<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 2000
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SCREAMING MEDIA.COM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7389 13-4042678
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
601 WEST 26TH STREET, 13TH FLOOR
NEW YORK, NEW YORK 10001
(212) 691-7900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KEVIN C. CLARK
CHIEF EXECUTIVE OFFICER
601 WEST 26TH STREET, 13TH FLOOR
NEW YORK, NEW YORK 10001
(212) 691-7900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID J. GOLDSCHMIDT, ESQ. STEPHEN L. BURNS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP CRAVATH, SWAINE & MOORE
FOUR TIMES SQUARE 825 EIGHTH AVENUE
NEW YORK, NEW YORK 10036-6522 NEW YORK, NEW YORK 10019-7475
(212) 735-3000 (212) 474-1000
</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 of 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, please 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(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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, par value $0.01........................... $75,000,000 $19,800
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
------------------------
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 AN 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 16, 2000
Shares
SCREAMINGMEDIA.COM
Common Stock
------------------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "SCRM."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE
4.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS SCREAMINGMEDIA
------------- ------------- --------------
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total........................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
The date of this prospectus is , 2000.
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[LEFT BLANK FOR INSIDE COVER]
<PAGE> 4
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY.................. 1
RISK FACTORS........................ 4
FORWARD-LOOKING STATEMENTS.......... 13
USE OF PROCEEDS..................... 13
DIVIDEND POLICY..................... 13
CAPITALIZATION...................... 14
DILUTION............................ 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..................... 17
BUSINESS............................ 23
MANAGEMENT.......................... 32
RELATED PARTY TRANSACTIONS.......... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PRINCIPAL STOCKHOLDERS.............. 42
DESCRIPTION OF CAPITAL STOCK........ 43
SHARES ELIGIBLE FOR FUTURE SALE..... 47
U.S. FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS.................. 48
UNDERWRITING........................ 52
NOTICE TO CANADIAN RESIDENTS........ 54
LEGAL MATTERS....................... 55
EXPERTS............................. 55
CHANGE IN ACCOUNTANTS............... 55
WHERE YOU CAN FIND MORE
INFORMATION....................... 56
INDEX TO FINANCIAL STATEMENTS....... F-1
</TABLE>
------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
i
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights the information contained elsewhere in this
prospectus. This summary is not complete and does not contain all the
information you should consider before buying shares in this offering. You
should read the entire prospectus.
SCREAMINGMEDIA.COM
We have developed a leading global technology platform for the aggregation
and distribution of digital content over the Internet. Using our proprietary
technologies, we aggregate content from a wide range of content providers and
filter, deliver and efficiently integrate this content into our customers' Web
sites almost instantaneously. Our technology is compatible with existing and
emerging delivery platforms, including wireless, and is designed to support a
variety of content formats, ranging from text to streaming video. We believe
that the ScreamingMedia solution offers Web sites the most cost-effective means
to meet the growing need to provide high-quality content to their users, which
is essential to building a loyal user base. We offer Web sites a single-source
solution for their timely and relevant content needs and offer content providers
an efficient syndication solution.
We have assembled a growing digital content network, which as of January
31, 2000 consisted of over 530 Web site customers and 119 content providers
supplying content from over 390 publications. We added 105 of our current
customers in January 2000. We enter into contracts with our customers, typically
for an initial period of one year, providing us with a recurring monthly fee. We
also have a growing international presence, with 54 of our customers and 19 of
our content providers based outside of the United States, primarily in Latin
America, the United Kingdom and Canada.
We believe that high-quality content is vital to Web sites in order to
drive traffic, develop user loyalty and increase the length of time that users
spend on a site. Web sites have limited options to obtain timely and relevant
content. Traditionally, Web sites either had to produce their own content or
enter into multiple relationships with a variety of content providers. These
options can involve considerable expense, limit the range and quality of the
content available and create integration difficulties.
Our solution offers Web sites the following key benefits:
- the ability to obtain highly-targeted, continuously updated content from
a wide range of sources;
- a reliable single-source solution, offering a compelling cost
proposition;
- seamless integration of content into the look and feel of the Web site,
giving customers control over their users' online experience and
enhancing their brand identity; and
- a flexible and scalable solution that meets the needs of a wide range of
customers and is easily adaptable to their changing needs.
Our objective is to establish our technology platform as the global
standard for the exchange of digital content and related services. To achieve
this, we intend to:
- rapidly expand our digital content network;
- maintain and extend our product and technology leadership;
- establish ScreamingMedia as a leading brand;
- continue to pursue strategic relationships; and
- expand our international presence.
Our principal executive offices are located at 601 West 26th Street, 13th
Floor, New York, New York 10001, and our telephone number is (212) 691-7900. The
address of our Web site is www.screamingmedia.com. The information on our Web
site is not part of this prospectus.
Content Engine(R) is a registered service mark of ScreamingMedia.
ScreamingMedia(SM) and Digital Content Network(SM) are service marks of
ScreamingMedia. SiteWare(TM) is a trademark of ScreamingMedia. This prospectus
also contains trademarks of other companies.
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THE OFFERING
<TABLE>
<S> <C>
Common stock offered............................... shares
Common stock to be outstanding after this
offering......................................... shares
Use of proceeds.................................... For general corporate purposes, including
increasing our sales and marketing activities,
expanding our international operations, product
development and working capital.
Nasdaq National Market Symbol...................... SCRM
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on our shares outstanding as of January 31, 2000. This information
excludes:
- 3,769,928 shares of common stock issuable on the exercise of stock
options outstanding as of January 31, 2000 issued under our 1999 stock
option plan at a weighted average exercise price of $2.30;
- 269,642 shares of common stock issuable on the exercise of warrants
outstanding as of January 31, 2000 at a weighted average exercise price
of $5.38; and
- shares of common stock available for issuance under our 2000
equity incentive plan.
------------------------
Except as otherwise indicated, the information in this prospectus assumes
the following:
- the conversion on closing of this offering of all outstanding shares of
convertible preferred stock into 8,411,314 shares of common stock; and
- no exercise of the underwriters' overallotment option.
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<PAGE> 7
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue................................ $ 525 $ 782 $ 574 $ 567 $ 2,985
Total operating expenses..................... 419 772 669 1,163 16,479
Operating income (loss)...................... 106 10 (95) (596) (13,494)
Net income (loss)............................ $ 106 $ 10 $ (95) $ (610) $(13,166)
====== ====== ====== ====== ========
Basic net income (loss) per share............ $ 0.10 $ 0.01 $(0.08) $(0.48) $ (1.44)
====== ====== ====== ====== ========
Weighted average number of shares of common
stock outstanding.......................... 1,100 1,100 1,175 1,283 9,115
====== ====== ====== ====== ========
Pro forma basic net loss per share........... $ (1.04)
========
Pro forma weighted average number of shares
of common stock outstanding................ 12,628
========
</TABLE>
Pro forma basic net loss per share has been calculated assuming the
conversion of all previously outstanding preferred stock into common stock, as
if the shares had converted immediately upon their issuance. See note 2 of the
notes to our financial statements for an explanation of the determination of the
number of shares used in computing basic net loss per share.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $22,122 $22,122 $
Working capital.......................................... 21,930 21,930
Total assets............................................. 32,370 32,370
Capital lease obligations, less current portion.......... 647 647
Redeemable convertible preferred stock................... 27,332 --
Total stockholders' equity (deficiency).................. (447) 26,885
</TABLE>
The pro forma balance sheet data gives effect to the automatic conversion
of our outstanding redeemable convertible preferred stock and our convertible
preferred stock into 8,411,314 shares of common stock. The pro forma as adjusted
data gives effect to our receipt of the net proceeds from the sale of
shares of common stock offered by us at an assumed initial public offering price
of $ and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
3
<PAGE> 8
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below before deciding to invest in
shares of our common stock. The trading price of our common stock could decline
due to any of these risks, in which case you could lose all or part of your
investment. In assessing these risks, you should also refer to the other
information in this prospectus, including our financial statements and the
related notes.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT WILL BE DIFFICULT FOR YOU TO
EVALUATE OUR BUSINESS.
We have a limited operating history on which you can evaluate our business
and prospects. We began our current line of business at the end of 1997 and
began focusing exclusively on this business in the later part of 1998. You
should consider the risks, uncertainties, expenses and difficulties frequently
encountered by early-stage companies, particularly companies, like us, that are
in new and rapidly evolving markets like the Internet, and using new and
unproven business models. We cannot be certain that our business strategy will
be successful or that we will successfully address these and other risks and
uncertainties.
WE HAVE A HISTORY OF SIGNIFICANT OPERATING LOSSES AND EXPECT TO INCUR
SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE.
We have incurred significant losses since our inception. As of December 31,
1999, we had an accumulated deficit of $13.8 million. We incurred a net loss of
$13.2 million for the year ended December 31, 1999. We expect to incur operating
losses and experience negative cash flow for the foreseeable future. We
anticipate our losses will also increase significantly from current levels as we
incur additional costs and expenses related to:
- sales and marketing activities;
- employing additional personnel;
- funding our international operations;
- software and product development;
- establishing strategic relationships; and
- increasing the number of content providers.
We cannot predict when we will operate profitably, if ever. Our ability to
achieve profitability will depend on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels. We
cannot be certain that if we were to achieve profitability, we would be able to
sustain or increase profitability.
OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS DUE TO
MANY FACTORS, ANY OF WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE.
Our revenues and operating results may vary significantly from quarter to
quarter. It is possible that in some future periods our operating results may
fall below the expectations of public market analysts and investors. Any decline
in revenues or earnings or a greater than expected loss for any quarter could
cause the market price of our common stock to decline. The factors, some of
which are outside our control, that may cause our financial results to vary from
quarter to quarter include:
- the demand for our services;
- the value, timing and renewal of contracts with customers and content
providers;
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our operations and development of our
technology and software;
- the ability to execute our sales and marketing strategy successfully;
- the introduction by our competitors of new or enhanced services or
products;
- the performance of our network and technology;
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<PAGE> 9
- changes in our management team and key personnel;
- changes in government regulations affecting our business; and
- general economic conditions.
These factors, together with our limited operating history and unproven
business model, make it difficult to forecast our future revenues or results of
operations accurately. We also have limited meaningful historical financial data
upon which to base planned operating expenses. A substantial portion of our
operating expenses is related to personnel costs, marketing programs and
overhead, which cannot be adjusted quickly. Our operating expense levels
reflect, in part, our expectations of future revenues. If actual revenues on a
quarterly basis are below management's expectations, or if our expenses precede
increased revenues, both gross margins and results of operations would be
materially adversely affected.
Because of these anticipated fluctuations, our results in any quarter may
not be indicative of future performance and it may be difficult for investors to
properly evaluate our prospects.
OUR BUSINESS WOULD SUFFER IF WE WERE TO LOSE ANY OF OUR MAJOR CONTENT PROVIDERS.
Access to a large and diverse array of content is critical for the
successful development of our digital content network and the ultimate appeal of
our services to our customers. We do not generate original content and are
therefore highly dependent upon third-party content providers. The loss of any
of our major content providers would harm our business. In addition, we cannot
be certain that we will be able to license content from our current or new
providers on favorable terms in the future, if at all. Failure to retain and add
content providers to our network would materially adversely affect our business,
financial condition and operating results.
FAILURE TO EFFECTIVELY MANAGE OUR GROWTH AND EXPANSION COULD ADVERSELY AFFECT
OUR BUSINESS AND OPERATING RESULTS.
Although we have grown rapidly during the past year, we may not be able to
continue to grow at a similar pace or to effectively manage our growth. Our
growth has placed significant demands on our management and other resources and
will continue to do so in the future. Our number of full-time employees
increased from eight on December 31, 1998 to 141 on January 31, 2000.
As we continue to grow, we expect to hire more employees and expand the
scope of our operating and financial systems, which will increase our operating
complexity and the level of responsibility exercised by our management
personnel. To manage our growth effectively, we must continue to develop and
improve on our operational and financial systems. We are currently in the
process of upgrading our accounting system, which we expect to complete by the
middle of 2000. If we are unable to manage our growth effectively, it could have
a material adverse effect on our business, financial condition or results of
operations.
OUR SENIOR MANAGEMENT TEAM HAS LIMITED EXPERIENCE WORKING TOGETHER, WHICH MAY
MAKE IT DIFFICULT TO CONDUCT AND GROW OUR BUSINESS.
Our chief executive officer has only been employed by us since November
1999, and several of our senior managers, including our chief technology
officer, joined us in the last several months. Therefore, there has been little
or no opportunity to evaluate the effectiveness of our senior management team as
a unit. The failure of our senior management to function effectively as a team
may have an adverse effect on our ability to maintain a cohesive culture and
compete effectively.
WE MAY BE UNABLE TO ATTRACT AND RETAIN PROFESSIONAL STAFF, WHICH COULD HARM OUR
BUSINESS AND PRODUCT DEVELOPMENT.
Our ability to grow, increase our market share and develop our products
depends in large part on our ability to hire, retain and manage highly skilled
employees, including technical, sales, marketing and business development
personnel. Companies in our industry and similar industries compete intensely to
hire and retain qualified personnel, and we cannot assure you that we will be
able to attract the employees we need, or that we will be able to retain the
services of those we have hired. We cannot assure you that we will be able to
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<PAGE> 10
prevent the unauthorized use or disclosure of our proprietary knowledge,
practices and procedures if our employees leave us.
THE LOSS OF ANY OF OUR SENIOR MANAGEMENT OR KEY PERSONNEL COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.
We depend on the continued services and performance of our senior
management and other key personnel including technical and sales personnel. If
we lose the services of our senior managers or any of our other executive
officers or key employees, our business could be materially adversely affected.
OUR BUSINESS MODEL DEPENDS ON SUCCESSFUL DEVELOPMENT OF IMPROVED TECHNOLOGY AND
SERVICES.
The market for Internet products and services is characterized by rapidly
changing technology, evolving industry standards and customer demands and
frequent new product introductions and enhancements. To be successful, we will
have to continually improve the performance, features and reliability of our
products and services. For example, we believe that to compete effectively in
the future, we will need to expand our customized content product to include
types of content, such as photo and video. Additionally, new Internet or
telecommunications technologies may require us to alter our technology and
products to avoid them becoming obsolete.
Improving our current products and developing and introducing new products
will require significant research and development. We can give no assurance that
our technological development will advance at the pace necessary to sustain our
growth.
WE HAVE RELATIVELY LITTLE EXPERIENCE IN SELLING AND MARKETING OUR SERVICES AND
WE MAY EXPERIENCE LONGER SALES CYCLES, WHICH MAY IMPEDE EXPANSION OF OUR
BUSINESS.
We have had relatively little experience marketing our services and may not
be able to successfully implement our sales and marketing initiatives. Marketing
our services in order to expand our customer base is crucial to the success of
our business. On December 31, 1998, we had only three sales people. The majority
of our sales people were hired since the start of 1999. We may be unable to
hire, retain, integrate and motivate sales and marketing personnel. New sales
and marketing personnel may also require a substantial period of time to become
effective. Moreover, although our average sales cycle from the time a potential
customer is first contacted to the time a contract is signed currently ranges
from three to six weeks, there can be no assurance that we will not experience
longer sales cycles in the future. Such a lengthening in sales cycles could make
our operating results more unpredictable. Unsuccessful sales or marketing
efforts or a material lengthening of our sales cycle could have material adverse
effects on our business, financial condition and operating results.
OUR NETWORK IS SUSCEPTIBLE TO FAILURES THAT COULD CAUSE LOSS OF DATA OR
INTERRUPTIONS OR DELAYS IN DISTRIBUTION OF CONTENT.
We are exposed to the risk of network failure, both through our own systems
and those of our service providers. While our utilization of redundant
transmission systems may improve our network's reliability, we cannot be certain
that the network will avoid downtime. Our systems and operations are vulnerable
to damage or interruption from fire, flood, power loss, telecommunications
failure, break-ins, earthquake and similar events. Substantially all of our own
computer and communications hardware systems are in facilities we lease in New
York City. Our disaster recovery plan may not be sufficient, and our business
insurance may not adequately compensate us for losses that may occur. The
occurrence of a natural disaster or unanticipated problems at our facilities in
New York could cause interruptions or delays in distribution of content and loss
of data.
We also rely upon third parties to facilitate network transmissions. There
are no assurances that these transmissions will remain either reliable or
secure. Any transmission problems, particularly if those problems persist or
recur frequently, could result in the loss of content providers and customers.
Network failures of any sort may have a material adverse effect on our business,
financial condition and operating results.
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WE MAY FACE CAPACITY CONSTRAINTS AND SYSTEMS DEVELOPMENT DIFFICULTIES THAT COULD
IMPEDE OUR ABILITY TO EXPAND OUR SYSTEMS AND OUR BUSINESS.
Our ability to provide high-quality content offerings depends largely on
the efficient and uninterrupted operation of our computer and communications
systems. We may be unable to expand the capacity of our existing systems or
develop new systems to enable our business to grow. Our future success will
depend in part on our ability to expand our network infrastructure rapidly in
order to accommodate significant increases in content processing volume.
Almost all of our software systems are internally developed, and we rely on
our employees and third-party contractors to develop and maintain these systems.
If certain of these employees or contractors become unavailable to us, we may
experience difficulty in improving and maintaining our systems. Although we are
continually enhancing and expanding our network infrastructure, we have
experienced periodic systems interruptions, which we believe may continue to
occur. Failure to achieve or maintain high-capacity data transmission without
system downtime would adversely affect our reputation and business.
WE FACE INTENSE COMPETITION THAT COULD IMPAIR OUR ABILITY TO GROW AND ACHIEVE
PROFITABILITY.
We currently compete against a variety of other content-oriented service
providers, and additional competitors may emerge. Competition among
Internet-related companies is generally intense. We may experience even greater
competition as we address a wider array of market segments. If we fail to
compete in this increasingly intense competitive environment, our operating
results may be adversely affected.
We compete with both traditional and online aggregators and distributors of
content. Historically, traditional content providers have offered products that
are less suitable for most Web site customers than ours. However, some of these
traditional providers have begun to offer products that are suitable for Web
sites. These providers may develop products that offer features comparable to
ours, and others may begin to focus on the online marketplace.
We also compete with existing online aggregators and distributors of
content, some of whom offer products similar to ours. Some of these companies
offer different subscription models, delivery systems and types of content, and
these differences could prove attractive to potential customers. In the future,
these competitors or others might offer products with the features we currently
provide, or other features desired by potential customers.
Many of our current and potential competitors have longer operating
histories, larger customer or user bases, and significantly greater financial,
marketing and other resources than we do. These competitors can devote
substantially more resources than we can to business development and may adopt
aggressive pricing policies. In addition, larger, well-established and
well-financed entities may acquire, invest in or form joint ventures with our
competitors as the use of the Internet and other online services increases.
Increased competition from these or other competitors could adversely affect our
business.
WE FACE RISKS RELATING TO OUR CUSTOMERS' ABILITY TO PAY US.
The Internet is a relatively new field of commercial endeavor. The cost of
establishing a Web site is low, and new online service providers, content
providers and advertisers are launched regularly. Many of our customers were
funded with venture capital and other forms of financing before they proved to
be successful. Those companies that are unable to prove themselves successful
before they have spent their initial funding may find it difficult or impossible
to secure additional funding and, therefore, be unable to pay amounts due to us.
Our financial condition could be adversely affected if any of our customers
fails to pay amounts due on a timely basis.
WE MAY BE LIABLE FOR CONTENT THAT WE DISTRIBUTE.
As a distributor of content on the Internet, we may face direct or indirect
liability for defamation, negligence, copyright, patent, trade secret or
trademark infringement and other claims based on the nature of the content we
distribute. Our proprietary software technology enables us to deliver content
harvested from participating content providers only to customers who have been
authorized to access that content. We might inadvertently distribute content to
a customer who is not authorized to receive it, which could subject us to a
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claim for damages from the information provider or harm our reputation in the
marketplace. In addition, we could be exposed to liability arising from the
activities of our customers or their users with respect to the unauthorized
duplication of, or insertion of inappropriate material into, the content we
supply. Although we carry general liability insurance, our insurance may not
cover claims of these types or may be inadequate to indemnify us for all
liability that may be imposed on us. If we face liability, particularly
liability that is not covered by our insurance or is in excess of our insurance
coverage, then our business may suffer.
IF WE ARE UNABLE TO MAINTAIN OUR REPUTATION AND EXPAND OUR NAME RECOGNITION, WE
MAY HAVE DIFFICULTY ATTRACTING NEW BUSINESS AND RETAINING CURRENT CUSTOMERS AND
EMPLOYEES, AND OUR BUSINESS MAY SUFFER.
We believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and retaining customers and employees.
We also believe that the importance of reputation and name recognition is
increasing and will continue to increase due to the growing number of providers
of Internet services. If our reputation is damaged or if potential customers are
not familiar with us or the solutions we provide, we may be unable to attract
new, or retain existing, customers and employees. Promotion and enhancement of
our name will depend largely on our success in continuing to provide effective
solutions. If customers do not perceive our solutions to be effective or of high
quality, our brand name and reputation will suffer.
WE MIGHT NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND MAY BECOME
INVOLVED IN COSTLY AND TIME-CONSUMING INFRINGEMENT CLAIMS.
We regard our trademarks, service marks, copyrights, trade secrets and
similar intellectual property as critical to our success. The unauthorized
reproduction or other misappropriation of our trademarks or other intellectual
property could diminish the value of our proprietary rights or reputation. If
this were to occur, our business could be materially and adversely affected.
We rely upon a combination of trademark and copyright law, patent law,
trade secret protection and confidentiality and license agreements with our
employees, customers and others to protect our proprietary rights. We have
received and have filed a number of trademarks and service marks, and have filed
several patent applications with the United States Patent and Trademark Office.
However, registrations and patents may only be granted in selected cases, and
there can be no assurance that we will be able to secure these or additional
registrations or patents. Furthermore, policing and enforcement against the
unauthorized use of our intellectual property rights could entail significant
expenses and could prove difficult or impossible.
In addition, there can be no assurance that third parties will not bring
claims of copyright or trademark infringement, patent violation or
misappropriation of creative ideas or formats against us with respect to content
that we distribute or our technology or marketing techniques and terminology.
Any such claims, with or without merit, could be time consuming to defend,
result in costly litigation, divert management attention, require us to enter
into costly royalty or licensing arrangements or prevent us from distributing
certain content or utilizing important technologies, ideas or formats.
In addition, we could be exposed to liability arising from the activities
of our customers or their users with respect to the unauthorized use of the
proprietary rights of our content providers. Our general liability insurance may
not cover claims of these types or may be inadequate to indemnify us for all
liability that may be imposed on us.
