.................................. 11,357,907 14,839,116 16,928,474
========== =========== ===========
</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 DEFERRED STOCK
------------------------ PAID-IN DEFERRED CONTRA SUBSCRIPTION
SHARES AMOUNT CAPITAL COMPENSATION REVENUE RECEIVABLE
---------- -------- ---------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996...... 9,404,200 $ 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...... 12,697,200 127 952 -- (42)
Sale of common stock.............. 2,995,400 30 985 -- -- --
Repayment of stock subscription
receivable...................... -- -- -- -- 31
Net loss.......................... -- -- -- -- --
---------- ---- ------- ----- ----- ----
Balance at December 31, 1998...... 15,692,600 157 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...... 19,150,400 $191 $14,123 $(916) $(353) $ --
========== ==== ======= ===== ===== ====
<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 revenues....................................... 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
companies 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
Revenues derived from custom market research projects, database marketing
services and other analytical services are recognized ratably over the term of
the contract using the percentage of completion method. Under this method,
revenues are recognized based on costs incurred to date in relation to total
estimated costs for the contract. 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.
Revenues from the license of the Company's hosted customer relationship
management platform are recognized ratably over the term of the license.
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.
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)
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.
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 to 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
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)
EMPLOYEES, and complies with the disclosure provisions of Statement of Financial
Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION
("SFAS 123").
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 periodically reviews the carrying value of its long-lived assets
in determining the ultimate recoverability of their unamortized values using
future undiscounted cash flow analyses. Such a review has been performed by
management and does not indicate an impairment of such assets.
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.
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, (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 at 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............................ 11,357,907 14,839,116 16,928,474
----------- ----------- -----------
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. 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......................... 11,357,907 14,839,116 16,928,474
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>
Revenue recognized from AMFMi........................ $ -- $ 229 $3,251
Contra revenue due to warrants issued.............. -- (117)
----- ------ ------
Net AMFMi revenue.................................... -- 229 3,134
----- ------ ------
Revenue recognized from other related parties........ 4 41 33
----- ------ ------
Total revenue recognized from related parties........ $ 4 $ 270 $3,167
===== ====== ======
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
Other............................................ 4 4 --
----- ------ ------
$ 146 $ 797 $ 546
===== ====== ======
DUE FROM RELATED PARTIES
Stockholders....................................... $ -- $ 14 $ 63
Affiliates......................................... -- 210 312
----- ------ ------
$ -- $ 224 $ 375
===== ====== ======
DUE TO RELATED PARTIES
Stockholders....................................... $ 152 $ 525 $ 74
===== ====== ======
</TABLE>
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 at
December 31, 1999 and has recorded consulting expenses of $149 for the year
ended December 31, 1999.
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
11. RELATED PARTY TRANSACTIONS (CONTINUED)
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 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. 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.
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's investment in AMFMi. CD/AMFMi was assigned a 3% interest
in the general partner's interest in the Wand investment. Employees of the
Company were granted limited partnership interests in CD/AMFMi. Compensation
expense amounting to $7 was recognized by the Company related to the interests
granted to employees.
The Company owns 11% of the outstanding LLC units of CD/AMFMi LLC, and in
1999, certain Company employees were granted an aggregate of 89% of the
outstanding LLC units by the Company.
12. 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.................................................. 831 1,325
Revenue in excess of billings........................... 136 25
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
Billings in excess of 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>
Revenues.................................................... $ 4,561 $ 4,185
Cost of revenues............................................ 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................................... (165) (494)
Revenue in excess of billings......................... (80) 111
Prepaid expenses and other assets..................... 115 31
Accounts payable and accrued expenses................. (218) 107
Billings in excess of 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 of the
operations, 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, adjusted to reflect only those operations acquired by Cyber
Dialogue. 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) contingent cash consideration of $1,750 payable on July 31, 2000;
iv) contingent 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.
F-23
<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
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
Revenues are recorded using the percentage-of-completion method. Under this
method, revenues are recognized based on costs incurred to date in relation to
total estimated costs for the contract. Direct costs include salaries and
benefits and other direct costs incurred on individual contracts. 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 occurs.
Certain events in 1999 caused the Company to revise its estimate of losses
incurred in connection with a significant contract which commenced in 1998. As a
result, 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.
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.
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)
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>
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
F-25
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
5. DEBT AND INTEREST EXPENSE (CONTINUED)
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.
YHI's debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Term Loan due in installments through March 30, 2004........ $4,625 $4,500
Revolver due March 25, 2004................................. 1,270 3,000
------ ------
5,895 7,500
====== ======
Less current portion of debt................................ (125) (1,250)
------ ------
Long-term debt.............................................. $5,770 $6,250
====== ======
</TABLE>
On March 25, 1998, YHI entered into a credit agreement with a financial
institution (the "YHI Credit Agreement") which provides for a term loan facility
of $5,000 (the "Term Loan") and a revolving credit facility of $3,000 (the
"Revolver"), which was subsequently amended on June 30, 1999. The Term Loan (as
amended) is repayable in 20 quarterly installments comprised of: i) four
installments of $125 commencing on June 30, 1998 and ending on March 31, 1999;
ii) one installment of $750 due on June 30, 2000; and iii) the remaining fifteen
installments in the amount of $250 each. The Revolver expires on March 25, 2004,
and the amount outstanding under the Revolver at any point in time is limited by
a borrowing base calculation corresponding to the amount of billed accounts
receivable. The interest rates (as amended) on both the Term Loan and Revolver
are based upon a Base Rate (Prime Rate, or Federal Funds Rate plus .50%) plus
1.50% or, at the Company's option, LIBOR plus 3.00%, with interest periods of
one, two, three or six months on each individual borrowing, at YHI's option.
Accrued interest is payable monthly or at the end of each interest period, but
at a minimum quarterly, and there is a commitment fee of 50 basis points on the
unused balance of the Revolver, payable quarterly. The YHI Credit Agreement also
contains provisions as to mandatory prepayments under certain circumstances such
as asset sales and Excess Cash Flow (as defined) and is secured by substantially
all the assets of YHI.
The YHI Credit Agreement contains various financial and other covenants
including those related to minimum EBITDA (earnings before interest, taxes,
depreciation and amortization), interest coverage ratio, cash flow leverage
ratio, fixed charge coverage ratio, current ratio and maximum capital
expenditures, as well as certain limitations such as those on debt, liens,
investments and asset sales. Certain equity infusions are included within the
definition of EBITDA.
The YHI Credit Agreement was further amended on January 25, 2000 in
connection with the sale of the Company to Cyber Dialogue, including the release
of all liens against the Company's assets. In connection with the amendment, the
$3,000 portion of the sale consideration was applied as a repayment to the YHI
Revolver and the stock consideration was pledged as collateral.
F-26
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
6. RELATED PARTY TRANSACTIONS
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
and the related interest expense; and iii) an estimation of the portion of YHI's
corporate general and administrative expense attributable to the Company.
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.
In addition, the Company performs services for its affiliate, Yankelovich
Partners Inc. Revenues related to such services and reflected in the statements
of operations totaled $1,666 in 1999.
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.
7. 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.
8. 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 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.
F-27
<PAGE>
APPLIED INFORMATION MANAGEMENT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, 1999
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
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.
9. 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.
10. 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-28
<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 revenues......................................... 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, 19,150,400 actual shares and 20,032,076 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 contra revenue................................... (353) -- -- (353)
Deferred compensation..................................... (916) -- -- (916)
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.
(3) Reflects 881,676 additional shares issued as partial consideration for the
Company's acquisition of AIM.
(4) Reflects elimination of YMSI's net investment in AIM, as required by
application of the purchase method of accounting for business combinations.
F-29
<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>
Revenues...................................... $ 8,227 $ 4,185 $ -- $ 12,412
Cost of revenues.............................. 5,023 4,029 -- 9,052
----------- ------- ----- -----------
Gross profit.................................. 3,204 156 -- 3,360
Operating expenses
Sales and marketing......................... 1,840 507 -- 2,347
General and administrative.................. 2,757 2,186 -- 4,943
Depreciation and amortization............... 519 1,301 793(1) 2,613
Research and development.................... 495 -- -- 495
----------- ------- ----- -----------
Total operating expenses...................... 5,611 3,994 793 10,398
----------- ------- ----- -----------
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 $ (0.15) $ (0.43)
loss per share..............................
Actual and pro forma weighted average shares 16,928,474 17,810,150(2)
outstanding.................................
</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-30
<PAGE>
[Logo: Arc 360 DEG.]
Graphic: Line across the page with an arrow pointing to the right.
Text: Above the line are headings entitled "COLLECT"; "CLEAN & STORE";
"ANALYZE"; "DECISION SUPPORT"; and "TARGETED ACTION".
Graphic: Vertical line under heading "COLLECT" leading to orange circle.
Text: Under circle: "Registration Date".
Graphic: Below and diagonally to left of text, orange circle.
Text: Under circle: "Log Files".
Graphic: Below and diagonally to right of text, and directly beneath text
"Registration Date", orange circle.
Text: Under circle: "Survey Responses".
Graphic: Below text, orange circle.
Text: Under circle: "Ad Stream".
Graphic: Below and diagonally to left of text, and directly beneath text "Log
Files", orange circle.
Text: Under circle: "E-commerce Transaction".
Graphic: Below and diagonally to right of text, orange circle.
Text: Under circle: "Off Line Sources".
Graphic: Vertical line under heading "CLEAN & STORE" leading to large white
circle.
Text: Inside circle: "Data Warehouse".
Graphic: Vertical line under heading "ANALYZE" leading to first of five
vertically aligned blue circles.
Text: Under first circle: "Customer Profitability"; Under second circle:
"Customer Segmentation"; Under third circle: "Retention/Attrition"; Under fourth
circle: "Cross-sell Modeling"; Under fifth circle: "Response Rate Modeling".
Graphic: Vertical line under heading "DECISION SUPPORT" leading to first of four
vertically aligned light blue circles.
Text: Under first circle: "Content Priorities"; Under second circle: "Value
Segmentation"; Under third circle: "Traffic Reports"; Under fourth circle: "Ad
Impressions".
Graphic: Vertical line under heading "TARGETED ACTION" leading to first of four
vertically aligned white circles.
Text: Under first circle: "Banner Ads"; Under second circle: "E-mail Campaigns";
Under third circle: "Personalization"; Under fourth circle: "Loyalty Programs".
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
[CYBER DIALOGUE LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
SG COWEN
BANC OF AMERICA SECURITIES LLC
ING BARINGS
February , 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.......................................... $
Accounting fees and expenses................................ $
Legal fees and expenses..................................... $
Director and officer insurance expenses..................... $
Printing and engraving...................................... $
Transfer Agent fees and expenses............................ $
Blue sky fees and expenses.................................. $
Miscellaneous expenses...................................... $
----------
Total..................................................... $
==========
</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
II-1
<PAGE>
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.
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 $200,975.000 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.
II-2
<PAGE>
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.
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 February 17, 2000, the registrant granted stock
options to its employees under its stock option plans as follows: (a) options to
purchase 85,000 shares at $3.39 per share, (b) options to purchase 135,000
shares at $8.06 per share, and (c) options to purchase 10,000 shares at $10.50
per share.
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 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.
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.
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.
10.4 Form of Cyber Dialogue Inc. Amended and Restated 1997 Stock
Option Plan Nonqualified Stock Option Agreement.
10.5* 2000 Equity Incentive Plan.
10.6* Employee Stock Purchase Plan.
10.7* 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.
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.
</TABLE>
- ------------------------
* To be filed by amendment.
+ 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 February 17, 2000.
<TABLE>
<S> <C> <C>
CYBER DIALOGUE INC.
BY: /S/ MARK ESIRI
-----------------------------------------
Name: Mark Esiri
Title: Chief Executive Officer,
President and Director
</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>
/s/ BRUCE W. SCHNITZER Chairman of the Board of
------------------------------------------- Directors February 17, 2000
Bruce W. Schnitzer
/s/ MARK ESIRI Chief Executive Officer,
------------------------------------------- President and Director February 17, 2000
Mark Esiri
/s/ C. ANDREW WATT Chief Financial Officer and
------------------------------------------- Secretary February 17, 2000
C. Andrew Watt
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID J. CALLARD Director
------------------------------------------- February 17, 2000
David J. Callard
/s/ CHRIS FORESTER Director
------------------------------------------- February 17, 2000
Chris Forester
/s/ JOHN FULLMER Director
------------------------------------------- February 17, 2000
John Fullmer
/s/ TIM TOBEN Director
------------------------------------------- February 17, 2000
Tim Toben
</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.
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.
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.
10.4 Form of Cyber Dialogue Inc. Amended and Restated 1997 Stock
Option Plan Nonqualified Stock Option Agreement.
10.5* 2000 Equity Incentive Plan.
10.6* Employee Stock Purchase Plan.
10.7* 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- --------------------- ------------------------------------------------------------
<C> <S>
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.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
<PAGE>
Exhibit 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
CYBER DIALOGUE INC.
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
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
SECTION 1.1 The Merger........................................................2
SECTION 1.2 Closing...........................................................2
SECTION 1.3 Effective Time....................................................2
SECTION 1.4 Effects of the Merger.............................................3
SECTION 1.5 Certificate of Incorporation and
By-laws of the Surviving Corporation................3
SECTION 1.6 Directors and Officers of the
Surviving Corporation...............................3
SECTION 1.7 Supplementary Action..............................................3
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 Effect on the Stock of the Constituent Corporations...............4
SECTION 2.2 Exchange of Certificates.........................................10
SECTION 2.3 Stock Options....................................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
AIM AND YHI
SECTION 3.1 Organization.....................................................13
SECTION 3.2 Capitalization...................................................14
SECTION 3.3 Authority........................................................14
SECTION 3.4 Consents and Approvals; No Violations............................15
SECTION 3.5 Financial Statements; Undisclosed
Liabilities........................................16
SECTION 3.6 Absence of Certain Changes or Events.............................16
SECTION 3.7 No Default .....................................................18
<PAGE>
SECTION 3.8 Litigation.......................................................18
SECTION 3.9 Compliance with Applicable Law...................................18
SECTION 3.10 Contracts........................................................19
SECTION 3.11 Intellectual Property............................................22
SECTION 3.12 Year 2000........................................................25
SECTION 3.13 Taxes............................................................25
SECTION 3.14 Employee Benefit Plans; Labor Relations..........................27
SECTION 3.15 Accounts Receivable..............................................29
SECTION 3.16 Environmental Matters............................................30
SECTION 3.17 Bank Accounts....................................................31
SECTION 3.18 Real Property; Leases; Equipment, Etc............................31
SECTION 3.19 Insurance........................................................33
SECTION 3.20 Absence of Questionable Payments.................................33
SECTION 3.21 Powers of Attorney; Guarantees...................................34
SECTION 3.22 Disclosure.......................................................34
SECTION 3.23 Securities Laws Matters..........................................34
SECTION 3.24 Loans to YHI.....................................................35
SECTION 3.25 Warranty Claims..................................................35
SECTION 3.26 Tax-Free Reorganization..........................................35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CDI
SECTION 4.1 Organization; Subsidiaries.......................................35
SECTION 4.2 Capitalization...................................................37
SECTION 4.3 Authority........................................................37
SECTION 4.4 Consents and Approvals; No Violations............................38
SECTION 4.5 Financial Statements; Undisclosed
Liabilities......................................................38
SECTION 4.6 Material Adverse Change..........................................39
SECTION 4.7 No Default ......................................................39
SECTION 4.8 Litigation.......................................................39
SECTION 4.9 Taxes............................................................40
SECTION 4.10 Compliance with Applicable Law...................................40
SECTION 4.11 Merger Sub.......................................................41
SECTION 4.12 CDI Common Stock.................................................41
SECTION 4.13 Disclosure.......................................................42
SECTION 4.14 Tax-Free Reorganization..........................................42
ii
<PAGE>
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business Pending the Merger...........................42
SECTION 5.2 AIM Covenants....................................................42
SECTION 5.3 CDI Covenants....................................................45
SECTION 5.4 401(k) Plan Transfer.............................................45
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Shareholder Approval.............................................46
SECTION 6.2 Access to Information............................................46
SECTION 6.3 Notification of Certain Matters..................................46
SECTION 6.4 Supplemental Disclosure..........................................46
SECTION 6.5 Best Efforts.....................................................47
SECTION 6.6 Certain Employment Agreements....................................47
SECTION 6.7 Merger Sub Board.................................................47
SECTION 6.8 Shareholder Loans ...............................................47
SECTION 6.9 AIM Benefit Plans................................................47
SECTION 6.10 AIM Shareholder Buy/Sell Agreement...............................48
SECTION 6.11 Tax-Free Reorganization..........................................48
SECTION 6.12 Qualification as a Foreign Corporation...........................48
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligation
To Effect the Merger.............................................48
SECTION 7.2 Conditions of Obligations of AIM.................................49
SECTION 7.3 Conditions of Obligations of CDI.................................50
iii
<PAGE>
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination......................................................52
SECTION 8.2 Effect of Termination............................................53
ARTICLE IX
SECURITIES LAW MATTERS
SECTION 9.1 Disposition of Shares............................................53
SECTION 9.2 Legend...........................................................53
ARTICLE X
SURVIVAL AND INDEMNIFICATION
SECTION 10.1 Survival Periods. .............................................54
SECTION 10.2 Indemnification of CDI..........................................54
SECTION 10.3 Indemnification of YHI..........................................56
SECTION 10.4 Indemnification Procedures......................................57
SECTION 10.5 Insurance.......................................................59
SECTION 10.6 Sole Remedies...................................................59
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Expenses........................................................59
SECTION 11.2 Brokers or Finders..............................................59
SECTION 11.3 Amendment.......................................................59
SECTION 11.4 Extension; Waiver...............................................60
SECTION 11.5 Notices.........................................................60
SECTION 11.6 Descriptive Headings............................................61
SECTION 11.7 Counterparts....................................................61
SECTION 11.8 Entire Agreement; No Third Party
Beneficiaries...................................................61
iv
<PAGE>
SECTION 11.9 Governing Law; Arbitration......................................62
SECTION 11.10 Publicity.......................................................62
SECTION 11.11 Assignment......................................................62
SECTION 11.12 Specific Performance............................................63
Exhibit A AIM Board Resolutions Approving Merger
Exhibit B YHI Board Resolutions Approving Merger
Exhibit C YHI Sole Stockholder Resolutions Approving Merger
Exhibit D Merger Sub Board Resolutions Approving
Merger
Exhibit E CDI Board Resolutions Approving Merger
Exhibit F CDI Sole Stockholder Resolutions Approving Merger
Exhibit G Form of Employment Agreement by and between AIM and
Scott Morrison
Exhibit H Form of Nonsolicitation Agreement by and between AIM, CDI
and YHI
Exhibit I Lock-up Agreement by and between YHI and SG Cowen
Exhibit J Services Agreement by and between Applied Information
Management Marketing, Inc., Cyber Dialogue Inc. and
Yankelovich Holdings Inc.
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of February 3, 2000, by and among Cyber Dialogue Inc., a Delaware corporation
("CDI"), AIM Acquisition I Inc., a Delaware corporation and wholly-owned
subsidiary of CDI ("Merger Sub"), Yankelovich Holdings Inc., a Delaware
corporation ("YHI") and Applied Information Management Marketing, Inc., a
Delaware corporation and wholly-owned subsidiary of YHI ("AIM").
WHEREAS, each of CDI, Merger Sub, YHI and AIM desires to
enter into a transaction whereby AIM will merge with and into Merger Sub (the
"Merger"), with Merger Sub being the surviving corporation, upon the terms and
subject to the conditions set forth in this Agreement, whereby issued and
outstanding shares of common stock, par value $.01 per share, of AIM ("AIM
Common Stock") will be converted into the right to receive the Merger
Consideration (as defined in Section 2.1);
WHEREAS, the respective Boards of Directors of CDI, Merger
Sub, YHI and AIM have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their
respective business strategies and goals and are advisable and in the best
interests of their respective stockholders;
WHEREAS, CDI, as the sole stockholder of Merger Sub, and YHI,
as the sole stockholder of AIM, have each approved and adopted the Agreement;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, for federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
rules and regulations under the Code, and that this Agreement is intended to
be, and hereby is adopted as, a plan of reorganization within the meaning of
Section 368 of the Code.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), AIM shall be merged with and into Merger Sub at
the Effective Time (as defined in Section 1.3). Following the Effective Time,
Merger Sub shall be the surviving corporation (sometimes referred to herein as
the "Surviving Corporation").
SECTION 1.2 CLOSING. The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VII, at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York, unless
another time, date or place is agreed to by the parties hereto. At the Closing,
there shall be delivered to CDI and AIM certificates and other documents and
instruments required to be delivered under Articles VI and VII hereof.
SECTION 1.3 EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, a certificate of merger
(the "Certificate of Merger") shall be properly executed and duly filed with the
Secretary of State of the State of Delaware as provided in the DGCL. The Merger
shall become effective upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (the "Effective Time").
SECTION 1.4 EFFECTS OF THE MERGER. At the Effective Time (a) the
separate existence of AIM shall cease and AIM shall be merged with and into
Merger Sub (AIM and Merger Sub are sometimes referred to herein as the
"Constituent Corporations") and (b) the Merger shall have the effects set forth
in Section 259 of the DGCL.
SECTION 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The Certificate of Incorporation, as amended to effect a name
change of Merger Sub to Applied Information Management Marketing, Inc.
immediately upon the Effective Time, shall, as a result of the Merger, be the
Certificate of Incorporation of the Surviving Corporation; and the By-laws of
Merger Sub shall, as a result of the Merger, be the By-laws of the Surviving
Corporation.
2
<PAGE>
SECTION 1.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of the Surviving Corporation shall be the directors of Merger Sub in
office immediately prior to the Effective Time, and the officers of the
Surviving Corporation shall be the officers of Merger Sub in office immediately
prior to the Effective Time, in each case, until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation.
SECTION 1.7 SUPPLEMENTARY ACTION. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
assignments or assurances are necessary or desirable to vest or to perfect or
confirm of record in the Surviving Corporation the title to any property or
rights of either of the Constituent Corporations, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered on behalf of the respective
Constituent Corporations, in the name of and on behalf of the appropriate
Constituent Corporation, to execute and deliver any and all things necessary or
proper to vest or to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes and provisions of
this Agreement.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 EFFECT ON THE STOCK OF THE CONSTITUENT CORPORATIONS. As of
the Effective Time, by virtue of the Merger and without any action on the part
of the holders of any shares of stock of the Constituent Corporations:
(a) CANCELLATION OF TREASURY SHARES. Each share of AIM Common
Stock held in the treasury of AIM shall automatically be cancelled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(b) CONVERSION OF AIM COMMON STOCK. Each share of AIM Common
Stock issued and outstanding immediately prior to the Effective Time, other than
shares to be cancelled in accordance with Section 2.1(a), shall automatically be
converted into and become the right to receive three thousand dollars ($3,000)
and 881.676 fully paid and nonassessable shares of common stock, par value $.01
per share (the "CDI Common Stock"), of CDI (the "Merger Consideration") (for an
aggregate Merger Consideration of three million dollars ($3,000,000) and 881,676
3
<PAGE>
shares of CDI Common Stock. As of the Effective Time, all such shares of AIM
Common Stock shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such AIM Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration upon
surrender of such certificate. In no event shall interest be paid or accrued on
the Merger Consideration.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. At the Effective Time, the Surviving
Corporation shall issue to, and each holder of certificates which immediately
prior to the Effective Time represented outstanding AIM Common Stock (the
"Certificates") shall receive, upon surrender to the Surviving Corporation of
one or more Certificates for cancellation, certificates representing the number
of shares of CDI Common Stock and the amount of cash which such holder of
Certificates has the right to receive as Merger Consideration pursuant to
Section 2.1.
(b) TRANSFER TAXES. If any certificates for any shares of CDI
Common Stock are to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay to the Surviving
Corporation any transfer or other taxes required by reason of the issuance of
certificates for such shares of CDI Common Stock in a name other than that of
the registered holder of the Certificate surrendered, or shall establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Surviving Corporation nor
any party hereto shall be liable to a holder of Certificates for any shares of
CDI Common Stock or dividends thereon delivered to a public official pursuant to
applicable escheat laws.
(c) CLOSING TRANSFER BOOKS. From and after the Effective Time,
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of AIM Common Stock that were
outstanding immediately prior to the Effective Time.
SECTION 2.3 STOCK OPTIONS. At the Effective Time, each then-outstanding
option granted by YHI to employees of AIM to purchase shares of YHI common
stock, whether or not then exercisable or fully vested ("YHI OPTION"), shall be
cancelled by YHI. At such time as the YHI Options are cancelled, CDI shall grant
to each employee of AIM that had previously been granted a YHI Option which has
been cancelled in accordance with this Section an option ("SUBSTITUTE OPTION")
to
4
<PAGE>
acquire the number of shares of CDI common stock, rounded down to the nearest
whole share, equal to the number of shares of YHI common stock subject to such
YHI Option multiplied by the Exchange Ratio (as defined below), at an exercise
price per share of CDI common stock, rounded up to the nearest whole cent, equal
to the exercise price for each share of YHI common stock subject to such YHI
Option divided by the Exchange Ratio; PROVIDED, HOWEVER, that in the case of any
YHI Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code, the
exchange formula shall be adjusted if necessary to comply with Section 424(a) of
the Code. Each Substitute Option shall be subject to the same terms and
conditions (including, without limitation, expiration date, vesting and
exercise provisions) as were applicable to the YHI Option immediately prior to
the Effective Time. For purposes of this Section 2.3. the "Exchange Ratio" shall
be the fair market value of the YHI common stock as of the Effective Time,
divided by $6.27.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIM
AND YHI
AIM and YHI jointly and severally represent and warrant to
each of CDI and Merger Sub as follows:
SECTION 3.1 ORGANIZATION. AIM is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and corporate authority to own, lease and operate
its properties and to carry on its business as now being conducted. Except as
set forth in Section 3.1 of the disclosure schedule to be delivered to CDI
prior to the date of this Agreement (the "AIM Disclosure Schedule"), AIM is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed and in good standing would not
have a material adverse effect on AIM. AIM has heretofore delivered to CDI
accurate and complete copies of its Certificate of Incorporation and By-laws as
in effect as of the date of this Agreement. Section 3.1 of the AIM Disclosure
Schedule sets forth a complete and accurate list of all jurisdictions in which
AIM is qualified or licensed to do business. AIM has no subsidiaries and, except
as set forth in Section 3.1 of the AIM Disclosure Schedule, no equity interest
or other investment, direct or indirect, in any corporation, partnership, joint
venture or other entity.
SECTION 3.2 CAPITALIZATION.
(a) The authorized capital stock of AIM consists of 1,000
shares of AIM Common Stock, of which, immediately prior to Closing, 1,000 shares
will be issued and outstanding and no shares will be held in treasury. Except
as set forth in Section 3.2 of the AIM Disclosure Schedule, all the outstanding
shares of AIM Common Stock are duly authorized, validly issued, fully paid and
non-assessable and free of any preemptive rights in respect thereto. Except as
set forth above and in Section 3.2 of the AIM Disclosure Schedule, there are no
outstanding options, warrants, calls, subscriptions, contracts, voting trusts,
proxies or other rights or other agreements or commitments obligating AIM to
issue or sell or cause to be issued or sold any shares of capital stock of, or
other equity interests in, AIM or securities convertible into or exchangeable
for such shares or equity interests.
(b) YHI is, and on the Closing Date shall be, the sole record
and beneficial owner and holder of all of the shares of AIM Common Stock issued
and outstanding, and upon surrender at the Closing, the AIM Common Stock held by
YHI will be free and clear of all encumbrances of any nature whatsoever.
SECTION 3.3 AUTHORITY. Each of YHI and AIM has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Boards of Directors of AIM and YHI and approved by YHI as the
sole stockholder of AIM, and no other corporate proceedings on the part of AIM
or YHI are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. The resolutions of the Boards of Directors of
AIM and YHI and the resolutions of YHI as the sole stockholder of AIM reflecting
such approval are attached hereto as Exhibits A, B and C, respectively. This
Agreement has been duly and validly executed and delivered by AIM and YHI and
constitutes a valid and binding obligation of each of AIM and YHI enforceable
against each of them in accordance with its terms, except as enforcement may be
limited by general principles of equity, whether applied in a court of law or a
court of equity, and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
SECTION 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
in Section 3.4 of the AIM Disclosure Schedule, and except for filings and
approvals
5
<PAGE>
which may be required under the DGCL, neither the execution or delivery of this
Agreement by AIM and YHI nor the consummation by AIM and YHI of the transac
tions contemplated hereby nor compliance by AIM with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
Certificate of In corporation or By-laws of AIM or YHI, (ii) require any filing
with, or authorization, consent or approval of any government, executive
official thereof, governmental or regulatory authority, agency or commission,
including courts of competent jurisdiction, domestic or foreign
(a "Governmental Entity"); (iii) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or
acceleration or result in the creation of any mortgage, pledge, charge,
security interest, claim or encum brance of any kind (collectively a "Lien"))
or require any authorization, consent or approval under, any material note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which AIM or YHI is a party or by which either of
their assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to AIM or YHI or any of their
respective assets.
SECTION 3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Section 3.5(a) of the AIM Disclosure Schedule contains the
unaudited balance sheets of AIM as of December 31, 1998 as of October 31, 1999
and the related statements of income for such fiscal year and ten-month period,
respectively. The balance sheets fairly present, and the December 31, 1999
balance sheet will fairly present, in all material respects, the financial
position of AIM as of their respective dates, and the statements of income
fairly present, and the December 31, 1999 statements of income and cash flows
will fairly present, in all material respects, the results of operations and
cash flows, respectively, of AIM for the periods therein set forth, in each case
in accordance with GAAP consistently applied during the periods involved
(subject to normal year-end adjustments in the case of the ten-month period
ended October 31, 1999 and subject to certain adjustments such as those required
pursuant to SEC Staff Accounting Bulletin No. 55 concerning push-down
accounting). The audited financial statements for the years ended December 31,
1998 and 1999, and the opinion of Ernst & Young LLP, AIM's certified
independent accountant, will be provided to CDI no later than February 14, 2000.
(b) Except as set forth in Section 3.5(b) of the AIM
Disclosure Schedule, AIM does not have any liabilities or obligations of any
material nature (whether absolute, accrued, contingent, or otherwise and whether
due or to become due) that were not fully reflected or reserved against in the
balance sheet as of
6
<PAGE>
October 31, 1999, and will not for the year ended December 31, 1999, except for
liabilities and obligations which were incurred in the ordinary course of
business consistent with past practice since the date thereof.
(c) As of the Effective Time, the revenue backlog is an amount
not less than $2.2 million; and Section 3.5(c) of the AIM Disclosure Schedule
sets forth a complete list of all contracts comprising this backlog.
SECTION 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in Section 3.6 of the AIM Disclosure Schedule, since October 31, 1999, AIM has
conducted its business only in the ordinary course, and there has not been any:
(a) material adverse change in the business, assets,
prospects, results of operations or financial condition ("Material Adverse
Change") of AIM;
(b) change in AIM's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of AIM;
issuance of any security convertible into such capital stock; grant of any
registration rights by AIM; purchase, redemption, retirement, or other
acquisition by AIM of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
(c) amendment to the Certificate of Incorporation or By-laws
of AIM;
(d) payment by AIM of any bonuses or compensation other than
regular salary or bonus payments to employees, or increase in the salaries, or
payment on any debt of AIM, to any shareholder, director, officer, or employee,
or entry into any employment, severance, or similar contract with any director,
officer, or employee;
(e) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any employees of
AIM;
(f) damage to or destruction or loss of any asset or property
of AIM, whether or not covered by insurance, in excess of $25,000;
(g) termination of, receipt of notice, or actions or omissions
which would give rise to a right of termination of any license, maintenance,
distributorship,
7
<PAGE>
dealer, sales representative, joint venture, credit, or similar agreement that
would be reasonably likely to result in a Material Adverse Change of AIM;
(h) termination of or receipt of notice of termination of any
AIM Contract (as defined in Section 3.10) or transaction involving a total
remaining commitment by AIM of at least $10,000;
(i) loan or advance by AIM to any person other than sales to
customers on credit in the ordinary course of business, or discharge or
satisfaction of any material liability except in the ordinary course of
business;
(j) sale, lease, or other disposition of any material asset or
property of AIM;
(k) mortgage, pledge, or imposition of any Lien or other
encumbrance on any asset or property of AIM;
(l) cancellation or waiver of any claims or rights, except in
the ordinary course of business, with a value to AIM in excess of $10,000;
(m) change in the tax or financial accounting methods used by
AIM or change of any election for federal income tax purposes; or
(n) agreement, whether oral or written, by AIM to do any of
the foregoing.
SECTION 3.7 NO DEFAULT. Except as set forth in Section 3.7 of the AIM
Disclosure Schedule, AIM is not in default or violation (and no event has
occurred that with or without notice or lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) its Certificate
of Incorporation or By-laws, (ii) any material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
AIM is a party or by which its assets may be bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to AIM or any of its
assets.
SECTION 3.8 LITIGATION. Except as set forth in Section 3.8 of the AIM
Disclosure Schedule, AIM is not a party to any, and there are no pending or, to
the knowledge of AIM and YHI, threatened legal, administrative, arbitration or
other proceedings, claims, actions, suits or governmental investigations of any
nature involving, affecting or relating to AIM, or challenging the validity or
propriety of the
8
<PAGE>
transactions contemplated in this Agreement; and there is not known to AIM any
reasonable basis for any such proceedings, claim, action or governmental
investiga tion. AIM is not a party to any order, judgment or decree which will,
or might reasonably be expected to, affect its business, operations, properties,
assets, financial condition, prospects or results of operations or its ability
to acquire any property or conduct business in any area in which it presently
does business.
SECTION 3.9 COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
Section 3.9 of the AIM Disclosure Schedule, AIM has all permits, licenses,
franchises and other governmental authorizations necessary and material to
conduct its business as presently conducted. The business of AIM is presently
being conducted so as to comply in all material respects with all federal, state
and local governmental laws, rules, regulations, orders, writs, injunctions and
decrees applicable to AIM and AIM has not received notice of violation of, and
does not know of any violations of any of the above. To the knowledge of AIM and
YHI, no suspension or cancellation of any material license, franchise, permit or
authorization is threatened.
SECTION 3.10 CONTRACTS.
(a) Sections 3.10(a)(i) through (xii) of the AIM Disclosure
Schedule contain a complete and accurate list of each contract, lease,
agreement, promise or undertaking (written or oral, express or implied),
currently in effect to which AIM is a party and which is described in (i)
through (xii) below, respectively (collectively, the "AIM Contracts"):
(i) each AIM Contract that involves performance of services
or delivery of goods or materials by AIM or to AIM in an amount or value in
excess of $25,000 (unless otherwise listed in Section 3.10(a)(ii) through (xii)
of the AIM Disclosure Schedule);
(ii) each AIM Contract with directors, officers, employees,
former employees, agents or consultants, with respect to salaries, bonuses,
commissions, percentage compensation, pensions, deferred compensation or
retirement payments;
(iii) each agreement or arrangement for the sale of any AIM
stock, assets, or rights or for the grant of any preferential rights to purchase
any AIM stock, assets, or rights or which requires the consent of any third
party to the transfer and assignment of any of AIM stock, assets, or rights;
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(iv) each AIM Contract relating to the borrowing of money in
excess of $10,000 by AIM, or the creation of an encumbrance on the assets of AIM
valued at over $10,000;
(v) each AIM Contract for capital expenditures, for other
expenditures not in the ordinary course of business involving expenditures of
AIM, in each case, in excess of $10,000, or providing for an express undertaking
by AIM to be responsible for consequential damages;
(vi) each license agreement (regardless of whether AIM is
licensor or licensee) other than license agreements relating to off-the-shelf
computer software purchased by AIM for less than $5,000 per unit, maintenance or
support agreement, trial agreement, distribution, consulting, development or
escrow agreement, or other AIM Contract with respect to the use, development,
marketing and distribution of Intellectual Property (as defined in Section 3.11)
including agreements with former employees, consultants and contractors
regarding the development, appropriation or the non-disclosure of any
Intellectual Property and any written settlement or consent relating to any
Intellectual Property (unless otherwise listed in Sections 3.11 of the AIM
Disclosure Schedule);
(vii) each AIM Contract with employees, officers and directors
(unless otherwise listed in Section 3.10(a)(ii) or (viii) of the AIM Disclosure
Schedule), relating to wages, hours, and other conditions of employment;
(viii) each AIM Contract to which, to AIM's and YHI's
knowledge, any employee, consultant, or contractor of AIM is bound that in any
manner purports to (A) restrict such employee's, consultant's, or contractor's
freedom to engage in any line of business or activity or to compete with any
other person, or (B) assign to any other person such employee's, consultant's,
or contractor's rights to any copyright, software, invention, improvement, or
discovery (unless otherwise listed in Section 3.10(a)(vi) or (vii) of the AIM
Disclosure Schedule);
(ix) each joint venture, partnership, and other AIM
Contract involving a sharing of profits, losses, costs, or liabilities by AIM
with any other person (unless otherwise listed in Section 3.10(a)(x) of the AIM
Disclosure Schedule);
(x) each AIM Contract providing for payments to or by any
person based on sales, purchases, or profits, including distribution, reseller
and sales representative agreements, other than direct payments for goods by
end users of AIM's products;
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(xi) each written warranty, guaranty, and/or other similar
undertak ing with respect to contractual performance extended by AIM, other than
in the ordinary course of business;
(xii) each AIM Contract, agreement, arrangement or commitment
not elsewhere specifically disclosed pursuant to this Agreement, involving the
payment or receipt by AIM of more than $25,000 or which is otherwise material to
the business, operation or financial condition of AIM.
(b) Each of the AIM Contracts is in full force and effect and
enforce able in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance and similar debtor-creditor law and general
principles of equity. Except as set forth in Section 3.10(b) of the AIM
Disclosure Schedule, there exists no event of default or occurrence, condition
or act on the part of AIM or, to the knowledge of AIM and YHI, on the part of
the other parties to the AIM Contracts which constitutes or would constitute
(with or without notice or lapse of time or both) a breach of or default under
any of the AIM Contracts, or cause or permit acceleration of any obligation of
AIM, which individually or in the aggregate would have a material adverse effect
on AIM. To the knowledge of AIM and YHI, there are no renegotiations of,
attempts to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to AIM under current or completed AIM Contracts with any
person having the contractual or statutory right to demand or require such
renegotiation and no such person has made written demand for such renegotiation.
(c) Except as set forth in Section 3.10(c) of the AIM
Disclosure Schedule, no consent of any other party to the AIM Contracts is
required in order for the AIM Contracts to remain in full force and effect
following the Merger.
(d) Except as set forth in Section 3.10(d) of the AIM
Disclosure Schedule, AIM is not a party to any agreement which materially limits
the freedom of AIM to compete in any line of business in which it currently
operates or with any person.
SECTION 3.11 INTELLECTUAL PROPERTY.
(a) AIM owns or has the valid right to use all patents and
patent applications, trademarks, service marks, and trademark or service mark
registrations
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and applications, trade names, logos, designs, Internet domain names, slogans
and general intangibles of like nature, together with all goodwill related to
the foregoing, copyrights, copyright registrations, renewals and applications,
Software (as defined below), and to the knowledge of AIM and YHI, technology,
Trade Secrets (as defined in Section 3.11(e)) and other confidential
information, knowhow, property, proprietary processes, formulae, algorithms,
models and methodologies, licenses, agree ments and all other proprietary rights
(collectively, the "Intellectual Property"), used in the business of AIM as
currently conducted or as presently contemplated to be conducted. Section
3.11(a) of the AIM Disclosure Schedule sets forth, for the Intellectual Property
owned by AIM, a complete and accurate list of all U.S. and foreign (i) patents
and patent applications, (ii) trademark or service mark registrations and
applications, (iii) copyright registrations and applications, (iv) material
unregis tered copyrights other than in Software (which are covered by Section
3.11(i) below), service marks, trademarks, trade names, and slogans, and (v)
Internet domain names, indicating for each the applicable jurisdiction,
registration number (or application number) and date issued (or date filed).
(b) The Intellectual Property owned by AIM is free and clear
of all Liens except as specifically identified in Section 3.11(b) of the AIM
Disclosure Schedule. AIM is listed in the records of the appropriate United
States, state or foreign agency as the sole owner of record for each application
and registration listed in Section 3.11(a) of the AIM Disclosure Schedule.
(c) The registrations listed in Section 3.11(a) of the AIM
Disclosure Schedule are valid and subsisting, in full force and effect, and have
not been cancelled, expired, or abandoned. There is no pending or, to the best
of AIM's and YHI's knowledge, threatened opposition, interference or
cancellation proceeding before any court or registration authority in any
jurisdiction against the registrations listed in Section 3.11(a) of the AIM
Disclosure Schedule or, to the best of AIM's and YHI's knowledge, against any
Intellectual Property licensed to AIM pursuant to the License Agreements (as
defined below).
(d) Section 3.11(d) of the AIM Disclosure Schedule sets forth
a complete and accurate list of all material agreements pertaining to the use of
or granting any right to use or practice any rights under any Intellectual
Property, whether AIM is the licensee or licensor thereunder, and any written
settlements or consents relating to any Intellectual Property (collectively, the
"License Agree ments"), indicating for each the title, the parties, date
executed, and the Intellectual Property covered thereby. Except as set forth in
Section 3.11(d) of the AIM Disclosure Schedule, there are no settlements,
consents, judgments, or orders or other
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agreements to which AIM or YHI is a party or AIM or YHI otherwise has knowledge
which restrict AIM's rights to use any Intellectual Property, or permit third
parties to use any Intellectual Property which would otherwise infringe AIM's
Intellectual Property.
(e) AIM takes reasonable measures to protect the
confidentiality of its material trade secrets, know-how or other confidential
information (together, "Trade Secrets") including requiring employees and
independent contractors having access thereto to execute written non-disclosure
agreements. To AIM's and YHI's knowledge, no Trade Secret material to the
business of AIM as currently operated or planned to be operated has been
disclosed or authorized to be disclosed to any third party, including any
employee, agent, contractor or other entity, other than pursuant to a
non-disclosure agreement or other confidential obligation that adequately
protects AIM's proprietary interests in and to such Trade Secrets. To AIM's and
YHI's knowledge, no party to any non-disclosure agreement relating to AIM's
Trade Secrets is in breach thereof.
(f) To AIM's and YHI's knowledge, the conduct of AIM's
business as currently conducted or planned to be conducted does not infringe
upon any Intellectual Property owned or controlled by any third party. There
are no claims or suits pending or, to AIM's and YHI's knowledge, threatened, and
AIM has not received any notice of a third party claim or suit (i) alleging that
AIM's activities or the conduct of its businesses infringes upon or constitutes
the unauthorized use of the Intellectual Property rights of any third party, or
(ii) challenging the ownership, use, validity or enforceability of any
Intellectual Property.
(g) To AIM's and YHI's knowledge, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned by or licensed to or by AIM and, except as set forth in Section 3.11(g) of
the AIM Disclosure Sched ule, no such claims are pending against a third party
by AIM.
(h) The consummation of the Merger and the transactions contem
plated hereby will not result in the loss or impairment of AIM's right to own or
use any of the Intellectual Property nor require the consent of any Governmental
Entity or, except with respect to off-the-shelf Software purchased by AIM for
less than $5,000 per unit, third party in respect of any such Intellectual
Property.
(i) "Software" means any and all (i) computer programs,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (ii) databases and
compilations, including any
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and all data and collections of data, whether machine readable or otherwise,
(iii) descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing, (iv) domain names and the technology
supporting and content contained on the respective Internet site(s), and (v) all
documentation, including user manuals and training materials, relating to any
of the foregoing. Section 3.11(i) of the AIM Disclosure Schedule lists all
material computer programs and databases other than off-the-shelf applications
programs which are owned, licensed, leased or otherwise used by AIM in
connection with the operation of its businesses as currently conducted,
including any Software currently or previously, or contemplated to be, licensed,
sublicensed or sold by AIM, and identifies which is owned, licensed, leased, or
otherwise used, as the case may be.
(j) Each item of Software listed in Section 3.11(i) of the AIM
Disclosure Schedule is either (i) owned by AIM, (ii) currently in the public
domain or other wise available to AIM without the license, lease or consent of
any third party, or (iii) used under rights granted to AIM pursuant to a written
agreement, license or lease from a third party, which written agreement, license
or lease is set forth in Section 3.11(i) of the AIM Disclosure Schedule. To
AIM's and YHI's knowledge, AIM's use of the Software set forth in Section
3.11(i) of the AIM Disclosure Schedule in connection with the operation of its
business does not violate the rights of any third party. With respect to the
Software set forth in Section 3.11(i) of the AIM Disclosure Schedule which AIM
purports to own, such Software was either developed by (i) employees of AIM
within the scope of their employment; or (ii) independent contractors who have
assigned their rights to AIM pursuant to written agreements.
SECTION 3.12 YEAR 2000. All Date Data and Date-Sensitive Systems, as of
the date hereof, are, and as of the Closing Date, will be, Year 2000 Compliant,
except for off-the-shelf Software purchased by AIM whose failure to be Year 2000
Compli ant would not be reasonably likely to result in a Material Adverse Change
of AIM. "Date Data" means any data of any type that includes date information or
which is otherwise derived from, dependent on or related to date information.
"Date-Sensitive System" means any Software, microcode or hardware system or
component, including any electronic or electronically controlled system or
component, that processes any Date Data and that is installed, in development or
on order by AIM for its internal use, or which AIM sells, leases, licenses,
assigns or otherwise provides, or the provision or operation of which AIM
provides the benefit, to its customers, vendors, suppliers, affiliates or any
other third party. "Year 2000 Compliant" means (a) with respect to Date Data,
that such data is in proper format and accurate for all dates in the twentieth
and twenty-first centuries, and (b) with respect to Date-Sensitive Systems,
that each such system accurately processes all Date Data, including for the
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twentieth and twenty-first centuries, without loss of any functionality,
including but not limited to calculating, comparing, sequencing, storing and
displaying such Date Data (including all leap year considerations), when used as
a stand-alone system or in combination with other software or hardware. In
addition, AIM has not received written notice from any supplier of critical
information technology systems or material current product offerings of any
material Year 2000-related problem that affects AIM and would cause AIM to not
be Year 2000 compliant
SECTION 3.13 TAXES.
(a) Except as provided in Section 3.13(a) of the AIM
Disclosure Schedule, AIM (i) has, within the time and in the manner prescribed
by law, filed, or there has been filed on its behalf (and until the Closing
will, within the time and in the manner prescribed by law, file, or will be
filed on its behalf) all Tax Returns with respect to Taxes of AIM, including any
consolidated, combined or unitary tax return of an affiliated group of which AIM
is now or ever was a member, and all such Tax Returns are complete and accurate
in all respects, (ii) has paid all Taxes that are required to be paid or that
AIM is obligated to withhold from amounts owing to any employee, creditor or
third party, except with respect to matters contested in good faith and as to
which adequate reserves have been provided, and (iii) has provided adequate
accruals, except as in the aggregate would not have a material adverse effect on
AIM, in its financial statements for the payment of all Taxes (including
deferred income taxes).
(b) Except as provided in Section 3.13(b) of the AIM
Disclosure Schedule, (i) there are not pending or threatened in writing any
audits, examinations, investigations, or other proceedings in respect of Taxes
or Tax Return of AIM or any affiliated group of which AIM is now or ever was a
member, (ii) there are no encumbrances for Taxes upon the assets or properties
of AIM except for statutory liens for Taxes not yet due, (iii) no power of
attorney has been granted by or with respect to AIM with respect to any matter
relating to Taxes, (iv) all Tax deficiencies which have been claimed, proposed
or asserted against AIM have been fully paid or finally settled, and no issue
has been raised in any examination by any Tax authority, which, by application
of similar principles, could reasonably be expected to result in the proposal or
assertion of a Tax deficiency for another year not so examined, (v) neither AIM
nor any affiliated, consolidated, combined or unitary group of which AIM is now
or ever was a member, has waived any statute of limitations or agreed to any
extension of time within which to file any Tax Return, which such statute of
limita tions has not expired or such Tax Return has not since been timely filed
and (vi) AIM has made available to CDI true and correct copies of the federal
income Tax Return
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and any state, local or foreign Tax Return for any jurisdiction that represents
five percent or more of the aggregate taxable income of AIM as filed by AIM for
each of the taxable years ended December 31, 1998, 1997, 1996 and 1995, together
with true and correct copies of any audit reports, letter rulings, technical
advice memoranda, closing agreements or other similar documents with respect to
Taxes of AIM for such periods.
(c) Other than with respect to the affiliated group of which
YHI is the common parent, AIM has not been a member of any affiliate group of
corporations (as defined in Section 1504 of the Code) and is not a party to,
bound by, or otherwise obligated under any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement.
(d) For purposes of this Agreement, (i) the term "Tax" or
"Taxes" includes all taxes, charges, fees, levies or other assessments imposed
by any federal, state, local, or foreign taxing authority, including, without
limitation, income, gross receipts, premium, recapture, credit, excise,
property, sales, use, occupation, service, service use, leasing, leasing use,
value added, transfer, payroll, employment, with holdings, estimated, license,
stamp, franchise or similar taxes (including any interest earned thereon or
penalties or additions attributable thereto) and (ii) "Tax Return" shall mean
any report, return, documents, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction with respect to
Taxes including, without limitation, any supporting schedules or attachments and
any amendments thereto.
SECTION 3.14 EMPLOYEE BENEFIT PLANS; LABOR RELATIONS.
(a) Section 3.14(a) of the AIM Disclosure Schedule contains a
true and complete list of each employee benefit plan, program, agreement or
arrangement, each stock-based or equity-based incentive plan or arrangement,
each severance or material perquisite policy or program, in any case, whether
written or oral, covering employees, former employees or directors of AIM, or
providing benefits to such persons in respect of services provided to AIM
(collectively, the "AIM Benefit Plans"). Section 3.14(a) of the AIM Disclosure
Schedule indicates which of the AIM Benefit Plans is an "employee benefit plan"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and which of the AIM Benefit Plans is subject
to Section 302 or Title IV of ERISA. AIM has no formal plan or commitment,
whether legally binding or not, to create any additional employee benefit plan
or modify or change any existing AIM Benefit Plan that would affect any employee
or former employee of AIM. No AIM Benefit Plan
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provides medical, surgical, hospitalization, death or similar benefits (whether
or not insured) for employees or former employees of AIM for periods extending
beyond their retirement or other termination or service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan" (as
that term is defined in ERISA) or (iii) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary).
(b) With respect to each AIM Benefit Plan, AIM has heretofore
delivered to CDI true and complete copies of such AIM Benefit Plan and any amend
ments thereto (or if the AIM Benefit Plan is not a written plan, a description
thereof), and, if applicable, (i) any related trust or other funding vehicle,
(ii) any reports (including but not limited to Forms 5500 for the two most
recently completed plan years) or summaries required under ERISA and any
material amendments thereto and (iii) the most recent determination letter
received from the Internal Revenue Service with respect to each AIM Benefit Plan
intended to qualify under section 401 of the Code.
(c) Each AIM Benefit Plan has been operated and administered
in all material respects in accordance with its terms and applicable law,
including but not limited to ERISA and the Code. Each AIM Benefit Plan intended
to be "qualified" within the meaning of section 401(a) of the Code is so
qualified and the trusts maintained thereunder are exempt from taxation under
section 501(a) of the Code and no consideration exists that would reasonably be
expected to adversely affect such qualification. No AIM Benefit Plan is, nor has
any AIM Benefit Plan been, during the last 6 years, subject to Section 302 or
Title IV of ERISA. There are no pending or, to the knowledge of AIM and YHI,
threatened or anticipated claims by or on behalf of any AIM Benefit Plan, by any
employee or beneficiary covered under any such Plan, or otherwise involving any
such Plan (other than routine claims for benefits). With respect to the AIM
Benefit Plans individually and in the aggregate, no event has occurred, and, to
the knowledge of AIM and YHI, there exists no condition or set of circumstances
that could subject AIM to any liability arising under the Code or any other
applicable law, or under the terms of any AIM Benefit Plan or any indemnity
agreement to which AIM is a party.
(d) Except as set forth in Section 3.14(d) of the AIM
Disclosure Schedule, the consummation or announcement of any transaction
contemplated by this Agreement will not (either alone or in combination with
another event) (i) entitle any current or former employee, officer or director
of AIM to severance pay, unemployment compensation or any other payment, except
as expressly provided in this Agreement or (ii) accelerate the time of payment
or vesting, or increase the amount of
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compensation due any such employee, officer or director. No amounts payable
under the AIM Benefit Plans will fail to be deductible for federal income tax
purposes by virtue of section 280G of the Code.
(e) Except as set forth in Section 3.14(e) of the AIM
Disclosure Schedule, (i) AIM is not a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of AIM; and (ii) none of the employees of AIM are
represented by any labor organization and neither AIM nor YHI have any knowledge
of any current union organizing activities among the employees of AIM, nor does
any question concerning representation exist concerning such employees.
(f) Except as set forth in Section 3.14(f) of the AIM
Disclosure Schedule, (i) there are no employment contracts or severance
agreements with any employees of AIM; (ii) there are no written personnel
policies, rules or procedures applicable to employees of AIM; (iii) AIM is, and
has at all times been, in material compliance with all applicable laws
respecting employment and employment prac tices, terms and conditions of
employment, wages, hours of work and occupational safety and health, and is not
engaged in any unfair labor practices as defined in the National Labor Relations
Act or other applicable law, ordinance or regulation; (iv) to the knowledge of
AIM and YHI, no charges with respect to or relating to AIM are pending before
the Equal Employment Opportunity Commission or any other agency responsible for
the prevention of unlawful employment practices; (v) to the knowledge of AIM and
YHI, no federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws intends to conduct an investigation with respect to
or relating to AIM and no such investigation is in progress; and (vi) to the
knowledge of AIM and YHI, there are no complaints, controversies, lawsuits or
other proceedings pending or threatened that allege or involve breach of any
express or implied contract of employment, violation of any law or regulation
governing employment, discriminatory hiring or termination of employees or
tortious conduct in connection with the employment relationship.
(g) Since the enactment of Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), AIM has not effectuated (i) a "plant
closing" (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
AIM, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of AIM; nor has AIM been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar
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state or local law. Except as set forth in Section 3.14(g) of the AIM Disclosure
Schedule, none of the employees of AIM has suffered an"employment loss" (as
defined in the WARN Act) in the past five years.
(h) Section 3.14(h) of the AIM Disclosure Schedule contains a
complete and accurate list of the following information for each employee of
AIM, including each employee on leave of absence: name; job title; current
compensation paid or payable and any change in compensation since December 31,
1998; vacation accrued; and service credited for purposes of vesting and
eligibility to participate under any AIM Benefit Plan. To AIM's and YHI's
knowledge, no current officer or director of AIM is a party to, or is otherwise
bound by, any agreement or arrange ment, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
officer or director and any other person ("Proprietary Rights Agreement") that
in any way materially adversely affected, affects, or will materially adversely
affect (i) the performance of his duties as an employee or officer or director
of AIM, or (ii) the ability of AIM to conduct its business, including any
Proprietary Rights Agreement with AIM by any such employee or director.
SECTION 3.15 ACCOUNTS RECEIVABLE. All accounts receivable of AIM that
are reflected on the October 31, 1999 and will be reflected on the December 31,
1999 balance sheets or on the accounting records of AIM as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Except as set forth in Section 3.15 of the AIM
Disclosure Schedules, unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible net of
the respective reserves shown on the October 31, 1999 or to be shown on the
December 31, 1999 balance sheets or on the accounting records of AIM as of the
Closing Date, which reserves are computed in accordance with GAAP. To the
knowledge of AIM and YHI, there is no contest, claim, or right of set-off
relating to the amount or validity of such Accounts Receiv able. Section 3.15 of
the AIM Disclosure Schedule contains a complete and accurate list of all
Accounts Receivable as of October 31, 1999 and December 31, 1999, which list
sets forth the aging of such Accounts Receivable.
SECTION 3.16 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in Section 3.16(a) of the AIM
Disclosure Schedule, to AIM's and YHI's knowledge, there are no Hazardous
Substances on, in, or under any property or buildings currently or formerly
owned, leased or operated by AIM (the "AIM Facilities") the presence of which
could reasonably be expected to
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result in a material adverse effect, individually or in the aggregate, on the
business, operations, assets, or financial condition of AIM.
(b) Except as disclosed in Section 3.16(b) of the AIM
Disclosure Schedule, (i) AIM is in full compliance with all Environmental Laws,
(ii) AIM has obtained all material permits required under any Environmental Law,
and (iii) neither YHI nor AIM has received, or has knowledge of, any notice of
any suit, litigation, arbitration, hearing, investigation or other action
(whether civil, criminal, administrative or investigative) brought by or before
any Governmental Entity or arbitrator ("Proceeding") relating to (A) any alleged
noncompliance with any requirement of any Environmental Law or (B) the presence
or alleged presence of Hazardous Substances in, under, or upon the AIM
Facilities or upon the properties of any sites to which any of AIM's waste has
been transported, whether for disposal or for any other purpose, and whether
against AIM or any other person that could reasonably be expected to result in a
material adverse effect, individually or in the aggregate, on the business,
operations, assets, properties or financial condition of AIM and neither YHI nor
AIM has knowledge of any basis for any such notice or action.
(c) Except as disclosed in Section 3.16(c) of the AIM
Disclosure Schedule, except for noncompliances or liabilities that could not
reasonably be expected to result in a material adverse effect on the business,
operations, properties, assets or financial condition of AIM, individually or in
the aggregate, to AIM's and YHI's knowledge, there have not been and there are
not any past or present events, conditions, circumstances, activities,
practices, incidents, or actions that could reasonably be expected to interfere
with or prevent continued compliance with any requirement of any Environmental
Law or that may give rise to any legal liability or otherwise form the basis of
any Proceeding against or involving AIM based on any condition or any violation
or alleged violation of any requirement of any Environmental Law.
(d) For purposes of this Agreement (i) "Hazardous Substances"
means any wastes, substances, or materials (whether solids, liquids or gases)
that are defined or regulated as hazardous or toxic under any Environmental Law,
including without limitation, substances defined as "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," or other
similar designations in any Environmental Laws. "Hazardous Substances"
includes, without limitation, polychlorinated biphenyls (PCBs), asbestos,
lead-based paints and petroleum and petroleum products; and (ii) "Environmental
Laws" means the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss. 9601 ET SEQ.;
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the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss. 2601 ET SEQ.; the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 ET SEQ.; the
Resources Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 9601 ET SEQ.;
the Clean Water Act ("CWA"), 33 U.S.C. ss. 1251 ET SEQ.; the Safe Drinking Water
Act, 42 U.S.C. ss. 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. ss. 7401
ET SEQ.; or any other applicable federal, state, or local laws, regulations,
ordinances, decrees, rules, judgments, orders or directives now or hereinafter
in effect relating to the protection of human health, safety or the environment,
or otherwise relating to Hazardous Substances generation, production, use,
storage, treatment, transportation or disposal.
SECTION 3.17 BANK ACCOUNTS. Section 3.17 of the AIM Disclosure Sched
ule contains a complete and accurate list of each bank at which AIM has an
account or safe deposit box, the number of each such account or box, and the
names of all persons authorized to draw on such accounts or to have access to
such boxes.
SECTION 3.18 REAL PROPERTY; LEASES; EQUIPMENT, ETC.
(a) AIM owns no real property. Section 3.18(a) of the AIM
Disclosure Schedule sets forth a complete and accurate listing of each lease
and sublease pursuant to which AIM leases or sublets real property
(collectively, the "Real Property Leases") and AIM has heretofore delivered to
CDI a complete and accurate copy of each Real Property Lease. Each Real Property
Lease is valid and in full force and effect and enforceable in accordance with
its terms and has not been further supplemented, amended or modified. AIM has
not received any notice of, and there exists no material default or event,
occurrence, condition or act, including without limitation, the execution and
delivery of this Agreement and the consummation of the Merger, which constitutes
or would constitute (with or without notice or lapse of time or both) a material
default in any respect under any of the Real Property Leases. AIM has not
received any notice of any event of default or any event, occurrence, condition
or act, including without limitation, the execution and delivery of the
Agreement and the consummation of the Merger, which constitutes or would
constitute (with or without notice or lapse of time or both) a default in any
respect under any of the Real Property Leases. To the knowledge of AIM and YHI
with respect to real property covered by any leasehold interests in real
property, the present use thereof complies, in all material respects, with all
restrictive covenants, deeds and other restrictions and all zoning laws,
ordinances and regulations of governmental or other authorities having
jurisdiction thereof, and such premises are not presently affected, nor to the
knowledge of AIM and YHI threatened, by any condemnation or eminent domain
proceeding.
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(b) Except as described in Section 3.18(b) of the AIM
Disclosure Schedule, all equipment and tangible personal property used by AIM
are either owned, free and clear of all Liens and encumbrances other than as
reflected in the balance sheet of AIM as of October 31, 1999, and will be
reflected in the balance sheet of AIM as of December 31, 1999, or are (i) used
under capital leases reflected on such balance sheet or (ii) used under
operating leases. Such Liens and encumbrances, individually and in the
aggregate, are not material in amount, do not detract from the value of, or
impair the use of, in the business of AIM, the properties subject thereto, and
have arisen only in the ordinary course of business consistent with past
practice. Section 3.18(b) of the AIM Disclosure Schedule lists all Liens and
encumbrances of any nature covering AIM's assets.
(c) Section 3.18(c) of the AIM Disclosure Schedule sets forth
a complete and accurate list of all capital leases and operating leases
pursuant to which AIM leases property. To the knowledge of AIM and YHI, all such
leases are valid and in full force and effect and enforceable in accordance with
their terms and have not been further supplemented, amended or modified. AIM has
not received any notice of, and there exists no event of material default, or
event, occurrence, condition or act, including, without limitation, the
execution and delivery of this Agreement and the consum mation of the Merger, on
the part of AIM, or to the knowledge of AIM and YHI, on the part of any other
party, which constitutes or would constitute (with or without notice or lapse of
time or both) a material default in any respect under any such lease. All of the
equipment and tangible personal property valued at an original cost of $5,000 or
more owned or leased by AIM is in good operating condition and repair, subject
to normal wear and tear, and to the knowledge of AIM and YHI, none of such
assets are in need of maintenance or repairs except for ordinary, routine
maintenance.
(d) Except as set forth in Section 3.18(d) of the AIM
Disclosure Schedule, none of the officers, directors, shareholders or employees
of AIM has any interest in any property, real or personal, tangible or
intangible, that is used in the business of AIM, including without limitation
any Intellectual Property.
SECTION 3.19 INSURANCE. Section 3.19 of the AIM Disclosure Schedule
sets forth a complete and correct list of all insurance policies (including
premiums, policy limits, deductibles, type of coverage and similar information)
providing coverage in favor of AIM or any of its properties. Each such policy is
in full force and effect, all premiums with respect thereto covering all periods
up to and including the Closing Date will have been paid, no notice of
termination, cancellation or reservation of rights has been received with
respect to any such policy, there is no default with respect to any provision
contained in any such policy, and there has not been any failure
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to give any notice or present any claim under any such policy in a timely
fashion or in the manner or detail required by any such policy. All of such
policies have been issued by reputable insurance companies actively engaged in
the insurance business. The coverage provided by such policies is, in AIM's and
YHI's judgment, reasonable in scope and amount, in light of the risks attendant
to the business and activities of AIM.