WE COULD FACE ADDITIONAL RISKS AND CHALLENGES AS WE EXPAND INTERNATIONALLY AND
MAY FACE UNEXPECTED COSTS IN DEVELOPING INTERNATIONAL REVENUES.
We have recently begun to invest financial and managerial resources to
expand our operations in international markets. We recently opened an office in
London and will be opening an office in Miami in early 2000 to service the Latin
American market. If our revenues from international operations, and particularly
from our operations in the countries and regions on which we have focused our
spending, do not exceed the expense of establishing and maintaining these
operations, our business, financial condition and operating results will suffer.
We have only limited experience in international operations, and we may not be
8
<PAGE> 13
able to capitalize on our investment in these markets. In this regard, we face
certain risks inherent in conducting business internationally, including:
- fluctuations in currency exchange rates;
- any imposition of currency exchange controls;
- unexpected changes in regulatory requirements applicable to the Internet
or our business;
- difficulties and costs of staffing and managing international operations;
- differing technology standards;
- difficulties in collecting accounts receivable and longer collection
periods;
- political instability or economic downturns;
- potentially adverse tax consequences; and
- reduced protection for intellectual property rights in certain countries.
Any of these factors could harm our international operations and, consequently,
our business, financial condition, and operating results.
POTENTIAL ACQUISITIONS AND STRATEGIC INVESTMENTS MAY RESULT IN INCREASED
EXPENSES, DIFFICULTIES IN INTEGRATING TARGET COMPANIES AND DIVERSION OF
MANAGEMENT'S ATTENTION.
We may attempt to expand our range of technology and products and gain
access to new markets through strategic acquisitions and investments. If this
occurs, we may encounter the following risks:
- our management's attention may be diverted during the acquisition and
integration process;
- we may face costs, delays and difficulties of integrating the acquired
company's operations, technologies and personnel into our existing
operations, organization and culture;
- the adverse impact on earnings of amortizing the acquired company's
intangible assets may be significant, particularly in light of the high
valuations of many Internet and other information technology services
companies;
- we may issue new equity securities to pay for acquisitions, which would
dilute the holdings of existing stockholders;
- the timing of the acquisition or our failure to meet operating
expectations for acquired businesses may impact adversely on our
financial condition; and
- we may be adversely affected by expenses of any undisclosed or potential
legal liabilities of the acquired company, including intellectual
property, employment and warranty and product liability-related problems.
If realized, any of these risks could have a material adverse effect on our
business, financial condition and operating results.
RISKS OF DOING BUSINESS OVER THE INTERNET
OUR SUCCESS DEPENDS ON THE CONTINUED GROWTH OF THE INTERNET AND THE DEVELOPMENT
OF INTERNET INFRASTRUCTURE.
Our success will depend in large part on continued growth in use of the
Internet, particularly for content and e-commerce facilitation. There are
critical issues concerning the commercial use of the Internet that remain
unresolved. Those issues that we expect to affect the development of the market
for our services include:
- security;
- reliability;
- cost;
- ease of access;
9
<PAGE> 14
- quality of service; and
- bandwidth availability.
If the Internet develops more slowly than we expect as a commercial or business
medium, it will adversely affect our business.
LEGAL UNCERTAINTIES AND GOVERNMENT REGULATION OF THE INTERNET COULD INHIBIT
GROWTH OF THE INTERNET AND E-COMMERCE.
Many legal questions relating to the Internet remain unclear. It may take
years to determine whether and how existing laws governing matters such as
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, new laws and regulations that apply directly to Internet
communications, commerce and advertising are becoming more prevalent. For
example, the U.S. Congress has recently passed Internet-related legislation
concerning copyrights, taxation, and the online privacy of children. As the use
of the Internet and the prevalence of e-commerce grow, there may be calls for
further regulation, such as more stringent consumer protection laws. Finally,
our distribution arrangements and customer contracts could subject us to the
laws of foreign jurisdictions in unpredictable ways.
These possibilities could affect us adversely in a number of ways. New
regulation could make the Internet less attractive to users, resulting in slower
growth in its use and acceptance than we expect. Complying with new regulations
could result in additional cost to us, which could reduce our margins, or it
could leave us at risk of potentially costly legal action. We may be affected
indirectly by legislation that fundamentally alters the practicality or
cost-effectiveness of utilizing the Internet, including the cost of transmitting
over various forms of network architecture, such as telephone networks or cable
systems, or the imposition of various forms of taxation on Internet-related
activities. Regulators continue to evaluate the best telecommunications policy
regarding the transmission of Internet traffic.
RISKS RELATING TO THIS OFFERING
YOU WILL EXPERIENCE IMMEDIATE AND SIGNIFICANT DILUTION IN THE BOOK VALUE PER
SHARE.
The initial public offering price of our common stock is substantially
higher than the net tangible book value per share of our outstanding common
stock will be immediately after this offering. If you purchase our common stock
in this offering, you will incur immediate dilution of approximately $ in
the net tangible book value per share of common stock from the price you pay for
our common stock in this offering.
WE CANNOT GUARANTEE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR OUR COMMON
STOCK.
There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how liquid that market
might become. The initial public offering price will be determined by
negotiation between the representatives of the underwriters and us and may not
be indicative of prices that will prevail in the trading market.
VOLATILITY OF OUR STOCK PRICE COULD ADVERSELY AFFECT STOCKHOLDERS.
The market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in response to factors such as:
- variations in our actual or anticipated quarterly operating results or
those of our competitors;
- announcements by us or our competitors of technological innovations;
- introduction of new products or services by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet industry;
- changes in the market valuations of other Internet companies;
- announcements by us or our competitors of significant acquisitions; and
- our entry into strategic partnerships or joint ventures.
10
<PAGE> 15
All of these factors are, in whole or part, beyond our control and may
materially adversely affect the market price of our common stock regardless of
our performance.
Investors may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to such
volatility. In addition, the stock market in general, and the market for
Internet-related and technology companies in particular, has been highly
volatile. The trading prices of many Internet-related and technology companies'
stocks have reached historical highs within the last 52 weeks and have reflected
relative valuations substantially above historical levels. During the same
period, such companies' stocks have also been highly volatile and have recorded
lows well below such historical highs. We cannot assure you that our stock will
trade at the same levels of other Internet stocks or that Internet stocks in
general will sustain their current market prices.
THE NET PROCEEDS FROM THIS OFFERING MAY BE ALLOCATED IN WAYS WITH WHICH YOU MAY
NOT AGREE.
Our business plan is subject to change based upon changing conditions and
opportunities and our management has significant flexibility in applying the net
proceeds we receive from this offering. Because the net proceeds are not
required to be allocated to any specific investment or transaction, you cannot
determine at this time the value or propriety of our application of the proceeds
and you and other stockholders may not agree with our decisions. See "Use of
Proceeds" for a more detailed description of how management intends to apply the
proceeds of this offering.
THE SALE OR AVAILABILITY FOR SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK
COULD ADVERSELY AFFECT ITS MARKET PRICE.
Sales of substantial amounts of our common stock in the public market after
the completion of this offering, or the perception that such sales could occur,
could adversely affect the market price of our common stock and could materially
impair our future ability to raise capital through offerings of our common
stock.
In connection with this offering, we and our officers, directors and all of
our existing stockholders and warrant holders have agreed not to sell or
transfer any shares of our common stock for 180 days after completion of this
offering without the underwriters' consent. However, the underwriters may
release these shares from these restrictions at any time. We cannot predict what
effect, if any, market sales of shares held by any stockholder or the
availability of these shares for future sale will have on the market price of
our common stock. See "Shares Eligible for Future Sale" for a more detailed
description of the restrictions on selling shares of our common stock after this
offering.
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
WE WILL CONTINUE TO BE EFFECTIVELY CONTROLLED BY OUR SIGNIFICANT STOCKHOLDERS
AFTER THIS OFFERING, AND THE INTERESTS OF THESE STOCKHOLDERS COULD CONFLICT WITH
YOUR INTERESTS.
Immediately upon completion of this offering, our executive officers and
directors, in the aggregate, will beneficially own approximately % of our
outstanding common stock on a fully-diluted basis. As a result, these
stockholders, if acting together, would be able to exert considerable influence
on any matters requiring approval by our stockholders, including the election of
directors, amendments to our charter and by-laws and the approval of mergers or
other business combination transactions. The ownership position of these
stockholders could delay, deter or prevent a change in control of ScreamingMedia
and could adversely affect the price that investors might be willing to pay in
the future for shares of our common stock.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, WHICH COULD
DEPRESS OUR STOCK PRICE.
Delaware corporate law and our certificate of incorporation and bylaws
contain provisions that could have the effect of delaying, deferring, or
preventing a change in control of ScreamingMedia that stockholders may consider
favorable or beneficial. These provisions could discourage proxy contests and
make it more difficult for you and other stockholders to elect directors and
take other corporate actions. These provisions
11
<PAGE> 16
could also limit the price that investors might be willing to pay in the future
for shares of our common stock. These provisions include:
- a staggered board of directors, so that it would take three successive
annual meetings to replace all directors;
- prohibition of stockholder action by written consent; and
- advance notice requirements for the submission by stockholders of
nominations for election to the board of directors and for proposing
matters that can be acted upon by stockholders at a meeting.
In addition, we have entered into a stockholder rights agreement that makes it
more difficult for a third party to acquire us without the support of our board
of directors and principal stockholders.
12
<PAGE> 17
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that address, among
other things: development of services; expansion strategy; use of proceeds;
projected capital expenditures; liquidity; development of additional revenue
sources; development and expansion of marketing relationships; market acceptance
of Internet commerce; technological advancement and ability to develop "brand"
awareness. These statements may be found in the sections of this prospectus
entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and in this prospectus generally. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including all the risks discussed in "Risk Factors"
and elsewhere in this prospectus.
We urge you to consider that statements which use the terms "believe," "do
not believe," "expect," "plan," "intend," "estimate," "anticipate" and similar
expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are based
on assumptions and are subject to risks and uncertainties.
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of the shares
of common stock in this offering of $ million, assuming an initial public
offering price of $ per share (the mid-point of the filing range) and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses. If the underwriters exercise their over-allotment option in
full, we estimate that our net proceeds will be $ million.
The principal purposes of this offering are to obtain additional capital,
to create a public market for our common stock and to facilitate future access
to public equity markets. As of the date of this prospectus, we have no specific
plans to use the net proceeds from this offering other than as set forth below.
We intend to use the net proceeds of this offering for general corporate
purposes, including increasing our sales and marketing activities, expanding our
international operations, product development and working capital. In addition,
we may use a portion of the net proceeds to explore potential acquisitions.
However, we currently have no commitments or agreements and are not involved in
any negotiations with respect to any such transaction. We have not determined
the amount of net proceeds to be used specifically for each of the foregoing
purposes. Pending any such uses, we intend to invest the net proceeds in
investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently anticipate that we will retain any future earnings for the development
and operation of our business. Accordingly, we do not anticipate declaring or
paying any cash dividends in the foreseeable future.
13
<PAGE> 18
CAPITALIZATION
The following table shows our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to give effect to the conversion of all of our
outstanding preferred stock into a total of 8,411,314 shares of common
stock upon the completion of this offering; and
- on a pro forma as adjusted basis to reflect the issue and sale of
shares of common stock by us in this offering at an assumed initial
public offering price of $ per share less estimated underwriting
discounts and commissions and estimated offering expenses payable by us.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 22,122 $22,122 $
======== ======= =======
Capital lease obligations, less current portion........... $ 647 $ 647 $
-------- ------- -------
Redeemable convertible preferred stock:
Series B, $0.01 par value; 2,678,572 shares authorized,
issued and outstanding actual; no shares authorized,
issued and outstanding pro forma and pro forma as
adjusted............................................. 27,332 --
-------- ------- -------
Stockholders' equity (deficiency):
Series A Convertible Preferred Stock, $0.01 par value;
1,527,085 shares authorized, issued and outstanding
actual; no shares authorized, issued and outstanding
pro forma and pro forma as adjusted.................. 15 --
Common Stock, $0.01 par value; 100,000,000 shares
authorized, 10,406,562 shares issued and 9,246,562
shares outstanding actual; 100,000,000 shares
authorized, 18,817,876 shares issued and 17,657,876
shares outstanding pro forma; 100,000,000 shares
authorized, shares issued and
shares outstanding pro forma as adjusted............. 104 188
Additional paid-in capital.............................. 22,857 50,120
Warrants................................................ 787 787
Deferred compensation................................... (10,379) (10,379)
Treasury stock.......................................... (19) (19)
Accumulated deficit..................................... (13,812) (13,812)
-------- ------- -------
Total stockholders' equity (deficiency)............ (447) 26,885
-------- ------- -------
Total capitalization............................ $ 27,532 $27,532 $
======== ======= =======
</TABLE>
The outstanding share information is based on our shares outstanding as of
December 31, 1999. This information excludes:
- 3,637,628 shares of common stock issuable on the exercise of stock
options outstanding as of December 31, 1999 issued under our 1999 stock
option plan at a weighted average exercise price of $2.26; and
- 269,642 shares of common stock issuable on the exercise of warrants
outstanding as of December 31, 1999 at a weighted average exercise price
of $5.38.
14
<PAGE> 19
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. Our pro forma net tangible book value as of December
31, 1999 was $26.5 million, or $1.50 per share. Pro forma net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding after
giving pro forma effect to the conversion upon completion of this offering of
all of our outstanding preferred stock into a total of 8,411,314 shares of
common stock. Dilution in pro forma net tangible book value per share represents
the difference between the amount per share paid by new investors purchasing
shares in this offering and the pro forma net tangible book value per share
immediately after this offering. After giving effect to the sale by us of
shares of common stock in this offering at an assumed initial public
offering price of $ per share, less estimated underwriting discounts and
commissions and offering expenses payable by us, our pro forma net tangible book
value as of December 31, 1999 would have been $ million, or $ per
share. This represents an immediate increase in pro forma net tangible book
value of $ per share to our existing stockholders and an immediate dilution
in pro forma net tangible book value of $ per share to new investors
purchasing shares in this offering. The following table illustrates this
dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of December
31, 1999............................................... $1.50
Increase in the pro forma net tangible book value per
share attributable to this offering....................
-----
Pro forma as adjusted net tangible book value per share
after this offering.......................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1999, the number of shares of stock purchased from us, the total consideration
paid to us and the average price per share paid by existing stockholders and by
new investors purchasing shares in this offering. The calculation below is based
upon an assumed initial public offering price of $ per share, before
deducting the estimated underwriting discounts and commissions and estimated
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- -------------------- AVERAGE PRICE
AMOUNT PERCENT AMOUNT PERCENT PER SHARE
------ ------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... % $ % $
New investors.............................
------ ------ ------ ------
Total................................... % $ %
====== ====== ====== ======
</TABLE>
The foregoing discussion and table assume no exercise of any outstanding
stock options or warrants to purchase common stock as of December 31, 1999. As
of December 31, 1999, there were:
- 3,637,628 shares of common stock issuable upon the exercise of stock
options outstanding at a weighted average exercise price of $2.26 per
share; and
- 269,642 shares of common stock issuable upon the exercise of warrants
outstanding at a weighted average exercise price of $5.38 per share.
To the extent these options or warrants are exercised, there will be further
dilution to the new investors.
15
<PAGE> 20
SELECTED FINANCIAL DATA
The following selected financial data should be read in connection with,
and are qualified by reference to, the financial statements and related notes
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The statements of operations
data for the years ended December 31, 1998 and 1999, and the balance sheet data
at December 31, 1998 and 1999 are derived from our financial statements, which
have been audited by Deloitte & Touche LLP, independent auditors. The statement
of operations data for the year ended December 31, 1997, and the balance sheet
data as of December 31, 1997 are derived from our financial statements, which
have been audited by David Tarlow & Co., P.C., independent auditors. The
financial statements for each of the two years in the period ended December 31,
1996 have been derived from our unaudited financial statements. These unaudited
financial statements have been prepared on substantially the same bases as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, that we consider necessary of a fair presentation
of the financial position and results of operations for these periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Network services.................. $ -- $ -- $ 246 $ 309 $ 2,480
Set-up fee........................ -- -- 41 68 492
Other............................. 525 782 287 190 13
---------- ---------- ---------- ---------- -----------
Total revenue.................. 525 782 574 567 2,985
---------- ---------- ---------- ---------- -----------
Operating expenses:
Cost of services.................. 115 242 70 130 974
Research and development.......... -- 3 107 97 894
Sales and marketing............... 35 129 87 105 3,768
General and administrative........ 235 360 347 455 4,330
Depreciation and amortization..... 34 38 33 26 451
Stock-based compensation.......... -- -- 25 350 6,062
---------- ---------- ---------- ---------- -----------
Total operating expenses....... 419 772 669 1,163 16,479
---------- ---------- ---------- ---------- -----------
Operating income (loss)............. 106 10 (95) (596) (13,494)
---------- ---------- ---------- ---------- -----------
Other income (expense), net......... -- -- -- (14) 328
---------- ---------- ---------- ---------- -----------
Net income (loss)................... $ 106 $ 10 $ (95) $ (610) $ (13,166)
---------- ---------- ---------- ---------- -----------
Basic net income (loss) per share... $ 0.10 $ 0.01 $ (0.08) $ (0.48) $ (1.44)
========== ========== ========== ========== ===========
Weighted average number of shares of
common stock outstanding.......... 1,100 1,100 1,175 1,283 9,115
========== ========== ========== ========== ===========
Pro forma basic net loss per
share............................. $ (1.04)
===========
Pro forma weighted average number of
shares of common stock
outstanding....................... 12,628
===========
</TABLE>
Pro forma basic net loss per share has been calculated assuming the
conversion of all previously outstanding preferred stock into common stock, as
if the shares had converted immediately upon their issuance. See note 2 of the
notes to financial statements for an explanation of the determination of the
number of shares used in computing basic net loss per share.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 30 $ 13 $-- $120 $22,122
Working capital..................................... 122 102 41 24 21,930
Total assets........................................ 220 240 166 274 32,370
Capital lease obligations, less current portion..... -- -- -- -- 647
Redeemable convertible preferred stock.............. -- -- -- -- 27,332
Total stockholders' equity (deficiency)............. 54 143 64 (190) (447)
</TABLE>
16
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and our financial statements and the related notes
included elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors including the risks discussed in "Risk Factors" and elsewhere
in this prospectus.
OVERVIEW
ScreamingMedia is a leading global aggregator and distributor of digital
content over the Internet. Using our proprietary technologies, we aggregate
digital content from a wide range of content providers and filter, deliver and
efficiently integrate this content into our customers' Web sites almost
instantaneously.
We were incorporated in August 1993 as The Interactive Connection, Inc.
Until 1997, our primary business focus was Web site design, development and
consulting. By the end of 1997 we had designed, developed and tested our
proprietary software. In late 1998 we shifted our business focus entirely to the
business of aggregating and distributing digital content over the Internet. In
January 1999, we were reincorporated in Delaware and renamed as Screaming
Media.Net, Inc. We subsequently changed our name to Screaming Media.com Inc. in
December 1999.
Revenue
Our revenue is composed of network services revenue, set-up fees and other
revenue. We derive our network services revenue primarily from distributing
content directly to our customers' Web sites through our network infrastructure.
Our contracts typically have an initial term of one year. We charge our
customers a minimum monthly fee based on a contractually specified volume of
content. We charge our customers additional monthly fees for content delivered
in excess of the contracted volume of content. We recognize revenue for the
contracted minimum monthly fee on a straight-line basis ratably over the life of
the contract. We recognize revenue from content used in excess of the contracted
volume as the services are delivered. We report our revenue net of allowances
and rebates.
We generally charge our customers a one time set-up fee. Set-up fees are
charged for building custom filters and enabling the customer to connect to our
network. The amount of the set-up fee varies according to the number of custom
filters created and other factors. We recognize set-up fee revenue ratably over
the initial term of the contract, commencing with the service start date
specified in the contract.
In 1999, our other revenue consisted of an immaterial amount of revenue
from other services, including server hosting and maintenance. Prior to 1999,
our other revenue also included revenue from Web hosting and Web design and
consulting. We do not expect to actively pursue these lines of business in the
future.
Cost of Services
Cost of services consists of the content royalty fees we pay to content
providers for the distribution of their content and the network costs associated
with the aggregation and distribution of that content. Monthly royalty fees are
calculated based on the volume of a provider's content used by our customers.
Under our existing contracts with content providers, we only pay royalties on
content that we have delivered to our customers.
Research and Development Expenses
Our research and development expenses consist primarily of personnel costs
and outside consulting services for research, design and development of our
internal use software applications relating to our digital content network.
Research and development costs are expensed as incurred.
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<PAGE> 22
Sales and Marketing Expenses
Our sales and marketing expenses consist mainly of advertising costs,
personnel costs and sales commissions, as well as related trade show,
promotional and public relations expenses. Our success in increasing revenues
depends on our ability to increase our customer base as well as our range of
content providers. Accordingly, we intend to pursue sales and marketing
campaigns aggressively after this offering.
General and Administrative Expenses
General and administrative expenses consist primarily of management and
administrative personnel costs, fees for professional services and facilities
costs.
Stock-Based Compensation
We recorded a charge for the amortization of deferred stock-based
compensation of approximately $6.1 million in 1999. Stock-based compensation is
a result of the issuance of stock options to employees, directors and affiliated
parties with exercise prices per share subsequently determined for financial
reporting purposes to be below the fair market value per share of our common
stock at the date of the applicable grant. This difference is recorded as a
reduction of stockholders' equity and amortized as non-cash compensation expense
on an accelerated basis over the vesting period of the related options.
RESULTS OF OPERATIONS
The following table sets forth our results of operations as a percentage of
revenue for the years ended December 31, 1997, 1998 and 1999, respectively.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1997 1998 1999
---- ----- -----
<S> <C> <C> <C>
Revenue:
Network services.......................................... 43% 54% 83%
Set-up fee................................................ 7 12 17
Other..................................................... 50 34 --
---- ----- -----
Total revenue.......................................... 100% 100% 100%
==== ===== =====
Operating expenses:
Cost of services.......................................... 12% 23% 33%
Research and development.................................. 19 17 30
Sales and marketing....................................... 15 18 126
General and administrative................................ 60 80 145
Depreciation and amortization............................. 6 5 15
Stock-based compensation.................................. 4 62 203
---- ----- -----
Total operating expenses............................... 116 205 552
---- ----- -----
Operating income (loss)..................................... (16) (105) (452)
Other income (expense), net................................. -- (2) 11
Net income (loss)...................................... (16)% (107)% (441)%
==== ===== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1998 AND 1999
Revenue. Total revenue increased to $3.0 million for the year ended
December 31, 1999, from $567,000 in the previous year. This increase was due to
an increase in our customers to 453 at December 31, 1999 from 30 at December 31,
1998, an increase in the average monthly network services revenue per customer
and higher initial set-up fees. In 1999, one customer accounted for
approximately 12% of revenue.