SECTION 3.20 ABSENCE OF QUESTIONABLE PAYMENTS. AIM has not, nor has any
director, officer, or to the knowledge of AIM and YHI, any agent, employee,
consultant or other person associated with, or acting on behalf of, AIM, (a)
used any AIM corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, or (b) made any direct
or indirect unlawful payments to government officials from any AIM corporate
funds, or established or maintained any unlawful or unrecorded accounts with
funds received from AIM.
SECTION 3.21 POWERS OF ATTORNEY; GUARANTEES. Except as set forth in
Section 3.21 of the AIM Disclosure Schedule, AIM does not have any power of
attor ney outstanding, nor any obligation or liability, either actual, accruing
or contingent, as guarantor, surety, co-signer, endorser, co-maker or indemnitor
(in the case of indemnitor, other than in the ordinary course of business) in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
SECTION 3.22 DISCLOSURE. No representation or warranty by AIM and YHI
in this agreement and no statement contained in any document, schedule or
certificate furnished or to be furnished by AIM or YHI to CDI or any of its
representatives pursuant to the provisions of this Agreement or in connection
with the transactions contemplated hereby, contains as of the date hereof or
will contain as of the Effective Time (after giving effect to the updating
procedures set forth in Section 6.4) any untrue statement of material fact or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
SECTION 3.23 SECURITIES LAWS MATTERS.
(a) YHI is an "accredited investor" as such term is defined in
Regulation D under the Securities Act.
(b) YHI is acquiring the shares of CDI Common Stock in the
Merger for its own account and for investment purposes and, except as previously
disclosed,
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not with a view toward, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling such shares
of CDI Common Stock. YHI agrees that the shares of CDI Common Stock may not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of without registration under the Securities Act of 1933, as amended
(the "Securities Act"), and any applicable state securities laws, except
pursuant to an exemption from such registration under the Securities Act and
such state securities laws.
(c) YHI confirms that it has such knowledge and experience in
financial and business matters that YHI is capable of evaluating the merits and
risks of an investment in the CDI Common Stock and of making an informed
investment decision and understands that (i) this investment is suitable only
for an investor which is able to bear the economic consequences of losing its
entire investment; (ii) the purchase of the CDI Common Stock to be purchased by
YHI hereunder is a speculative investment which involves a high degree of risk
of loss of the entire investment; and (iii) there are substantial restrictions
on the transferability of, and there may be no public market for the CDI Common
Stock, and accordingly, it may not be possible for YHI to liquidate YHI's
investment in case of emergency.
(d) YHI has conducted its own independent review and analysis
of the business, operations, assets, liabilities, financial condition and
prospects of CDI and acknowledges that it has been provided access to the
personnel, properties, premises and records of CDI for such purpose. In entering
into this Agreement, YHI has relied solely upon its own investigation and
analysis and the representations and warranties contained herein.
SECTION 3.24 LOANS TO YHI. Except as set forth in Section 3.24 of the
AIM Disclosure Schedule, there are no contracts or agreements (oral or written)
relating to the lending or borrowing of any money between AIM and YHI.
SECTION 3.25 WARRANTY CLAIMS. Except as set forth in Section 3.25 of
the AIM Disclosure Schedule, there are no pending or, to the knowledge of AIM
and YHI, threatened material claims relating to written warranties, guaranties
or similar undertakings with respect to contractual performance by AIM.
SECTION 3.26 TAX-FREE REORGANIZATION. Neither AIM nor YHI has taken or
agreed to take any action that is reasonably likely to prevent the Merger from
qualifying as a reorganization under the provisions of Section 368(a) of the
Code.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CDI
CDI represents and warrants to AIM and YHI as follows:
SECTION 4.1 ORGANIZATION; SUBSIDIARIES.
(a) Except as set forth in Section 4.1 of the disclosure
schedule to be delivered to AIM prior to the date of this Agreement (the "CDI
Disclosure Schedule"), each of CDI and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Except as set forth in Section 4.1 of the CDI Disclosure Schedule, each of CDI
and Merger Sub is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not have a material adverse effect on CDI. CDI has
heretofore delivered to AIM accurate and complete copies of the Certificate of
Incorporation and By-laws, as in effect as of the date of this Agreement, of CDI
and Merger Sub. Section 4.1 of the CDI Disclosure Schedule sets forth a complete
and accurate list of all jurisdictions in which CDI or Merger Sub is qualified
or licensed to do business.
(b) Section 4.1(b) of the CDI Disclosure Schedule sets forth
the name, jurisdiction of incorporation and capitalization of each subsidiary of
CDI (each a "CDI Subsidiary"). Each CDI Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Except as disclosed in Section 4.1(b) of the
CDI Disclosure Schedule, CDI does not own, directly or indirectly, any capital
stock or other equity securities of any corporation or have any direct or
indirect equity or ownership interest (financial or otherwise) in any business.
Except as disclosed in Section 4.1(b) of the CDI Disclosure Schedule, all of the
outstanding shares of capital stock of each of the CDI Subsidiaries have been
validly issued and are fully paid and nonassessable and are owned by either CDI
or another CDI Subsidiary free and clear of all Liens or other encumbrances.
There are not as of the date of this Agreement, and at the Effective Time there
will not be, any outstanding subscriptions, options, warrants, calls, rights,
convertible securities or
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other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of any of the CDI Subsidiaries, or
otherwise obligating CDI or any CDI Subsidiary to issue, transfer or sell any
such securities. Except as set forth above or in Section 4.1(b) of the CDI
Disclosure Schedule, there are no persons or entities (other than CDI
Subsidiaries) in which CDI or any CDI Subsidiary has any voting rights or equity
interests.
SECTION 4.2 CAPITALIZATION. The authorized capital stock of CDI
consists of (i) 40,000,000 shares of CDI Common Stock, of which, as of the date
hereof, 19,150,400 shares are issued and outstanding and no shares are held in
treasury. Section 4.2 of the CDI Disclosure Schedule sets forth, as of the date
hereof, a true and complete list of each holder of CDI Common Stock and the
amounts held and of the amounts of all outstanding options and warrants
exercisable for shares of CDI's Common Stock. All of the outstanding shares of
CDI Common Stock are, and all shares which may be issued pursuant to the
outstanding options and warrants will be, duly authorized, validly issued, fully
paid and non-assessable and free of any preemptive rights in respect thereto.
Except as set forth above and in Section 4.2 of the CDI Disclosure Schedule,
there are no outstanding options, warrants, calls, subscriptions, contracts,
voting trusts, proxies or other rights or other agreements or commit ments
obligating CDI to issue or sell or cause to be issued or sold any shares of capi
tal stock of, or other equity interests in, CDI or securities convertible into
or ex changeable for such shares or equity interests.
SECTION 4.3 AUTHORITY. Each of CDI and Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of CDI
and Merger Sub and no other corporate proceedings on the part of CDI or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. Forms of the resolutions of the Boards of Directors of
Merger Sub and CDI and the resolutions of CDI as the sole stockholder of Merger
Sub reflecting such approval are attached hereto as Exhibits D, E and F,
respectively. This Agreement has been duly executed and delivered by each of CDI
and Merger Sub and constitutes a valid and binding obligation of each of CDI and
Merger Sub enforceable against each of them in accordance with its terms, except
as enforcement may be limited by general principles of equity, whether applied
in a court of law or a court of equity, and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
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SECTION 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
in Section 4.4 of CDI Disclosure Schedule, and except for filings and approvals
which may be required under the DGCL, neither the execution or delivery of this
Agreement by CDI and Merger Sub nor the consummation by CDI or Merger Sub of the
trans actions contemplated hereby nor compliance by CDI and Merger Sub with any
of the provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of CDI or any CDI
Subsidiary, (ii) require any filing with, or authorization, consent or approval
of, any Governmental Entity, (iii) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration or
result in the creation of any Lien) or require any authorization, consent or
approval under, any material note, bond, mortgage, indenture, lease, license,
con tract, agreement or other instrument or obligation to which CDI or any CDI
Subsidiary is a party or by which any of their respective assets may be bound
or (iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to CDI, any CDI Subsidiary or any of their respective assets.
SECTION 4.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Section 4.5(a) of the CDI Disclosure Schedule contains the
audited balance sheet of CDI as of December 31, 1998 and the unaudited balance
sheet of CDI as of December 31, 1999, and the related statements of income for
such fiscal years then ended. The balance sheets fairly present, in all material
respects, the finan cial position of CDI as of their respective dates, and the
statements of income fairly present, in all material respects, the results of
operations, of CDI for the periods there in set forth, in each case in
accordance with GAAP consistently applied during the periods involved. The
financial statements for the year ended December 31, 1999 will be audited by
Ernst & Young, CDI's certified independent accountant, and provided, along with
Ernst & Young's opinion thereon, to YHI and AIM no later than February 14, 2000.
(b) Except as set forth in Section 4.5(b) of the CDI
Disclosure Schedule, CDI does not have any liabilities or obligations of any
material nature (whether absolute, accrued, contingent, or otherwise and whether
due or to become due) which were not fully reflected or reserved against in the
December 31, 1999 balance sheet, except for liabilities and obligations which
were incurred in the ordinary course of business consistent with past practice
since the date thereof.
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SECTION 4.6 MATERIAL ADVERSE CHANGE. Except as disclosed in Section
4.6 of the CDI Disclosure Schedule, since December 31, 1999, there has not been
any Material Adverse Change of CDI or any CDI Subsidiary.
SECTION 4.7 NO DEFAULT. Except as set forth in Section 4.7 of the CDI
Disclosure Schedule, neither CDI nor any CDI Subsidiary is in default or
violation (and no event has occurred that with or without notice or lapse of
time or both would constitute a default or violation) of any term, condition or
provision of (i) its Certificate of Incorporation or By-laws, (ii) any material
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which it is a party or by which its assets maybe
bound or (iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to it or any of its assets.
SECTION 4.8 LITIGATION. Except as set forth in Section 4.8 of the CDI
Disclosure Schedule, neither CDI nor an CDI Subsidiary is a party to any, and
there are no pending or, to the knowledge of CDI, threatened legal,
administrative, arbitration or other proceedings, claims, actions, suits or
governmental investigations of any nature involving, affecting or relating to
CDI or any CDI Subsidiary, or challenging the validity or propriety of the
transactions contemplated in this Agreement; and there is not known to CDI any
reasonable basis for any such proceedings, claim, action or governmental
investigation. Neither CDI nor any CDI Subsidiary is a party to any order,
judgment or decree which will, or might reasonably be expected to, affect its
business, operations, properties, assets, financial condition, prospects or
results of operations or its ability to acquire any property or conduct business
in any area in which it presently does business.
SECTION 4.9 TAXES. Except for returns not yet due or the due dates of
which have been appropriately extended, CDI has filed all federal, foreign,
state and local Tax Returns which are required to be filed, and has paid, or
made provision for the payment of, all Taxes shown as due on such Tax Returns
for all periods ending on or before the date of Closing, except such Taxes, if
any, as are being contested in good faith and as to which adequate reserves have
been provided. To the knowledge of CDI, no audit of any federal, state or local
Tax Return of CDI is in progress or pending, and no waiver of any statute of
limitations has been given and is in effect with respect to the assessment of
any Taxes for such periods. CDI is not a party to, bound by, or otherwise
obligated under any Tax sharing agreement, Tax indemnification agreement or
similar contract or arrangement.
SECTION 4.10 COMPLIANCE WITH APPLICABLE LAW. CDI and each CDI
Subsidiary has all permits, licenses, franchises and other governmental
authorizations
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necessary and material to conduct its business as presently conducted. The
business of CDI and each CDI Subsidiary is presently being conducted so as to
comply in all material respects with all federal, state and local governmental
laws, rules, regulations, orders, writs, injunctions, and decrees applicable to
it and neither CDI nor any CDI Subsidiary has received notice of violation of,
or knows of any violations of any of the above. To the knowledge of CDI, no
suspension or cancellation of any material license, franchise, permit or
authorization of CDI or any CDI Subsidiary is threatened.
SECTION 4.11 MERGER SUB. Merger Sub has not conducted any operations or
incurred any liabilities or obligations other than arising under or in
connection with its formation and the transactions contemplated hereby.
SECTION 4.12 CDI COMMON STOCK. All of the CDI Common Stock to be issued
in connection with the Merger will, at the time of such issuance, be validly
issued, fully paid and nonassessable and free of preemptive rights and, except
as provided for in this Agreement, free of any adverse Liens or encumbrances
other than Liens resulting from YHI's own agreements. Assuming that the
representations contained in Section 3.23 are true and correct, the issuance of
the shares of CDI Common Stock in the Merger will not violate Section 5 of the
Securities Act.
SECTION 4.13 DISCLOSURE. No representation or warranty by CDI in this
Agreement and no statement contained in any document, schedule or certificate
furnished or to be furnished by CDI to AIM, YHI or any of their respective
represen tatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains as of the date hereof or will contain
as of the Effective Time (after giving effect to the updating procedures set
forth in Section 6.4) any untrue statement of material fact or omits or will
omit to state any material fact necessary in order to make the statements herein
or therein, in light of the circum stances under which they were made, not
misleading.
SECTION 4.14 TAX-FREE REORGANIZATION. Neither CDI nor Merger Sub has
taken or agreed to take any action that is reasonably likely to prevent the
Merger from qualifying as a reorganization under the provisions of Section
368(a) of the Code.
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ARTICLE V
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS PENDING THE MERGER. From the date
hereof until the Effective Time, CDI and AIM shall carry on their respective
busi nesses in the usual and ordinary course in substantially the same manner as
heretofore conducted and use all reasonable efforts to preserve intact their
present business organizations, and to keep available the services of their
present officers and employ ees and to preserve their relationships with persons
having business dealings with them.
SECTION 5.2 AIM COVENANTS.
(a) From the date hereof until the Effective Time, except as
expressly contemplated or permitted by this Agreement or to the extent CDI shall
otherwise consent in writing, which consent shall not be unreasonably withheld,
AIM shall not:
(i) acquire or agree to acquire by merging or consolidating
with, or by purchasing all or a substantial equity interest in or all or a
substantial portion of the assets of, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets other than assets acquired in
the ordinary course of business which are immaterial in nature or amount;
(ii) other than in the ordinary course of business consistent
with past practice, sell, assign, lease, or otherwise dispose of, or agree to
sell, assign, lease or otherwise dispose of, all or any part of its assets or
enter into any agreement to do the same;
(iii) except as set forth in Section 5.2(a)(iii) of the AIM
Disclosure Schedule, make any capital expenditures or commitments for capital
expenditures other than in the ordinary course of business and consistent with
past practice and in an amount not in excess of $10,000 in respect of any
individual project or $25,000 in the aggregate;
(iv) terminate, adopt, amend or enter into, except as may be
required by applicable law or regulation, any bonus, profit sharing, severance,
termination, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund,
plan or arrangement for the
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benefit or welfare of its employees or pay any benefit not required by any
existing plan or arrangement;
(v) make any Tax elections or settle or compromise any Tax
liability or, except as required by law or applicable accounting standards,
change any account ing policies or procedures;
(vi) enter into any new agreement which is or may be deemed
to be material or amend or modify any AIM Contract;
(vii) (A) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock or (C) directly or indi rectly repurchase, redeem or otherwise
acquire, any shares of its capital stock;
(viii) issue or sell, or authorize or propose the issuance or
sale of, any shares of its capital stock of any class or any securities
convertible into or exchange able for, or any rights, warrants, calls,
subscriptions or options to acquire, any such shares, or convertible or
exchangeable securities;
(ix) amend its Certificate of Incorporation or By-laws;
(x) incur any indebtedness for money borrowed or issue any
debt securities; assume, guarantee, or otherwise become liable or responsible
for the obli gations of any other person; or make any loans or capital
contributions to, or invest ments in, any other person;
(xi) pay, discharge, settle or satisfy or agree to pay,
discharge, settle or satisfy, any claims, liabilities or obligations other than
when due in accordance with their respective terms and other than claims,
liabilities, and obligations with re spect to itself in an amount not in excess
of $10,000 individually or $25,000 in the aggregate;
(xii) hire or retain any new employees, consultants or
contractors, or increase the compensation of current employees, consultants or
contractors;
(xiii) enter into any real property lease or any lease of
personal property or extend or modify any existing lease of real or personal
property;
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(xiv) take any action that is intended or would result in
any of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect, or in any of the conditions to the
Merger set forth in Article VII not being satisfied, or in a violation of any
provision of this Agreement except, in every case, as may be required by
applicable law;
(xv) change its methods of accounting in effect at December
31, 1999;
(xvi) transfer or license to any person or entity or
otherwise extend, amend or modify any rights to the Intellectual Property, other
than in the ordinary course of business consistent with past practices; or
(xvii) agree to do any of the foregoing.
(b) AIM and YHI agree that each of them will immediately cease
any existing discussions or negotiations with any third parties conducted prior
to the date hereof with respect to any Acquisition Proposal (as defined below).
AIM and YHI further agree that they will not, directly or indirectly, through
any officer, director, employee, representative or agent or any of its
subsidiaries, (i) solicit, initiate, or encourage any inquiries or proposals
that constitute, or would lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of shares
of capital stock of AIM or similar transactions involving AIM, AIM's securities
or any of its subsidiaries, other than a transaction with CDI and/or its
affiliates (any of the foregoing inquiries or proposals being referred to herein
as an "Acquisition Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Acquisi tion Proposal, or (iii) agree to, approve or recommend
any Acquisition Proposal. AIM agrees to notify CDI immediately after receipt by
AIM of any Acquisition Proposal. Such notice shall be made orally and shall
indicate the identity of the offeror and the terms and conditions of such
proposal, inquiry or contract.
SECTION 5.3 CDI COVENANTS. From the date hereof until the Effective
Time, except as expressly contemplated or permitted by this Agreement or to the
extent AIM in its discretion shall otherwise consent in writing, CDI shall not
take or agree to take any action that is intended or would result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, or in any of the conditions to the Merger set
forth in Article VII not being satisfied, or in a violation of any provision of
this Agreement, except, in every case, as may be required by applicable law.
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SECTION 5.4 401(K) PLAN TRANSFER. As soon as practicable, and in any
event within ninety (90) days, after and effective as of the Effective Time, CDI
shall designate a defined contribution pension plan (or plans) and trust (or
trusts) intended to qualify under Section 401(a) and Section 501(a) of the Code
(such plan or plans referred to as "CDI'S SAVINGS PLAN"). As soon as practicable
following receipt by YHI of either (A) a copy of a favorable determination
letter issued by the Internal Revenue Service with respect to CDI's Savings Plan
which takes into account recent plan amendments required under the Code or (B)
an opinion, satisfactory to YHI's counsel, of CDI's counsel to the effect that
the terms of CDI's Savings Plan and its related trust qualify under Section
401(a) and Section 501(a) of the Code, YHI and CDI shall cause the accounts
under the Yankelovich Partners Inc. 401(k) Plan ("YHI'S SAVINGS PLAN"), and the
value of assets attributable to such accounts, of the employees of AIM who will
continue their employment with the Surviving Corporation upon the Effective Time
and who are participants in YHI's Savings Plan as of the Effective Time to be
transferred to CDI's Savings Plan in a "transfer of assets or liabilities" in
accordance with Section 414(l) of the Code and Section 208 of ERISA and the
respective rules and regulations promulgated thereunder. The assets to be
transferred will be in the form of cash or other property, as YHI and CDI shall
mutually agree prior to such transfer. Prior to such transfer, CDI will provide
YHI with such documents and other information as YHI shall reasonably request to
assure itself that CDI's Savings Plan and the trust established pursuant thereto
(i) permit the transfer by YHI of voluntary participant after-tax contributions
and (ii) contain participant loan provisions and procedures necessary to effect
the orderly transfer of participant loan balances associated with the transfer
of assets. Prior to the transfer, YHI and CDI will notify the Internal Revenue
Service of the transfer by timely filing Forms 5310-A, to the extent such
filings are required, and YHI will provide CDI with copies of such personnel and
other records of YHI pertaining to the employees of AIM who are participants in
YHI's Savings Plan as of the Effective Time and such records of any agent or
representative of YHI pertaining to such employees and such records of any agent
or representative of YHI, in each case pertaining to YHI's Savings Plan and as
CDI may reasonably request in order to administer and manage the accounts and
assets transferred to CDI's Savings Plan. Upon such transfer, CDI's Savings Plan
shall assume all liabilities and obligations whatsoever with respect to all
amounts transferred from YHI's Savings Plan to CDI's Savings Plan in respect of
such employees and each of YHI and its affiliates and YHI's Savings Plan shall
be relieved of all such liabilities and obligations. CDI and YHI shall cooperate
in the filing of documents required by the transfer of assets and liabilities
described therein.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS TO INFORMATION. Upon reasonable notice, each of CDI
and AIM shall give to each other and its respective authorized representatives
access, during normal business hours, to all its respective properties, books,
and records and furnish promptly to the other all information concerning its
business, properties and personnel as the other party hereto may reasonably
request. Unless otherwise required by law, each of CDI and AIM will hold any
such information which is nonpublic in strict confidence until such time as such
information otherwise becomes publicly available through no wrongful act on its
part, and in the event of termination of this Agreement for any reason CDI and
AIM shall each promptly return to the other party all nonpublic documents
obtained from the other party, and any copies made of such documents.
SECTION 6.2 NOTIFICATION OF CERTAIN MATTERS. Each of the parties
agrees to promptly notify the other of (a) events causing any representation or
warranty contained herein to be untrue; (b) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement; and
(c) any event, change or effect constituting a Material Adverse Change on such
party or having a material adverse effect on its ability to consummate the
transactions contemplated hereby in a timely manner.
SECTION 6.3 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
SECTION 6.4 SUPPLEMENTAL DISCLOSURE. Each of the parties hereto shall
promptly supplement or amend its Disclosure Schedule with respect to any
material matter hereafter arising or discovered which, if existing or known at
the date hereof, would have been required to be disclosed in its Disclosure
Schedule; PROVIDED, HOWEVER, that any such supplemental or amended disclosure
by one party shall not be deemed to have been disclosed as of the date hereof
unless so agreed to in writing by the other party in its sole discretion.
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SECTION 6.5 TAX-FREE REORGANIZATION. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. No party to this
Agreement shall take any action or allow or cause any action to be taken by any
of its affiliates or fail to take any action or fail to allow or cause any
action to be taken, that would be reasonably likely to prevent the Merger from
qualifying as a reorganization under the provisions of Section 368(a) of the
Code.
ARTICLE VII
CONDITIONS
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) APPROVALS. Other than the filing of the Certificate of
Merger provided for by Section 1.3, all authorizations, consents, orders or
approvals of, or declarations or filings with, any Governmental Entity the
failure of which to obtain would have a material adverse effect on the Surviving
Corporation or which would prohibit the Merger shall have been filed, occurred
or been obtained.
(b) NO RESTRAINTS. There shall have been no order or
preliminary or permanent injunction entered in any action or proceeding before
any Governmental Entity or other action taken, nor statute, rule, regulation,
judgment or order enacted, amended, issued or deemed applicable to AIM, CDI or
Merger Sub or this Agreement by any Governmental Entity and which shall remain
in effect or any suit, claim, action or proceeding pending before any
Governmental Entity, which, if adversely decided, would have the effect of (i)
making illegal, materially delaying or otherwise directly or indirectly
restraining or prohibiting the Merger or the consummation of the transactions
contemplated by this Agreement; (ii) prohibiting or materially limiting the
ownership or operation by CDI or the Surviving Corporation of all or any
material portion of the business or assets of AIM, CDI or Merger Sub or
compelling CDI or the Surviving Corporation to dispose of or hold separate all
or any material portion of the business or assets of AIM, CDI or Merger Sub as a
result of the Merger or (iii) imposing material limitations on the ability of
the holders of CDI Common Stock after the Merger to exercise full rights of
ownership of any CDI Common Stock.
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SECTION 7.2 CONDITIONS OF OBLIGATIONS OF AIM. The obligations of AIM
to effect the Merger shall be subject to the satisfaction of the following
conditions unless waived by AIM:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of CDI set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and AIM shall have received a certificate signed
on behalf of CDI by the chief executive officer of CDI to such effect.
(b) PERFORMANCE OF OBLIGATIONS. CDI shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and AIM shall have received a
certificate signed on behalf of CDI by the chief executive officer of CDI to
such effect.
(c) SECRETARY'S CERTIFICATE. AIM shall have received from each
of the Secretaries of CDI and Merger Sub a good standing certificate and
certified charter documents, dated as of a date reasonably close to the Closing
Date.
SECTION 7.3 CONDITIONS OF OBLIGATIONS OF CDI. The obligation of CDI to
cause Merger Sub to effect the Merger is subject to the satisfaction of the
following conditions unless waived by CDI:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of AIM and YHI set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the Closing Date
as though made on and as of the Closing Date, except as otherwise contemplated
by this Agreement, and CDI shall have received certificates signed on behalf of
AIM and YHI by their respective chief executive officers to such effect.
(b) PERFORMANCE OF OBLIGATIONS. AIM and YHI shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and CDI shall have
received a certificate signed on behalf of AIM and YHI by their respective chief
executive officers to such effect.
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(c) APPROPRIATE CONSENTS. AIM shall have obtained all
consents, approvals and waivers of all persons and entities which CDI in its
sole and absolute discretion deems to be appropriate in connection with the
Merger, including, but not limited to, the consent of Roche Diagnostics
Corporation ("Roche") to the assignment of the contract by and between Roche and
Yankelovich Partners Inc. (the "Roche Contract") to AIM and furthermore, the
consent of Roche to the assignment of the Roche Contract to the Surviving
Corporation upon the Closing.
(d) EMPLOYMENT AGREEMENT. AIM and Scott Morrison shall have
entered into an employment agreement effective as of the Effective Time, which
upon its execution terminates the prior employment agreement between AIM and Mr.
Morrison, and is in substantially the form attached hereto as Exhibit G.
(e) NONSOLICITATION AGREEMENT. AIM, CDI and YHI shall have
entered into a nonsolicitation agreement effective as of the Effective Time in
substantially the form attached hereto as Exhibit H.
(f) SECRETARY'S CERTIFICATE. CDI shall have received from each
of the Secretaries of AIM and YHI a good standing certificate and certified
charter documents, dated as of a date reasonably close to the Closing Date.
(g) STOCKHOLDERS AGREEMENT AND REGISTRATION RIGHTS AGREEMENT.
YHI shall have entered into the stockholders agreement and registration rights
agreement, in each case, as has been entered into by the other holders of CDI
Common Stock, and forms of which have been provided to YHI.
(h) SECURITIES ACT OPINION. YHI shall have provided to CDI an
opinion of its counsel, the opinion and counsel being reasonably satisfactory to
CDI, concerning the applicable exemption under the Securities Act for any
previously disclosed and pre-determined distributions of the CDI Common Stock to
be received in the Merger Consideration.
(i) LOCK-UP AGREEMENT. YHI shall have entered into the lock-up
agreement with SG Cowen, as has been entered into by other affiliates of CDI
holding CDI Common Stock, substantially in the form attached hereto as Exhibit
I, restricting YHI's ability to sell its CDI Common Stock for a specified period
of time, if any, after CDI has an effective registration statement with the SEC
for an initial public offering.
(j) MORRISON AFFIDAVIT. Mr. Scott Morrison shall have signed
an affidavit asserting that (i) he is an "accredited investor" as such term is
defined under
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Regulation D of the Securities Act; (ii) he is aware and understands that the
CDI Common Stock that he is receiving will be unregistered and "restricted" as
such term is defined under Rule 144 of the Securities Act and (iii) he is aware
and understands that the shares of CDI Common Stock that he is receiving may not
be sold except pursuant to an effective registration statement under the
Securities Act or an applicable exemption.
(k) SERVICES AGREEMENT. YHI shall have entered into a services
agreement, effective as of the Effective Time in substantially the form at
attached hereto as Exhibit J.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of AIM and CDI;
(b) by either AIM or CDI if (i) there shall have been a
material breach of any representation, warranty, covenant or agreement set forth
in this Agreement, on the part of CDI, in the case of a termination by AIM or on
the part of AIM or YHI in the case of a termination by CDI, which breach shall
not have been cured, in the case of a representation or warranty, prior to the
Closing or, in the case of a covenant or agreement, within 5 business days
following receipt by the breaching party of notice of such breach, or (ii) any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable; or
(c) by either AIM or CDI if the Merger shall not have been
consummated on or before February 15, 2000; PROVIDED, HOWEVER, that the right
to terminate this Agreement pursuant to this Section 8.1(c) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
have occurred on or before the aforesaid date.
SECTION 8.2 EFFECT OF TERMINATION. In the event of a termination of
this Agreement by either CDI or AIM as provided in Section 8.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of AIM
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or CDI or their respective officers or directors, except for the second sentence
of Section 6.1 and Section 11.1, which shall survive such termination. Nothing
contained in this Section 8.2 shall relieve any party hereto from any liability
for any breach of this Agreement.
ARTICLE IX
SECURITIES LAW MATTERS
YHI agrees as follows with respect to the sale or other
disposition of the shares of CDI Common Stock by YHI after the Closing:
SECTION 9.1 DISPOSITION OF SHARES. YHI represents and warrants that,
except as YHI has previously disclosed to CDI, the shares of CDI Common Stock
are being acquired and will be acquired for its own account and will not be sold
or otherwise disposed of except pursuant to the terms of the stockholders
agreement referred to in Section 7.3(g) and (a) an exemption or exclusion from
the registration requirements under the Securities Act which does not require
the filing by CDI with the Securities and Exchange Commission ("SEC") of any
registration statement, offering circular or other document, in which case YHI
shall first supply to CDI an opinion of counsel (which opinion and counsel shall
be reasonably satisfactory to CDI) that such exemption or exclusion is
available, or (b) a registration statement filed by CDI with the SEC under the
Securities Act (which YHI acknowledges CDI has no obligation to file).
SECTION 9.2 LEGEND. The certificates for the shares of CDI Common
Stock received in the Merger shall bear a legend as provided for in the
stockholders agreement referred to in Section 7.3(g).
ARTICLE X
SURVIVAL AND INDEMNIFICATION
SECTION 10.1 SURVIVAL PERIODS. All representations and warranties of
the parties contained in this Agreement shall survive the Effective Time until
the two year anniversary of the Closing Date, except that the representations
and warranties in Section 3.13 shall survive until all applicable statutes of
limitation with respect to matters set forth therein have elapsed (each such
period to be referred to herein as the
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"Survival Period"). Notwithstanding the foregoing, all representations and
warranties shall continue in effect in the event a claim for breach thereof has
been made prior to the expiration of the applicable Survival Period and shall
survive until such claim is resolved.
SECTION 10.2 INDEMNIFICATION OF CDI.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing Date, YHI agrees to defend, indemnify and hold harmless
CDI, the Surviving Corporation and their respective successors and assigns
(individually, a "CDI Indemnitee," and collectively, the "CDI Indemnitees"),
from and against all liability, demands, claims, actions, assessments, losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "CDI Damages") asserted against or
incurred by any CDI Indemnitee as a result of or arising out of or otherwise
relating to (i) any breach of a representation or warranty of AIM or YHI
contained in or made pursuant to this Agreement when made or at and as of the
Closing Date as though such representation or warranty was made at and as of the
Closing Date, (ii) any failure by AIM or YHI to perform or otherwise fulfill or
comply with any undertaking, agreement or obligation to be performed, fulfilled
or complied with by AIM or YHI under this Agreement prior to the Closing Date or
(iii) any performance or nonperformance by the CDI Indemnitee or otherwise
relating to any contract listed in Section 3.10 of the AIM Disclosure Schedule.
(b) YHI's obligation to indemnify the CDI Indemnitees pursuant
to Section 10.2(a) is subject to the following limitations:
(i) No indemnification shall be made by YHI unless and until
the aggregate amount of CDI Damages exceeds $100,000, in which event
indemnification shall be made by YHI for that amount of CDI Damages that exceeds
$100,000. Notwithstanding the foregoing, YHI shall indemnify the CDI Indemnitees
for the full amount of CDI Damages relating to that certain contract by and
between AIM and Vail (the "Vail Contract") and the full amount of CDI Damages
relating to Mr. William Simpson's claim concerning his termination from
employment at AIM (the "Simpson Matter");
(ii) In no event shall YHI's aggregate obligation to indemnify
the CDI Indemnitees exceed the sum of $3,000,000; except that any CDI Damages
resulting from the Vail Contract and Simpson matter shall not be included in any
calculations of the $3,000,000 limit discussed in this Section; and
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(iii) The amount of any CDI Damages shall be reduced by any
amount received by a CDI Indemnitee with respect thereto under any insurance
coverage or from any other party alleged to be responsible therefor. The CDI
Indemnitees shall use reasonable efforts to collect any amounts available under
such insurance coverage and from such other party alleged to have
responsibility. If a CDI Indemnitee receives an amount under insurance coverage
or from such other party with respect to CDI Damages at any time subsequent to
any indemnification provided by YHI pursuant to this Section 10.2, then such CDI
Indemnitee shall promptly reimburse YHI for any payment made or expense incurred
by YHI in connection with providing such indemnification up to such amount
received by the CDI Indemnitee.
SECTION 10.3 INDEMNIFICATION OF YHI.
(a) Subject to the terms and conditions set forth herein, from
and after the Closing Date, CDI agrees to defend, indemnify and hold harmless
YHI (the "AIM Indemnitee"), from and against all liability, demands, claims,
actions, assessments, losses, damages, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) (collectively, "AIM
Damages") asserted against or incurred by the AIM Indemnitee as a result of or
arising out of or otherwise relating to (i) any breach of a representation or
warranty of CDI contained in or made pursuant to this Agreement when made or at
and as of the Closing Date as though such representation or warranty was made
at and as of the Closing Date or (ii) any failure to perform or otherwise
fulfill any undertaking, agreement or obligation to be performed, fulfilled or
complied with by CDI under this Agreement prior to the Closing Date.
(b) CDI's obligation to indemnify the AIM Indemnitee pursuant
to Section 10.3(a) is subject to the following limitations:
(i) No indemnification shall be made by CDI unless and until
the aggregate amount of AIM Damages exceeds $100,000, in which event
indemnification shall be made by CDI for that amount of AIM Damages that
exceeds $100,000;
(ii) In no event shall CDI's aggregate obligation to indemnify
the AIM Indemnitee exceed the sum of $3,000,000; and
(iii) The amount of any AIM Damages shall be reduced by any
amount received by the AIM Indemnitee with respect thereto under any insurance
coverage or from any other party alleged to be responsible therefor. The AIM
Indemnitee shall use reasonable efforts to collect any amounts available under
such
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insurance coverage and from such other party alleged to have responsibility. If
the AIM Indemnitee receives an amount under insurance coverage or from such
other party with respect to AIM Damages at any time subsequent to any
indemnification provided by CDI pursuant to this Section 10.3, then such AIM
Indemnitee shall promptly reimburse CDI for any payment made or expense incurred
by CDI in connection with providing such indemnification up to such amount
received by the AIM Indemnitee.
SECTION 10.4 INDEMNIFICATION PROCEDURES. The party or parties being
indemnified, CDI Indemnitee and AIM Indemnitee, are referred to herein as the
"Indemnified Party" and the indemnifying party is referred to herein as the
"Indemnifying Party."
(a) The Indemnified Party shall use commercially reasonable
efforts to minimize any Losses in respect of which indemnity may be sought
hereunder, PROVIDED, HOWEVER, that this sentence shall not be construed to
release the Indemnifying Party from liability for the breach of any
representation, warranty, covenant or agreement contained in this Agreement or
to waive the rights of an Indemnified Party to indemnification for the breach of
any representation, warranty, covenant or agreement contained in this Agreement.
The Indemnified Party shall give written notice (the "Indemnification Notice")
to the Indemnifying Party within ten (10) days after discovery by the
Indemnified Party of any matters giving rise to a claim for indemnification or
reimbursement under this Agreement; PROVIDED, HOWEVER, that if no prejudice
results from a failure to deliver prompt notice of a claim, no penalty shall be
exacted therefor and the Indemnified Party shall continue to be entitled to
indemnification. Notwithstanding the preceding sentence, any such
Indemnification Notice must be given before the end of the Survival Period.
(b) In case any such action, proceeding or claim is brought
against an Indemnified Party, the Indemnifying Party shall be entitled to
participate in and, unless in the reasonable judgment of the Indemnified Party a
conflict of interest between it and the Indemnifying Party may exist in respect
of such action, proceeding or claim, to assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Party, and after notice from the
Indemnifying Party to the Indemnified Party of its election so to assume the
defense thereof, the Indemnifying Party shall not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. In the event that the Indemnifying Party advises the Indemnified
Party that the Indemnifying Party will contest a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any Indemnification
Notice to
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notify, in writing, the Indemnified Party of its election to defend, settle or
compromise, at its sole cost and expense, any action or claim (or discontinues
its defense at any time after it commences such defense), then the Indemnified
Party may, at its option, defend, settle or otherwise compromise or pay such
action or claim. In any event, unless and until the Indemnifying Party elects in
writing to assume and does so assume the defense of any such claim or action,
the Indemnified Party's costs and expenses arising out of the defense,
settlement or compromise of any such action or claim shall be Losses subject to
indemnification hereunder.
(c) The Indemnified Party shall cooperate fully with the
Indemnifying Party in connection with any negotiation or defense of any such
action or claim by the Indemnifying Party and shall furnish to the Indemnifying
Party all information reasonably available to the Indemnified Party which
relates to such action or claim. The Indemnifying Party shall keep the
Indemnified Party fully appraised at all times as to the status of the defense
or any settlement negotiations with respect thereto. If the Indemnifying Party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. If the Indemnifying Party does not assume the defense, the
Indemnified Party shall keep the Indemnifying Party appraised at all times as to
the status of the defense; PROVIDED, HOWEVER, that the failure to keep the
Indemnifying Party so informed shall not affect the obligations of the
Indemnifying Party hereunder. Payment of indemnification amounts hereunder
shall be made to the person or entity specified by the Indemnified Party.
Anything in this Article X to the contrary notwithstanding, the Indemnifying
Party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party, a release from all liability in respect of
such claim.
SECTION 10.5 INSURANCE. The Indemnifying Party shall be subrogated to
the rights of the Indemnified Party in respect of any insurance relating to
damages to the extent of any indemnification payments made hereunder.
SECTION 10.6 SOLE REMEDIES. The indemnification provided for in this
Article X shall be the sole remedy against an Indemnifying Party with respect to
the matters covered by this Article X; PROVIDED, HOWEVER, that nothing in this
agreement shall preclude any remedy available at law or in equity for fraud or
similar acts.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1 EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
SECTION 11.2 BROKERS OR FINDERS. Each of AIM, YHI and CDI represents
that no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
SECTION 11.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors
and, if required by law, their respective stockholders, at any time. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
SECTION 11.4 EXTENSION; WAIVER. At any time prior to the Effective
Time, either party hereto, may (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
SECTION 11.5 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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if to AIM or YHI, to:
Yankelovich Holdings Inc.
101 Merritt 7 Corporate Park
Norwalk, Connecticut 06851
Attn: Mr. John S. Struck
Fax: (203) 845-8373
with a copy to:
Kleban & Samor, P.C.
2425 Post Road
P.O. Box 763
Southport, Connecticut 06490
Attn: Mr. Al Samor
Fax: (203) 259-9617
and
if to CDI, to:
Cyber Dialogue Inc.
304 Hudson Street
New York, New York 10013
Attn: Andrew Watt
Fax: (212) 255-6622
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attn: Michael P. Rogan, Esq.
Fax: (202) 393-5760
SECTION 11.6 DESCRIPTIVE HEADINGS. The descriptive headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
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SECTION 11.7 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute a single agreement.
SECTION 11.8 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the Merger; and (b) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
SECTION 11.9 GOVERNING LAW; ARBITRATION.
(a) This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
(b) Except as specifically provided for elsewhere in this
Agreement, all claims and controversies arising out of or in connection with
this Agreement shall be subject to binding arbitration by a single arbitrator in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA") or the existing Rules of Practice and Procedures of the
Judicial Arbitration and Mediation Services, Inc. ("JAMS"). Any arbitration
shall occur in Connecticut and any judgment on the award rendered in such
arbitration shall be entered in any Connecticut state or federal court having
jurisdiction. The party filing the arbitration shall have the right to select
either AAA or JAMS. The prevailing party in any arbitration proceeding hereunder
as determined by the arbitrator or in any legal proceedings or actions arising
from or in connection with this Agreement shall be entitled to recover
reasonable attorneys' fees, costs and expenses and the losing party shall be
responsible for payment of the arbitrator's fee(s). Nothing herein shall
prohibit a party from seeking equitable relief in a court of law to maintain the
status quo while an arbitration is pending hereunder. The parties agree that the
arbitrator shall not have the power to award punitive damages.
SECTION 11.10 PUBLICITY. CDI and YHI shall consult with each other
prior to issuing any press release or making any other public announcement with
respect to the transactions contemplated by this Agreement and shall not issue
any such press release or make any such public announcement prior to such
consultation, except as may be required by applicable law or by applicable rules
of any securities exchange.
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SECTION 11.11 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that CDI shall be entitled without the
consent of AIM or YHI to assign the rights of Merger Sub to consummate the
Merger to any other wholly-owned subsidiary. This Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and permitted assigns.
SECTION 11.12 SPECIFIC PERFORMANCE. The parties recognize and agree
that if for any reason any of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to any
other available remedies, the other party shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity. In the event that any action should be brought in equity to enforce the
provisions of this Agreement, no party will allege, and each party hereby waives
the defense, that there is an adequate remedy at law.
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IN WITNESS WHEREOF, CDI, Merger Sub, YHI and AIM have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
CYBER DIALOGUE INC.
By: /s/ Andrew Watt
-------------------------------
Name: Andrew Watt
Title: Chief Operating Officer
AIM ACQUISITION I INC.
By: /s/ Andrew Watt
-------------------------------
Name: Andrew Watt
Title: Treasurer
YANKELOVICH HOLDINGS INC.
By: /s/ John S. Struck
-------------------------------
Name: John S. Struck
Title: President
APPLIED INFORMATION MANAGEMENT
MARKETING, INC.
By: /s/ John S. Struck
-------------------------------
Name: John S. Struck
Title: Treasurer
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EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CYBER DIALOGUE INC.
-------------------------------------------------------------
Pursuant to Section 245 of the General
Corporation Law of the State of Delaware
-------------------------------------------------------------
Cyber Dialogue Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
The name of the Corporation is Cyber Dialogue Inc. and the date of
filing of its original Certificate of Incorporation with the Delaware Secretary
of State was September 25, 1996. This Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Section 245 of the General
Corporation Law of the State of Delaware. This Restated Certificate of
Incorporation only restates and integrates, and does not further amend, the
provisions of the Corporation's Certificate of Incorporation, as amended to
date, and there is no discrepancy between those provisions and the provisions of
this Restated Certificate of Incorporation, which reads in its entirety as set
forth below:
FIRST: The name of the Corporation is Cyber Dialogue Inc.
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 as set forth in Title 8 of the Delaware Code (the
"GCL").
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 40,000,000 shares of Common Stock, each having a par
value of one penny ($0.01).
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
<PAGE>
Deborah M. Reusch
P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal
the By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the
By-Laws of the Corporation. Election of directors need not be
by written ballot unless the By-Laws so provide.
(4) 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 for liability (i) for any
breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the
Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit.
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.
(5) In addition to the powers and authority hereinbefore 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
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provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however,
that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have
been valid if such By-Laws had not been adopted.
SEVENTH: 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 provisions 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.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed by the Chief Financial Officer and
Secretary of the Corporation this 17th day of February, 2000.
/s/ C. Andrew Watt
-------------------------------------
C. Andrew Watt
Chief Financial Officer and Secretary
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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-
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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 seven 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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<PAGE>
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,
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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
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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
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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
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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
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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
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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
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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-
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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
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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
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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
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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
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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
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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
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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-
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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-
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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
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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
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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
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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,
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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
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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.
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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
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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.
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Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of September
14, 1999, by and among Cyber Dialogue Inc., a Delaware corporation (the
"Company"), the parties listed on Annex A, and such other persons as may from
time to time become a party to this Agreement in accordance with Section 2.
The Stockholders (as defined below) have requested, and the Company
has agreed to provide, registration rights with respect to the Registrable
Securities (as hereinafter defined), as set forth in this Agreement.
In consideration of the mutual agreements contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
agree as follows:
Section 1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
"Additional Demand Registration" shall have the meaning set forth in
Section 3 hereof.
"Affiliate" of a specified person shall mean any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control,"
when used with respect to any person, means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Common Stock" shall mean shares of the Company's Common Stock, $.01
par value per share.
"Demand Notice" shall have the meaning set forth in Section 3 hereof.
"Demand Registration" shall have the meaning set forth in Section 3
hereof.
<PAGE>
"Designated Investors" shall mean eCom, NIG and MV Partners, and such
other parties to this Agreement as may from time to time be designated by the
Company as a Designated Investor with the consent of Wand and the Designated
Investors.
"eCom" shall mean eCom Partners Fund I LLC.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Initial Demand Registration" shall have the meaning set forth in
Section 3 hereto.
"Initial Public Offering" shall mean an offering to the public of
shares of Common Stock of the Company pursuant to the initial registration
thereof under the Securities Act.
"Initial Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of July 31, 1999 among the Company and the other
parties identified therein.
"Losses" shall have the meaning set forth in Section 8 hereof.
"MV Partners" shall mean MV Partners L.P. III, L.P.
"NIG" shall mean NIG-Cyber Dialogue, Ltd.
"Person" shall mean an individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other entity.
"Piggyback Notice" shall have the meaning set forth in Section 4
hereof.
"Piggyback Registration" shall have the meaning as set forth in Section
4 hereof.
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"Proceeding" shall mean an action, claim, suit or proceeding
(including without limitation, an investigation or partial proceeding, such
as a deposition), whether commenced or threatened.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" shall mean the shares of Common Stock held by
the Stockholders (including any shares of Common Stock issued or distributed by
way of dividend, stock split or other distribution in respect of such shares).
As to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (x) a Registration Statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such Registration Statement, (y) they are sold pursuant to Rule 144 (or
any similar provision then in force under the Securities Act), or (z) they shall
have ceased to be outstanding.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
"Rule 144" shall mean Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
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"Stockholders" refers collectively to Wand, eCom, NIG, MV Partners,
each of the other parties listed on Annex A and such other persons as may
hereafter become a party to this Agreement.
"underwritten registration or underwritten offering" shall mean a
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
"Wand" refers collectively to Wand Equity Portfolio II, L.P., Wand
Affiliates Fund, L.P., Wand/Yankelovich Investments L.P., Wand Partners L.P. and
Wand Partners (S.C.) Inc.
Section 2. HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns Registrable
Securities or has a right to acquire such Registrable Securities. The Company
and the Stockholders agree that each other Person who shall hereafter become a
holder of Registrable Securities shall become a signatory to this Agreement upon
execution of an instrument in the form attached hereto as Annex B. Each
Stockholder (other than Wand) party to the Initial Registration Rights Agreement
hereby acknowledges and agrees with the Company that, immediately upon becoming
a party to this Agreement and with no further action on its part, such
Stockholder shall be deemed to be relieved of any and all obligations under, and
to have relinquished any and all rights under, the Initial Registration Rights
Agreement, and shall instead by bound solely by the terms and provisions of this
Agreement. Wand hereby acknowledges and agrees with the Company that, once all
of the other Stockholders party to the Initial Registration Rights Agreement
become a party to this Agreement, Wand shall, with no further action on its
part, be deemed to be relieved of any and all obligations under, and to have
relinquished any and all rights under, the Initial Registration Rights
Agreement, and shall instead by bound solely by the terms and provisions of this
Agreement, and the Initial Registration Rights Agreement shall thereupon become
null and void.
Section 3. DEMAND REGISTRATION.
(a) REQUESTS FOR REGISTRATION. At any time after the Company shall
have effected an Initial Public Offering, the holders of not less than (x)
twenty-five (25) percent of the outstanding Registrable Securities together as a
group, or (y) a majority of the Registrable Securities held by the Designated
Investors as a group, which Registrable Securities were acquired on or after the
date hereof,
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<PAGE>
shall have the right by written notice delivered to the Company (the "Demand
Notice"), to require the Company to register (a "Demand Registration") under and
in accordance with the provisions of the Securities Act the number of
Registrable Securities requested to be so registered pursuant to the terms of
this Agreement.
Until such time as the Company shall become eligible to use Form S-3
for the registration under the Securities Act of any of its securities, the
number of Demand Registrations pursuant to this Section 3(a) shall not exceed
two (2) for all of the holders of the Registrable Securities (the "Initial
Demand Registration"). Thereafter, one (1) Demand Registration shall become
available each year in addition to the Initial Demand Registrations provided for
in the preceding sentence (the "Additional Demand Registration") either of which
must be approved by the holders of the Registrable Securities in the same manner
specified in clause (x) or (y) in the preceding paragraph, provided, HOWEVER,
that no Demand Notice may be given with respect to such Additional Demand
Registrations prior to six months after the effective date of the immediately
preceding Demand Registration; and PROVIDED FURTHER, that no Demand Registration
shall be deemed to have occurred for purposes of this Section 3(a) if a
requested Demand Registration does not become effective or is not maintained
effective for the period required pursuant to this Section 3(a), or the amount
of Registrable Securities to be registered on behalf of the holders requesting
such Demand Registration is reduced by more than 50% pursuant to Section 3(b)
hereof, in which case the holders of Registrable Securities shall be entitled to
an additional Demand Registration in lieu thereof until such Demand Registration
is declared and maintained effective for such period.
Within ten (10) days after receipt by the Company of a Demand Notice,
the Company shall give written notice (the "Notice") of such Demand Notice to
all other holders of Registrable Securities and shall, subject to the provisions
of Section 3(b) hereof, include in such registration all Registrable Securities
with respect to which the Company received written requests for inclusion
therein within ten (10) days after such notice is given by the Company to such
holders.
All requests made pursuant to this Section 3 will specify the amount of
Registrable Securities to be registered and the intended methods of disposition
thereof.
The Company shall be required to maintain the effectiveness of the
Registration Statement with respect to any Demand Registration for the lesser of
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(i) 90 days after the effective date thereof and (ii) consummation of the
distribution by the holders of the Registrable Securities included in such
Registration Statement.
Notwithstanding the foregoing paragraph, if holders of a majority of
the then outstanding Registrable Securities requested to be included in such
registration pursuant to Section 3(a) request that such Demand Registration be
a "shelf" registration pursuant to Rule 415 under the Securities Act, and the
Company is then eligible to make such a filing, the Company shall file such
Demand Registration under Rule 415 and shall keep the Registration Statement
filed in respect thereof effective for a period which shall terminate on the
earlier of (i) 180 days from the date on which the SEC declares such
Registration Statement effective and (ii) the date on which all Registrable
Securities covered by such Registration Statement have been sold pursuant to
such Registration Statement.
(b) PRIORITY ON DEMAND REGISTRATION. If any of the Registrable
Securities registered pursuant to a Demand Registration are to be sold in a firm
commitment underwritten offering, and the managing underwriter or underwriters
advise the holders of such securities in writing that in its opinion the total
number or dollar amount of Registrable Securities proposed to be sold in such
offering is such as to materially and adversely affect the success of such
offering, then there shall be included in such firm commitment underwritten
offering the number or dollar amount of Registrable Securities that in the
opinion of such managing underwriter can be sold, and such Registrable
Securities shall be allocated PRO RATA among the holders of Registrable
Securities on the basis of the number or dollar amount of securities owned by
each such holder participating in such offering.
(c) POSTPONEMENT OF DEMAND REGISTRATION. The Company shall be
entitled to postpone, for a reasonable period of time not in excess of ninety
(90) days, the filing of a Registration Statement if the Company determines, in
the good faith exercise of its reasonable business judgment, that such
registration and offering could adversely affect or interfere with BONA FIDE
financing plans of the Company or would require disclosure of information, the
premature disclosure of which could adversely affect the Company or any
transaction under consideration by the Company.
Section 4. PIGGYBACK REGISTRATION.
(a) RIGHT TO PIGGYBACK. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
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Common Stock (other than a registration statement (i) on Form S-4, Form S-8 or
any successor forms thereto or (ii) filed solely in connection with an exchange
offer or any employee benefit or dividend reinvestment plan), whether or not for
its own account, then the Company shall give written notice of such proposed
filing to the holders of Registrable Securities at least fifteen (15) days
before the anticipated filing date (the "Piggyback Notice"). The Piggyback
Notice shall offer such holders the opportunity to register in such registration
statement such amount of Registrable Securities as each such holder may request
(a "Piggyback Registration"). Subject to Section 5(b) hereof, the Company shall
include in each such Piggyback Registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within ten (10) days after notice has been given to the applicable holder. The
holders of Registrable Securities shall be permitted to withdraw all or part of
the Registrable Securities from a Piggyback Registration at any time prior to
the effective date of such Piggyback Registration. The Company shall not be
required to maintain the effectiveness of the Registration Statement beyond the
earlier to occur of (i) 180 days after the effective date thereof and (ii)
consummation of the distribution by the holders of the Registrable Securities
included in such Registration Statement.
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. The Company shall cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit holders of Registrable Securities requested to be included in the
registration for such offering to include all such Registrable Securities on the
same terms and conditions as any other shares of Common Stock, if any, of the
Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such underwritten offering have informed the
Company in writing that it is their opinion that the total amount of securities
that such holders, the Company and any other Persons having rights to
participate in such registration, intend to include in such offering is such as
to materially and adversely affect the success of such offering, then the amount
of securities to be offered (i) for the account of holders of Registrable
Securities and (ii) for the account of all such other Persons (other than the
Company) shall be reduced or limited PRO RATA in proportion to the respective
dollar amounts of securities to be registered to the extent necessary to reduce
the total amount of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters.
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<PAGE>
Section 5. HOLD-BACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE
SECURITIES. Each holder of Registrable Securities agrees, in connection with the
Initial Public Offering and in connection with any underwritten registration of
Registrable Securities filed pursuant to Section 3 or Section 4 hereof, if
requested (pursuant to a timely written notice) by the Company or the managing
underwriter or underwriters in an underwritten offering, not to effect any
public sale or distribution of any of the Company's securities (except as part
of such underwritten offering), including a sale pursuant to Rule 144, during
the 90-day period after the closing date of each underwritten offering made by
the Company or pursuant to such Registration Statement.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation from
entering into any such agreement; PROVIDED, HOWEVER, that any such holder shall
undertake in its request to participate in any such underwritten offering, not
to effect any public sale or distribution of the class of securities covered by
such Registration Statement (except as part of such underwritten offering)
during such period unless it has provided forty-five (45) days' prior written
notice of such sale or distribution to the managing underwriter or underwriters.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees
that without the written consent of the managing underwriter or underwriters in
an underwritten offering of Registrable Securities covered by a Registration
Statement filed pursuant to Section 3 or Section 4 hereof, it will not effect
any public or private sale or distribution of its equity securities, including a
sale pursuant to Regulation D under the Securities Act, during the 90-day period
beginning on the closing date of each underwritten offering made pursuant to
such Registration Statement (except (w) as part of such underwritten
registration, (x) pursuant to registrations on Form S-4 or Form S-8 or any
successor form to such forms or pursuant to any unregistered offering to the
Company's employees or directors, or to employees of its subsidiaries, pursuant
to any employee benefit plan (as defined in Rule 405 under the Securities Act),
(y) in connection with an exchange offer or (z) in connection with the
acquisition of assets by the Company or its subsidiaries).
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Section 6. REGISTRATION PROCEDURES.
In connection with the Company's registration obligations pursuant to
Section 3 or Section 4 hereof, the Company shall effect such registration to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) Prepare and file with the SEC, as soon as practicable, a
Registration Statement or Registration Statements on such form which shall be
available for the sale of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution thereof, and use
its best efforts to cause such Registration Statement to become effective and to
remain effective as provided herein; PROVIDED, HOWEVER, that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto
(including documents that would be incorporated or deemed to be incorporated
therein by reference), the Company shall furnish or otherwise make available to
the holders of the Registrable Securities covered by such Registration
Statement, their counsel and the managing underwriters, if any, copies of all
such documents proposed to be filed, which documents will be subject to the
review of such holders, their counsel and such underwriters, if any, PROVIDED,
HOWEVER, that the Company shall not be required to deliver to such holders a
copy of any such document that has not been materially changed from a copy of
such document that was previously delivered to such holders. The Company shall
not file any such Registration Statement or Prospectus or any amendments or
supplements thereto (including such documents that, upon filing, would be
incorporated or deemed to be incorporated by reference therein) to which the
holders of a majority of the Registrable Securities covered by such Registration
Statement, their counsel, or the managing underwriters, if any, shall reasonably
object, in writing, on a timely basis, unless, in the opinion of the Company,
such filing is necessary to comply with applicable law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective during the period
provided herein with respect to the disposition of all securities covered by
such Registration Statement; and cause the related Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act.
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(c) Notify the selling holders of Registrable Securities, their
counsel and the managing underwriters, if any, promptly, and (if requested by
any such Person), confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any other Federal
or state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information (provided, that
the Company shall not be required to notify the holders or their counsel of all
"comment" letters received by the Company from the SEC or to deliver copies of
such comment letters or the Company's responses thereto to the holders or their
counsel unless such letters request information from or about the holders),
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (iv) if at any time the representations and warranties of the Company
contained in any agreement (including any underwriting agreement) contemplated
by Section 6(n) below cease to be true and correct, (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction, or the initiation or threatening of any proceeding for such
purpose, and (vi) of the happening of any event that makes any statement made
in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in such Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not 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, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction.
(e) If requested by the managing underwriters, if any, or the
holders of a majority of the holders of the then outstanding Registrable
Securities being sold in connection with an underwritten offering, promptly
include in a
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Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such holders may reasonably request in
order to permit the intended method of distribution of such securities and
make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has
received such request; PROVIDED, HOWEVER, that the Company shall not be
required to take any actions under this Section 6(e) that are not, in the
opinion of counsel for the Company, in compliance with applicable law.
(f) Furnish to each selling holder of Registrable Securities, its
counsel and each managing underwriter, if any, without charge, at least one
conformed copy of the Registration Statement and each post-effective amendment
thereto, including financial statements (but excluding schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all
exhibits, unless requested in writing by such holder, counsel or underwriter).
(g) Deliver to each selling holder of Registrable Securities,
its counsel, and the underwriters, if any, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with the distribution of the Registrable Securities; and the Company,
subject to the last paragraph of this Section 6, hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
holders of Registrable Securities and the underwriters, if any, in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus and any such amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to use
its best efforts to register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and their respective counsel
in connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or "Blue Sky" laws of such jurisdictions within the United
States as any seller or underwriter reasonably requests in writing and to keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective;
PROVIDED, HOWEVER, that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (B) take any action that would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
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(i) Cooperate with the selling holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates shall be in a form eligible for deposit with The Depository Trust
Company, and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or holders may
request at least two (2) business days prior to any sale of Registrable
Securities in a firm commitment public offering, but in any other such sale,
within ten (10) business days prior to having to issue the securities.
(j) Cause the Registrable Securities covered by the Registration
Statement to be registered with or approved by such other governmental agencies
or authorities within the United States, except as may be required solely as a
consequence of the nature of such selling holder's business, in which case the
Company will cooperate in all best respects with the filing of such Registration
Statement and the granting of such approvals, as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities.
(k) Upon the occurrence of any event contemplated by Section
6(c)(vi) above, prepare a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(l) Prior to the effective date of the Registration Statement
relating to the Registrable Securities, provide a CUSIP number for the
Registrable Securities.
(m) Use its best efforts to cause all shares of Registrable
Securities covered by such Registration Statement to be authorized to be quoted
on the Nasdaq National Market or listed on a national securities exchange if
shares of the particular class of Registrable Securities are at that time quoted
on the Nasdaq National Market or listed on such exchange, as the case may be.
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(n) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions reasonably requested by the holders
of a majority of the Registrable Securities being sold in connection therewith
(including those reasonably requested by the managing underwriters, if any) to
expedite or facilitate the disposition of such Registrable Securities, and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (i) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, with respect to the business of the Company and its
subsidiaries, and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, in
form, substance and scope as are customarily made by issuers to underwriters in
underwritten offerings, and, if true, confirm the same if and when requested,
(ii) use its reasonable efforts to obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any, and counsels to
the selling holders of the Registrable Securities), addressed to each selling
holder of Registrable Securities and each of the underwriters, if any, covering
the matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such counsel and
underwriters, (iii) use its reasonable efforts to obtain "cold comfort" letters
and updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each selling holder of
Registrable Securities (unless such accountants shall be prohibited from so
addressing such letters by applicable standards of the accounting profession)
and each of the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings, (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
substantially to the effect set forth in Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section and (v) deliver such
documents and certificates as may be reasonably requested by the holders of a
majority of the Registrable Securities being sold, their counsel and the
managing underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to Section 6(n)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into
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by the Company. The above shall be done at each closing under such underwriting
or similar agreement, or as and to the extent required thereunder.
(o) Make available for inspection by a representative of the
selling holders of Registrable Securities, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorneys or
accountants retained by such selling holders or underwriter, at the offices
where normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information in each case reasonably requested by
any such representative, underwriter, attorney or accountant in connection with
such Registration Statement; PROVIDED, HOWEVER, that any information that is
designated by the Company in writing as confidential at the time of delivery of
such information shall be kept confidential by such Persons unless (i)
disclosure of such information is required by court or administrative order,
(ii) disclosure of such information, in the opinion of counsel to such Person,
is required by law, or (iii) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by such
Person. Without limiting the foregoing, no such information shall be used by
such Person as the basis for any market transactions in securities of the
Company or its subsidiaries in violation of law.
(p) Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder, or any similar rule promulgated under the Securities Act, no later
than forty-five (45) days after the end of any twelve (12) month period (or
ninety (90) days after the end of any twelve (12) month period if such period is
a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements shall
cover one of said twelve (12) month periods.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
and the Company may exclude from such registration the Registrable Securities of
any seller who
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unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(c)(ii), 6(c)(iii),
6(c)(v) or 6(c)(vi) hereof, such holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6(k) hereof, or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus.
Section 7. REGISTRATION EXPENSES.
All reasonable fees and expenses incident to the performance of or
compliance with this Agreement by the Company (including, without limitation,
(i) all registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with the National
Association of Securities Dealers, Inc. and (B) of compliance with securities
or Blue Sky laws, including, without limitation, fees and disbursements of
counsel for the underwriters or selling holders in connection with Blue Sky
qualifications of the Registrable Securities pursuant to Section 6(h)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in any Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) fees and disbursements of all
independent certified public accountants referred to in Section 6(n)(iii) hereof
(including, without limitation, the expenses of any "cold comfort" letters
required by this Agreement) and (vi) the reasonable fees and disbursements of
one (1) counsel for the holders of Registrable Securities, as a group, which
counsel shall be reasonably acceptable to the Company shall be borne by the
Company whether or not any of the Registration Statements is filed or becomes
effective. In addition, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with
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the listing of the securities to be registered on any securities exchange on
which similar securities issued by the Company are then listed and rating agency
fees and the fees and expenses of any Person, including special experts,
retained by the Company.
The Company shall not be required to pay (i) fees and disbursements of
any counsel retained by any holder of Registrable Securities or by any
underwriter (except as set forth in clauses (i)(B) and (vi), above), (ii) any
underwriter's fees and expenses (including discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities), or
(iii) the fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Section 3 of
Schedule E to the By-laws of the National Association of Securities Dealers,
Inc.
Section 8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each holder of Registrable Securities whose Registrable
Securities are covered by a Registration Statement or Prospectus, the officers,
directors and agents and employees of each of them, each Person who controls
each such holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling person, to the fullest extent lawful, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and reasonable attorneys' fees) and
expenses (collectively, "Losses"), as incurred, arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in such
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based upon information furnished in writing to the Company by such
holder expressly for use therein.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In
connection with any Registration Statement in which a holder of Registrable
Securities is participating, such holder of Registrable Securities shall furnish
to the Company in writing such information as the Company reasonably requests
for use in
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connection with any Registration Statement or Prospectus and agrees to
indemnify, to the fullest extent permitted by law, the Company, its
directors, officers, agents and employees, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, agents or employees of
such controlling persons, from and against all Losses arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in
any Registration Statement or Prospectus or any amendment or supplement
thereto, or any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, to the extent,
but only to the extent, that such untrue or alleged untrue statement or
omission or alleged omission is contained in any information so furnished in
writing by such holder to the Company expressly for use in such Registration
Statement or Prospectus and that such information was relied upon by the
Company in preparation of such Registration Statement or Prospectus or
amendment, supplement or preliminary prospectus; PROVIDED, HOWEVER, that the
liability of each selling holder of Registrable Securities hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the public offering price of
the shares sold by such selling holder under such Registration Statement
bears to the total public offering price of all securities sold thereunder,
but not in any event to exceed the net proceeds received by such selling
holder from the sale of Registrable Securities covered by such Registration
Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Person shall be
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any Proceeding with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; PROVIDED, HOWEVER, that the delay or failure to so notify the
indemnifying party shall not relieve the indemnifying party from any obligation
or liability except to the extent that the indemnifying party has been
prejudiced materially by such delay or failure. The indemnifying party shall
have the right, exercisable by giving written notice to an indemnified party
promptly after the receipt of written notice from such indemnified party of such
claim or Proceeding, to assume, at the indemnifying party's expense, the defense
of any such claim or Proceeding, with counsel reasonably satisfactory to such
indemnified party; PROVIDED, HOWEVER, that an indemnified party shall have the
right to employ separate counsel in any such claim or Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified
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party unless: (l) the indemnifying party agrees to pay such fees and expenses;
or (2) the indemnifying party fails promptly to assume the defense of such claim
or Proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; in which case the indemnified party shall have the right to
employ counsel and to assume the defense of such claim or proceeding; PROVIDED,
HOWEVER, that the indemnifying party shall not, in connection with any one such
claim or Proceeding or separate but substantially similar or related claims or
Proceedings in the same jurisdiction, arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one firm of attorneys (together with appropriate local counsel) at any time for
all of the indemnified parties, or for fees and expenses that are not
reasonable. Whether or not such defense is assumed by the indemnifying party,
such indemnified party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably withheld).
The indemnifying party shall not consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release, in form and
substance reasonably satisfactory to the indemnified party, from all liability
in respect of such claim or litigation for which such indemnified party would be
entitled to indemnification hereunder.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any Losses (other
than in accordance with its terms) or is insufficient to hold such indemnified
party harmless, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
investigation or Proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 8(d), an indemnifying
party that is a selling holder of Registrable Securities shall not be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities sold by such indemnifying party exceeds the
amount of any damages that such indemnifying party has otherwise been required
to pay by reason of such 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.
Section 9. RULE 144.
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act, and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144. Upon the request of any holder of Registrable
Securities, the Company shall deliver to such holder a written statement as to
whether it has complied with such requirements.
Section 10. UNDERWRITTEN REGISTRATIONS.
If any Demand Registration is an underwritten offering, the holders of
a majority of the Registrable Securities covered by such Demand Registration
shall have the right to select the investment banker or investment bankers and
managers to administer the offering, subject to approval by the Company, not to
be unreasonably withheld. The Company shall have the right to select the
investment banker or investment bankers and managers to administer any Piggyback
Registration.
No Person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's Registrable Securities on
the basis provided in any underwriting arrangements approved by the Company and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
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underwriting agreements and other documents required under the terms of such
underwriting arrangements.
Section 11. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of holders
of at least a majority of the then outstanding Registrable Securities; PROVIDED
that, for so long as Wand owns at least a majority of the then outstanding
Registrable Securities, the Company must obtain the written consent of holders
of at least 67% of the then outstanding Registrable Securities. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities may be given by holders of at
least a majority of the Registrable Securities being sold by such holders
pursuant to such Registration Statement; PROVIDED, that in the event Wand then
owns at least a majority of (x) the then outstanding Registrable Securities and
(y) the Registrable Securities being sold by such holders pursuant to such
Registration Statement, then such waiver or consent may be given by the holders
of at least 67% of the Registrable Securities being sold by such holders, and
PROVIDED, FURTHER, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(b) NOTICES. All notices and other communications provided for
hereunder shall be in writing and delivered by hand or sent by overnight courier
service or sent by telecopy (which is confirmed), sent as follows:
If to Wand, to:
Wand Equity Portfolio II, L.P.
Wand Affiliates Fund, L.P.
Wand/Yankelovich Investments L.P.
Wand Partners L.P.
Wand Partners (S.C.) Inc.
630 Fifth Avenue, Suite 2435
New York, New York 10111
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Attention: John S. Struck
Telecopy No.: (212) 307-5599
with a copy to:
Michael P. Rogan, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Telecopy No.: (202) 393-5760
If to the Company, to:
Cyber Dialogue Inc.
304 Hudson Street
New York, NY 10013
Attention: Andrew Watt
Telecopy No.: (212) 255-6622
If to a Stockholder other than Wand, to the address of such
Stockholder set forth in the stock records of the Company
maintained for such purpose;
or to such other address or addresses or telecopy number or numbers as any of
the parties hereto may most recently have designated in writing to the other
parties hereto by such notice. All such communications shall be deemed to have
been given or made when so delivered by hand or overnight courier or sent by
telecopy.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities.
(d) 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.
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(e) HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without giving
effect to the choice of law principles thereof).
(g) SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(h) ENTIRE AGREEMENT. This Agreement is intended by the parties as
a final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company with
respect to Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(i) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than the Stockholders or subsequent holders of Registrable Securities if
such subsequent holders are deemed to be such affiliates solely by reason of
their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the holders of such
required percentage.
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
CYBER DIALOGUE INC.
By: /s/ Mark Esiri
---------------------------------------------
Name: Mark Esiri
Title: CEO
WAND EQUITY PORTFOLIO II, L.P.
By: WAND PARTNERS LLC
General Partner
By: /s/ J.S. Struck
---------------------------------------------
Name:
Title:
WAND AFFILIATES FUND, L.P.
By: WAND AF LLC
General Partner
By: /s/ J.S. Struck
---------------------------------------------
Name:
Title:
WAND/YANKELOVICH INVESTMENTS L.P.
By: WAND PARTNERS (S.C.) INC.
General Partner
By: /s/ J.S. Struck
---------------------------------------------
Name:
Title:
<PAGE>
WAND PARTNERS L.P.
By: WAND PARTNERS (S.C.) INC.
General Partner
By: /s/ J.S. Struck
---------------------------------------------
Name:
Title:
WAND PARTNERS (S.C.) INC.
By: /s/ J.S. Struck
---------------------------------------------
Name:
Title:
eCOM PARTNERS FUND I LLC
By: /s/ Christopher P. Forester
---------------------------------------------
Name:
Title:
NIG-CYBER DIALOGUE, LTD.
By: /s/ George Nasra
---------------------------------------------
Name:
Title:
MV PARTNERS L.P. III, L.P.
By: /s/ C. Richard Vermillion, Jr.
---------------------------------------------
Name: C. Richard Vermillion, Jr.
Title: G.P.
<PAGE>
ANNEX A
STOCKHOLDERS
Wand Equity Portfolio II, L.P.
Wand Affiliates Fund, L.P.
Wand/Yankelovich Investments L.P.
Wand Partners L.P.
Wand Partners (S.C.) Inc.
eCom Partners Fund I LLC
NIG-Cyber Dialogue, Ltd.
MV Partners L.P. III, L.P.
<PAGE>
ANNEX B
INSTRUMENT
The undersigned hereby acknowledges and agrees that:
1. The undersigned has acquired shares of common stock, $.01 par value
per share, of Cyber Dialogue Inc. or options, warrants or rights to subscribe
for or purchase shares of Common Stock.
2. The undersigned has received and reviewed a copy of the Registration
Rights Agreement dated as of September 14, 1999 by and among Cyber Dialogue Inc.
and the other parties thereto (as amended, supplemented or otherwise modified
from time to time, the "Registration Rights Agreement"). The undersigned hereby
agrees to become a party to the Registration Right Agreement and to be bound by
the terms thereof as if the undersigned were an original signatory thereto.
Date:____________ ________________________
[name]
<PAGE>
Exhibit 10.3
CYBER DIALOGUE INC.
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
As Amended and Restated as of June 25, 1998
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,
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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.
2
<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. Each Option Agreement shall require that
the Option Price be paid in full, at the time of exercise of an
Option, in cash, by certified or cashier's check.
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) If there is any change in the shares of Common Stock through the
declaration of extraordinary dividends, stock dividends,
re-capitalization, stock splits, or combinations or exchanges of
such shares, or in the event of a sale of all or substantially all
of the assets of the Company (an "Asset Sale"), or the merger or
consolidation of the Company with or into another corporation (a
"Merger"), or in the event of other similar transactions, the
Committee shall promptly make an appropriate adjustment to the
number and class of shares of Common Stock available for awards, to
the number of shares covered by outstanding awards after the
effective date of such transaction, and, if applicable, to the price
thereof; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated.
b) In the event of the dissolution or liquidation of the Company, in
the event of any corporate separation or division, including, but
not limited to, split-up, split-off or spin-off or in the event of
other similar transactions, the Committee may provide that:
i) the Optionee of any Option shall have the right to exercise
such Option; and/or
ii) each Option granted under the Plan shall terminate as of a
date to be fixed by the Committee, and that not be less than
thirty (30) days notice of the date so fixed shall be given to
each Optionee, who shall have the right, during the period of
thirty (30) days preceding such termination, to exercise (to
the extent exercisable) with respect to such Option all or any
part of the shares of Common Stock covered thereby.
c) In the event of an Asset Sale or a Merger, any award then
outstanding may be assumed or an equivalent award may be substituted
by such successor corporation or a parent or subsidiary of such
successor corporation. If such successor corporation does not agree
to assume the award or to substitute an equivalent award, the Board
may, in lieu of such assumption or substitution, provide for the
realization of such outstanding award in the manner set forth in
subsections 9(b)(i) or 9(b)(ii) above.
d) In the event of a change in the Common Stock of the Company as
presently constituted that is limited to a change of all of its
authorized shares of Common Stock into the same number of shares
with a different par value or without par value, the shares
resulting from any such change shall be deemed to be the Common
Stock within the meaning of the Plan.
4
<PAGE>
e) Except as hereinbefore expressly provided in this Section 9, the
Optionee of an award hereunder shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the
payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any
dissolution, liquidation, Merger or spin-off of assets or stock of
another company; and any issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common
Stock subject to an award. The grant of an award pursuant to the
Plan shall not affect in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or changes
of its capital or business structures or to merge or to consolidate
or to dissolve, liquidate or sell, or transfer all or part of its
business or assets or engage in any similar transactions.
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
5
<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>
Exhibit 10.4
Form of Option Agreement for option grants under the Cyber Dialogue, Inc.
Amended and Restated Stock Option Plan
THE OPTION GRANTED PURSUANT TO THIS
NONQUALIFIED STOCK OPTION AGREEMENT (THE
"OPTION") AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR
THE OPTION OR THE SHARES UNDER THE
SECURITIES ACT, OR AN OPINION OF
COUNSEL, WHICH IS SATISFACTORY TO THE
COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
Agreement #
888
CYBER DIALOGUE INC.
AMENDED AND RESTATED 1997 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT ("Option Agreement"), dated as
of 31st March, 1999 by and between Cyber Dialogue Inc. (the "Company") and
XXXXXXXXXXXXXXXXX, an employee of the Company or a division or subsidiary of the
Company (the "Optionee").
WHEREAS, pursuant to the Cyber Dialogue Inc. Amended and Restated
1997 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 XXXXXXXX shares of
Common Stock (the "Shares") at a price (the "Option Price") of $XXXXXXXXX
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 date 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
1
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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 of, or in
connection with, the
4
<PAGE>
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 Stockholders 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 b 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 leg 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 law 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. Amended and Restated
1997 Stock Option Plan incorporated
herein by reference.
By
--------------------------------------
Optionee
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<PAGE>
EXHIBIT 10.8
THIS LEASE made this 24th day of October, 1996
LANDLORD
between The Rector, Church-Wardens and Vestrymen of Trinity Church in the city
of New York, a religious corporation (hereafter referred to as "the Landlord"),
having its offices at 74 Trinity Place, Borough of Manhattan, City, County and
State of New York, and
AMERICAN DIALOGUE, INC.
TENANT
(hereafter referred to as "the Tenant"), a Michigan corporation,
having its place of business at 630 Fifth Avenue, Borough of Manhattan, City,
County and State of New York.
Witnesseth:
GRANT PREMISES
That the Landlord hereby lets and leases to the Tenant, and the Tenant
hereby takes and hires from the Landlord, the following described space: a
portion of the 6th floor as hatched in red on the diagram attached hereto and
made part of this lease and marked Exhibit "A".
TERM
(Such space is hereafter referred to as "the premises") in the building known by
street number as No. 304 Hudson Street in the Borough of Manhattan, City, County
and State of New York (hereafter referred to as "the building"), with the
privilege to the Tenant of using (subject to such rules and regulations as the
Landlord shall from time to time prescribe) the necessary entrances and
appurtenances to the premises, reserving to the Landlord all other portions of
the building not herein specifically demised, for a term to commence on the
first day of October, 1996, at noon, Standard Time, and to expire on the
thirtieth day of September, 2001, at noon, Standard Time (or until such term
shall sooner cease and expire or be terminated as hereafter provided), at the
rent at the annual rate or rates as follows: THIRTY FOUR THOUSAND TWO HUNDRED
AND NINETY AND NO/100 ($34,290.00) Dollars,
ADDITIONAL RENT
Payable at the offices of the Landlord in equal monthly payments of $2,857.50
each or if more than one annual rate is specified above, then in installments
equal to 1/12th of the rent at the annual rates as above prescribed for the
respective periods in which they are payable, in advance without demand therefor
an installment equal to the amount of the rent payable under this lease for the
first month of the term for which rent is payable upon the execution hereof by
the Tenant, and thereafter, on the first day of each month during said term, in
lawful money of the United States, plus (i) when due or demanded, such items as
shall be provided hereafter are payable by the Tenant as additional rent and,
(ii) should the Tenant at the commencement of the term of this lease be in
default in the payment of rent to the Landlord pursuant to the terms of any
prior lease with the Landlord, or with a predecessor in interest of the
Landlord, the amount of such arrears, which the Landlord may at its option and
without notice thereof to the Tenant, add to any monthly installments of rent
due under this lease.
COVENANTS AND CONDITIONS
THE ABOVE LETTING IS UPON THE FOLLOWING COVENANTS AND CONDITIONS: each and
every one of which the Tenant covenants and agrees with the Landlord to keep and
perform, and the Tenant agrees that the covenants herein contained on the part
of the Tenant to be performed, shall be deemed conditional limitations, as well
as covenants and conditions:
(1)
<PAGE>
USE
FIRST: (a) The Tenant shall use the premises only for executive and
administrative offices in connection with Tenant's computer market research
company.
(b) If any portion of the premises consists of basement space, such
portion shall be used only for storage purposes.
PLEASE INITIAL
(c) No auction sale and no other sale of all or substantially all of the
Tenant's property, stock, fixtures and machinery, except a sale made in
connection with an assignment of this lease to another tenant for which the
Landlord's consent shall have been obtained shall be held at the premises unless
the provisions of Article TWENTY-NINTH (b) of this lease shall have been
complied with.
RENT
SECOND: (a) The Tenant shall pay the rent and additional rent as provided
in this lease.
(b) If any installment or installments of rent or additional rent or any
service charge shall not be paid within five (5) days following the date on
which the same shall be due and payable pursuant to this lease then, in addition
to, and without waiving or releasing, any other rights and remedies of the
Landlord, the Tenant shall pay to the Landlord a late charge of one and one-half
(1 1/2%) percent per month computed (on the basis of a 30-day month) from the
date on which each such installment became due and payable to the date of
payment of the installment on the amount of each such installment or
installments, as liquidated damages for Tenant's failure to make prompt payment,
and the same may be collected on demand or as additional rent in accordance with
the provisions of Article TWENTY-FIFTH of this lease.
REPAIRS MACHINERY CLEANING AND WASTE
THIRD: (a) The Tenant shall take good care of the premises and the
fixtures, appurtenances, equipment and facilities therein and shall make, as and
when needed, all repairs in and about the premises required to keep them in good
order and condition; such repairs to be equal in quality to the original work
PROVIDED that the Tenant shall not be obligated for structural or exterior
repairs to the building or for repairs to the systems and facilities of the
building for the use or service of tenants generally, other than fixtures,
appurtenances, equipment and facilities in the premises, except where structural
or exterior repairs or repairs to such systems and facilities are made necessary
by reason of one or more of the occurrences described below in clauses (i)
through (iv) of this Article THIRD. (x) Should the Tenant fail to repair any
condition in or about the premises or the fixtures, appurtenances, equipment and
facilities therein which is of such a nature that its neglect would result in
damage or danger to the building, its fixtures, appurtenances, facilities and
equipment, or to its occupants (of which nature the Landlord shall be the judge)
or, in the case of repairs of any other nature, should the Tenant have failed to
make the required repairs or to have begun in good faith, the work necessary to
make them within five days after notice from the Landlord of the condition
requiring repair, the Landlord may, in either such case, immediately enter the
premises and make the required repairs at the expense of the Tenant. The
Landlord may make, at the expense of the Tenant, any repairs to the building or
to its fixtures, appurtenances, facilities or equipment, whether of a structural
or any other nature, which are required by reason of damage or injury due (i) to
the negligence or the improper acts of the Tenant or its employees, agents,
licenses or visitors; (ii) to the moving, into or out of the building, of
property being delivered to or taken from the premises; (iii) to the
installation, repair or removal of the property of the Tenant in the premises;
or (iv) to the faulty operation of any machinery, equipment, or facility
installed in the premises by or for the Tenant. The Tenant will pay the cost of
any repairs made by the Landlord pursuant to this paragraph upon presentation of
bills therefor, or the Landlord may, at its option, add such amounts to any
installment or installments of rent due under this lease and collect the same as
additional rent. The liability of the Tenant under this Article Third shall
survive the expiration or other termination of this lease.
MACHINERY
(b) If the Tenant shall install or maintain machinery or manufacturing
equipment of any description in the premises, the operation of which produces
noise or vibration which is transmitted beyond the premises and the Landlord
deems it necessary that the noise or vibration of such machinery or equipment be
diminished, eliminated, prevented or confined to the premises, the Landlord may
give written notice to the Tenant, requiring that the Tenant provide and install
rubber or other approved settings for absorbing, preventing or decreasing the
noise or vibration of such machinery or equipment within fifteen days. The
judgment of the Landlord of the necessity of such installation shall be
conclusive, and the installation shall be made in such manner and of such
material as the Landlord may direct. Should the Tenant fail to comply with such
request within fifteen days, the Landlord may do the work necessary to absorb,
prevent or decrease the noise or vibration of such machinery or equipment and
the Tenant will pay to the Landlord the cost of such work upon demand or such
cost may, at the option of the Landlord, be added to any installment or
installments of rent under this lease and shall be payable by the Tenant as
additional rent.
CLEANING AND WASTE
(c) The premises shall be kept clean and in order by the Tenant, at the
Tenant's expense, and to the satisfaction of the Landlord. The Tenant shall, at
its own expense, clean the interior and exterior surfaces of the windows at such
times as the windows become dirty to a degree which, in the judgment of the
Landlord, adversely affects the appearance of the building or the premises. Such
window cleaning shall be done in a manner which complies with the requirements
of this lease and all applicable laws and regulations. The Tenant shall, at its
own expense, remove from the building any and all rubbish, refuse and waste
originating in the premises of the Tenant or cause the same to be removed. The
removal of such refuse, rubbish and waste shall be subject to such rules and
regulations as to time and manner of removal as, in the judgment of the
Landlord, are necessary for the proper operation of the building. In the event
that the Tenant shall fail to clean the windows or remove its refuse, rubbish
and waste, such cleaning or removal may be done by the Landlord, and the Tenant
shall pay to the Landlord the cost of the cleaning of the windows or the removal
of any of the Tenant's refuse, rubbish and waste from the building. Bills for
the same shall be rendered by the Landlord to the Tenant at such times as the
Landlord may elect and shall be due and payable when rendered, and the amount of
such bills shall be deemed to be, and be paid as, additional rent. Should the
Landlord clean the windows or remove the rubbish of the Tenant and of other
tenants, the cost of such cleaning or removal shall be apportioned as between
the Tenant and such other tenants respectively on the basis of the number of
windows or the respective approximate quantities of such rubbish and waste as
the case may be. The Landlord's apportionment of such respective quantities
shall be conclusive on the parties.
PLEASE INITIAL
(2)
<PAGE>
ALTERATIONS AND FIXTURES
FOURTH: (a) The Tenant shall not make any alteration, decoration, addition
or improvement in or upon the premises, nor incur any expense therefor, without
having first obtained the written consent of the Landlord therefor. If the
Tenant shall desire to make alterations, decorations, additions or improvements
to fit out the premises for the Tenant's use which will not adversely affect the
structure of the building or the operation of any of the systems or facilities
of the building for the use of all tenants or violate the requirements of
government hereafter referred to and if the Tenant shall furnish the Landlord
with the Tenant's plans and specifications for the proposed alteration,
decoration, addition or improvement in sufficient detail to permit the Landlord
to determine that the same will comply with the requirements of this
subdivision; (a) the Landlord's approval will not be unreasonably withheld or
delayed. Whenever any alterations, decorations, additions or improvements of
the premises are made by the Tenant, the Tenant shall not, knowingly, employ
or permit to be employed therein any labor which will cause strikes or labor
troubles with other employees in the building employed by the Landlord or its
contractors. All alterations, decorations, additions or improvements shall be
made and installed in a good and workmanlike manner and shall comply with all
requirements, by law, regulation or rule, of the Federal, State and City
Governments and all subdivisions and agencies thereof, and with the
requirements of the New York Fire Insurance Exchange, New York Board of Fire
Underwriters and all other bodies exercising similar functions, and shall
conform to any particular requirements of the Landlord expressed in its
consent for the making of any such alterations, decorations, additions, and
improvements. Any such work once begun shall be completed with all reasonable
dispatch, but shall be done at such time and in such manner as not to
interfere with the occupancy of any other tenant or the progress of any work
being performed by or on account of the Landlord. If requested to do so by
the Tenant in connection with the Landlord's approval of any alteration,
decoration, addition or improvement, the Landlord will advise the Tenant
whether the alteration, decoration, addition or improvement will be required
to be removed by the Tenant at the expiration or earlier termination of this
lease or may remain upon the premises to become the property of the Landlord.
If no such advice is given by the Landlord, the provision of subdivision (b)
of this Article shall apply.
(b) All alterations, decorations, additions or improvements, which may be
made or installed in or upon the premises (whether made during or prior to the
term of this lease or during the term of any prior lease of the premises by the
Landlord, the Tenant or any previous tenant), except the furniture, trade
fixtures, stock in trade, and like personal property of the Tenant, shall be
conclusively deemed to be part of the freehold and the property of the Landlord,
and shall remain upon the premises, and, upon the expiration or any termination
of the term of this lease, shall be surrendered therewith as a part thereof,
unless the Landlord shall, prior to the expiration or termination of the term,
notify the Tenant that any or all of such alterations, decorations, additions or
improvements shall be removed, in which event, the Tenant shall remove the same
in accord with the Landlord's notice at its own cost and expense at or prior to
the expiration or termination of the term. The Tenant, at or prior to the
expiration or any termination of the term of this lease shall, at its own
expense, remove all its furniture, trade fixtures, stock in trade and like
personal property. The Tenant shall restore and repair, at its own cost and
expense, any damage or disfigurement of the premises occasioned by any such
removals or remaining after such removals, so as to leave the premises in good
order and condition or, the Landlord, at its option, may do such restoration and
repair and the Tenant will pay the cost thereof upon demand. If any furniture,
trade fixtures, stock in trade or other personal property of the Tenant shall
not be removed at the expiration or any termination of this lease, the Landlord,
at the Landlord's option, may treat the same as having been irrevocably
abandoned, in which the Tenant shall have no further right, title or interest
therein and the Landlord may remove the same from the premises, disposing of
them in any way which the Landlord sees fit to do, and the Tenant shall, on
demand, pay to the Landlord the expense incurred by the Landlord for the removal
thereof, as well as the cost of any restoration of the premises above provided.
The Tenant's obligations under this subdivision (b) of this Article Fourth shall
survive the expiration of this lease.
(c) The Landlord may at any time during the term of this lease, change the
arrangement or location of the entrances or passageways, doors and doorways, and
the corridors, elevators, stairs, toilets or other parts of the building used by
the public or in common by the Tenant and other tenants (including, without
limitation, the conversion of elevators from a manually operated to an automatic
self-service basis) and may alter the staffing of the building and the scale and
manner of the operation thereof, PROVIDED that the services to which the Tenant
is entitled as specified in this lease are not diminished and may alter the
facilities, fixtures, appurtenances and equipment of the building as it may deem
the same advisable, or as it may be required so to do by any governmental
authority, law, rule or regulation. The Landlord may, after reasonable notice,
change the name, street number or designation by which the building is commonly
known.
COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS
FIFTH: The Tenant shall promptly comply, at the Tenant's own expense, with
all laws, ordinances, regulations and requirements of the City, State and
Federal Government, and all subdivisions and agencies thereof, and the New York
Fire Insurance Exchange, the New York Board of Fire Underwriters, and of any
fire insurance rating organization, and of all other departments, bureaus,
officials, boards and commissions with regard to the premises or the use thereof
by the Tenant, and (if the premises are situated on the ground floor) the
sidewalks adjoining the same in so far as such compliance is made necessary by
the Tenant's use of the sidewalks, PROVIDED that the Tenant shall not be
required to make alterations or additions to the premises, except where the same
are required by reason of the nature of the Tenant's use of the premises, the
manner in which its business is carried on in the premises or a failure on the
part of the Tenant to conform to the provisions of this lease. The Tenant will
not permit the maintenance of any nuisance upon the premises or permit its
employees, licensees or visitors to do any illegal act therein, or in and about
the building after notice thereof from the Landlord. If any such law, ordinance,
regulation or requirement shall not be promptly complied with by the Tenant,
then the Landlord may, at its option, enter upon the premises to comply
therewith, and should any fine or penalty be imposed for failure to comply
therewith or by reason of any such illegal act, the Tenant agrees that the
Landlord may, at its option, pay such fine or penalty, which the Tenant agrees
to repay to the Landlord, with interest from the date of payment, as additional
rent.
(3)
<PAGE>
COMPLIANCE WITH LANDLORD'S RULES
SIXTH: The Tenant and the Tenant's employees, and any other persons
subject to the control of the Tenant, shall well and faithfully observe all the
rules and regulations annexed hereto, and also any and all reasonable rules and
regulations affecting the premises, the building or the equipment,
appurtenances, facilities and services thereof, hereafter promulgated by the
Landlord. The Landlord may at any time, and from time to time, prescribe and
regulate the placing of safes, machinery, quantities of merchandise and other
things, and regulate which elevator and entrance shall be used by the Tenant's
employees, and for the Tenant's shipping; and may make such other and further
rules and regulations as in its judgment may, from time to time, be needed or
desirable for the safety, care or cleanliness of the building and for the
preservation of good order therein.
PLATE GLASS
SEVENTH: The Landlord may, at its option, either (i) at the Tenant's
expense, keep the plate glass, if any, in the premises insured in the name of
the Landlord against loss or damage, the premium for which, whether by separate
policy or as a part of a schedule of another policy, shall be paid by the Tenant
to the Landlord, upon demand, or (ii) require the Tenant, at the Tenant's
expense, to keep the plate glass, if any, in the premises insured in the name of
the Landlord against loss or damage, in which event, the Tenant shall deliver
such policy and evidence of due payment of the premium therefor to the Landlord.
CARE OF SIDEWALKS
EIGHTH: If the premises, or any part thereof, consist of a first floor or
any part thereof, the Tenant shall, at the Tenant's own expense, keep the
sidewalk, gutter and curb in front thereof free from snow and ice, and in a
cleanly condition,
LANDLORD'S ACCESS TO THE PREMISES
NINTH: (a) The Tenant shall, without in any way affecting the Tenant's
obligations hereunder, and without constituting any eviction, permit the
Landlord and its agents; (i) at all reasonable hours, to enter the premises and
have access thereto, for the purpose of inspecting or examining them and to show
them to other persons; (ii) to enter the premises to make repairs and
alterations, and to do any work on the premises and any work in connection with
excavation or construction on any adjoining premises or property (including, but
not limited to, the shoring up of the building) and to take in any of the
foregoing instances, any space needed therefor; and (iii) during the six months
preceding the termination hereof, to place and maintain thereon the usual "for
rent" notices. The Tenant shall permit the Landlord to erect and maintain ducts,
pipes and conduits in and through the premises. In the exercise of the rights of
the Landlord reserved under clause (ii) or under the next preceding sentence of
this subdivision (a) of Article NINTH the Landlord will do so in a manner which
minimizes the interference with the Tenant's use of the premises so far as
practicable and where ducts, pipes or conduits are to be erected through the
premises will locate them along walls or ceilings wherever practicable.
(b) In the event that the premises shall, in the Landlord's judgment,
become substantially vacated before the expiration of this lease, or in the
event the Tenant shall be removed by summary proceedings or in the event that,
during the last month of the term, the Tenant shall have removed all or
substantially all of the Tenant's property therefrom, the Landlord may
immediately enter into and upon said premises for the purpose of decorating,
renovating or otherwise preparing same for a new tenant, without thereby causing
any abatement of rent or liability on the Landlord's part for other
compensation, and such acts shall have no effect upon this lease.
(c) If the Tenant or an officer or authorized employee of the Tenant shall
not be personally present to open and permit an entry into said premises, at any
time, when for any reason an entry therein shall be necessary or permissible
hereunder, the Landlord or the Landlord's agents, may enter the same by a master
key, or may forcibly enter the same without rendering the Landlord or such
agents liable therefor (if during such entry the Landlord shall accord
reasonable care to the Tenant's property) and without in any manner affecting
the obligations and covenants of this lease and in no event shall any such entry
by the Landlord or its agents be deemed an acceptance of a surrender of this
lease, either expressed or implied, nor a waiver by the Landlord of any covenant
of this lease on the part of the Tenant to be performed.
ELECTRIC CURRENT; LIVE STEAM
TENTH: (a) Electric current is to be supplied by the Landlord. The Tenant
covenants and agrees to purchase the Tenant's requirements therefor at the
premises from the Landlord or the Landlord's designated agent at 112% of the
rates set forth in the rate schedule of Consolidated Edison Company of New York,
Inc. applicable to the building (or the conjunctional group in which the
building is included), plus any sales or use tax or other governmental charge or
levy; PROVIDED, HOWEVER, that if such rate schedule includes any adjustment for
time-of-day for either demand or consumption, the rate applicable to the
Tenant's demand for and consumption of electricity, shall be that specified for
the peak period. The calculation of the rate shall include the effect of all
direct and indirect charges which affect the cost of the electricity, including
without limitation, consumption charges, demand charges and fuel cost escalation
charges.
(b) Where more than one meter measures the service of the Tenant in the
building, the service rendered through each meter may be computed and billed
separately in accord with the rates herein provided for. No current shall be
furnished until the equipment of the Tenant has been approved by the proper
authorities, and after such approval, no changes shall be made in such equipment
without the written consent of the Landlord. The Tenant shall pay, upon demand,
the bills for electric current furnished and the use of meters; the Landlord and
its agent reserving the right, without releasing the Tenant from any liability,
and without constituting any eviction, and without any liability on the
Landlord's part, to cut off such electric current after five days' notice for
non-payment of any such bill or bills. The Tenant shall comply with such rules,
regulations and contract provisions as are customarily prescribed by public
service corporations supplying such services, for consumption similar to that of
the Tenant.
(c) The Landlord may discontinue the supply of electric current under
subdivision (a) at any time on sixty (60) days' notice to the Tenant without
being liable to the Tenant therefor or without in any way affecting this lease
or the liability of the Tenant hereunder or causing the diminution of rent, and
the same shall not be deemed to be a lessening or diminution of services within
the meaning of any law, rule, or regulation now or hereafter enacted,
promulgated, or issued. Should the Landlord give such notice of discontinuance,
the Tenant shall make the Tenant's own arrangements to receive such service
direct from such public utility corporation serving the building and the
Landlord shall permit the Landlord's wires, conduits and meters, to the extent
to which they are safely available for such use and to the extent to which they
may be used under any applicable governmental regulations or the regulations of
such public utility, to be used for the purpose. Should any additional or other
wiring, conduits, meters or any other or
(4)
<PAGE>
different distribution equipment be required in order to per[ILLEGIBLE] from the
public utility, the same will be installed, as the Landlord shall elect, either
by the Landlord, at the sole cost and expense of the Tenant, or by the Tenant at
the Tenant's sole cost and expense. In the case of central distribution
equipment which is used in connection with the distribution or metering of
current supplied to the Tenant and other tenants of the building, and which is
required to be installed under governmental regulations or the regulations of
such utility, the cost of installation thereof will be prorated among the
several tenants, serviced through the distribution facility in the proportion
which their average consumption of electric current over the next preceding
period of not less than six month's duration bears to the total consumption of
electric current by all tenants during such period, and the Tenant shall pay to
the Landlord the Tenant's share of such cost of installation, apportioned as
above, within five (5) days following receipt of a statement showing the cost of
the distribution equipment and the manner in which the cost has been allocated
to the Tenant. Should the supply of electric current by the Landlord be
discontinued, but not as a result of the Landlord's election to discontinue the
supply of current, then the Tenant shall, at the Tenant's expense, install all
wiring, metering and distribution facilities which are required in order to
permit the Tenant to purchase the Tenant's requirements for electric current for
the premises from such utility and shall discontinue the use of the Landlord's
electric wires, cables, meters and distribution facilities. All such facilities
installed by the Tenant shall be installed in a workmanlike way which complies
with applicable governmental regulations and the regulations of the public
utility. The Landlord will in any such case permit any pipe-chases or channels
available in the building to be used by the Tenant for the Tenant's cables and
conduits, to the extent that the same may be available and may be safely used
for the purpose.
(d) The Landlord shall not in any way be liable or responsible to the
Tenant for any loss or damage or expense which the Tenant may sustain or
incur if either the quantity or character of electric service is changed or
is no longer available or suitable for the Tenant's requirements, nor shall
the Landlord be in any way responsible for any interruption of service due to
breakdowns, repairs, malfunction of electrical equipment or any other cause
relating to electrical service which is beyond the Landlord's reasonable
control.
(e) If there be any facilities for the supply of live steam in the
building, such steam shall be supplied to the Tenant only if separate agreements
are made therefor and pursuant to such arrangements. In the event that such
separate agreements shall be made, the appropriate provisions of this Article
TENTH shall be applicable thereto.
CONDEMNATION AND DEMOLITION
ELEVENTH: (a) If the premises or any part thereof, shall be taken or
condemned for any public or quasi public use, this lease and the term hereby
granted shall terminate on the date when title to the premises or such part
shall be actually taken for such public or quasi public use. If any other part
of the building shall be so taken and such taking shall, in the judgment of the
Landlord, make the operation of the building impractical, unprofitable or
uneconomical (even though no part of the premises be taken), the Landlord may,
at its option, give to the Tenant, at any time after the vesting of title and
prior to the actual taking of possession, thirty (30) days' notice of intention
to terminate this lease, and upon the date designated in such notice, this lease
and the term hereby granted shall terminate. In no event shall any condemnation
award be apportioned, and the Tenant hereby assigns to the Landlord all right
and claim to any part of such award, but the rent, and all other sums payable by
the Tenant, shall be apportioned as of the date of any such termination of this
lease, PROVIDED that nothing contained in the foregoing portion of this Article
ELEVENTH shall be deemed to prevent the Tenant's making claim for and retaining
an award for the damage to or loss of value of its trade fixtures and such of
the installations made by the Tenant as remain the Tenant's property or from
making claim for and retaining any award which may be made to the Tenant for the
Tenant's moving expenses if, and to the extent that, the award to be claimed and
retained by the Tenant is independent of and does not result in a diminution of
the award to the Landlord for the taking of the land, building and the
Landlord's other property.
(b) If the Landlord shall desire to demolish the building wherein the
premises are located, the Landlord shall have the right and option to terminate
the term of this lease at any time during the term thereof upon giving to the
Tenant not less than six months' notice of the Landlord's election to terminate
this lease and of the date, which shall be the last day of a calendar month, not
less than 180 days following the date of the Landlord's notice of election to
terminate, on which Landlord elects that this lease shall terminate and come to
an end, together with an affidavit, sworn to by an officer of the Landlord, if
the Landlord at such time is a corporation, or by a general partner of the
Landlord, if the Landlord at such time is a partnership, or by the Landlord, if
the Landlord at such time is an individual, to the effect that the Landlord, its
successor in interest or a lessee intends to demolish the building containing
the premises and to erect a different building in lieu thereof. If such notice
and affidavit are given to the Tenant, then this lease shall terminate and come
to an end on the date of termination specified in the Landlord's notice, as if
that date were the date originally fixed for the termination of the term of this
lease, and on such date the Tenant shall quit, vacate and surrender up the
premises in accord with the provisions of this lease relating to surrender at
the expiration of the term.
MECHANIC'S LIENS
TWELFTH: The Tenant will not permit, during the term hereby granted, any
mechanic's or other lien or order for payment of work, labor, services, or
materials furnished or to be furnished to attach to or affect the premises or
any portion thereof and agrees that no such lien or order shall under any
circumstances attach to or affect the fee, leasehold or other estate of the
Landlord herein, or the building. The Tenant's obligation to keep the premises
in repair, and its right to make alterations therein, if any, shall not be
construed as the consent of the Landlord to the furnishing of any such work,
labor or materials within the meaning of any present or future lien law. Notice
is hereby given that the Tenant has no power, authority or right to do any act
or to make any contract which may create, or be the foundation for, any lien
upon the fee or leasehold estate of the Landlord in the premises or upon the
land or buildings of which they are a part or the improvements now erected or
hereafter to be erected upon the premises or the land or building of which the
premises are a part; and if any such mechanic's or other lien or order shall be
filed against the premises or the land or building of which the premises are a
part, the Tenant shall, within ten (10) days thereafter, discharge said lien or
order by payment, deposit or by bond fixed in a proper proceeding according to
law. If the Tenant shall fail to take such action, or shall not cause such lien
or order to be discharged within ten (10) days after the filing thereof, the
Landlord may pay the amount of such lien or discharge the same by deposit or by
bond or in any other manner according to law, and pay any judgment recovered in
any action to establish or foreclose such lien or order, and any amount so paid,
together with the expenses incurred by the Landlord, including all attorneys'
fees and disbursements incurred in any defense of any such action, bonding or
other proceeding, shall be deemed additional rent.
PLEASE INITIAL
<PAGE>
SUBORDINATION
THIRTEENTH: This lease, and all the rights of the Tenant hereunder, are
and shall be subject and subordinate to any and all mortgages now or hereafter
liens either in whole or in part on the building, or the land on which it
stands, and also to any and all other mortgages covering other lands or lands
and buildings, which may now or hereafter be consolidated with any mortgage or
mortgages upon the building and the land on which it stands or which may be
consolidated and spread to cover the building and such land and any such other
lands or lands and buildings, and any extension, renewal or modification of any
such mortgages, and to any and all underlying leases on record, or hereafter to
be recorded, against the building or the land on which it stands, and any
extensions, renewals or modifications thereof. The Tenant hereby constitutes and
irrevocably appoints the Landlord the Tenant's attorney in fact to execute any
instrument or certificate evidencing such subordination for and on behalf of the
Tenant.
CERTIFICATE OF OCCUPANCY
FOURTEENTH: The Tenant shall immediately discontinue any use of the
demised premises, which may, at any time, be claimed or declared by the City
or State of New York or other governmental authority to be in violation of or
contrary to law, or by reason of which any attempt may be made to penalize
the Landlord or require the Landlord to secure any certificate of occupancy
for the building.
VAULTS
FIFTEENTH: Notwithstanding anything herein contained, or shown on any
sketch, plan or schedule hereto attached, to the contrary, if any vault space
forms a part of the premises, or adjoins the same, or any part or portion of the
herein demised premises is not within the property line of the building or
premises, and if the use of the said space shall hereafter be prevented or
curtailed by exercise of any governmental authority, the Tenant shall have no
claim whatever upon the Landlord for the loss of such space, by any abatement of
the rent, or otherwise, and the Landlord's covenant of quiet enjoyment
hereinafter contained, shall not be deemed to apply to any such space. The
Landlord makes no representation as to the location of the property line of the
building. The Tenant shall reimburse the Landlord for the vault charge or tax,
if any, imposed by the City of New York and respect of any such vault space.
LIQUORS
SIXTEENTH: Neither the Tenant nor any occupant of the premises or of any
part thereof, shall at any time during the continuance of the term, sell,
traffic in, expose for sale, dispense or give away, upon any part of the
premises, any strong or spirituous liquor, wine, ale or beer, or take or have a
license for such sale.
FIRE AND FIRE INSURANCE
SEVENTEENTH: (a) If the premises shall be damaged by fire, action of the
elements or other casualty or cause which is within the risks covered by
insurance carried by the Landlord, the Tenant shall give immediate notice
thereof to the Landlord, and said damage (unless the same shall be due to the
negligence or other fault of the Tenant or its employees) shall be repaired by
the Landlord, at the Landlord's expense, with all reasonable speed, making due
allowance for delay due to labor troubles, settlement of loss and other causes
beyond the control of the Landlord, and the Tenant shall, in every reasonable
way, facilitate the making of such repairs, and (unless the fire shall be due to
the negligence or other fault of the Tenant or its employees) the rent shall be
suspended during such period as the premises shall have been rendered wholly
untenantable and, in the event that the premises are rendered partially
untenantable, the rent shall be abated during such period, in the proportion
which the area of the premises which is rendered untenantable bears to the area
of the whole premises, but no damage to the premises or the building by fire, or
other cause, however extensive, shall terminate this lease, or give the Tenant
the right to quit and surrender the premises, or impair any obligations of the
Tenant hereunder, except with respect to the payment of rent (and with respect
thereto to the extent above provided) and except that (i) if the damage shall be
so extensive that the Landlord shall determine to demolish or substantially
alter the building, the Landlord may at any time within sixty (60) days
following the occurrence of the damage give to the Tenant 30 days' notice of
intention to terminate this lease; (ii) if the damage to the premises is
substantial so that the whole or substantially the whole of the premises is
rendered untenantable by the Tenant and the Landlord does not within 60 days
following the occurrence of the damage notify the Tenant of the Landlord's
intention to repair the damage to the premises so that the premises are again
useable by the Tenant within a period of not more than 120 days following the
occurrence of the damage subject to delays due to causes of the kinds described
in Article THIRTY-FOURTH of this lease, the Tenant may cancel this lease by
notice given with in 10 days following the expiration of the said 60-day period
for the Landlord's notice of election to repair; and (iii) in the event of the
occurrence of damage to the premises of the degree described above in clause
(ii) of this paragraph (a), the Landlord may also elect to terminate this lease
by notice of election to do so given within 60 days following the occurrence of
the damage. If notice of election to terminate this lease shall be given as
above PROVIDED, then, upon the date for termination designated in any such
notice this lease and the term hereby granted shall terminate and the rent shall
be apportioned as of the date of the damage or as of such later date as the
Tenant may actually surrender possession. Nothing herein contained shall be
deemed to obligate the Landlord to restore the Tenant's trade fixtures, stocks,
furnishings or other property remaining the property of the Tenant.
(b) The Tenant shall conduct its business and use the premises in such a
manner as shall make and keep the rate of insurance upon the entire building as
low as such rate can be made and kept, and so as not to increase the rate of
insurance applicable to the property of other tenants, and the Tenant shall
install and maintain all its furniture, fixtures, equipment, stocks and
materials in such a manner as to accomplish the foregoing purposes. The Tenant
further agrees not to permit any act to be done or anything brought into or kept
upon the premises which will void or avoid the insurer's liability under any
contract of fire insurance on the building or its contents. Should the fire
insurance rate on the building be increased beyond the present rate, by reason
of the Tenant's occupancy or character of its business, or the Tenant's failure
to comply with the terms hereof, the Tenant agrees to pay to the Landlord, on
demand, the additional cost of such insurance, or, at the option of the
Landlord, the same may be added to any installment of rent and be payable as
additional rent. The schedule of the makeup of a rate issued by an authorized
rating organization shall be conclusive evidence of the facts therein stated and
of the items in the rate applicable to the premises.
PLEASE INITIAL
<PAGE>
(c) The Landlord, as to the premises, and the Tenant, as to the
improvements made therein at the Tenant's expense and all of the Tenant's stock,
trade fixtures and other property in the premises, hereby release one another
from all liability for any loss or damage caused by fire or any of the risks
enumerated in standard extended coverage insurance. This release is conditioned
upon the inclusion in their respective policies of insurance of a provision
stating that such release shall not adversely affect said policies or prejudice
any right of the insured to recover thereunder. The Landlord and Tenant agree
that their respective insurance policies will include the aforesaid provision so
long as the same is obtainable without extra cost or if extra cost be charged,
so long as the party for whose benefit the clause is obtained shall pay such
extra cost. If extra cost shall be chargeable therefor the party so affected
shall advise the other thereof, of the amount of the extra cost and the other
party at its election may pay the same or decline to so pay in which event the
release from liability given to said party by this Article SEVENTEENTH (c) shall
be deemed to be withdrawn and of no force and effect.
CHANGE IN USE OF PREMISES, SUBLETTING AND ASSIGNMENT
See Article EIGHTEENTH (re-written) on Rider No. 2 attached hereto and made part
of this Lease.
WAIVER AND SURRENDER; REMEDIES CUMULATIVE
NINETEENTH: No consent or waiver of any provision hereof or acceptance of
any surrender shall be implied from any act or forbearance by the Landlord. No
agreement purporting to accept a surrender of this lease, or to modify, alter,
amend or waive any term or provision thereof, shall have any effect or validity
whatever, unless the same shall be in writing, and executed by the Landlord and
by the Tenant, and be duly delivered, nor shall the delivery of any keys to
anyone have any legal effect, any rule or provision of law to the contrary
notwithstanding. Any consent, waiver or acceptance of surrender, in writing, and
properly executed and delivered as aforesaid, shall be limited to the special
instance for which it is given, and no superintendent or employee, other than an
officer of the Landlord or of its managing agent, and no renting representative
shall have any authority to accept a surrender of the premises, or to make any
agreement or modification of this lease, or any of the terms and provisions
hereof. No provision of any lease made by the Landlord to any other tenant of
the building shall be taken into consideration in any manner whatever in
determining the rights of the Tenant herein. No payment by the Tenant or receipt
by the Landlord of a lesser amount than the monthly rent herein stipulated shall
be deemed to be other than on account of the stipulated rent, nor shall any
endorsement on any check, nor any letter accompanying any such payment of rent
be deemed an accord and satisfaction (unless an agreement to accept a lesser
amount be signed by the Landlord), but the Landlord may accept such payment
without prejudice to the Landlord's full right to recover the balance of such
rent and to institute summary proceedings therefor. The receipt by the Landlord
of any rent, or additional rent or of any other sum of money which may be
payable under this lease, or of any portion thereof, shall not be deemed a
waiver of the right of the Landlord to enforce the payment of any sum of any
kind previously due or which may thereafter become due under this lease, or of
the right to forfeit this lease by such remedies as may be appropriate, or to
terminate this lease or to exercise any of the rights and remedies reserved to
the Landlord hereunder, and the failure of the Landlord to enforce any covenant
or condition (although the Tenant shall have repeatedly or continuously broken
the same without objection from the Landlord) shall not estop the Landlord at
any time from taking any action with respect to such breach which may be
authorized by this lease, or by law, or from enforcing said covenant or any
other covenant or condition on the occasion of any subsequent breach or default.
In the event of any continuing or threatened breach by the Tenant, the Landlord
shall have the right of injunction. The various rights, remedies, powers and
elections of the Landlord, as PROVIDED in this lease or created by law, are
cumulative, and none of them shall be deemed to be exclusive of the others, or
of such other rights, remedies, powers or elections as are now or may hereafter
be conferred upon the Landlord by law.
REPRESENTATIONS AS TO PREMISES, CERTIFICATE OF OCCUPANCY AND USE
TWENTIETH: The Tenant represents to the Landlord that the Tenant has made,
or caused to be made, a careful inspection of the premises and that the area and
present condition of the premises are in all respects satisfactory to the
Tenant, except (if at all) as may herein otherwise be expressly stated in the
memorandum of repairs or decorations to be done by the Landlord attached to this
lease, Tenant has determined that the use of the premises, as set forth in this
lease, is consistent with the uses. The Tenant acknowledges that no
representations or promises have been made by the Landlord or the Landlord's
agents with respect to the premises or the building or the certificate of
occupancy thereof, except as in this lease set forth. The statements contained
in this lease regarding the use of the premises by the Tenant shall not be
deemed a representation or warranty by the Landlord that such use is lawful.
PLEASE INITIAL
(7)
<PAGE>
(8)
LIMITATION OF LANDLORD'S LIABILITY
TWENTY-FIRST: (a) The Tenant shall make no claim upon the Landlord for
abatement of rent, constructive eviction, rescision, or otherwise, and the
Landlord shall be exempt from all liability, except for injuries to the Tenant's
person or property which are due to the negligence of the Landlord, its agents,
servants or employees in the management of the premises or the real property of
which the demised premises are a part, for or on account of any annoyance,
inconvenience, interference with business, or other damage, caused by: (i) any
interruption, malfunction or curtailment of the operation of the elevator
service, heating plant, sprinkler system, gas, water, sewer or steam supply,
plumbing, machinery, electric equipment or other appurtenances, facilities,
equipment and conveniences in the building, whether such interruption,
malfunction or curtailment be due to breakdowns, or repairs, or strikes or
inability to obtain electricity, fuel or water due to any such cause or any
other cause beyond the Landlord's control; (ii) any work of repair, alteration
or replacement done by or on behalf of the Landlord or the Tenant, pursuant to
the provisions of this lease; (iii) any water, rain, snow, steam, gas,
electricity or other element, which may enter, flow from or into the premises or
any part of the building, or any noise or vibration audible in, or transmitted
to the premises; (iv) any vermin; (v) any falling paint, plaster or cement; (vi)
any interference with light or with other easements or incorporeal
hereditaments; (vii) any latent defect or deterioration in the building or the
appurtenances thereof, whether or not the Landlord shall have been notified of
any condition allegedly causing same; (viii) any zoning ordinance or other acts
of governmental or public authority now or hereafter in force; and (ix) any act
or omission of any other occupant of the building or other person temporarily
therein. The Tenant will not hold the Landlord liable for any loss or theft of,
or damage to, any property in the premises done or caused by any employee,
servant, or agent of the Landlord who is invited into the premises by the
Tenant, nor for the loss, damage or theft of any property stored or left in the
basement or in any other part of the building, which is not enclosed within the
premises or of any property, left with any employee of the Landlord, not
withstanding such theft, loss or damage may occur through carelessness or
negligence of the Landlord's employees; and the Tenant agrees that any employee
in entering the premises at the invitation of the Tenant or accepting custody of
property shall be then deemed agent of the Tenant or other person at whose
instance he may be acting, and not agent of the Landlord. Employees are not
permitted to receive or accept packages or property for account of Tenants.
Storerooms or storage space for personal property (if provided) are provided
gratuitously by the Landlord, and the use of same shall be at the Tenant's risk
and the Tenant will not hold the Landlord liable for any loss of or damage to
person or property therein or thereby. Nothing in this lease contained shall
impose any obligation upon the Landlord with respect to any real property other
than the building, whether said other real property be owned by the Landlord or
otherwise, or shall in any way limit the Landlord's right to build upon or
otherwise use said other real property in such manner as the Landlord may see
fit. The Tenant shall make no claim upon the Landlord for abatement of rent,
constructive eviction or rescission, and the Landlord shall have no liability by
reason of the Landlord's failure to enforce the provisions of the lease to any
other tenant against such other tenant.
(b) Any right and authority reserved by and granted to the Landlord under
this lease, to enter upon and make repairs in the premises shall not be taken as
obligating the Landlord to inspect and to repair the premises and the Landlord
hereby assumes no responsibility or liability for the care, inspection,
maintenance, supervision, alteration or repair of the premises except as herein
specifically provided. The Tenant assumes possession and control of the premises
and exclusively the whole duty of care and repair thereof, except as herein
specifically provided, and the duty of care, if any, owed by the Tenant to the
persons on the sidewalks or in the corridors of the building.
INDEMNITY BY TENANT
TWENTY-SECOND: The Tenant hereby indemnifies and agrees forever to save
harmless the Landlord against any and all liabilities, penalties, claims,
damages, expenses (including attorneys' and counsel fees) or judgments, arising
from injury to person or property of any kind, occasioned wholly or in part by
the Tenant's failure to perform or abide by any of the covenants of this lease
or occasioned wholly or in part by any act or acts, omission or omissions of the
Tenant, or of the employees, customers, agents, assigns or under-tenants of the
Tenant, or based on any matter or thing growing out of the Tenant's use or
occupation of the premises or any part of the building.
NOTICES
TWENTY-THIRD: Any notice which is to be given by either party to the other
pursuant to this lease shall be in writing and shall be given as follows: (a) if
such notice is to be given by the Landlord to the Tenant, such notice may be
given personally or by registered mail in the following manner: (i) notice may
be given personally, by delivering the same to the Tenant or, if the Tenant be a
corporation or partnership, to any officer of such corporation or member of the
partnership, at the premises or at any other place; or (ii) notice may also be
given personally at the premises by delivering the same to the Tenant or any
officer or partner of the Tenant; or (iii) notice may also be given by
registered or certified mail, by depositing the notice, enclosed in an envelope
addressed to the Tenant at its address given in this lease or at the premises,
in any United States Post Office, postage and registry or certification fees
prepaid; (b) if such notice is to be given by the Tenant to the Landlord, the
notice shall be given by registered or certified mail, by depositing the notice,
enclosed in an envelope, addressed to the Landlord at 74 Trinity Place, New
York, N.Y., or at such other place as the Landlord shall hereafter designate in
writing, in any United States Post Office, postage and registry or certification
fees prepaid. Any notice shall be deemed to have been given on the date when the
same is delivered as above provided or, if given by mail, on the date when it is
deposited as above provided in the United States Post Office.
<PAGE>
INSOLVENCY
TWENTY-FOURTH. If, at any time after the execution and delivery of this
lease, the Tenant shall be adjudicated a bankrupt, or if the Tenant shall make
any assignment for the benefit of creditors, or attempt to take the benefit of
any insolvency law, or if a petition or answer to reorganize the Tenant shall be
approved by any court or judge, or if a petition or answer for a composition or
extension shall be filed by the Tenant, or if a receiver or trustee shall be
appointed for the Tenant's property, or if the Tenant's interest in this lease
shall be attached or levied upon or shall evolve upon or pass to any party other
than the Tenant (whether such event occurs prior or subsequent to the
commencement of the term or Tenant's entry into possession) such event shall be
conclusively deemed a default hereunder, and the Landlord shall have the right
to terminate this lease in the manner hereinafter provided, as if such event
were a breach by the Tenant of one of the covenants of this lease. In the event
of such termination, the Tenant or any person claiming under, by or through the
Tenant, by virtue of any statute or of an order of any court, shall not be
entitled to possession or to remain in possession of the demised premises but
shall forthwith quit and surrender same. Exclusive of and in addition to any
other rights or remedies the Landlord may have through any other portion or
provision of this lease or by virtue of any rule of law or statute, said
Landlord may keep and retain, as liquidated damages, any rent, security, deposit
or other moneys or consideration received by the Landlord from the Tenant, or
others on behalf of the Tenant. Also, in the event of termination of this lease
as aforesaid, the Landlord shall be entitled, as and for liquidated damages from
the Tenant for breach of the unexpired term of this lease, to an amount equal to
the difference between the rental value of the remainder of the term at the time
of termination and the actual rent reserved, both discounted to present worth at
the rate of four per centum (4%) per annum. If at any time within a reasonable
period following the date of the termination of the lease, as aforesaid, the
premises should be re-rented by the Landlord, the rent realized by any
re-letting shall be deemed prima facie to be the rental value. In the event of
the occurrence of any of the above-mentioned events of default occasioned solely
through the invocation by the Tenant or by third parties of the laws of the
State of New York, judicial or statutory, as distinguished from the invocation
of Federal laws relating to bankruptcy, reorganization, or otherwise, the
Landlord, in addition to the foregoing, may accelerate the full amount of rent
reserved for the remainder of the lease, and the same shall forthwith become due
and payable to the Landlord. Nothing herein provided shall be deemed to prevent
or restrict the Landlord from proving and receiving as liquidated damages herein
the maximum permitted by any rule of law or statute prevailing when such damages
are to be proved, whether they be greater or less than those referred to above.
REMEDIES OF THE LANDLORD ON DEFAULT PERFORMANCE BY THE LANDLORD
TWENTY-FIFTH: (a) If the Tenant shall default in the full and due
performance of any covenant of this lease, the Landlord shall have the right,
upon ten (10) days' notice to the Tenant (unless a shorter period of notice or
provision for the performance of such work without notice is elsewhere
established), to perform the same for the account of the Tenant, and in such
event all workmen employed by the Landlord shall be deemed the agents of the
Tenant, and any reasonable payment made, and expense incurred, by the Landlord
in this connection, shall forthwith become due and payable by the Tenant to the
Landlord. If the Landlord is compelled to incur any expenses, including
reasonable attorneys' fees in instituting, prosecuting or defending any action
or proceeding instituted by reason of any default of the Tenant hereunder, the
sum or sums so paid by the Landlord with all interest, costs and damages, shall
be deemed immediately due to the Landlord upon demand. Any and all sums payable
by the Tenant to the Landlord shall bear interest at the rate of six per centum
(6%) per annum from the due date to the date of actual payment, and any and all
such sums (except the rent hereinabove expressly reserved) shall be deemed to be
additional rent for the period prior to such due date, and the Landlord shall
have the same remedies for default in the payment of such additional rent as for
default in the payment of the rent expressly reserved.
PERFORMANCE BY THE LANDLORD NOT AN EXCLUSIVE REMEDY
(b) In the event that under the provisions of this lease the Landlord
shall have the privilege of performing any covenant in respect of which the
Tenant may be in default and of recovering the expenses so involved from the
Tenant as additional rent or otherwise, such remedy shall not be the exclusive
remedy of the Landlord but the Landlord may, at its option, treat such default
as a breach of substantial obligation of this lease and shall have all the other
remedies in respect thereof PROVIDED in this or any other Article of this lease.
DISPOSSESS TERMINATION OF LEASE
(c) If the Tenant shall violate or default in the full and due performance
of any covenant, provision or condition of this lease (other than the covenant
to pay the rent or any additional rent), or any covenant, provision or condition
of any other lease under which the Tenant is a tenant in the building, or if any
of the events specified in the Article of this lease numbered Twenty-fourth and
headed "Insolvency" shall occur, or if the conduct of the Tenant or any occupant
of the premises shall reasonably be deemed objectionable by the Landlord or the
Landlord's managing agent, the Landlord will give to the Tenant five days'
notice of such violation, default or misconduct. In the event that (i) the
Tenant shall default in the payment of the rent or of any additional rent, or
(ii) if the premises shall be vacated, abandoned or deserted, or (iii) in the
event that the Tenant, after notice thereof as above provided, shall fail to
stop any violation or fully cure or remedy any default or terminate any
misconduct under this lease (or in the event that the default is of a nature
such that the steps required to cure or remedy the same fully cannot reasonably
be completed within five days, then if the Tenant shall not have commenced and
have diligently and continuously prosecuted the steps necessary to cure or
remedy such default) the Landlord may give to the Tenant ten (10) days' notice
of its intention to terminate this lease, and, in such event, on the tenth day
following the giving such notice this lease and the term hereby granted shall
terminate and expire as fully and completely as if that day were the date herein
expressly fixed for the expiration of the term, and the Tenant shall thereupon
quit and surrender the premises into the possession of the Landlord, but the
Tenant shall nevertheless remain liable for deficiency in future rent and for
any other defaults hereunder, as hereinafter provided. If the Tenant shall
default in the payment of the rent, or any additional rent herein
PLEASE INITIAL
(9)
<PAGE>
(10)
mentioned, or of any part of either, or if this lease shall be terminated by the
notice last above PROVIDED for, the Landlord may immediately, or at any time
thereafter, re-enter the premises and remove all persons and property therefrom,
either by summary dispossess proceedings, or by any suitable action or
proceeding at law, or by force, or otherwise, without being liable to
indictment, prosecution or damages therefor, and re-possess and enjoy the
premises, together with all additions, alterations, installations and
improvements, and no entry by the Landlord shall be deemed an acceptance of
surrender. Upon any such re-entry, the Landlord may re-let the premises or any
part or parts thereof, and for such term or terms as to the Landlord may seem
wise, even though the same extend beyond the date herein expressly fixed for the
expiration of the term. Any such re-letting shall, at the Landlord's option, be
either for the Landlord's own account, or as the agent for the Tenant. If the
Landlord shall re-let as the agent of the Tenant, the Landlord shall receive the
rents and apply the same, first, to the payment of all expenses which the
Landlord shall have incurred by reason of the Tenant's default and in connection
with such re-entry and re-letting, including, but not by way of limitation,
legal expenses, brokers' commissions, and the cost of reasonable repairs,
re-decoration and alterations, and, secondly to the fulfillment of the covenants
of the Tenant herein contained, and the surplus, if any, existing at the date
herein expressly fixed for the expiration of the term, shall be paid to the
Tenant, but the Tenant shall be entitled to no such payment until said date. So
long as the premises, or any part thereof, shall not be re-let, or shall be
re-let by the Landlord as the agent of the Tenant, the Tenant shall remain
liable for the full and due performance of all the covenants of this lease, and
the Tenant hereby agrees to pay to the Landlord, as damages for any default
hereunder, until the date herein expressly fixed for the expiration of the term,
the equivalent of the amount of all the rent and additional rent reserved
herein, less the net avails of re-letting, as hereinbefore defined, if any, and
the same shall be due and payable by the Tenant to the Landlord on the several
rent days above specified, that is, upon each of the said rent days the Tenant
shall pay to the Landlord the amount of deficiency then existing, and shall not
be entitled to withhold any such payment until the date herein expressly fixed
for the expiration of the term. The liability of the Tenant shall survive the
issuance of a final order and warrant of dispossess, and re-entry by the
Landlord, and any other termination of this lease for default of the Tenant, and
the granting by the Landlord of a new lease of the premises to another tenant,
and the Tenant hereby waives any defense which might be predicated upon any of
said acts or events.
The Tenant hereby expressly waives (i) any and all right to regain
possession of said premises or to reinstate or redeem this lease as provided
by the Real Property Actions & Proceedings Law, (and as said law may be
amended) or any such right which is or may be given by any other statute, law
or decision now or hereafter in force; (ii) the service of any notice
demanding rent or stating an intention to re-enter; or any similar right
which is or may be given by any statute, law or decision now or hereafter in
force; (iii) any and all rights of redemption and all other rights to regain
possession or to reinstate this lease (in case the Tenant shall be
dispossessed or ejected by, or pursuant to judgment, order, execution or
warrant of any court or judge). Except as provided in Section 259-c of the
Real Property Law with respect to an action for personal injury or property
damage between the parties hereto, the Tenant waives and will waive all right
to trial by jury in any summary proceedings and in any other proceeding or
action at law hereafter instituted by the Landlord against the Tenant in
respect of this lease, and also in any action or proceeding between the
parties hereto for any cause; and it is hereby agreed, that in any of such
events, the matter in dispute shall be tried before a judge without a jury.