()
Cost of Services. Cost of services increased to $974,000 for the year
ended December 31, 1999, from $130,000 in the year ended December 31, 1998. As a
percentage of revenue, cost of services also increased
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<PAGE> 23
to approximately 33% for the year ended December 31, 1999 from approximately 23%
for the year ended December 31, 1998. The dollar increase was primarily due to
increases in network services revenue resulting in greater content royalty fees
paid to content providers. The percentage increase was primarily a function of
higher royalty fee arrangements with certain content providers. We anticipate
that the cost of services will continue to grow in absolute dollars as we expand
our digital content network.
Research and Development. Research and development expenses increased to
$894,000 for the year ended December 31, 1999, from $97,000 for the year ended
December 31, 1998. As a percentage of revenue, research and development expenses
increased to approximately 30% for the year ended December 31, 1999 from
approximately 17% for the year ended December 31, 1998. This increase was due to
direct personnel and consulting costs incurred in further development of our
content filtering, aggregation and distribution software and the development of
new products. During this period, we increased the number of our research and
development staff to 13 from two. We believe that significant investments in
research and development expenses will be required to enhance and expand our
products and services. Accordingly, we expect that our research and development
expenses will continue to increase in absolute dollars for the forseeable
future.
Sales and Marketing. Sales and marketing expenses increased to $3.8
million for the year ended December 31, 1999, from $105,000 for the year ended
December 31, 1998. As a percentage of revenue, sales and marketing expenses
increased to approximately 126% for the year ended December 31, 1999 from
approximately 18% for the year ended December 31, 1998. The increase in sales
and marketing expense was primarily due to a $2.5 million increase in
compensation expense associated with the growth of our sales, content
acquisition, customer support and marketing departments. The remainder of the
increase was primarily attributable to the launch of a marketing campaign in the
third quarter of 1999. We intend to expand our sales and marketing activities
and staff substantially, both domestically and internationally, in order to
increase market awareness and to promote and sell the ScreamingMedia solution.
Accordingly, we expect our sales and marketing expenses to continue to increase
in absolute dollars.
General and Administrative. General and administrative expenses increased
to $4.3 million for the year ended December 31, 1999, from $455,000 for the year
ended December 31, 1998. As a percentage of revenue, general and administrative
expenses increased to approximately 145% for the year ended December 31, 1999
from approximately 80% for the year ended December 31, 1998. This increase
resulted primarily from an increase in personnel costs associated with a
significant increase in the number of administrative personnel, as well as
increased facilities expenses and accounting, legal and consulting fees.
Stock-Based Compensation. In connection with the grant of stock options to
employees during 1999, we recorded deferred stock compensation of $16.4 million.
We amortized $6.1 million of this deferred stock compensation in 1999. In 1998,
we incurred a charge of $350,000 for stock-based compensation.
YEARS ENDED DECEMBER 31, 1997 AND 1998
Revenue. Total revenue decreased to $567,000 for the year ended December
31, 1998, from $574,000 for the year ended December 31, 1997. In 1998, we
completed our transition from a Web design, hosting and consulting enterprise to
our present content delivery business. As a result, we did not actively seek to
renew Web design, hosting and consulting agreements when they expired.
Cost of Services. Cost of services increased to $130,000 for the year
ended December 31, 1998, from $70,000 for the year ended December 31, 1997. As a
percentage of revenue, cost of services increased to approximately 23% for the
year ended December 31, 1998 from approximately 12% for the year ended December
31, 1997. This increase was primarily the result of additional network costs
associated with our aggregation and distribution of content.
Research and Development. Research and development expenses decreased to
$97,000 for the year ended December 31, 1998, from $107,000 for the year ended
December 31, 1997. Our research and development expenses remained essentially
flat as we redirected our internal resources from the business of Web site
design and development to the development of our digital content network.
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<PAGE> 24
Sales and Marketing. Sales and marketing expenses increased to $105,000
for the year ended December 31, 1998, from $87,000 for the year ended December
31, 1997. Sales and marketing costs remained relatively flat as a percentage of
revenue.
General and Administrative. General and administrative expenses increased
to $455,000 for the year ended December 31, 1998, from $347,000 for the year
ended December 31, 1997. As a percentage of revenue, general and administrative
expenses increased to approximately 80% for the year ended December 31, 1998
from approximately 60% for the year ended December 31, 1997. This increase
resulted primarily from increases in overhead costs associated with legal and
accounting services, additional facilities expenses and general office supplies.
QUARTERLY OPERATING RESULTS
The following table sets forth our unaudited quarterly operating results
for the fiscal year ended December 31, 1999. This information has been derived
from our unaudited interim financial statements. In our opinion, this unaudited
information has been prepared on a basis consistent with our audited financial
statements contained elsewhere in this prospectus and includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information for the quarters presented. Historical results
for any quarter are not necessarily indicative of the results to be expected for
any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
--------- -------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue:
Network services............................... $ 234 $ 324 $ 681 $ 1,241
Set-up fee..................................... 25 69 135 263
Other.......................................... 8 -- 2 3
----- ------- ------- -------
Total revenue.......................... 267 393 818 1,507
Operating expenses:
Cost of services............................... 60 96 283 535
Research and development....................... 137 182 196 379
Sales and marketing............................ 75 445 1,389 1,859
General and administrative..................... 270 549 1,036 2,475
Depreciation and amortization.................. 12 35 125 279
Stock-based compensation....................... -- 134 1,687 4,241
----- ------- ------- -------
Total operating expenses............... 554 1,441 4,716 9,768
----- ------- ------- -------
Operating loss................................... (287) (1,048) (3,898) (8,261)
----- ------- ------- -------
Other income (expenses), net..................... -- 31 24 273
----- ------- ------- -------
Net loss............................... $(287) $(1,017) $(3,874) $(7,988)
===== ======= ======= =======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of equity and debt securities, which totaled approximately $34.2 million
in aggregate net proceeds through December 31, 1999. As of December 31, 1999, we
had cash and cash equivalents of $22.1 million.
As of December 31, 1999, our principal commitments consisted of obligations
outstanding under a series of capital leases of computer and networking
equipment and our facilities leases. The capital leases expire at intervals
between 2000 and 2002. We have no obligation to purchase the equipment subject
to the leases at their conclusion. We operate from leased premises in New York,
San Francisco and London. Our current aggregate annual rent obligations under
these leases are approximately $1.1 million for each of 2000 and
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<PAGE> 25
2001. We anticipate that our actual rental obligations for those years will be
higher as a result of us entering into leases for additional offices. During
1999, our capital expenditures were $3.4 million, consisting primarily of
purchases of computers, networking equipment and the build-out of our
headquarters.
For the years ended December 31, 1999 and 1998, net cash used in operating
activities was $7.8 million and $110,000, respectively. The net cash used in
operating activities in 1999 resulted primarily from net losses of $13.2
million, an increase in prepaid advertising of $2.9 million and an increase in
trade accounts receivable of $1.3 million, offset by a $6.1 million non-cash
charge for stock-based compensation and a $3.1 million increase in accounts
payable and accrued expenses.
For the years ended December 31, 1999 and 1998, net cash used in investing
activities was $3.8 million and $7,000, respectively. The net cash used in
investing activities in 1999 was principally for the purchase of equipment and
leasehold improvements.
For the years ended December 31, 1999 and 1998, net cash provided by
financing activities amounted to $33.5 million and $237,000, respectively. Net
cash provided by financing activities in 1999 was provided primarily by net
proceeds generated from our offerings of capital stock, which together totaled
$33.5 million. This total included $28.0 million from the sale of Series B
preferred stock and $5.5 million from the sale of Series A preferred stock.
We anticipate that the net proceeds of this offering, together with our
current cash and cash equivalents, will be sufficient to meet our working
capital and capital expenditure requirements for at least the next 12 months.
However, we may need to raise additional funds in order to support our growth,
to expand our international operations, to develop new, or enhance existing,
services or products, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If we need to raise
additional funds, we will likely do so through the issuance and sale of equity
securities. If this were to occur, the percentage ownership of our stockholders
could be reduced, our stockholders may experience additional dilution and such
securities may have rights, preferences or privileges senior to those of our
stockholders. 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 are
not available on acceptable terms, our ability to fund our expansion, take
advantage of unanticipated opportunities, develop or enhance services or
products or otherwise respond to competitive pressures would be significantly
limited. Our business, results of operations and financial condition could be
materially adversely affected by such limitations.
MARKET RISK
In 1999, all of our revenues and expenses were denominated in U.S. dollars.
We anticipate that in the future the proportion of operating expenses paid in
foreign currencies will increase and that the number of foreign currencies in
which our revenue is denominated will also increase. Accordingly, we may be
subject to exposure from adverse movements in foreign currency exchange rates in
relation to these revenues and expenses. We do not currently use derivative
financial instruments.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer systems and programs using
two digits rather than four to identify a given year. As a result, computer
systems or programs that are not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which could result in a variety of
failures and other errors. Our business is dependent on the Year 2000 compliance
of our own computer systems and software including the software that we supply
to our customers, as well as that of third parties, such as major content
providers, and the infrastructure that supports the Internet.
In preparation for the Year 2000, we tested our software and hardware and
performed minor remedial work on our software to ensure Year 2000 compliance.
Because we are a relatively new business, the majority of our own hardware and
software has been acquired or developed within the last two years, during which
time there was a high awareness of Year 2000 issues.
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<PAGE> 26
To date, we have not experienced any material difficulties associated with
the Year 2000. To our knowledge, no third party upon which we depend has
experienced a material Year 2000 problem. However, it is still possible that
errors or defects may remain undetected, or that dates other than January 1,
such as February 29, 2000, may trigger Year 2000 problems. If this occurs with
respect to our software or computer systems, or those of third parties on which
we rely, our reputation, business, operating results and financial condition
could suffer.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 131, Disclosure about Segments of an Enterprise and Related
Information. SFAS No. 131 establishes standards for the way business enterprises
report information about operating segments, as well as enterprise-wide
disclosures about products and services, geographic areas and major customers.
We operate in one segment. Our customers are located in eight countries around
the world with the majority being in the United States. All of our transactions
have been conducted in United States dollars. As of January 31, 2000, we did not
have any material revenues or assets outside the United States.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments and hedging
activities. Generally, it requires that an entity recognizes all derivatives as
either an asset or liability and measures those instruments at fair value, as
well as identifies the conditions for which a derivative may be specifically
designated as a hedge. SFAS No. 133 is effective for fiscal years beginning
after June 15, 2000. We do not currently engage in or plan to engage in any
derivative or hedging activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This statement
requires companies to capitalize qualifying computer software costs which are
incurred during the application development stage and amortize them over the
software's estimated useful life. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998. We adopted requirements of SOP 98-1 as of
January 1, 1999.
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BUSINESS
OVERVIEW
We have developed a leading global technology platform for the aggregation
and distribution of digital content over the Internet. Using our proprietary
technologies, we aggregate digital content from a wide range of content
providers and filter, deliver and efficiently integrate this content into our
customers' Web sites almost instantaneously. Our technology is compatible with
existing and emerging delivery platforms, including wireless, and is designed to
support a variety of content formats, ranging from text to streaming video. We
believe that the ScreamingMedia solution offers Web sites the most
cost-effective means to meet the growing need to provide high-quality content to
their users, which is essential to building a loyal user base. Our rapidly
growing digital content network offers a single-source solution of timely and
relevant content for Web sites and offers our content providers an efficient
syndication solution.
Our digital content network is composed of Web site customers and content
providers. As of January 31, 2000, we had over 530 customers and obtained
content from over 390 publications, supplied by 119 content providers. We added
105 of our current customers in January 2000. We have a growing international
presence, with 54 of our customers and 19 of our content providers based outside
the United States, primarily in Latin America, the United Kingdom and Canada.
We enter into contracts with our customers, typically for an initial period
of one year, that provide for a recurring monthly network services fee. Our
customers are predominantly operators of Web sites, spanning a broad range of
Internet categories, and include AltaVista Shopping.com, The Black World Today,
CareerBuzz, Commerce One, drkoop.com, Entertaindom.com, InteliHealth, MSN
MoneyCentral, Sun Microsystems, Inc. and Yupi Internet. Our content providers
range from traditional news services to new media sources and include
Astrology.com, AP Online, Deutsche Presse-Agentur, EFE, Knight-Ridder Tribune,
Knoxville New-Sentinel, The New York Times Syndicate, Red Herring.com and
ThirdAge.com.
INDUSTRY BACKGROUND
Rapid Growth of the Internet
The Internet has emerged as a global medium for communications and
commerce. International Data Corporation, or IDC, estimates that the number of
Web users worldwide will increase from approximately 196 million in 1999 to
approximately 502 million by the end of 2003. IDC also estimates that the number
of Web users in the United States alone will increase from approximately 81
million in 1999 to approximately 177 million by the end of 2003.
Rapid Growth in Business Use of the Internet and "Vertical" Web Sites
Businesses worldwide are increasingly using the Internet to take advantage
of new revenue opportunities and operational efficiencies. In the last several
years, many businesses have emerged with operating models that are exclusively
dependent on the Internet, while traditional businesses of all sizes are working
quickly to establish Web sites and expand their Internet presence. One indicator
of the pace of this growth is IDC's projection that the market for
business-to-business e-commerce will grow from $80 billion in 1999 to $1.1
trillion in 2003.
As the number of Web sites has grown, another trend that has emerged is the
proliferation of "vertical" Web sites, or Web sites targeted to specific
interest groups. Vertical sites represent one of the fastest-growing segments of
the Internet and are attracting a greater portion of advertising dollars.
According to Forrester Research, the share of Internet advertising revenue
generated by vertical Web sites will grow from 35% in 1999 to 55% in 2004.
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<PAGE> 28
Growing Importance of High-quality Content
The ability of Web sites to attract users is based in large part on their
ability to provide users with value-added content. We believe that high-quality
content is the primary reason users return to their favorite Web sites. In order
to drive traffic to their sites and maximize stickiness, or the amount of time a
user spends on a Web site, Web sites need to obtain high-quality content to
differentiate themselves and to attract the attention of loyal users on the
increasingly crowded Internet.
Web Sites Face Challenges Obtaining and Managing High-quality Content
Web sites have traditionally faced two costly and time consuming
alternatives in attempting to obtain and integrate compelling content -- either
to produce the content themselves or to outsource content from multiple
third-party sources. Web sites that choose to create their own content face the
high cost of maintaining an editorial staff as well as limitations on the volume
and breadth of the content they can produce. Web sites that choose to aggregate
third party content themselves must spend the time and effort to establish
relationships with multiple content providers, often at a high cost, in order to
obtain a sufficient array of content. They must then sift through a large volume
of incoming content, in multiple formats, in order to find relevant content for
their site.
THE SCREAMINGMEDIA SOLUTION
We provide a single-source solution that enables Web sites to
cost-effectively obtain and integrate high-quality, targeted content. Our
proprietary technologies allow our customers to obtain custom-filtered digital
content that is delivered in real time and fully integrated into the look and
feel of their Web sites. Our rapidly growing digital content network provides
important benefits to both our customers and our content providers.
BENEFITS TO OUR CUSTOMERS
Custom-Filtered, Real-Time Content. We offer Web sites continuously
updated customized content drawn from our broad selection of content providers.
We create one or more custom filters for our Web site customers, producing what
we believe is the most precisely targeted content service currently available.
Our proprietary technology enables us to process and deliver relevant content to
customers' Web sites within seconds of our receiving the material from our
content providers.
Compelling Cost Proposition. We provide our Web site customers with a
single-source solution for their content needs. Our solution is both easy to
implement -- our software is compatible with all major Web platforms and can be
installed with minimal time and effort -- and easy to use, with very little
ongoing effort required. Customers can opt to maintain full editorial control in
selecting the content they receive from us or they can opt to operate
"hands-free," with content integrated directly into their Web site without any
further editorial effort. By using the ScreamingMedia solution, our customers
can avoid the time and expense associated with maintaining an editorial staff or
dealing with multiple content providers, enabling them to focus their resources
on other critical aspects of their business.
Seamless Integration into a Customer's Web Site. We deliver and integrate
content directly into our customers' Web sites in a manner consistent with the
look and feel of the site, enabling our customers to maintain and enhance their
brand identity. The content we supply is fully integrated so that users remain
on our customers' sites, which is an advantage over other services that require
users to link away to the content provider's site. This enhances user loyalty,
allows Web sites to control the user's online experience and maximizes our
customers' revenue opportunities.
Flexible Solutions for a Broad Range of Customers. Our solutions are
scalable and adaptable to meet customers' changing needs. The ScreamingMedia
solution is equally suitable for customers requiring a high volume of content
across many categories and those requiring a narrow stream of highly targeted
content. Additionally, our solution may be used to supplement a Web site's
original content. We can supply local, national and international content in
different languages from a broad range of sources to Web sites worldwide. In
addition, our new packaged news product, which we expect to launch in early
2000, will offer
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<PAGE> 29
customers a lower-cost, pre-edited news solution. Our delivery formats are
compatible with existing and evolving standards, including HTML, ASCII text, XML
and special formatting for database insertion, and our software is compatible
with all major Web site technology platforms.
Enhanced Stickiness and Value. By providing our customers with
continuously updated, targeted and relevant content, we believe that we help
them differentiate their Web sites, build a loyal user base and increase the
time each user spends on the site, as well as the frequency of user visits. This
enhanced traffic and stickiness increases revenue opportunities for our
customers.
BENEFITS TO OUR CONTENT PROVIDERS
We offer our content providers the opportunity to expand the distribution
of their content and extend their reach at little or no cost. Our digital
content network also allows content providers to increase their brand exposure
while generating additional revenue opportunities. For content providers that
already syndicate their content, the benefit lies in accessing additional
distribution outlets without having to negotiate specific arrangements, which
translates into increased distribution and revenue potential at little or no
incremental cost. For other publishers, particularly small or niche content
providers, we offer an attractive opportunity to syndicate their material and
reach audiences that they could not otherwise access.
STRATEGY
Our objective is to establish our technology platform as the global
standard for the exchange of digital content and related services. The key
elements of our strategy are as follows:
Rapidly Expand Our Digital Content Network. We plan to aggressively expand
the number of customers and content providers that make up our digital content
network. The growth of our digital content network benefits both customers and
content providers. As more Web sites use our services, this helps attract
content providers by offering greater exposure and the opportunity to earn more
revenue. Similarly, as more content providers join the network, the more
valuable our services become to our customers as they gain access to an even
greater array of content. We intend to rapidly grow our customer base through
expanded domestic and international sales and marketing efforts and the
continued expansion and enhancement of our products and services. We believe
that the expansion of our digital content network will create significant
barriers to entry and help our solution become the global standard for digital
content aggregation and distribution.
Maintain and Extend Product and Technology Leadership. We believe that we
are currently the technology leader in aggregating and distributing digital
content to Web sites. We intend to maintain and extend our technology and
product leadership through continued research and development investments. We
plan to continue developing products and services that respond to changing
customer needs and evolving technologies and standards. Our development efforts
are focused on offering new types of content such as photos, audio and video and
adding complementary network services such as context-based e-commerce
applications. In addition, we are currently extending our platform to provide
our Web site customers with enhanced wireless content delivery capabilities.
Establish ScreamingMedia as a Leading Brand. We believe that strong brand
recognition is critical to our continued success. We intend to establish
ScreamingMedia as the leading global brand for digital content aggregation and
distribution. In September 1999, we launched our first brand-building campaign
through print advertising in major business publications. We intend to
aggressively extend our global brand-building campaign in 2000, which will
include offline and online advertising, appearing at industry trade shows,
sponsoring and appearing at industry conferences and other activities.
Continue to Pursue Strategic Relationships. We intend to continue
developing strategic relationships with other Internet-related companies to
expand and enhance our digital content network. To date, we have entered into
strategic alliances with partners including Agency.com, B2Bworks, Concentric
Networks, Interwoven, Proxicom and Red Hat. These partners help us generate
sales leads, and in some instances bundle our software with their technology
offerings, which facilitates the growth of our network. We intend to form
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<PAGE> 30
additional strategic relationships that further enhance our business. In
addition, where appropriate, we intend to pursue strategic acquisitions that
offer complementary products, services or technologies.
Expand Our International Presence. There are significant opportunities to
continue to expand our digital content network outside the United States. In
particular, Latin America, Europe and Asia are expected to experience dramatic
growth in Internet use over the next several years. We intend to capitalize on
these opportunities. By moving into these markets early, just as the need for
Web content becomes critical, we believe we will be able to obtain a significant
advantage over our competitors. Our content processing technology allows us to
aggregate and manipulate any form of content in any language and consequently we
face few technological barriers to international expansion. Currently, we
aggregate and distribute content in different languages for customers both
within the United States and internationally. To further extend our
international presence, we opened a London office in January 2000 and we plan to
open an office in Miami in early 2000 to service the Latin American market. We
will also pursue strategic relationships with international partners when
appropriate opportunities arise.
CUSTOMERS
As of January 31, 2000, we had entered into contracts with over 530
customers. Our customers are predominantly operators of Web sites, spanning a
broad spectrum of Internet categories. The following is a representative list of
our customers:
BUSINESS-TO-BUSINESS
ChemConnect
Commerce One
eSteel
Power Marketers Association
TECHNOLOGY
EarthWeb
Red Hat
Sun Microsystems, Inc.
BUSINESS AND FINANCE
Accounting.com
Insurance Information Institute
MSN MoneyCentral
E-COMMERCE/ADVERTISING/PORTALS
About.com
AltaVista Shopping.com
AuctionRover
DoubleClick
GoEdison.com
ENTERTAINMENT
DVDfile
Entertaindom.com
iCAST
Trans-World Entertainment Company
HEALTH
Cancer Facts
drkoop.com
eNutrition.com
InteliHealth
National Multiple Sclerosis Society
Shared Medical Systems
thehealthchannel.com
INTERNATIONAL/FOREIGN LANGUAGE
LatPro.com
Telemundo
Yupi Internet
RECRUITING
CareerBuzz
Career Zone
SPECIAL INTERESTS
The Black World Today
EVOTE.COM
The Gay Financial Network
Womens' Health Interactive
WIRELESS ENABLED
The New York Times on the Web
OmniSky
Oracle Corp.
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CASE STUDIES
thehealthchannel.com -- Using ScreamingMedia Content to Enhance
Stickiness. thehealthchannel.com had been subscribing to a content syndication
service that only provided headlines that linked the visitor off their site in
order to read the articles. thehealthchannel.com needed a content service that
allowed them to keep their users on their site longer. ScreamingMedia provided
thehealthchannel.com with custom filters and our SiteWare(TM) software, allowing
them to access thousands of high-quality, full-text articles from our Content
Engine(R). Using SiteWare(TM), thehealthchannel.com is now able to publish the
entire text of articles in a manner consistent with the look and feel of their
site. As a result, thehealthchannel.com can now provide targeted content without
driving away traffic or surrendering advertising revenue to a third party.
The Black World Today -- Using ScreamingMedia to Help Increase Ad
Revenue. The Black World Today, or TBWT, wanted to create additional revenue
from advertising and sponsorships in order to expand, but had insufficient
page-views to attract the volume of advertising they desired. ScreamingMedia's
solution has enabled TBWT to publish relevant, high-quality content, thereby
adding additional pages of targeted news content to their site. TBWT believes
that the use of the ScreamingMedia network has helped them to increase their
page-views and attract new advertisers.
Sun Microsystems, Inc. -- Using ScreamingMedia as a Single Source Content
Solution. Sun wanted to offer their large community of Java(TM) developers
real-time news from multiple sources, but did not want the inconvenience and
expense of creating and managing multiple content licensing deals. The
ScreamingMedia solution provided Sun with a single source for custom-filtered
articles related to Java technology from multiple sources in real time and
allowed them to integrate these articles directly into Sun's Web site. By
outsourcing the provision of news for its Web site to ScreamingMedia, Sun was
able to gain a depth and specificity of news coverage it could not have obtained
elsewhere, and integrate these articles into its Web site at low cost, with very
little effort.
EVOTE.COM -- Using ScreamingMedia to Lower Editorial Costs. EVOTE needed
to provide high-quality, up-to-the-minute election news for the 2000
Presidential election, but it was not cost-effective to hire the additional
editorial staff it required. ScreamingMedia created a custom filter for EVOTE,
enabling EVOTE's editors to select election-related content from a wide variety
of sources with minimal effort. With ScreamingMedia's custom content solution,
EVOTE can now provide high-quality, real-time election news in a cost-effective
and efficient manner with no additional editorial staff.
InteliHealth -- Using ScreamingMedia to Maximize Editorial
Control. InteliHealth was looking for real-time, health-related news to
supplement its already extensive database of high-quality content. InteliHealth
chose ScreamingMedia because our Editor's Desk feature provided a mechanism for
their news editors to effectively review, classify and hand-pick the articles
they wanted. Additionally, our SiteWare(TM) software allowed them to publish
content to their site, in a manner consistent with InteliHealth's own look and
feel, with the click of a mouse. For InteliHealth, ScreamingMedia offered a
solution that provided a large quantity of filtered content and offered full
editorial control over the content they choose to publish on their Web site.
CONTENT PROVIDERS
We employ a specialized content acquisition team to build our network of
content providers. As of January 31, 2000, this team was composed of 13
employees. Members of this department typically specialize in a particular type
of source, such as newspapers, newswires, magazines or Web sites, or on major
geographic or vertical markets. We intend to hire additional content acquisition
staff as we expand.
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We currently obtain content from over 390 publications from 119 content
providers, ranging from traditional news syndication services to specialized
media sources and including both domestic and international publications. A
representative list is provided below:
GENERAL NEWS SYNDICATION
AP Online
The Christian Science Monitor
Knight-Ridder Tribune
Medical Tribune News Service
Newsbytes News Network
The New York Times Syndicate
Policy.com
Scripps Howard News Service
INTERNATIONAL/FOREIGN LANGUAGE
Deutsche Presse - Agentur
EFE
Fut Brasil
Latin Trade
LIFESTYLES/ENTERTAINMENT/SPORTS
AP Mega Sports
Asimba.com
Astrology.com
Theatre.com
ThirdAge.com
TVData Features Syndicate
BUSINESS AND INDUSTRY
American Banker
Biomedical Market Newsletter
Financial Gazette
Internet Wire
IRA Info
Microcap Stock Digest
Mutual Funds Interactive/Brill.com
Red Herring.com
Total Stock Research.com
LOCAL/REGIONAL
Albuquerque Journal
Arizona Republic
Atlanta Journal - Constitution
Knoxville News - Sentinel
Las Vegas Review Journal
MaineToday.com
NETWORK SERVICES
We provide real-time delivery of custom-filtered content to Web site
customers. We provide a single-source solution that enables Web sites to
cost-effectively obtain and integrate high-quality, targeted content. Our
service employs two principal software applications:
- the Content Engine(R), which resides on our servers, processes, filters
and distributes incoming content; and
- SiteWare(TM), which is installed on our customers' servers, is used to
receive content from us and to integrate this content into the customer's
Web site.
The key features of our service are:
- customization -- we work with our customers to create a series of custom
filters that extract exactly the type of content the customer desires;
- real-time delivery -- as soon as we receive content, our Content
Engine(R) processes, filters and delivers it almost instantaneously to
our customers' Web sites;
- control -- customers can use the Editor's Desk feature of SiteWare(TM) to
review the content we deliver and choose which items to display on their
sites. Alternatively, customers can choose to have ScreamingMedia publish
content directly to their Web sites without an intervening step; and
- integration -- once a customer has chosen the desired content,
SiteWare(TM) automatically integrates it into the customer's Web site.
Customers can choose to receive content in most commonly-used formats,
including ASCII text, XML, HTML, and database-ready formats. Our system
enables content to appear on the customer's site in a manner consistent
with the look and feel of the site.
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In early 2000, we intend to begin offering a new packaged news product to
Web sites. This product will offer customers a lower-cost, pre-edited news
solution available for purchase from our Web site. Customers will be able to
choose one or more of a number of topical content packages, which will be
composed of items selected daily by our editors. This content will be sent to
customers over the Internet and will automatically be integrated into the look
and feel of the customer's Web site.
TECHNOLOGY
ScreamingMedia's proprietary software platform is designed for flexibility,
scalability and reliability. The primary elements consist of SiteWare(TM)
software that is installed on each customer's Internet server computer and the
Content Engine(R) that resides on our own server computers. Key features of the
technology include:
Object-Oriented Multi-Tiered Architecture. Our software is based on the
distributed object model, allowing virtually any digital data to be
encapsulated and transferred through our network -- for example, text,
photo, video and audio based content. The modularity resulting from our
multi-tiered architecture enhances our ability to modify and upgrade the
network without interruption to our services. Both of these features
contribute to the scalability of our platform.
Robust Processing and Filtering Technology. The algorithms employed in our
Content Engine(R) software allow real-time processing and custom filtering
of all incoming content. Our proprietary pre-processing algorithms
normalize all incoming content prior to the filtering stage. Our filtering
technology uses regular expression pattern matching, allowing a high degree
of customization and control. The Content Engine(R) currently houses over
5,000 custom filters.
Platform Independent Java Application. Our SiteWare(TM) software is
written entirely in Java. Using Java allows the software to function on any
type of operating system for which a Java run-time environment is
available, making the software platform-independent.
Compatibility With Evolving Technologies. Our technology enables us to
both deliver content to and aggregate content from a variety of Web
platforms and in a variety of standard and legacy data formats.
SiteWare(TM) can deliver content to Web sites in most commonly-used
formats, including ASCII text, binary data, XML, HTML, and database-ready
formats. Our content aggregation system can access content through a
variety of delivery channels, including satellite, leased lines and the
Internet.
Content Engine(R)
The Content Engine(R) resides on our servers and is a highly scalable
server software solution that aggregates, normalizes, filters and disseminates
content from various media sources. Incoming content undergoes a process of
parsing and normalization to prepare it for further processing. Once data is
normalized and indexed, the process of matching client-specific filters occurs.
When a piece of content matches a client filter, that piece of content is copied
into a customer-specific file. We deliver content by means of a proprietary
TCP/IP socket communication protocol that communicates between the Content
Engine(R) and SiteWare(TM), which is installed on the customer's server.
SiteWare(TM)
We provide our customers with our SiteWare(TM) software. SiteWare(TM)
allows the customer access to our services and allows communication between the
customer's server and the Content Engine(R). SiteWare(TM) houses each customer's
unique integration configuration and, upon receiving data from the Content
Engine(R), can immediately integrate that information into the customer's Web
site in the manner desired.
SiteWare(TM) includes a feature called the Editor's Desk that allows a
customer to exercise complete control over the content they select and publish
to their Web site. From the Editor's Desk, a customer can review articles and
publish selected stories to pre-determined locations on their Web site with a
single click of their mouse. Web sites that prefer to have "hands-free" content
delivery can choose to have us publish content directly to their Web site
without any further editorial involvement.
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Scalable Network Infrastructure
Our network infrastructure consists of multiple UNIX servers on a
multi-tiered TCP/IP backbone, which allow for hardware and software scalability.
All server applications are distributed across multiple server computers for
maximum redundancy.
SALES AND MARKETING
Sales
We sell our ScreamingMedia solution through a direct sales force. As of
January 31, 2000, our sales force was composed of 37 employees. Our sales staff
is currently located in New York, San Francisco and London. Our sales force is
divided into teams focused on international markets and vertical categories,
such as health, technology, finance and entertainment. We intend to hire
additional sales people as we expand.
Marketing
Our marketing strategy is to build brand awareness and increase customer
familiarity with ScreamingMedia and our services through online and traditional
media advertising, public relations efforts and a presence at trade shows and
other industry events. In addition, we use online and offline promotions and
strategic marketing partnerships to help generate sales leads. Our Web site is
also used as a marketing and sales tool, providing current and potential
customers the ability to research and sample our services and to contact our
sales staff.
Alliance Partner Program
To accelerate the growth of our digital content network, we have developed
an alliance partner program. The program consists of a range of strategic
partnerships with businesses that offer particular opportunities to market our
products or to distribute our software. Our marketing partners, such as
Agency.com, Concentric Networks, B2Bworks and Proxicom, recommend our products
and services, where appropriate, as part of their overall service package. We
work with our technology partners, such as Red Hat and Interwoven, to bundle
SiteWare(TM) with their technology offerings. We believe these arrangements
benefit our partners by enabling them to offer additional products and services
to their customers, and will assist us in achieving our goal of having our
products widely adopted as a standard content platform across the Internet.
CUSTOMER SUPPORT
We believe that a high level of customer support is critical to our
success. We provide our customers and content providers with 24 hours a day,
seven days a week support. As of January 31, 2000, our customer support staff
was composed of 28 employees. We provide full life-cycle support, beginning with
software configuration and installation assistance and filter building, and
extending to ongoing technical support and account management. We also provide
Web-based customer support. We intend to hire additional customer support
personnel as our digital content network expands.
COMPETITION
The market for digital content aggregation and distribution on the Internet
is new and rapidly evolving. We expect competition to increase significantly in
the future as current competitors improve their offerings and as new
participants enter the market.
We believe that the principal competitive factors in our market are
cost-effectiveness, ease of use, brand recognition, ease of integration,
scalability and breadth, depth and timeliness of content.
We currently compete with both traditional and online aggregators and
distributors of content. Historically, traditional aggregators and distributors
have delivered large volumes of content in proprietary formats. These services
have typically been relatively expensive and inflexible and thus are less
suitable for most Web site customers.
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While many of the traditional content aggregators and distributors have not
focused on the online marketplace, several now offer products that can be used
by Web sites to obtain content. Many of these companies have longer operating
histories, larger customer bases, greater brand recognition, and significantly
greater financial, marketing and other resources than we do.
We also compete with existing online aggregators and distributors of
content, some of whom offer products similar to ours. Some of these companies
offer different subscription models, delivery systems and types of content, and
these differences could prove attractive to potential customers. In the future,
these competitors or any other competitors might offer products that offer the
features we now offer or other features desired by potential customers.
Although we believe that we have competitive advantages over our current
competitors and other potential entrants in our market, we may be unable to
compete successfully against current and future competitors, which could
adversely affect our business.
INTELLECTUAL PROPERTY
Our success will depend in part on our ability to protect our intellectual
property and other proprietary rights in our software and other technology. To
protect our proprietary rights, we rely on a combination of patent, trademark,
copyright, and trade secret laws, confidentiality and license agreements with
our employees, customers, partners, and others, and security features we have
built into our technology.
We have four pending U.S. patent applications, but presently do not have
any issued patents. Unless and until patents are issued, no patent rights can be
enforced. We have applied for registration in the United States for certain of
our trademarks and service marks, including ScreamingMedia(SM), SiteWare(TM),
Content Engine(R) and others, and we intend to pursue registration of certain
marks internationally.
Despite these protections, others still might be able to use our
intellectual property without our authorization. In addition, the laws of some
foreign countries do not protect proprietary rights to the same extent as do
U.S. laws. Moreover, potential competitors might be able to develop technologies
or services similar to ours without infringing our patents. In addition, if our
agreements with employees, consultants and others who participate in product and
service development activities are breached, we may not have adequate remedies,
and our trade secrets may become known or independently developed by
competitors. If we are unable to protect our intellectual property adequately,
it could materially affect our financial performance.
There can also be no assurance that other parties will not assert claims
that our products or names infringe on their proprietary rights. A third-party
infringement claim could be time-consuming to defend, result in costly
litigation, divert management's attention and resources, cause product and
service delays or require us to enter into royalty or licensing agreements.
EMPLOYEES
As of January 31, 2000, we had 141 full-time employees. Of these, 41 were
employed in sales and business development, 28 in customer support, four in
marketing, 13 in content acquisition, 20 in research and development and 35 in
general and administrative positions. None of our employees is represented by a
union. We believe that our relations with our employees are good.
FACILITIES
We are headquartered in New York City, where we lease approximately 25,000
square feet of space. This lease expires in March 2009. We have an option to
lease an adjacent 4,608 square feet and have recently entered into an agreement
to sublet a further adjacent 17,100 square feet. We also lease offices in London
and San Francisco and are in the process of opening an office in Miami.
LEGAL PROCEEDINGS
We are not presently a party to any material legal proceedings.
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MANAGEMENT
Our executive officers, key employees and directors, and their ages and
positions as of February 15, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jay Chiat................................. 68 Chairman of the Board of Directors
Kevin C. Clark............................ 39 Chief Executive Officer and Director
Alan S. Ellman............................ 36 President, Chief Operating Officer and
Director
Joseph F. Choti........................... 39 Chief Technical Officer
Terry Waters.............................. 41 President, International
Marianne Howatson......................... 51 Executive Vice President, Global Content
Management
Sean P. Morgan............................ 35 Senior Vice President of Sales
Roy R. Boling............................. 42 Director of Financial Operations
William P. Kelly.......................... 33 General Counsel, Secretary and Director
James D. Robinson III..................... 64 Director
Wm. Brian Little.......................... 57 Director
Kenneth B. Lerer.......................... 47 Director
Patrick J. McNeela........................ 51 Director
</TABLE>
Jay Chiat has served as chairman of our board of directors since November
1999 and as a director since April 1997. Between November 1998 and November
1999, he also served as interim chief executive officer. Since 1995, Mr. Chiat
has served as an advisor to several new media start-up businesses. Mr. Chiat is
the founder of Chiat/Day Advertising, Inc., an international advertising agency
for which he served as chairman from July 1968 to January 1995. Mr. Chiat is a
director of Cybergold, Inc., the Hereditary Disease Foundation, Department 56,
Inc. and SoftCom, Inc. Mr. Chiat has received numerous awards in the advertising
industry and was elected to the AAF Advertising Hall of Fame in 1999.
Kevin C. Clark has served as our chief executive officer since November
1999 and he has been a director since November 1998. From August 1998 until
November 1999, Mr. Clark pursued Internet investment activities as chairman and
chief executive officer of KMC Holdings LLC. Mr. Clark served as vice chairman
of Modem Media.Poppe Tyson from May 1998 to August 1998. From May 1997 to May
1998, Mr. Clark served as chairman and chief executive officer of Poppe Tyson, a
global digital marketing business. From March 1996 to May 1997, he served as a
director of and advisor to Poppe Tyson. Mr. Clark founded Cross Country Staffing
in 1986, and was chairman and chief executive officer from 1986 through 1994 and
chairman from June 1994 through March 1996. Mr. Clark serves as a director of
Healthmarket.com and Primary Knowledge, Inc. and as an advisor to the board of
Ecommerce Solutions, LLC.
Alan S. Ellman founded the company and has served as a director since 1993.
Mr. Ellman has served as president since 1995 and he has served as president and
chief operating officer since February 2000. From 1990 to 1993, Mr. Ellman was
the director of finance at ABC Radio Networks in New York, where his
responsibilities included managing domestic and international financial and
accounting operations.
Joseph F. Choti has served as chief technology officer since October 1999.
From September 1998 to October 1999, Mr. Choti was chief technical officer of
Real Time Data Inc. From May 1996 to September 1998, Mr. Choti was chief
technical officer and director of product development at Applied Information
Services, Inc. From 1994 to 1996 Mr. Choti worked in the enterprise systems
research and development group of Bloomberg Financial Markets, LP.
Terry Waters was appointed president, international in February 2000. From
July 1999 to February 2000, Mr. Waters has pursued Internet investment and
consulting activities as an independent consultant. From
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September 1985 to June 1999, Mr. Waters was employed by Gartner Group, Inc., a
NYSE listed company, most recently serving as senior vice president and managing
director of Executive Programs. Prior to this, Mr. Waters was vice president,
worldwide marketing from October 1990 to December 1993 and vice president,
eastern region sales from March 1987 to October 1990. Mr. Waters was employed by
the Xerox Corporation from September 1981 to August 1985.
Marianne Howatson has served as our executive vice president of global
content management since June 1999. From June 1998 through April 1999, Ms.
Howatson served as an advisor to Emap plc, the British publisher of Elle, New
Woman and Q magazines, on the acquisition by Emap plc of the Peterson Publishing
Company. From April 1997 through March 1998, Ms. Howatson was executive vice
president of Playboy Enterprises, Inc. and president of the Publishing Group of
Playboy. In this position Ms. Howatson oversaw Playboy's domestic and overseas
publishing businesses, including the U.S. edition of Playboy Magazine, its 15
foreign editions and new media business. From 1995 to April 1997, Ms. Howatson
was an equity partner and general manager of Cardinal Business Media. Prior to
that Ms. Howatson was group publisher at Gruner + Jahr USA Publishing and
publisher of Conde Nast Publications' Self magazine and American Express' Travel
and Leisure magazine.
Sean P. Morgan has served as our senior vice president of sales since
February 1997. Prior to joining us, Mr. Morgan founded Gravity Sports, a firm
that created sports-based, cross-promotional events for companies, for which he
served as president from 1991 to 1997. Prior to that, Mr. Morgan directed the
Manhattan marketing operations for Community Quote Graphics Inc., a provider of
data services for the commodities and futures markets.
Roy R. Boling has served as director of financial operations since April
1999. Mr. Boling served as director of financial operations for RCN Corp. from
July 1998 to April 1999. From May 1997 through July 1998, he served initially as
controller and then as vice president/controller of Javanet, Inc., a regional
Internet service provider that RCN Corp. acquired in July 1998. From June 1996
to May 1997, Mr. Boling served as a consultant for Polska Telewisa Kablowa, a
Polish cable concern and a subsidiary of Chase Enterprises, a real estate and
international cable company. From May 1991 through June 1996, Mr. Boling served
first as business/operations manager of radio properties, then as station
manager, for 1080 Corporation, an AM/FM radio station in Hartford, Connecticut,
a subsidiary of Chase Enterprises.
William P. Kelly has served as general counsel, director and secretary
since April 1997. Since 1991, Mr. Kelly has been engaged in the practice of law
in the area of complex civil litigation. Mr. Kelly was a founder in 1996 of the
law firm of McCarthy & Kelly LLP, where he continues to practice. From 1995 to
1996, he was associated with the law firm of Condon & Forsyth.
James D. Robinson III has served as a director of since April 1997. He is
co-founder, chairman and chief executive officer of RRE Investors, LLC, a
private information technology venture investment firm, and since 1996, he has
been chairman of Violy, Byorum & Partners Holdings. Mr. Robinson served as
chairman and chief executive officer of American Express Company from 1977 to
1993. Mr. Robinson is a director of The Coca-Cola Company, Bristol-Myers Squibb
Company, First Data Corporation, Cambridge Technology Partners and Concur
Technologies, Inc. He is a limited partner and advisor to International Equity
Partners and serves on the boards of InfiCorp Holdings, Inc., Ibero-American
Media Partners and Qpass Inc., all private companies. Mr. Robinson is a member
of the Business Council and the Council on Foreign Relations.
Wm. Brian Little has served as a director since June 1999. Since January
1995, Mr. Little has been a private investor. During 1994, Mr. Little was a
special limited partner of Forstmann Little & Co. From 1978 through 1993, Mr.
Little served as a founding general partner of Forstmann Little & Co. Mr. Little
serves on the boards of directors of The Topps Company, Inc., Department 56 Inc.
and Aldila, Inc.
Kenneth B. Lerer has served as a director since November 1998. Mr. Lerer
has served since May 1996 as the president and chief operating officer of
Robinson, Lerer and Montgomery, a financial consulting firm providing services
to Fortune 500 companies. In addition, Mr. Lerer has served as vice president of
corporate communications at America Online since October 1999. From 1980 to
1996, Mr. Lerer was vice president of
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corporate affairs at Warner Amex Cable. Mr. Lerer is chairman of the board of
the Public Theater/New York Shakespeare Festival and is a director of Oxygen
Media, Inc., an Internet and cable company.
Patrick J. McNeela has served as a director since December 1999. Since
December 1997, Mr. McNeela has served as vice president of General Electric
Investment Company, Private Equity Group. From January 1995 to December 1997, he
was senior vice president and manager of GE Capital Corporation, Equity Capital
Group.
CLASSES OF DIRECTORS
Our certificate of incorporation divides our board of directors into three
classes, denominated as Class I, Class II and Class III. Members of each class
hold office for staggered three-year terms. At each annual meeting of our
stockholders beginning in 2001, the successors to the directors whose term
expires at that meeting will be elected to serve until the third annual meeting
after their election or until their successor has been elected and qualified.
will serve as Class I directors whose terms expire at the
2001 annual meeting of stockholders. will serve as Class II
directors whose terms expire at the 2002 annual meeting of stockholders.
will serve as Class III directors whose terms expire at the
2003 annual meeting of stockholders. With respect to each class, each director's
term will be subject to the election and qualification of his or her successor,
or his or her earlier death, resignation or removal. These provisions, when
taken in conjunction with other provisions of our certificate of incorporation
authorizing the board of directors to fill vacant directorships, may delay a
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies with its own nominees.