In the event the Landlord shall commence any action or summary proceeding for
non-payment of rent or other breach of covenant or condition, the Tenant
hereby agrees not to interpose any counter-claim of whatever nature or
description in any such action or proceeding. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning.
SURRENDER AT EXPIRATION
TWENTY-SIXTH: Upon the expiration or any termination of the term of this
lease, the Tenant shall quit and surrender the demised premises, together with
any fixtures, equipment or appurtenances installed in the premises at the
commencement of this lease, and any alterations, decorations, additions and
improvements which are not to be removed in compliance with the provisions of
Article Fourth hereof, to the Landlord, in good order and condition, ordinary
wear excepted. The Tenant shall remove all its furnishings, trade fixtures,
stock in trade and like personal property in accord with the requirements of
Article Fourth, so as to leave the premises broom-clean and in an orderly
condition. If the last day of the term of this lease falls on Sunday, this lease
shall expire on the business day immediately preceding. The Tenant's obligation
to observe and perform this covenant shall survive the expiration or other
termination of the term of this lease.
QUIET ENJOYMENT
TWENTY-SEVENTH: The Landlord covenants that, if the Tenant shall duly keep
and perform all the terms and conditions hereof, the Tenant shall peaceably and
quietly have, hold and enjoy the premises for the term aforesaid, subject
however to ground leases, underlying leases and mortgages as hereinbefore
described, and to the lien, rights and estate by virtue of unpaid taxes of any
government having jurisdiction of the premises of which the herein demised
premises are a part. If the Landlord shall hereafter sell, exchange or lease the
entire building or the land and building wherein the premises are located,
subject to this lease, or, being the lessee thereof, shall assign its lease, the
grantee, lessee, or assignee thereof, as the case may be, shall, without further
agreement by any party, be conclusively deemed to be the Landlord of this lease
and to have assumed and undertaken to carry out all of the obligations hereof on
the part of the Landlord to be performed, and the Tenant does hereby release the
above-named Landlord from any claim or liability arising or accruing hereunder
subsequent to such transfer of ownership or possession, for breach of the
covenant of quiet enjoyment, or otherwise.
<PAGE>
TENANT'S DEPOSIT
See Rider to Article TWENTY-EIGHTH attached hereto and made a part of this
lease.
TWENTY-EIGHTH: The Tenant has deposited with the Landlord the sum of
TWENTY THOUSAND AND NO/100------------------------Dollars ($20,000.00----) to
secure the faithful performance by the Tenant of all the terms, conditions,
covenants and agreements of this lease, and to make good to the Landlord any
damage which it may sustain by reason of any act or omission of the Tenant. The
Landlord shall segregate the said security deposit as a trust fund not to be
mingled with other funds of the Landlord, and if, during the term of this lease,
the Landlord shall sell, exchange or lease the entire building, subject to this
lease, or, being the lessee thereof, shall assign its lease, the Landlord shall
have the right to pay or transfer the said deposit to such grantee, lessee, or
assignee, as the case may be, and, in such event, the Landlord shall be released
from all responsibility and liability in connection therewith, and the Tenant
will look solely to said grantee, lessee, or assignee for its return. If the
aforesaid security deposit shall be deposited with a bank or trust company,
savings bank or savings and loan association, the Landlord shall advise the
Tenant of the name and address thereof. The Tenant shall not be entitled to the
payment of any interest on the aforesaid security deposit unless earned and any
interest earned upon such deposit less the amount equal to 1% of the deposit, to
which the Landlord shall be entitled as administration expense shall be added to
the amount of the deposit. The Tenant's interest in said deposit shall not be
assigned or encumbered without the written consent of the Landlord, and within
thirty (30) days after the expiration of the term, the amount of said deposit
shall be repaid to the Tenant, less any proper charges against the same, as
hereinabove or hereinafter provided. If the Tenant shall at any time be in
default with respect to any payment of rent or of additional rent or of any
other payment due from the Tenant to the Landlord under this lease, or if the
Landlord shall be damaged by any act or omission of the Tenant the Landlord may,
at its option, apply such portion of said deposit as may be adequate to cure
such default or to make good such damage, including, but not by way of
limitation, interest, costs, fees and other expenses, paid or incurred by the
Landlord, and thereafter such portion so applied shall be free from any claim by
the Tenant for its return. If the Landlord shall re-enter, pursuant to the
provisions of this lease (other than in the event of insolvency in which event
the provisions of Article Twenty-fourth of the lease shall apply, and shall
re-let the premises for its own account, the entire said deposit shall
immediately be and become the absolute property of the Landlord, as fixed,
liquidated and agreed damages, and not as a penalty, it being impossible in such
event to ascertain the exact amount of the damage which the Landlord may thus
sustain, but unless the Landlord shall so re-let the premises for its own
account, the Landlord shall continue to hold the said deposit, as security for
the performance of the Tenant's obligations, until the date herein expressly
fixed for the expiration of the term, and apply the same from time to time to
the unpaid obligations of the Tenant, under the same terms and conditions as if
the said lease were still in full force and effect. No termination of this lease
or re-entry by the Landlord for default of the Tenant shall entitle the Tenant
to the return of any part of said deposit, nor shall the retention of such
deposit, after such re-entry, impair or otherwise affect the Tenant's liability
to the Landlord during the balance of the term originally provided for. If, at
any time, the said deposit shall be diminished, by reason of the Landlord's
having applied any part thereof in accordance with the provisions of this
paragraph, the Tenant shall pay over to the Landlord upon demand, the equivalent
of such decrease, to be added to said deposit and to be held and applied in
accordance with the provisions of this paragraph.
ELEVATORS, HEAT
See Article FORTIETH of Rider No. 2 attached hereto and made part of this lease.
TWENTY-NINTH: (a) Except on Saturdays and Sundays, and on holidays
recognized as legal holidays by State or Federal Government, the Landlord shall
furnish, between the hours of eight a.m. and six p.m., elevator service with the
elevators now in the building, and sufficient heat during the cold season to
heat the premises. If the building is equipped with any automatic elevators then
the Landlord shall have one such elevator in service and available for the
Tenant's use at all other times. The Landlord may suspend such service, if it
should become necessary or proper so to do, at any time. The Landlord shall
restore such service within a reasonable time, making due allowance for labor
troubles, acts of God, or any cause beyond the Landlord's control. Should the
Tenant be in default in the payment of any rent hereunder, the Landlord may,
upon not less than three days notice, and without diminution of the liability of
the Tenant hereunder, and without constituting an eviction, constructive or
otherwise, suspend or refuse the Tenant freight and passenger elevator service
and should the Tenant, after notice, violate the provisions of Rule 14, the
Landlord may, without any diminution of such liability or constituting such
eviction, suspend or refuse the Tenant freight elevator service until the
conditions in violation of Rule 14 have been fully remedied.
(b) The Landlord shall be entitled to refuse to furnish passenger or
freight elevator service in connection with any sale at auction of the Tenant's
fixtures, machinery, stock in trade and other property or a sale in any other
manner of all or substantially all of such property unless the Landlord shall
have been given not less than two days' notice of the intention to hold the
auction or other sale and unless the Landlord shall be given an undertaking by
a person, firm or corporation of satisfactory financial resources wherein the
Landlord shall be indemnified against (i) all expense incurred by the Landlord
in connection with the removal by purchasers of any property sold to them at the
auction or other sale, (ii) all expense for removal or storage of any property
sold at the auction or other sale which is not removed by the purchaser within
two days following the sale, and (iii) all expenses which the Landlord may incur
for the removal of property not sold and waste and rubbish from the premises.
WATER AND SEWER RENTS
THIRTIETH: (a) The Tenant shall pay for all hot and cold water used on the
premises and the Tenant's proportionate share of the cost of such water used for
lavatory purposes in any lavatories used by the Tenant in common with other
tenants at the Landlord's standard rates. In the event that the Tenant shall use
water for any industrial purpose or any purpose other than usual lavatory
purposes, the Tenant shall, at its own expense, install a meter or meters for
the measurement of the quantity of water thus consumed and keep the same in good
working order. With respect to water used for lavatory purposes, whether on the
premises or in lavatories used by the Tenant in common with other tenants, if
the quantity of water so used is measured by a meter which measures the
consumption of water by other tenants, the Tenant shall pay its proportionate
share of all water so consumed. Such proportionate part shall be fixed in
PLEASE INITIAL
(11)
<PAGE>
accord with the number of persons occupying the premises and the number of
persons occupying all premises using water which is measured by such meter. In
the event that there shall be a separate meter which measures the use of water
by the Tenant for lavatory purposes, the Tenant will pay for the water so shown
to have been used and the cost of maintenance of such meter. All payments for
water shall be due when billed to the Tenant. In the event that the Tenant
defaults in the payment for any water, the amount not paid shall forthwith be
payable as additional rent and the Landlord may also, without incurring any
liability or disability thereby or constituting a constructive eviction,
discontinue the Tenant's supply of water. The Landlord is not under obligation
to supply hot water and, if hot water is supplied, the Landlord may at any time
without notice discontinue such supply without constituting an eviction or
without incurring any liability or disability therefor.
(b) The Tenant shall pay the New York City sewer rents apportioned to the
Tenant's consumption of water at the premises. The apportionment of the sewer
rent to the premises shall be made in accord with the measurement or
apportionment of water consumed at the premises as in this lease hereinbefore
PROVIDED. The sewer rents shall be billed with the water charges and the
Landlord shall have the same remedies for the collection thereof provided in the
case of charges for water.
SPRINKLER MAINTENANCE
THIRTY-FIRST: The Tenant shall pay to the Landlord the Tenant's
proportionate share of the cost of maintenance, operation and rental of the
automatic fire alarm supervisory service and manual alarm and sprinkler system
now installed in the building and the premises. The Tenant's proportionate share
of such cost shall be the fraction of the annual expenditures of the Landlord
for such purposes, of which the numerator is the area of the premises and the
denominator is the rentable area of the entire building. The amount so payable
by the Tenant shall be due when bills therefor are rendered by the Landlord to
the Tenant, and in the event of default in the payment thereof, the Landlord may
add the amount of any such bill to any succeeding installment of rent and the
same shall be collectible as additional rent.
INSURANCE
THIRTY-SECOND: The Tenant shall, during the demised term, provide and keep
in force public liability insurance, written by insurance companies approved by
the Landlord, covering the Tenant, which shall be in the limit of at least
$500,000 for claims arising from injury to any one person and (subject to said
limit for each individual) with a limit of at least $1,000,000 for total claims
arising from any one casualty.
The Tenant shall furnish the Landlord within five (5) days after the
commencement of the term hereof, with a certificate of such insurance, which
certificate shall provide, that in the event of any change or cancellation of
the policy, advance notice thereof will be given to the Landlord. Upon failure
at any time on the part of the Tenant to obtain or keep in force the insurance
required by this paragraph, or to pay the premiums thereof, in addition to the
rights and remedies provided in paragraph Twenty-fifth hereof, the Landlord
shall be at liberty from time to time, and as often as such failure shall occur,
to pay the premiums therefor and any and all sums so paid for insurance by the
Landlord shall be and become, and are hereby declared to be, additional rent
under this lease due and payable on the next rent day or any successive rent
day.
DEFAULT UNDER OTHER LEASES
THIRTY-THIRD: (a) If the Tenant, before the commencement of the term
herein granted, shall default in any covenant of any other lease with the
Landlord, then at the option of the Landlord this lease shall not go into effect
and the Tenant shall have no right to possession of the premises; and the Tenant
agrees to reimburse the Landlord upon demand for any expense or loss that may be
suffered due to the Tenant's default.
(b) In the event that during the term herein granted the Tenant shall
default in the performance of the covenants of any other lease with the Landlord
such default shall be deemed a default under the terms of this lease and the
Landlord shall have all the remedies herein PROVIDED for in the event of a
default under this lease.
WORK TO BE DONE BY LANDLORD
THIRTY-FOURTH: If work of any nature is agreed herein to be done by the
Landlord, the Tenant agrees that it may be done after the commencement of the
term of this lease and that no rebate of rent or allowance will be granted
therefor. The Landlord shall not be required to furnish any work or materials to
the premises, except as expressly provided in the memorandum of repairs or
decorations to be done by the Landlord attached to this lease. In case the
Landlord is prevented from making any repairs, improvements, decorations or
alterations, installing any fixtures or articles of equipment, furnishing any
services or performing any other covenant herein contained to be performed on
the Landlord's part, due to the Landlord's inability to obtain, or difficulty in
obtaining, labor or materials necessary therefor, or due to any governmental
rules and regulations relating to the priority of national defense requirements,
or due to labor troubles, or due to any other cause beyond the Landlord's
control, the Landlord shall not be liable to the Tenant for damages resulting
therefrom, nor except as expressly otherwise provided in Article SEVENTEENTH
hereof (in respect of damage to the premises due to fire), shall the Tenant be
entitled to any abatement or reduction of rent by reason thereof, nor shall the
same give rise to a claim in the Tenant's favor that such failure constitutes
actual or constructive, total or partial, eviction from the premises.
TRADING WITH THE ENEMY
THIRTY-FIFTH: The Tenant represents and warrants that the Tenant is not
disqualified under the Trading with the Enemy Act or any other similar
legislation or under the rules and regulations of any governmental department or
authority, from acquiring, owning and holding any interest in real property. The
breach by the Tenant of this condition shall be deemed a default within the
meaning of Article TWENTY-FIFTH of this lease.
MARGINAL NOTES
THIRTY-SIXTH: The marginal headings or titles of the various Articles or
paragraphs of this lease are for reference and index purposes only, and none of
them shall be taken into consideration or given any effect whatever in
determining the meaning or scope of the provisions to which any of them apply.
The use of any pronoun referring to either of the parties to this lease shall be
construed to include any or no gender and any number.
PLEASE INITIAL
<PAGE>
Rider to Article TWENTY-EIGHTH
The Landlord agrees that, provided that the Tenant has not defaulted in
the payment of the fixed rent, additional rent or any other amount due under
this lease beyond the expiration of any applicable grace or cure period, then
(i) October 1, 1998 the amount of the security deposit shall be reduced to
$15,000.00 and (ii) on October 1, 1999 the amount of the security deposit shall
be reduced to $8,500.00.
(b) In lieu of delivering cash as all or any portion of the Deposit or in
exchange for all or any portion of cash previously delivered, the Tenant may
deliver to Landlord an unconditional, irrevocable letter of credit (such letter
of credit, or any extension or replacement thereof, being hereinafter referred
to as the "Letter of Credit") issued by a New York Clearing House bank, in
substance reasonably satisfactory to the Landlord, which Letter of Credit is to
be held by Landlord in accordance with the terms described in paragraph (a)
above. In the event that the Landlord receives notice from the Bank or Tenant
that the Letter of Credit is not being renewed or in the event that Tenant has
not delivered a replacement Deposit or a similar Letter of Credit to Landlord by
thirty (30) days before the expiration of the Letter of Credit, then Landlord
shall be entitled to present the Letter of Credit for immediate payment of the
then-potential amount available pursuant to the Letter of Credit, and such
amount of the Letter of Credit shall become the Deposit hereunder and shall be
held, applied and returned by Landlord in accordance with the terms PROVIDED by
the lease for the holding, application and return of the Deposit. If the Letter
of Credit is not being renewed but Tenant does deliver a replacement Deposit or
a similar Letter of Credit by thirty (30) days before expiration of the Letter
of Credit, then Landlord shall not thereafter be entitled to present the
expiring Letter of Credit for payment of any amounts.
(c) At Tenant's request, any cash or cash equivalent held by Landlord as
part of the security deposit, which is in excess of that required to be held by
Landlord pursuant to paragraph (a) which has not been or is not in the process
of being applied pursuant to the provisions of paragraph (a) of this Article,
shall be returned to Tenant within ten (10) days following the applicable date
indicated above. If Landlord is holding a Letter of Credit as part of the
security deposit and provided Landlord has not presented for payment such Letter
of Credit, upon delivery of a substitute Letter of Credit in the appropriate
amount and which otherwise satisfies the requirements of paragraph (b) of this
Article, the Landlord shall deliver to Tenant the Letter of Credit being
replaced.
PLEASE INITIAL
(11a)
<PAGE>
Rider No. 1 attached to, and made part of, Lease dated the 24th day of October,
1996, between THE RECTOR, CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH IN THE
CITY OF NEW-YORK, as Landlord, and AMERICAN DIALOGUE, INC. as Tenant.
- --------------------------------------------------------------------------------
CPI ESCALATION
THIRTY-SEVENTH: (a) Real Estate Tax and CPI Escalation. In order (i) to
adjust, during the term of this lease, for increases in the expenses of the
Landlord for Real Estate Taxes, the Tenant shall pay to the Landlord, as
additional rent, the Tenant's Proportionate Share of any increases in such Real
Estate Taxes, and (ii) to adjust for increases in other operating expenses of
the Landlord, the Tenant shall pay to the Landlord, as additional rent, the CPI
Adjustments for Increases in Other Operating Expenses, namely the amount by
which the Base Rent Allocated to Other Operating Expenses is increased by
application to the Base Rent Allocated to Other Operating Expenses of increases
in the Index over the Base Index, all as computed as set forth below in this
Article. The Landlord may, at any time during the term of this lease, elect to
discontinue the Tenant's payment of additional rent representing CPI Adjustments
for Increases in Other Operating Expenses as set forth in clause (ii) of
subparagraph (a) above in order to adjust for increases in other operating
expenses of the Landlord, and may elect to substitute therefor additional rent
representing Increases in Operating Expenses, all as set forth in, and in
accordance with the provisions of, Article THIRTY-EIGHTH. Capitalized words or
expressions used above are defined in subparagraph (b) below.
(b) Definitions. As used in this Article the following capitalized words
or expressions shall have the meanings ascribed to them below:
1. "Real Estate Taxes" shall mean and include the expenditures of the
Landlord for taxes or assessments payable by the Landlord upon or with respect
to the building and the land upon which it is located, imposed by Federal, State
or local government (plus all expenditures for fees and expenses incurred in the
course of obtaining a reduction in any tentative assessed valuation), and all
taxes imposed by any such authority relating to the maintenance and operation of
the building, but shall not include income, franchise, inheritance or capital
stock taxes.
PLEASE INITIAL
2. "Base Rent Allocated to Other Operating Expenses" shall mean an amount
equal to 85% of the fixed annual rent prescribed on page 1 of this lease, as
such rent may be payable from time to time.
3. "Increase in Real Estate Taxes" shall mean the amount by which Real
Estate Taxes in any Subsequent Year, exceed Real Estate Taxes for the Base
Year.
4. "CPI Adjustment for Increases in Other Operating Expenses" shall mean
the amount obtained by multiplying the Base Rent Allocated to Other Operating
Expenses by the percentage by which the Index, as last published on the date
next prior to the Computation Date and the Index as last published on the date
next prior to each anniversary date of the Computation Date, shall exceed the
Base Index.
5. "Index" shall mean the "Consumer Price Index for All Urban Consumers"
"(1982/84 = 100)" specified for "All Items," relating to New York City and
published by the Bureau of Labor Statistics of the United States Department of
Labor. In the event the Index shall hereafter be converted to a different
standard reference base or otherwise revised, the determination of the CPI
Adjustment for Increases in Other Operating Expenses shall be made on the basis
of such conversion factor, formula or table for converting the Index as may be
published by the Bureau of Labor Statistics, or, if said Bureau shall not
publish the same, then with the use of such conversion factor, formula or table
as may be published by Prentice-Hall, Inc., or, failing such publication, by any
other nationally recognized publisher of similar statistical information. In the
event either Index shall cease to be published, then, for the purposes of this
Article, there shall be substituted for the Index such other index as Landlord
and Tenant shall agree upon, and, if they are unable within ninety (90) days
after the Index ceases to be published, such matter shall be determined in New
York City by arbitration in accordance with the Rules of the American
Arbitration Association.
6. "Base Index" shall mean the Index as last published prior to October 1,
1996
7. "CPI Comparative Statement" shall mean a statement, in writing, signed
by the Landlord, or, on its behalf, by an officer of any corporation acting as
its managing agent, showing (i) a comparison of (a) Real Estate Taxes for the
Base Year with (b) Projected Real Estate Taxes for a Subsequent Year (which
shall be the same calendar year as the year of the Computation Date used in such
CPI Comparative Statement), (ii) the Base Rent Allocated to Other Operating
Expenses and the CPI Adjustment for Increases in Other Operating Expenses for
such Subsequent Year, and (iii) if the Tenant paid additional rent pursuant to
this Article with respect to the immediate preceding Subsequent Year, any
adjustment necessitated by a variance between the Projected Real Estate Taxes
for such Subsequent Year (as shown in the last previous CPI Comparative
Statement) and the actual Real Estate Taxes for such Subsequent Year (as shown
in the current CPI Comparative Statement).
8 "Base Year" shall mean the Real Estate Tax Year commencing July 1, 1996
and ending June 30, 1997.
9. "Subsequent Year" shall mean any calendar year following the Base Year,
falling wholly or partly within the term of the Tenant under this lease and the
calendar year following the year in which the term of this lease terminates.
PLEASE INITIAL
(1)
<PAGE>
(2)
Escalator
77-B/82
10. "Computation Date" shall mean the first day of October, 1997, and,
in Subsequent Years, its anniversary date.
11. "Projected Real Estate Taxes" shall mean the Landlord's estimate
(which in any event must be reasonable in the light of past experience) of Real
Estate Taxes for a particular Subsequent Year.
12. "Tenant's Proportionate Share" shall mean a fraction, of which the
numerator shall be the number of Rentable Square Feet of Area of the premises
occupied by the Tenant and the denominator shall be 90% of the total number of
Rentable Square Feet of Area in the entire building.
13. "Rentable Square Feet of Area" shall mean, as to basement and ground
floor space, the number of net square feet of the area thereof and, as to all
floors above the ground floor, shall mean the number of gross square feet of the
area thereof.
The terms "Increases in Other Operating Expenses" and "Operating Expense
Comparative Statement" shall have the meanings assigned to such terms in
paragraph (b) of Article THIRTY-EIGHTH.
(c) Statements for the Tenant. On or before November 1, 1997, and on or
before that day in each Subsequent Year, the Landlord will furnish a CPI
Comparative Statement to the Tenant. The failure of the Landlord to furnish a
CPI Comparative Statement shall be without prejudice to the right of the
Landlord to furnish a CPI Comparative Statement at any time in the future.
Every CPI Comparative Statement furnished by the Landlord pursuant to
this Article shall be conclusive and binding upon the Tenant unless (i)
within ten (10) days after the receipt of such CPI Comparative Statement
Tenant shall notify Landlord that it disputes the correctness thereof,
specifying the particular respects in which the CPI Comparative Statement is
claimed to be incorrect, and (ii) if such dispute shall not have been settled
by agreement, the dispute shall have been submitted to arbitration within
ninety days after receipt of the CPI Comparative Statement. Pending the
determination of such dispute by agreement of arbitration as aforesaid,
Tenant shall pay additional rent in accordance with the CPI Comparative
Statement and such payment shall be without prejudice to Tenant's position
and to the Tenant's rights to a refund of any overpayment. If the dispute
shall be determined in Tenant's favor, Landlord shall forthwith pay Tenant
the amount of Tenant's overpayment of additional rent resulting from
compliance with the CPI Comparative Statement.
PLEASE INITIAL
(d) Computation of Increase in Rent Payable by the Tenant. When the
Landlord shall furnish the Tenant with any CPI Comparative Statement in
accordance with this Article which shall show an Increase in Projected Real
Estate Taxes or a CPI Adjustment for Increases in Other Operating Expenses, then
the rent payable under the lease shall be increased by the Tenant's
Proportionate Share of the increase in Projected Real Estate Taxes and by the
CPI Adjustment for Increases in Other Operating Expenses which shall be payable
(with payment on account of such increases) as follows: (1) on the first day for
the payment of rent under this lease following the receipt of a CPI Comparative
Statement, the Tenant shall pay to the Landlord a sum equal to one-twelfth of
the Tenant's Proportionate Share of the increase in Projected Real Estate Taxes
plus one-twelfth of the CPI Adjustment for Increases in Other Operating Expenses
(plus or minus, as the case may be, any adjustment necessitated by a variance
between (x) the Projected Real Estate Taxes for the calendar year prior to the
year of the Computation Date used in such CPI Comparative Statement and (y) the
actual Real Estate Taxes for such calendar year) and (2) thereafter, until a
different CPI Comparative Statement or Operating Expense Comparative Statement
shall be submitted, the monthly installments of rent payable under this lease
shall continue to be increased by such amount.
With respect to any CPI Comparative Statement furnished to the Tenant in
the Subsequent Year following the year in which the term of this lease
terminates, if such CPI Comparative Statement shall indicate an adjustment
necessitated by a variance between (x) the Projected Real Estate Taxes for the
calendar year prior to the year of the Computation Date used in such CPI
Comparative Statement (i.e., the last calendar year of the lease term) and (y)
the actual Real Estate Taxes for such calendar year, then the Tenant shall
promptly pay to the Landlord, or the Landlord promptly shall pay to the Tenant,
as the case may be, the amount of any such adjustment as indicated in such CPI
Comparative Statement.
(e) Inspection of Books. The Tenant or its authorized representative shall
have a right to examine the books of the Landlord showing the Real Estate Taxes
with respect to the building during regular business hours for the purpose of
verifying the information set forth in any CPI Comparative Statement relating to
any Increase in Real Estate Taxes shown in such CPI Comparative Statement;
PROVIDED that a written request for such inspection is made by the Tenant within
ten days of the receipt of any such CPI Comparative Statement.
(f) Decreases in Real Estate Taxes or Index. In no event shall any
decrease in the Real Estate Taxes or the Index in any way reduce the fixed rent
or additional rent payable by the Tenant under this lease, except to the extent
to which any such decrease shall result in a decrease in the additional rent
payable pursuant to this Article; PROVIDED HOWEVER that no decrease in Real
Estate Taxes shall in any way reduce any additional rent payable on account of
any CPI Adjustment for Increases in Other Operating Expenses, and that no
decrease in the amount of the CPI Adjustment for Increases in Other Operating
Expenses shall in any way reduce any additional rent payable on account of any
Increase in Real Estate Taxes.
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INCREASES IN EXPENSES
THIRTY-EIGHTH: (a) Landlord's Election to Substitute Operating Expense
Escalation. In order to adjust for increases in certain expenses of the
Landlord, clause (ii) of subparagraph (a) of Article THIRTY-SEVENTH provides
that the Tenant will pay the Landlord as additional rent, the CPI Adjustment for
Increases in Other Operating Expenses. The Landlord may, at any time during the
term of this lease, elect to discontinue, prospectively, the payment of the CPI
Adjustment for Increases in Other Operating Expenses, and may elect to
substitute therefor additional rent representing Increases in Operating Expenses
as set forth below. The Landlord shall give the Tenant notice of such election
by delivering to the Tenant prior to June 1st in any year an Operating Expense
Comparative Statement, together with a Landlord's Notice, and, such election
shall be effective commencing with the first day of the next calendar month and
shall remain effective for the balance of the term of this lease.
Capitalized words or expressions are used as defined in subparagraph (b)
below.
(b) Definitions. As used in this Article the following capitalized words
or expressions shall have the meanings ascribed to them below:
1. "Operating Expense Comparative Statement" shall mean a statement, in
writing signed by the Landlord or, on its behalf by an officer of any
corporation acting as its managing agent, showing (i) a comparison of (a) Real
Estate Taxes for the Base Year with (b) Projected Real Estate Taxes for the then
current Subsequent Year, (ii) the Base Rent Allocated to Other Operating
Expenses and the Final CPI Adjustment Amount, (iii) a comparison of (x) the
Operating Expenses for the OE Base Year with the Projected Operating Expenses
for the then current Subsequent Year, and (iv) if the Tenant paid additional
rent pursuant to this Article with respect to the immediately preceding
Subsequent Year, any adjustment necessitated by a variance between Projected
Real Estate Taxes for such immediately preceding Subsequent Year (as shown in
the last Operating Expense Comparative Statement) and the Actual Real Estate
Taxes for such immediately preceding Subsequent Year (as shown in the current
Operating Expense Comparative Statement) or by a variance between the Projected
Operating Expenses for such immediately preceding Subsequent Year (as shown in
the last Operating Expense Comparative Statement) and the actual Operating
Expenses for such immediately preceding Subsequent Year (as shown in the current
Operating Expense Comparative Statement).
2. "Landlord's Notice" shall mean a notice, to be delivered with the first
Operating Expense Comparative Statement, in which the Landlord confirms that it
has elected to discontinue, prospectively, the Tenant's payment of additional
rent representing CPI Adjustments for Increases in Other Operating Expenses as
contemplated by clause (ii) of subparagraph (a) of Article THIRTY-SEVENTH and to
adjust in the future for increases in other operating expenses of the Landlord
by requiring the Tenant to pay as additional rent an amount equal to Increases
in Operating Expenses as set forth in this Article THIRTY-EIGHTH.
PLEASE INITIAL
3. "Projected Operating Expenses" shall mean the Landlord's estimate
(which in any event must be reasonable in the light of past experience) of
Operating Expenses for a particular Subsequent Year.
4. "OE Base Year" shall mean the calendar year preceding the calendar year
of the Computation Date used in the Operating Expense Comparative Statement
accompanied by the Landlord's Notice.
5. "Final CPI Adjustment Amount" shall mean the amount obtained by
multiplying the Base Rent allocated to Other Operating Expenses by the
percentage by which the Index, as last published immediately prior to December
31st in the calendar year which is the OE Base Year exceeds the Base Index.
6. "Operating Expenses" shall mean with respect to any particular calendar
year all costs and expenses paid or incurred in such calendar year by Landlord
or on Landlord's behalf in respect of the repair, maintenance and/or operation
of the land and/or the building and the curbs, sidewalks, plazas and other
appurtenances adjoining the same, including, without limitation, the following:
(a) Wages, salaries, fees and other compensation and payments and payroll
taxes and contributions to any social security, unemployment insurance,
welfare, pension or similar fund and payments for other fringe benefits
(including premiums on health, accident and group life insurance for
employees) made to or on behalf of all employees of Landlord performing
services rendered in connection with the operation and maintenance of the
building;
(b) payroll taxes, workers' compensation, uniforms and related expenses
for employees;
(c) the cost of painting and the cost of interior and exterior landscape
maintenance;
(d) premiums and other charges for rent, casualty, boiler, sprinkler,
plate-glass, liability, fidelity and any other insurance Landlord
maintains;
(e) the cost of all supplies (including, without limitation, cleaning
supplies), hand tools and other materials used in the repair, maintenance
and/or operation of the building, and sales and other taxes thereon;
(f) the depreciation for, or the cost of the rental (including all
applicable sales taxes) of, all movable equipment used in the repair,
maintenance and/or operation of the building;
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(3)
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(4)
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(g) the cost of, or the cost of the rental of, together with the cost of
the installation of, any building security or other system used in
connection with life or property protection, installed after the OE Base
Year (including the cost of and/or the cost of the rental of all
machinery, electronic systems and other equipment comprising any part
thereof), as well as the cost of the operation and repair of any such
system in operation during the OE Base Year;
(h) the cost of all charges for window and other cleaning, janitorial and
other services;
(i) charges of independent contractors;
(j) whether or not capitalized under generally accepted accounting
principles, cost of repairs, and costs of replacements made in connection
with repairs, of cables, fans, pumps, boilers, cooling equipment, wiring
and electrical fixtures and metering, control and distribution equipment,
component parts of the HVAC, electrical, plumbing, elevator and any life
and/or property protection (including, without limitation, sprinkler)
systems, window washing equipment and snow removal equipment;
(k) the cost of steam or any other fuel used in connection with the
operation and maintenance of the building;
(l) the cost of electricity used in connection with the operation and
maintenance of the building (excluding electricity consumed directly by
tenants);
(m) whether or not capitalized under generally accepted accounting
principles, costs for alterations and improvements to the building made
after the OE Base Year by reason of the laws and requirements of any
public authorities or the requirements of insurance bodies or Landlord's
insurer which costs shall be amortized over five years;
(n) management fees or, if no managing agent is employed by Landlord, a
sum in lieu thereof which is not in excess of the then prevailing rates
for management fees of first class office buildings in New York County;
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(o) whether or not capitalized under generally accepted accounting
principles, costs of improvements, equipment or machinery installed for
the purpose of reducing energy consumption or reducing other Operating
Expenses, which costs shall be amortized over five years;
(p) reasonable legal, accounting and other professional fees incurred in
connection with the operation, maintenance and/or management of the
building;
(q) all other charges properly allocable to the repair, operation and/or
maintenance of the building in accordance with real estate accounting
practices customarily used in New York City.
Notwithstanding the foregoing, Operating Costs shall not include expenditures
for any of the following: (1) depreciation (except as PROVIDED above), (2)
interest on and amortization of mortgages, (except as otherwise PROVIDED above),
(3) leasehold improvements made for tenants of the building, (4) brokerage
commissions, (5) refinancing costs, (6) the cost of any electricity furnished to
tenants, (7) the cost of capital improvements (other than such capital
improvements as are included above). The cost of any Operating Expense which was
included in the OE Base Year and which is no longer being incurred by Landlord
by reason of the installation of labor saving devices or other capital
improvements or expenditures the cost of which was paid by other than Tenant
shall be deleted from OE Base Year Operating Expenses in calculating any
Increase in Operating Expenses in any Subsequent Year.
All of the capitalized words or expressions not otherwise defined herein
shall have the meanings ascribed to them in paragraph (b) of Article
THIRTY-SEVENTH.
(c) Statements for the Tenant. Prior to June 1st in each Subsequent Year
after delivery of the Landlord's Notice, and on or before that day in each
Subsequent Year, the Landlord will furnish an Operating Expense Comparative
Statement to the Tenant. The failure of the Landlord to furnish an Operating
Expense Comparative Statement shall be without prejudice to the right of the
Landlord to furnish an Operating Expense Comparative Statement at any time in
the future.
Every Operating Expense Comparative Statement furnished by the Landlord
pursuant to this Article shall be conclusive and binding upon Tenant unless (i)
within ten days after the receipt of such Operating Expense Comparative
Statement Tenant shall notify Landlord that it disputes the correctness thereof,
specifying the particular respects in which such Operating Expense Comparative
Statement is claimed to be incorrect, and (ii) if such dispute shall not have
been settled by agreement, the dispute shall have been submitted to arbitration
within ninety days after receipt of such Operating Expense Comparative
Statement. Pending the determination of such dispute by agreement of arbitration
as aforesaid, Tenant shall pay additional rent in accordance with such Operating
Expense Comparative Statement and such payment shall be without prejudice to
Tenant's position and to the Tenant's rights to a refund of any overpayment. If
the dispute shall be determined in Tenant's favor, Landlord shall forthwith pay
Tenant the amount of Tenant's overpayment of additional rent resulting from
compliance with such Operating Expense Comparative Statement.
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(d) Computation of Increases in Rent Payable by Tenant. When the Landlord
shall furnish the Tenant with any Operating Expense Comparative Statement in
accordance with this Article which shall show either (i) an Increase in
Projected Real Estate Taxes, (ii) a Final CPI Adjustment Amount or (iii) an
increase in Projected Operating Expenses, then the rent payable under the lease
shall be increased by the Tenant's Proportionate Share of the increase in the
Projected Real Estate Taxes, the Final CPI Adjustment Amount, and the Tenant's
Proportionate Share of the increase in Projected Operating Expenses, which shall
be payable (with payment on account of such increases) as follows: (1) on the
first day for the payment of rent under this lease following the receipt of the
Operating Expense Comparative Statement, the Tenant shall pay to the Landlord
the sum equal to the aggregate of one-twelfth of the Tenant's Proportionate
Share of the increase in Projected Real Estate Taxes, plus one-twelfth of the
Final CPI Adjustment Amount, plus one-twelfth of the Tenant's Proportionate
Share of the increase in Projected Operating Expenses (plus or minus, as the
case may be), any adjustment necessitated by a variance between (x) the
Projected Real Estate Taxes for such immediately preceding Subsequent Year and
(y) the actual Real Estate Taxes for such immediately preceding Subsequent Year
or by a variance between the (aa) Projected Operating Expenses for such
Subsequent Year and (bb) the actual Operating Expenses for such Subsequent Year,
and (2) thereafter, until a different Operating Expense Comparative Statement
shall be submitted as above PROVIDED, the monthly installments of rent payable
under this lease shall be continued to be increased by such amount.
With respect to the Operating Expense Comparative Statement furnished to
the Tenant in the Subsequent Year following the year in which the term of this
lease terminates, if such Operating Expense Comparative Statement shall indicate
an adjustment necessitated by a variance of the type referred to in clauses (x)
and (y) or clauses (aa) and (bb) in the immediately preceding paragraph, then
the Tenant shall promptly pay to the Landlord, or the Landlord promptly shall
pay to the Tenant, as the case may be, the amount of any such adjustment as
indicated in such Operating Expense Comparative Statement.
(e) Inspection of Books. The Tenant or its authorized representative shall
have a right to examine the books of the Landlord showing the Real Estate Taxes
and Operating Expenses with respect to the building during regular business
hours for the purpose of verifying the information set forth in any Operating
Expense Comparative Statement relating to any Increase in Real Estate Taxes or
Operating Expenses shown in such Operating Expense Comparative Statement;
PROVIDED that a written request for such inspection is made by the Tenant within
ten days of the receipt of any such Operating Expense Comparative Statement.
(f) Decreases in Real Estate Taxes, Index or Operating Expenses. In no
event shall any decrease in the Real Estate Taxes or any decrease in the Index
or the Operating Expenses in any way reduce the fixed rent or additional rent
payable by the Tenant under this lease, except to the extent to which any such
decrease shall result in a decrease in the additional rent payable pursuant to
this Article; PROVIDED however that a decrease in Real Estate Taxes shall not in
any way reduce any additional rent payable on account of the Final CPI
Adjustment Amount or any Increase in Operating Expenses, and that a decrease in
the Index shall not in any way affect any amount, including without limitation
the CPI Final Adjustment Amount, and that a decrease in the amount of the
Operating Expenses shall not in any way reduce any additional rent payable on
account of any Increase in Real Estate Taxes or the Final CPI Adjustment Amount.
PLEASE INITIAL
<PAGE>
RIDER NO. 2
attached to and made part of Lease, dated October 24, 1996 between THE RECTOR,
CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH IN THE CITY OF NEW YORK, as
Landlord, and AMERICAN DIALOGUE, INC., as Tenant.
EIGHTEENTH (re-written): (a) The use to be made of the premises by the Tenant
and the identity of the Tenant being among the inducements to the making of this
lease by the Landlord, the Tenant shall not, except in accordance with the terms
of this Article, (i) use or permit the premises or any part thereof to be used
for any purposes other than those specified in the lease, (ii) sublet or
underlet the premises or any part thereof, (iii) permit the premises or any part
thereof to be occupied by anyone other than the Tenant or its officers or
employees, (iv) mortgage or encumber this lease or any interest therein, (v)
assign or transfer, by operation of law or otherwise, this lease or any interest
therein.
(b) The Tenant shall not, without having first obtained the Landlord's
prior written consent thereto, (i) use or permit the premises or any part
thereof to be used for any purposes other than those specified in the lease, or
(ii) mortgage or encumber this lease or any interest therein.
PLEASE INITIAL
(c) The Tenant shall not, except in accordance with the provisions of
paragraphs (d) through (1) of this Article, (i) assign or transfer, by operation
of law or otherwise, this lease or any part therein, (ii) sublet or underlet the
premises or any part thereof, or (iii) permit the premises or any part thereof
to be occupied by anyone other than the Tenant or its officers or employees.
(d) If the Tenant shall desire to assign this lease or to sublet the whole
or any part of the premises or to permit the premises to be occupied by any
person other than the Tenant, the Tenant will notify the Landlord as to (i) the
action which the Tenant proposes; (ii) the portion of the premises with respect
to which the Tenant proposes to take such action (the "Affected Premises");
(iii) the name and business address of the proposed assignee, sublessee or
occupant (the "Proposed Undertenant"); (iv) the name and residence address of
the officers and principal stockholders of the Proposed Undertenant, if a
corporation is involved, or the names and residence addresses of the partners
thereof if a partnership or joint venture is involved; (v) the information, in
reasonable detail, as to the Proposed Undertenant which is required to permit
the Landlord to make the determinations described in paragraph (h) below; (vi)
the terms upon which the Tenant proposes to assign this lease or sublet the
premises or permit the premises to be occupied by the Proposed Undertenant
(including the terms under
<PAGE>
which any additions, alterations or decorations are to be made to the Affected
Premises and the terms on which the Proposed Undertenant is to buy or lease any
fixtures, leasehold improvements, equipment, furniture, furnishings or other
personal property from the Tenant); and (vii) the name and address of any real
estate broker or other person to whom a commission may be owed by any person in
connection with such assignment, subleasing or occupation. (The Tenant's notice
of desire to assign, sublease or permit occupancy of the Affected Premises by
others, with the information prescribed above is hereafter referred to as a
"Tenant's Subleasing Notice").
(e) By written notice executed by the Landlord and delivered to the Tenant
within thirty (30) days following receipt of the Tenant's Subleasing Notice (for
the purposes hereof such notice shall not be deemed to have been received by the
Landlord until all of the information required by paragraph (d) above shall have
been furnished to the Landlord), the Landlord shall have the absolute right to
select one of the alternatives set forth in paragraphs (f), (g) or (h) below.
PLEASE INITIAL
(f) In the event of a proposed assignment of this lease or the subleasing
or occupation of the entire premises subject to this lease for the then
remaining balance of the term of this lease, (i) the Landlord may elect to
require the Tenant to surrender the premises to the Landlord and terminate this
lease with respect to the premises on the last day of the second complete
calendar month following the Tenant's Subleasing Notice and comply with the
provisions of this lease respecting surrender at the end of the term not later
than such date or (ii) the Landlord may give its consent to any such assignment,
sublease or occupation. Any subletting or occupancy by a third party as a
consequence of which 25% or less in an area of the Premises shall remain in
occupancy by the Tenant herein named may, at the Landlord's option, be
considered a subleasing of the whole of the Premises.
(g) In the event of a proposed subleasing or occupation of less than the
entire premises subject to this lease or the entire premises for less than the
then remaining balance of the term of this lease, (i) the Landlord may elect to
require the Tenant to surrender to the Landlord and vacate the Affected Premises
not later than the date upon which the proposed subleasing or occupation is
proposed to commence and comply on such date with the provisions of this lease
as to surrender at the expiration of the term with respect to the Affected
Premises, and the Tenant shall, at its expense, erect the partitioning required
to separate the Affected Premises from the remainder of the premises, create any
doors required to provide an independent means of access to the Affected
Premises from elevators and
(2)
<PAGE>
lavatories and to segregate the wiring and meters and electric current
facilities, so that the Affected Premises may be used as a unit for commercial
purposes, separate from the remainder of the premises remaining in occupation of
the Tenant; in which event the rent and all additional rent payable under this
lease shall be reduced proportionately with the diminution in the area of the
premises upon surrender of the Affected Premises; or (ii) the Landlord may give
its consent to any such sublease or occupation.
(h) In the case of an assignment, the Landlord shall be under no
obligation to consent thereto or to select one of the alternatives set forth in
paragraph (f) above, unless the Landlord's investigation of the financial
standing of the proposed assignee discloses that there is no reason to doubt the
financial ability of the assignee to carry out its obligations under this lease
for the balance of the term and the Landlord's investigation of the manner in
which the proposed assignee conducts its business indicates that the assignee
will conduct its business in the premises in conformity with the requirements of
this lease or that there will be no interference with the orderly conduct of
their business and the enjoyment of their premises by other tenants in the
building. In the case of a sublease or occupation, the Landlord shall be under
no obligation to consent thereto or select one of the alternatives set forth in
paragraph (f) or (g) above, as the case may be, unless the Landlord's
investigation of the nature of the business of the proposed sublessee or
occupant or the manner in which the proposed sublessee or occupant will conduct
such business indicates that there is no reason to doubt that such business will
be conducted in conformity with the requirements of this lease and that the use
of the premises by the proposed sublessee or occupant will not result in damage
to or deterioration of the premises or the building, or interfere with the
orderly conduct of their businesses and the enjoyment of their premises by other
tenants in the building. The Landlord shall be under no obligation to consent to
any assignment of this lease or any subletting or occupation of the premises to
or by any person other than the Tenant unless the criteria set forth in this
paragraph are satisfied.
PLEASE INITIAL
(i) If the Landlord's Subleasing Notice shall be to the effect that the
Landlord elects that the Affected Premises be surrendered, then the Affected
Premises shall be surrendered in accordance with clause (i) of paragraph (f) or
(g) above, as the case may be, and any work required to be done to separate the
Affected Premises from the remainder shall be commenced promptly following the
Tenant's receipt of the Landlord's Subleasing Notice and carried on with
diligence and conformity.
(3)
<PAGE>
(j) No consent given by the Landlord shall be deemed to permit any act
except the act to which it specifically refers, or to render unnecessary any
subsequent consent, and any assignment or subletting of the premises shall not
relieve the Tenant or any mesne assignee from any obligations, duty or covenant
under this lease, and in all cases a violation of any of the covenants or duties
or obligations under this lease by a subtenant or assignee shall, in addition,
be deemed to be the act of the Tenant herein. No assignment, transfer, mortgage,
encumbrance, subletting or arrangement in respect of the occupancy of the
premises shall create any right in the assignee, transferee, mortgagee,
subtenant or occupant, unless the consent of the Landlord shall first have been
obtained, and unless, if an assignment is involved, the transferee or assignee
shall have delivered an agreement duly executed by the assignee or transferee
wherein the assignee or transferee assumes and agrees to pay or otherwise keep
and perform the obligations of the Tenant in this lease or, if a sublease is
involved wherein the sublessee agrees that any act or omission by the sublessee
which, if performed or omitted by the Tenant under this lease would be a default
thereunder shall also be a default under the provisions of the sublease. Any
assignee by accepting an assignment shall nevertheless be conclusively deemed to
have assumed this lease and all obligations already accrued or to accrue
thereunder and further to have agreed to fully and duly perform all the Tenant's
covenants herein contained. If the Tenant shall, at any time, be in default in
the payment of rent, the Landlord shall have the right to collect rent from any
assignee, undertenant or occupant, and credit the same to the account of the
Tenant, and no such collection shall constitute a waiver of the foregoing
covenant or the acceptance of anyone other than the Tenant, as Tenant or shall
otherwise release, impair or otherwise affect any obligation of the Tenant under
this lease. Immediately following the execution and delivery of any assignment
of this lease or any subleasing of the premises or an agreement as to the
occupancy thereof, the Tenant will furnish a duplicate of the instrument in
question to the Landlord.
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(k) Subject to paragraphs (j) and (l) of this Article and to continued
compliance with Article FIRST of this lease, the Tenant is authorized to
sublease portions of the premises to a subsidiary corporation or corporations or
to a corporation affiliated with the Tenant, without compliance with the
provisions of paragraph (c) through (g) of this Article. A subsidiary
corporation shall mean and include a corporation of which the Tenant owns and
holds at least a majority of each class of stock which is authorized to vote at
the time when the sublease is executed. An affiliated corporation shall mean and
include a corporation which is owned and
PLEASE INITIAL
(4)
<PAGE>
controlled by the corporation which owns and controls the Tenant by ownership of
at least a majority of each such class of stock. Before making any sublease to
any such subsidiary or affiliated corporation, the Tenant shall certify to the
Landlord the manner in which such subsidiary or affiliated corporation is
related to and controlled by the Tenant and the purposes for which the subleased
premises will be used. If the Tenant is a corporation or partnership, the
transfer of a controlling interest in such entity shall be deemed an assignment.
(l) Anything herein to the contrary notwithstanding, the Tenant may not
assign this lease or sublet or permit the occupancy by any other party of all or
any part of the demised premises at any time when the Tenant has not paid any
rent and additional rent when it is payable or at any time prior to the
expiration of the first twelve months following the commencement of the term of
this lease. The Tenant shall furnish the Landlord with a counterpart (which may
be a conformed or reproduced copy) of each sublease, assignment or agreement of
occupancy made hereunder within ten days after the date of its execution. Tenant
shall remain fully liable for the performance of all of Tenant's obligations
hereunder notwithstanding anything provided for herein, and without limiting the
generality of the foregoing, shall remain fully responsible and liable to
Landlord for all acts and omissions of any subtenant, assignee or occupant or
anyone claiming under or through any such person which shall be in violation of
any of the obligations of this lease and any such violation shall be deemed to
be a violation by Tenant. Tenant shall pay Landlord on demand any expense which
Landlord may reasonably be required to incur in acting upon any request for
consent pursuant to this Article.
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(m) Notwithstanding anything else in this Article, the Landlord shall have
the right to condition its consent to any proposed sublease of all or a portion
of the premises on the following:
(i) The Tenant shall not be in default in the payment of rent or the
performance of any other of its obligations under this lease.
(ii) The Tenant shall have delivered to the Landlord a Tenant's
Subleasing Notice as required by Subparagraph (d) above.
(iii) The Tenant shall have complied with the provisions of paragraphs (j)
and (l) of this Article.
(iv) The Tenant shall grant the Landlord a security interest in the
sublease and the rents payable thereunder and shall take all
necessary steps required to perfect such security interest.
(5)
<PAGE>
(v) The sublease shall include a provision to the effect that if the
Landlord shall notify the sublessee that the Tenant is in default in
the payment of rent or the performance of its other obligations
under this lease the sublessee shall, if so requested by the
Landlord pay all rent and other amounts due under the sublease
directly to the Landlord.
(n) At the request of the Landlord, the Tenant will furnish to the
Landlord, within ten days of receipt of a request therefor, a certificate
executed in the name and on behalf of the Tenant, confirming that, except as
previously consented to in writing by the Landlord or as otherwise specifically
set forth in such certificate, the Tenant has not (i) used or permitted the
premises or any part thereof to be used for any purposes other than those
specified in this lease, (ii) mortgaged or encumbered this lease or any interest
therein, (iii) assigned or transferred, by operation of law or otherwise, this
lease or any interest therein, (iv) sublet or underlet the premises or any part
thereof, or (v) permitted the premises or any part thereof to be occupied by
anyone other than the Tenant or its officers or employees. With respect to any
exception to clauses (i) through (v) above which the Landlord has not previously
consented to in writing, the Landlord in its sole discretion, may either consent
thereto (which consent may be subject to any conditions specified by the
Landlord) or exercise the rights and remedies available to the Landlord under
the terms of this lease.
THIRTY-NINTH: If the Landlord has instituted, or shall institute, a security
guard program at the building under contract with a recognized security guard or
patrol agency which shall supply guards for lobby, hall, loading bank and other
patrol services at the building on a contract basis, the Tenant will, within ten
days following receipt of a statement from the Landlord of the Landlord's
expenditures for the security guard services, pay to the Landlord the Tenant's
proportionate share of 121% of the Landlord's expenditures for the security
guard services for the building. The amount payable hereunder shall constitute
additional rent. Statements of the Landlord's expenditures in successive periods
of 90 days following the institution of the service shall be submitted not more
frequently than once in each period of three months during the term. The
Tenant's proportionate share of the Landlord's expenditures for the security
guard services shall be that fraction of such expenditures for a three-month
period of which the numerator is the number of square feet of the rentable area
of the premises and the denominator is the number of square feet of the rentable
area of the building which at the expiration of each three-month period in
question was under lease and
PLEASE INITIAL
(6)
<PAGE>
occupied or under lease to be occupied by other tenants. Any basement or ground
floor rentable space whose area is to be computed and used in the foregoing
fraction shall be computed on a net measurement basis, all other rentable areas
are to be computed on a gross measurement basis.
The Landlord may discontinue any such security guard program at any time
after 90 days' notice to the Tenant of the Landlord's election to do so.
FORTIETH: In addition to the elevator service described in paragraph
TWENTY-NINTH of this lease, the Landlord will maintain in service and available
for the use of the Tenant, one passenger elevator at all times on all days of
the week, including Saturdays, Sundays and legal holidays. In the event that the
Tenant requires freight elevator service, or heat on Saturdays, Sundays, federal
and state holidays and all holidays recognized by the unions representing
Landlord's building personnel or during hours in addition to those prescribed
under paragraph TWENTY-NINTH of this lease, the Landlord will furnish the
additional elevator service or heat or both, as the case may be, upon notice of
the Tenant's need therefor. Such notice may be written or oral and shall be
given as long a time as practicable prior to the time when the additional heat
or freight elevator service is required. The Tenant will pay for any additional
freight elevator service and heat furnished after the hours prescribed in
paragraph TWENTY-NINTH at the respective prevailing rates per hour as
established from time to time by the Landlord for such services at the building
or in the buildings of the Landlord, generally, for each hour during which the
additional service is supplied. All charges for additional freight elevator
service and heat shall be payable when billed and in the event of default of
payment therefor, the Landlord may refuse further service and the amount unpaid
shall be deemed additional rent for which the Landlord shall have all the
remedies for collection herein specified with respect to rent. The failure on
the part of the Landlord to furnish such additional elevator service or heat, if
due to breakdowns, repairs, maintenance, strikes, or other causes beyond the
control of the Landlord, shall involve no liability on the part of the Landlord
nor shall it constitute an eviction.
FORTY-FIRST: The Tenant is hereby granted the privilege of occupying the
premises subject to all of the terms, covenants and conditions of this lease,
including, but not limited to, the payment of any service charges for electric
current, water, sprinkler maintenance
PLEASE INITIAL
(7)
<PAGE>
and any overtime elevator or heat service and to the payment of any additional
rent payable pursuant to the provisions of Article THIRTY-SEVENTH of this lease
but otherwise free of the payment of fixed rent during the following periods:
(i) During the period beginning with the tender of possession of the
premises by the Landlord to the Tenant at any time prior to the commencement of
the term of this lease and ending on September 30, 1996, the date prior to the
commencement of the term.
(ii) During the period of the term of this lease commencing on October 1,
1996, and ending on November 30, 1996, and during the period commencing on
October 1, 1997, and ending on October 31, 1997.
The right to occupy the premises free of rent during the periods set forth
in clause (ii) of this Article FORTY-FIRST shall be subject to the condition
that the Tenant shall not default in the payment of any other fixed rent, or any
additional rent or any other charge due under this lease or in the performance
of the other terms, covenants and conditions thereof. In the event of any such
default, then fixed annual rent at the monthly rate set forth in this lease
shall be payable during the period in which the Tenant would otherwise be
entitled to the use of the premises free of fixed annual rent. Any such payment
shall be paid within 10 days following demand and shall constitute additional
rent under this lease.
FORTY-SECOND: In the event that the Landlord, for any reason, shall be unable to
give possession of the premises hereby demised by the first day of October,
1996, this lease shall nevertheless continue in full force and effect and the
Landlord shall tender and the Tenant will take possession of said premises under
the terms of this lease as soon as the Landlord shall have tendered possession
thereof to the Tenant; the fixed rent, however, to begin on the date upon which
such possession is tendered to the Tenant.
FORTY-THIRD: The Tenant represents that no broker, licensed or otherwise, was
involved in the making of this lease or brought the premises to the attention of
the Tenant and that all of the negotiations respecting this lease were conducted
with and through the offices of the Landlord.
If the foregoing representation is breached, the Tenant agrees to
indemnify and hold Landlord harmless from any and all costs and expenses,
including without limitation, Landlord's legal fees and expenses paid or
incurred by Landlord in connection with any claim by a broker, co-broker and/or
finder in connection with this lease.
PLEASE INITIAL
(8)
<PAGE>
FORTY-FOURTH: In conducting its business in the premises, as permitted by this
lease, the Tenant will not deal in any sexually explicit, pornographic or
similarly objectionable materials. It being understood that violations of the
foregoing restriction may be subject to varying interpretations, it is agreed
that the Landlord shall be the sole judge of what constitutes sexually explicit,
pornographic or similarly objectionable materials.
PLEASE INITIAL
If the Tenant shall fail to operate the premises in the manner specified
in this Article, the Landlord may give notice to the Tenant to cure any
violation of this Article within 30 days. If the Tenant fails to cure such
violations to the satisfaction of the Landlord, as the Landlord in its sole
discretion shall determine, in such 30-day period, such failure shall constitute
a default hereunder and the Landlord shall have the right to terminate this
lease in accordance with the provisions of Article TWENTY-FIFTH of this lease.
PLEASE INITIAL
<PAGE>
WORK SHEET
Attached to and made part of lease dated October 24, 1996 Between THE
RECTOR, CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH IN THE CITY OF NEW YORK,
Landlord,
and AMERICAN DIALOGUE, INC., Tenant.
Building 304 Hudson Street
Space Part 6th Floor
It is agreed that the following work is to be done by the Landlord at the
Landlord's expense:
1. Install 7 1/2 ton air-cooled air conditioning unit with basic distribution
ductwork (including power and control wiring, filing and Local Law #5
hook-up).
2. Repair existing windows to building standard and clean once at
commencement of lease.
3. Provide up to 10 watts per sq. ft. for air conditioning, lighting and
convenience outlets (with meter and switch to a location selected by
Landlord).
4. Sand and seal existing wood floors to Landlord's specifications.
5. Filing and Local Law #5 hookup to base building system to be done by
Landlord's contractor at Tenant's expense, including all additional Tenant
Local Law #5 devices within Tenant's premises.
6. Landlord will reimburse tenant up to $22,860.00, upon presentation to the
Landlord of invoices marked "Paid In Full" and waiver of liens from the
contractor(s). Such funds shall be used for tenant improvements in the
premises excluding telephone, computer systems, furniture and decorations
(other than window blinds and carpeting), and professional fees.
It is stipulated and agreed that the foregoing constitutes the memorandum
of repairs or decorations to be done by the Landlord referred so in the attached
and all the work to be done by the Landlord in the demised premises, except as
otherwise expressly PROVIDED in the attached lease.
It is further stipulated and agreed that the aforesaid work shall be
commenced by the Landlord as soon as possible after the signing of the attached
lease and the payment by the Tenant of the first installment of rent and the
performance by the Tenant of any other obligations to be performed by the Tenant
at the time of the signing of the lease and shall be completed with reasonable
diligence, PROVIDED that the Landlord shall not be required to do the work on
days or hours other than usual working days and hours in the trades in question.
Subject to the foregoing provisions the Landlord reserves the right, after
according reasonable consideration to the Tenant's wishes in the matter, to make
all decisions as to the time or times when, the order and style in which, said
work is so be done, and the labor or materials to be employed therefor. The work
shall be done, unless the Landlord otherwise directs, during the usual working
hours observed by the trades in question. It is stipulated and agreed that in
case the Landlord is prevented from commencing, prosecuting or completing said
work, due to the Landlord's inability to obtain or difficulty in obtaining the
labor or materials necessary therefor, or due to any governmental requirements
or regulations relating to the priority or national defense requirements, or due
to any other cause beyond the Landlord's control, the Landlord shall not be
liable to the Tenant for damages resulting therefrom, nor shall the Tenant be
entitled to any abatement or reduction of rent by reason thereof, nor shall the
same give rise to a claim in the Tenant's favor that such failure constitutes
actual, constructive, total or partial eviction from the demised premises.
THE RECTOR, CHURCH-WARDENS AND VESTRYMEN OF
TRINITY CHURCH IN THE CITY OF NEW YORK, Landlord.
By: /s/ [ILLEGIBLE]
---------------------------------------------
Director of Leasing
AMERICAN DIALOGUE, INC.
---------------------------------------------
Tenant
By: /s/ Andrew Watt
---------------------------------------------
<PAGE>
Rules and Regulations
1. The Tenant shall not clean, nor require, permit or allow any window in
the demised premises to be cleaned from the outside in violation of Section 202
of the Labor Law or of the Rules of the Board of Standards and Appeals, or of
any other board or body having or asserted jurisdiction;
2. All machinery shall be kept in approved settings, sufficient to absorb
any shock and prevent any noise, vibration or annoyance in the building of which
the demised premises are a part and shall be provided with oil pans between such
machinery and the floor beneath it, sufficient to prevent the seepage of oil on
or into the floors;
3. No acid that in any way may injure any of the pipes or plumbing
equipment in the building shall be poured or allowed to drain into the pipes or
plumbing equipment thereof, but shall in the event that the building is PROVIDED
with an acid line be poured or allowed to drain only therein, or if there be no
acid line, shall be neutralized in a manner satisfactory to the Landlord. No
substance which may cause any objectionable odor shall be left in the demised
premises;
4. During the cold season, the windows shall be kept closed to maintain
the temperature of the demised premises and to prevent any freezing thereof, or
of any equipment or appliance therein;
5. All trucks, vehicles or conveyances used by the Tenant in the demised
premises shall have rubber-tired wheels;
6. The Tenant's employees, except clerical or executive help, shall, if
the Landlord so directs, at all times use only the combination passenger and
freight elevator, if any, in going into or coming out of the demised premises;
7. No sign or lettering shall be inscribed on any door, wall or window of
the demised premises which is visible from the street or the portion of the
building used in common by other tenants except such as may be approved in
writing by the Landlord or its agents or designee;
8. No additional locks or bolts shall be placed anywhere upon or within
the demised premises or any on rooms therein, unless duplicate keys thereto be
given to the Landlord and all such keys must, on the termination of this lease,
be surrendered to the Landlord;
9. The Landlord may exclude any persons visiting or attempting to visit
the premises between 7 P.M. and 8 A.M. and on Saturdays, Sundays and the
holidays recognized as such by the state or federal government unless such
person shall be equipped with a pass signed by the Tenant and unless such person
shall sign his name and the premises which he is to visit on the night report.
10. The sanitary and safety facilities used solely by the Tenant or by the
Tenant in common with other occupants of the building of which the demised
premises are a part, shall be used only for the purposes for which they were
constructed;
11. No signs, signals, devices, displays, sounds or advertisements visible
or audible from the street or from the halls and other parts of the building
used in common by the Tenant and other tenants shall be inscribed, erected or
maintained unless the kind, style, location and manner thereof shall have been
approved in writing by the Landlord and if any sign, signal, sound display or
advertising be erected, made or inscribed without such approval, the Landlord
may remove the same and charge the cost of so doing to the Tenant as additional
rent. Any sign or display which may be installed by the Tenant shall be kept in
good order and repair and in a neat and attractive condition. The Landlord
reserves the right to use the roof and outside walls surrounding the premises
for sign purposes. The Landlord may remove any sign or signs or displays in
order to paint the premises or any part of the building, or make any repairs,
alterations or improvements in or upon the premises or building, or any part
thereof, provided it causes the same to be removed and replaced at the
Landlord's expense, whenever the said painting, repairs, alterations or
improvements shall have been completed;
<PAGE>
(14)
12. No advertising which, in the opinion of the Landlord, tends to impair
the reputation of the building or its desirability as a loft or office building,
shall be published or caused to be published by the Tenant and, upon notice from
the Landlord, the Tenant shall refrain from or discontinue such advertising;
13. Awnings, antennae, aerials, ventilating and air-conditioning apparatus
or other projections from the window or outside walls of the demised premises
shall not be erected or installed. All air-conditioning apparatus installed in
windows shall be so arranged that condensate does not drain on the outside of
the building wall or into the street;
14. The lights, skylights, entrances, passages, courts, elevators,
stairways, loading platforms, halls or any part of the building intended for the
use in common by the Tenant and the other occupants thereof shall not be
obstructed or encumbered (whether by means of storing of materials and skids or
otherwise). In the event of any such encumbrance or obstruction, the Landlord
may remove the material causing such encumbrance or obstruction and cause it to
be stored and charge the cost of doing so to the Tenant. No courtyard or yard
appurtenant to the premises or the building shall be used for parking vehicles
of any kind;
15. No part of the premises or the building shall be marked, painted,
drilled into, or in any way defaced. No laying of linoleum, or other similar
floor covering so that the same shall come in direct contact with the floor of
the demised premises shall be made; and if linoleum or other similar floor
covering is desired to be used, an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water.