BOARD COMMITTEES
We have established an audit committee and a compensation committee. The
audit committee reviews our internal accounting procedures and considers and
reports to the board of directors with respect to other auditing and accounting
matters, including the selection of our independent auditors, the scope of
annual audits, fees to be paid to our independent auditors and the performance
of our independent auditors. The audit committee consists of . The
compensation committee reviews and recommends to the board of directors the
salaries, benefits and stock option grants for all employees, consultants,
directors and other individuals compensated by us. The compensation committee
also administers our stock option and other employee benefit plans. The
compensation committee consists of Jay Chiat, Wm. Brian Little and James D.
Robinson III.
COMPENSATION OF DIRECTORS
We do not currently pay cash fees to our directors for attending board or
committee meetings, but we reimburse directors for their reasonable expenses
incurred in connection with attending these meetings. Directors are eligible for
grants of awards under our stock equity plans, as described below under "Stock
Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of our compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee. See "Certain Relationship and Related Transactions" for a description
of transactions between us and entities affiliated with members of the
compensation committee.
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EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning
compensation earned in 1999 by both of the individuals who served as
ScreamingMedia's chief executive officer during 1999 and the remaining four most
highly compensated executive officers as of December 31, 1999 whose salary and
bonus earned in 1999 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION ($) ($) ($) (#) ($)
------------------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Jay Chiat................................ $ -- $ -- $20,870(5) -- $ --
Chairman of the Board(1)
Kevin C. Clark(2)........................ 46,140 -- -- 900,000 --
Chief Executive Officer
Alan S. Ellman........................... 95,870 100,000 -- -- --
President and Chief Operating Officer
Gregoire Sentilhes(3).................... 59,222 -- -- 200,000(6) 80,000(7)
Former President, International
Marianne Howatson(4)..................... 103,930 70,000 -- 600,000 --
Executive Vice President, Global
Content Management
Sean P. Morgan........................... 85,890 100,250 -- -- --
Senior Vice President of Sales
</TABLE>
- ---------------
(1) Mr. Chiat was our interim chief executive officer until November 1999 but
resigned from that position when Mr. Clark joined ScreamingMedia as our
chief executive officer. Mr. Chiat was not paid any cash compensation for
his services as chief executive officer.
(2) Mr. Clark joined ScreamingMedia on November 8, 1999 at an annual salary of
$300,000.
(3) Mr. Sentilhes joined ScreamingMedia on September 1, 1999 at an annual salary
of $175,000. Mr. Sentilhes left ScreamingMedia on February 8, 2000.
(4) Ms. Howatson joined ScreamingMedia on June 7, 1999 at an annual salary of
$180,000.
(5) We maintain an apartment in New York City for business purposes. This amount
represents the cost in 1999 of allowing Mr. Chiat to use the apartment for
his personal use.
(6) This number excludes 450,000 shares subject to unvested options that expired
when Mr. Sentilhes left ScreamingMedia on February 8, 2000.
(7) This amount represents consulting fees paid to Mr. Sentilhes in 1999 for
work he did for us as a consultant before he became one of our officers.
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OPTION GRANTS IN 1999
The following table sets forth information concerning individual grants of
stock options made during 1999 to each of the executive officers named in the
Summary Compensation Table. Potential realizable value is presented net of the
option exercise price, but before any federal or state income taxes associated
with exercise, and is calculated assuming that the fair market value on the date
of the grant appreciates at the indicated annual rates, compounded annually, for
the term of the option. The 0%, 5% and 10% assumed rates of appreciation are
mandated by the rules of the SEC and do not represent our estimate or projection
of future increases in the price of our common stock. Actual gains will be
dependent on the future performance of our common stock and the option holder's
continued employment throughout the vesting period. Accordingly, the amounts
reflected in the following table may not actually be achieved.
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK PRICE
SHARES GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 0% 5% 10%
---- ------------------ ------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jay Chiat............ -- -- -- -- -- -- --
Kevin C. Clark....... 900,000 24.7% 3.25 11/08/04 $6,075,000 $8,561,534 $11,569,590
Alan S. Ellman....... -- -- -- -- -- -- --
Gregoire Sentilhes... 650,000(1) 17.9 1.80 09/01/04 2,106,000 3,011,098 4,106,031
Marianne Howatson.... 600,000 16.5 1.80 06/07/04 1,944,000 2,779,475 3,790,182
Sean P. Morgan....... -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) This number includes 450,000 shares subject to unvested options that expired
when Mr. Sentilhes left ScreamingMedia on February 8, 2000.
1999 OPTION EXERCISES AND OPTION VALUES
The following table sets forth information concerning unexercised stock
options held of December 31, 1999 by the executive officers named in the Summary
Compensation Table. None of these persons exercised any options during 1999. The
value of "in-the-money" options represents the difference between the exercise
price of an option and the fair market value of our common stock as of December
31, 1999, which, solely for purposes of this calculation, we estimate to have
been $20.00 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
NAME --------------------------- ---------------------------
---- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Jay Chiat................................... -- -- -- --
Kevin C. Clark.............................. 225,000 675,000 $3,768,750 $11,306,250
Alan S. Ellman.............................. -- -- --
Gregoire Sentilhes.......................... 200,000 450,000 (1) 3,640,000 8,190,000
Marianne Howatson........................... 100,000 500,000 1,820,000 9,100,000
Sean P. Morgan.............................. -- -- -- --
</TABLE>
- ---------------
(1) These 450,000 shares were subject to unvested options that expired when Mr.
Sentilhes left ScreamingMedia on February 8, 2000.
EMPLOYMENT AGREEMENTS
Kevin C. Clark. We are a party to a three-year employment agreement with
Kevin C. Clark, dated November 8, 1999. Pursuant to this agreement, he serves as
our chief executive officer. Mr. Clark receives an annual salary of $300,000 per
year, is eligible to participate in any bonus plans we have for our senior
executives, and participates at the highest level in all of our benefit plans
and fringe benefit arrangements. On his first day of employment, Mr. Clark
received stock options to purchase 900,000 shares of our common stock at an
exercise price of $3.25 per share. Of these options, 225,000 vested on December
1, 1999 and the
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remainder will vest quarterly in equal installments over a two and one-half year
period beginning November 8, 1999. Under the employment agreement, we are
obligated to pay Mr. Clark a "gross-up" payment to reimburse him for any excise
tax imposed under Section 4999 of the Internal Revenue Code on any payment,
including any gross-up payments, made to Mr. Clark (whether under his employment
agreement or otherwise). If Mr. Clark is terminated without cause or he quits
for good reason, he will receive his base salary, medical and other insurance
benefits for six months following termination. In addition, all options held by
Mr. Clark that would have vested within one year after termination, had he been
employed for that period, will automatically vest on the date of his
termination. Mr. Clark is subject to six-month post-termination noncompetition
and nonsolicitation covenants.
Marianne Howatson. We are party to an employment agreement with Marianne
Howatson, dated June 7, 1999. Pursuant to this agreement, she was paid a signing
bonus of $70,000 and receives an annual salary of $180,000. In addition, Ms.
Howatson was granted options to purchase 600,000 shares of our common stock at
an exercise price of $1.80 per share. These options vest in 36 substantially
equal monthly installments, as long as Ms. Howatson remains employed with us.
Ms. Howatson participates in our standard benefit plans.
STOCK PLANS
1999 Stock Option Plan
General. We have reserved for issuance 5,000,000 shares of common stock
under our 1999 stock option plan, subject to adjustment in the event of a
reorganization, merger, consolidation, recapitalization, reclassification, stock
split or other similar corporate event. If an option expires, terminates or
becomes unexercisable for any reason without having been exercised in full, the
unpurchased shares will again be available for future option grants under the
plan.
Options granted under the plan may be incentive stock options within the
meaning of Section 422 of the Internal Revenue Code or non-qualified stock
options.
Administration. The plan is administered by our compensation committee.
The committee has the authority to adopt, amend and rescind rules and
regulations as it determines advisable for administration of the plan. The
committee also has the sole authority to determine who will be granted options
and to determine the terms of the options, including the number of shares and
the exercise price of the option.
Eligibility. Options may be granted under the plan to our officers,
employees, directors, consultants, advisors and representatives, but incentive
stock options may be granted only to our employees.
Terms and Conditions of Options. The number of shares of common stock to
be subject to an option and the option's exercise price are determined by the
committee. Incentive stock options may not be granted at an exercise price less
than 100% of the fair market value of the common stock on the date of grant.
Non-qualified options may not be granted under the plan at an exercise price
less than 85% of the fair market value of the common stock on the date of grant.
Options granted under the plan become exercisable at the times and upon the
conditions that the committee may determine, as reflected in the applicable
option agreement. The committee determines the term of the option, which
generally may not exceed ten years from the date of grant.
If there is a sale of substantially all of our property and assets or if a
change in control occurs, the purchaser of our assets or common stock may, in
its discretion, deliver to the optionees the same kind of consideration that is
delivered to our stockholders as a result of the sale or change in control that
has a value equal to the option had it been exercised in full and no shares had
been sold prior to the sale or change in control. The committee also has the
authority, but not the obligation, to accelerate the exercisability of any
options granted under the plan upon a merger, consolidation, sale of
substantially all of our property and assets or upon a change in control. If
there is a hostile change in control, each option outstanding under the plan
will automatically accelerate in full and unvested shares will vest in full
immediately. If we are dissolved or liquidated, all options outstanding under
the plan will terminate, but each optionee, if then
37
<PAGE> 42
employed by us or any of our subsidiaries, will have the right to exercise his
or her options immediately before the dissolution or liquidation.
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;
- by delivery of a promissory note, provided that a note may be used only
under the circumstances and according to the terms established by the
committee; or
- by delivery of previously acquired shares of common stock.
Termination of Employment or Service. If an optionee's employment or
service terminates because of disability or death, the optionee's options will
terminate on the last day of the twelfth month from the date of cessation of
employment or service. If an optionee's employment or service terminates within
six months of the date on which there occurs a hostile change of control, any
options held by the optionee will immediately accelerate, and any shares which
are not vested at the time of termination will automatically vest in full and
may be exercised during the three-month period after the date of cessation of
employment or service. The committee also has the authority to permit
post-termination exercise of an option under other circumstances. In any event,
no option may be exercised after the original exercise period has expired.
Amendment, Termination of Plan. Unless earlier terminated by the board of
directors, the plan will terminate ten years from the date of its adoption. The
board of directors may terminate, modify or amend the plan at any time, except
that an amendment will be subject to stockholder approval if the amendment would
increase the maximum number of shares reserved for the plan or change the class
of persons eligible to receive options, or make any other change that requires
stockholder approval under applicable law or regulations. The committee
generally may terminate, amend or modify any outstanding option without the
optionee's consent, except that the committee cannot change the number of shares
subject to the option, its exercise price or its term without the optionee's
consent.
Since the amount of benefits to be received by any plan participant is
determined by the committee, the amount of future benefits allocated to any
employee or group of employees in any particular year is not determinable.
2000 Equity Incentive Plan
General. We have reserved for issuance a maximum of shares of
common stock under our 2000 equity incentive plan. If an award granted under the
plan expires or is terminated, the shares of common stock underlying the award
will again be available under the plan.
Types of Awards. The following awards may be granted under the plan:
- stock options, including incentive stock options and non-qualified stock
options;
- restricted stock;
- phantom stock;
- stock bonuses; and/or
- other stock-based awards.
Administration. The plan will initially be administered by the
compensation committee, although it may be administered by either our full board
of directors or any other committee designated by the board.
The committee may, subject to the provisions of the plan, determine the
persons to whom awards will be granted, 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
committee may delegate to any of our senior
38
<PAGE> 43
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
and advisors, as selected by the committee.
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 non-qualified 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 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. The committee
will determine the term of the option, which generally 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 pursuant to the
exercise of an option; or
- through a "broker cashless exercise" procedure approved by us.
The committee may, in its sole discretion, authorize ScreamingMedia to make
or guarantee loans to a participant to assist the participant in exercising
options.
At the time of grant of an option, the committee may provide 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 vest in accordance with the vesting schedule set forth in the
original option agreement. The restricted shares will be subject to our right to
repurchase the shares following termination of the participant's employment or
service with us.
Restricted Stock. The plan provides for awards of common stock that are
subject to restrictions on transferability and others imposed by the committee.
Except as provided for 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 awards of phantom stock which, upon
vesting, entitle the participant to receive an amount in cash equal to the fair
market value of the number of shares. 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 the committee, in its
discretion, may award shares of common stock to employees. In addition, the
committee may grant other awards valued in whole or in part, by reference to, or
otherwise based on, common stock.
Termination of Employment or Service. Generally, unless otherwise
determined by the committee, the termination of a participant's employment or
service will immediately cancel any unvested portion of awards granted under the
plan. However, 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
39
<PAGE> 44
termination may be exercised for a period of one year. In no case may an option
after it expires be exercised 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. No options
may be granted under the plan after the day prior to the tenth anniversary of
its adoption date.
Since the amount of benefits to be received by any employee plan
participant is determined by the committee, the amount of future benefits
allocated to any employee or group of employees in any particular year is not
determinable.
Management Incentive Plan
Prior to the completion of this offering, we intend to adopt a management
incentive plan. The plan will be administered by the compensation committee who
will have the authority to determine the plan's participants, as well as the
terms and conditions of incentive awards. The payment of bonuses under the
management incentive plan will be based upon the achievement of certain
performance goals set by the compensation committee, which may include any, 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 such period;
- growth of revenue; or
- reductions in expenses.
Minimum bonuses will be based on achievement of 80% of the performance goals and
maximum bonuses will be based on achievement of 150% of the performance goals. A
bonus will be paid only if the participant is employed by ScreamingMedia.com,
Inc. 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 150% 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.
LIMITATION OF LIABILITY OF DIRECTORS AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
As permitted by the Delaware General Corporation Law (the "DGCL"), our
certificate of incorporation provides that our directors shall not be liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by the DGCL as it now exists or as it
may be amended. As of the date of this prospectus, the DGCL permits limitations
of liability for a director's breach of fiduciary duty other than liability (1)
for any breach of the director's duty of loyalty to a company or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the DGCL or (4) for any transaction from which the director derived an improper
personal benefit. In addition, our bylaws provide that we must indemnify all of
our directors, officers, employees and agents for acts performed on our behalf
in such capacity.
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<PAGE> 45
RELATED PARTY TRANSACTIONS
CONVERTIBLE LOANS TO THE COMPANY BY OFFICERS AND DIRECTORS
Between October 1998 and March 1999, certain of our officers, directors and
related persons lent us an aggregate of $550,000 ($250,000 from Mr. Chiat,
$100,000 from Mr. Clark and $50,000 each from Brian Cavanaugh, Messrs. Lerer and
Robinson and his spouse). Our obligation to repay these loans was evidenced by
convertible promissory notes of terms between 32 and 36 months (collectively,
the "Notes"). The Notes bore interest at 9.5% per annum, payable quarterly.
The Notes were convertible into our common stock upon and after the earlier
of (1) raising at least $1,000,000 in an equity financing and (2) a trigger
date, which ranged from April 30, 1999 to August 15, 1999. The completion of our
Series A preferred stock financing triggered conversion of the Notes in March
1999. The number of shares receivable upon conversion of each Note was
determined by dividing the outstanding principal by a discounted per-share price
determined by reference to the per-share price of our Series A preferred stock
offering, which was 7%. Upon conversion of the Notes in March 1999, all of the
outstanding principal amount of the Notes was converted into an aggregate
328,562 shares of common stock.
In 1996, we entered into a promissory note with our president for $19,350
that we repaid during 1999.
RETENTION OF ROBINSON, LERER & MONTGOMERY
In April 1999, we executed an agreement employing the firm of Robinson,
Lerer & Montgomery ("RL&M") for corporate communications services for a monthly
fee of $20,000. The contract is cancelable at any time without advance notice.
Kenneth Lerer, a principal of RL&M is one of our directors. Linda Robinson,
another principal of RL&M, is the spouse of James Robinson III, who is one of
our directors and principal stockholders.
INVESTMENT IN SOFTCOM, INC.
In May 1999, we invested $150,000 to purchase 384,615 shares of Series A
preferred stock of SoftCom, Inc. The SoftCom shares are convertible on a
one-for-one basis into SoftCom common stock. We also hold a warrant that expires
May 14, 2004 for purchase of up to 19,231 additional shares of Series A
preferred stock of SoftCom at an exercise price of $0.39 per share. Jay Chiat,
our chairman and former interim chief executive officer, is a director of
SoftCom.
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<PAGE> 46
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 31, 2000 by:
- each of our executive officers and directors;
- each person, entity or group known by us to own beneficially more than 5%
of our outstanding common stock; and
- all of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. These rules generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power or
investment power with respect to those securities and include shares of common
stock issuable upon the exercise of stock options or warrants that are
immediately exercisable or exercisable within 60 days. Unless otherwise
indicated, the persons or entities identified in this table have sole voting and
investment power with respect to all shares shown as beneficially owned by them,
subject to applicable community property laws.
Percentage ownership calculations are based on 18,725,076 shares
outstanding as of January 31, 2000, which includes shares of common stock that
will be issued on the conversion of outstanding shares of convertible preferred
stock on completion of this offering.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES BENEFICIALLY OWNED
BENEFICIALLY ---------------------
OWNED BEFORE AFTER
NAME PRIOR TO OFFERING OFFERING OFFERING
---- ----------------- -------- ---------
<S> <C> <C> <C>
Jay Chiat................................................. 2,019,344 10.8%
Kevin C. Clark(1)......................................... 552,238 2.9
Alan S. Ellman............................................ 3,100,000 16.6
Gregoire Sentilhes(2)..................................... 200,000 1.1
Marianne Howatson(3)...................................... 150,000 *
Sean P. Morgan............................................ 400,000 2.1
William P. Kelly.......................................... 498,000 2.7
James D. Robinson III(4).................................. 1,829,740 9.8
Wm. Brian Little(5)....................................... 198,868 1.1
Kenneth B. Lerer.......................................... 229,870 1.2
Patrick J. McNeela(6)..................................... -- --
All executive officers and directors as a group (12
persons)................................................ 9,178,060 49.0%
</TABLE>
- ---------------
* Represents less than 1% of outstanding shares of common stock.
(1) Includes options to purchase 292,500 shares of common stock.
(2) Consists of options to purchase 200,000 shares of common stock.
(3) Consists of options to purchase 150,000 shares of common stock.
(4) Includes 129,870 shares of common stock held by members of Mr. Robinson's
family. Mr. Robinson disclaims beneficial ownership of these shares.
(5) Includes options to purchase 43,164 shares of common stock. Also includes
155,704 shares of common stock that will be issued upon the automatic
conversion of our convertible preferred stock on closing of this offering,
which are beneficially owned by Mr. Little through AMCITO Partners, L.P.
(6) Excludes 893,056 shares of common stock that will be issued upon the
automatic conversion of our convertible preferred stock on closing of this
offering, which are held by General Electric Pension Trust. Mr. McNeela is a
vice president of General Electric Investment Corporation, the investment
manager of General Electric Pension Trust.
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<PAGE> 47
DESCRIPTION OF CAPITAL STOCK
Under our certificate of incorporation, we are authorized to issue
100,000,000 shares of common stock and 5,000,000 shares of preferred stock.
Shares of each class have a par value of $0.01 per share. The following
description summarizes the material provisions of our capital stock.
COMMON STOCK
As of January 31, 2000, there were 9,246,562 shares of common stock
outstanding, which were held of record by 14 shareholders. An additional
8,411,314 shares of common stock will be issued to approximately 80 shareholders
at the time the registration statement for this offering becomes effective and
on closing, respectively, in each case as the result of mandatory conversion of
our outstanding preferred stock.
Each share of our common stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors. Subject to any preference rights of holders of preferred stock, the
holders of common stock are entitled to receive dividends, if any, declared from
time to time by the directors out of legally available funds. In the event of
our liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after the payment of
liabilities, subject to any rights of holders of preferred stock to prior
distribution.
The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable and the shares of common stock to be issued on completion
of this offering will be fully paid and nonassessable.
PREFERRED STOCK
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock and to designate the
rights, preferences and privileges of each series of preferred stock, which may
be greater than the rights attached to the common stock. It will not be possible
to state the actual effect of the issuance of any shares of preferred stock on
the rights of holders of common stock until the board of directors determines
the specific rights attached to that preferred stock. The effects of issuing
preferred stock could include one or more of the following:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- delaying or preventing a change of control of ScreamingMedia.
There are currently 4,205,657 shares of preferred stock outstanding,
comprising 1,527,085 shares of Series A preferred stock and 2,678,572 shares of
Series B preferred stock. On January 31, 2000, the preferred stock was held of
record by approximately 80 holders. The Series A preferred stock will
automatically convert into 3,054,170 shares of common stock at the time the
registration statement for this offering becomes effective. The Series B
preferred stock will automatically convert into 5,357,144 shares of common stock
on closing of this offering. Following these conversions, there will be no
preferred stock outstanding, and we have no current plans to issue any shares of
preferred stock.
WARRANTS
As of January 31, 2000, we had the following warrants to purchase shares of
common stock outstanding:
- Carter, Ledyard, Milburn, LLP holds a warrant for the issue of 14,286
shares at an exercise price of $3.50 per share;
- Hut Sachs Studio holds a warrant for the issue of 14,286 shares at an
exercise price of $3.50 per share; and
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<PAGE> 48
- Deutsche Bank Securities Inc. holds a warrant for the issue of 241,070
shares at an exercise price of $5.60 per share.
OPTIONS
As of January 31, 2000, options to purchase a total of 3,769,928 shares of
common stock were outstanding, of which 915,255 have vested. The exercise prices
of the vested options range from $0.50 to $3.25.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE
OF INCORPORATION AND BYLAWS
Some provisions of our certificate of incorporation and bylaws may be
deemed to have an anti-takeover effect and may delay 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.
Classified Board of Directors
Our board of directors is divided into three classes of directors serving
staggered three-year terms. As a result, approximately one-third of the board of
directors is elected each year. These provisions, when coupled with the
provision of our certificate of incorporation authorizing the board of directors
to fill vacant directorships or increase the size of the board of directors, may
deter a stockholder from removing incumbent directors and simultaneously gaining
control of the board of directors by filling the vacancies created by such
removal with its own nominees.
Cumulative Voting
Our certificate of incorporation expressly denies our stockholders the
right to cumulative voting in the election of 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.
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 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders.