Cements and other similar adhesive material shall not be used. Removal of any
alterations, decorations or improvements in compliance with paragraph Fourth of
this lease shall include the removal of all linoleum, lining and adhesive
material;
16. No part of the demised premises shall be used in a manner or for a
purpose that is substantially objectionable to the Landlord or to another
tenant, or which in the reasonable judgment of the Landlord, might cause
structural injury to the building;
17. The Tenant's employees shall not stand or loiter around the hallways,
stairways, elevators, front, roof or any other part of the building used in
common by the occupants thereof;
18. No load shall be placed upon any floor of the building exceeding the
floor load per square foot area which such floor was designed to carry, and all
loads shall be evenly distributed. The Landlord reserves the right to prescribe
the weight and position of all safes, machinery and other personal property in
the premises which must be placed so as to distribute their weight;
19. Nothing shall be thrown out of the windows or doors, or down the
passages or skylights of the building, nor shall any of them be covered,
obstructed or encumbered. No improper noises shall be made in the building, nor
shall birds or animals be brought therein;
20. Where freight elevators are provided by the building and are in
operation, all deliveries shall be made to or from the demised premises
exclusively by means of such elevators;
21. Any one doing janitorial work for the Tenant shall at all times be
subject to order and direction by the superintendent of the building, although
he shall not be the servant of either the superintendent or the Landlord;
22. No peddling, soliciting or canvassing shall be permitted in the
premises or by the Tenant's employees elsewhere in the building;
23. The Landlord may prescribe, and from time to time vary, the time for
any removals or deliveries from or into the premises, at any time, and such
prescriptions shall apply whether or not the material so removed or received is
the property of the Tenant. Removals or deliveries of safes, machinery and any
other heavy or bulky matter shall be done only upon written authorization of the
Landlord and only in such manner and by such persons as may be acceptable to the
Landlord, and the Landlord may require any further assurances or agreements or
indemnity from the Tenant and the movers to that effect. The Landlord reserves
the right to inspect all freight to be brought into the building and to exclude
from the building all freight which violates any of these Rules and Regulations
or the lease of which these Rules and Regulations are a part;
<PAGE>
24. The Tenant shall not permit its servants, employees, agents, visitors
or licensees, at any time to bring or keep upon the premises any inflammable,
combustible or explosive fluid, chemical or substance or cause or permit any
unusual or objectionable odors to be produced upon or emanate from the premises;
25. The passenger and service elevators, other than automatic self-service
elevators, if any, shall be operated only by employees of the Landlord, and must
not in any event be interfered with by the Tenant, his servants, employees,
agents, visitors or licensees. Manned freight elevators will be operated only
during such hours as the Landlord may from time to time determine;
26. The Tenant shall not use any other method of heating than that
supplied by the Landlord;
27. If the premises consist of basement space, or if any merchandise of
the Tenant is stored in the basement portion of the building, all such
merchandise shall, at the Tenant's own cost and expense, be placed entirely on
skids or platforms, which will raise such merchandise at least six inches from
the floor;
28. No drilling in floors, walls or ceilings shall be done except in
compliance with paragraph Fourth of this lease and no such drilling shall be
done during usual business hours unless authorized by the Landlord in writing;
29. No vending machine shall be installed or permitted to remain in the
premises unless the Landlord shall first have given its specific written
authorization for the installation of each such machine. The Tenant shall not
authorize or permit any vendor of sandwiches, coffee, or other foods, candies
or beverages to enter the premises for the purpose of soliciting sales of such
wares to the Tenant's employees.
THE TERMS, COVENANTS AND CONDITIONS contained in the foregoing lease
shall be binding on, and shall enure to the benefit of the parties hereto, and
their respective legal representatives, successors, and assigns, but no
assignment made or purported to be made in violation of the provisions of this
lease shall vest in such assignee any right or title in or to this lease or in
or to the estate hereby created.
IN WITNESS WHEREOF, this agreement, consisting of fifteen (15)
printed pages numbered 1 to 15 and typewritten or printed rider pages bearing
clauses numbered EIGHTEENTH (re-written) and THIRTY-SEVENTH to FORTY-FOURTH
inclusive, has been signed and sealed by the parties hereto, the day and year
first above written.
THE RECTOR, CHURCH-WARDENS, AND VESTRYMEN OF
Attest: TRINITY CHURCH IN THE CITY OF NEW YORK
As to Landlord:
/s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
- ------------------------ ----------------------------------------
Executive Vice President Director of Leasing
of Real Estate
/s/ [ILLEGIBLE]
----------------------------------------
Finance Department
Attest:
As to Tenant: AMERICAN DIALOGUE, INC.
----------------------------------------
Tenant
/s/ [ILLEGIBLE] /s/ ANDREW WATT
- ------------------------ ----------------------------------(L.S.)
----------------------------------(L.S.)
(15)
<PAGE>
[FLOOR MAP OMITTED]
--------------------------------------------
NOTES
-------------------
PLEASE INITIAL
==============
/s/ [ILLEGIBLE]
==============
EXHIBIT "A"
--------------------------------------------
304
HUDSON
STREET
--------------------------------------------
6TH FLOOR PLAN
--------------------------------------------
Date:
09/05/96 No Scale
--------------------------------------------
[LOGO] TRINITY
REAL ESTATE
PARISH OF TRINITY CHURCH
74 TRINITY PLACE, NY, NY 10006
(212) 602-0867
--------------------------------------------
<PAGE>
THIS LEASE made this 11 day of March, 1999
LANDLORD
between The Rector, Church-Wardens and Vestrymen of Trinity Church in the city
of New-York, a religious corporation (hereafter referred to as "the Landlord"),
having its offices at 74 Trinity Place, Borough of Manhattan, City, County and
State of New York, and CYBER DIALOGUE, INC.
TENANT
(hereafter referred to as "the Tenant"), a Delaware corporation, having its
place of business at 304 Hudson Street, Borough of Manhattan, City, County and
State of New York.
Witnesseth
GRANT PREMISES
That the Landlord hereby lets and leases to the Tenant, and the Tenant
hereby takes and hires from the Landlord, the following described space: a
portion of the 4th floor as hatched in red on the diagram attached hereto and
made part of this lease and marked Exhibit "A".
TERM
(such space is hereafter referred to as "the premises") in the building known by
street number as No. 304 Hudson Street in the Borough of Manhattan, City, County
and State of New York (hereafter referred to as "the building"), with the
privilege to the Tenant of using (subject to such rules and regulations as the
Landlord shall from time to time prescribe) the necessary entrances and
appurtenances to the premises, reserving to the Landlord all other portions of
the building not herein specifically demised, for a term to commence on the
first day of April, 1999, at noon, Standard Time, and to expire on the
thirty-first day of March, 2001, at noon, Standard Time (or until such term
shall sooner cease and
RENT
expire or be terminated as hereafter provided), at the rent at the annual rate
or rates as follows: THREE HUNDRED TEN THOUSAND FIVE HUNDRED AND NO/100
($310,500.00) Dollars,
ADDITIONAL RENT
payable at the offices of the Landlord in equal monthly payments of $25,875.00
each or if more than one annual rate in specified above, then in installments
equal to 1/12th of the rent as the annual rates as above prescribed for the
respective periods in which they are payable, in advance without demand therefor
an installment equal to the amount of the rent payable under this lease for the
first month of the term for which rent is payable upon the execution hereof by
the Tenant, and thereafter, on the first day of each month during said term, in
lawful money of the United States, plus (i) when due or demanded, such items as
shall be provided hereafter are payable by the Tenant as additional rent, and
(ii), should the Tenant as the commencement of the term of this lease be in
default in the payment of rent to the Landlord pursuant to the terms of any
prior lease with the Landlord, or with a predecessor in interest of the
Landlord, the amount of such arrears, which the Landlord may at its option and
without notice thereof to the Tenant, add to any monthly installments of rent
due under this lease.
COVENANTS AND CONDITIONS
THE ABOVE LETTING IS UPON THE FOLLOWING COVENANTS AND CONDITIONS, each and every
one of which the Tenant covenants and agrees with the Landlord to keep and
perform, and the Tenant agrees that the covenants herein contained on the part
of the Tenant to be performed, shall be deemed conditional limitations, as well
as covenants and conditions:
(1)
<PAGE>
(2)
USE
FIRST: (a) The Tenant shall use the premises only for executive and
administrative offices in connection with Tenant's computer market research
company.
(b) If any portion of the premises consists of basement space, such
portion should be used only for storage purposes.
PLEASE INITIAL
(c) No auction sale and no other sale of all or substantially all of the
Tenant's property, stock, fixtures and machinery, except a sale made in
connection with an assignment of this lease to another tenant for which the
Landlord's consent shall have been obtained shall be held at the premises unless
the provisions of Article TWENTY-NINTH (b) of this lease shall have been
complied with.
RENT
SECOND: (a) The Tenant shall pay the rent and additional rent as provided
in this lease.
(b) If any installment or installments of rent or additional rent or any
service charge shall not be paid within five (5) days following the date on
which the same shall be due and payable pursuant to this lease then, in addition
to, and without waiving or releasing, any other rights and remedies of the
Landlord, the Tenant shall pay to the Landlord a late charge of one and one half
(1 1/2%) percent per month computed (on the basis of a 30-day month) from the
date on which each such installment became due and payable to the date of
payment of the installment on the amount of each such installment or
installments, as liquidated damages for Tenant's failure to make prompt payment,
and the same may be collected on demand or as additional rent in accordance with
the provisions of Article TWENTY-FIFTH of this lease.
REPAIRS MACHINERY CLEANING AND WASTE
THIRD: (a) The Tenant shall take good care of the premises and the
fixtures, appurtenances, equipment and facilities therein and shall make, as and
when needed, all repairs in and about the premises required to keep them in good
order and condition; such repairs to be equal in quality to the original work
PROVIDED that the Tenant shall not be obligated for structural or exterior
repairs to the building or for repairs to the systems and facilities of the
building for the use or service of tenants generally, other than fixtures,
appurtenances, equipment and facilities in the premises, except where structural
or exterior repairs or repairs to such systems and facilities are made necessary
by reason of one or more of the occurrences described below in clauses (i)
through (iv) of this Article THIRD (a) Should the Tenant fail to repair any
condition in or about the premises or the fixtures, appurtenances, equipment and
facilities therein which is of such a nature that its neglect would result in
damage or danger to the building, its fixtures, appurtenances, facilities and
equipment, or to its occupants (of which nature the Landlord shall be the judge)
or, in the case of repairs of any other nature, should the Tenant have failed to
make the required repairs or to have begun in good faith, the work necessary to
make them within five days after notice from the Landlord of the condition
requiring repair, the Landlord may, in either such case, immediately enter the
premises and make the required repairs at the expense of the Tenant. The
Landlord may make, at the expense of the Tenant, any repairs to the building or
to its fixtures, appurtenances, facilities or equipment, whether of a structural
or any other nature, which are required by reason of damage or injury due (i) to
the negligence or the improper acts of the Tenant or its employees, agents,
license or visitors; (ii) to the moving, into or out of the building, of
property being delivered to or taken from the premises; (iii) to the
installation, repair or removal of the property of the Tenant in the premises;
or (iv) to the faulty operation of any machinery, equipment, or facility
installed in the premises by or for the Tenant. The Tenant will pay the cost of
any repairs made by the Landlord pursuant to this paragraph upon presentation of
bills therefor, or the Landlord may, as its option, add such amounts to any
installment or installments of rent due under this lease and collect the same as
additional rent. The liability of the Tenant under this Article Third shall
survive the expiration or other termination of this lease.
MACHINERY
(b) If the Tenant shall install or maintain machinery or manufacturing
equipment of any description in the premises, the operation of which produces
noise or vibration which is transmitted beyond the premises and the Landlord
deems it necessary that the noise or vibration of such machinery or equipment be
diminished, eliminated, prevented or confined so the premises, the Landlord may
give written notice to the Tenant, requiring that the Tenant provide and install
rubber or other approved settings for absorbing, preventing or decreasing the
noise or vibration of such machinery or equipment within fifteen days. The
judgment of the Landlord of the necessity of such installation shall be
conclusive, and the installation shall be made in such manner and of such
material as the Landlord may direct. Should the Tenant fail to comply with such
request within fifteen days, the Landlord may do the work necessary to absorb,
prevent or decrease the noise or vibration of such machinery or equipment and
the Tenant will pay to the Landlord the cost of such work upon demand or such
cost may, at the option of the Landlord, be added to any installment or
installments of rent under this lease and shall be payable by the Tenant as
additional rent.
CLEANING AND WASTE
(c) The premises shall be kept clean and in order by the Tenant, at the
Tenant's expense, and to the satisfaction of the Landlord. The Tenant shall, at
its own expense, clean the interior and exterior surfaces of the windows at such
times as the windows become dirty to a degree which, in the judgment of the
Landlord, adversely affects the appearance of the building or the premises. Such
window cleaning shall be done in a manner which complies with the requirements
of this lease and all applicable laws and regulations. The Tenant shall, at its
own expense, remove from the building any and all rubbish, refuse and waste
originating in the premises of the Tenant or cause the same to be removed. The
removal of such refuse, rubbish and waste shall be subject to such rules and
regulations as to time and manner or removal as, in the judgment of the
Landlord, are necessary for the proper operation of the building. In the event
that the Tenant shall fail to clean the windows or remove its refuse, rubbish
and waste, such cleaning or removal may be done by the Landlord, and the Tenant
shall pay to the Landlord the cost of the cleaning of the windows or the removal
of any of the Tenant's refuse, rubbish and waste from the building. Bills for
the same shall be rendered by the Landlord to the Tenant at such times as the
Landlord may elect and shall be due and payable when rendered, and the amount of
such bills shall be deemed to be, and be paid as, additional rent. Should the
Landlord clean the windows or remove the rubbish of the Tenant and of other
tenants, the cost of such cleaning or removal show be apportioned as between the
Tenant and such other Tenants respectively on the basis of the number of windows
or the respective approximate quantities of such rubbish and waste as the case
may be. The Landlord's apportionment of such respective quantities shall be
conclusive on the parties.
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Rider No. 1 attached to, and made part of, Lease dated the day of 11
March, 1999, between THE RECTOR, CHURCH-WARDENS AND VESTRYMEN OF TRINITY
CHURCH IN THE CITY OF NEW-YORK, as Landlord, and CYBER DIALOGUE, INC. as
Tenant.
- --------------------------------------------------------------------------------
CPI ESCALATION
THIRTY-SEVENTH: (a) Real Estate Tax and CPI Escalation. In order (i) to
adjust, during the term of this lease, for increases in the expenses of the
Landlord for Real Estate Taxes, the Tenant shall pay to the Landlord, as
additional rent, the Tenant's Proportionate Share of any increases in such Real
Estate Taxes, and (ii) to adjust for increases in other operating expenses of
the Landlord, the Tenant shall pay to the Landlord, as additional rent, the CPI
Adjustments for Increases in Other Operating Expenses, namely the amount by
which the Base Rent Allocated to Other Operating Expenses is increased by
application to the Base Rent Allocated to Other Operating Expenses of increases
in the Index over the Base Index, all as computed as set forth below in this
Article. The Landlord may, at any time during the term of this lease, elect to
discontinue the Tenant's payment of additional rent representing CPI Adjustments
for Increases in Other Operating Expenses as set forth in clause (ii) of
subparagraph (a) above in order to adjust for increases in other operating
expenses of the landlord, and may elect to substitute therefor additional rent
representing Increases in Operating Expenses, all as set forth in, and in
accordance with the provisions of, Article THIRTY-EIGHTH. Capitalized words or
expressions used above are defined in subparagraph (b) below.
(b) Definitions. As used in this Article the following capitalized words
or expressions shall have the meanings ascribed to them below:
1. "Real Estate Taxes" shall mean and include the expenditures of the
Landlord for taxes or assessments payable by the Landlord upon or with respect
to the building and the land upon which it is located, imposed by Federal, State
or local government (plus all expenditures for fees and expenses incurred in the
course of obtaining a reduction in any tentative assessed valuation), and all
taxes imposed by any such authority relating so the maintenance and operation of
the building, but shall not include income, franchise, inheritance or capital
stock taxes.
PLEASE INITIAL
2. "Base Rent Allocated to Other Operating Expenses" shall mean an amount
equal to 100% of the fixed annual rent prescribed on page 1 of this lease, as
such rent may be payable from time to time.
3. "Increase in Real Estate Taxes" shall mean the amount by which Real
Estate Taxes in any Subsequent Year, exceed Real Estate Taxes for the Base Year.
4. "CPI Adjustment for Increases in Other Operating Expenses" shall mean
the amount obtained by multiplying the Base Rent Allocated to Other Operating
Expenses by the percentage by which the Index, as last published on the date
next prior to the Computation Date and the Index as last published on the date
next prior to each anniversary date of the Computation Date, shall exceed the
Base Index. See Rider to Article THIRTY-SEVENTH attached hereto and made part of
this lease.
5. "Index" shall mean the "Consumer Price Index for All Urban Consumers"
"(1982/84=100)" specified for "All Items," relating to New York City and
published by the Bureau of Labor Statistics of the United States Department of
Labor. In the event the Index shall hereafter be converted to a different
standard reference base or otherwise revised, the determination of the CPI
Adjustment for Increases in Other Operating Expenses shall be made on the basis
of such conversion factor, formula or table for converting the Index as may be
published by the Bureau of Labor Statistics, or, if said Bureau shall not
publish the same, then with the use of such conversion factor, formula or table
as may be published by Prentice-Hall, Inc., or, failing such publication, by any
other nationally recognized publisher of similar statistical information. In the
event either Index shall cease to be published, then, for the purposes of this
Article, there shall be substituted for the Index such other index as Landlord
and Tenant shall agree upon, and, if they are usable within ninety (90) days
after the Index ceases to be published, such matter shall be determined in New
York City by arbitration in accordance with the Rules of the American
Arbitration Association.
6. "Base Index" shall mean the Index as last published prior to March 1,
1999.
7. "CPI Comparative Statement" shall mean a statement, in writing, signed
by the Landlord, or, on its behalf, by an officer of any corporation acting as
its managing agent, showing (i) a comparison of (a) Real Estate Taxes for the
Base Year with (b) Projected Real Estate Taxes for a Subsequent Year (which
shall be the same calendar year as the year of the Computation Date used in such
CPI Comparative Statement), (ii) the Base Rent Allocated to Other Operating
Expenses and the CPI Adjustment for Increases in Other Operating Expenses for
such Subsequent Year, and (iii) if the Tenant paid additional rent pursuant to
this Article with respect to the immediate preceding Subsequent Year, any
adjustment necessitated by a variance between the Projected Real Estate Taxes
for such Subsequent Year (as shown in the last previous CPI Comparative
Statement) and the actual Real Estate Taxes for such Subsequent Year (as shown
in the current CPI Comparative Statement).
8. "Base Year" shall mean the Real Estate Tax Year commencing July 1, 1999
and ending June 30, 2000.
9. "Subsequent Year" shall mean any calendar year following the Base Year,
falling wholly or partly within the term of the Tenant under this lease and the
calendar year following the year in which the term of this lease terminates.
(1)
<PAGE>
(2)
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10. "Computation Date" shall mean the first day of March , 2000, and, in
Subsequent Years, its anniversary date.
11. "Projected Real Estate Taxes" shall mean the Landlord's estimate
(which in any event must be reasonable in the light of past experience) of Real
Estate Taxes for a particular Subsequent Year.
12. "Tenant's Proportionate Share" shall mean .0576.
13. "Rentable Square Feet of Area" shall mean, as to basement and ground
floor space, the number of net square feet of the area thereof and, as to all
floors above the ground floor, shall mean the number of gross square feet of the
area thereof.
The terms "Increases in Other Operating Expenses" and "Operating Expense
Comparative Statements" shall have the meanings assigned to such terms in
paragraph (b) of Article THIRTY-EIGHTH.
(c) Statements for the Tenant. On or before April 1, 2000, and on or
before that day at each Subsequent Year, the Landlord will furnish a CPI
Comparative Statement to the Tenant. The failure of the Landlord to furnish a
CPI Comparative Statement shall be without prejudice to the right of the
Landlord to furnish a CPI Comparative Statement at any time in the future.
Every CPI Comparative Statement furnished by the Landlord pursuant to this
Article shall be conclusive and binding upon the Tenant unless (i) within ten
days after the receipt of such CPI Comparative Statement Tenant shall notify
Landlord that it disputes the correctness thereof, specifying the particular
respects in which the CPI Comparative Statement is claimed so be incorrect, and
(ii) if such dispute shall not have been settled by agreement, the dispute shall
have been submitted to arbitration within ninety days after receipt of the CPI
Comparative Statement. Pending the determination of such dispute by agreement of
arbitration as aforesaid, Tenant shall pay additional rent in accordance with
the CPI Comparative Statement and such payment shall be without prejudice to
Tenant's position and to the Tenant's rights to a refund of any overpayment. If
the dispute shall be determined in Tenant's favor, Landlord shall forthwith pay
Tenant the amount of Tenant's overpayment of additional rent resulting from
compliance with the CPI Comparative Statement.
PLEASE INITIAL
(d) Computation of Increase in Rent Payable by the Tenant. When the
Landlord shall furnish the Tenant with any CPI Comparative Statement in
accordance with this Article which shall show an Increase in Projected Real
Estate Taxes or a CPI Adjustment for Increases in Other Operating Expenses, then
the rent payable under the lease shall be increased by the Tenant's
Proportionate Share of the increase in Projected Real Estate Taxes and by the
CPI Adjustment for Increases in Other Operating Expenses which shall be payable
(with payment on account of such increases) as follows: (1) on the first day for
the payment of rent under this lease following the receipt of a CPI Comparative
Statement, the Tenant shall pay to the Landlord a sum equal to one-twelfth of
the Tenant's Proportionate Share of the increase in Projected Real Estate Taxes
plus one-twelfth of the CPI Adjustment for Increases in Other Operating Expenses
(plus or minus, as the case may be, any adjustment necessitated by a variance
between (x) the Projected Real Estate Taxes for the calendar year prior to the
year of the Computation Date used in such CPI Comparative Statement and (y) the
actual Real Estate Taxes for such calendar year) and (2) thereafter, until a
different CPI Comparative Statements or Operating Expense Comparative Statement
shall be submitted, the monthly installments of rent payable under the lease
shall continue to be increased by such amount.
With respect to any CPI Comparative Statement furnished to the Tenant in
the Subsequent Year following the year in which the term of this lease
terminates, if such CPI Comparative Statement shall indicate an adjustment
necessitated by a variance between (x) the Projected Real Estate Taxes for the
calendar year prior to the year of the Computation Date used in such CPI
Comparative Statement (i.e., the last calendar year of the lease term) and (y)
the actual Real Estate Taxes for such calendar year, then the Tenant shall
promptly pay so the Landlord, or the Landlord promptly shall pay to the Tenant,
as the case may be, the amount of any such adjustment as indicated in such CPI
Comparative Statement.
(e) Inspection of Books. The Tenant or its authorized representative shall
have a right to examine the books of the Landlord showing the Real Estate Taxes
with respect to the building during regular business hours for the purpose of
verifying the information set forth in any CPI Comparative Statement relating to
any Increase in Real Estate Taxes shown in such CPI Comparative Statement;
PROVIDED that a written request for such inspection is made by the Tenant within
ten days of the receipt of any such CPI Comparative Statement.
(f) Decreases in Real Estate Taxes or Index. In no event shall any
decrease in the Real Estate Taxes or the Index in any way reduce the fixed rent
or additional rent payable by the Tenant under this lease, except to the extent
to which any such decrease shall result in a decrease in the additional rent
payable pursuant to this Article; PROVIDED HOWEVER that no decrease in Real
Estate Taxes shall at any way reduce any additional rent payable on account of
any CPI Adjustment for Increases in Other Operating Expenses, and that no
decrease in the amount of the CPI Adjustment for Increases in Other Operating
Expenses shall in any way reduce any additional rent payable on account of any
Increase in Real Estate Taxes.
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INCREASES IN
EXPENSES
THIRTY EIGHTH: (a) Landlord's Election to Substitute Operating Expense
Escalation. In order to adjust for increases in certain expenses of the
Landlord, clause (ii) of subparagraph (a) of Article THIRTY-SEVENTH provides
that the Tenant will pay the Landlord as additional rent, the CPI Adjustment for
Increases in Other Operating Expenses. The Landlord may, at any time during the
term of this lease, elect to discontinue, prospectively, the payment of the CPI
Adjustment for Increases in Other Operating Expenses, and may elect to
substitute therefor additional rent representing Increases in Operating Expenses
as set forth below. The Landlord shall give the Tenant notice of such election
by delivering to the Tenant prior to June lst in any year an Operating Expense
Comparative Statement, together with a Landlord's Notice, and, such election
shall be effective commencing with the first day of the next calendar month and
shall remain effective for the balance of the term of this lease.
Capitalized words or expressions are used as defined in subparagraph (b)
below.
(b) Definitions. As used in this Article the following capitalized words
or expressions shall have the meanings ascribed to them below:
1. "Operating Expense Comparative Statement" shall mean a statement, in
writing signed by the Landlord or, on its behalf by an officer of any
corporation acting as its managing agent, showing (i) a comparison of (a) Real
Estate Taxes for the Base Year with (b) Projected Real Estate Taxes for the then
current Subsequent Year, (ii) the Base Rent Allocated to Other Operating
Expenses and the Final CPI Adjustment Amount, (iii) a comparison of (x) the
Operating Expenses for the OE Base Year with the Projected Operating Expenses
for the then current Subsequent Year, and (iv) if the Tenant paid additional
rent pursuant to the Article with respect to the immediately preceding
Subsequent Year, any adjustment necessitated by variance between Projected Real
Estate Taxes for such immediately preceding Subsequent Year (as shown in the
last Operating Expense Comparative Statement) and the Actual Real Estate Taxes
for such immediately preceding Subsequent Year (as shown in the current
Operating Expense Comparative Statement) or by a variance between the Projected
Operating Expenses for such immediately preceding Subsequent Year (as shown in
the last Operating Expense Comparative Statement) and the actual Operating
Expenses for such immediately preceding Subsequent Year (as shown in the current
Operating Expense Comparative Statement).
2. "Landlord's Notice" shall mean a notice, to be delivered with the first
Operating Expense Comparative Statement, in which the Landlord confirms that it
has elected to discontinue, prospectively, the Tenant's payment of additional
rent representing CPI Adjustments for Increases in Other Operating Expenses as
contemplated by clause (ii) of subparagraph (a) of Article THIRTY-SEVENTH and to
adjust in the future for increases in other operating expenses of the Landlord
by requiring the Tenant to pay as additional rent an amount equal to the
Increases in Operating Expenses as set forth in this Article THIRTY-EIGHTH.
PLEASE INITIAL
3. "Projected Operating Expenses" shall mean the Landlord's estimate
(which in any event must be reasonable in the light of past experience) of
Operating Expenses for a particular Subsequent Year.
4. "OE Base Year" shall mean the calendar year preceding the calendar year
of the Computation Date used in the Operating Expense Comparative Statement
accompanied by the Landlord's Notice.
5. "Final CPI Adjustment Amount" shall mean the amount obtained by
multiplying the Base Rent allocated to Other Operating Expenses by the
percentage by which the Index, as last published immediately prior to December
31st in the calendar year which is the OE Base Year exceeds the Base Index.
6. "Operating Expenses" shall mean with respect to any particular calendar
year all costs and expenses paid or incurred in such calendar year by Landlord
or on Landlord's behalf in respect of the repair, maintenance and/or operation
of the land and/or the building and the curbs, sidewalks, plazas and other
appurtenances adjoining the same, including, without limitation, the following:
(a) Wages, salaries, fees and other compensation and payments and payroll
taxes and contributions to any social security, unemployment insurance,
welfare, pension or similar fund and payments for other fringe benefits
(including premiums on health, accident and group life insurance for
employees) made to or on behalf of all employees of Landlord performing
services rendered in connection with the operation and maintenance of the
building;
(b) payroll taxes, workers' compensation, uniforms and related expenses
for employees;
(c) the cost of painting and the cost of interior and exterior landscape
maintenance;
(d) premiums and other charges for rent, casualty, boiler, sprinkler,
plate-glass, liability, fidelity and any other insurance Landlord
maintains;
(e) the cost of all supplies (including, without limitation, cleaning
supplies), hand tools and other materials used in the repair, maintenance
and/or operation of the building, and sales and other taxes thereon;
(f) the depreciation for, or the cost of the rental (including all
applicable sales taxes) of, all movable equipment used in the repair,
maintenance and/or operation of the building;
(3)
<PAGE>
(4) Escalator
77-B/82
(g) the cost of, or the cost of the rental of, together with the cost of
the installation of, any building security or other system used in
connection with life or property protection, installed after the OE Base
Year (including the cost of and/or the cost of the rental of all
machinery, electronic systems and other equipment comprising any part
thereof), as well as the cost of the operation and repair of any such
system in operation during the OE Base Year;
(h) the cost of all charges for window and other cleaning, janitorial and
other services;
(i) charges of independent contractors;
(j) whether or not capitalized under generally accepted accounting
principles, cost of repairs, and costs of replacements made in connection
with repairs, of cables, fans, pumps, boilers, cooling equipment, wiring
and electrical fixtures and metering, control and distribution equipment,
component parts of the HVAC, electrical, plumbing, elevator and any life
and/or property protection (including, without limitation, sprinkler)
systems, window washing equipment and snow removal equipment;
(k) the cost of steam or any other fuel used in connection with the
operation and maintenance of the building;
(l) the cost of electricity used in connection with the operation and
maintenance of the building (excluding electricity consumed directly by
tenants);
(m) whether or not capitalized under generally accepted accounting
principles, costs for alterations and improvements to the building made
after the OE Base Year by reason of the laws and requirements of any
public authorities or the requirements of insurance bodies or Landlord's
insurer which costs shall be amortized over five years;
(n) management fees or, if no managing agent is employed by Landlord, a
sum in lieu thereof which is not in excess of the then prevailing rates
for management fees of first class office buildings in New York County;
PLEASE INITIAL
(o) whether or not capitalized under generally accepted accounting
principles, costs of improvements, equipment or machinery installed for
the purpose of reducing energy consumption or reducing other Operating
Expenses, which costs shall be amortized over five years;
(p) reasonable legal, accounting and other professional fees incurred in
connection with the operation, maintenance and/or management of the
building;
(q) all other charges properly allocable to the repair, operation and/or
maintenance of the building in accordance with real estate accounting
practices customarily used in New York City.
Notwithstanding the foregoing, Operating Costs shall not include expenditures
for any of the following: (1) depreciation (except as PROVIDED above), (2)
interest on and amortization of mortgages, (except as otherwise PROVIDED above),
(3) leasehold improvements made for tenants of the building, (4) brokerage
commissions, (5) refinancing costs, (6) the cost of any electricity furnished to
tenants, (7) the cost of capital improvements (other than such capital
improvements as are included above). The cost of any Operating Expense which was
included in the OE Base Year and which is no longer being incurred by Landlord
by reason of the installation of labor saving devices or other capital
improvements or expenditures the cost of which was paid by other than Tenant
shall be deleted from OE Base Year Operating Expenses in calculating any
Increase in Operating Expenses in any Subsequent Year.
All of the capitalized words or expressions not otherwise defined herein
shall have the meanings ascribed to them in paragraph (b) of Article
THIRTY-SEVENTH.
(c) Statements for the Tenant. Prior to June 1st in each Subsequent Year
after delivery of the Landlord's Notice, and on or before that day in each
Subsequent Year, the Landlord will furnish an Operating Expense Comparative
Statement to the Tenant. The failure of the Landlord to furnish an Operating
Expense Comparative Statement shall be without prejudice to the right of the
Landlord to furnish an Operating Expense Comparative Statement at any time in
the future.
Every Operating Expense Comparative Statement furnished by the Landlord
pursuant to this Article shall be conclusive and binding upon Tenant unless (i)
within ten days after the receipt of such Operating Expense Comparative
Statement Tenant shall notify Landlord that it disputes the correctness thereof,
specifying the particular respects in which such Operating Expense Comparative
Statement is claimed to be incorrect, and (ii) if such dispute shall not have
been settled by agreement, the dispute shall have been submitted to arbitration
within ninety days after receipt of such Operating Expense Comparative
Statement. Pending the determination of such dispute by agreement of arbitration
as aforesaid, Tenant shall pay additional rent in accordance with such Operating
Expense Comparative Statement and such payment shall be without prejudice to
Tenant's position and to the Tenant's rights to a refund of any overpayment. If
the dispute shall be determined in Tenant's favor, Landlord shall forthwith pay
Tenant the amount of Tenant's overpayment of additional rent resulting from
compliance with such Operating Expense Comparative Statement.
<PAGE>
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77-B/82
(d) Computation of Increases in Rent Payable by Tenant. When the Landlord
shall furnish the Tenant with any Operating Expense Comparative Statement in
accordance with this Article which shall show either (i) an increase in
Projected Real Estate Taxes, (ii) a Final CPI Adjustment Amount or (iii) an
increase in Projected Operating Expenses, then the rent payable under the lease
shall be increased by the Tenant's Proportionate Share of the increase in the
Projected Real Estate Taxes, the Final CPI Adjustment Amount, and the Tenant's
Proportionate Share of the increase in Projected Operating Expenses, which shall
be payable (with payment on account of such increases) as follows: (1) on the
first day for the payment of rent under this lease following the receipt of the
Operating Expense Comparative Statement, the Tenant shall pay to the Landlord
the sum equal to the aggregate of one-twelfth of the Tenant's Proportionate
Share of the increase in Projected Real Estate Taxes, plus one-twelfth of the
Final CPI Adjustment Amount, plus one-twelfth of the Tenant's Proportionate
Share of the increase in Projected Operating Expenses (plus or minus, as the
case may be), any adjustment necessitated by a variance between (x) the
Projected Real Estate Taxes for such immediately preceding Subsequent Year and
(y) the actual Real Estate Taxes for such immediately preceding Subsequent Year
or by a variance between the (aa) Projected Operating Expenses for such
Subsequent Year and (bb) the actual Operating Expenses for such Subsequent Year,
and (2) thereafter, until a different Operating Expense Comparative Statement
shall be submitted as above PROVIDED, the monthly installments of rent payable
under this lease shall be continued to be increased by such amount.
With respect to the Operating Expense Comparative Statement furnished to
the Tenant in the Subsequent Year following the year in which the term of this
lease terminates, if such Operating Expense Comparative Statement shall indicate
an adjustment necessitated by a variance of the type referred to in clauses (x)
and (y) or clauses (aa) and (bb) in the immediately preceding paragraph, then
the Tenant shall promptly pay to the Landlord, or the Landlord promptly shall
pay to the Tenant, as the case may be, the amount of any such adjustment as
indicated in such Operating Expense Comparative Statement.
(e) Inspection of Books. The Tenant or its authorized representative shall
have a right to examine the books of the Landlord showing the Real Estate Taxes
and Operating Expenses with respect to the building during regular business
hours for the purpose of verifying the information set forth in any Operating
Expense Comparative Statement relating to any Increase in Real Estate Taxes or
Operating Expenses shown in such Operating Expense Comparative Statement;
PROVIDED that a written request for such inspection is made by the Tenant within
ten days of the receipt of any such Operating Expense Comparative Statement.
PLEASE INITIAL
(f) Decreases in Real Estate Taxes, Index or Operating Expenses. In no
event shall any decrease in the Real Estate Taxes or any decrease in the Index
or the Operating Expenses in any way reduce the fixed rent or additional rent
payable by the Tenant under this lease, except to the extent to which any such
decrease shall result in a decrease in the additional rent payable pursuant to
this Article; PROVIDED HOWEVER that a decrease in Real Estate Taxes shall not in
any way reduce any additional rent payable on account of the Final CPI
Adjustment Amount or any Increase in Operating Expenses, and that a decrease in
the Index shall not in any way affect any amount, including without limitation
the CPI Final Adjustment Amount, and that a decrease in the amount of the
Operating Expenses shall not in any way reduce any additional rent payable on
account of any Increase in Real Estate Taxes or the Final CPI Adjustment Amount.
(5)
<PAGE>
RIDER NO. 2
attached to and made part of Lease, dated between THE RECTOR,
CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH in THE CITY OF NEW YORK, as
Landlord, and CYBER DIALOGUE, INC., as Tenant.
EIGHTEENTH (re-written): (a) The use to be made of the premises by the Tenant
and the identity of the Tenant being among the inducements to the making of this
lease by the Landlord, the Tenant shall not, except in accordance with the terms
of this Article, (i) use or permit the premises or any part thereof to be used
for any purposes other than those specified in the lease, (ii) sublet or
underlet the premises or any part thereof, (iii) permit the premises or any part
thereof to be occupied by anyone other than the Tenant or its officers or
employees, (iv) mortgage or encumber this lease or any interest therein, (v)
assign or transfer, by operation of law or otherwise, this lease or any interest
therein.
(b) The Tenant shall not, without having first obtained the Landlord's
prior written consent thereto, (i) use or permit the premises or any part
thereof to be used for any purposes other than those specified in the lease, or
(ii) mortgage or encumber this lease or any interest therein.
PLEASE INITIAL
(c) The Tenant shall not, except in accordance with the provisions of
paragraphs (d) through (l) of this Article, (i) assign or transfer, by operation
of law or otherwise, this lease or any part therein, (ii) sublet or underlet the
premises or any part thereof, or (iii) permit the premises or any part thereof
to be occupied by anyone other than the Tenant or its officers or employees.
(d) If the Tenant shall desire to assign this lease or to sublet the whole
or any part of the premises or to permit the premises to be occupied by any
person other than the Tenant, the Tenant will notify the Landlord as to (i) the
action which the Tenant proposes; (ii) the portion of the premises with respect
to which the Tenant proposes to take such action (the "Affected Premises");
(iii) the name and business address of the proposed assignee, sublessee or
occupant (the "Proposed Undertenant"); (iv) the name and residence address of
the officers and principal stockholders of the Proposed Undertenant, if a
corporation is involved, or the names and residence addresses of the partners
thereof if a partnership or joint venture is involved; (v) the information, in
reasonable detail, as to the Proposed Undertenant which is required to permit
the Landlord to make the determinations described in paragraph (h) below, (vi)
the terms upon which the Tenant proposes to assign this lease or sublet the
premises or permit the premises to be occupied by the Proposed Undertenant
(including the terms under
<PAGE>
which any additions, alterations or decorations are to be made to the Affected
Premises and the terms on which the Proposed Undertenant is to buy or lease any
fixtures, leasehold improvements, equipment, furniture, furnishings or other
personal property from the Tenant), and (vii) the name and address of any real
estate broker or other person to whom a commission may be owed by any person in
connection with such assignment, subleasing or occupation. (The Tenant's notice
of desire to assign, sublease or permit occupancy of the Affected Premises by
others, with the information prescribed above is hereafter referred to as a
"Tenant's Subleasing Notice").
(e) By written notice executed by the Landlord and delivered to the Tenant
within thirty (30) days following receipt of the Tenant's Subleasing Notice (for
the purposes hereof such notice shall nor be deemed to have been received by the
Landlord until all of the information required by paragraph (d) above shall have
been furnished to the Landlord), the Landlord shall have the absolute right to
select one of the alternatives set forth in paragraphs (f), (g) or (h) below.
PLEASE INITIAL
(f) In the event of a proposed assignment of this lease or the subleasing
or occupation of the entire premises subject to this lease for the then
remaining balance of the term of this lease, (i) the Landlord may elect to
require the Tenant to surrender the premises to the Landlord and terminate this
lease with respect to the premises on the last day of the second complete
calendar month following the Tenant's Subleasing Notice and comply with the
provisions of this lease respecting surrender at the end of the term not later
than such date or (ii) the Landlord may give its consent to any such assignment,
sublease or occupation. Any subletting or occupancy by a third party as a
consequence of which 25% or less in an area of the Premises shall remain in
occupancy by the Tenant herein named may, at the Landlord's option, be
considered a subleasing of the whole of the Premises.
(g) In the event of a proposed subleasing or occupation of less than the
entire premises subject to this lease or the entire premises for less than the
then remaining balance of the term of this lease, (i) the Landlord may elect to
require the Tenant to surrender to the Landlord and vacate the Affected Premises
not later than the date upon which the proposed subleasing or occupation is
proposed to commence and comply on such date with the provisions of this lease
as to surrender at the expiration of the term with respect to the Affected
Premises, and the Tenant shall, at its expense, erect the partitioning required
to separate the Affected Premises from the remainder of the premises, create any
doors required to provide an independent means of access to the Affected
Premises from elevators and
(2)
<PAGE>
lavatories and to segregate the wiring and meters and electric current
facilities, so that the Affected Premises may be used as a unit for commercial
purposes, separate from the remainder of the premises remaining in occupation of
the Tenant; in which event the rent and all additional rent payable under this
lease shall be reduced proportionately with the diminution in the area of the
premises upon surrender of the Affected Premises; or (ii) the Landlord may give
its consent to any such sublease or occupation.
(h) In the case of an assignment, the Landlord shall be under no
obligation to consent thereto or to select one of the alternatives set forth in
paragraph (f) above, unless the Landlord's investigation of the financial
standing of the proposed assignee discloses that there is no reason to doubt the
financial ability of the assignee to carry out its obligations under this lease
for the balance of the term and the Landlord's investigation of the manner in
which the proposed assignee conducts its business indicates that the assignee
will conduct its business in the premises in conformity with the requirements of
this lease or that there will be no interference with the orderly conduct of
their business and the enjoyment of their premises by other tenants in the
building. In the case of a sublease or occupation, the Landlord shall be under
no obligation to consent thereto or select one of the alternatives set forth in
paragraph (f) or (g) above, as the case may be, unless the Landlord's
investigation of the nature of the business of the proposed sublessee or
occupant or the manner in which the proposed sublessee or occupant will conduct
such business indicates that there is no reason to doubt that such business will
be conducted in conformity with the requirements of this lease and that the use
of the premises by the proposed sublessee or occupant will not result in damage
to or deterioration of the premises or the building, or interfere with the
orderly conduct of their businesses and the enjoyment of their premises by other
tenants in the building. The Landlord shall be under no obligation to consent to
any assignment of this lease or any subletting or occupation of the premises to
or by any person other than the Tenant unless the criteria set forth in this
paragraph are satisfied.
PLEASE INITIAL
(i) If the Landlord's Subleasing Notice shall be to the effect that the
Landlord elects that the Affected Premises be surrendered, then the Affected
Premises shall be surrendered in accordance with clause (i) of paragraph (f) or
(g) above, as the case may be, and any work required to be done to separate the
Affected Premises from the remainder shall be commenced promptly following the
Tenant's receipt of the Landlord's Subleasing Notice and carried on with
diligence and continuity.
(3)
<PAGE>
(j) No consent given by the Landlord shall be deemed to permit any act
except the act to which it specifically refers, or to render unnecessary any
subsequent consent, and any assignment or subletting of the premises shall not
relieve the Tenant or any mesne assignee from any obligations, duty or covenant
under this lease, and in all cases a violation of any of the covenants or duties
or obligations under this lease by a subtenant or assignee shall, in addition,
be deemed to be the act of the Tenant herein. No assignment, transfer, mortgage,
encumbrance, subletting or arrangement in respect of the occupancy of the
premises shall create any right in the assignee, transferee, mortgagee,
subtenant or occupant, unless the consent of the Landlord shall first have been
obtained, and unless, if an assignment is involved, the transferee or assignee
shall have delivered an agreement duly executed by the assignee or transferee
wherein the assignee or transferee assumes and agrees to pay or otherwise keep
and perform the obligations of the Tenant in this lease or, if a sublease is
involved wherein the sublessee agrees that any act or omission by the sublessee
which, if performed or omitted by the Tenant under this lease would be a default
thereunder shall also be a default under the provisions of the sublease. Any
assignee by accepting an assignment shall nevertheless be conclusively deemed to
have assumed this lease and all obligations already accrued or to accrue
thereunder and further to have agreed to fully and duly perform all the Tenant's
covenants herein contained. If the Tenant shall, at any time, be in default in
the payment of rent, the Landlord shall have the right to collect rent from any
assignee, undertenant or occupant, and credit the same to the account of the
Tenant, and no such collection shall constitute a waiver of the foregoing
covenant or the acceptance of anyone other than the Tenant, as Tenant or shall
otherwise release, impair or otherwise affect any obligation of the Tenant under
this lease. Immediately following the execution and delivery of any assignment
of this lease or any subleasing of the premises or an agreement as to the
occupancy thereof, the Tenant will furnish a duplicate of the instrument in
question to the Landlord.
PLEASE INITIAL
(k) Subject to paragraphs (j) and (l) of this Article and to continued
compliance with Article FIRST of this lease, the Tenant is authorized to
sublease portions of the premises to a subsidiary corporation or corporations or
to a corporation affiliated with the Tenant, without compliance with the
provisions of paragraph (c) through (g) of this Article. A subsidiary
corporation shall mean and include a corporation of which the Tenant owns and
holds at least a majority of each class of stock which is authorized to vote at
the time when the sublease is executed. An affiliated corporation shall mean and
include a corporation which is owned and
(4)
<PAGE>
controlled by the corporation which owns and controls the Tenant by ownership of
at least a majority of each such class of stock. Before making any sublease to
any such subsidiary or affiliated corporation, the Tenant shall certify to the
Landlord the manner in which such subsidiary or affiliated corporation is
related to and controlled by the Tenant and the purposes for which the subleased
premises will be used. If the Tenant is a corporation or partnership, the
transfer of a controlling interest in such entity shall be deemed an assignment.
(l) Anything herein to the contrary notwithstanding, the Tenant may not
assign this lease or sublet or permit the occupancy by any other party of all or
any part of the demised premises at any time when the Tenant has not paid any
rent and additional rent when it is payable or at any time prior to the
expiration of the first twelve months following the commencement of the term of
this lease. The Tenant shall furnish the Landlord with a counterpart (which may
be a conformed or reproduced copy) of each sublease, assignment or agreement of
occupancy made hereunder within ten days after the date of its execution. Tenant
shall remain fully liable for the performance of all of Tenant's obligations
hereunder notwithstanding anything provided for herein, and without limiting the
generality of the foregoing, shall remain fully responsible and liable to
Landlord for all acts and omissions of any subtenant, assignee or occupant or
anyone claiming under or through any such person which shall be in violation of
any of the obligations of this lease and any such violation shall be deemed to
be a violation by Tenant. Tenant shall pay Landlord on demand any expense which
Landlord may reasonably be required to incur in acting upon any request for
consent pursuant to this Article.
PLEASE INITIAL
(m) Notwithstanding anything else in this Article, the Landlord shall have
the right to condition its consent so any proposed sublease of all or a portion
of the premises on the following:
(i) The Tenant shall not be in default in the payment of rent or the
performance of any other of its obligations under this lease.
(ii) The Tenant shall have delivered to the Landlord a Tenant's
Subleasing Notice as required by Subparagraph (d) above.
(iii) The Tenant shall have complied with the provisions of paragraphs (j)
and (l) of this Article.
(iv) The Tenant shall grant the Landlord a security interest in the
sublease and the rents payable thereunder and shall take all
necessary steps required to perfect such security interest.
(5)
<PAGE>
(v) The sublease shall include a provision to the effect that if the
Landlord shall notify the sublessee that the Tenant is in default in
the payment of rent or the performance of its other obligations
under this lease the sublessee shall, if so requested by the
Landlord pay all rent and other amounts due under the sublease
directly to the Landlord.
(n) At the request of the Landlord, the Tenant will furnish to the
Landlord, within ten days of receipt of a request therefor, a certificate
executed in the name and on behalf of the Tenant, confirming that, except as
previously consented to in writing by the Landlord or as otherwise specifically
set forth in such certificate, the Tenant has not (i) used or permitted the
premises or any part thereof to be used for any purposes other than those
specified in this lease, (ii) mortgaged or encumbered this lease or any interest
therein, (iii) assigned or transferred, by operation of law or otherwise, this
lease or any interest therein, (iv) sublet or underlet the premises or any part
thereof, or (v) permitted the premises or any part thereof to be occupied by
anyone other than the Tenant or its officers or employees. With respect to any
exception to clauses (i) through (v) above which the Landlord has not previously
consented to in writing, the Landlord in its sole discretion, may either consent
thereto (which consent may be subject to any conditions specified by the
Landlord) or exercise the rights and remedies available to the Landlord under
the terms of this lease.
PLEASE INITIAL
(o) In the event the Tenant obtains the consent of the Landlord pursuant
to paragraph (f) or (g) above and sublets or assigns all or a portion of the
premises, the Tenant shall pay to the Landlord, monthly, as additional rent,
fifty percent (50%) of all Subleasing Profit (as hereinafter defined).
"Subleasing Profit" shall mean all consideration received by the tenant, less
(i) the rent and additional rent payable by the Tenant under this lease for the
period in question (exclusive of any amount payable by the Tenant under this
subparagraph (o)), (ii) any brokerage commission (not exceeding 110% of those
set forth in Landlord's brokerage commission schedule as published from time to
time) and reasonable legal fees paid by the Tenant in connection with such
subletting and assignment, (iii) the unamortized cost of demising and improving
the premises for subtenant, and (iv) any amounts paid by Tenant to subtenant as
a cash or rental concession.
(p) Notwithstanding anything to the contrary herein, in the event that the
Tenant intends to sublet not more than 40% of the premises (measured in the
area), the Landlord will not seek to recapture such premises and will not
unreasonably withhold or delay its consent to any proposed sublease.
(6)
<PAGE>
THIRTY-NINTH: If the Landlord has instituted, or shall institute, a security
guard program at the building under contract with a recognized security guard or
patrol agency which shall supply guards for lobby, hall, loading bank and other
patrol services at the building on a contract basis, the Tenant will, within ten
days following receipt of a statement from the Landlord of the Landlord's
expenditures for the security guard services, pay to the Landlord the Tenant's
proportionate share of 121% of the Landlord's expenditures for the security
guard services for the building. The amount payable hereunder shall constitute
additional rent. Statements of the Landlord's expenditures in successive periods
of 90 days following the institution of the service shall be submitted not more
frequently than once in each period of three months during the term. The
Tenant's proportionate share of the Landlord's expenditures for the security
guard services shall be that fraction of such expenditures for a three-month
period of which the numerator is the number of square feet of the rentable area
of the premises and the denominator is the number of square feet of the rentable
area of the building which at the expiration of each three-month period in
question was under lease and occupied or under lease to be occupied by other
tenants. Any basement or ground floor rentable space whose area is to be
computed and used in the foregoing fraction shall be computed on a net
measurement basis, all other rentable areas are to be computed on a gross
measurement basis.
PLEASE INITIAL
The Landlord may discontinue any such security guard program at any time
after 90 days' notice to the Tenant of the Landlord's election so do so.
FORTIETH: In addition to the elevator service described in paragraph
TWENTY-NINTH of this lease, the Landlord will maintain in service and available
for the use of the Tenant, one passenger elevator at all times on all days of
the week, including Saturdays, Sundays and legal holidays. In the event that the
Tenant requires freight elevator service, or heat on Saturdays, Sundays, federal
and state holidays and all holidays recognized by the unions representing
Landlord's building personnel or during hours in addition so those prescribed
under paragraph TWENTY-NINTH of this lease, the Landlord will furnish the
additional elevator service or heat or both, as the case may be, upon notice of
the Tenant's need therefor. Such notice may be written or oral and shall be
given as long a time as practicable prior to the time when the additional heat
or freight elevator service is required. The Tenant will pay for any additional
freight elevator service and heat furnished after the hours prescribed in
(7)
<PAGE>
paragraph TWENTY-NINTH at the respective prevailing rates per hour as
established from time to time by the Landlord for such services at the building
or in the buildings of the Landlord, generally, for each hour during which the
additional service is supplied. All charges for additional freight elevator
service and heat shall be payable when billed and in the event of default of
payment therefor, the Landlord may refuse further service and the amount unpaid
shall be deemed additional rent for which the Landlord shall have all the
remedies for collection herein specified with respect to rent. The failure on
the part of the Landlord to furnish such additional elevator service or heat, if
due to breakdowns, repairs, maintenance, strikes, or other causes beyond the
control of the Landlord, shall involve no liability on the part of the Landlord
nor shall it constitute an eviction.
FORTY-FIRST: The Tenant is hereby granted the privilege of occupying the
premises subject to all of the terms, covenants and conditions of this lease,
including, but not limited to, the payment of any service charges for electric
current, water, sprinkler maintenance and any overtime elevator or heat service
and to the payment of any additional rent payable pursuant to the provisions of
Article THIRTY-SEVENTH of this lease but otherwise free of the payment of fixed
rent during the following periods:
PLEASE INITIAL
(i) During the period beginning with the tender of possession of the
premises by the Landlord to the Tenant at any time prior to the commencement of
the term of this lease and ending on March 31, 1999, the date prior to the
commencement of the term.
(ii) During the period of the term of this lease commencing on April 1,
1999, and ending on May 31, 1999.
The right to occupy the premises free of rent during the periods set forth
in clause (ii) of this Article FORTY-FIRST shall be subject to the condition
that the Tenant shall not default in the payment of any other fixed rent, or any
additional rent or any other charge due under this lease or in the performance
of the other terms, covenants and conditions thereof. In the event of any such
default, then fixed annual rent at the monthly rate set forth in this lease
shall be payable during the period in which the Tenant would otherwise be
entitled to the use of the premises free of fixed annual rent. Any such payment
shall be paid within 10 days following demand and shall constitute additional
rent under this lease.
FORTY-SECOND: In the event that the Landlord, for any reason, shall be unable to
give exclusive possession of the premises hereby demised by the first day of
April 1999, this lease shall
(8)
<PAGE>
nevertheless continue in full force and effect and the Landlord shall tender and
the Tenant will take possession of said premises under the terms of this lease
as soon as the Landlord shall have tendered possession thereof to the Tenant;
the fixed rent, however, to begin on the date which is the 61st day following
the date upon which such possession is tendered to the Tenant. See Rider to
Article Forty-Second
FORTY-THIRD: The Tenant represents and warrants to the Landlord that all of the
Tenant's negotiations respecting this lease which were conducted with or through
any person, firm or corporation, other than the officers of the Landlord, were
conducted through H. L. Poretsky Associates, Inc., 130 Fifth Avenue, New York,
New York, real estate brokers.
Tenant agrees to indemnify and hold Landlord harmless from any and all
costs and expenses, including without limitation, Landlord's legal fees and
expenses paid or incurred by Landlord in connection with any claim by a broker,
co-broker and/or finder in connection with this lease as a result of any action
by Tenant, its agents, or employees.
PLEASE INITIAL
FORTY-FOURTH: Provided that the Tenant shall not be in default in the
performance of its obligations hereunder (after giving effect to any applicable
grace period) either on (i) the date on which notice is given as hereinafter
provided, or (ii) March 31, 2001, the Tenant shall have the right to extend this
lease for a period of two years (that is, so that the termination date shall be
March 31, 2003) by giving the Landlord written notice of the Tenant's election
to do so not later than November 1, 2000. In the event the Tenant shall extend
the Lease as provided for in this Article for such additional two years, then
commencing April 1, 2001 the Tenant shall continue to pay to the Landlord (i)
annual fixed rent at the rate of $310,500.00 per annum and (ii) additional rent
pursuant to Article THIRTY-SEVENTH OR THIRTY-EIGHTH of the Lease, as the case
may be.
TENTH (a) (re-written) Electric current is to be supplied by the Landlord. The
Tenant covenants and agrees to purchase the Tenant's requirements therefor at
the premises from the Landlord or the Landlord's designated agent at 105% of (i)
the rates set forth in the rate schedule of Consolidated Edison Company of New
York, Inc. applicable to the building (or the conjunctional group in which the
building is included), plus (ii) a rate adjustment amount equal to all sales,
use and gross receipt taxes and other governmental charges or levies,
(9)
<PAGE>
Rider to Article Forty-Second
In the event Landlord is unable to deliver possession of the premises by April
1, then in that event the commencement date of this Lease shall be five (5) days
after Landlord shall have tendered exclusive possession of the demised premises
to Tenant.
Notwithstanding anything to the contrary contained in this Lease or any Rider to
this Lease, in the event the Landlord is unable to deliver exclusive possession
of the Premises to Tenant by May 1, 1999, then in that event Tenant shall have
the right to cancel this Lease by written notice (via facsimile or first class
mail) to Landlord's Associate Director of Commercial Real Estate, Donna M. Leto
no later than May 10, 1999 and upon receipt of said notice, Landlord shall
immediately return to Tenant all prepaid rent and security deposits and other
rent paid to Landlord pursuant to this Lease and upon such repayment to Tenant,
this Lease shall terminate and be of no further force and effect.
<PAGE>
generally applicable to the purchase and sale of electricity in New York City
(and without regard to whether the Landlord is exempt from paying or collecting
any such tax, charge or levy); PROVIDED, HOWEVER, that if such rate schedule
includes any adjustment for time-of-day for either demand or consumption, the
rate applicable to the Tenant's demand for and consumption of electricity, shall
be that specified for the peak period. The calculation of the rate shall include
the effect of all direct and indirect charges which affect the cost of the
electricity, including without limitation, consumption charges, demand charges
and fuel cost escalation charges. All amounts payable with respect to
electricity constitute additional rent under this lease.
PLEASE INITIAL
AW
(10)
<PAGE>
WORK SHEET
Attached to and made part of lease dated 11 March 1999 between THE
RECTOR, CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH ON THE CITY OF NEW-YORK,
Landlord.
and CYBER DIALOGUE, INC., Tenant.
Building 304 Hudson Street
-----------------------------
Space Part 4th Floor
--------------------------------
It is agreed that the following work is to be done by the Landlord at the
Landlord's expense:
1. No work to be done by Landlord. Deliver premises in "as is" condition.
It is stipulated and agreed that the foregoing constitutes the memorandum
of repairs or decorations to be done by the Landlord referred to in the attached
and all the work to be done by the Landlord in the demised premises, except as
otherwise expressly PROVIDED in the attached lease.
It is further stipulated and agreed that the aforesaid work shall be
commenced by the Landlord as soon as possible after the signing of the attached
lease and the payment by the Tenant of the first installment of rent and the
performance by the Tenant of any other obligations to be performed by the Tenant
at the time of the signing of the lease and shall be completed with reasonable
diligence, PROVIDED that the Landlord shall not be required to do the work on
days or hours other than usual working days and hours in the trades in
question.
Subject to the foregoing provisions the Landlord reserves the right, after
according reasonable consideration to the Tenant's wishes in the matter, to make
all decisions as to the time or times when, the order and style in which, said
work is to be done, and the labor or materials to be employed therefor. The work
shall be done, unless the Landlord otherwise directs, during the usual working
hours observed by the trades in question. It is stipulated and agreed that in
case the Landlord is prevented from commencing, prosecuting or completing said
work, due to the Landlord's inability to obtain or difficulty in obtaining the
labor or materials necessary therefor, or due to any governmental requirements
or regulations relating to the priority or national defense requirements, or due
to any other cause beyond the Landlord's control, the Landlord shall not be
liable to the Tenant for damages resulting therefrom, nor shall the Tenant be
entitled to any abatement or reduction of rent by reason thereof, nor shall the
same give rise to a claim in the Tenant's favor that such failure constitutes
actual, constructive, total or partial eviction from the demised premises.
THE RECTOR, CHURCH-WARDENS AND VESTRYMEN OF TRINITY
CHURCH IN THE CITY OF NEW-YORK, Landlord.
By:
-------------------------------------------------
Director of Leasing
CYBER DIALOGUE, INC.
----------------------------------------------------
Tenant
By: /s/ ANDREW WATT CFO
-------------------------------------------------
<PAGE>
Rules and Regulations
1. The Tenant shall not clean, nor require, permit or allow any window in
the demised premises to be cleaned from the outside in violation of Section 202
of the Labor Law or of the Rules of the Board of Standards and Appeals, or of
any other board or body having or asserted jurisdiction;
2. All machinery shall be kept in approved settings, sufficient to absorb
any shock and prevent any noise, vibration or annoyance in the building of which
the demised premises are a part and shall be provided with oil pans between such
machinery and the floor beneath it, sufficient to prevent the seepage of oil on
or into the floors;
3. No acid that in any way may injure any of the pipes or plumbing
equipment in the building shall be poured or allowed to drain into the pipes or
plumbing equipment thereof, but shall in the event that the building is provided
with an acid line be poured or allowed to drain only therein, or if there be no
acid line, shall be neutralized in a manner satisfactory to the Landlord. No
substance which may cause any objectionable odor shall be left in the demised
premises;
4. During the cold season, the windows shall be kept closed to maintain
the temperature of the demised premises and so prevent any freezing thereof, or
of any equipment or appliance therein;
5. All trucks, vehicles or conveyances used by the Tenant in the demised
premises shall have rubber-tired wheels;
6. The Tenant's employees, except clerical or executive help, shall, if
the Landlord so directs, at all times use only the combination passenger and
freight elevator, if any, in going into or coming out of the demised premises;
7. No sign or lettering shall be inscribed on any door, wall or window of
the demised premises which is visible from the street or the portion of the
building used in common by other tenants except such as may be approved in
writing by the Landlord or its agents or designee;
8. No additional locks or bolts shall be placed anywhere upon or within
the demised premises or any on rooms therein, unless duplicate keys thereto be
given to the Landlord and all such keys must, on the termination of this lease,
be surrendered to the Landlord;
9. The Landlord may exclude any persons visiting or attempting to visit
the premises between 7 P.M. and 8 A.M. and on Saturdays, Sundays and the
holidays recognized as such by the state or federal government unless such
person shall be equipped with a pass signed by the Tenant and unless each person
shall sign his name and the premises which he is to visit on the night report.
10. The sanitary and safety facilities used solely by the Tenant or by the
Tenant in common with other occupants of the building of which the demised
premises are a part, shall be used only for the purposes for which they were
constructed;
11. No signs, signals, devices, displays, sounds or advertisements visible
or audible from the street or from the halls and other parts of the building
used in common by the Tenant and other tenants shall be inscribed, erected or
maintained unless the kind, style, location and manner thereof shall have been
approved in writing by the Landlord and if any sign, signal, sound display or
advertising be erected, made or inscribed without such approval, the Landlord
may remove the same and charge the cost of so doing to the Tenant as additional
rent. Any sign or display which may be installed by the Tenant shall be kept in
good order and repair and in a neat and attractive condition. The Landlord
reserves the right to use the roof and outside walls surrounding the premises
for sign purposes. The Landlord may remove any sign or signs or displays in
order to paint the premises or any part of the building, or make any repairs,
alterations or improvements in or upon the premises or building, or any part
thereof, provided it causes the same to be removed and replaced at the
Landlord's expense, whenever the said painting, repairs, alterations or
improvements shall have been completed;
(13)
<PAGE>
(14)
12. No advertising which, in the opinion of the Landlord, tends to impair
the reputation of the building or its desirability as a loft or office building,
shall be published or caused to be published by the Tenant and, upon notice from
the Landlord, the Tenant shall refrain from or discontinue such advertising;
13. Awnings, antennae, serials, ventilating and air-conditioning apparatus
or other projections from the window or outside walls of the demised premises
shall not be erected or installed. All air-conditioning apparatus installed in
windows shall be so arranged that condensate does not drain on the outside of
the building wall or into the street;
14. The lights, skylights, entrances, passages, courts, elevators,
stairways, loading platforms, halls or any part of the building intended for the
use in common by the Tenant and the other occupants thereof shall not be
obstructed or encumbered (whether by means of storing of materials and skids or
otherwise). In the event of any such encumbrance or obstruction, the Landlord
may remove the material causing such encumbrance or obstruction and cause it to
be stored and charge the cost of doing so to the Tenant. No courtyard or yard
appurtenant to the premises or the building shall be used for parking vehicles
of any kind;
15. No part of the premises or the building shall be marked, painted,
drilled into, or in any way defaced. No laying of linoleum, or other similar
floor covering so that the same shall come in direct contact with the floor of
the demised premises shall be made; and if linoleum or other similar floor
covering is desired to be used, an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water.
Cements and other similar adhesive material shall not be used. Removal of any
alterations, decorations or improvements in compliance with paragraph Fourth of
this lease shall include the removal of all linoleum, lining and adhesive
material;
16. No part of the demised premises shall be used in a manner or for a
purpose that is substantially objectionable to the Landlord or to another
tenant, or which in the reasonable judgment of the Landlord, might cause
structural injury to the building;
17. The Tenant's employees shall not stand or loiter around the hallways,
stairways, elevators, front, roof or any other part of the building used in
common by the occupants thereof;
18. No load shall be placed upon any floor of the building exceeding the
floor load per square foot area which such floor was designed to carry, and all
loads shall be evenly distributed. The Landlord reserves the right to prescribe
the weight and position of all safes, machinery and other personal property in
the premises which must be placed so as so distribute their weight;
19. Nothing shall be thrown out of the windows or doors, or down the
passages or skylights of the building, nor shall any of them be covered,
obstructed or encumbered. No improper noises shall be made in the building, nor
shall birds or animals be brought therein;
20. Where freight elevators are provided by the building and are in
operation, all deliveries shall be made to or from the demised premises
exclusively by means of such elevators;
21. Any one doing janitorial work for the Tenant shall at all times be
subject to order and direction by the superintendent of the building, although
he shall not be the servant of either the superintendent or the Landlord;
22. No peddling, soliciting or canvassing shall be permitted in the
premises or by the Tenant's employees elsewhere in the building;
23. The Landlord may prescribe, and from time to time vary, the time for
any removals or deliveries from or into the premises, at any time, and such
prescriptions shall apply whether or not the material so removed or received is
the property of the Tenant. Removals or deliveries of safes, machinery and any
other heavy or bulky matter shall be done only upon written authorization of the
Landlord and only in such manner and by such persons as may be acceptable to the
Landlord, and the Landlord may require any further assurances or agreements or
indemnity from the Tenant and the movers to that effect. The Landlord reserves
the right to inspect all freight to be brought into the building and to exclude
from the building all freight which violates any of these Rules and Regulations
or the lease of which these Rules and Regulations are a part;
<PAGE>
24. The Tenant shall not permit its servants, employees, agents, visitors
or licensees, at any time to bring or keep upon the premises any inflammable,
combustible or explosive fluid, chemical or substance or cause or permit any
unusual or objectionable odors to be produced upon or emanate from the premises;
25. The passenger and service elevators, other than automatic self-service
elevators, if any, shall be operated only by employees of the Landlord, and must
not in any event be interfered with by the Tenant, his servants, employees,
agents, visitors or licensees. Manned freight elevators will be operated only
during such hours as the Landlord may from time to time determine;
26. The Tenant shall not use any other method of heating than that
supplied by the Landlord;
27. If the premises consist of basement space, or if any merchandise of
the Tenant is stored in the basement portion of the building, all such
merchandise shall, at the Tenant's own cost and expense, be placed entirely on
skids or platforms, which will raise such merchandise at least six inches from
the floor;
28. No drilling in floors, walls or ceilings shall be done except in
compliance with paragraph Fourth of this lease and no such drilling shall be
done during usual business hours unless authorized by the Landlord in writing;
29. No vending machine shall be installed or permitted to remain in the
premises unless the Landlord shall first have given its specific written
authorization for the installation of each such machine. The Tenant shall not
authorize or permit any vendor of sandwiches, coffee, or other foods, candies
or, beverages to enter the premises for the purpose of soliciting sales of such
wares to the Tenant's employees.
THE TERMS, COVENANTS AND CONDITIONS contained in the foregoing lease shall
be binding on, and shall enure to the benefit of the parties hereto, and their
respective legal representatives, successors, and assigns, but no assignment
made or purported to be made in violation of the provisions of this lease shall
vest in such assignee any right or title in or to this lease or in or to the
estate hereby created.
IN WITNESS WHEREOF, this agreement, consisting of fifteen (15) printed
pages numbered 1 to 15 and typewritten or printed rider pages bearing clauses
numbered EIGHTEENTH (re-written) and THIRTY-SEVENTH to TENTH(a) (re-written)
inclusive, has been signed and sealed by the parties hereto, the day and year
first above written.
THE RECTOR, CHURCH-WARDENS, AND VESTRYMEN OF
Attest: TRINITY CHURCH IN THE CITY OF NEW-YORK
As to Landlord:
By:
-----------------------------------------
- ------------------------ Director of Leasing
Executive Vice President
of Real Estate
--------------------------------------------
Finance Department
CYBER DIALOGUE, INC.
Attest: ---------------------------------------
As to Landlord: Tenant
/s/ ANDREW WATT
- ------------------------ ---------------------------------------(L.S)
/s/ ANDREW WATT CFO
---------------------------------------(L.S)
(15)
<PAGE>
- --------------------------------------------------------------------------------
[Map Omitted]
- --------------------------------------------------------------------------------
NOTES
---------------------
PLEASE INITIAL
=====================
=====================
EXHIBIT "A"
- --------------------------------------------------------------------------------
304
HUDSON STREET
- --------------------------------------------------------------------------------
4TH FLOOR PLAN
- --------------------------------------------------------------------------------
Date:
08/10/98 No Scale
- --------------------------------------------------------------------------------
[LOGO] TRINITY
REAL ESTATE
PARISH OF TRINITY CHURCH
74 TRINITY PLACE, NY NY 10006
(212) 602-0867
- --------------------------------------------------------------------------------
<PAGE>
AMENDMENT OF LEASE dated as of December 24, 1999 by and between THE
RECTOR, CHURCH-WARDENS AND VESTRYMEN OF TRINITY CHURCH IN THE CITY OF NEW YORK,
a religious corporation having its offices at 74 Trinity Place, New York, New
York 10006, as Landlord (the "Landlord"), and CYBER DIALOGUE, INC., a Delaware
corporation having its offices at 304 Hudson Street, New York, New York 10013,
as Tenant (the "Tenant").
W I T N E S S E T H:
WHEREAS, by lease dated as of March 11, 1999 (the "Lease"), the Landlord
leased to Tenant, and the Tenant leased from the Landlord a portion of the
fourth floor (the "4th Floor Premises") in the building known as 304 Hudson
Street, New York, New York (the "Building") for a term expiring March 31, 2001;
and
WHEREAS, the Tenant wishes to lease from the Landlord, and the Landlord
wishes to lease to the Tenant, a portion of the fifth floor in the Building (the
"5th Floor Premises"; the 4th Floor Premises and the 5th Floor Premises are
sometimes collectively referred to herein as the "Premises"), as indicated by
the cross-hatched area on Exhibit "B" annexed hereto, on the terms and
conditions set forth herein, and the parties desire to amend the Lease
accordingly; and
WHEREAS, capitalized terms used herein shall have the meaning ascribed to
them in the Lease, except as otherwise specifically set forth herein.
NOW, THEREFORE, in exchange for the mutual covenants and promises made
herein, the parties agree as follows:
1. Term: The Landlord hereby leases to the Tenant, and the Tenant hereby
leases from the Landlord, the 5th Floor Premises for a term commencing as of the
date set forth above and expiring on November 30, 2004 (or until such term shall
sooner cease and expire or be terminated as provided in the Lease).
2. Rent: The annual fixed rent for the 5th Floor Premises (the "5th Floor
Rent") shall be One Hundred Ninety Eight Thousand Two Hundred Sixty Nine and
50/100 Dollars ($198,269.50), payable in equal monthly installments of Sixteen
Thousand Five Hundred Twenty Two and 46/100 Dollars ($16,522.46). The Tenant
shall continue to pay annual fixed rent with respect to the 4th Floor Premises
as set forth in the Lease.
<PAGE>
3. Additional Security Deposit: The Tenant shall deposit with the Landlord
an additional security deposit of Seventy Thousand and 00/100 Dollars
($70,000.00), which shall be held in accordance with the provisions of Article
TWENTY-EIGHTH of the Lease. In lieu of delivering cash for the additional
security deposit, the Tenant may deliver to the Landlord an unconditional,
irrevocable and transferable letter of credit (such letter of credit or any
extension or replacement thereof, being hereinafter referred to as the "Letter
of Credit") issued for the account of the Landlord by a New York Clearing House
bank acceptable to the Landlord, in substance satisfactory to the Landlord,
which Letter of Credit is to be held by Landlord in accordance with the terms of
Article TWENTY-EIGHTH. The Letter of Credit shall permit the Landlord or its
duly authorized representative (1) to draw thereon up to the full amount of the
credit evidenced thereby upon presentation of the Letter of Credit and a sight
draft in the amount to be drawn and (2) to draw the full amount thereof to be
held as cash security pursuant to this Article if for any reason the Letter of
Credit is not renewed within sixty (60) days prior to its expiration date. The
Letter of Credit shall be fully transferable by the Landlord and its successors
and assigns without charge to the Landlord. In the event that the expiration
date of the Letter of Credit is prior to sixty (60) days after the Expiration
Date (or sixty days after any subsequent date through which the term of this
lease may be extended), if the Landlord receives notice from the bank or the
Tenant that the Letter of Credit is not being renewed or in the event that the
Tenant has not delivered a replacement cash security deposit or Letter of Credit
to the Landlord by thirty (30) days before the expiration of the Letter of
Credit, then the Landlord, acting through one of its duly authorized
representatives, shall be entitled to present the Letter of Credit for immediate
payment of the then potential amount available pursuant to the Letter of Credit,
and the amount of the Letter of Credit shall become the Deposit hereunder and
shall be held, applied and returned by the Landlord in accordance with the terms
provided by the lease for the holding, application and return of the Deposit. If
the Letter of Credit is not being renewed but the Tenant does deliver a
replacement Deposit or a similar Letter of Credit by thirty (30) days before
expiration of the Letter of Credit, then the Landlord shall not thereafter be
entitled to present the expiring Letter of Credit for payment of any amounts.
2
<PAGE>
4. Electricity: Article TENTH (a) (re-written) shall apply with respect to
the 5th Floor Premises, except that, with respect to the 5th Floor Premises, the
reference to "105%" therein shall be amended to be "108%".
5. Demolition: If the Landlord terminates the Lease with respect to the
5th Floor Premises in accordance with the provisions of Article ELEVENTH (b) of
the Lease, and, if on the date of termination (i) the Tenant is not in default
in the payment of rent, additional rent and other amounts due under the lease,
and (ii) the Tenant actually surrenders the premises on the date of termination,
then concurrently with the surrender of the premises the Landlord shall pay to
the Tenant the unamortized cost of any alterations and improvements in the 5th
Floor Premises made by the Tenant at the Tenant's expense (excluding moveable
furnishings and machinery and equipment), as calculated in accord with the
provisions of the following sentence. The expression "unamortized cost" with
reference to alterations and improvements in the 5th Floor Premises made by the
Tenant at the Tenant's expense shall mean a sum equal to the actual expenditures
of the Tenant in excess of the amounts paid by the Landlord pursuant to the
provisions of Paragraph 7 of this Lease Amendment (up to a maximum of $67,210)
for alterations and improvements in the 5th Floor Premises (excluding items of
moveable furnishings, machinery and equipment), less an amount equal to the
product obtained by multiplying such expenditures by a fraction, of which the
numerator shall be the number of months of the term of the lease with respect to
the 5th Floor Premises prior to the date of termination specified in the
Landlord's notice of termination and of which the denominator is 60. If the
Tenant shall make alterations and improvements in the 5th Floor Premises at its
expense with respect to which it may wish to have the benefit of reimbursement
pursuant to this paragraph, the Tenant shall furnish the Landlord within 60 days
following the completion of the alterations and improvements with a statement,
in writing, certified to be correct by an officer or partner of the Tenant
setting forth the amount of the Tenant's expenditures for the alterations and
improvements broken down in reasonable detail to show the nature of the various
alterations and improvements with respect to which such expenditures were made
and the amount of the Tenant's expenses for each such alteration and
improvement. The Tenant shall furnish the Landlord with receipted copies of
bills and such other additional information as the Landlord may reasonably
request.
3
<PAGE>
6. Tax and CPI Escalation: The Tenant shall continue to pay Real Estate
Tax and CPI Escalation for the 4th Floor Premises in accordance with the
provisions of Article THIRTY-SEVENTH of the Lease. The Tenant shall pay Real
Estate Tax Escalation and CPI Escalation for the 5th Floor Premises in
accordance with the provisions of Article THIRTY-SEVENTH of the Lease, except
that (i) "Tenant's Proportionate Share" with respect to the 5th Floor Premises
shall mean .0274; (ii) the "Base Index" with respect to the 5th Floor Premises
shall mean the Index as last published prior to December 1, 1999; (iii) the
"Computation Date" with respect to the 5th Floor Premises shall mean the first
day of December, 2000 and, in Subsequent Years, its anniversary date; and (iv)
in Article THIRTY-SEVENTH (c), Comparative Statements for the 5th Floor Premises
shall be rendered on or before January 1, 2001, and on or before that day in
each Subsequent Year.
7. Improvement Allowance: It is agreed that the Tenant will modify and
improve the 5th Floor Premises to prepare them for the Tenant's initial
occupancy (the "Initial Improvements"), which Initial Improvements shall be
performed in accordance with the terms of the Lease. The Landlord will reimburse
the Tenant for the Initial Improvements up to a maximum of $67,210 (the
"Improvement Allowance") over and above the items included in the Work Sheet
annexed to this Lease Amendment (and the Tenant will pay the cost of the Initial
Improvements in excess of such amount), all in accordance with, and subject to
the limitations set forth in subparagraphs (a) through (d) below:
(a) The Initial Improvements for which reimbursement may be sought are the
hard costs of constructing the Initial Improvements. Such hard costs shall not
include any telephone systems, computer systems, furniture and decorations, but
may include carpeting, wall coverings, window blinds and telephone and data
cabling.
(b) The Landlord shall reimburse the Tenant from time-to-time (but not
more often than monthly) for work done in connection with the installation and
construction of the Tenant's Initial Improvements, up to an aggregate maximum
reimbursement of $67,210, within thirty (30) days following receipt of the
following:
(i) a request for payment of the Improvement Allowance signed by an
officer of Tenant, specifying the work for which reimbursement is
being sought, which shall be accompanied by a certificate signed
by an officer of the Tenant
4
<PAGE>
certifying that the payment requested in the invoice has been paid
in full and that the Initial Improvements specified therein have
been completed substantially in conformance with the plans therefor
which were approved by the Landlord and that such work has been
completed in a good and workmanlike manner;
(ii) copies of invoices from the vendors, supplier, or contractor
evidencing the amount for which payment or reimbursement is sought,
such invoices, if submitted for reimbursement, to be marked "paid in
full" by such vendor, supplier or contractor (or, in lieu thereof
the Landlord shall be furnished other documentation satisfactory to
the Landlord evidencing payment in full);
(iii) a certificate from the Tenant's architect stating that (x) such
portion of the Initial Improvements for which reimbursement is being
sought has been fully completed substantially in accordance with the
final plans as approved by the Landlord, and (y) that such work has
been completed in a good and workmanlike condition; and
(iv) lien waivers from each contractor(s) or subcontractor(s) to the
extent of the amount to be paid to such parties, which waivers may
contain a condition that the effectiveness of such waivers shall be
subject to the payment to the applicable contractor(s) or
subcontractor(s) of the amount of the invoice accompanying such
waiver. The Landlord shall not be obligated to reimburse the Tenant
for any invoice which is not accompanied by such a waiver.
(v) Notwithstanding the foregoing, the Landlord shall retain an amount
equal to ten percent (10%) of the Improvement Allowance until the
Tenant has submitted to the Landlord final permits required in
connection with the construction of the Initial Improvements by any
governmental department or agency having jurisdiction thereof,
together with a final, unconditional sign-off from the New York City
Department of Buildings for such work.
(c) It is understood and agreed that the Landlord shall have no
responsibility for the performance of the contractor installing the Initial
Improvements (including matters of quality or timeliness), and in the event that
for any reason the Initial Improvements are not completed in
5
<PAGE>
a timely fashion and/or there is any delay in the date on which the premises are
ready for occupancy by the Tenant for the purposes of conducting business, this
lease shall nevertheless continue in full force and effect, and, except in the
circumstances set forth below and to the extent set forth below, the Tenant
shall have no right, remedy or claim (including any claim for actual, punitive
or consequential damages) against the Landlord.
(d) The Landlord's maximum liability under this Article shall not exceed
$67,210.00. If the actual cost of the Initial Improvements shall exceed the
amount of the Improvement Allowance, the entire amount of the excess cost shall
be paid solely by the Tenant and the Landlord shall be under no obligation to
pay such excess. No portion of the Improvement Allowance may be applied to
alterations performed in the 4th Floor Premises.
(e) Within thirty (30) days after completion of the Initial Improvements,
the Tenant shall deliver to the Landlord general releases and waivers of lien
from all contractors, subcontractors and materialmen involved in the performance
of the Initial Improvements and the materials furnished in connection therewith
(unless the same were previously furnished pursuant to subparagraph (b)(iv)
above), and a certificate from the Tenant's independent licensed architect
certifying that, in its opinion, the Initial Improvements have been performed in
a good and workmanlike manner and substantially completed in accordance with the
final plans, as approved by the Landlord.
8. Construction of Stairway: Subject to the Landlord's approval of
structural and engineering drawings, as well as the Tenant's compliance with all
applicable provisions of the Lease, the Tenant may, at it's own expense,
construct an internal stairway connecting the 5th Floor Premises with the 4th
Floor Premises. The Tenant shall, at it's expense, remove the stairway and
restore all damage resulting from the removal upon the earlier of the expiration
or sooner termination of the term of the Lease for the 4th Floor Premises or the
5th Floor Premises.
9. Work: The Landlord shall not be obligated to perform any work in the
5th Floor Premises, except as set forth in Exhibit "C" annexed hereto, which
work shall be completed within 90 days following the commencement date of the
lease for the 5th Floor Premises. The terms of the Lease shall govern with
respect to the performance of such work by the Landlord.
10. Cleaning: Provided the Tenant shall keep the 5th Floor Premises in
order, the Landlord, at the Landlord's expense, shall cause the 5th Floor
Premises, excluding any portions
6
<PAGE>
thereof used for the storage, preparation, service or consumption of food or
beverages, to be cleaned Monday through Friday (except for those days designated
as legal holidays by the Federal or State government or by the unions now or
hereafter representing the Landlord's building personnel) substantially in
accordance with the specifications set forth as Exhibit "D" annexed hereto. The
Tenant, at the Tenant's sole cost and expense, shall cause all portions of the
premises used for the storage, preparation, service or consumption of food or
beverages to be cleaned daily in a manner satisfactory to the Landlord, and to
be exterminated against infestation by vermin, rodents or roaches regularly and,
in addition, whenever there shall be evidence of any infestation. Any such
extermination shall be done at the Tenant's sole cost and expense and by
contractors reasonably approved by the Landlord. The Landlord reserves the
right, on thirty days' notice to the Tenant, to require the Tenant to receive
cleaning services for the 4th Floor Premises from the Landlord's contractor, at
a cost to the Tenant not to exceed the Tenant's cost in contracting
independently for such cleaning services for the 4th Floor Premises. If the
Tenant shall desire any additional cleaning services in addition to the services
PROVIDED by the Landlord (as set forth on Exhibit "D"), the Tenant shall, at its
sole cost, employ such cleaning contractor providing services to the building on
behalf of the Landlord or such other cleaning contractor as shall be approved by
the Landlord. The Tenant shall, at its sole cost and expense, comply with all
present and future laws, ordinances, regulations and requirements of the City,
State or Federal Government or any agency having jurisdiction over the building,
or any rules which the Landlord may impose, with respect to the recycling or
sorting of refuse and rubbish. The Landlord reserves the right to refuse to
collect or accept from the Tenant any refuse or rubbish which is not separated
and sorted as required and to require the Tenant to arrange for such collection,
at the Tenant's sole cost and expense, using a contractor reasonably
satisfactory to the Landlord. The Tenant shall indemnify the Landlord from all
liability arising from the Tenant's failure to comply with the provisions of
this Paragraph. The Tenant shall pay to the Landlord the cost of removal of any
of the Tenant's refuse and rubbish from the building which exceeds normal office
requirements.
11. No Broker: The Tenant represents that it dealt with no broker in
connection with the lease of the 5th Floor Premises or the transaction
contemplated hereby. Tenant agrees to indemnify and hold the Landlord harmless
from and against all demands, liabilities, losses, causes
7
<PAGE>
of action, damages, costs and expenses (including, without limitation,
attorneys' fees and disbursements) suffered or incurred in connection with any
claims for a brokerage commission, finder's fee, consultation fees or other
compensation arising out of any conversations or negotiations had by the Tenant
with any broker or other party.
12. Assignment/Subletting: Paragraph (p) of Article EIGHTEENTH
(re-written) of the Lease is deleted and the following inserted in lieu thereof:
"(p) Notwithstanding anything to the contrary herein, in the event
that the Tenant intends to sublet not more than 40% of the premises
(measured in the area), the Landlord will not seek to recapture such
premises and will not unreasonably withhold or delay its consent to
any proposed sublease, PROVIDED that in no event shall the proposed
subtenant then be a tenant, subtenant or assignee of any space in
the building or any other building then owned, directly or
indirectly, by the Landlord, nor shall the proposed subtenant be a
person or entity with whom the Landlord is then, or within the
immediately preceding six months has been, negotiating to lease
space in the building or any other building then owned, directly or
indirectly, by the Landlord. The provisions of paragraph (o) of this
Article EIGHTEENTH (re-written) shall apply to any sublease entered
into pursuant to this paragraph (p)."
13. Option to Expand: (a) So long as the Tenant (i) is not in default in
the performance of any of the terms, covenants or conditions of this Lease
beyond the expiration of applicable notice and cure periods, and (ii) is then
occupying the entire 5th Floor Premises, the Tenant shall have an option to
lease additional space on the fifth floor of the Building, as indicated on
Exhibit "E" annexed hereto (the "Additional 5th Floor Premises") on the terms
set forth herein. The Tenant shall deliver written notice to the Landlord of its
election to lease the Additional 5th Floor Premises on or before March 31, 2000,
time being of the essence as to the delivery of such notice. If the Tenant fails
to deliver such notice to the Landlord on or before such date, it shall be
deemed to have waived the right to lease the Additional 5th Floor Premises and
the Landlord may thereafter lease such space to any third-party free of the
Tenant's rights. Upon receipt of notice of the Tenant's election to lease the
Additional 5th Floor Premises, the Landlord shall promptly prepare an amendment
to this lease reflecting the addition of such space upon the terms set forth
herein and the Tenant shall then have a period of fifteen (15) days after
Tenant's receipt of such lease amendment in which to execute and return such
lease amendment to the Landlord. If the Tenant does not execute and return such
lease amendment to the Landlord within 15 days, the Landlord may thereafter
lease the Additional 5th Floor Premises to a third-party and the Landlord shall
have no further obligation under this paragraph (a).
8
<PAGE>
(b) If the Tenant elects to lease the Additional 5th Floor Premises, then
as of June 1, 2000, (1) the Additional 5th Floor Premises shall be added to and
be deemed to be part of the premises upon all of the terms and conditions of
this lease, except as set forth in this paragraph 13; (2) the Additional 5th
Floor Premises shall be delivered in its then "as is" condition and the Landlord
shall not be obligated to perform any work therein; (3) the annual fixed rent
shall be increased by $198,269.50; (4) there shall be no Improvement Allowance
or free rent for the Additional 5th Floor Premises; (5) Tenant's Proportionate
Share shall be increased to reflect the addition of the Additional 5th Floor
Premises; (6) Article TENTH (a) (re-written) shall apply with respect to the
Additional 5th Floor Premises, except that the reference to "105%" shall be
amended to be "108%", and (7) the security deposit pursuant to Article
TWENTY-EIGHTH shall be increased by $16,522.00.
14. Existing Lease: Except as set modified herein, the terms and
conditions of the Lease are hereby ratified and affirmed and shall remain in
full force and effect and the Tenant covenants and agrees to keep and perform
the obligations of the Lease as hereby modified.
IN WITNESS WHEREOF, the parties have signed this Lease Amendment as of the
date set forth above.
THE RECTOR, CHURCH-WARDENS AND
VESTRYMEN OF TRINITY CHURCH IN THE
CITY OF NEW YORK
By:
---------------------------------------
Director of Leasing
By:
---------------------------------------
Executive Vice President of Real Estate
By:
---------------------------------------
Chief Financial Officer
CYBER DIALOGUE, INC.
By: /s/ E. R. Melcher
---------------------------------------
9
<PAGE>
EXHIBIT B
5TH FLOOR PREMISES
See Attached
i
<PAGE>
[FLOOR MAP OMITTED]
--------------------------------------------
NOTES
-------------------
PLEASE INITIAL
==============
==============
EXHIBIT "B"
--------------------------------------------
304
HUDSON
STREET
--------------------------------------------
5TH FLOOR PLAN
--------------------------------------------
Date:
10/05/99 No Scale
--------------------------------------------
[LOGO] TRINITY
REAL ESTATE
PARISH OF TRINITY CHURCH
74 TRINITY PLACE, NY, NY 10006
(212) 602-0867
--------------------------------------------
<PAGE>
EXHIBIT C
WORK LETTER
It is agreed that, except as otherwise indicated, the following work is to
be done to the 5th Floor Premises by the Landlord, at the Landlord's expense:
1. The Landlord shall deliver an ACP-5 certificate relative to asbestos
compliance within the 5th Floor Premises.
2. Landlord shall provide a total connected load of up to twelve watts per
usable square foot of 3 phase 4 wire electric power with full neutrals
(inclusive of the HVAC system). The disconnect switch and distribution of
electricity within the premises shall be at the Tenant's expense. If the
Tenant requires additional electrical capacity, it may bring in additional
power to the premises, at it's own cost and expense and otherwise in
accordance with the provisions of the Lease, PROVIDED that, in the
Landlord's judgment, such additional power shall not create a dangerous or
hazardous condition or interfere with or disturb other tenants or
occupants in the building.
3. The Landlord shall deliver the 5th Floor Premises broom clean. The
Landlord will repair any major defects in the floor of the 5th Floor
Premises which would prevent the floor from being carpeted.
4. The Landlord shall deliver the sprinkler system and perimeter radiation in
the 5th Floor Premises (including the "ex-bathroom" portion of the
premises in the 5th Floor Premises) in good working order.
5. The Landlord shall install air cooled air conditioning equipment in a
mechanical equipment room on the 5th floor, which shall have a louvered
window, the tonnage and location of which shall be agreed upon by the
engineers for the Landlord and the Tenant. The Tenant shall be responsible
for the cost of the distribution of the air conditioning within the 5th
Floor Premises.
6. The Landlord will demise the 5th Floor Premises in accordance with the
plans delivered to the Tenant's architects.
7. Upon the commencement of the term, the Landlord will clean and repair,
where necessary, all windows within the 5th Floor premises.
8. Demolish the existing bathroom within the 5th Floor Premises stubbing off
the water and water lines.
9. Carpet over cement slab.
10. The Landlord has a mini Class E system and will provide points of
connection for the Tenant.
i
<PAGE>
EXHIBIT D
CLEANING SPECIFICATIONS
A. TENANT SUITES
a. Nightly
a) Carpeted floors: All carpeted floors will be swept nightly and
vacuumed weekly using a high quality vacuum, moving all light
furniture such as chairs and stands. All furniture will be
replaced to its original position. Vacuum under all desks and
large furniture where possible.
b) Uncarpeted floors: All hard-surfaced floors will be
dust-mopped nightly, using a treated dust mop, moving all
light furniture. All furniture will be replaced to its
original position. Dust-mop under all desks and large
furniture where possible.
c) Dusting and cleaning: Wipe all furniture tops, legs, rungs and
sides within hands' reach; wipe and disinfect telephones. Wipe
all horizontal surfaces within reach, including window ledges,
baseboards, ledges, molding and sills on glass and partitions.
No feather dusters will be allowed. Papers or other personal
items (i.e., pictures, keys, wallets, etc.) left on desk tops
will not be moved.
d) Furniture and Accessories: Dust, wipe clean and remove finger
marks, if necessary, from all furniture, file cabinets,
mapboards, and telephones using treated cloth.
e) Trash Removal: Collect and remove wastepaper, waste material
and cardboard boxes to designated area in or adjacent to the
premises.
f) Miscellaneous:
i. Scour, wash clean and disinfect all water fountains and
coolers, emptying waste water as needed.
ii. Once entering a suite, the door is to be locked.
iii. Upon completion of all nightly chores, all lights shall
be turned off, windows closed, doors locked and offices
left in a neat and orderly condition.
b. Quarterly
a) High Dusting: Perform all high dusting throughout on a
quarterly basis unless otherwise specified, including the
following:
i. Vacuum and dust all pictures, frames, charts, graphs and
similar wall hangings not reached in nightly cleaning.
ii. Dust all overhead pipes, sprinklers, ventilating and
air-conditioning louvers and adjacent ceiling areas,
ducts and other equipment items not reached in nightly
cleaning.
iii. Dust all venetian blinds and window frames.
iv. Wash all furniture glass.
ii
<PAGE>
B. RESTROOMS (Including Tenant Suites)
1) All lavatories shall be thoroughly cleaned with an approved
disinfectant.
2) Air fresheners shall not be used to cover-up unpleasant odors.
Should there be an unpleasant odor, proper disinfecting procedures
shall be used to abate the odors. An odorless disinfectant shall be
used.
3) Remove all wastepaper and refuse, including sanitary napkins, to a
designated area in the building and dispose of same. All wastepaper
and sanitary napkin receptacles are to be thoroughly cleaned and
washed, and new liners installed; liners to be installed so as to
ensure maximum usage of receptacles.
4) Fill toilet tissue holders, seat cover containers, soap dispensers,
towel dispensers, and sanitary napkin dispensers.
5) All tasks detailed above are to be done on a nightly basis.
1. Nightly Cleaning
a) Walls and Metal Partitions: Damp wipe all metal toilet
partitions and tiled walls, removing graffiti with care taken
not to damage surfaces. All surfaces are to be wiped dry so
that all wipe marks are removed and surface has a uniformly
bright appearance. Dust the top edges of all partitions,
ledges and mirror tops.
b) Floors and Tile: Floors will be swept clean and wet-mopped
with a germicidal detergent approved by the Landlord using
spray tank method. The floors will then be mopped dry and all
watermarks and stains wiped from wall and metal partition
bases, paying particular attention to corners. Scuff marks and
footmarks are to be removed throughout.
c) Metal Fixtures: Wash and polish all mirrors, powder shelves,
bright work (including flushometers and exposes piping below
wash basins and behind toilet fixtures), towel dispensers,
receptacles and any other metal accessories.
d) Ceramic Fixtures: Scour, wash and disinfect all basins,
including faucet handles, bowls, urinals and tile walls near
urinals with approved germicidal detergent solution. Wash both
sides of all toilet seats with approved germicidal solution
and wipe dry. Toilet seats are to be left in an upright
position.
e) Powder Rooms: If applicable, should be thoroughly cleaned and
floors should be washed or vacuumed, as applicable.
2. Weekly
a) Floor Drains: Clean, disinfect, and fill with water to avoid
the escape of sewer gases. Use of acids is prohibited.
3. Monthly
a) Walls and Metal Partitions and Washable Ceiling: Wash with
water and germicidal solution. Wipe dry and polish to a
uniformly bright, clean condition.
b) High Dusting and Cleaning: Perform all high dusting, inclusive
of grilles and diffusers, vacuum and wash all ceiling
diffusers.
iii
<PAGE>
c) Floors: All floors will be machine-scrubbed, using a
germicidal solution, detergent and water. After scrubbing,
floors will be rinsed with clean water and dried. All water
marks will be removed from walls, partitions, and fixtures.
iv
<PAGE>
EXHIBIT E
ADDITIONAL FIFTH FLOOR PREMISES
v
<PAGE>
[FLOOR MAP OMITTED]
--------------------------------------------
NOTES
--------------------
PLEASE INITIAL
==============
==============
EXHIBIT "E"
--------------------------------------------
304
HUDSON
STREET
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5TH FLOOR PLAN
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Date:
12/10/99 No Scale
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[LOGO] TRINITY
REAL ESTATE
PARISH OF TRINITY CHURCH
74 TRINITY PLACE, NY, NY 10006
(212) 602-0867
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Exhibit 10.9
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") is made and entered into
on and as of August 30, 1999 (the "Effective Date"), by and between CYBER
DIALOGUE INC., a Delaware corporation, ("Dialogue"); and AMFM INTERACTIVE INC..
a Delaware corporation ("AMFMi") (individually, a "Party" and collectively, the
"Parties").
RECITALS
WHEREAS the Parties desire to set forth herein the terms and
conditions pursuant to which AMFMi will retain Dialogue to plan, develop,
manage, service, and/or maintain the Customer Management Initiative (as defined
below);
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall have the meanings prescribed as follows:
1.1 "Affiliate" shall mean, with respect to a party, any Person that,
directly or indirectly, Controls, or is Controlled by, or is under
common Control with, such party.
1.2 "AMFMi Intellectual Property" shall mean the Customer Data, Customer
Database, and the AMFMi APIs.
1.3 "AMFMi APIs" shall mean the application programming interfaces
developed or licensed by AMFMi in order to allow Dialogue to access
and gather Customer Data from Websites.
1.4 "Associated Entities" shall mean, with respect to an entity, any
Person that, directly or indirectly. Controls, or is Controlled by,
or is under common Control with, such entity.
1.5 "Claim" shall mean any claim, action, suit, proceeding, or
litigation and any loss, deficiency, damages, liabilities, costs and
expenses, including without limitation, reasonable attorneys' fees
and all related costs and expenses, to be paid to a third party or
otherwise incurred in connection with the defense of any claim,
action, suit, proceeding, or litigation.
1.6 "Confidential Information" shall mean written or oral information
about the disclosing Party's business or activities that if written
is marked or designated by such Party as "Confidential Information,"
"Proprietary," or other words of similar import, or, whether written
or oral, is by the circumstances in which it was dis-
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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closed understood to be Confidential information. Confidential
Information shall include, but not be limited to, the terms of this
Agreement, the Dialogue Intellectual Property, the AMFMi
Intellectual Property, and all business (including marketing and
business plans), financial and technical information of a Party.
Information shall not be considered Confidential Information of a
Party if it can be shown that such information: (i) is known to the
recipient on the date of disclosure directly or indirectly from a
source other than the providing Party or other than a source having
an obligation of confidentiality to the providing Party; (ii)
thereafter becomes known (independently of disclosure by the
providing Party) to the recipient directly or indirectly from a
source other than one having an obligation of confidentiality to the
providing Party; (iii) becomes publicly known or otherwise ceases to
be secret or confidential, except through a breach of this Agreement
by the recipient; or (iv) was independently developed by the
recipient without use of or reference to the providing Party's
Confidential Information, as shown by evidence in the recipient's
possession.
1.7 "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a Person, whether by contract or through the ownership
of voting securities, including, without limitation, the ownership
of more than fifty percent (50%) of the equity, partnership or
similar interest in such Person.
1.8 "Customer Data" shall mean raw data or other information regarding
Web Site Visitors that is collected either through Web Site Visitor
input or through tracking Web Site Visitor activity or otherwise; as
well as data derived from the raw data or other information.
1.9 "Customer Database" shall mean a database containing Customer Data,
as well as the Data Model and infrastructure for the database.
1.10 "Customer Management Initiative" shall mean the methods, services,
marketing-programs and Customized Applications, whether existing now
or developed in the future, for (i) gathering, storing and managing
Customer Data; and (ii) using the Customer Database to conduct
market research and data analysis, and to create marketing programs
for Web Site Visitors, including loyalty and/or rewards programs.
For purposes of clarity, the foregoing activities shall not include
in-bound e-mail management or any call center management activities.
1.11 "Customized Applications" shall mean the methods, programs and
technologies, created by Dialogue for AMFMi pursuant to this
Agreement, expressly excluding ICARUS.
1.12 "Data Model" shall mean a graphical representation of the
architecture of the database of Customer Data, together with the
file field definitions and related file associations.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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1.13 "Dialogue Technology" shall mean the Dialogue technology known as
ICARUS, including without limitation all new versions, releases, and
updates thereto, that is owned by Dialogue, and that is used for the
Customer Management Initiative.
1.14 "Dialogue Intellectual Property" shall mean all Intellectual
Property (i) owned by Dialogue as of the date hereof; or (ii)
developed by or on behalf of Dialogue for use in connection with the
Customer Management Initiative, including without limitation the
Dialogue Technology, but excluding AMFMi Intellectual Property.
1.15 "Intellectual Property" shall mean all trademarks, service marks,
trade names, Internet domain names, designs, logos, slogans and
general intangibles of like nature, together with goodwill,
registrations and applications relating to the foregoing; registered
and unregistered patents; copyrights (including registrations and
applications); computer programs, including any and all software
implementation of algorithms, applications, tools, models and
methodologies whether in source code or object code, databases and
computations, including any and all data and collections of data,
all documentation, including user manuals and training materials,
relating to any of the foregoing; and Confidential Information,
technology, know-how, inventions, processes, formulae, algorithms,
models, trade secrets and methodologies.
1.16 "Mirror site" means an Internet site that (i) contains the exact
form and content of a site, (ii) is located at a geographic location
distinct from a site and (iii) is created for the purpose of
improving the performance of and accessibility to a site.
1.17 "Owned Entities" shall mean, with respect to an entity, any Person
in which such entity directly or indirectly possesses an ownership
interest of 10% or more of the total ownership interest.
1.18 "Person" shall mean any individual, sole proprietorship,
partnership. joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.19 "Web Sites" shall mean those Internet sites owned or managed by
AMFMi, and any Mirror Sites.
1.20 "Web Site Visitors" shall mean individuals that access or visit the
Web Sites.
2. TECHNOLOGY DEVELOPMENT.
2.1 Technology Plan. Dialogue shall design, develop and test the
Customer Database and any modifications, enhancements or
improvements to the Dialogue Technology necessary to implement the
Customer Management Initiative. AMFMi and Dialogue shall cooperate
to establish requirements, a project plan and interim
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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milestones. AMFMi and Dialogue shall also cooperate to ensure that
the Customer Management Initiative is structured and operated in a
manner consistent with federal statutes and regulation related to
privacy.
3. RESPONSIBILITIES OF THE PARTIES
3.1 Overview of Responsibilities - Dialogue. Dialogue shall be
responsible for (a) creating the Customer Database and for
integrating the Customer Data into that Customer Database, and (b)
implementing the Customer Management Initiative, including procuring
all necessary equipment, software and connectivity and performing
all aspects of the Initiative not explicitly designated for AMFMi.
Dialogue shall have no obligation or exclusive right to provide
AMFMi with Customer Management Initiative to the extent it is to be
used to benefit a party that is not an Affiliate of AMFMi.
3.2 Overview of Responsibilities - AMFMi. AMFMi shall be responsible for
(a) providing Dialogue with the AMFMi APIs to allow Dialogue to
integrate the Dialogue Technology and other aspect of the Customer
Management Initiative with AMFMi data and technology, and (b) making
the Customer Data and AMFMi intellectual Property available to
Dialogue.
3.3 Marketing Campaigns. Dialogue shall be responsible for helping to
develop strategic plans for all marketing campaigns developed as
part of the Customer Management Initiative ("Marketing Campaigns"),
and for the execution, management and measurement of such Marketing
Campaigns. Notwithstanding the foregoing, AMFMi shall be responsible
for all creative aspects of the Marketing Campaigns, including all
production and design elements. The parties shall provide each other
with reasonable assistance as requested in connection with the
Marketing Campaigns. AMFMi shall have final authority and control of
Marketing Campaigns.
3.4 Maintenance and Back-up. Dialogue shall develop and implement (i) a
monitoring plan; (ii) a disaster recovery plan (including off-site
and on-site storage and hot-swap back-up); and (iii) upgrade plans
for all aspects of the Customer Management Initiative (including for
equipment, software. connectivity, and content).
3.5 Support. Dialogue shall provide AMFMi with customer support to
address questions regarding the Customer Management Initiative. Such
support shall be provided during reasonable business hours and in a
manner to be determined by the parties. Dialogue shall have no
obligation to provide any direct support for AMFMi customers or Web
Site Visitors.
3.6 Third Parties. Dialogue may retain third parties to assist in any or
all of its activities performed in connection with this Agreement,
provided that Dialogue shall be responsible for the activities of
such third parties, and provided further that such
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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third parties must agree in writing to abide by the confidentiality
provisions contained in Section 11 of this Agreement.
4. EXCLUSIVITY
4.1 Exclusive Contract. During the Term, Dialogue shall be the exclusive
service provider to AMFMi for using the Customer Database to conduct
market research and data analysis, and executing and managing
marketing programs for Web Site Visitors, including loyalty and/or
rewards programs.
4.2 Covenant Not to Compete. During the term of the services provided
by Dialogue hereunder and for a period of one year following the
termination of such services, (the "Noncompete Term"), neither
Dialogue, nor any of its subsidiaries, nor any entities in which
Dialogue has an ownership interest equal to or greater than 20% of
the total ownership, (collectively the "Dialogue Entities"), shall
directly or indirectly, perform strategic planning services, interim
management services, and data analysis services, or creation of
marketing programs for Web Site Visitors, including loyalty and/or
rewards programs, (collectively the "Excluded Services") for the
following named competitors and their Associated Entities: *****.
Additionally, during the Noncompete Term, the Dialogue Entities
shall not perform Excluded Services for the following named
competitors and their Owned Entities: *****. Notwithstanding
anything in this Section 4.2, Dialogue Entities may (i) perform
Excluded Services during the Noncompete Term for the entities listed
in Schedule 4, (ii) continue to provide marketing data to *****
provided that such data is similar in type and scope to that which
Dialogue is currently providing *****, and (iii) perform Excluded
Services for the ***** and its Associated Entities (collectively the
"***** Entities"), except that Dialogue may not provide Excluded
Services during the Noncompete Term for any of the ***** Entities
that engages in any Internet strategy, inclusive of radio, directed
at a local or a regional market rather than a national market.
5. LICENSE GRANT
5.1 AMFMi License. Pursuant to the terms and conditions of this
Agreement, Dialogue grants to AMFMi the non-exclusive right, during
the Term, to use the Dialogue Intellectual Property solely to the
extent required by AMFMi to meet its Customer Management Initiative
responsibilities. AMFMi may not sublicense or transfer any of its
license rights. This license grant extends to all territories in
which Dialogue holds the applicable Intellectual Property Right.
5.2 Dialogue License. Pursuant to the terms and conditions of this
Agreement, AMFMi grants to Dialogue a non-exclusive, royalty-free
right, during the Term, to
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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use AMFMi intellectual Property solely to the extent required by
Dialogue to meet its Customer Management Initiative responsibilities
pursuant to Section 3.1. Dialogue may not sublicense or transfer any
of its license rights. This license grant extends to all territories
in which AMFMi holds the applicable Intellectual Property Rights.
5.3 Source Code Escrow. Dialogue shall deposit with a third party source
code escrow vendor to be mutually selected by the parties: (a) one
copy of the source code for the Dialogue Technology; and (b)
existing documentation regarding the use of the Dialogue Technology
(collectively, the "Source Code Deposit"). Dialogue shall update the
Source Code Deposit during the Term such that the Source Code
Deposit will always contain the then current version of the Dialogue
Technology.
5.3.1 The parties and the escrow vendor shall enter into an escrow
agreement regarding the Source Code deposit, which shall
provide, among other things, (a) that the Source Code Deposit
may be released to AMFMi only upon (i) the bankruptcy of
Dialogue pursuant to Section 9.3 hereof, or (ii) the
termination of the Agreement due to material breach by
Dialogue; (b) that Dialogue may challenge the release of the
Source Code Deposit if it believes that the condition for
release has not been met; and (c) that AMFM1 shall bear all
escrow costs.
5.3.2 In the event that the Source Code Deposit is released, AMFMi
acknowledges that its right to the Source Code Deposit shall
be a limited license to use the Source Code Deposit solely as
required for it to enjoy the benefits of the license granted
hereunder. AMFMi shall have no right to sublicense or transfer
the Source Code Deposit, and shall have no ownership rights
therein.
5.3.2 Bankruptcy Provisions. The Parties intend that AMFMi shall
have all rights afforded to licensees under Section 365(n) of
the U.S. Bankruptcy Code (and any successor thereto) in
connection with any bankruptcy of Dialogue.
6. DIALOGUE ATTRIBUTION
6.1 Use of Dialogue Name. AMFMi shall display the phrase "CyberDialogue
Enabled" on all Web Site pages where Customer Data is input by the
Web Site Visitor. Such phrase shall be in a font no smaller than
eight points.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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7. INTELLECTUAL PROPERTY.
7.1 Ownership.
7.1.1 AMFMi Intellecutal Property. As between Dialogue and AMFMi,
Dialogue acknowledges and agrees that all AMFMi Intellectual
Property shall be the sole property of AMFMi, and that
Dialogue shall not gain any right, title, or interest in such
AMFMi Intellectual Property except as expressly provided under
this Agreement.
7.1.2 Dialogue Intellectual Property. As between Dialogue and AMFMi,
AMFMi acknowledges and agrees that all Dialogue Intellectual
Property shall be the sole property of Dialogue, and that
AMFMi shall not gain any right, title, or interest in such
Dialogue Intellectual Property except as expressly provided
under this Agreement. Notwithstanding the foregoing, Dialogue
acknowledges that Customized Applications, both in source code
and object code format, shall be the sole property of AMFMi,
provided that Dialogue retains any know-how it develops while
creating the Customized Applications and may in its discretion
develop code which performs the same or similar functionality
so long as it does not copy or refer to the Customized
Applications during such development. Breach of this provision
by Dialogue shall be considered a material breach of this
Agreement.
7.1.3 Cooperation. Each Party agrees that it shall take all actions
reasonably requested by the other Party to fully vest or
perfect in the other Party all right, title, and interest in
and to their respective Intellectual Property. Each Party
shall promptly enter into appropriate agreements with its
employees, contractors, and agents having access to the other
Party's property pursuant to which: (i) each such person
effectively releases and relinquishes any and all right,
title, and interest which he/she/it may have in the other
Party's property or any portion thereof; and (ii) each such
person agrees to cooperate with the other Party in the
protection of any of such Party's rights.
8. FEES.
8.1 Fees. In consideration of the services performed by Dialogue
pursuant to this Agreement, AMFMi shall pay Dialogue the applicable
fees as set forth in Schedule 1. Dialogue shall provide AMFMi with
an invoice for such fees, which shall be payable within 30 days of
receipt.
8.2 Audit Right. AMFMi shall have the right to verify, upon not less
than thirty (30) days prior written notice to Dialogue all fees and
charges made by Dialogue pursuant to this Agreement, through
inspection of Dialogue's pertinent books and records. AMFMi may, if
it chooses, retain a third party auditor, approved by Dia-
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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logue (such approval not to be unreasonably withheld) to conduct
such audit ("Auditor"), provided that such Auditor must agree to
sign the standard form of non-disclosure agreement for requiring
that Dialogue's books and records shall be held in strict
confidence, except as may be necessary to report to AMFMi concerning
the accuracy of the payment amount. Dialogue shall keep its records
and books relating to the payment amount for a period of five (5)
years. AMFMi shall bear the cost and expense of any such audit;
provided, however, that if such audit reveals an overpayment by
AMFMi of three percent (3%) or more, Dialogue shall bear the cost of
such audit and shall pay interest at the rate of ten percent (10%)
per annum (or, if less, the highest lawful rate) on the amount of
such overpayment.
9. TERM AND TERMINATION.
9.1 Term. This Agreement shall commence upon the Effective Date and
continue for sixteen (16) months (the "Initial Term"), unless
earlier terminated in accordance with the provisions hereof. AMFMi
shall provide four (4) months notice prior to the end of the Initial
Term as to whether it desires to extend the Agreement for another
three (3) years and eight (8) months (the "Extended Term" and
together with the Initial Term, the "Term"). If AMFMi does not
desire to extend the Agreement, the Agreement shall terminate at the
end of the Initial Term. If AMFMi notifies Dialogue that it desires
to extend the Agreement for the Extended Term, the parties shall
meet and negotiate in good faith the terms and conditions under
which the Agreement will be extended, and will use their best
efforts to reach agreement.
9.2 Termination for Breach. Upon the material breach of this Agreement
by a Party, the non-breaching Party may terminate this Agreement
upon thirty (30) days prior written notice of the breach, provided
that the breaching Party was unable to cure the breach during such
thirty (30) day period.
9.3 Termination for AMFMi. This Agreement may be terminated by AMFMi, in
its sole discretion, upon thirty (30) days prior written notice to
Dialogue. If AMFMi terminates this Agreement without cause pursuant
to this Section 9.3 within the first sixteen (16) months of the
Initial Term, AMFMi shall pay Dialogue the sum of $***** per month
for every remaining full month, pro-rated for every remaining
partial month, after the date of termination in the initial Term
(the "Termination Fee"). The Parties agree that the duty to pay a
Termination Fee applies solely to termination by AMFMi pursuant to
this Section 9.3, and does not apply to termination of the Agreement
pursuant to Sections 9.1, 9.2, 9.4 and 14.1. The Termination Fee
shall be AMFMi's sole obligation upon termination pursuant to this
Section 9.3, and upon payment of the Termination Fee, AMFMi shall
have no further liability for any damages or injury to Dialogue due
to the termination of this Agreement. If AMFMi terminates this
Agreement without cause pursuant to this Section 9.2, the parties
agree that the Noncompete Term defined in Section
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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4.2 shall be limited to six months, or the remainder of the Initial
Term, whichever is more.
9.4 Automatic Termination. This Agreement will terminate automatically
upon (i) the commencement of any voluntary bankruptcy or other
insolvency proceeding of either Party; or (ii) the commencement of
any involuntary bankruptcy or other insolvency proceeding with
respect to either Party that is not dismissed within ninety (90)
days. No termination of this Agreement will relieve any party of
liability for its prior breach of this Agreement.
9.5 Return of Materials. Upon termination of this Agreement for any
reason, each Party shall return to the other any Confidential
Information of such other Party, other than Confidential Information
governed by Section 9.6 of this Agreement, in that Party's
possession, custody or control.
9.6 Transition Assistance. Upon the termination of this Agreement, the
Parties shall work to develop a transition plan pursuant to which
Dialogue shall reasonably assist AMFMi to transition the Customer
Marketing Initiative to AMFMi or to an entity or entities retained
by AMFMi. AMFMi shall pay Dialogue for its transition services on a
time and materials basis at Dialogue's then prevailing market rates,
provided however that AMFMi shall not pay a rate higher than that
paid by any other similar customer of Dialogue.
9.7 License Rights Upon Termination. Upon termination of this Agreement
for any reason, AMFMi shall have a perpetual license to use the
version of the Dialogue Technology being used by AMFMi. Under such
license, AMFMi shall have the limited right to use the Dialogue
Technology for its own internal purposes only, without any right to
transfer or sublicense the Dialogue Technology and without any right
to use the Dialogue Technology for the benefit of any entity that is
not an Affiliate of AMFMi. Dialogue shall have no obligation after
termination of this Agreement to support the Dialogue Technology or
to provide AMFMi with any updates or new versions or releases of the
Dialogue Technology. Any agreement by Dialogue to do so shall be
subject to an arms length agreement between AMFMi and Dialogue which
Dialogue may enter into in its sole discretion.
10. STATUS MEETINGS.
10.1 Project Managers. AMFMi shall each designate project managers who
shall be the primary contact point for any issue related to the
Customer Management Initiative. The initial project manager for
AMFMi shall be Jim Burtson. The initial project manager for Dialogue
shall be Marc Esiri.
10.2 Progress Meetings. Dialogue and AMFMi project managers shall meet no
less than twice per month during the Initial Term to discuss the
progress of, and plan future activities regarding technology
development and the Customer Management Initiative.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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11. CONFIDENTIALITY.
11.1 Protection of Confidential Information. The Parties acknowledge and
agree that, in connection with the performance of this Agreement,
each of them may disclose to the other its Confidential Information.
Except as provided in Section 11.2, the Party receiving any
Confidential Information agrees to maintain the confidential status
of such Confidential Information and not to use any such
Confidential Information for any purpose other than the purpose for
which it was disclosed to the receiving Party, and not to disclose
any of such Confidential Information to any third party.
11.2 Permitted Disclosure. Notwithstanding Section 11.1, the Parties
acknowledge and agree that each may disclose Confidential
Information: (i) as required by law, regulation, or court order
subject to the terms and conditions of this Section 11.2; (ii) to
their respective directors, officers, employees, attorneys,
accountants, and other advisors, who are under an obligation of
confidentiality of scope similar to those set forth hereunder and
only on a "need-to-know" basis; (iii) to investors or joint venture
partners, who are under an obligation of confidentiality of scope
similar to those set forth hereunder and only on a "need-to-know"
basis, provided that such disclosure shall be limited to the terms
of this Agreement; or (iv) in connection with disputes or litigation
between the Parties involving such Confidential Information, in
which case each Party shall endeavor to limit disclosure to such
purpose. If a Party is required by law, regulation, or court order
to disclose any Confidential Information of the other Party (the
"Owner"), such Party shall promptly notify Owner in writing prior to
any such disclosure to enable Owner to seek a protective order or
other appropriate remedy from the proper authority. The disclosing
Party agrees to cooperate with Owner in seeking such order or other
remedy. The disclosing Party further agrees that if Owner is not
successful in precluding the requesting legal body from requiring
the disclosure of the Confidential Information, it will furnish only
that portion of the Confidential Information which is legally
required and will exercise all reasonable efforts to obtain reliable
assurances that confidential treatment will be accorded the
Confidential Information.
11.3 Press Releases. Each Party may use the other Party's name in
marketing materials unless the other Party objects to such use. The
Parties agree to refrain from any use of another Party's name to
which that Party has objected.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS.
12.1 AMFMi. AMFMi represents, warrants, and covenants for the sole
benefit of Dialogue that it has the authority to grant Dialogue the
rights granted hereunder.
12.2 Dialogue. Dialogue represents, warrants, and covenants for the sole
benefit of AMFMi that: (i) the personnel performing the Customer
Management Initiative
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The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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under this Agreement shall have the skill and expertise necessary to
perform such services; and (ii) Dialogue has the authority to grant
AMFMi the rights granted hereunder.
12.3 Services Warranty. Dialogue will perform the services required under
this Agreement in a high-quality, professional, and competent
manner.
12.4 Warranties of Title. Dialogue has good and marketable title, and the
right to license, all of the Dialogue Intellectual Property provided
by Dialogue pursuant to this Agreement free and clear of all liens,
security interests, and encumbrances.
12.5 No Conflicting Obligations or Agreements Warranty. Dialogue has no
outstanding assignments, grants, licenses, encumbrances,
obligations, or agreements which relate to the Dialogue Intellectual
Property (whether written, oral, or implied) and are inconsistent
with this Agreement or the rights, duties, and obligations stated
in this Agreement.
12.6 Data Integrity. Dialogue warrants Dialogue will take all reasonable
steps to prevent the loss or corruption of data in the Customer
Database and any datamarts containing Customer Data.
12.7 Year 2000 Warranty. The Dialogue Technology will create, store and
generate output data relating to or including Millennial Dates and
leap year dates without errors or omissions, and the occurrence in
or use by such software, hardware, equipment and microprocessors of
Millennial Dates and leap year dates will not adversely affect the
performance of such software, hardware, equipment and
microprocessors with respect to date dependent data, compilations,
output or other functions (including, without limitation,
calculating, computing, sequencing and storing instructions and
data). As used in this Agreement, "Millennial Dates" means dates (in
any form, including two or four digits) on or after September 9,
1999.
12.8 Disclaimer of Warranties. EXCEPT AS PROVIDED IN THIS SECTION, THE
DIALOGUE TECHNOLOGY. THE DATABASE, SERVICES, SOFTWARE, AMFMi
INTELLECTUAL PROPERTY AND EQUIPMENT PROVIDED HEREUNDER ARE PROVIDED,
AND ACCEPTED "AS IS" WITHOUT WARRANTY OF ANY KIND. EXPRESS OR.
IMPLIED, INCLUDING WITHOUT LIMITATION AS TO CONDITION, DESIGN,
PERFORMANCE, ACCURACY, COMPLETENESS, OR OPERATION, OR REGARDING THE
ACCURACY OR COMPLETENESS OF ANY DATA OR RESULTS PRODUCED THEREFROM.
EACH PARTY EXPRESSLY DISCLAIMS AND EACH PARTY EXPRESSLY WAIVES ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
ERROR-FREE OR UNINTERRUPTED OPERATION, AND NONINFRINGEMENT.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
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13. LIMITATION OF LIABILITY.
13.1 No Liability for Certain Damages. EXCEPT TO THE EXTENT OF THE
PARTIES' INDEMNIFICATION OBLIGATIONS PURSUANT TO SECTION 14, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF ANY KIND OR NATURE,
WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT, TORT
(INCLUDING NEGLIGENCE OR STRICT LIABILITY), OR OTHERWISE, EVEN IF
THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS OR
DAMAGES.
13.2 LIMITATION OF LIABILITY. EXCEPT FOR CLAIMS OF INDEMNIFICATION
PURSUANT TO SECTION 14, EACH PARTY'S TOTAL LIABILITY FOR ANY CAUSE
WHATSOEVER UNDER THIS AGREEMENT OR FOR ACTIVITIES ARISING OUT OF OR
RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT WILL BE LIMITED TO
THE FEES PAID BY AMFMi TO DIALOGUE DURING THE TWELVE MONTHS PRIOR TO
THE DATE OF RECEIPT OF NOTICE OF A CLAIM FOR SUCH DAMAGES.
13.3 Notification. Neither Party shall be liable for any Claim arising
out of this Agreement for which it has not received written notice
from the other within six months from the date the Party asserting
such claim reasonably should have been aware of the Claim.
14. INDEMNIFICATION.
14.1 Dialogue's Indemnification. Dialogue shall indemnify and hold AMFMi,
its respective officers, directors, employees, contractors, agents,
its successors and assigns harmless from and against any and all
Claims that the Dialogue Intellectual Property infringes any
existing (i) United States patent; (ii) copyright in any country
that is a signatory to the Berne Convention; (iii) trademark in any
country that is a signatory to the Paris Convention: or (iv)
world-wide trade secret. AMFMi shall give Dialogue prompt written
notice of the assertion of a Claim. Dialogue shall assume defense of
such Claim at its own expense, with counsel of its own choosing and
shall have complete control over the Claim including for its
compromise a settlement. AMFMi shall be entitled to participate in
any such defense at its own expense with counsel of its own
choosing. AMFMi shall, at Dialogue's expense, cooperate with
Dialogue in the defense of the Claim. In addition to Dialogue's
indemnity obligations, should the Dialogue Intellectual Property, or
any portion thereof, become, or in Dialogue's reasonable opinion be
likely to become, the subject of a claim of infringement, Dialogue
shall have the right, at Dialogue's option and expense, (i) to
procure for AMFMi the right to continue using such Dialogue
Intellectual Property; or (ii) to replace or modify
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
12
<PAGE>
such Dialogue Intellectual Property with a non-infringing version of
substantially equivalent function and performance. If options (i)
and (ii) above cannot be accomplished despite Dialogue's best
efforts, the Dialogue shall have the right to require AMFMi to to
stop using Dialogue Intellectual Property by notifying AMFMi in
writing (the "Cease Use Notification"). If Dialogue sends a Cease
Use Notification, Dialogue shall refund to AMFMi the fees paid by
AMFMi to Dialogue pursuant to this Agreement for the twelve months
prior to the Cease Use Notification. Additionally, if Dialogue
exercises the Cease Use Notification, AMFMi shall have the right to
terminate this Agreement by providing written notice of termination
to Dialogue, such termination to be effective immediately upon
receipt of written notice of termination by Dialogue.
14.2 AMFMi's Indemnification, AMFMi shall indemnify and hold Dialogue,
its respective officers, directors, employees, contractors, agents,
its successors and assigns harmless from and against any and all
Claims that the AMFMi APIs or Customer Data infringes any existing
(i) copyright in any country that is a signatory to the Berne
Convention; (ii) trademark in any country that is a signatory to the
Paris Convention; or (iii) world-wide trade secret. Dialogue shall
give AMFMi prompt written notice of the assertion of a Claim. AMFMi
shall assume defense of such Claim at its own expense, with counsel
of its own choosing and shall have complete control over the Claim
including for its compromise a settlement. Dialogue shall be
entitled to participate in any such defense at its own expense with
counsel of its own choosing. Dialogue shall, at AMFMi's expense,
cooperate with AMFMi in the defense of the Claim. In addition to
AMFMi's indemnity obligations, should the AMFMi APIs or Customer
Data, or any portion thereof, become, or in AMFMi's reasonable
opinion be likely to become, the subject of a claim of infringement,
AMFMi shall have the right, at AMFMi's option and expense, (i) to
procure for Dialogue the right to continue using such AMFMi APIs or
Customer Data; or (ii) to replace or modify such AMFMi APIs or
Customer Data with a non-infringing version of substantially
equivalent function and performance (iii) to require Dialogue to
stop using such AMFMi APIs or Customer Data.
14.3 Limitations on Indemnification by Dialogue. Dialogue shall have no
liability for any claim brought by a third party against Dialogue or
AMFMi, including a claim for infringement in accordance with this
Section 14, to the extent it is based on AMFMi's: (a) use of a
release or version of any software or other materials provided by
Dialogue no longer supported by Dialogue, including but not limited
to versions or releases which Dialogue has determined that AMFMi
must replace with a new version or release in order to avoid
infringement or other liability; or (b) combination of the any
software or other materials provided by Dialogue with third party
hardware or software not provided by Dialogue hereunder, with which
it could not reasonably be expected to be used, if such claim arose
from the use of any software or other materials provided by Dialogue
in such combination. Dialogue will provide reasonable advance notice
if it will no longer support a version or release.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
13
<PAGE>
14.4 Limitations on Indemnification by AMFMi. AMFMi shall have no
liability for any claim brought by a third party against Dialogue or
AMFMi, including a claim for infringement in accordance with this
Section l4, to the extent it is based on Dialogue's: (a) use of a
release or version of any software or other materials provided by
AMFMi no longer supported by AMFMi, including but not limited to
versions or releases which AMFMi has determined that Dialogue must
replace with a new version or release in order to avoid infringement
or other liability; or (b) combination of the any software or other
materials provided by AMFMi with, third party hardware or software
not provided by AMFMi hereunder, with which it could not reasonably
be expected to be used, if such claim arose from the use of any
software or other materials provided by AMFMi in such combination.
AMFMi will provide reasonable advance notice if it will no longer
support a version or release.
14.5 Limited Obligation. The provisions of this Section 14 are in lieu of
all other obligations, including without limitation the implied
warranty of non-infringement, and state the sole, exclusive and
entire liability of each Party and the sole, exclusive and entire
remedy of each Party with respect to any claim that materials
licensed under this Agreement or any portion thereof infringes on a
patent, copyright, trade secret or other intellectual property right
of any third party.