However, in the event that the annual meeting is called for a date that is not
within 30 days before or after such anniversary date, notice by the stockholder
in order to be timely must be received not later than the close of business on
the tenth day following the date on which notice of the date of the annual
meeting was mailed to stockholders or made public, 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 will
be 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
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<PAGE> 49
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 ScreamingMedia by means of a proxy contest, tender offer,
merger or otherwise.
AMENDMENTS; SUPERMAJORITY 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 by-laws,
unless either a corporation's certificate of incorporation or bylaws require a
greater percentage. Our certificate of incorporation imposes supermajority 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 classified board of directors, 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 such 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 such 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 stockholder rights agreement. As with most
stockholder 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, if you require more
information, 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 our common stock
outstanding after this offering will have one right to purchase one-hundredth of
a preferred share attached to it. The purchase price for one one-hundredth of a
preferred share will be the price of our common stock for the first five days of
trading after the consummation of this offering.
Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common stock and no separate
certificates representing the rights will be distributed. The rights will
separate from our common stock and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender offer for 5%
of our outstanding common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of our common stock. Once
distributed, the rights certificates alone will represent the rights.
All shares of our common stock issued prior to 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 two times 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.
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<PAGE> 50
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 outstanding common
stock, our board of directors may, at its option, exchange all or part of the
then outstanding and exercisable rights for shares of our common stock. In such
an event, 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 redeem all of the outstanding rights under our
rights agreement prior to 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 the 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 prior to 10 days after someone acquires
or commences a tender offer for 15% of our outstanding common stock without the
approval of the holders of the rights. However, after that date, the rights
agreement may not be amended in any manner which would adversely effect the
interests of the holders of the rights, excluding the interests of any 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 anti-takeover 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 acquirers
from making takeover proposals or tender offers. However, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquirer on behalf of all the stockholders. In
addition, the rights should not interfere with a proxy contest.
TRANSFER AGENT REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company. Its address is 40 Wall Street, New York, New York
10005.
LISTING
We expect our common stock to be approved for quotation on The Nasdaq
National Market under the symbol "SCRM."
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<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. We
cannot assure you that a significant public market for our common stock will
develop or will be sustained after the offering. Future sales in the public
markets of substantial amounts of common stock (including shares issued on the
exercise of outstanding options and warrants) could adversely affect the market
prices prevailing from time to time for the common stock. It could also impair
our ability to raise capital through future sales of equity securities.
After completion of this offering, we will have shares of common
stock outstanding (assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options). All of the shares of
common stock sold in this offering will be freely transferable without
restriction or further registration under the Securities Act, except for any of
the shares that are acquired by "affiliates" as that term is defined in Rule 144
under the Securities Act.
Shares acquired by affiliates and the remaining shares held by existing
shareholders 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, which is summarized below. The following table illustrates the shares
eligible for sale in the public market assuming Credit Suisse First Boston
Corporation does not release any portion of the shares subject to lock-up
agreements described below and under "Underwriting".
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<S> <C>
After the date of this prospectus
After 180 days from the date of this prospectus (subject, in
some cases, to volume limitations)
At various times after 180 days after the date of this
prospectus
</TABLE>
LOCK-UP
We have agreed that, without the prior written consent of Credit Suisse
First Boston, we will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of capital stock or any securities that may be converted
into or exchanged for shares of capital stock for a period of 180 days from the
date of this prospectus. Each of our officers, directors and all of our existing
stockholders and warrant holders have also entered into an agreement to the same
effect.
RULE 144
In general, Rule 144 has the effect that, beginning 90 days after the date
of this prospectus, a person who has beneficially owned ordinary shares 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 total number of shares of common stock then outstanding; or
- the average weekly trading volume of the common stock on The Nasdaq
National Market during the four calendar weeks preceding the filing of
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(k)
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 which was not an affiliate) is
entitled to sell the 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 on
completion of this offering.
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<PAGE> 52
RULE 701
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchases ordinary shares from us in connection with
a compensatory stock or option plan or other written agreement before the
effective date of this prospectus is entitled to resell those shares 90 days
after the effective date of this prospectus in reliance on Rule 144, without
having to comply with certain restrictions (including the holding period)
contained in Rule 144.
Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144
without complying with the holding period requirements of Rule 144. It permits
non-affiliates to sell their Rule 701 shares in reliance on Rule 144 without
having to comply with the holding period, public information, volume limitation
or notice provisions of Rule 144. All holders of Rule 701 shares are required to
wait until 90 days after the date of this prospectus before selling those
shares.
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
issued or reserved for issuance under our various stock option plans. The
registration statement will become effective automatically upon filing. As of
January 31, 2000, options to purchase 3,769,928 shares of common stock were
issued and outstanding, of which 915,255 shares have vested. Accordingly, shares
registered under the registration statement will, subject to vesting provisions
and Rule 144 volume limitations applicable to our affiliates, be available for
sale in the open market immediately after the 180-day lock-up agreements expire.
REGISTRATION RIGHTS
Within the six months following the closing of this offering, the holders
of the common stock issued on conversion of our Series B preferred stock may
require us on up to two occasions to use our best efforts to file a registration
statement covering the public sale of part of that common stock having an
aggregate offering price of more that $10 million. We have the right to delay
any registration required by up to 90 days.
In addition to this right, the holders are also entitled to require us to
register their shares on any registration that we initiate, and we are obliged
to undertake three registrations per year on Form S-3, provided that a minimum
of $3 million worth of shares of common stock are offered on each registration.
U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion of the principal U.S. federal income
and estate tax consequences of the ownership and disposition of our common stock
by a Non-U.S. Holder. As used in this prospectus, the term "Non-U.S. Holder" is
a person that is not:
- a citizen or individual resident of the United States for U.S. federal
income tax purposes;
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or of any political
subdivision of the United States;
- an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
- a trust, in general, if it is subject to the primary supervision of a
court within the United States and the control of one or more U.S.
persons.
An individual may, subject to certain exceptions, be treated as a resident
of the United States for U.S. federal income tax purposes, instead of a
nonresident, by, among other things, being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year -- counting for
these purposes all of the days present in the current year, one-third of the
days present in the immediately preceding year and one-sixth of the days present
in the second preceding year. Residents are subject to U.S. federal taxes as if
they were U.S. citizens.
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<PAGE> 53
This discussion does not consider:
- U.S. state and local or non-U.S. tax consequences;
- specific facts and circumstances that may be relevant to a particular
Non-U.S. Holder's tax position, including, if the Non-U.S. Holder is a
partnership, that the U.S. tax consequences of holding and disposing of
our common stock may be affected by certain determinations made at the
partner level;
- the tax consequences for the shareholders, partners or beneficiaries of a
Non-U.S. Holder;
- special tax rules that may apply to certain Non-U.S. Holders, including
without limitation, banks, insurance companies, dealers in securities and
traders in securities; or
- special tax rules that may apply to a Non-U.S. Holder that holds our
common stock as part of a "straddle," "hedge" or "conversion
transaction."
The following discussion is based on provisions of the U.S. Internal
Revenue Code of 1986, applicable Treasury regulations, and administrative and
judicial interpretations, all as of the date of this prospectus, and all of
which may change, retroactively or prospectively. The following summary is for
general information. Accordingly, each Non-U.S. Holder should consult a tax
advisor regarding the U.S. federal, state, local and non-U.S. income and other
tax consequences of acquiring, holding and disposing of shares of our common
stock.
DIVIDENDS
We do not anticipate paying cash dividends on our common stock in the
foreseeable future. In the event, however, that dividends are paid on shares of
common stock, dividends paid to a Non-U.S. Holder of common stock generally will
be subject to withholding of U.S. federal income tax at a 30% rate, or a lower
rate as may be provided by an applicable income tax treaty. Canadian holders of
the common stock, for example, will generally be subject to a reduced rate of
15% under the Canada-U.S. Income Tax Treaty. Non-U.S. Holders should consult
their tax advisors regarding their entitlement to benefits under a relevant
income tax treaty.
Dividends that are effectively connected with a Non-U.S. Holder's conduct
of a trade or business in the United States or, if an income tax treaty applies,
attributable to a permanent establishment, or in the case of an individual, a
"fixed base," in the United States, as provided in that treaty ("U.S. trade or
business income"), are generally subject to U.S. federal income tax on a net
income basis at regular graduated rates, but are not generally subject to the
30% withholding tax if the Non-U.S. Holder files the appropriate U.S. Internal
Revenue Service form with the payor. Any U.S. trade or business income received
by a Non-U.S. Holder that is a corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
a lower rate as specified by an applicable income tax treaty.
Dividends paid prior to 2001 to an address in a foreign country are
presumed, absent actual knowledge to the contrary, to be paid to a resident of
that country for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. For dividends paid after
December 31, 2000:
- a Non-U.S. Holder of common stock who claims the benefit of an applicable
income tax treaty rate generally will be required to satisfy applicable
certification and other requirements;
- in the case of common stock held by a foreign partnership, the
certification requirement will generally be applied to the partners of
the partnership and the partnership will be required to provide certain
information, including a U.S. taxpayer identification number; and
- look-through rules will apply for tiered partnerships.
A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit of
any excess amounts withheld by filing an appropriate claim for a refund with the
IRS.
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<PAGE> 54
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of common stock unless:
- the gain is U.S. trade or business income, in which case, the branch
profits tax described above may also apply to a corporate Non-U.S.
Holder;
- the Non-U.S. Holder is an individual who holds the common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue
Code, is present in the United States for more than 182 days in the
taxable year of the disposition and meets other requirements;
- the Non-U.S. Holder is subject to tax pursuant to the provisions of the
U.S. tax law applicable to some U.S. expatriates; or
- we are or have been a "U.S. real property holding corporation" for U.S.
federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition or period that the
Non-U.S. Holder held our common stock.
Generally, a corporation is a "U.S. real property holding corporation" if
the fair market value of its "U.S. real property interests" equals or exceeds
50% of the sum of the fair market value of its worldwide real property interests
plus its other assets used or held for use in trade or business. We believe that
we have not been, are not currently, and do not anticipate becoming, a "U.S.
real property holding corporation," and thus we believe that the effects which
could arise if we were ever a "U.S. real property holding corporation" will not
apply to a Non-U.S. Holder. Even if we were, or were to become, a "U.S. real
property holding corporation," no adverse tax consequences would apply to a
Non-U.S. Holder whose holdings, direct and indirect, at all times during the
applicable period, constituted 5% or less of our common stock, provided that our
common stock was regularly traded on an established securities market.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes, unless an applicable estate tax or other
treaty provides otherwise and, therefore, may be subject to U.S. federal estate
tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
We must report annually to the IRS and to each Non-U.S. Holder the amount
of dividends paid to that holder and the tax withheld with respect to those
dividends. Copies of the information returns reporting those dividends and
withholding may also be made available to the tax authorities in the country in
which the Non-U.S. Holder is a resident under the provisions of an applicable
income tax treaty or agreement.
Under some circumstances, U.S. Treasury Regulations require information
reporting and backup withholding at a rate of 31% on certain payments on common
stock. Under currently applicable law, Non-U.S. Holders of common stock
generally will be exempt from these information reporting requirements and from
backup withholding on dividends prior to 2001 to an address outside the United
States. For dividends paid after December 31, 2000, however, a Non-U.S. Holder
of common stock that fails to certify its Non-U.S. Holder status in accordance
with applicable U.S. Treasury Regulations may be subject to backup withholding
at a rate of 31% on payments of dividends.
The payment of the proceeds of the disposition of common stock by a holder
to or through the U.S. office of a broker through a non-U.S. branch of a U.S.
broker generally will be subject to information reporting and backup withholding
at a rate of 31% unless the holder either certifies its status as a Non-U.S.
Holder under penalties of perjury or otherwise establishes an exemption. The
payment of the proceeds of the disposition by a Non-U.S. Holder of common stock
to or through a non-U.S. office of non-U.S. broker will not be subject to backup
withholding or information reporting unless the non-U.S. broker is a "U.S.
related person." In the case of the payment of proceeds from the disposition of
common stock by or through a non-
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<PAGE> 55
U.S. office of a broker that is a U.S. person or a "U.S. related person,"
information reporting, but currently not backup withholding, on the payment
applies unless the broker receives a statement from the owner, signed under
penalty of perjury, certifying its non-U.S. status or the broker has documentary
evidence in its files that the holder is a Non-U.S. Holder and the broker has no
actual knowledge to the contrary. For this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes;
- a foreign person, 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment, or for such part of the period that the broker has been in
existence, is derived from activities that are effectively connected with
the conduct of a U.S. trade or business; or
- effective after December 31, 2000, a foreign partnership if, at any time
during the taxable year, (A) at least 50% of the capital or profits
interest in the partnership is owned by U.S. persons or (B) the
partnership is engaged in a U.S. trade or business.
Effective after December 31, 2000, backup withholding may apply to the
payment of disposition proceeds by or through a non-U.S. office of a broker that
is a U.S. person or a "U.S. related person" unless certification requirements
are satisfied or an exemption is otherwise established and the broker has no
actual knowledge that the holder is a U.S. person. Non-U.S. Holders should
consult their own tax advisors regarding the application of the information
reporting and backup withholding rules to them, including changes to these rules
that will become effective after December 31, 2000.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded, or credited against the holder's U.S. federal
income tax liability, if any, provided that the required information is
furnished to the IRS.
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<PAGE> 56
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Deutsche Bank
Securities Inc. and Thomas Weisel Partners LLC are acting as representatives,
the following respective numbers of shares of our common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Deutsche Bank Securities Inc................................
Thomas Weisel Partners LLC..................................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares of our common stock at the initial
public offering price less the underwriting discounts and commissions. The
option may be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to the
selling group members at that price less a concession of $ per share. The
underwriters and the selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions
paid by us............................ $ $ $ $
Expenses payable by us.................. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
for grants of employees stock options pursuant to the terms of any plan in
effect on the date of this prospectus, issuances of securities pursuant to the
exercise of employee stock options outstanding on the date of this prospectus,
employee stock purchases pursuant to the term of any plan in effect on the date
of this prospectus or the issuance of shares pursuant to the exercise of any
warrants outstanding on the date of this prospectus.
Our officers and directors and all our existing stockholders and warrant
holders have agreed that they will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common
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<PAGE> 57
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any of
the economic consequences of ownership of our common stock, whether any such
transaction is to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, or to enter into any such transaction,
swap, hedge or other arrangement, without, in each case, the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for our employees and certain other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares of common stock available for sale
to the general public in the offering will be reduced to the extent these
persons purchase these reserved shares. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock listed on The Nasdaq
Stock Market's National Market under the symbol "SCRM."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives, and may not reflect the market price for our
common stock that may prevail following this offering. We will consider, among
others, the following principal factors in determining the initial public
offering price:
- the information in this prospectus and otherwise available to the
representatives;
- market conditions for initial public offerings;
- the history of and prospects for the industry in which we will compete;
- our past and present operations;
- our past and present earnings and current financial position;
- the ability of our management;
- our prospects for future earnings;
- the present state of our development and our current financial condition;
- the recent prices of, and the demand for, publicly traded common stock of
generally comparable companies; and
- the general condition of the securities markets at the time of this
offering.
We can offer no assurance that the initial public offering price will
correspond to the price at which our common stock will trade in the public
market subsequent to this offering or that an active trading market for our
common stock will develop and continue after this offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act.
- 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.
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<PAGE> 58
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by that
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of our 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.
Thomas Weisel Partners, LLC, one of the representatives of the
underwriters, was organized and registered as a broker-dealer in December 1998.
Since December 1998, Thomas Weisel Partners has been named as a lead or
co-manager on numerous public offerings of equity securities. Thomas Weisel
Partners does not have any material relationship with us or any of our officers,
directors or other controlling persons, except with respect to its contractual
relationship with us pursuant to the underwriting agreement entered into in
connection with this offering.
In connection with the placement of 2,678,572 shares of Series B preferred
stock in our October 1999 private placement, we issued Deutsche Bank Securities
Inc., one of the representatives of the underwriters, a warrant to purchase
241,070 shares of our common stock. This warrant is exercisable at a price of
$5.60 per share.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (1) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (2) where required
by law, that such purchaser is purchasing as principal and not as agent, and (3)
such purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada. All or a
substantial portion of the assets of the issuer and such persons may be located
outside of Canada and, as a result, it may not be possible to satisfy a judgment
against the issuer or such persons in
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<PAGE> 59
Canada or to enforce a judgment obtained in Canadian courts against such issuer
or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. Such report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one such report must be
filed in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of any investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Certain legal matters in connection with the offering will be passed upon for
the underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements of ScreamingMedia.com, Inc. as of December 31,
1998 and 1999 and for the years ended December 31, 1999 and 1998, included in
this prospectus, have been audited by Deloitte and Touche LLP, independent
auditors, as stated in their report appearing in this prospectus and are
included in reliance upon the report of that firm given upon their authority as
experts in accounting and auditing.
Our financial statements for the year ended December 31, 1997 included in
this prospectus and in the registration statement have been audited by David
Tarlow & Co., P.C., independent auditors, as stated in their report appearing in
this prospectus, and are included in reliance upon the report of that firm given
upon their authority as experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
Effective June 16, 1999, Deloitte & Touche LLP was engaged as our
independent auditors and replaced David Tarlow & Co., P.C. who had previously
served as our independent auditors. The decision to change independent auditors
was approved by our board of directors. In the period from January 1, 1997 to
December 31, 1998, David Tarlow & Co., P.C. issued no audit report that was
qualified or modified as to uncertainty, audit scope or accounting principles,
no adverse opinions or disclaimers of opinion on any of our financial
statements, and there were no disagreements with David Tarlow & Co., P.C. on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures. Prior to June 16, 1999, we had not consulted with
Deloitte & Touche LLP on items which involved our accounting principles or the
form of audit opinion to be issued on our financial statements.
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<PAGE> 60
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is a part of a registration statement on Form S-1 that we
have filed with the Securities and Exchange Commission under the Securities Act,
with respect to the common stock offered in this prospectus. This prospectus
does not contain all the information which is in the registration statement.
Certain parts of the registration statement are omitted as allowed by the rules
and regulations of the SEC. We refer you to the registration statement for
further information about our company and the securities offered in this
prospectus. Statements contained in this prospectus concerning the provisions of
documents filed as exhibits are not necessarily complete, and reference is made
to the copy so filed, each such statement being qualified in all respects by
such reference. You can inspect and copy the registration statement and the
reports and other information we file with the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. The same information will be available for inspection and
copying at the regional offices of the SEC located at 7 World Trade Center,
13(th) Floor, New York, N.Y. 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can also obtain copies of this
material from the public reference room of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains a Web site
which provides on-line access to reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC at
the address http://www.sec.gov.
Upon the effectiveness of the registration statement, we will become
subject to the information requirements of the Exchange Act. We will then file
reports, proxy statements and other information under the Exchange Act with the
SEC. You can inspect and copy these reports and other information of our company
at the locations set forth above or download these reports from the SEC's Web
site.
We have applied to have our common stock approved for quotation on The
Nasdaq National Market. Reports, proxy statements and other information
concerning us can be inspected at the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
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<PAGE> 61
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Independent Auditors' Report................................ F-3
Balance Sheets as of December 31, 1998 and 1999............. F-4
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-6
Statements of Stockholders' Equity (deficiency) for the
years ended
December 31, 1997, 1998 and 1999.......................... F-7
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-8
Notes to Financial Statements............................... F-9
</TABLE>
F-1
<PAGE> 62
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Screaming Media.com Inc.
We have audited the accompanying balance sheets of Screaming Media.com Inc.
(the "Company") as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity (deficiency) and cash flows for each of the two
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1999, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
January 19, 2000 (February 1, 2000 as
to Note 12)
F-2
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Screaming Media.com Inc.
New York, New York
We have audited the accompanying statements of operations, stockholders
equity (deficiency) and cash flows of Screaming Media.com Inc. for the year
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on those
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Screaming
Media.com Inc. for the year ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ DAVID TARLOW & CO., P.C.
--------------------------------------
David Tarlow & Co., P.C.
New York, New York
December 28, 1999
F-3
<PAGE> 64
SCREAMING MEDIA.COM INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31,
1998 1999 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 120,357 $ 22,121,667
Accounts receivable, net of allowance for doubtful
accounts
of $10,000 and $138,802 as of December 31, 1998
and 1999, respectively.......................... 92,112 1,398,980
Prepaid expenses................................... -- 3,248,295
------------ ------------
Total current assets....................... 212,469 26,768,942
PROPERTY AND EQUIPMENT -- Net of accumulated
depreciation....................................... 41,333 4,552,495
INVESTMENTS.......................................... -- 349,987
OTHER ASSETS......................................... 20,232 698,751
------------ ------------
TOTAL ASSETS............................... $ 274,034 $ 32,370,175
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............. $ 124,249 $ 3,273,527
Current portion of notes payable -- stockholder.... 19,351 --
Deferred revenue................................... 45,108 873,360
Current portion of capital lease obligations....... -- 691,643
------------ ------------
Total current liabilities.................. 188,708 4,838,530
------------ ------------
NONCURRENT LIABILITIES:
Notes payable -- stockholders, less current
portion......................................... 275,000 --
Capital lease obligations, less current portion.... -- 646,586
------------ ------------
Total liabilities.......................... 463,708 5,485,116
------------ ------------
COMMITMENTS
REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Series B convertible preferred stock, $0.01 par
value, no shares authorized, issued, and
outstanding, 1998, 2,678,572 shares authorized,
issued, and outstanding, 1999, no shares
authorized, issued and outstanding 1999 -- pro
forma........................................... -- 27,331,814 $ --
------------ ------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $0.0001 par value, 4,000,000
shares authorized and issued, and 3,620,000
shares outstanding at December 31, 1998 and no
shares authorized, issued, and outstanding at
December 31, 1999 and 1999 -- pro forma......... 400 -- --
</TABLE>
F-4
<PAGE> 65
BALANCE SHEETS -- (CONTINUED)
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31,
1998 1999 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Series A convertible preferred stock, $0.01 par
value, no shares authorized, issued, and
outstanding, 1998, 1,527,085 shares authorized,
issued, and outstanding at December 31, 1999 and
no shares authorized, issued and outstanding at
December 31, 1999 -- pro forma.................. -- 15,271 --
Common stock, $0.0001 par value, 2,000,000 shares
authorized and issued, and 1,600,000 shares
outstanding at December 31, 1998 and no shares
authorized, issued and outstanding at December
31, 1999 and 1999 -- pro forma.................. 200 -- --
Common stock, $0.01 par value, no shares
authorized, issued, and outstanding, 1998,
100,000,000 shares authorized and 10,406,562 and
18,817,876 issued and 9,246,562 and 17,657,876
outstanding at December 31, 1999 and 1999 -- pro
forma, respectively............................. -- 104,066 188,179
Additional paid-in capital......................... 475,014 22,856,984 50,119,956
Warrants........................................... -- 787,000 787,000
Deferred compensation.............................. -- (10,379,049) (10,379,049)
Treasury stock..................................... (19,311) (19,311) (19,311)
Accumulated deficit................................ (645,977) (13,811,716) (13,811,716)
------------ ------------ ------------
Total stockholders' equity (deficiency).... (189,674) (446,755) $ 26,885,059
------------ ------------ ============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)....................................... $ 274,034 $ 32,370,175
============ ============
</TABLE>
See notes to financial statements.