15. MISCELLANEOUS.
15.1 Assignment. Neither Party may assign this Agreement without the
prior written consent of the other Party; provided, however, that
(i) either party may assign this Agreement to any parent,
subsidiary, affiliate, or any successor in interest to all or the
majority of the business of such party to which this Agreement
relates. Any attempted or purported assignment without such required
consent shall be void and a material breach of this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the successors and permitted assigns of the
Parties hereto,
15.2 Survival. The respective rights and obligations of Dialogue and
AMFMi wider the provisions of Sections 1, 4.2, 5.3.2, 7, 8, 9.3
(last sentence only), 9.4, 9.5, 9.6, 11.1. 11.2, 11.3, 13, 14 and 15
shall survive termination of this Agreement indefinitely.
15.3 Force Majeure. Neither Party hereto shall be responsible for any
failure to perform its obligations under this Agreement (other than
obligations to pay money) caused by an event reasonably beyond its
control, including wars, riots, labor strikes, industry shortages,
power outages, natural disasters, or any law, regulation, ordinance,
or other act or order of any court, government, or governmental
agency. Obligations hereunder, however, shall in no event be excused
but shall be suspended only until the cessation of any cause of such
failure. In the event
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
14
<PAGE>
that such force majeure should obstruct performance of this
Agreement for more than three (3) months, the Parties hereto shall
consult with each other to determine whether this Agreement should
be modified. The Party facing an event of force majeure shall use
its best endeavors in order to remedy that situation as well as to
minimize its effects. A Party experiencing an event of force majeure
shall notify the other Party as soon as possible after its
occurrence.
15.4 No Joint Venture. The sole relationship between the Parties shall be
that of independent contractors. Nothing herein shall be construed
to constitute the Parties as partners, joint venturers, or agents of
each other in any way whatsoever. Neither Party shall make any
warranties or representations, or assume or create any obligations,
on the other Party's behalf. Each Party shall be solely responsible
for the actions of its respective employees, agents, and
representatives.
15.5 Rules of Construction. As used in this Agreement, all terms used in
the singular shall be deemed to include the plural, and vice versa,
as context requires. The words hereof, herein, and hereunder refer
to this Agreement as a whole, including any exhibits hereto, as the
same may from time to time be amended or supplemented and not to any
subdivision contained in this Agreement. When used herein, including
shall mean including, without limitation and discretion shall mean
sole discretion. Descriptive headings are inserted for convenience
only, and shall not be utilized in interpreting this Agreement. This
Agreement has been negotiated by the Parties and their respective
counsel and shall be fairly interpreted in accordance with its terms
and without any strict construction in favor of or against either
Party.
15.6 Amendment; Waiver. This Agreement may not be modified, nor shall any
provision hereof be waived or amended, except in a writing duly
signed by authorized representatives of the Parties. A waiver with
respect to one event shall not be construed as continuing, or as a
bar to or waiver of any right or remedy as to subsequent events.
15.7 Severability. If any provision hereof is found to be invalid or
unenforceable by a court of competent jurisdiction, such provision
shall be reformed without further action by the Parties to the
extent necessary to make such provision valid and enforceable, and
no other provisions hereof shall be affected or impaired thereby.
15.8 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York applicable to contracts entered
into and wholly to be performed therein, without regard to that body
of law relating to conflict of laws.
15.9 No Third Party Beneficiaries. Nothing express or implied in this
Agreement is intended to confer, nor shall anything herein confer,
upon any person other than the Parties and the respective successors
or assigns of the Parties, any rights, remedies, obligations, or
liabilities whatsoever.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
15
<PAGE>
15.10 Recovery of Costs and Expenses. If either Party brings an action
against the other Party to enforce its rights under this Agreement,
the prevailing Party shall be entitled to recover its reasonable
costs and expenses incurred in connection with such action and all
appeals of such action, including without limitation reasonable
attorneys' fees and costs.
15.11 Notices. Any notices to be given hereunder to a Party shall be made
via U.S. Mail or express courier to such Party's address given
below, and/or (other than for the delivery of fees) via facsimile to
the facsimile telephone numbers listed on the signature page of this
Agreement.
If to Dialogue, to
Cyber Dialogue Inc.
304 Hudson Street
6th Floor
New York, New York 10013
Attention; Mark Esiri
Fax: *****
with a copy to;
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005
Attention: Michael P. Rogan, Esq.
Fax: *****
If to AMFMi, to
AMFM Interactive Inc.
c/o AMFM Inc.
1845 Woodall Rodgers Freeway
Suite 1300
Dallas, Texas 75201
Attention: President of Chancellor Media Services
Fax: *****
with copies to;
AMFM Inc.
1845 Woodall Rodgers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Fax: *****
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
16
<PAGE>
Vinson & Elkins, L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
Fax: *****
Each party named above may change its address and that of its
representative for notice by the giving of notice thereof in the
manner hereinabove provided.
15.12 Counterparts; Facsimiles. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
Facsimile copies hereof shall be deemed to be originals.
15.13 Entire Agreement. This Agreement constitutes the complete agreement
between the Parties with respect to the subject matter hereof, and
supersedes and replaces all prior or contemporaneous understandings,
communications, and agreements, written or oral, regarding such
subject matter.
15.14 Solicitation. For the term of this Agreement and for twelve (12)
calendar months after its termination or expiration, neither party
will solicit for employment any person who (i) at the time, is an
employee of the other Party; or (ii) at any time within the prior
six (6) months was an employee of the other Party, without the
express written permission of the other. For purposes of this
Section 15.14 only, "Party" shall mean the signatories hereto and
also include AMFM Inc. and its subsidiaries. Notwithstanding the
foregoing, AMFMi may offer employment to the following Dialogue
employees: *****.
15.15 Warrant. On execution of this Agreement, Dialogue will grant to
AMFMi a warrant for five percent (5%) of the fully diluted shares of
Dialogue as set forth in Schedule 3.
15.16 No Recourse Against Others. No past or present or future director,
officer, employee, stockholder or incorporator, as such, of a Party
or any of its affiliates shall have any liability for any
obligations of the Party under this Agreement or for any claim based
on, in respect of or by reason of such obligations or their
creation.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
17
<PAGE>
IN WITNESS WHEREOF, the Parties to this Agreement by their duly
authorized representatives have executed this Agreement as of the date first
above written.
AMFM INTERACTIVE INC. CYBER DIALOGUE INC.
By: /s/ James E. Burton By:
--------------------------- -------------------------------------
Title: Chief Financial Officer Title:
------------------------ ----------------------------------
Name: James E. Burton Name:
------------------------- -----------------------------------
_______________________________ _________________________________________
_______________________________ _________________________________________
Attn:__________________________ Attn:____________________________________
Fax:___________________________ Fax:_____________________________________
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
18
<PAGE>
IN WITNESS WHEREOF, the Parties to this Agreement by their duly
authorized representatives have executed this Agreement as of the date first
above written.
AMFM INTERACTIVE INC. CYBER DIALOGUE INC.
By: By: /s/ Mark Esiri
--------------------------- -------------------------------------
Title: Title: CHIEF EXECUTIVE OFFICER
------------------------ ----------------------------------
Name: Name: Mark Esiri
------------------------- -----------------------------------
_______________________________ _________________________________________
_______________________________ _________________________________________
Attn:__________________________ Attn:____________________________________
Fax:___________________________ Fax:_____________________________________
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
18
<PAGE>
SCHEDULES
Schedule 1 Fees
Schedule 2 Budgets
Schedule 3 Warrants
Schedule 4 Dialogue Clients
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE I
FEES
AMFMi shall pay Dialogue the following fees:
For the first three months of the Initial Term, AMFMi shall pay Dialogue's
actually incurred reasonable direct out-of-pocket costs, plus *****.
For the second three months of the Initial Term, AMFMi shall pay
Dialogue's actually incurred reasonable direct out-of-pocket costs, plus *****.
For the third three months of the Initial Term, AMFMi shall pay Dialogue's
actually incurred reasonable direct out-of-pocket costs, plus *****.
For the remaining months of the Initial Term, AMFMi shall pay Dialogue's
actually incurred reasonable direct out-of-pocket costs, plus *****.
If the Agreement is extended beyond the Initial Term, the parties shall
mutually agree in good faith on the fees to be paid during the Extended Term.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE 2
BUDGETS
AMFMi Customer Management Hardware and Software Budget
All hardware and software purchased or licensed for use as part of the Customer
Management Initiative will be at the sole cost of, and the property of, AMFMi.
The following hardware and software will be acquired at market prices negotiated
by Dialgoue, or licensed on standard terms [where Dialogue provides existing
software code.] All equipment orders will be placed in AMFMi's name and paid
directly by AMFMi, except to the extent that receipt of discounts requires
purchase by Dialogue, in which case Dialogue shall bill AMFMi for the full cost
of such equipment plus a ***** handling fee, with payments for such equipment
due net thirty from the date of billing. Usage fees are summarized below at
Schedule C.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Component Hardware Software Budget
Estimate
- ----------------------------------------------------------------------------------------------------------
Operational
Customer
Database
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*****
</TABLE>
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
Schedule 2 - 2
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
Design and Development Budget
Designing, programming and maintaining the architecture for the various elements
of AMFMi's Customer Management Platform. The following budget is an estimate of
a one-time fee, based on Dialogue's engineering rates of ***** per man-day (7
hours). Dialogue's engineering rates represent a blended average of the
fully-loaded (to include salaries, bonuses, benefits and overhead allocation)
costs of professionals primarily dedicated the AMFMi. Third party vendors or
contractors will be charged on a "time and materials basis" with bills submitted
monthly, with a detailed break-down of man-days worked, project status and
materials expended. Total, including contingency, is a "cost not to exceed"
commitment for specified deliverables.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Component Development Maintenance Budget
Estimate
- ---------------------------------------------------------------------------------------------------------------
Operational Customer
Database
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*****
</TABLE>
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
SCHEDULE 3
WARRANTS
- --------------------------------------------------------------------------------
Grant 5,000, representing at least five percent (5%) of the
fully diluted shares of the company on the Effective
Date
- --------------------------------------------------------------------------------
Vesting Schedule 333 vest on signing; 333 vest on the first day of the
sixth month of the Initial Term assuming contract not
terminated; 334 vest on the twelfth month of the initial
Term assuming contract not terminated; 2,000 vest on
first day of the Extended Term assuming contract not
terminated, 1,000 vest on the 2nd anniversary of the
first day of the Extended Term assuming contract not
terminated, and 1,000 vest on renewal of the contract
past the Extended Term.
- --------------------------------------------------------------------------------
Strike Price $310 per share
- --------------------------------------------------------------------------------
Term 6 years
- --------------------------------------------------------------------------------
Rights Not applicable
- --------------------------------------------------------------------------------
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
Schedule 4 - Cyber Dialogue Clients
Strictly Confidential
<TABLE>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
About.com
- ------------------------------------------------------------------------------------------
GTE Thetrip.com
- ------------------------------------------------------------------------------------------
Thomson
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
IBM-Global Sm. Bus. Time Warner
- ------------------------------------------------------------------------------------------
IBM-PSG
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
IMP
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
America Online (AOL)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Lending Tree
- ------------------------------------------------------------------------------------------
Vertical Net
- ------------------------------------------------------------------------------------------
AOL (Canada)
- ------------------------------------------------------------------------------------------
AOL (Health Channel) Lycos Warner Brothers
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Bank One
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Women.com
- ------------------------------------------------------------------------------------------
Y&R
- ------------------------------------------------------------------------------------------
Modern Media
- ------------------------------------------------------------------------------------------
Modern Media Yankelovich
- ------------------------------------------------------------------------------------------
Monsanto
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
Capital One Multimedia Resources
- ------------------------------------------------------------------------------------------
Cartoon Network NASDAQ
- ------------------------------------------------------------------------------------------
Cdnow
- ------------------------------------------------------------------------------------------
Netscape
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
CNN
- ------------------------------------------------------------------------------------------
Compaq Organic
- ------------------------------------------------------------------------------------------
Organic
- ------------------------------------------------------------------------------------------
Organic - SF
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
DeloitteConsulting
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Discovery
- ------------------------------------------------------------------------------------------
Real Media
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
FirstUSA
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
Garfield Group
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
GE Financial Assurance
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Global Sports
- ------------------------------------------------------------------------------------------
*****
- ------------------------------------------------------------------------------------------
</TABLE>
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE>
Exhibit 10.10
ANNUAL DATABASE SERVICES AGREEMENT
THIS AGREEMENT is made as of the 29th day of September, 1999 (the
"Effective Date"), by and between Roche Diagnostics Corporation, headquartered
at 9115 Hague Rd., Indianapolis, Indiana, 46168 ("Roche") and Yankelovich
Partners, Inc., headquartered at 101 Merritt 7 Corporate Park, Norwalk, CT
06851, ("YPI")
WHEREAS, Roche Diagnostics (Roche) has requested that Yankelovich Partners
(YPI), provide certain database marketing services and YPI has agreed to
provide such database consulting, marketing and maintenance services as more
fully set forth on Schedule A attached hereto and made part hereof.
NOW, THEREFORE, in consideration of the conditions and covenants set forth
hereinafter, it is agreed as follows:
1. Retention. Roche hereby retains YPI to provide database consulting, marketing
and maintenance services as set forth on Schedule A (the "Services") effective
as of the Effective Date and YPI hereby accepts such retention by Roche
2. Services. YPI shall perform the Services in accordance with the
Specifications outlined in detail in the Marketing Operations Manual developed
and maintained by YPI and approved by Roche.
3. Staffing. UPI shall provide sufficient experienced and qualified personnel to
perform the Services.
4. Fees and Expenses. YPI shall be compensated for the Services on a time and
materials basis. The Fees shall be paid by Roche to YPI within thirty (30) days
of the date of invoice. An estimate of the Fees with a detailed breakdown is set
forth on Schedule B. YPI and Roche agree to meet quarterly to review the Fees
for the immediately preceding quarter. In the event that such review by YPI and
Roche reveals the Fees to be higher or lower than estimated, the parties will
mutually agree upon appropriate revisions to Schedule A and B for the remainder
of the term hereof. The Fees are exclusive of all travel and lodging expenses,
and other costs which shall be billed separately (the "Expenses"). Roche shall
reimburse UPI for Expenses within thirty (30) of Roche's receipt of request for
payment. Expenses in excess of the ***** monthly estimate must be
pre-approved by Roche prior to those expenses being incurred.
5. Additional Services. Upon the terms and subject to the conditions contained
herein, YPI agrees to provide to Roche additional services not covered in
Schedule A. The scope of any additional services requested by Roche shall be
documented in proposals or work orders with cost estimates, which require Roche
approval prior to any such additional services being provided.
6. Confidentiality.
6.1 "Confidential Information" shall mean any information relating to or
disclosed in the course of the Agreement by the disclosing party.
Confidential Information shall not include any information which is or
becomes generally available to the public without breach of this
Agreement; is in the possession of a party prior to its disclosure by the
other party; becomes available from a third party not in breach of any
obligations of confidentiality to the disclosing party, has been
independently developed by the non-disclosing party or; is required to be
disclosed to any governmental agency or a court of competent jurisdiction
pursuant to a written order, subpoena or by operation of law, provided the
subpoenaed party has given the disclosing party prior advance written
notice in order that the disclosing party may attempt to obtain a
protective order limiting disclosure and use of the information disclosed.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
-1-
<PAGE>
6.2 Each party acknowledges that it will receive Confidential Information
of the other party relating to its technical, marketing, product and/or
business affairs. All Confidential Information of the other party shall be
held in strict confidence and shall not be disclosed or used for any
purpose other than for the benefit of the disclosing party in performance
of this Agreement, without express written consent of the other party,
except as may be required by law. Each party shall use reasonable measures
and reasonable efforts to provide protection for Confidential Information,
including measures at least as strict as those such party uses to protect
its own Confidential Information.
6.3 Neither Roche nor YPI shall make any announcement or other disclosure
to any third party of the transactions contemplated by this agreement
without the prior approval of the other party. All requests by YPI to
Roche in this regard shall be directed to Roche's Consumer Marketing
Manager.
7. Intellectual Property.
7.1 All right, title and interest in any software program code used in
conjunction with YPI's delivery of Services hereunder that was owned or
controlled by YPI prior to the System development commencing for the Roche
Marketing System (MCAD) dated November 1, 1997, or developed without
additional costs to Roche, or is based upon reusable YPI methodologies
("YPI Materials") shall be and remain the property of YPI. YPI grants to
Roche a perpetual, royalty free, right to use, modify, transfer and
maintain the yPI Materials as is necessary, solely in connection with the
operation of MCAD.
7.2 Unless otherwise specified in a Statement of Work, all deliverables as
described in Schedule A ("Deliverables) prepared for exclusive and solely
for Roche by YPI under this Agreement are the property of Roche and all
title and interest therein shall vest in Roche and shall be deemed to be
in "work made for hire" and made in the course of the services rendered
hereunder (the "Exclusive Materials"). It is understood that specifically
excluded from Exclusive Materials are yPI Materials. To the extent that
title to any such Exclusive Materials may not, by operation of law, vest
in Roche or such works may not be considered works made for hire, all
right, title and interest therein are hereby irrevocably assigned to
Roche. All such materials, including materials used in development shall
belong exclusively to Roche with Roche having the right to obtain and to
hold, in its own name, copyrights, registrations or such other protection
as may be appropriate to the subject matter, including any extensions and
renewals thereof. YPI agrees to give Roche, and any persons designated by
Roche, any reasonable assistance required to perfect the rights defined in
this Section.
7.3 Nothing herein shall be construed to grant any right or license to YPI
in or to any Roche product, marketing, competitive and financial
information ("Roche Information") or other material provided to YPI
hereunder by Roche, other than the right to use such material solely on
behalf of Roche in accordance with the terms hereof. All of the foregoing
materials, including without limitation any and all copyrights, trademarks
or trade names, are and shall remain the property of Roche.
7.4 Nothing herein shall be construed to grant Roche rights to property
owned by others and used in conjunction with YPI Materials. Roche shall be
required to obtain such licensing as may be required for the use of such
third-party property.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
-2-
<PAGE>
8. Warranties.
8.1 YPI represents and warrants that: (a) all of the services to be
performed by it hereunder will be rendered using sound, professional
practices and in a competent and professional manner by knowledgeable,
trained and qualified personnel; (b) YPI is the owner of or otherwise
has the right to use and distribute all materials and methodologies
used in connection with providing the Deliverables, except as otherwise
provided herein; (c) YPI will comply with all applicable federal, state
and local laws in the performance of its obligations hereunder; (d) the
Deliverables are and will be free of any software disabling devices or
internal controls, including, without limitation, time bombs, viruses,
or devices of a similar nature; (e) the Deliverables (other than
information or materials supplied by Roche and reproduced accurately in
the Deliverables) shall not infringe upon any third party copyright,
patent, trademark, trade secret or other proprietary right; (f) all
Deliverables hereunder will be designed to be compatible and operate in
conjunction with all software delivered under this Agreement; and (g)
YPI shall perform in conformance with this Agreement.
8.2 Roche represents and warrants that: (a) the use, as contemplated by
this Agreement, of the material supplied by Roche hereunder shall not
infringe any copyright, patent, trademark, trade secret or other third
party proprietary right; (b) there is no impediment to Roche's
performance of its obligations hereunder; and (c) Roche shall perform in
conformance with this Agreement.
9. Indemnification.
9.1 YPI agrees to indemnify, defend and hold harmless Roche, its
directors, officers, and employees in any action brought against same
with respect to any claim, demand, cause of action, debt or liability,
including reasonable attorneys' fees, based upon an allegation: (i) if
true, would constitute a breach of any of YPI's representations,
warranties, or agreements hereunder; (ii) arises out of the negligence
or willful misconduct of YPI; or (iii) any of the claimed Deliverables
or services to be provided by YPI hereunder infringe or violate any
patent, copyright, trademark, trade secret, license, or any other
contract or other right of any third party.
9.2 Roche agrees to indemnify, defend and hold harmless YPI, its
directors, officers, and employees in any action brought against same
with respect to any claim, demand, cause of action, debt or liability,
including reasonable attorneys' fees, based upon an allegation
that: (i) if true, would constitute a breach of any of Roche's
representations, warranties, or agreements hereunder; (ii) arises out of
the negligence or willful misconduct of Roche; or (iii) any of the
Roche information provided by Roche hereunder infringe or violate any
patent, copyright, trademark, trade secret, license, or any other
contract or other right of any third party.
9.3 In claiming any indemnification hereunder, the indemnified party
shall promptly provide the indemnifying party with written notice of
any such claim. The indemnified party may, at its own expense, assist
in the defense if it so chooses, provided that the indemnifying party
shall control such defense and all negotiations relative to the
settlement of any such claim and further provided that any settlement
intended to bind an indemnified party shall not be final without the
indemnified party's written consent, which shall not be unreasonably
withheld.
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
-3-
<PAGE>
10. Limitation of Liability. Except for the indemnification obligations set
forth herein, neither party hereto will be liable for lost profits, lost
opportunities, or indirect, incidental or consequential damages under
any circumstances.
11. Term. This Agreement shall commence as of September 1, 1999 and shall
continue until December 31, 2000 or prior termination according to the
terms hereof (the "Term").
12. Termination. Either party may terminate this Agreement for any reason
with 120 days written notice. In the event of a termination of this
Agreement: (i) the provisions of Sections 6, 7, 8, 9, and 10 shall
service any termination of this Agreement, whether upon expiration of
its stated Term or termination as provided hereunder; (ii) each party
shall return all copies of Confidential Information and all other
property belonging to and/or received from the other party; and (iii)
except as otherwise stated herein, each party may pursue claims it has
against the other for any breach of terms of this Agreement. In
addition, if this Agreement is terminated while work is in process, YPI
shall provide Roche with all documentation and materials related to
such work upon payment therefor by Roche, such payment shall equal the
prorata share of the price payable hereunder commensurate with the work
performed by YPI at the time of termination.
13. General Provisions:
13.1 Force Majeure. Neither party shall be deemed in default of this
Agreement to the extent that performance of its obligations or attempts
to cure any breach are delayed or prevented by reason of any act of
God, fire, natural disaster, accident, act of government, or any other
cause beyond the control of such party ("Force Majeure") provided that
such party gives the other party written notice thereof promptly and,
in any event, within fifteen (15) days of discovery thereof and uses
its best efforts to cure the delay. In the event of such a Force
Majeure, the time for performance or cure shall be extended for a
period equal to the duration of the Force Majeure, provided, however
that if the Force Majeure continues for longer than six (6) months, the
party not affected by the Force Majeure may terminate this Agreement
without any liability upon written notice to the other, other than
obligations relating to termination as set forth in this Agreement.
13.2 Partial Invalidity. Should any provision of this Agreement be
held to be void, invalid or inoperative, the remaining provisions of
this Agreement shall not be affected and shall continue in effect and
the invalid provision shall be deemed modified to the least degree
necessary to remedy such invalidity.
13.3 No Waiver. The failure of either party to partially or fully
exercise any right or the waiver by either party of any breach, shall
not prevent a subsequent exercise of such right or be deemed a waiver
of any subsequent breach of the same or any other term of this
Agreement.
13.4 Insurance. Each party shall, at all times during the term of
this Agreement, maintain all necessary insurance against losses,
claims, demands, proceedings, damages, costs, charges and expenses for
injuries or damage to any person or property which are the result of
the fault or negligence of each party in the carrying out of its
obligations under this Agreement, including, without limitation,
workman's compensation, public liability, property damage, and
automobile liability.
13.5 Notices. Any notice required or permitted to be sent shall be in
writing and shall be sent in a manner requiring a signed receipt such
as authenticated Internet transmission, Federal Express or like courier
delivery, or if mailed, then mailed by registered or certified mail,
return receipt requested. Notice is effective upon receipt. Notice
shall be sent to the
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
- 4 -
<PAGE>
Consumer Marketing Manager at Roche and the Chief Financial Officer of
Yankelovich with copies delivered or mailed as defined above to Roche
General Counsel.
13.6 Assignment. Neither party shall assign any of its rights or
obligations under this Agreement to any other entity without the other
party's prior written consent.
13.7 Entire Agreement. This Agreement, including Schedules A and
B, set forth the entire agreement between the parties on this subject
and supersedes all prior negotiations, understandings and agreements
between the parties concerning the subject matter. No amendment or
modification of this Agreement shall be made except in a written
agreement signed by both parties.
13.8 Governing Law and Venue. This Agreement shall be governed
in all respects by the laws of the State of Indiana, without regard to
any rules of conflict and choice of laws which would require the
application of laws of another jurisdiction.
13.9 Mediation. If any dispute arises under the terms of this
Agreement, the parties agree to select a mutually agreeable neutral
third party to help them mediate it.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
YANKELOVICH PARTNERS, INC.
By: /s/ SCOTT MORRISON
----------------------------------
Title: EXECUTIVE VICE PRESIDENT
ROCHE DIAGNOSTICS CORPORATION
By: /s/ MELINDA B. FRANGI
----------------------------------
Title: CONSUMER MARKETING MANAGER
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
-5-
<PAGE>
Schedule A ("Deliverables")
Initial Services/Specifications: Both parties agree that the following services
are the estimated services to be provided within the term of this agreement:
*****
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
-6-
<PAGE>
Schedule B
Estimated Fees and Expenses (see attached Spreadsheet)
*****
***** = Confidential treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
-7-
<PAGE>
Exhibit 10.11
WARRANT
TO PURCHASE COMMON STOCK OF
CYBER DIALOGUE INC.
WARRANT NO. 1
TO PURCHASE 5,000
SHARES OF COMMON STOCK
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................................. 2
2. EXERCISE OF WARRANT..................................................... 3
2.1. Manner of Exercise................................................ 3
2.2. Payment of Taxes.................................................. 4
2.3. Fractional Shares................................................. 4
3. TRANSFER DIVISION AND COMBINATION....................................... 5
3.1. Transfer.......................................................... 5
3.2. Division and Combination.......................................... 5
3.3. Expenses.......................................................... 5
3.4. Maintenance of Books.............................................. 5
4. ADJUSTMENTS TO EXERCISE PRICE AND WARRANT STOCK......................... 5
4.1. Adjustment of Exercise Price...................................... 5
4.2. Adjustment of Warrant Stock....................................... 6
5. NOTICES TO WARRANT HOLDERS.............................................. 7
6. NO IMPAIRMENT........................................................... 7
7. RESERVATION AND AUTHORIZATION OF CLASS B COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY............. 7
8. TAKING OF RECORD: STOCK AND WARRANT TRANSFER BOOKS...................... 7
9. LOSS OR MUTILATION...................................................... 8
10. OFFICE OF THE COMPANY................................................... 8
11. LIMITATION OF LIABILITY................................................. 8
12. MISCELLANEOUS........................................................... 8
12.1. Notice Generally.................................................. 8
12.2. Successors and Assigns............................................ 9
12.3. Severability......................................................10
12.4. Headings..........................................................10
12.5. GOVERNING LAW.....................................................10
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO
(i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT. THIS SECURITY IS
SUBJECT TO RESTRICTIONS ON TRANSFER, VOTING AND OTHER TERMS AND CONDITIONS
SET FORTH IN THE STOCKHOLDERS AGREEMENT (DEFINED BELOW), A COPY OF WHICH MAY
BE OBTAINED FROM CYBER DIALOGUE INC., AT ITS PRINCIPAL EXECUTIVE OFFICES.
Warrant No. 1
WARRANT
To Purchase Common Stock Of
CYBER DIALOGUE INC.
THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, AMFM Interactive Inc.,
a Delaware corporation ("AMFMi"), or its registered permitted assigns, is
entitled at any time on or after the date hereof and on or prior to the
Expiration Date (as such term is defined herein) to purchase from Cyber
Dialogue Inc., a Delaware corporation (the "Company"), up to an aggregate of
5,000 ("Warrant Shares") shares of Common Stock, par value $.01 per share
("Common Stock"), of the Company (subject to adjustment as provided herein)
in whole but not in part, at an exercise price per share (the "Exercise
Price") equal to $310 (subject to adjustment as provided herein), all on the
terms and conditions and pursuant to the provisions hereinafter set forth.
This Warrant has been issued pursuant to that certain Services
Agreement, dated of even date herewith (the "Services Agreement"), by and
between the Company and AMFMi. This Warrant may only be exercised to purchase
Vested Warrant Shares. Warrant Shares shall (as such term is defined herein)
become "Vested Warrant Shares" with respect to:
(i) 333 Warrant Shares, on August __, 1999;
(ii) 333 Warrant Shares on the first day of the sixth month of
the Initial Term;
(iii) 334 Warrant Shares on the first day of the twelfth month of
the Initial Term;
(iv) 2,000 Warrant Shares, on the first day of the Extended Term
(as such term is defined in the Services Agreement);
<PAGE>
(v) 1,000 Warrant Shares, on the second anniversary of the first
day of the Extended Term; and
(vi) 1,000 Warrant Shares, on the first day of the renewal of the
Services Agreement beyond the Extended Term.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"AMFMi" shall have the meaning set forth in the first paragraph of
this Warrant.
"Business Day" shall mean any day that is not a Saturday or Sunday
or a day on which banking institutions are not required to be open in the
State of New York.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, or other equivalents (however
designated) of such Person's capital stock, and any warrants, options or
similar rights to acquire such capital stock.
"Common Stock" shall have the meaning set forth in the first
paragraph of this Warrant, and shall include any shares of Capital Stock into
which such Common Stock may be changed.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Exercise Price" shall have the meaning set forth in the first
paragraph of this Warrant.
"Expiration Date" shall mean August __, 2005.
"Holder" shall mean the Person in whose name the Warrant set forth
herein is registered on the books of the Company maintained for such purpose.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Sales price" means the closing sales price per share of the Common
Stock (or if no sale prices is reported, the average of the high and low bid
prices) as reported by the principal national or regional stock exchange on
which the Common Stock is listed or, if such Common Stock is not listed on a
national or regional stock exchange, as reported by the Nasdaq Stock Market
or, if not so reported, then the average of the bid and asked prices per
share for such Common Stock as reported by the National Quotation Bureau
Incorporated or, if not so reported,
<PAGE>
the per share fair market value as determined in good faith by the Board of
Directors of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time.
"Services Agreement" shall have the meaning set forth in the second
paragraph of this Warrant.
"Warrants" shall mean this Warrant and all Warrants issued upon
transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to the product of the
number of shares of Common Stock being purchased upon exercise of this
Warrant and the Exercise Price.
"Warrant Shares" shall have the meaning set forth in the second
paragraph of this Warrant.
"Warrant Stock" shall mean the shares of Common Stock purchased by
the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. Holder may exercise this Warrant, on any
Business Day on or after the date hereof until 5:00 P.M., New York City time,
on the Expiration Date, for all or any part (but not as to a fractional share
of Common Stock) of the number of shares of Common Stock purchasable
hereunder. This Warrant will terminate automatically and immediately after
5:00 P.M., New York City time, on the Expiration Date.
In order to exercise this Warrant, Holder shall deliver to the
Company at its principal office at 304 Hudson Street, 6th Floor, New York,
New York 10013 or at the office or agency designated by the Company pursuant
to Section 10, (i) a written notice of Holder's election to exercise this
Warrant, (ii) payment of the Warrant Price (which shall be paid in cash or by
certified or official bank check payable to the Company), and (iii) this
Warrant. Such written notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its duly appointed agent or attorney. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event
within five (5) Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock so
purchased, together with cash in lieu of any fractional share, as hereinafter
provided. The stock certificate or certificates so delivered shall be, to the
extent possible, in such denomination or denominations as such Holder shall
request in the notice and shall be registered in the name of Holder. Subject
to the provisions of the immediately following paragraph, this Warrant shall
be deemed to have been exercised and such certificate or certificates shall
be deemed to have been issued, and the Holder shall be deemed to have become
a Holder of record
<PAGE>
of such shares for all purposes, as of the date the notice, together with the
cash or certified or official bank check payable to the Company and this
Warrant, is received by the Company as described above and all taxes required
to be paid by Holder, if any, pursuant to Section 2.2 prior to the issuance
of such shares have been paid. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register shares in the name of
any Person who acquired this Warrant (or part hereof) or any Warrant Stock
otherwise than in accordance with this Warrant.
Notwithstanding any provision herein to the contrary, if the
acquisition of any shares for which this Warrant is exercised requires any
filing (and expiration or early termination of the applicable waiting period)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), then the issuance of such shares upon such exercise of this
Warrant shall be contingent upon (and shall not be effective until) the
expiration or early termination of such waiting period). In such event, the
Holder shall not be deemed to have become a Holder of such shares for any
purpose unless and until such waiting period has expired or otherwise been
terminated. In the event the acquisition of any shares for which this Warrant
is exercised requires any filing (and expiration or early termination of the
applicable waiting period) under the HSR Act, then the Company will file (or
attempt to cause its ultimate parent entity to file, if applicable), any
notification and report form required to be filed by the Company or such
ultimate parent entity as the "acquired person" (as defined in the HSR Act
and/or applicable rules or regulations promulgated thereunder), with respect
to such acquisition of shares.
If this Warrant is exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing the shares of
Common Stock purchasable hereunder (unless this Warrant shall have then
expired), issue and deliver to the Holder a new Warrant in the name of the
Holder evidencing the right of the Holder to acquire the aggregate number of
shares of Common Stock purchasable hereunder that shall not have been
exercised, and this Warrant shall be cancelled.
2.2. PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights. The
Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or
delivery thereof, unless such tax or charge is imposed by law upon Holder, in
which case such taxes or charges shall be paid by Holder. The Company shall
not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for
shares of Common Stock issuable upon exercise of this Warrant in any name
other than that of Holder, and in such case the Company shall not be required
to issue or deliver any stock certificate until such tax or other charge has
been paid or it has been established to the satisfaction of the Company that
no such tax or other charge is due.
2.3. FRACTIONAL SHARES. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon exercise of this
Warrant. If more than one Warrant shall be exercised at one time by the same
Holder, the number of full shares of Common Stock issuable upon exercise
thereof shall be computed on the basis of the aggregate number of shares of
Common Stock purchasable pursuant to such Warrants or specified portions
thereof so
<PAGE>
exercised. Instead of any fractional share of Common Stock otherwise issuable
upon exercise of any Warrant or Warrants (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the Sales Price at the close of business on the
day of exercise.
3. TRANSFER DIVISION AND COMBINATION
3.1. TRANSFER. Any transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company referred to in Section 2.1 or the office
or agency designated by the Company pursuant to Section 10, together with a
written assignment of this Warrant substantially in the form of Exhibit B
hereto duly executed by Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, and this Warrant shall promptly be cancelled. A Warrant may
be exercised by a new holder for the purchase of shares of Common Stock
without having a new Warrant issued.
3.2. DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office
or agency of the Company, together with a written notice specifying the names
and denominations in which new Warrants are to be issued, signed by Holder or
its agent or attorney. Subject to compliance with Section 3.1, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS TO EXERCISE PRICE AND WARRANT STOCK
4.1. ADJUSTMENT OF EXERCISE PRICE. The Exercise Price at which
this Warrant is exercisable shall be subject after the date hereof to
adjustment, without duplication, as follows:
(a) In case the Company shall (i) pay a dividend on any class of
its Capital Stock in shares of its Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares or (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such action shall
be adjusted retroactively as provided below so that the Exercise Price
thereafter shall be determined by multiplying the Exercise Price at which
this Warrant was theretofore exercisable by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding
immediately following such action and of which the numerator shall be the
number of shares of Common Stock outstanding immediately
<PAGE>
prior thereto. Such adjustment shall be made whenever any event listed above
shall occur and shall become effective retroactively immediately after the
record date in the case of a dividend and immediately after the effective
date in the case of a subdivision or combination.
(b) No adjustment in the Exercise Price shall be required unless
the adjustment would require an increase or decrease of at least 1% in the
Exercise Price then in effect; PROVIDED, HOWEVER, that any adjustments that
by reason of this Section 4.1(b) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this section 4.1 shall be made to the nearest cent.
(c) In case of any reclassification of the Common Stock, any
consolidation of the Company with, or merger of the Company into, any other
entity, any merger of another entity into the Company (other than a merger
that does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), any
compulsory share exchange pursuant to which share exchange the Common Stock is
converted into other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction whereby the
Holder of this Warrant shall have the right thereafter, during the period
this Warrant shall be exercisable, to exercise this Warrant only into the
kind and amount of securities, cash and other property receivable upon the
reclassification, consolidation, merger, or share exchange by a holder of the
number of shares of Common Stock of the Company into which this Warrant would
have been exercisable immediately prior to the reclassification,
consolidation, merger, or share exchange. The Company, the Person formed by
consolidation or resulting from the merger or which acquires the Company's
shares, as the case may be, shall make provisions in its certificate or
articles of incorporation or other constituent document to establish such
rights. The certificate or articles of incorporation or other constituent
document shall provide for adjustments, which, for events subsequent to the
effective date of the certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 4. The provisions of this
Section 4.1(c) shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
4.2. ADJUSTMENT OF WARRANT STOCK. Whenever the Exercise Price is
adjusted, as herein provided, the number of shares of Common Stock
purchasable upon exercise of this Warrant following the effectiveness of such
adjustment shall be adjusted to the number of shares of Common Stock equal to
(i) the product of (A) the number of shares of Common Stock purchasable
immediately before such adjustment upon exercise of this Warrant and (B) the
Exercise Price in effect immediately before such adjustment divided by (ii)
the Exercise Price in effect immediately after such adjustment of the
Exercise Price.
5. NOTICES TO WARRANT HOLDERS
Whenever an event specified in Section 4.1 shall occur, the Company
shall forthwith prepare a certificate to be executed by an officer of the
Company describing, in
<PAGE>
reasonable detail, the event requiring such adjustment and a computation
thereof. The certificate shall be conclusive evidence of the correctness of
the adjustment in the absence of manifest error. The Company shall promptly
cause a signed copy of such certificate to be delivered to each Holder in
accordance with Section 12.1. The Company shall keep at its principal office
referred to in Section 2.1 or the office or agency designated pursuant to
Section 10 copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any, reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the rights of
Holder against impairment. Without limiting the generality of the foregoing,
the Company will (a) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant and
(b) use its commercially reasonable efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.
7. RESERVATION AND AUTHORIZATION OF CLASS B COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY
The Company shall at all times reserve and keep available for issue
upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full
of all outstanding Warrants. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrant and payment therefor in
accordance with the terms of such Warrant, shall be duly and validly issued
and fully paid and nonassessable, and not subject to preemptive rights.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company
to the holders of its Common Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the
close of business on a Business Day. The Company will not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
9. LOSS OF MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant
<PAGE>
and indemnity reasonably satisfactory to it, and in case of mutilation upon
surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; PROVIDED, in the case
of mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be, and shall initially be, the
principal executive offices of the Company) where the Warrants may be
presented for exercise, registration of transfer, division or combination as
provided in this Warrant.
11. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmation action by Holder
to purchase shares of Common Stock, and no enumeration herein of the rights
or privileges of Holder hereof, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors
of the Company.
12. MISCELLANEOUS
12.1 NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to any Holder or Holder of Warrant Stock:
AMFM Interactive Inc.
c/o AMFM Inc.
1845 Woodall Rogers Freeway
Suite 1300
Dallas, Texas 75201
Attention: President of Chancellor Media Services
Facsimile: (214) 979-6699
with copies to:
AMFM Inc.
1845 Woodall Rodgers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Facsimile: (214) 979-6699
and
<PAGE>
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attention: Michael D. Wortley
Facsimile: (214) 999-7732
(b) If to the Company:
Cyber Dialogue Inc.
304 Hudson Street
6th Floor
New York, New York 10013
Attention: Mark Esiri
Facsimile: (212) 255-6622
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Michael P. Rogan
Facsimile: (202) 371-7936
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, or three (3) Business
Days after the same shall have been deposited in the United States mail.
Failure or delay in delivering copies of any notice, demand, request,
approval declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration,
delivery or other communication.
12.2. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
3.1, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the successors and
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Stock.
12.3. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
<PAGE>
12.4 HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
12.5 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REGARD TO THE PROVISIONS THEREOF RELATING TO
CONFLICT OF LAWS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
Dated: August 30, 1999
CYBER DIALOGUE INC.
By: /s/ Mark Esiri
-----------------------------------
Name: Mark Esiri
-----------------------------------
Title: CHIEF EXECUTIVE OFFICER
-----------------------------------
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of the attached Warrant irrevocably
exercises this Warrant for the purchase of _____ shares of Common Stock of
Cyber Dialogue Inc., and herewith makes payment therefor, all at the price
and on the terms and conditions specified in the attached Warrant and
requests that certificates for the shares of Common Stock hereby purchased
(and any securities or other property issuable upon such exercise) be issued
in the name of and delivered the undersigned at the address set forth below.
---------------------------------
(Name of Registered Owner)
----------------------------------
(Signature of Registered Owner)
----------------------------------
(Street Address)
----------------------------------
(City) State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached
Warrant hereby sells assigns and transfers unto the Assignee named below all
of the rights of the undersigned under the attached Warrant, with respect to
the number of shares of Common Stock set forth below.
No of Shares
Name and Address of Assignee Of Common Stock
- ---------------------------- ---------------
and does hereby irrevocably constitute and appoint ___________________
attorney-in-fact to register such transfer on the books of Cyber Dialogue
Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated: Print Name:
---------------- ---------------------
Signature
---------------------
Witness:
---------------------
NOTICE: This signature on this assignment must correspond with the name
as written upon the face of the attached Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
Exhibit 10.12
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND ANY SHARES ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE TIME
OF SUCH OFFERING, SALE OR TRANSFER.
CYBER DIALOGUE INC.
Common Stock Purchase Warrant
New York, New York
No. W-1 March 1, 1999
Cyber Dialogue Inc. (the "Company"), a Delaware corporation, for
value received, hereby certifies that Wand Equity Portfolio II, L.P., or
registered assigns, is entitled to purchase from the Company 1,926 duly
authorized, validly issued, fully paid and nonassessable shares of common stock,
par value $.01 per share (the "Common Stock") of the Company at the purchase
price per share of $101.96, at any time or from time to time prior to 5:00 P.M.,
New York City time, on March 31, 2007 (or such later date as may be determined
pursuant to section 18), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is the Common Stock Purchase Warrant (the "Warrant",
such term to include any such warrants issued in substitution therefor)
originally issued in connection with the issue by the Company of a 9% Senior
Convertible Note, dated March 1, 1999, to Wand Equity Portfolio II, L.P. (the
"Holder"). The Warrant originally so issued evidences rights to purchase an
aggregate of 1,926 shares of Common Stock subject to adjustment as provided
herein. Certain capitalized terms used in this Warrant are defined in section
13; references to an "Exhibit" are, unless otherwise specified, to one of the
Exhibits attached to this Warrant and references to a "section" are, unless
otherwise specified, to one of the sections of this Warrant.
<PAGE>
1. Exercise of Warrant.
1.1. Manner of Exercise. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any Business Day,
by surrender of this Warrant to the Company at its principal office, accompanied
by a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company, or in the manner provided in section 1.5 or section 1.6 (or by any
combination of such methods), in the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
thereof) designated in such subscription by (b) $101.96, and such holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities)
determined as provided in sections 2 through 4.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise from time to time of this Warrant, in whole or in part, and
in any event within five Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to section
9, as such holder (upon payment by such holder of any applicable transfer taxes)
may direct,
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash in an amount equal to the same fraction of the
Market Price per share on the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number
<PAGE>
of shares of Common Stock equal (without giving effect to any adjustment
thereof) to the number of such shares called for on the face of this
Warrant minus the number of such shares designated by the holder upon such
exercise as provided in section 1.1.
1.4. Company to Reaffirm Obligations. The Company will, at the time
of each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights to which such holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the holder of this
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to such holder.
1.5. Payment by Application of Note. Upon any exercise of this
Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount including accrued but unpaid interest of any Note at the time
held by such holder, in which case the Company will accept the principal amount
specified in such notice in satisfaction of a like amount of such payment. In
case less than the entire unpaid principal amount of the Note shall be so
specified, the principal amount so specified shall be credited, as of the date
of such exercise. Upon any partial application of a Note, the Company at its
expense shall forthwith issue and deliver to or upon the order of the holder
thereof a new Note in principal amount equal to the unpaid principal amount of
such surrendered Note which has not been applied against such payment, such new
Note to be dated and to bear interest from the date to which interest has been
paid on such surrendered Note. Within two Business Days after receipt of any
such notice, the Company will pay to the holder of the Note giving such notice,
in the manner provided in the Note, all unpaid interest on the principal amount
so specified in such notice, accrued to the date of the exercise of such
Warrant.
1.6 Payment by Application of Shares Otherwise Issuable. Upon any
exercise of this Warrant, the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of this Warrant at the
time of such exercise, to apply to the payment required by section 1.1 such
number of the shares of Common Stock otherwise issuable to such holder upon such
exercise as shall be specified in such notice, in which case an amount equal to
the excess of the aggregate Current Market Price of such specified number of
shares on the date of exercise over the portion of the payment required by
section 1.1 attributable to such shares shall be deemed to have been
3
<PAGE>
paid to the Company and the number of shares issuable upon such exercise shall
be reduced by such specified number.
2. Adjustment of Common Stock Issuable Upon Exercise.
2.1. General; Warrant Price. The number of shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this section 2) be issuable
upon such exercise, as designated by the holder hereof pursuant to section 1.1,
by the fraction of which (a) the numerator is $101.96 and (b) the denominator is
the Warrant Price in effect on the date of such exercise. The "Warrant Price"
shall initially be $101.96 per share, shall be adjusted and readjusted from time
to time as provided in this section 2 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the lesser of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
(a) the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the lesser of such
Current Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
4
<PAGE>
provided that, for the purposes of this section 2.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
2.2.2 Extraordinary Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than a dividend
payable in Additional Shares of Common Stock, then, and in each such case,
subject to section 2.8, the Warrant Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
any class of securities entitled to receive such dividend or distribution shall
be reduced, effective as of the close of business on such record date, to a
price (calculated to the nearest .001 of a cent) determined by multiplying such
Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in
effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the amount of such dividend or distribution (as determined
in good faith by the Board of Directors of the Company) applicable to one
share of Common Stock, and
(y) the denominator of which shall be such Current Market Price.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or assumption or,
in case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), provided that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined
5
<PAGE>
pursuant to section 2.5) of such shares would be less than the lesser of the
Current Market Price and the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and provided, further, that in any such case in
which Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon
the subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
any Person or group of Persons of any specified number or percentage of
the Voting Securities of the Company or (z) any similar event or
occurrence, each such case to be deemed hereunder to involve a separate
issuance of Additional Shares of Common Stock, Options or Convertible
Securities, as the case may be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion
or exchange under such Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or
6
<PAGE>
retirement of any such Convertible Securities the rights of conversion or
exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or
such cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or
sold were the Additional Shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration actually
received by the Company upon such exercise, or for the issue or sale
of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received
by the Company for the Additional Shares of Common Stock deemed to
have then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration deemed to
have been received by the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities with respect to which
such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible
Securities; and
7
<PAGE>
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment
shall be made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this section
2,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net
amount of cash received by the Company, without deducting any
expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time
of such issue or sale, as determined in good faith by the Board of
Directors of the Company (subject to confirmation by a firm of
independent certified public accountants of recognized standing
approved by the Holder), and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of
such
8
<PAGE>
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company
(subject to confirmation by a firm of independent certified public
accountants of recognized standing approved by the Holder);
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration
to protect against dilution) payable to the Company upon the
exercise in full of such Options or the conversion or exchange of
such Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, in each case computing such consideration as provided in
the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number to protect against dilution) issuable upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immedi-
9
<PAGE>
ately prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
2.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Warrant Price.
3. Consolidation, Merger, etc.
3.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2),
10
<PAGE>
then, and in the case of each such transaction, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the holder of this Warrant, upon the exercise hereof at any time after
the consummation of such transaction, shall be entitled to receive (at the
aggregate Warrant Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such holder would actually have been entitled as
a shareholder upon such consummation if such holder had exercised the rights
represented by this Warrant immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations. Notwithstanding anything contained
in this Warrant to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of section 3.1 unless, prior
to the consummation thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the holder of this Warrant, (a) the
obligations of the Company under this Warrant (and if the Company shall survive
the consummation of such transaction, such assumption shall be in addition to,
and shall not release the Company from, any continuing obligations of the
Company under this Warrant), and (b) the obligation to deliver to such holder
such shares of stock, securities, cash or property as, in accordance with the
foregoing provisions of this section 3, such holder may be entitled to receive,
and such Person shall have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory to such
holder, stating that this Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without limitation, all of the
provisions of this section 3) shall be applicable to the stock, securities, cash
or property which such Person may be required to deliver upon any exercise of
this Warrant or the exercise of any rights pursuant hereto.
4. Other Dilutive Events. In case any event shall occur as to which
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (such firm to be subject to the approval of the Holder), which shall
give their opinion upon the adjustment, if any, on a basis consistent with the
11
<PAGE>
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the Holder and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of the Warrant would exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise, and (d) will not issue
any capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation or
winding-up, unless the rights of the holders thereof shall be limited to a fixed
sum or percentage of par value or a sum determined by reference to a formula
based on a published index of interest rates, an interest rate publicly
announced by a financial institution or a similar indicator of interest rates in
respect of participation in dividends and to a fixed sum or percentage of par
value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and cause independent certified public accountants of recognized
national standing (such firm to be subject to the approval of the Holder)
selected by the Company to verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in reasonable detail the
method of calculation thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (a) the consideration
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received or to be received by the Company for any Additional Shares of Common
Stock issued or sold or deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and (c) the Warrant Price
in effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by section 2) on account thereof. The Company will forthwith mail a
copy of each such report to the Holder and will, upon the written request at any
time of the Holder, furnish to the Holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its
principal office and will cause the same to be available for inspection at such
office during normal business hours by the Holder or any prospective purchaser
of a Warrant designated by the holder thereof.
7. Notices of Corporate Action. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a regular periodic
dividend payable in cash out of earned surplus in an amount not exceeding
the amount of the immediately preceding cash dividend for such period) or
other distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any
other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
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merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 45 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock (or
Other Securities) required to be reserved for purposes of exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law (other than the Securities Act) before such
shares may be issued upon exercise, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be. At any such time as Common Stock is
listed on any national securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on each such exchange,
upon official notice of issuance, the shares of Common Stock issuable upon
exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also list on such national
securities exchange, will register under the Exchange Act and will maintain such
listing of, any Other Securities that at any time are issuable upon exercise of
the Warrants, if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Company.
9. Restrictions on Transfer. 9.1. Restrictive Legends. Except as
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of except
while a registration under such Act is in effect or pursuant to an
exemption therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred
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<PAGE>
in the absence of such registration or an exemption therefrom under such
Act. Such shares may be transferred only in compliance with the conditions
specified in certain Common Stock Purchase Warrants issued by Cyber
Dialogue Inc. A complete and correct copy of the form of such Warrant is
available for inspection at the principal office of Cyber Dialogue Inc. or
at the office or agency maintained by Cyber Dialogue Inc. as provided in
such Warrant and will be furnished to the holder of such shares upon
written request and without charge."
10. Availability of Information. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections 13 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission (including Rule 144 adopted
by the Commission under the Securities Act) from time to time in effect and
relating to the availability of an exemption from the Securities Act for the
sale of any Common Stock. The Company will furnish to each holder of any
Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Commission.
11. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. Registration and Transfer of Warrants, etc.
12.1. Warrant Register; Ownership of Warrants. The Company will keep
at its principal office a register in which the Company will provide for the
registration of Warrants and the registration of transfers of Warrants. The
Company may treat the Person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company
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<PAGE>
may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new Warrant first having
been issued.
12.2. Transfer and Exchange of Warrants. Upon surrender of any
Warrant for registration of transfer or for exchange to the Company at its
principal office, the Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange therefor a new Warrant
or Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine or, in the case of any such mutilation, upon the surrender of such
Warrant for cancellation to the Company at its principal office, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) not to exceed 20,000 shares (as constituted on such date) issued
upon the exercise of options granted or to be granted under the Company's
stock option plans as in effect on the date hereof or under any other
employee stock option or purchase plan or plans adopted or assumed after
such date that represent 20% of the fully-diluted ownership of the Company
and 25% of the currently outstanding ownership of the Company as of the
date herein.
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<PAGE>
(c) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clauses (a)
and (b) by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date hereof,
but only if and to the extent that such adjustments are required as the
result of the original issuance of the Warrants, and
(d) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clauses (a)
and (b) by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date hereof,
in order to reflect any subdivision or combination of Common Stock, by
reclassification or otherwise, or any dividend on Common Stock payable in
Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term
to include any corporation which shall succeed to or assume the obligations of
the Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
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Current Market Price: On any date specified herein, the average
daily Market Price during the period of the most recent 20 days, ending on such
date, on which the national securities exchanges were open for trading, except
that if no Common Stock is then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Current Market
Price shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the value as determined by a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company, and approved by the Holder, as of the last day of any month ending
within 30 days preceding the date as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
Note: The 9% Senior Convertible Promissory Note, due September 30,
1999, of the Company originally issued to the Holder, such term to include any
such notes issued in substitution for such note.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
18
<PAGE>
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a limited liability company,
a partnership, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
Warrant Price: As defined in section 2.1.
Warrants: As defined in the introduction to this Warrant.
14. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
15. No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon the holder hereof any rights
as a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
16. Notices. All notices and other communications under this Warrant
shall be in writing and shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally recognized overnight courier,
postage prepaid,
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addressed (a) if to any holder of any Warrant, at the registered address of such
holder as set forth in the register kept at the principal office of the Company,
or (b) if to the Company, to the attention of its President at its principal
office, provided that the exercise of any Warrant shall be effective in the
manner provided in section 1.
17. Amendments. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
18. Expiration. The Company will give the holder of this Warrant not
less than six weeks nor more than two months notice of the expiration of the
right to exercise this Warrant. The right to exercise this Warrant shall expire
at 5:00 P.M., New York City time, on March 31, 2007, unless the Company shall
fail to give such notice as aforesaid, in which event the right to exercise this
Warrant shall not expire until a date six weeks after the date on which the
Company shall give the holder hereof notice of the expiration of the right to
exercise this Warrant.
19. Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
21. Judicial Proceedings; Waiver of Jury. Any judicial proceeding
brought against the Company with respect to this Warrant may be brought in any
court of competent jurisdiction in the State of New York or of the United States
of America for the Southern District of New York and, by execution and delivery
of this Agreement, the Company (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Warrant, subject to any rights of appeal, and (b) irrevocably waives
any objection the Company may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company hereby waives personal service of process and
consents that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of section 16, and service so made shall be
deemed
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<PAGE>
completed on the third Business Day after such service is deposited in the mail
or, if earlier, when delivered. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of any
holder of any Warrant to bring proceedings against the Company in the courts of
any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
CYBER DIALOGUE INC.
By: /s/ C. Andrew Watt
---------------------------------
Title: CFO
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<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Cyber Dialogue Inc.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______* shares of Common
Stock of Cyber Dialogue Inc. and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to _________________, whose address is
_____________________________________.
Dated: __________________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of Warrant)
_________________________________________________
(Street Address)
_________________________________________________
(City)(State)(Zip Code)
- ----------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
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<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto _____________________ the right
represented by such Warrant to purchase ___________ shares of Common Stock of
Cyber Dialogue Inc. to which such Warrant relates, and appoints ________________
Attorney to make such transfer on the books of Cyber Dialogue Inc. maintained
for such purpose, with full power of substitution in the premises.
Dated: __________________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of Warrant)
_________________________________________________
(Street Address)
_________________________________________________
(City)(State)(Zip Code)
Signed in the presence of:
____________________________________
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<PAGE>
Exhibit 10.13
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND ANY SHARES ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE
TIME OF SUCH OFFERING, SALE OR TRANSFER.
CYBER DIALOGUE INC.
Common Stock Purchase Warrant
New York, New York
No. W-2 March 1, 1999
Cyber Dialogue Inc. (the "Company"), a Delaware corporation,
for value received, hereby certifies that Wand Affiliates Fund, L.P., or
registered assigns, is entitled to purchase from the Company 113 duly
authorized, validly issued, fully paid and nonassessable shares of common stock,
par value $.01 per share (the "Common Stock") of the Company at the purchase
price per share of $101.96, at any time or from time to time prior to 5:00 P.M.,
New York City time, on March 31, 2007 (or such later date as may be determined
pursuant to section 18), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is the Common Stock Purchase Warrant (the
"Warrant", such term to include any such warrants issued in substitution
therefor) originally issued in connection with the issue by the Company of a 9%
Senior Convertible Note, dated March 1, 1999, to Wand Affiliates Fund, L.P. (the
"Holder"). The Warrant originally so issued evidences rights to purchase an
aggregate of 113 shares of Common Stock subject to adjustment as provided
herein. Certain capitalized terms used in this Warrant are defined in section
13; references to an "Exhibit" are, unless otherwise specified, to one of the
Exhibits attached to this Warrant and references to a "section" are, unless
otherwise specified, to one of the sections of this Warrant.
<PAGE>
1. EXERCISE OF WARRANT.
1.1. MANNER OF EXERCISE. This Warrant may be exercised by the
holder hereof, in whole or in part, during normal business hours on any Business
Day, by surrender of this Warrant to the Company at its principal office,
accompanied by a subscription in substantially the form attached to this Warrant
(or a reasonable facsimile thereof) duly executed by such holder and accompanied
by payment, in cash, by certified or official bank check payable to the order of
the Company, or in the manner provided in section 1.5 or section 1.6 (or by any
combination of such methods), in the amount obtained by multiplying (a) the
number of shares of Common Stock (without giving effect to any adjustment
thereof) designated in such subscription by (b) $101.96, and such holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities)
determined as provided in sections 2 through 4.
1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
section 1.3 shall be deemed to have become the holder or holders of record
thereof.
1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after each exercise from time to time of this Warrant, in whole or
in part, and in any event within five Business Days thereafter, the Company at
its expense (including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the holder hereof or, subject
to section 9, as such holder (upon payment by such holder of any applicable
transfer taxes) may direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the Market Price per share on the Business Day
next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for
<PAGE>
the number of shares of Common Stock equal (without giving effect to
any adjustment thereof) to the number of such shares called for on the
face of this Warrant minus the number of such shares designated by the
holder upon such exercise as provided in section 1.1.
1.4. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the
time of each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights to which such holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, PROVIDED that if the holder of this
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to such holder.
1.5. PAYMENT BY APPLICATION OF NOTE. Upon any exercise of this
Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount including accrued but unpaid interest of any Note at the time
held by such holder, in which case the Company will accept the principal amount
specified in such notice in satisfaction of a like amount of such payment. In
case less than the entire unpaid principal amount of the Note shall be so
specified, the principal amount so specified shall be credited, as of the date
of such exercise. Upon any partial application of a Note, the Company at its
expense shall forthwith issue and deliver to or upon the order of the holder
thereof a new Note in principal amount equal to the unpaid principal amount of
such surrendered Note which has not been applied against such payment, such new
Note to be dated and to bear interest from the date to which interest has been
paid on such surrendered Note. Within two Business Days after receipt of any
such notice, the Company will pay to the holder of the Note giving such notice,
in the manner provided in the Note, all unpaid interest on the principal amount
so specified in such notice, accrued to the date of the exercise of such
Warrant.
1.6 PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE. Upon
any exercise of this Warrant, the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of this Warrant at the
time of such exercise, to apply to the payment required by section 1.1 such
number of the shares of Common Stock otherwise issuable to such holder upon such
exercise as shall be specified in such notice, in which case an amount equal to
the excess of the aggregate Current Market Price of such specified number of
shares on the date of exercise over the portion of the payment required by
section 1.1 attributable to such shares shall be
<PAGE>
deemed to have been paid to the Company and the number of shares issuable upon
such exercise shall be reduced by such specified number.
2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
2.1. GENERAL; WARRANT PRICE. The number of shares of Common
Stock which the holder of this Warrant shall be entitled to receive upon each
exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this section 2) be
issuable upon such exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator is $101.96 and (b) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $101.96 per share, shall be adjusted and
readjusted from time to time as provided in this section 2 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this section 2.
2.2. ADJUSTMENT OF WARRANT PRICE.
2.2.1 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case
the Company at any time or from time to time after the date hereof shall issue
or sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the lesser of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
(a) the numerator of which shall be (I) the number of shares
of Common Stock outstanding immediately prior to such issue or sale
plus (II) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
the lesser of such Current Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, PROVIDED
that, for the purposes of this section 2.2.1, (X) immediately after any
Additional Shares of Common Stock are deemed to have been issued
pursuant to section 2.3 or 2.4, such Additional Shares shall be deemed
to be outstanding, and (Y) treasury shares shall not be deemed to be
outstanding.
2.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the
<PAGE>
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock, other
than a dividend payable in Additional Shares of Common Stock, then, and in each
such case, subject to section 2.8, the Warrant Price in effect immediately prior
to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close of business on such
record date, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the amount of such dividend or distribution (as
determined in good faith by the Board of Directors of the Company)
applicable to one share of Common Stock, and
(y) the denominator of which shall be such Current Market
Price.
2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or assumption or,
in case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), PROVIDED that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to section 2.5) of such shares
would be less than the lesser of the Current Market Price and the Warrant Price
in effect on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record date
(or, if the Common Stock trades on an ex-dividend basis, on the date prior to
the commencement of ex-dividend trading),
<PAGE>
as the case may be, and PROVIDED, FURTHER, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made
upon the subsequent issue or sale of Convertible Securities or shares
of Common Stock upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, except in the case of any such
Options or Convertible Securities which contain provisions requiring an
adjustment, subsequent to the date of the issue or sale thereof, of the
number of Additional Shares of Common Stock issuable upon the exercise
of such Options or the conversion or exchange of such Convertible
Securities by reason of (X) a change of control of the Company, (Y) the
acquisition by any Person or group of Persons of any specified number
or percentage of the Voting Securities of the Company or (Z) any
similar event or occurrence, each such case to be deemed hereunder to
involve a separate issuance of Additional Shares of Common Stock,
Options or Convertible Securities, as the case may be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Warrant Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects
such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have
been exercised or the expiration of any rights of conversion or
exchange under any such Convertible Securities which (or purchase by
the Company and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which) shall not
have been exercised, the Warrant Price computed upon the original
issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading,
as the case may be, with respect thereto), and any subsequent adjust
ments based thereon, shall, upon such expiration (or such cancellation
or retirement, as the case may be), be recomputed as if:
<PAGE>
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the
Company upon such exercise, or for the issue or sale of all
such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue, sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was the consideration actually received by the Company
for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to
have been received by the Company (pursuant to section 2.5)
upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Warrant Price by an amount in
excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
(e) in the case of any such Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Warrant Price shall be made
until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the manner provided in subdivision (c)
above.
2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case
the Company at any time or from time to time after the date hereof shall declare
or pay
<PAGE>
any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (A) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (B) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. COMPUTATION OF CONSIDERATION. For the purposes of this
section 2,
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration,
(i) insofar as it consists of cash, be computed at
the net amount of cash received by the Company, without
deducting any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value
thereof at the time of such issue or sale, as determined in
good faith by the Board of Directors of the Company (subject
to confirmation by a firm of independent certified public
accountants of recognized standing approved by the Holder),
and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company
(subject to confirmation by a firm of independent certified
public accountants of recognized standing approved by the
Holder);
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to section 2.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
<PAGE>
(i) the total amount, if any, received and receivable
by the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration to protect
against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such
consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number to protect against dilution) issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to section 2.4, relating to stock dividends, stock
splits, etc., shall be deemed to have been issued for no consideration.
2.6. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Warrant Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effective ness of such combination or
consolidation, be proportionately increased.
2.7. DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted
<PAGE>
by the Company (or any such other issuer or Person) for a consideration such as
to dilute, on a basis consistent with the standards established in the other
provisions of this section 2, the purchase rights granted by this Warrant, then,
and in each such case, the computations, adjustments and readjustments provided
for in this section 2 with respect to the Warrant Price shall be made as nearly
as possible in the manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the exercise of the Warrants,
so as to protect the holders of the Warrants against the effect of such
dilution.
2.8. MINIMUM ADJUSTMENT OF WARRANT PRICE. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Warrant Price.
3. CONSOLIDATION, MERGER, ETC.
3.1. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Company after the date hereof (A) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (B) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (C) shall transfer all or substantially all of its
properties or assets to any other Person, or (D) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in sections 2 through 4.
<PAGE>
3.2. ASSUMPTION OF OBLIGATIONS. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not effect any of
the transactions described in clauses (a) through (d) of section 3.1 unless,
prior to the consummation thereof, each Person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (A)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant), and (B) the obligation to deliver to such
holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this section 3, such holder may be entitled to
receive, and such Person shall have similarly delivered to such holder an
opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
4. OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the provisions of section 2 or section 3 are not strictly applicable but
the failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (such firm to be subject to the approval of the Holder), which shall
give their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the Holder and shall make the adjustments described therein.
5. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other
<PAGE>
impairment. Without limiting the generality of the foregoing, the Company (A)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (B) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of the Warrants from time to time
outstanding, (C) will not take any action which results in any adjustment of the
Warrant Price if the total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise of the Warrant would
exceed the total number of shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation and available for the
purpose of issue upon such exercise, and (D) will not issue any capital stock of
any class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value or a sum determined by reference to a formula based on a published
index of interest rates, an interest rate publicly announced by a financial
institution or a similar indicator of interest rates in respect of participation
in dividends and to a fixed sum or percentage of par value in any such
distribution of assets.
6. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and cause independent certified public accountants of recognized
national standing (such firm to be subject to the approval of the Holder)
selected by the Company to verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in reasonable detail the
method of calculation thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (A) the consideration received
or to be received by the Company for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (B) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (C) the Warrant Price in
effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by section 2) on account thereof. The Company will forthwith mail a
copy of each such report to the Holder and will, upon the written request at any
time of the Holder, furnish to the Holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its
principal office and will cause the same to be available for inspection at such
office during normal business hours by the Holder or any prospective purchaser
of a Warrant designated by the holder thereof.
<PAGE>
7. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a regular
periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend for
such period) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or substantially all the assets of
the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding- up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (I) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (II) the date or expected date on which any
such reorganization, reclassifi cation, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 45 days prior to the date therein specified.
8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
(or Other Securities) required to be reserved for purposes of exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law (other than the Securities Act) before such
shares may be issued upon exercise, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be. At any such time as Common Stock is
listed on any national securities exchange,
<PAGE>
the Company will, at its expense, obtain promptly and maintain the approval for
listing on each such exchange, upon official notice of issuance, the shares of
Common Stock issuable upon exercise of the then outstanding Warrants and
maintain the listing of such shares after their issuance; and the Company will
also list on such national securities exchange, will register under the Exchange
Act and will maintain such listing of, any Other Securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange by the
Company.
9. RESTRICTIONS ON TRANSFER.
9.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by
this section 9, each Warrant (including each Warrant issued upon the transfer of
any Warrant) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of 1933,
as amended, and may not be transferred, sold or otherwise disposed of
except while a registration under such Act is in effect or pursuant to
an exemption therefrom under such Act. This Warrant and such shares may
be transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred
in the absence of such registration or an exemption therefrom under
such Act. Such shares may be transferred only in compliance with the
conditions specified in certain Common Stock Purchase Warrants issued
by Cyber Dialogue Inc. A complete and correct copy of the form of such
Warrant is available for inspection at the principal office of Cyber
Dialogue Inc. or at the office or agency maintained by Cyber Dialogue
Inc. as provided in such Warrant and will be furnished to the holder of
such shares upon written request and without charge."
<PAGE>
10. AVAILABILITY OF INFORMATION. If the Company shall have
filed a registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections 13 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission (including Rule 144 adopted
by the Commission under the Securities Act) from time to time in effect and
relating to the availability of an exemption from the Securities Act for the
sale of any Common Stock. The Company will furnish to each holder of any
Warrants, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Commission.
11. RESERVATION OF STOCK, ETC. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
12.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. The Company
will keep at its principal office a register in which the Company will provide
for the registration of Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer thereof as the owner of such Warrant for all purposes. Subject
to section 9, a Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
12.2. TRANSFER AND EXCHANGE OF WARRANTS. Upon surrender of any
Warrant for registration of transfer or for exchange to the Company at its
principal office, the Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange therefor a new Warrant
or Warrants of
<PAGE>
like tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
12.3. REPLACEMENT OF WARRANTS. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant, upon delivery of an indemnity bond in such
reasonable amount as the Company may determine or, in the case of any such
mutilation, upon the surrender of such Warrant for cancellation to the Company
at its principal office, the Company at its expense will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
13. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
ADDITIONAL SHARES OF COMMON STOCK: All shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to section 2.3 or
2.4, deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) not to exceed 20,000 shares (as constituted on such date)
issued upon the exercise of options granted or to be granted under the
Company's stock option plans as in effect on the date hereof or under
any other employee stock option or purchase plan or plans adopted or
assumed after such date that represent 20% of the fully-diluted
ownership of the Company and 25% of the currently outstanding ownership
of the Company as of the date herein.
(c) such additional number of shares as may become issuable
upon the exercise of any of the securities referred to in the foregoing
clauses (a) and (b) by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities as in effect on
the date hereof, but only if and to the extent that such adjustments
are required as the result of the original issuance of the Warrants,
and
(d) such additional number of shares as may become issuable
upon the exercise of any of the securities referred to in the foregoing
clauses (a) and (b) by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities as in effect on
the date hereof, in order to reflect any subdivision or combination of
Common Stock, by reclassification or otherwise, or any dividend on
Common Stock payable in Common Stock.
<PAGE>
BUSINESS DAY: Any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
COMMISSION: The Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
COMMON STOCK: As defined in the introduction to this Warrant,
such term to include any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and all other stock of any class or classes (however designated) of the Company
the holders of which have the right, without limitation as to amount, either to
all or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
COMPANY: As defined in the introduction to this Warrant, such
term to include any corporation which shall succeed to or assume the obligations
of the Company hereunder in compliance with section 3.
CONVERTIBLE SECURITIES: Any evidences of indebtedness, shares
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
CURRENT MARKET PRICE: On any date specified herein, the
average daily Market Price during the period of the most recent 20 days, ending
on such date, on which the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
EXCHANGE ACT: The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
MARKET PRICE: On any date specified herein, the amount per
share of the Common Stock, equal to (a) the last sale price of such Common
Stock, regular way, on such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof on such date, in each
case as officially reported
<PAGE>
on the principal national securities exchange on which such Common Stock is then
listed or admitted to trading, or (b) if such Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of the
Common Stock on such date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the closing bid
and asked prices of the Common Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then listed or admitted to
trading on any national exchange or quoted in the over-the-counter market, the
value as determined by a firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company, and approved by the
Holder, as of the last day of any month ending within 30 days preceding the date
as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
NOTE: The 9% Senior Convertible Promissory Note, due September
30, 1999, of the Company originally issued to the Holder, such term to include
any such notes issued in substitution for such note.
OPTIONS: Rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
OTHER SECURITIES: Any stock (other than Common Stock) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
PERSON: A corporation, an association, a limited liability
company, a partnership, an organization, a business, an individual, a government
or political subdivision thereof or a governmental agency.
SECURITIES ACT: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
TRANSFER: Any sale, assignment, pledge or other disposition of
any security, or of any interest therein, which could constitute a "sale" as
that term is defined in section 2(3) of the Securities Act.
<PAGE>
WARRANT PRICE: As defined in section 2.1.
WARRANTS: As defined in the introduction to this Warrant.
14. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained
in this Warrant shall be construed as conferring upon the holder hereof any
rights as a stock holder of the Company or as imposing any obligation on such
holder to purchase any securities or as imposing any liabilities on such holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
16. NOTICES. All notices and other communications under this
Warrant shall be in writing and shall be delivered, or mailed by registered or
certified mail, return receipt requested, by a nationally recognized overnight
courier, postage prepaid, addressed (A) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (B) if to the Company, to the attention of
its President at its principal office, PROVIDED that the exercise of any Warrant
shall be effective in the manner provided in section 1.
17. AMENDMENTS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.
18. EXPIRATION. The Company will give the holder of this
Warrant not less than six weeks nor more than two months notice of the
expiration of the right to exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 P.M., New York City time, on March 31, 2007, unless
the Company shall fail to give such notice as aforesaid, in which event the
right to exercise this Warrant shall not expire until a date six weeks after the
date on which the Company shall give the holder hereof notice of the expiration
of the right to exercise this Warrant.
<PAGE>
19. DESCRIPTIVE HEADINGS. The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
21. JUDICIAL PROCEEDINGS; WAIVER OF JURY. Any judicial
proceeding brought against the Company with respect to this Warrant may be
brought in any court of competent jurisdiction in the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, the Company (A) accepts, generally and
unconditionally, the nonexclusive jurisdiction of such courts and any related
appellate court, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Warrant, subject to any rights of appeal, and
(B) irrevocably waives any objection the Company may now or hereafter have as to
the venue of any such suit, action or proceeding brought in such a court or that
such court is an inconvenient forum. The Company hereby waives personal service
of process and consents that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address specified or
determined in accordance with the provisions of section 16, and service so made
shall be deemed completed on the third Business Day after such service is
deposited in the mail or, if earlier, when delivered. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any holder of any Warrant to bring proceedings against the
Company in the courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
CYBER DIALOGUE INC.
By: Andrew Watt
---------------------
Title: CFO
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Cyber Dialogue Inc.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______* shares of Common
Stock of Cyber Dialogue Inc. and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to _________________, whose address is _____________________________.
Dated:
(Signature must conform in all respects to name
of holder as specified on the face of Warrant)
(Street Address)
(City)(State)(Zip Code)
- ---------------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case
of partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the
holder surrendering the Warrant.
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto _____________________ the right
represented by such Warrant to purchase ___________ shares of Common Stock of
Cyber Dialogue Inc. to which such Warrant relates, and appoints ________________
Attorney to make such transfer on the books of Cyber Dialogue Inc. maintained
for such purpose, with full power of substitution in the premises.
Dated:
(Signature must conform in all respects to name
of holder as specified on the face of Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
<PAGE>
Exhibit 10.14
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND ANY SHARES ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE TIME
OF SUCH OFFERING, SALE OR TRANSFER.
CYBER DIALOGUE INC.
Common Stock Purchase Warrant
New York, New York
No. W-3 September 14, 1999
Cyber Dialogue Inc. (the "Company"), a Delaware corporation, for
value received, hereby certifies that eCom Partners Fund I LLC; or registered
assigns (the "holder"), is entitled to purchase from the Company the Exercisable
Number (as defined in section 9) of duly authorized, validly issued, fully paid
and nonassessable shares of common stock, par value $.01 per share (the "Common
Stock") of the Company at the Purchase Price (as defined in section 9), at any
time or from time to time prior to 5:00 P.M., New York City time, on the
three-year anniversary of the Issuance Date (or such later date as may be
determined pursuant to section 14), all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is the Common Stock Purchase Warrant (the "Warrant",
such term to include any such warrants issued in substitution therefor)
originally issued on September 14, 1999 (the "Issuance Date") in connection with
the Consulting Agreement of even date herewith between the Company and the
holder. The Warrant originally so issued evidences rights to purchase the
Exercisable Number of shares of Common Stock subject to adjustment as provided
herein. Certain capitalized terms used in this Warrant are defined in section 9;
references to an "Exhibit" are, unless otherwise specified, to one of the
Exhibits attached to this Warrant and references to a "section" are, unless
otherwise specified, to one of the sections of this Warrant.
<PAGE>
1. Exercise of Warrant.
1.1. Representations of the Holder. Prior to exercise of the
Warrant, the holder shall represent and warrant that (i) it is an "accredited
investor" as such term is defined in Regulation D under the Securities Act; (ii)
it is acquiring the shares of Common Stock for its own account for investment
and not with a view to, or for sale in connection with, any distribution thereof
in violation of the Securities Act, nor with any present intention of
distributing or selling the same in violation of the Securities Act; and (iii)
it confirms that it has such knowledge and experience in financial and business
matters that such holder is capable of evaluating the merits and risks of an
investment in the shares and of making an informed investment decision and
understands that (A) this investment is suitable only for an investor which is
able to bear the economic consequences of losing its entire investment; (B) the
purchase of the shares hereunder is a speculative investment which involves a
high degree of risk of loss of the entire investment; and (C) there are
substantial restrictions on the transferability of, and there will be no public
market for, the shares, and accordingly, it may not be possible for such holder
to liquidate such holder's investment in case of emergency.
1.2. Manner of Exercise. This Warrant may be exercised by the
holder, in whole or in part, during normal business hours on any Business Day,
by surrender of this Warrant to the Company at its principal office, accompanied
by a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company, or in the manner provided in section 1.5 (or by any combination of
such methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) the Purchase Price, and such holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock determined as provided in sections 2
and 3.
1.3. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.2, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such exercise as provided in section 1.4 shall be deemed to have
become the holder or holders of record thereof.
<PAGE>
1.4. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise from time to time of this Warrant, in whole or in part, and
in any event within five Business Days thereafter, the Company will cause to be
issued in the name of and delivered to the holder hereof or, subject to section
5, as such holder (upon payment by such holder of any applicable transfer taxes)
may direct,
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock to
which such holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be entitled,
cash in an amount equal to the same fraction of the Market Price per share
on the Business Day next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.2.
1.5. Payment by Application of Shares Otherwise Issuable. Upon any
exercise of this Warrant, the holder may, at its option, instruct the Company,
by written notice accompanying the surrender of this Warrant at the time of such
exercise, to apply to the payment required by section 1.2 such number of the
shares of Common Stock otherwise issuable to such holder upon such exercise as
shall be specified in such notice, in which case an amount equal to the excess
of the aggregate Current Market Price of such specified number of shares on the
date of exercise over the portion of the payment required by section 1.2
attributable to such shares shall be deemed to have been paid to the Company and
the number of shares issuable upon such exercise shall be reduced by such
specified number.
2. Adjustment of Common Stock Issuable Upon Exercise.
2.1. General; Warrant Price. The number of shares of Common Stock
which the holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this section 2) be issuable
upon such exercise, as designated by the holder hereof pursuant to section 1.2,
by the fraction of which (a) the numerator is the Purchase Price and (b) the
denominator is the Warrant Price in
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<PAGE>
effect on the date of such exercise. The "Warrant Price" shall initially be the
Purchase Price per share, shall be adjusted and readjusted from time to time as
provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2 Treatment of Issuances of Additional Shares of Common Stock.
2.2.1 Adjustment. Subject to Section 2.2.2, in case the Company at
any time or from time to time shall issue or sell Additional Shares of Common
Stock without consideration or for a consideration per share less than the
lesser of the Current Market Price and the Warrant Price in effect immediately
prior to such issue or sale (in either case, a "Below Market Issuance"), then,
in each such case, subject to section 2.6, such Warrant Price shall be reduced,
concurrently with such issue or sale, to a price (calculated to the nearest .001
of a cent) determined by multiplying such Warrant Price by a fraction:
(a) the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such Additional Shares of
Common Stock so issued or sold would purchase at the lesser of such
Current Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale.
2.2.2 Limitation on Adjustment. Section 2.2.1 shall not apply if the
Below Market Issuance had been approved:
(a) in accordance with Section 7.6(E) of the Common Stock Purchase
Agreement of the Company of even date herewith (as such agreement may
subsequently be amended, supplemented or otherwise modified by the parties
thereto, the "Stock Purchase Agreement") or under any other agreement
involving the Company and the holder or any of its affiliates granting the
holder or its affiliate any approval rights with respect to such Below
Market Issuance, or
4
<PAGE>
(b) by any member of the Board of Director designated by the holder
or any its affiliates under any stockholders agreement or other
arrangement involving the Company and any of its other stockholders.
2.3. Treatment of Extraordinary Dividends and Distributions. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend or other distribution on the Common Stock (other than (x)
regular periodic dividends payable in cash out of earned surplus and (y) shares
of Common Stock), then, and in each such case, the Warrant Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction:
(x) the numerator of which shall be the Current Market Price in
effect on such record date less the amount of such dividend or
distribution (as determined in good faith by the Board of Directors of the
Company) applicable to one share of Common Stock, and
(y) the denominator of which shall be such Current Market Price.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend or other distribution on the Common Stock payable in Common
Stock, or shall effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock), then, and in each such
case, the Warrant Price shall be reduced, effective as of (a) in the case of any
such dividend, immediately after the close of business on the record date for
the determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction:
(x) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such dividend or subdivision, and
(y) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such dividend or subdivision.
5
<PAGE>
2.5. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.6. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Warrant Price.
3. Extraordinary Transactions.
3.1. Consolidation, Merger or Transfer. In case the Company after
the date hereof (a) shall consolidate with or merge into any other Person and
shall not be the continuing or surviving corporation of such consolidation or
merger, or (b) shall permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, the Company shall give 30 days' notice
of such transaction to the holder, which notice shall specify that the Warrant
will terminate unless exercised prior to such transaction and, provided such
notice is timely given, this this Warrant shall terminate immediately prior to
consummation of such transaction unless previously exercised by the holder.
3.2. Reorganization or Classification. In case the Company after the
date hereof shall effect a capital reorganization or reclassification of the
Common Stock (other than a capital reorganization or reclassification for which
adjustment in the Warrant Price is provided in section 2), then, and in the case
of each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
transaction, shall be entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common Stock issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock
issuable upon such exercise prior to such consummation, the number
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<PAGE>
of shares of capital stock of the Company which such holder would actually have
been entitled to receive as a shareholder upon such consummation if such holder
had exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments (subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in section 2.
4. Notices of Corporate Action. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a regular periodic
dividend payable in cash out of earned surplus) or other distribution, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any
other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend or distribution, and the amount and character of such dividend or
distribution and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock shall be entitled to exchange their shares of Common Stock for the
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 45
days prior to the date therein specified.
5. Restrictions on Transfer.
5.1. Restrictive Legends. Except as otherwise permitted by this
section 5, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
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<PAGE>
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of except
while a registration under such Act is in effect or pursuant to an
exemption therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 5, each certificate for Common
Stock issued upon the exercise of any Warrant, and each certificate issued upon
the transfer of any such Common Stock shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence
of such registration or an exemption therefrom under such Act. Such shares
may be transferred only in compliance with the conditions specified in
certain Common Stock Purchase Warrants issued by Cyber Dialogue Inc. A
complete and correct copy of the form of such Warrant is available for
inspection at the principal office of Cyber Dialogue Inc. or at the office
or agency maintained by Cyber Dialogue Inc. as provided in such Warrant
and will be furnished to the holder of such shares upon written request
and without charge."
5.2. Recipients of Transfer. The holder shall not transfer the
Warrant to any person other than an affiliate or principal of eCom Partners
Fund, L.P., and only if such transferee is an "accredited investor" as such term
is defined in Regulation D of the Securities Act, and the transfer would not
otherwise cause registration under the Securities Act to be required.
6. Availability of Information. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company will comply with the reporting requirements of
Sections 13 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission (including Rule 144 adopted
by the Commission under the Securities Act) from time to time in effect and
relating to the availability of an exemption from the Securities Act for the
sale of any Common Stock. The Company will furnish to each holder of any
Warrants, promptly upon their becoming available, copies of all financial
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<PAGE>
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Commission.
7. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon exercise of the
Warrant, the number of shares of Common Stock from time to time issuable upon
exercise of the Warrant. All shares of Common Stock issuable upon exercise of
the Warrant shall be duly authorized and, when issued upon such exercise, shall
be validly issued and, in the case of shares, fully paid and nonassessable with
no liability on the part of the holders thereof.
8. Registration and Transfer of Warrant, etc.
8.1. Warrant Register; Ownership of Warrant. The Company will keep
at its principal office a register in which the Company will provide for the
registration of the Warrant and the registration of transfers of the Warrant.
The Company may treat the Person in whose name the Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary. Subject to section 5, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
8.2. Transfer and Exchange of Warrant. Upon surrender of the Warrant
for registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will (subject to compliance with section 5,
if applicable) execute and deliver in exchange therefor a new Warrant or
Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
8.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine or, in the case of any such mutilation, upon the surrender of such
Warrant for cancellation to the Company at its principal office, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
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<PAGE>
9. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares of Common Stock issued
or sold by the Company after the date hereof, whether or not subsequently
reacquired or retired by the Company, other than shares issuable:
(i) in connection with the Stock Purchase Agreement or the
transactions contemplated thereby;
(ii) upon the exercise or conversion of any security disclosed
in Section 3.3 of the Disclosure Schedule to the Stock Purchase Agreement;
or
(iii) upon exercise of options granted under the Company's
stock option plans as long as the aggregate number of such shares does not
exceed 20% of the fully-diluted ownership of the Company and 25% of the
Outstanding Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Company: As defined in the introduction to this Warrant.
Current Market Price: On any date specified herein, the average
daily Market Price during the period of the most recent 20 days, ending on such
date, on which the national securities exchanges were open for trading, except
that if no Common Stock is then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Current Market
Price shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
10
<PAGE>
Exercisable Number: (i) 1,477 shares of Common Stock if the Warrant
is exercised on or before the one-year anniversary of the Issuance Date; (ii)
1,149 shares of Common Stock if the Warrant is exercised during the period
beginning one day after the one-year anniversary of the Issuance Date and ending
on the two-year anniversary of the Issuance Date; and (iii) 941 shares of Common
Stock if the Warrant is exercised during the period beginning one day after the
two-year anniversary of the Issuance Date and ending on the three-year
anniversary of the Issuance Date.
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock on such
date or, if no such sale takes place on such date, the average of the closing
bid and asked prices thereof on such date, in each case as officially reported
on the principal national securities exchange on which such Common Stock is then
listed or admitted to trading, or (b) if such Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security by the NASD, the last trading price of the
Common Stock on such date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the closing bid
and asked prices of the Common Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then listed or admitted to
trading on any national exchange or quoted in the over-the-counter market, the
value as determined by a firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company, as of the last day
of any month ending within 30 days preceding the date as of which the
determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
Person: A corporation, an association, a limited liability company,
a partnership, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
Purchase Price: The purchase price per share of Common Stock of (i)
$677.17 if the Warrant is exercised on or before the one-year anniversary of the
Issuance Date; (ii) $869.96 if the Warrant is exercised during the period
beginning one day after the one-year anniversary of the Issuance Date and ending
on the two-year anniversary of the Issuance Date; and (iii) $1,062.75 if the
Warrant is exercised during the period beginning one day after the two-year
anniversary of the Issuance Date and ending on the three-year anniversary of the
Issuance Date.
11
<PAGE>
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Stock Purchase Agreement: As defined in section 2.2.2.
Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
Warrant Price: As defined in section 2.1.
Warrants: As defined in the introduction to this Warrant.
10. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
11. No Rights or Liabilities as Stockholder. Nothing contained in
this Warrant shall be construed as conferring upon the holder hereof any rights
as a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
12. Notices. All notices and other communications under this Warrant
shall be in writing and shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally recognized overnight courier,
postage prepaid, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its principal office, provided that the exercise of any Warrant
shall be effective in the manner provided in section 1.
13. Amendments. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party
12
<PAGE>
against which enforcement of such change, waiver, discharge or termination is
sought.
14. Expiration. Except with respect to section 3, in which case the
notice provisions specified therein shall apply, the Company will give the
holder of this Warrant not less than six weeks nor more than two months notice
of the expiration of the right to exercise this Warrant. Except as otherwise
provided in section 3, the right to exercise this Warrant shall expire at 5:00
P.M., New York City time, on the three-year anniversary of the Issuance Date,
unless the Company shall fail to give such notice as aforesaid, in which event
the right to exercise this Warrant shall not expire until a date six weeks after
the date on which the Company shall give the holder hereof notice of the
expiration of the right to exercise this Warrant.
15. Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
16. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
17. Judicial Proceedings; Waiver of Jury. Any judicial proceeding
brought against the Company with respect to this Warrant may be brought in any
court of competent jurisdiction in the State of New York or of the United States
of America for the Southern District of New York and, by execution and delivery
of this Agreement, the Company (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Warrant, subject to any rights of appeal, and (b) irrevocably waives
any objection the Company may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company hereby waives personal service of process and
consents that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of section 12, and service so made shall be
deemed completed on the third Business Day after such service is deposited in
the mail or, if earlier, when delivered. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any holder of any Warrant to bring proceedings against the Company in the
courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL
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<PAGE>
PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
CYBER DIALOGUE INC.
By: /s/ Mark Esiri
-------------------------------------
Title: CEO Mark Esiri
14
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Cyber Dialogue Inc.
The undersigned registered holder of the within Warrant hereby represents
that (i) it is an "accredited investor" as such term is defined in Regulation D
under the Securities Act; (ii) it is acquiring the shares for its own account
for investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act, nor with any present
intention of distributing or selling the same in violation of the Securities
Act; and (iii) it confirms that it has such knowledge and experience in
financial and business matters that such holder is capable of evaluating the
merits and risks of an investment in the shares and of making an informed
investment decision and understands that (A) this investment is suitable only
for an investor which is able to bear the economic consequences of losing its
entire investment; (B) the purchase of the shares hereunder is a speculative
investment which involves a high degree of risk of loss of the entire
investment; and (C) there are substantial restrictions on the transferability
of, and there will be no public market for, the shares, and accordingly, it may
not be possible for such holder to liquidate such holder's investment in case of
emergency.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______* shares of Common
Stock of Cyber Dialogue Inc. and herewith makes payment of $___________
therefor, and
- ----------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
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<PAGE>
requests that the certificates for such shares be issued in the name of, and
delivered to _________________, whose address is ______________________________.
Dated:
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
` face of Warrant)
----------------------------------------
(Street Address)
----------------------------------------
(City)(State)(Zip Code)
16
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto _____________________ the right
represented by such Warrant to purchase ___________ shares of Common Stock of
Cyber Dialogue Inc. to which such Warrant relates, and appoints ________________
Attorney to make such transfer on the books of Cyber Dialogue Inc. maintained
for such purpose, with full power of substitution in the premises.
Dated:
----------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
----------------------------------------
(Street Address)
----------------------------------------
(City)(State)(Zip Code)
Signed in the presence of:
- ----------------------------------------
17
<PAGE>
Exhibit 10.15
[LETTERHEAD OF CYBER DIALOGUE]
December 21, 1999
Lynne R. Bolen
267 Main Street #2A
Boston, MA 02129
Dear Lynne:
Following your recent discussions with Mark, I write to summarize Cyber
Dialogue's offer of employment. In parallel to this letter, we are drafting
an employment agreement for your review. We appreciate your patience while we
have been getting to know you better. Our interview process is a somewhat
lengthy experience, as it takes a while for us to understand the challenges
that candidates are looking for, and whether or not Cyber Dialogue is a place
where they will be happy. We have gathered together an incredible team of
smart, energetic, caring people over the years, and exercise extreme
diligence in choosing new people to join this family.
Anyway, we have all very much enjoyed meeting with you, and we feel that you are
an excellent candidate and someone with whom we would very much like to work. As
such, we are excited to offer you a full-time position with Cyber Dialogue as
VICE PRESIDENT, INTERNET DATABASE MARKETING, which is an exempt position.
Specifics of our offer include the following:
1. As we have discussed, this job is a full-time position, and we would
like you to start on January 14, 2000 or as soon as is mutually
agreeable. This employment agreement is for the term of one year.
After one year's time, a period of 3 months notice is required prior
to termination without cause.
2. You will be compensated as follows:
- Base -- at an annualized rate of $170,000. This will be paid
every 2 weeks, and, in the usual way, we will deduct federal
and state income taxes, social security, unemployment
insurance, and other customary deductions.
- Relocation Allowance -- we are happy to help you with your
relocation costs, up to a ceiling of $15,000. These costs to
include moving & storage, breaking your existing lease, and
living expenses in New York while looking for more permanent
accommodation. Such expenses to be submitted on our standard
expense report. Relocation expenses in excess of $15,000 will
have to be met out of your own pocket. This also includes funds
for commuting from Boston to NYC.
3. Additionally, you will be eligible to earn further discretionary
bonuses, in accordance with the bonus policy in place from time to
time, with a guaranteed bonus of $50,000 for the first year of
employment. Our near term aggressive growth strategy means that
reinvestment in the company for the benefit of everybody is well-
understood to be one of our highest priorities. Thus, our policy at
Cyber Dialogue has always been to have conservative base salaries, but
to reward significant contributions to the success of the firm with
meaningful bonuses. Payment of such bonuses is made at the discretion
of senior management and, naturally, is based upon Cyber Dialogue's
profitability, the aforementioned reinvestment needs, and your merit.
4. Requests for time off should be approved in advance by Mark Esiri,
and we ask that you give plenty of notice. Clearly, requesting time
off does not apply for holidays observed by all of Cyber Dialogue's
employees. Currently there are 14 company-wide holidays throughout the
year, including the period between Christmas and the New Year.
5. The current Cyber Dialogue Stock Option policy allows for
discretionary stock option grants to individual employees by the Board
of Directors on a case by case basis. Accordingly, we would like to
<PAGE>
offer you the option, on the terms and conditions set forth in the
CYBER DIALOGUE INC. AMENDED AND RESTATED 1997 STOCK OPTION PLAN and
the associated NONQUALIFIED STOCK OPTION AGREEMENT, to purchase 50,000
shares of Common Stock (the "Shares") at a price (the "Option Price")
of $3.39 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
date hereof.
As stated in the NONQUALIFIED STOCK OPTION AGREEMENT, the term of the
Option shall commence on the date hereof (the "Date of Grant") and
terminate upon the expiration of ten (10) years from the Date of
Grant. 20% of this option grant will vest immediately upon employment
at Cyber Dialogue. The remaining shares of the grant shall be
exercisable over 4 years, 10% every 6 months.
6. As we have discussed, your job will involve the duties that we have
outlined as well as other tasks that we might agree are applicable to
the position. We expect everybody at Cyber Dialogue to focus
diligently on their priorities, but at the same time encourage you to
look for new challenges and opportunities throughout the company. We
won't stand in your way when you feel the time is right for a new
direction.
7. You will be entitled to 3 weeks' vacation, in addition to the week
between Christmas and New Year's Day, as well as the same paid
holidays as are observed by all Cyber Dialogue employees. Our current
policies also entitle you to other time off benefits (maternity leave,
etc.). If you would like more details with regard to these sorts of
benefits, please ask Margaret (ext. 118) to send you our Manual. As
before, we ask that you ask for time off in advance from Mark Esiri.
8. You will be entitled to participate in Cyber Dialogue's medical and
dental insurance programs and to such other employee benefits as Cyber
Dialogue offers to all of its employees from time to time. Margaret
will also be able to answer your questions with regard to these
policies. Naturally, you will be reimbursed for your business-related
expenses, in accordance with our Expense Reimbursement policy.
9. Nearly everybody works virtually from time to time, and we're sure
that you will find this useful on occasion. However, for the most
part, we ask that you perform the majority of your work in our
offices, particularly while you are getting to know what everybody
does.
10. We are flexible on almost everything, but, because of the nature of
the work that we do for clients and because of the working environment
that we encourage, we need your employment to be exclusive to Cyber
Dialogue. Thus, while you are employed by Cyber Dialogue, we require
that you not perform services for compensation for any third party.
11. Finally, in consideration of the work that you will be executing for
our clients and because of the nature of our business, we will ask in
your contract that you sign appropriate "Non-competition" and
"Confidentiality" Agreements.
We very much hope that the terms of this offer are acceptable to you. If so,
please indicate below by signing and returning one copy of this letter to us,
together with the signed "Non-compete" and "Confidentiality" Agreements. As you
know, we are anxious to fill this position, so we ask that you let us know your
intentions by DECEMBER 29, 1999. If we do not hear from you by that time, we'll
assume that you won't be joining us and this offer will lapse.
Lynne, we are all very excited about the possibility of your joining our
firm. We strongly believe in a team approach and fostering an innovative,
casual, learning atmosphere. We all feel that Cyber Dialogue has many
potentially fruitful opportunities ahead, which would only improve with your
addition to the team. Be sure to call me if you have any questions about the
contents of this offer letter.
Sincerely, ACCEPTED AND AGREED TO
THIS 14 DAY OF DECEMBER, 1999
/s/ Sharon Pilkauskas /s/ Lynne Bolen
- -------------------------------- ------------------------------
Sharon Pilkauskas Lynne Bolen
Vice President, Human Resources
<PAGE>
Exhibit 10.16
INDEMNIFICATION AGREEMENT
This Indemnification Agreement made and entered into this 14th day of
September, 1999 ("Agreement"), by and between Cyber Diaglogue Inc., a Delaware
corporation (the "Company") and Christopher P. Forester ("Indemnitee"):
WHEREAS, it is essential to the Company that it be able to retain and
attract as directors and/or officers the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors and/or
officers to litigation risks and expenses, and the limitations on the
availability of directors and officers liability insurance have made it
increasingly difficult for the Company to attract and retain such persons;
WHEREAS, the Company's by-laws require it to indemnify its directors
and/or officers to the fullest extent permitted by law and permit it to make
other indemnification arrangements and agreements; and
WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of any such by-laws or any change in the ownership of the
Company or the composition of its Board of Directors);
NOW, THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Definitions.
(a) "Corporate Status" describes the status of a person who is
serving or has served (i) as a director or officer of the Company,
(ii) in any capacity with respect to any employee benefit plan of
the Company, or (iii) as a director, partner, trustee, officer,
employee, or agent of any other Entity at the request of the
Company. For purposes of subsection (iii) of this Section 1(a), an
officer or director of the Company who is serving or has served as a
director, partner, trustee, officer, employee or agent of a
Subsidiary shall be deemed to be serving at the request of the
Company.
(b) "Entity" shall mean any corporation, partnership, limited
liability company, joint venture, trust, foundation, association,
organization or other legal entity.
<PAGE>
(c) "Expenses" shall mean all reasonable fees, costs and expenses
incurred in connection with any Proceeding (as defined below),
including, without limitation, attorneys' fees, disbursements and
retainers (including, without limitation, any such fees,
disbursements and retainers incurred by Indemnitee pursuant to
Sections 10 and 11(c) of this Agreement), fees and disbursements of
expert witnesses, private investigators and professional advisors
(including, without limitation, accountants), court costs,
transcript costs, fees of experts, travel expenses, duplicating,
printing and binding costs, telephone and fax transmission charges,
postage, delivery services, secretarial services, and other
disbursements and expenses.
(d) "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those
terms in Section 3(a) below.
(e) "Liabilities" shall mean judgments, damages, liabilities,
losses, penalties, excise taxes, fines and amounts paid in
settlement.
(f) "Proceeding" shall mean any threatened, pending or completed
claim, action, suit, arbitration, alternate dispute resolution
process, investigation, administrative bearing, appeal, or any other
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, whether formal or informal, including a proceeding
initiated by Indemnitee pursuant to Section 10 of this Agreement to
enforce Indemnitee's rights hereunder.
(g) "Subsidiary" shall mean any corporation, partnership, limited
liability company, joint venture, trust or other Entity of which the
Company owns (either directly or through or together with another
Subsidiary of the Company) either (i) a general partner, managing
member or other similar interest or (ii) (A) 50% or more of the
voting power of the voting capital equity interests of such
corporation, partnership, limited liability company, joint venture
or other Entity, or (B) 50% or more of the outstanding voting
capital stock or other voting equity interests of such corporation,
partnership, limited liability company, joint venture or other
Entity.
2. Services of Indemnitee. In consideration of the Company's covenants and
commitments hereunder, Indemnitee agrees to serve or continue to serve as a
Director of the Company. However, this Agreement shall not impose any obligation
on Indemnitee or the Company to continue Indemnitee's service to the Company
beyond any period otherwise required by law or by other agreements or
commitments of the parties, if any.
2
<PAGE>
3. Agreement to Indemnify. The Company agrees to indemnify Indemnitee as
follows:
(a) Subject to the exceptions contained in Section 4(a) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding (other than an action by or in the right of the
Company) by reason of Indemnitee's Corporate Status, Indemnitee
shall be indemnified by the Company to the fullest extent permitted
by law against all Expenses and Liabilities incurred or paid by
Indemnitee in connection with such Proceeding (referred to herein as
"Indemnifiable Expenses" and "Indemnifiable Liabilities,"
respectively, and collectively as "Indemnifiable Amounts").
(b) Subject to the exceptions contained in Section 4(b) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding by or in the right of the Company to procure a
judgment in its favor by reason of Indemnitee's Corporate Status,
Indemnitee shall be indemnified by the Company to the fullest extent
permitted by law against all Indemnifiable Expenses.
4. Exceptions to Indemnification. Indemnitee shall be entitled to
indemnification under Sections 3(a) and 3(b) above in all circumstances other
than the following:
(a) If indemnification is requested under Section 3(a) and it has
been adjudicated finally by a court of competent jurisdiction that,
in connection with the subject of the Proceeding out of which the
claim for indemnification has arisen, Indemnitee failed to act (i)
in good faith and (ii) in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company, or, with
respect to any criminal action or proceeding, Indemnitee had
reasonable cause to believe that Indemnitee's conduct was unlawful,
Indemnitee shall not be entitled to payment of Indemnifiable Amounts
hereunder.
(b) If indemnification is requested under Section 3(b) and
(i) it has been adjudicated finally by a court of competent
jurisdiction that, in connection with the subject of the
Proceeding out of which the claim for indemnification has
arisen, Indemnitee failed to act (A) in good faith and (B) in
a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, Indemnitee shall
not be entitled to payment of Indemnifiable Expenses
hereunder; or
(ii)it has been adjudicated finally by a court of competent
jurisdiction that Indemnitee is liable to the Company with
respect to any claim, issue or matter involved in the
Proceeding out of which the claim for indemnification has
arisen, including, without
3
<PAGE>
limitation, a claim that Indemnitee received an improper
personal benefit, no Indemnifiable Expenses shall be paid with
respect to such claim, issue or matter unless the Court of
Chancery or another court in which such Proceeding was brought
shall determine upon application that, despite the
adjudication of liability, but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such Indemnifiable Expenses which
such court shall deem proper.
5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit
to the Company a written request specifying the Indemnifiable Amounts for which
Indemnitee seeks payment under Section 3 of this Agreement and a short
description of the basis for the claim. The Company shall pay such Indemnifiable
Amounts to Indemnitee within twenty (20) calendar days of receipt of the
request. At the request of the Company, Indemnitee shall furnish such
documentation and information as are reasonably available to Indemnitee and
necessary to establish that Indemnitee is entitled to indemnification hereunder.
6. Indemnification for Expense of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding. Indemnitee shall be indemnified against all
Expenses reasonably incurred Indemnitee or on Indemnitee's behalf in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Agreement, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
7. Effect of Certain Resolution. Neither the settlement or termination of
any Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that Indemnitee is not entitled to indemnification hereunder. In addition, the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal action or proceeding, had reasonable cause to
believe that Indemnitee's action was unlawful.
8. Agreement to Advance Expenses; Conditions. The Company shall pay to
Indemnitee ail Indemnifiable Expenses incurred by Indemnitee in connection with
any Proceeding, including a Proceeding by or in the right of the Company, in
advance of the final disposition of such Proceeding. To the extent required by
Delaware law, Indemnitee hereby undertakes to repay
4
<PAGE>
the amount of Indemnifiable Expenses paid to Indemnitee if it is finally
determined by a court of competent jurisdiction that Indemnitee is not entitled
under this Agreement to indemnification with respect to such Expenses. This
undertaking is an unlimited general obligation of Indemnitee.
9. Procedure for Advance Payment of Expenses. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no
later than twenty (20) calendar days after the Company's receipt of such
request.
10. Remedies of Indemnitee.
(a) Right to Petition Court. In the event that Indemnitee makes a
request for payment of Indemnifiable Amounts under Sections 3 and 5
above or a request for an advancement of Indemnifiable Expenses
under Sections 8 and 9 above and the Company fails to make such
payment or advancement in a timely manner pursuant to the terms of
this Agreement, Indemnitee may petition the Court of Chancery to
enforce the Company's obligations under this Agreement.
(b) Burden of Proof. In any judicial proceeding brought under
Section 10(a) above, the Company shall have the burden of proving
that Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) Expenses. The Company agrees to reimburse Indemnitee in full for
any Expenses incurred by Indemnitee in connection with
investigating, preparing for, litigating, defending or settling any
action brought by Indemnitee under Section 10(a) above, or in
connection with any claim or counterclaim brought by the Company in
connection therewith.
(d) Validity of Agreement. The Company shall be precluded from
asserting in any Proceeding, including, without limitation, an
action under Section 10(a) above, that the provisions of this
Agreement are not valid, binding and enforceable or that there is
insufficient consideration for this Agreement and shall stipulate in
court that the Company is bound by all the provisions of this
Agreement.
(e) Failure to Act Not a Defense. The failure of the Company
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination
concerning the permissibility of the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses under this
Agreement shall not be a defense in any action brought under Section
10(a) above, and shall not create a presumption that such payment or
advancement is not permissible.
5
<PAGE>
11. Defense of the Underlying Proceeding.
(a) Notice by Indemnitee. Indemnitee agrees to notify the Company
promptly upon being served with any summons, citation, subpoena,
complaint, indictment, information, or other document relating to
any Proceeding which may result in the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses hereunder;
provided, however, that the failure to give any such notice shall
not disqualify Indemnitee from the right to receive payments of
Indemnifiable Amounts or advancements of Indemnifiable Expenses
unless the Company's ability to defend in such Proceeding is
materially and adversely prejudiced thereby.
(b) Defense by Company. Subject to the provisions of the last
sentence of this Section 11(b) and of Section 11(c) below, the
Company shall have the right to defend Indemnitee in any Proceeding
which may give rise to the payment of Indemnifiable Amounts
hereunder; provided, however that the Company shall notify
Indemnnitee of any such decision to defend within ten (10) days of
receipt of notice of any such Proceeding under Section 11(a) above.
The Company shall not, without the prior written consent of
Indemnitee, consent to the entry of any judgment against Indemnitee
or enter into any settlement or compromise which (i) includes an
admission of fault of Indemnitee or (ii) does not include, as an
unconditional term thereof, the full release of Indemnitee from all
liability in respect of such Proceeding, which release shall be in
form and substance reasonably satisfactory to Indemnitee. This
Section 11(b) shall not apply to a Proceeding brought by Indemnitee
under Section 10(a) above or pursuant to Section 19 below.
(c) Indemnitee's Right to Counsel. Notwithstanding the provisions of
Section 11(b) above, if in a Proceeding to which Indemnitee is a
party by reason of Indemnitee's Corporate Status, Indemnitee
reasonably concludes that it may have separate defenses or
counterclaims to assert with respect to any issue which may not be
consistent with the position of other defendants in such Proceeding,
or if the Company fails to assume the defense of such proceeding in
a timely manner, Indemnitee shall be entitled to be represented by
separate legal counsel of Indemnitee's choice at the expense of the
Company. In addition, if the Company fails to comply with any of its
obligations under this Agreement or in the event that the Company or
any other person takes any action to declare this Agreement void or
unenforceable, or institutes any action, suit or proceeding to deny
or to recover from Indemnitee the benefits intended to be provided
to Indemnitee hereunder, Indemnitee shall have the right to retain
counsel of Indemnitee's choice, at the expense of the Company, to
represent Indemnitee in connection with any such matter.
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12. Representations and Warranties of the Company. The Company hereby
represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority to
enter into, and be bound by the terms of, this Agreement, and the
execution, delivery and performance of the undertakings contemplated
by this Agreement have been duly authorized by the Company.
(b) Enforceability. This Agreement, when executed and delivered by
the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally.
13. Insurance. The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the Company to obtain and
maintain a policy or policies of insurance with a reputable insurance company
providing the Indemnitee with coverage for losses from wrongful acts, and to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of director and officer liability insurance,
Indemnitee shall be provided Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Company's officers and directors.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is nor reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, or if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit. The Company shall promptly notify Indemnitee of any good
faith determination not to provide such coverage.
14. Contract Rights Not Exclusive. The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time under applicable law, the Company's by-laws or certificate
of incorporation, or any other agreement, vote of stockholders or directors (or
a committee of directors), or otherwise, both as to action in Indemnitee's
official capacity and as to action in any other capacity as a result of
Indemnitee's serving as a director of the Company.
15. Successors. This Agreement shall be (a) binding upon all successors
and assigns of the Company (including any transferee of all or substantially all
of the business, stock and/or assets of the Company and any direct or indirect
successor by merger or consolidation or otherwise by operation of law) and (b)
binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall
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<PAGE>
continue for the benefit of Indemnitee and such heirs, personal representatives,
executors and administrators after Indemnitee has ceased to have Corporate
Status.
16. Subrogation. In the event of any payment of Indemnifiable Amounts
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of contribution or recovery of indemnitee against
other persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.
17. Change in Law. To the extent that a change in Delaware law (whether by
statute or judicial decision) shall permit broader indemnification or
advancement of expenses than is provided under the terms of the by-laws of the
Company and this Agreement, Indemnitee shall be entitled to such broader
indemnification and advancements, and this Agreement shall be deemed to be
amended to such extent.
18. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or any clause thereof,
shall be determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, in whole or in part, such provision or clause shall be limited
or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining previsions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.
19. Indemnitee as Plaintiff. Except as provided in Section 10(c) of this
Agreement and in the next sentence, Indemnitee shall not be entitled to payment
of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect
to any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director or officer thereof, or any third party, unless the
Company has consented to the initiation of such Proceeding. This Section shall
not apply to counterclaims or affirmative defenses asserted by Indernnitee in an
action brought against Indemnitee.
20. Modifications and Waiver. Except as provided in Section 17 above with
respect to changes in Delaware law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.
21. General Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed:
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(i) If to Indemnitee, to:
Christopher P. Forester
eCom Partners Fund I LLC
55 Walls Drive
Suite 401
Fairfield, CT 06430;
(ii) If to the Company, to:
Cyber Dialogue Inc.
304 Hudson Street
New York, New York 10013
Attention: Andrew Watt
or to such other address as may have been furnished in the same manner by any
party to the others.
22. Governing Law. This Agreement shall be governed by and construed and
enforced under the laws of Delaware without giving effect to the provisions
thereof relating to conflicts of law.
23. Consent to Jurisdiction. The Company hereby irrevocably and
unconditionally consents to the jurisdiction of the courts of the State of
Connecticut and the United States District Court for the District of
Connecticut. The Company hereby irrevocably and unconditionally waives any
objection to the laying of venue of any Proceeding arising out of or relating to
this Agreement in the courts of the State of Delaware or the United States
District Court for the District of Delaware, and hereby irrevocably and
unconditionally waives and agrees not to plead or claim that any such Proceeding
brought in any such court has been brought in an inconvenient forum.
[END OF TEXT]
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<PAGE>
IN WITNESS WHEROF, the parties hereto have executed this Agreement as of
the day and year first above written.
CYBER DIALOGUE INC.
By: /s/ C. Andrew Watt
----------------------------------
Its: CFO
INDEMNITEE
--------------------------------------
Print Name: Christopher P. Forester
Address: eCom Partners Fund I LLC
55 Walls Drive
Suite 401
Fairfield, CT 06430
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CYBER DIALOGUE INC.
By:
----------------------------------
Its:
INDEMNITEE
/s/ Christopher P. Forester
--------------------------------------
Print Name: Christopher P. Forester
Address: eCom Partners Fund I LLC
55 Walls Drive
Suite 401
Fairfield, CT 06430
<PAGE>
Exhibit 10.17
INDEMNIFICATION AGREEMENT
This Indemnification Agreement made and entered into this 14th day of
September, 1999 ("Agreement"), by and between Cyber Dialogue Inc., a Delaware
corporation (the "Company") and John Fullmer ("Indemnitee"):
WHEREAS, it is essential to the Company that it be able to retain and
attract as directors and/or officers the most capable persons available;
WHEREAS, increased corporate litigation has subjected directors and/or
officers to litigation risks and expenses, and the limitations on the
availability of directors and officers liability insurance have made it
increasingly difficult for the Company to attract and retain such persons;
WHEREAS, the Company's by-laws require it to indemnify its directors
and/or officers to the fullest extent permitted by law and permit it to make
other indemnification arrangements and agreements; and
WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of any such by-laws or any change in the ownership of the
Company or the composition of its Board of Directors);
NOW, THEREFORE, in consideration of the promises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Definitions.
(a) "Corporate Status" describes the status of a person who is
serving or has served (i) as a director or officer of the Company,
(ii) in any capacity with respect to any employee benefit plan of
the Company, or (iii) as a director, partner, trustee, officer,
employee, or agent of any other Entity at the request of the
Company. For purposes of subsection (iii) of this Section 1(a), an
officer or director of the Company who is serving or has served as a
director, partner, trustee, officer, employee or agent of a
Subsidiary shall be deemed to be serving at the request of the
Company.
(b) "Entity" shall mean any corporation, partnership, limited
liability company, joint venture, trust, foundation, association,
organization or other legal entity.
<PAGE>
(c) "Expenses" shall mean all reasonable fees, costs and expenses
incurred in connection with any Proceeding (as defined below),
including, without limitation, attorneys' fees, disbursements and
retainers (including, without limitation, any such fees,
disbursements and retainers incurred by Indemnitee pursuant to
Sections 10 and 11(c) of this Agreement), fees and disbursements of
expert witnesses, private investigators and professional advisors
(including, without limitation, accountants), court costs,
transcript costs, fees of experts, travel expenses, duplicating,
printing and binding costs, telephone and fax transmission charges,
postage, delivery services, secretarial services, and other
disbursements and expenses.
(d) "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those
terms in Section 3(a) below.
(e) "Liabilities" shall mean judgments, damages, liabilities,
losses, penalties, excise taxes, fits and amounts paid in
settlement.
(f) "Proceeding" shall mean any threatened, pending or completed
claim, action, suit, arbitration, alternate dispute resolution
process, investigation, administrative hearing, appeal, or any other
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, whether formal or informal, including a proceeding
initiated by Indemnitee pursuant to Section 10 of this Agreement to
enforce Indemnitee's rights hereunder.
(g) "Subsidiary" shall mean any corporation, partnership, limited
liability company, joint venture, trust or other Entity of which the
Company owns (either directly or through or together with another
Subsidiary of the Company) either (i) a general partner, managing
member or other similar interest or (ii) (A) 50% or more of the
voting power of the voting capital equity interests of such
corporation, partnership, limited liability company, joint venture
or other Entity, or (B) 50% or more of the outstanding voting
capital stock or other voting equity interests of such corporation,
partnership, limited liability company, joint venture or other
Entity.
2. Services of Indemnitee. In consideration of the Company's covenants and
commitments hereunder, Indemnitee agrees to serve or continue to serve as a
Director of the Company. However, this Agreement shall not impose any obligation
on Indemnitee or the Company to continue Indemnitee's service to the Company
beyond any period otherwise required by law or by other agreements or
commitments of the parties, if any.
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<PAGE>
3. Agreement to Indemnify. The Company agrees to indemnify Indemnitee as
follows:
(a) Subject to the exceptions contained in Section 4(a) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding (other than an action by or in the right of the
Company) by reason of Indemnitee's Corporate Status, Indemnitee
shall be indemnified by the Company to the fullest extent permitted
by law against all Expenses and Liabilities incurred or paid by
Indemnitee in connection with such Proceeding (referred to herein as
"Indemnifiable Expenses" and "Indemnifiable Liabilities,"
respectively, and collectively as "Indemnifiable Amounts").
(b) Subject to the exceptions contained in Section 4(b) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding by or in the right of the Company to procure a
judgment in its favor by reason of Indemnitee's Corporate Status,
Indemnitee shall be indemnified by the Company to the fullest extent
permitted by law against all Indemnifiable Expenses.
4. Exceptions to Indemnification. Indemnitee shall be entitled to
indemnification under Sections 3(a) and 3(b) above in all circumstances other
than the following:
(a) If indemnification is requested under Section 3(a) and it has
been adjudicated finally by a court of competent jurisdiction that,
in connection with the subject of the Proceeding out of which the
claim for indemnification has arisen, Indemnitee failed to act (i)
in good faith and (ii) in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the Company, or, with
respect to any criminal action or proceeding, Indemnitee had
reasonable cause to believe that Indemnitee's conduct was unlawful,
Indemnitee shall not be entitled to payment of Indemnifiable Amounts
hereunder.
(b) If indemnification is requested under Section 3(b) and
(i) it has been adjudicated finally by a court of
competent jurisdiction that, in connection with the
subject of the Proceeding out of which the claim for
indemnification has arisen, Indemnitee failed to act (A)
in good faith and (B) in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests
of the Company, Indemnitee shall not be entitled to
payment of Indemnifiable Expenses hereunder; or
(ii) it has been adjudicated finally by a court of
competent jurisdiction that Indemnitee is liable to the
Company with respect to any claim, issue or matter
involved in the Proceeding out of which the claim for
indemnification has arisen, including, without
3
<PAGE>
limitation, a claim that Indemnitee received an improper
personal benefit, no Indemnifiable Expenses shall be
paid with respect to such claim, issue or matter unless
the Court of Chancery or another court in which such
Proceeding was brought shall determine upon application
that, despite the adjudication of liability, but in view
of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such
Indemnifiable Expenses which such court shall deem
proper.
5. Procedure for Payment of Indemnifiable Amounts. Indemnitee shall submit
to the Company a written request specifying the Indemnifiable Amounts for which
Indemnitee seeks payment under Section 3 of this Agreement and a short
description of the basis for the claim. The Company shall pay such Indemnifiable
Amounts to Indemnitee within twenty (20) calendar days of receipt of the
request. At the request of the Company, Indemnitee shall furnish such
documentation and information as are reasonably available to Indemnitee and
necessary to establish that Indemnitee is entitled to indemnification hereunder.
6. Indemnification for Expense of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, Indemnitee shall be indemnified against all
Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Agreement, the termination of any claim, issue
or matter in such a Proceeding by dismissal with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
7. Effect of Certain Resolutions. Neither the settlement or termination of
any Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that Indemnitee is not entitled to indemnification hereunder. In addition, the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal action or proceeding, had reasonable cause to
believe that Indemnitee's action was unlawful.
8. Agreement to Advance Expenses; Conditions. The Company shall pay to
Indemnitee all Indemnifiable Expenses incurred by Indemnitee in connection with
any Proceeding, including a Proceeding by or in the right of the Company, in
advance of the final disposition of such Proceeding. To the extent required by
Delaware law, Indemnitee hereby undertakes to repay
4
<PAGE>
the amount of Indemnifiable Expenses paid to Indemnitee if it is finally
determined by a court of competent jurisdiction that Indemnitee is not entitled
under this Agreement to indemnification with respect to such Expenses. This
undertaking is an unlimited general obligation of Indemnitee.
9. Procedure for Advance Payment of Expenses. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no
later than twenty (20) calendar days after the Company's receipt of such
request.
10. Remedies of Indemnitee.
(a) Right to Petition Court. In the event that Indemnitee makes a
request for payment of Indemnifiable Amounts under Sections 3 and 5
above or a request for an advancement of Indemnifiable Expenses
under Sections 8 and 9 above and the Company fails to make such
payment or advancement in a timely manner pursuant to the terms of
this Agreement, Indemnitee may petition the Court of Chancery to
enforce the Company's obligations under this Agreement.
(b) Burden of Proof. In any judicial proceeding brought under
Section 10(a) above, the Company shall have the burden of proving
that Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) Expenses. The Company agrees to reimburse Indemnitee in full for
any Expenses incurred by Indemnitee in connection with
investigating, preparing for, litigating, defending or settling any
action brought by Indemnitee under Section 10(a) above, or in
connection with any claim or counterclaim brought by the Company in
connection therewith.
(d) Validity of Agreement. The Company shall be precluded from
asserting in any Proceeding, including, without limitation, an
action under Section 10(a) above, that the provisions of this
Agreement are not valid, binding and enforceable or that there is
insufficient consideration for this Agreement and shall stipulate in
court that the Company is bound by all the provisions of this
Agreement.
(e) Failure to Act Not a Defense. The failure of the Company
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination
concerning the permissibility of the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses under this
Agreement shall not be a defense in any action brought under Section
10(a) above, and shall not create a presumption that such payment or
advancement is not permissible.
5
<PAGE>
11. Defense of the Underlying Proceeding.
(a) Notice by Indemnitee. Indemnitee agrees to notify the Company
promptly upon being served with any summons, citation, subpoena,
complaint, indictment, information, or other document relating to
any Proceeding which may result in the payment of Indemnifiable
Amounts or the advancement of Indemnifiable Expenses hereunder;
provided, however, that the failure to give any such notice shall
not disqualify Indemnitee from the right to receive payments of
Indemnifiable Amounts or advancements of Indemnifiable Expenses
unless the Company's ability to defend in such Proceeding is
materially and adversely prejudiced thereby.
(b) Defense by Company. Subject to the provisions of the last
sentence of this Section 11(b) and of Section 11(c) below, the
Company shall have the right to defend Indemnitee in any Proceeding
which may give rise to the payment of Indemnifiable Amounts
hereunder; provided, however that the Company shall notify
Indemnitee of any such decision to defend within ten (10) days of
receipt of notice of any such Proceeding under Section 11(a) above.
The Company shall not, without the prior written consent of
Indemnitee, consent to the entry of any judgment against Indemnitee
or enter into any settlement or compromise which (i) includes an
admission of fault of Indemnitee or (ii) does not include, as an
unconditional term thereof, the full release of Indemnitee from all
liability in respect of such Proceeding, which release shall be in
form and substance reasonably satisfactory to Indemnitee. This
Section 11(b) shall not apply to a Proceeding brought by Indemnitee
under Section 10(a) above or pursuant to Section 19 below.
(c) Indemnitee's Right to Counsel. Notwithstanding the provisions of
Section 11(b) above, if in a Proceeding to which Indemnitee is a
party by reason of Indemnitee's Corporate Status, Indemnitee
reasonably concludes that it may have separate defenses or
counterclaims to assert with respect to any issue which may not be
consistent with the position of other defendants in such Proceeding,
or if the Company fails to assume the defense of such proceeding in
a timely manner, Indemnitee shall be entitled to be represented by
separate legal counsel of Indemnitee's choice at the expense of the
Company. In addition, if the Company fails to comply with any of its
obligations under this Agreement or in the event that the Company or
any other person takes any action to declare this Agreement void or
unenforceable, or institutes any action, suit or proceeding to deny
or to recover from Indemnitee the benefits intended to be provided
to Indemnitee hereunder, Indemnitee shall have the right to retain
counsel of Indemnitee's choice, at the expense of the Company, to
represent Indemnitee in connection with any such matter.
6
<PAGE>
12. Representations and Warranties of the Company. The Company hereby
represents and warrants to Indemnitee as follows:
(a) Authority. The Company has all necessary power and authority to
enter into, and be bound by the terms of, this Agreement, and the
execution, delivery and performance of the undertakings contemplated
by this Agreement have been duly authorized by the Company.
(b) Enforceability. This Agreement, when executed and delivered by
the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally.
13. Insurance. The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the Company to obtain and
maintain a policy or policies of insurance with a reputable insurance company
providing the Indemnitee with coverage for losses from wrongful acts, and to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of director and officer liability insurance,
Indemnitee shall be provided Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Company's officers and directors.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, or if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit. The Company shall promptly notify Indemnitee of any good
faith determination not to provide such coverage.
14. Contract Rights Not Exclusive. The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time under applicable law, the Company's by-laws or certificate
of incorporation, or any other agreement, vote of stockholders or directors (or
a committee of directors), or otherwise, both as to action in Indemnitee's
official capacity and as to action in any other capacity as a result of
Indemnitee's serving as a director of the Company.
15. Successors. This Agreement shall be (a) binding upon all successors
and assigns of the Company (including any transferee of all or substantially all
of the business, stock and/or assets of the Company and any direct or indirect
successor by merger or consolidation or otherwise by operation of law) and (b)
binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall
7
<PAGE>
continue for the benefit of Indemnitee and such heirs, personal representatives,
executors and administrators after Indemnitee has ceased to have Corporate
Status.
16. Subrogation. In the event of any payment of Indemnifiable Amounts
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of contribution or recovery of Indemnitee against
other persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.
17. Change in Law. To the extent that a change in Delaware law (whether by
statute or judicial decision) shall permit broader indemnification or
advancement of expenses than is provided under the terms of the by-laws of the
Company and this Agreement, Indemnitee shall be entitled to such broader
indemnification and advancements, and this Agreement shall be deemed to be
amended to such extent.
18. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or any clause thereof,
shall be determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, in whole or in part, such provision or clause shall be limited
or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this Agreement shall remain fully enforceable and binding on the
parties.
19. Indemnitee as Plaintiff. Except as provided in Section 10(c) of this
Agreement and in the next sentence, Indemnitee shall not be entitled to payment
of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect
to any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director or officer thereof, or any third party, unless the
Company has consented to the initiation of such Proceeding. This Section shall
not apply to counterclaims or affirmative defenses asserted by Indemnitee in an
action brought against Indemnitee.
20. Modifications and Waiver. Except as provided in Section 17 above with
respect to changes in Delaware law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.
21. General Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed:
8
<PAGE>
(i) If to Indemnitee, to:
John Fullmer
eCom Partners Fund I LLC
55 Walls Drive
Suite 401
Fairfield, CT 06430;
(ii) If to the Company, to:
Cyber Dialogue Inc.
304 Hudson Street
New York, New York 10013
Attention: Andrew Watt
or to such other address as may have been furnished in the same manner by any
party to the others.
22. Governing Law. This Agreement shall be governed by and construed and
enforced under the laws of Delaware without giving effect to the provisions
thereof relating to conflicts of law.
23. Consent to Jurisdiction. The Company hereby irrevocably and
unconditionally consents to the jurisdiction of the courts of the State of
Connecticut and the United States District Court for the District of
Connecticut. The Company hereby irrevocably and unconditionally waives any
objection to the laying of venue of any Proceeding arising out of or relating to
this Agreement in the courts of the State of Delaware or the United States
District Court for the District of Delaware, and hereby irrevocably and
unconditionally waives and agrees not to plead or claim that any such Proceeding
brought in any such court has been brought in an inconvenient forum.
[END OF TEXT]
9
<PAGE>
[Indemnification Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CYBER DIALOGUE INC.
By: /s/ Andrew Watt
------------------------------------
Its: CFO
INDEMNITEE
----------------------------------------
Print Name: John Fullmer
Address: eCom Partners Fund I LLC
55 Walls Drive
Suite 401
Fairfield, CT 06430
<PAGE>
[Indemnification Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CYBER DIALOGUE INC.
By:
------------------------------------
Its:
INDEMNITEE
/s/ John Fullmer
----------------------------------------
Print Name: John Fullmer
Address: eCom Partners Fund I LLC
55 Walls Drive
Suite 401
Fairfield, CT 06430
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Dialogue/IMS 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- ) and related Prospectus of Cyber Dialogue Inc. for
the registration of shares of its common stock.
/s/ Ernst & Young LLP
New York, New York
February 17, 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- ) and related Prospectus of Cyber Dialogue Inc. for
the registration of shares of its common stock.
/s/ Kamler, Lewis & Noreman LLP
Great Neck, New York
February 17, 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- ) and related Prospectus of
Cyber Dialogue Inc. for the registration of shares of its common
stock.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 17, 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>
<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> 5,023 2,774
<TOTAL-COSTS> 5,023 2,774
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 79 21
<INTEREST-EXPENSE> (218) (31)
<INCOME-PRETAX> (2,511) (1,479)
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<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)
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