F-5
<PAGE> 66
SCREAMING MEDIA.COM INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
--------- ---------- ------------
<S> <C> <C> <C>
REVENUE:
Network services....................................... $ 246,143 $ 308,661 $ 2,479,660
Set-up fee............................................. 40,865 67,582 492,360
Other.................................................. 287,090 190,564 13,170
--------- ---------- ------------
Total revenue.................................. 574,098 566,807 2,985,190
--------- ---------- ------------
OPERATING EXPENSES:
Cost of services (excluding depreciation shown
below).............................................. 69,801 130,111 973,518
Research and development (exclusive of stock-based
compensation shown below)........................... 107,278 97,077 893,686
Sales and marketing (exclusive of stock-based
compensation shown below)........................... 87,200 104,204 3,768,005
General and administrative (exclusive of stock-based
compensation shown below)........................... 346,214 454,970 4,330,384
Depreciation and amortization.......................... 33,117 26,119 451,309
Stock-based compensation............................... 25,000 350,000 6,062,298
--------- ---------- ------------
Total operating expenses....................... 668,610 1,162,481 16,479,200
--------- ---------- ------------
OPERATING LOSS........................................... (94,512) (595,674) (13,494,010)
--------- ---------- ------------
OTHER INCOME (EXPENSE):
Interest income........................................ -- -- 381,373
Interest expense....................................... (449) (10,993) (53,102)
Other expense.......................................... -- (3,160) --
--------- ---------- ------------
Total other income (expense)................... (449) (14,153) 328,271
--------- ---------- ------------
NET LOSS................................................. $ (94,961) $ (609,827) $(13,165,739)
========= ========== ============
BASIC NET LOSS PER SHARE................................. $ (0.08) $ (0.48) $ (1.44)
========= ========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING............................................ 1,175,068 1,282,740 9,115,056
========= ========== ============
Pro forma basic net loss per share (unaudited)........... $ (1.04)
============
Pro forma weighted average number of shares of common
stock outstanding (unaudited).......................... 12,628,170
============
</TABLE>
See notes to financial statements.
F-6
<PAGE> 67
SCREAMING MEDIA.COM INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK
-------------------
PREFERRED STOCK SERIES A COMMON STOCK COMMON STOCK
------------------- ------------------- ------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997...... 3,250,000 $325 -- $ -- 1,900,000 $ 190 -- $ --
Stock issuance............... 750,000 75 -- -- 100,000 10 -- --
Net loss for the year ended
December 31, 1997.......... -- -- -- -- -- -- -- --
---------- ---- --------- ------- ---------- ----- ---------- --------
BALANCE, DECEMBER 31,
1997......................... 4,000,000 400 -- -- 2,000,000 200 -- --
Issuance of shares from
treasury for directors'
fees....................... -- -- -- -- -- -- -- --
Interest expense on
convertible note........... -- -- -- -- -- -- -- --
Net loss for the year ended
December 31, 1998......... -- -- -- -- -- -- -- --
---------- ---- --------- ------- ---------- ----- ---------- --------
BALANCE, DECEMBER 31,
1998......................... 4,000,000 400 -- -- 2,000,000 200 -- --
Reincorporation.............. (4,000,000) (400) -- -- (2,000,000) (200) 10,000,000 100,000
Stock grants................. -- -- -- -- -- -- 78,000 780
Issuance of Series A
preferred stock............ -- -- 1,527,085 15,271 -- -- -- --
Warrants granted to
investment bankers......... -- -- -- -- -- -- -- --
Warrants granted for legal
services................... -- -- -- -- -- -- -- --
Warrants granted for
architectural services..... -- -- -- -- -- -- -- --
Conversion of notes into
common stock............... -- -- -- -- -- -- 328,562 3,286
Interest expense on
convertible notes.......... -- -- -- -- -- -- -- --
Issuance of stock options to
employees.................. -- -- -- -- -- -- -- --
Amortization of deferred
compensation............... -- -- -- -- -- -- -- --
Net loss..................... -- -- -- -- -- -- -- --
---------- ---- --------- ------- ---------- ----- ---------- --------
BALANCE, DECEMBER 31, 1999.... -- $ -- 1,527,085 $15,271 -- $ -- 10,406,562 $104,066
========== ==== ========= ======= ========== ===== ========== ========
<CAPTION>
TREASURY STOCK
-------------------------------------------
ADDITIONAL COMMON STOCK PREFERRED STOCK
PAID-IN DEFERRED --------------------- ------------------- ACCUMULATED
CAPITAL WARRANTS COMPENSATION SHARES AMOUNT SHARES AMOUNT DEFICIT
---------- -------- ------------ ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997...... $ 100,485 $ -- $ -- (800,000) $(13,318) (380,000) $(12,652) $ 58,811
Stock issuance............... 24,915 -- -- -- -- -- -- --
Net loss for the year ended
December 31, 1997.......... -- -- -- -- -- -- -- (94,961)
----------- -------- ------------ ---------- -------- -------- -------- ------------
BALANCE, DECEMBER 31,
1997......................... 125,400 -- -- (800,000) (13,318) (380,000) (12,652) (36,150)
Issuance of shares from
treasury for directors'
fees....................... 343,341 -- -- 400,000 6,659 -- -- --
Interest expense on
convertible note........... 6,273 -- -- -- -- -- -- --
Net loss for the year ended
December 31, 1998......... -- -- -- -- -- -- -- (609,827)
----------- -------- ------------ ---------- -------- -------- -------- ------------
BALANCE, DECEMBER 31,
1998......................... 475,014 -- -- (400,000) (6,659) (380,000) (12,652) (645,977)
Reincorporation.............. (99,400) -- -- (760,000) (12,652) 380,000 12,652 --
Stock grants................. 76,995 -- -- -- -- -- -- --
Issuance of Series A
preferred stock............ 5,381,176 -- -- -- -- -- -- --
Warrants granted to
investment bankers......... -- 687,000 -- -- -- -- -- --
Warrants granted for legal
services................... -- 50,000 -- -- -- -- -- --
Warrants granted for
architectural services..... -- 50,000 -- -- -- -- -- --
Conversion of notes into
common stock............... 546,714 -- -- -- -- -- -- --
Interest expense on
convertible notes.......... 35,138 -- -- -- -- -- -- --
Issuance of stock options to
employees.................. 16,441,347 -- (16,441,347) -- -- -- -- --
Amortization of deferred
compensation............... -- -- 6,062,298 -- -- -- -- --
Net loss..................... -- -- -- -- -- -- -- (13,165,739)
----------- -------- ------------ ---------- -------- -------- -------- ------------
BALANCE, DECEMBER 31, 1999.... $22,856,984 $787,000 $(10,379,049) (1,160,000) $(19,311) -- $ -- $(13,811,716)
=========== ======== ============ ========== ======== ======== ======== ============
<CAPTION>
TOTAL
-----
<S> <C>
BALANCE, JANUARY 1, 1997...... $ 133,841
Stock issuance............... 25,000
Net loss for the year ended
December 31, 1997.......... (94,961)
------------
BALANCE, DECEMBER 31,
1997......................... 63,880
Issuance of shares from
treasury for directors'
fees....................... 350,000
Interest expense on
convertible note........... 6,273
Net loss for the year ended
December 31, 1998......... (609,827)
------------
BALANCE, DECEMBER 31,
1998......................... (189,674)
Reincorporation.............. --
Stock grants................. 77,775
Issuance of Series A
preferred stock............ 5,396,447
Warrants granted to
investment bankers......... 687,000
Warrants granted for legal
services................... 50,000
Warrants granted for
architectural services..... 50,000
Conversion of notes into
common stock............... 550,000
Interest expense on
convertible notes.......... 35,138
Issuance of stock options to
employees.................. --
Amortization of deferred
compensation............... 6,062,298
Net loss..................... (13,165,739)
------------
BALANCE, DECEMBER 31, 1999.... $ (446,755)
============
</TABLE>
See notes to financial statements
F-7
<PAGE> 68
SCREAMING MEDIA.COM INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(94,961) $(609,827) $(13,165,739)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization......................... 33,117 26,119 451,309
Stock/warrants issued for services.................... 25,000 350,000 105,400
Interest from beneficial conversion................... -- 6,273 35,138
Stock-based compensation.............................. -- -- 6,062,298
Changes in operating assets and liabilities:
Decrease (increase) in account receivable........... 41,114 (5,898) (1,306,868)
Increase in other assets............................ -- (1,000) (3,926,813)
Increase in account payable and accrued expenses.... 19,448 79,210 3,149,277
Increase in deferred revenue........................ -- 45,108 828,252
-------- --------- ------------
Net cash provided by (used in) operating
activities..................................... 23,718 (110,015) (7,767,746)
-------- --------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....................... (13,218) (6,675) (3,415,656)
Purchase of investments.................................. -- -- (349,987)
-------- --------- ------------
Net cash used in investing activities............ (13,218) (6,675) (3,765,643)
-------- --------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of convertible preferred
stock, net............................................ -- -- 28,018,814
Borrowings from company directors and officers........... -- 252,114 275,000
Repayments of loans to stockholders...................... (10,500) (15,067) (19,350)
Repayment of capital lease obligation.................... -- -- (208,587)
Proceeds from sale of stock.............................. -- -- 5,468,822
-------- --------- ------------
Net cash (used in) provided by financing
activities..................................... (10,500) 237,047 33,534,699
-------- --------- ------------
NET INCREASE IN CASH....................................... -- 120,357 22,001,310
CASH, BEGINNING OF YEAR.................................... -- -- 120,357
-------- --------- ------------
CASH, END OF YEAR.......................................... $ -- $ 120,357 $ 22,121,667
======== ========= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest................................... $ 449 $ 35 $ 22,648
======== ========= ============
Cash paid for income taxes............................... $ 688 $ 1,018 $ 1,171
======== ========= ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH
TRANSACTIONS:
Fixed assets acquired under capital leases............ $ -- $ -- $ 1,531,418
======== ========= ============
Conversion of promissory notes into common stock...... $ -- $ -- $ 550,000
======== ========= ============
Warrant granted to investment bankers................. $ -- $ -- $ 687,000
======== ========= ============
Warrant granted for legal services.................... $ -- $ -- $ 50,000
======== ========= ============
Warrant granted for architectural services............ $ -- $ -- $ 50,000
======== ========= ============
</TABLE>
See notes to financial statements
F-8
<PAGE> 69
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. ORGANIZATION AND NATURE OF BUSINESS
Screaming Media.com Inc. (formerly ScreamingMedia.net, Inc.) (the
"Company") was incorporated in the state of Delaware on January 22, 1999, for
the purpose of reincorporating The Interactive Connection, Inc. ("Interactive"),
a corporation incorporated in the state of New York on August 16, 1993. On
January 28, 1999, a merger took place between these two companies (under common
control) with the Company being the surviving corporation. The merger was
treated as if it were a pooling of interests (see Note 10).
The Company's primary business is aggregating, processing, filtering and
delivering content to its customers. The Company receives the data from various
content providers, processes and filters it using customized software to meet
individual customers' needs, and then distributes the content almost
instantaneously to such customers. Prior to 1999, the Company derived revenue
from other services, including Web hosting, server hosting and maintenance and
Web design and consulting.
2. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
BASIS OF PRESENTATION -- The financial statements of the Company have been
prepared on the accrual basis of accounting. A summary of the major accounting
policies followed in the preparation of the accompanying financial statements,
which conform to generally accepted accounting principles, is presented below.
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 amount of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS -- The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT AND RELATED DEPRECIATION AND
AMORTIZATION -- Property and equipment are stated at cost, and in the case of
equipment under capital leases, the present value of the future minimum lease
payments, less accumulated depreciation and amortization. Depreciation and
amortization is calculated using the straight-line method over the estimated
useful lives of the depreciable assets, which range from three to seven years,
or, if shorter, the lease term. Improvements are capitalized, while repair and
maintenance costs are charged to operations as incurred.
INVESTMENTS -- Investments of less than 20% of the voting interest of other
companies are presented at cost. In the event that management identifies an
impairment in the estimated fair value of an investment to an amount below cost
(other than a temporary decline), such investment will be written down to fair
market value.
IMPAIRMENT OF ASSETS -- The Company's long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the net
carrying amount may not be recoverable. When such events occur, the Company
measures impairment by comparing the carrying value of the long-lived asset to
the estimated undiscounted future cash flows expected to result from use of the
assets and their eventual disposition. If the sum of the expected undiscounted
future cash flows were less than the carrying amount of the assets, the Company
would recognize an impairment loss. The impairment loss, if determined to be
necessary, would be measured as the amount by which the carrying amount of the
asset exceeds the fair value of the asset. The Company determined that, as of
December 31, 1998 and 1999, there had been no impairment in the carrying value
of its long-lived assets.
F-9
<PAGE> 70
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
2. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES -- (CONTINUED)
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE -- As of
January 1, 1999, costs of computer software developed or obtained for internal
use are capitalized while in the application development stage and are expensed
while in the preliminary stage and post-implementation stage. The Company
amortizes these capitalized costs over the life of the systems, which is
estimated to be two years. The Company capitalized approximately $1,314,000 of
internal development and software purchase costs relating to its internal use
software incurred during the application development stage. Prior to January 1,
1999, the Company had no significant costs related to software development.
Normal maintenance of internal use software is expensed as incurred.
DEFERRED REVENUES -- Deferred revenues represents amounts billed in excess
of revenues recognized. Such deferred revenues relate to set-up fees. (See
revenue recognition below.) Included in accounts receivable are amounts due
(under contract) relating to deferred revenues.
REVENUE RECOGNITION -- Income is derived primarily from the Company's
network services and related set-up fees. Network services contracts have a
minimum monthly charge. The minimum revenues from these services, net of rebates
and allowances, are recognized on a straight-line basis, over the lives of the
contracts, which are typically for terms of one year. Revenue amounts in
addition to the minimum charge are recognized as the services are delivered.
Revenue for set-up fees are recognized ratably over the initial term of the
contract, commencing with the service start date specified in the contract. The
Company has also derived revenue from its other Internet-related activities such
as Web Site development, custom programming and hosting. Such revenue is
recognized as earned over the term of each agreement.
ADVERTISING COSTS -- The costs of advertising are expensed as incurred.
INCOME TAXES -- The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, pursuant to which deferred income tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities, using enacted tax rates currently in effect. State
and local taxes are based on factors other than income.
NET LOSS PER COMMON SHARE -- Basic loss per common share was computed by
dividing net loss by the weighted average number of shares of common stock
outstanding. Diluted loss per share has not been presented since the impact of
options, warrants and conversion of preferred shares would have been anti-
dilutive (see Notes 9 and 10).
UNAUDITED PRO FORMA NET LOSS PER SHARE AND UNAUDITED PRO FORMA
STOCKHOLDERS' EQUITY -- Unaudited pro forma net loss per share has been computed
in the same manner as net loss per common share as described above and also
gives effect to the conversion of all convertible preferred stock that will
automatically occur upon completion of the Company's initial public offering
(using the if-converted method) (see Notes 9 and 10). If the offering
contemplated by this prospectus is consummated, all of the convertible preferred
stock outstanding as of December 31, 1999 will automatically be converted into
an aggregate of 8,411,314 shares of common stock, based on the shares of all
convertible preferred stock outstanding at December 31, 1999. Unaudited pro
forma stockholders' equity at December 31, 1999, as adjusted for the
F-10
<PAGE> 71
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
2. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES -- (CONTINUED)
conversion of all convertible preferred stock, is disclosed on the balance
sheet. Pro forma basic net loss per share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Net loss.................................................... $(13,165,739)
============
Shares used in computing basic net loss per share........... 9,115,056
Adjusted to reflect the effect of the automatic conversion
of all convertible preferred stock from the date of
issuance.................................................. 3,513,114
------------
Weighted average shares used in computing pro forma basic
net loss per share........................................ 12,628,170
============
Pro forma basic net loss per share.......................... $ (1.04)
============
</TABLE>
STOCK DIVIDEND -- On December 22, 1999, the Board of Directors of the
Company approved a 100% stock dividend (two-for-one stock split). The Company's
financial statements have been retroactively adjusted to show the effect of this
stock dividend for all periods presented.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable, and
notes payable, are carried at cost, which approximates their fair value because
of the short-term maturity of these instruments and the relatively stable
interest rate environment.
RECENT ACCOUNTING PRONOUNCEMENTS -- Effective January 1, 1998, the Company
adopted SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information. SFAS No. 131 establishes standards for the way business enterprises
report information about operating segments, as well as enterprise-wide
disclosures about products and services, geographic areas and major customers.
Management believes the Company operates in one segment. The Company's customers
are located in eight countries around the world with the majority being in the
United States. All of the Company's transactions have been conducted in United
States dollars. The Company does not have any material revenues or assets
outside of the United States. In 1999, one customer accounted for approximately
12% of net revenue.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires an entity to recognize all derivatives as either an asset or liability
and to measure those instruments at fair value, as well as to identify the
conditions for which a derivative may be specifically designated as a hedge.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. The
Company does not currently engage or plan to engage in any derivative or hedging
activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and to amortize them over the
software's estimated useful life. SOP 98-1 is effective for fiscal years
beginning after December 15, 1998. The Company adopted the requirements of SOP
98-1 as of January 1, 1999.
F-11
<PAGE> 72
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
3. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
trade accounts receivable. The Company maintains cash and cash equivalents with
two high credit quality domestic financial institutions. The Company performs
periodic evaluations of the relative credit standing of these institutions. From
time to time, the Company's cash balances with any one financial institution may
exceed Federal Deposit Insurance Corporation insurance limits.
The Company's customers are generally located in the United States. The
Company performs ongoing credit evaluations and generally does not require
collateral on accounts receivable. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of customers,
historical trends and other information; to date, such losses have been within
management's expectations.
4. INVESTMENTS
In May 1999, the Company paid $150,000 to purchase 384,615 shares of Series
A convertible preferred stock of SoftCom, Inc. ("SoftCom"), convertible on a
one-for-one basis into SoftCom common stock. The Company also holds a warrant
that expires on May 14, 2004, to purchase up to 19,231 additional shares of
Series A convertible preferred stock of SoftCom at an exercise price of $0.39
per share. The Chairman of the Company's Board of Directors serves on the Board
of Directors of SoftCom.
In June 1999, the Company paid $199,987 to purchase 11,996 shares of Series
A convertible preferred stock of i-Recall, Inc. ("i-Recall"), convertible on a
one-for-one basis into i-Recall common stock.
These investments represent ownership interest of less than 20% of
SoftCom's and i-Recall's equity and are accounted for under the cost method.
These securities are carried at cost since neither the SoftCom securities nor
the i-Recall securities are traded on a public market and there are no other
readily determinable fair values of such securities.
5. PROPERTY AND EQUIPMENT
Major classifications of property and equipment at December 31, 1998 and
1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
Software and computer equipment, including assets
under capital leases................................ $ 144,440 $3,359,869
Construction in process............................... -- 103,240
Leasehold improvements................................ -- 1,117,907
Office furniture and equipment........................ 39,775 565,670
--------- ----------
184,215 5,146,686
Less: accumulated depreciation and amortization....... (142,882) (594,191)
--------- ----------
Property and equipment, net......................... $ 41,333 $4,552,495
========= ==========
</TABLE>
Depreciation expense (including assets under capital leases) amounted to
$32,921, $26,119 and $451,309 for the years ended December 31, 1997, 1998 and
1999, respectively.
6. INCOME TAXES
No provision for income taxes has been made because the Company has
sustained cumulative losses since the commencement of operations. At December
31, 1999, the Company had net operating loss
F-12
<PAGE> 73
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
6. INCOME TAXES -- (CONTINUED)
carryforwards ("NOLs") of approximately $13,767,000, which will be available to
reduce future taxable income. The NOLs are expected to expire in the following
years (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
2008........................................................ $ 13
2010........................................................ 51
2012........................................................ 578
2013........................................................ 54
2014........................................................ 13,071
-------
$13,767
=======
</TABLE>
In accordance with SFAS No. 109, the Company has computed the components of
deferred income taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
--------- -----------
<S> <C> <C>
Deferred tax assets.................................. $ 307,421 $ 6,549,864
Less valuation allowance............................. (307,421) (6,549,864)
--------- -----------
Net deferred taxes................................... $ -- $ --
========= ===========
</TABLE>
The Company's NOLs primarily generated the deferred tax assets. At December
31, 1998 and 1999, a valuation allowance was provided as the realization of the
deferred tax benefits is not likely.
The effective tax rate varies from the U.S. Federal statutory tax rate for
the years ended December 31, principally due to the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory tax................................. 35% 35% 35%
State and local taxes...................................... 12 12 12
Valuation allowance........................................ (47) (47) (47)
--- --- ---
Effective tax rate......................................... --% --% --%
=== === ===
</TABLE>
7. COMMITMENTS
OFFICE LEASES -- The Company leases office space in New York under
noncancelable operating leases expiring on March 31, 2009. These leases contain
provisions for escalations due to increases in real estate taxes and operating
costs.
F-13
<PAGE> 74
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
7. COMMITMENTS -- (CONTINUED)
The following schedule reflects future required minimum lease payments.
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
2000........................................................ $ 580,875
2001........................................................ 581,636
2002........................................................ 572,852
2003........................................................ 576,334
2004........................................................ 576,334
Thereafter.................................................. 2,606,601
----------
Total....................................................... $5,494,632
==========
</TABLE>
Rent expense under these leases was $65,505, $70,260 and $295,672 for the
years ended December 31, 1997, 1998 and 1999, respectively.
EQUIPMENT LEASES -- Fixed assets included assets acquired under capital
leases of $0 and $1,531,418, at December 31, 1998 and 1999, respectively. The
related accumulated amortization was $0 and $141,371 for the years ended
December 31, 1998 and 1999, respectively.
The Company is a lessee under several capital lease agreements expiring
through 2002 with third parties for certain equipment. Future minimum lease
payments under noncancelable capital leases, together with the present value of
the net minimum payments as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ----------
<S> <C>
2000........................................................ $ 768,163
2001........................................................ 523,047
2002........................................................ 162,280
----------
Total minimum lease payments................................ 1,453,490
Less: amount representing interest.......................... (115,261)
----------
Present value of minimum capital lease payments............. 1,338,229
Less: current portion....................................... (691,643)
----------
Long-term capitalized lease obligations..................... $ 646,586
==========
</TABLE>
The assets and liabilities under capital leases are recorded at the present
value of the minimum lease payments using effective interest rates ranging from
2.85% to 9.43% per annum.
8. RELATED PARTY TRANSACTIONS AND BALANCES
In October 1998, the Company entered into a convertible promissory note due
on October 19, 2001, with an officer of the Company whereby the Company received
cash of $250,000. In addition, in 1999, the Company entered into five
convertible promissory notes with certain directors, officers and the spouse of
a director of the Company whereby the Company received cash totaling $300,000.
During 1999, these notes were converted into 328,562 shares of the Company's
common stock, which reflected a 7% discount from the then-fair value of the
common stock as determined by reference to the per-share price of the Company's
Series A Preferred Stock offering. The intrinsic value of this beneficial
conversion feature has been recorded as interest expense ratably from the date
of issuance to the earliest date on which the notes could be
F-14
<PAGE> 75
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
8. RELATED PARTY TRANSACTIONS AND BALANCES -- (CONTINUED)
converted into common stock, resulting in additional interest expense of $6,273
and $35,138 in 1998 and 1999, respectively.
In 1996, the Company entered into a promissory note with its president for
$19,350 that it repaid during 1999.
In April 1999, the Company entered into an agreement with a corporate
communications service firm ("Communications") for a monthly fee of $20,000. A
principal of Communications is a director of the Company. Additionally, another
principal of Communications is the spouse of a different director of the
Company. The Company has determined that the terms of this agreement are at
arms-length.
9. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In October 1999, the Company issued 2,678,572 shares of Series B
Convertible Preferred Stock ("Series B Preferred Stock") through a private
placement for $30,000,000 resulting in net proceeds to the Company of
$28,018,814. Each share of Series B Preferred Stock is convertible, at any time,
at the option of the holder, into two shares of common stock.
The Series B Preferred Stock was recorded at $27,331,814 which reflects the
face amount of the preferred stock reduced by all issuance costs, resulting in a
discount of $2,668,186.
The Company will be required to redeem all outstanding shares of Series B
Preferred Stock on and after December 31, 2003, at $11.20 per share plus all
declared but unpaid dividends, if any. If total net revenue for the year ending
December 31, 2000, is less than $13,650,000, the conversion price will be
reduced as follows: (a) to $9.82 if net revenues for the year ending December
31, 2000, are at least $11,600,000 but less than $13,650,000 or (b) to $8.09 if
net revenues for the year ending December 31, 2000, are less than $11,600,000.
The carrying value of the Series B Preferred Stock is equal to its redemption
value, net of offering costs, as no dividends have been declared or paid on
these shares.
The Series B Preferred Stock will be automatically converted into two
shares of common stock upon the earlier of: (a) completion by the Company of an
initial public offering raising gross proceeds of at least $20,000,000 and at an
offering price per share of at least 150% of the then applicable conversion
price, or (b) obtaining the written consent of the holders of at least 66 2/3%
of the shares of Series B Preferred Stock then outstanding. Holders of a
majority of outstanding shares of Series B Preferred Stock may, at any time,
have the Company redeem all then outstanding shares of Series B Preferred Stock
at the original purchase price plus all cumulative and unpaid dividends and any
declared but unpaid dividends.
The Series B Preferred Stock is senior to the Series A Preferred Stock,
which in turn is senior to the Common Stock with respect to payment of
dividends, if any, and liquidation preference. Series B and Series A Preferred
Stockholders are entitled to voting rights equal to the number of shares of
Common Stock into which the preferred stock is convertible. The Series B and A
holders have additional voting rights regarding matters that affect their
respective series of preferred stock. Series B Preferred Stockholders have
certain additional voting rights.
The Company incurred fees and expenses of $1,981,186 relating to the
placement of the Series B Preferred Stock and also issued a five year warrant on
to the placement agent to purchase 241,070 shares of common stock at an exercise
price of $5.60 per share until June 7, 2004. The Company calculated the value of
such warrant to be $687,000 using the Black-Scholes valuation method and reduced
additional paid-in capital by such amount.
F-15
<PAGE> 76
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
10. STOCKHOLDERS' EQUITY (DEFICIENCY)
In January 1999, the Company was reincorporated in the state of Delaware.
Pursuant to that reorganization, common stockholders of Interactive received one
share of common stock of the Company with a par value of $0.01 per share in
exchange for each common share of Interactive with a par value of $0.0001 per
share. In addition, each preferred stockholder of Interactive received two
shares of the Company's common stock in exchange for each share of Interactive
preferred stock owned. Shares of common treasury stock and shares of preferred
treasury stock of Interactive common were replaced by shares of common treasury
stock of the Company at exchange rates of one for one and two for one,
respectively.
PREFERRED STOCK -- The Company is authorized to issue up to 5,000,000
shares of preferred stock.
In January 1999, the Company issued 1,527,085 shares of Series A
Convertible Preferred Stock ("Series A Preferred Stock") through a private
placement, in consideration of gross proceeds to the Company of $5,500,000.
Each share of Series A Preferred Stock is convertible at any time at the
election of the preferred stockholders into two shares of common stock, subject
to the provisions set forth in the Company's Certificate of Incorporation. The
preferred stockholders are entitled to voting rights equal to the number of
shares of common stock into which the Series A Preferred Stock is convertible.
The Series A Preferred Stock will automatically be convertible into common stock
upon the effectiveness of the filing by the Company of a registration statement
with Securities and Exchange Commission in connection with the Company's initial
public offering.
TREASURY STOCK -- At December 31, 1998 and 1999, common treasury stock was
comprised of 400,000 and 1,160,000 shares of common stock with a cost basis of
$6,659 and $19,311, respectively. At December 31, 1998 preferred treasury stock
consisted of 380,000 shares of preferred stock with a cost basis of $12,652. In
January 1999, pursuant to the reorganization of the Company, all of the shares
of preferred stock held in treasury were converted to 760,000 shares of common
stock held in treasury. There are no preferred shares of treasury stock at
December 31, 1999. During October 1998, the Company issued 400,000 shares of
common stock from shares held in treasury stock to two directors and recorded
compensation expense of $350,000 in connection with such grants. Such
compensation expense equaled the fair value of the stock at the time of grant.
WARRANTS -- In June 1999, in connection with legal services provided, the
Company issued a warrant to purchase up to 14,286 shares of Common Stock at an
exercise price of $3.50 per share. The warrant was valued at $50,000, using the
Black-Scholes options pricing model. The warrant may be exercised at any time
prior to June 10, 2004. The exercise price and the number and type of securities
for which the warrant is exercisable are subject to adjustment in the event the
Company issues any stock dividends, combines or splits its Common Stock or
issues rights to acquire Common Stock under certain circumstances.
In June 1999, in connection with architectural services provided, the
Company issued a warrant to purchase up to 14,286 shares of Common Stock at an
exercise price of $3.50 per share. The warrant was valued at $50,000, which was
the invoiced amount of the services provided. The warrant may be exercised at
any time prior to June 15, 2004. The exercise price and the number and type of
securities for which the warrant is exercisable are subject to adjustment in the
event the Company issues any stock dividends, combines or splits its Common
Stock or issues rights to acquire Common Stock under certain circumstances.
F-16
<PAGE> 77
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
11. STOCK OPTION PLAN
The Company has established the 1999 Stock Option Plan (the "Plan") to
provide for the granting of nonqualified stock options and incentive stock
options to employees, directors and advisors to reward them for service to the
Company and to provide incentives for future service and enhancement of
shareholder value. As amended in April 1999, the Plan authorized the issuance of
stock options covering up to 5,000,000 shares of Common Stock. The options vest
in accordance with the terms of the agreements entered into by the Company and
the grantee of the options. A total of 3,821,340 options have been granted under
this plan at December 31, 1999.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options.
Transactions involving the incentive stock options granted are summarized
as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
OPTIONS EXERCISE
(IN SHARES) PRICE
----------- --------
<S> <C> <C>
Outstanding, January 1, 1999............................ -- $ --
Granted................................................. 3,821,340 $2.19
Exercised............................................... -- $ --
Forfeited............................................... (183,712) $0.83
--------- -----
Outstanding, December 31, 1999.......................... 3,637,628 $2.26
========= =====
</TABLE>
There were 873,032 options exercisable at December 31, 1999.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING LIFE EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES (IN SHARES) (IN YEARS) PRICE (IN SHARES) PRICE
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.50..................................... 326,000 3.25 $0.50 103,860 $0.50
$1.80..................................... 1,978,842 3.25 $1.80 528,786 $1.80
$3.25-$3.50............................... 1,308,786 3.25 $3.33 240,386 $3.25
$5.50-$5.60............................... 24,000 3.25 $5.60 -- $ --
</TABLE>
SFAS No. 123, "Accounting for Stock-Based Compensation," provides for a
fair value based method of accounting for employee options and options granted
to non-employees and measures compensation expense using an option valuation
model that takes into account, as of the grant date, the exercise price and
expected life of the option, the current price of the underlying stock and its
expected volatility, expected dividends on the stock, and the risk-free interest
rate for the expected term of the options.
In connection with the issuance of certain options at prices below fair
market value, the Company had recorded deferred compensation expense of
$10,379,049 as of December 31, 1999, net of recognized compensation expense of
$6,062,298 for the year ended December 31, 1999, representing the unamortized
difference between the exercise price and the deemed fair market value of the
Company's common stock at such date. Such amount is included as a reduction of
stockholders' equity (deficiency) and is being amortized by charges to
operations over the vesting period.
F-17
<PAGE> 78
SCREAMING MEDIA.COM INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
11. STOCK OPTION PLAN -- (CONTINUED)
Pro forma disclosure as if the Company had adopted the cost recognition
requirement under SFAS 123 is presented below for the year ended December 31,
1999.
<TABLE>
<S> <C>
Net loss -- as reported..................................... $(13,165,739)
Net loss -- pro forma....................................... $(13,909,885)
Net loss per common share -- as reported.................... $ (1.44)
Net loss per common share -- pro forma...................... $ (1.53)
</TABLE>
The fair value of options granted under the Plan for the year ended
December 31, 1999, in complying with SFAS No. 123, was estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used: no dividend yield, a volatility factor of
50%, risk-free interest rate of 6.0% and expected lives of 3.25 years.
12. SUBSEQUENT EVENTS
On February 4, 2000, the Company entered into an agreement with another
tenant with contiguous space in the building to sublease the space with consent
of the landlord. The lease expires on January 31, 2009, and results in
additional straight line rent expense of $513,000 per year. The Company issued a
warrant to the tenant allowing the tenant the right to purchase 50,000 shares of
the Company's common stock at an exercise price of $5.60 per share. This warrant
may be exercised at any time and expires on February 4, 2005.
In addition, the tenant may require the Company to buy back the warrant at
$14.40 per share. The fair market value of the common stock at the issuance date
of the warrant is $20 per share. The value of the warrant has been determined to
be $957,000; such value was derived by using the Black-Scholes option model. The
value of the warrant will be amortized ratably over the life of the additional
space.
******
F-18
<PAGE> 79
[LOGO]
<PAGE> 80
PART II
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, other than
underwriting discounts and commissions, all of which will be paid by the
Company. All amounts are estimates, other than the registration fee and the NASD
fee.
<TABLE>
<S> <C>
Registration fee............................................ $19,800
NASD fee.................................................... 8,000
Nasdaq National Market application and listing fee.......... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and engraving...................................... *
Transfer Agent fees and expenses............................ *
Blue sky fees and expenses.................................. *
Miscellaneous expenses...................................... *
-------
Total............................................. $ *
=======
</TABLE>
- ---------------
* To be completed by amendment.
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
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 we 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 ScreamingMedia) by reason of the fact that the
person is or was a director, officer, agent or employee of the ScreamingMedia or
is or was serving at our 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 ScreamingMedia, 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 the
ScreamingMedia 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 ScreamingMedia, unless the court
believes that in light of all the circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to such
actions to be entered in the books containing the minutes of the meetings of the
board of directors at the time such action occurred or immediately after such
absent director receives notice of the unlawful acts.
II-1
<PAGE> 81
Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to ScreamingMedia or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
Our Amended and Restated 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 indemnified 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 Amended and Restated
Certificate of Incorporation and Amended and Restate 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, we maintain
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.
Since its inception, ScreamingMedia.com has issued and sold the following
securities:
On October 20, 1998, ScreamingMedia.com's predecessor issued a convertible
promissory note to Jay Chiat, in the amount of $250,000, due on October 19,
2001. This note was converted in April 1999 for 149,344 shares of Common Stock.
On January 28, 1999, we issued a total of 2,075,000 shares of Common Stock
to holders of our original common stock and preferred stock, in connection with
our reorganization which included 75,000 shares of common stock to Brian
Cavanaugh in exchange for services rendered to the Company and 400,000 shares of
common stock to two members of the board of directors.
On February 15, 1999, we issued convertible promissory notes to James D.
Robinson, Linda Robinson, Ken Lerer and Kevin C. Clark for a total amount of
$250,000, due on December 10, 2001. All notes were converted in April 1999 for a
total of 149,344 shares of Common Stock.
On March 9, 1999, we issued a convertible promissory note to Brian
Cavanaugh, in the amount of $50,000, due on December 10, 2001. This note was
converted in April 1999 for 29,870 shares of Common Stock.
In March 1999, we issued and sold 1,107,366 shares of Series A Preferred
Stock for gross proceeds of $4.0 million.
In April 1999, we issued and sold an additional 419,719 shares of Series A
Preferred Stock for gross proceeds of $1.5 million.
In April 1999, we granted four members of our advisory board options to
purchase an aggregate of 55,560 shares of Common Stock at $1.80 per share.
In July 1999, we granted three members of our advisory board options to
purchase an aggregate 41,670 shares of common stock at $1.80 per share.
II-2
<PAGE> 82
In July 1999, we granted Wm. Brian Little, a director of the Company, a
five-year option to purchase 27,778 shares of Common Stock at $1.80 per share.
All options granted to directors and advisors were fully vested upon grant.
In August 1999, we issued 3,000 shares of common stock in consideration for
consultancy services.
On October 6, 1999, we issued and sold 2,678,572 shares of our Series B
Convertible Preferred Stock at a price of $11.20 per share.
On December 27, 1999, we granted a non-qualified stock option to Wm. Brian
Little to purchase 15,386 shares of Common Stock at an exercise price of $3.25
per share.
In addition, as of January 31, 2000, the Company has granted options to
purchase a total of 3,769,928 shares of Common Stock to employees, including
certain senior managers, at a weighted average exercise price of approximately
$2.30 per share.
The issuances described above in this Item 15 were deemed exempt from
registration under the Securities Act in reliance on either: (1) Rule 701
promulgated under the Securities Act as offers and sales of securities pursuant
to certain compensatory benefit plans and contracts relating to compensation in
compliance with Rule 701; or (2) Section 4(2) of the Securities Act, including
Regulation D thereunder, as transactions by an issuer not involving any public
offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1 Form of Underwriting Agreement.*
3.1 Amended and Restated Certificate of Incorporation of the
Company.*
3.2 Amended and Restated By-laws of the Company.*
4.1 Form of ScreamingMedia's stock certificate.*
4.2 Form of ScreamingMedia's Rights Plan.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
10.1 Master Lease Agreement No. 13330 dated July 16, 1999 by and
among the Registrant and Data General Corporation.
10.2 Master Agreement No. 2430 dated December 9, 1999 by and
among the Registrant and Cisco Systems Capital Corporation.*
10.3 Master Lease Agreement No. 7345913 dated May 25, 1999 by and
among the Registrant and Dell Financial Services L.P.*
10.4.1 Agreement of Lease dated March 31, 1999, by and among the
Registrant and 601 West Associates LLC.
10.4.2 First Lease Modification Agreement dated June 18, 1999 by
and among the Registrant and 601 West Associates LLC.
10.5 Sublease Agreement dated February 4, 2000 by and among the
Registrant and Tomar Studio, Inc.
10.6 Warrant Agreement dated June 7, 1999, by and among the
Registrant and Deutsche Bank Securities Inc.
10.7 Warrant Agreement dated June 10, 1999, by and among the
Registrant and Carter, Ledyard, Milburn, LLP.
10.8 Warrant Agreement dated February 4, 2000 by and among the
Registrant and Tomar Associates, Inc.
10.9 Letter Employment Agreement dated June 7, 1999 between the
Registrant and Marianne Howatson.
10.10 Employment Agreement dated November 8, 1999, between the
Registrant and Kevin C. Clark.
10.11 Series A Preferred Stock Purchase Agreement dated as of June
8, 1999 by and among the Registrant, the investors named
therein and i-Recall, Inc.
</TABLE>
II-3
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.12 Preferred Stock Purchase Agreement of Series A Preferred
Stock dated as of May 14, 1999 by and among the Registrant
and SoftCom, Inc.
10.13 1999 Stock Option Plan.*
10.14 Form of 2000 Equity Incentive Plan, dated , 2000.*
10.15 Form of ScreamingMedia.com Inc. Management Incentive Plan,
dated , 2000.*
10.16 Agreement dated April 1999, by and among the Registrant and
Robinson, Lerer & Montgomery.
10.17 Warrant Agreement dated June 15, 1999 by and among the
Registrant and Hut Sachs Studio.
16 Letter regarding change in certifying accountant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of David Tarlow & Co., P.C.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP.*
24 Power of Attorney (included on signature page of the
Registration Statement).
</TABLE>
- ---------------
* To be filed by amendment.
b. Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake to provide to the underwriters
at the closing 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
registrants pursuant to the provisions described in Item 14, or otherwise, the
registrants have 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 by the registrants 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 registrants will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or
(4) or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 84
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 16, 2000.
SCREAMING MEDIA.COM INC.
By: /s/ KEVIN C. CLARK
------------------------------------
Name: Kevin C. Clark
Title: Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
Kevin C. Clark and William P. Kelly, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any and all (1) amendments (including post-effective amendments) and additions
to this Registration Statement and (2) Registration Statements, and any and all
amendments thereto (including post-effective amendments), relating to the
offering contemplated pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, and hereby
grants to such attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ JAY CHIAT Chairman of the Board February 16, 2000
- ------------------------------
Jay Chiat
/s/ ALAN S. ELLMAN President Chief Operating Officer and Director February 16, 2000
- ------------------------------
Alan S. Ellman
/s/ KEVIN C. CLARK Chief Executive Officer and Director February 16, 2000
- ------------------------------
Kevin C. Clark
/s/ ROY R. BOLING Principal Accounting Officer February 16, 2000
- ------------------------------
Roy R. Boling
/s/ WILLIAM P. KELLY General Counsel, Secretary and Director February 16, 2000
- ------------------------------
William P. Kelly
/s/ JAMES D. ROBINSON III Director February 16, 2000
- ------------------------------
James D. Robinson III
/s/ WM. BRIAN LITTLE Director February 16, 2000
- ------------------------------
Wm. Brian Little
/s/ KENNETH B. LERER Director February 16, 2000
- ------------------------------
Kenneth B. Lerer
/s/ PATRICK J. MCNEELA Director February 16, 2000
- ------------------------------
Patrick J. McNeela
</TABLE>
II-5
<PAGE> 85
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1 Form of Underwriting Agreement.*
3.1 Amended and Restated Certificate of Incorporation of the
Company.*
3.2 Amended and Restated By-laws of the Company.*
4.1 Form of ScreamingMedia's stock certificate.*
4.2 Form of ScreamingMedia's Rights Plan.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
10.1 Master Lease Agreement No. 13330 dated July 16, 1999 by and
among the Registrant and Data General Corporation.
10.2 Master Agreement No. 2430 dated December 9, 1999 by and
among the Registrant and Cisco Systems Capital Corporation.*
10.3 Master Lease Agreement No. 7345913 dated May 25, 1999 by and
among the Registrant and Dell Financial Services, L.P.*
10.4.1 Agreement of Lease dated March 31, 1999, by and among the
Registrant and 601 West Associates LLC.
10.4.2 First Lease Modification Agreement dated June 18, 1999 by
and among the Registrant and 601 West Associates LLC.
10.5 Sublease Agreement dated February 4, 2000 by and among the
Registrant and Tomar Studios, Inc.
10.6 Warrant Agreement dated June 7, 1999, by and among the
Registrant and Deutsche Bank Securities Inc.
10.7 Warrant Agreement dated June 10, 1999, by and among the
Registrant and Carter, Ledyard, Milburn, LLP.
10.8 Warrant Agreement dated February 4, 2000 by and among the
Registrant and Tomar Studios, Inc.
10.9 Letter Employment Agreement date June 7, 1999 between the
Registrant and Marianne Howatson.
10.10 Employment Agreement dated November 8, 1999, 2000 between
the Registrant and Kevin C. Clark.
10.11 Series A Preferred Stock Purchase Agreement dated as of June
8, 1999 by and among the Registrant, the investors named
therein and i-Recall, Inc.
10.12 Preferred Stock Purchase Agreement of Series A Preferred
Stock dated as of May 14, 1999 by and among the Registrant
and SoftCom, Inc.
10.13 1999 Stock Option Plan.*
10.14 Form of 2000 Equity Incentive Plan, dated , 2000.*
10.15 Form of ScreamingMedia.com Inc. Management Incentive Plan,
dated , 2000.*
10.16 Agreement dated April 1999, by and among the Registrant and
Robinson, Lerer & Montgomery.
10.17 Warrant Agreement dated June 15, 1999, by and among the
Registrant and Hut Sachs Studio.
16 Letter regarding change in certifying accountant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of David Tarlow & Co., P.C.
23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP.*
24 Power of Attorney (included on signature page of the
Registration Statement).
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 10.1
MASTER LEASE AGREEMENT
Rev. 6/97 Master Lease No. 13330
MASTER LEASE AGREEMENT ("Master Agreement") made as of July 16, 1999, between
DATA GENERAL CORPORATION, a Delaware corporation with a principal place of
business at 4400 Computer Drive, Westboro, MA 01580 ("Lessor") and Screaming
Media, Inc., a New York Corporation with a principal place of business at 55
Broad Street, New York, NY 10004 ("Lessee").
1. LEASE
1.1 Lessor leases to Lessee, and Lessee hires from Lessor, the equipment,
software licenses and other tangible or intangible personal property described
in each Lease Schedule executed under this Master Agreement. All such property
is referred to as "Leased Property". When Leased Property is installed, the
parties shall promptly complete and execute a Lease Schedule in the form
attached.
1.2 Lessee assumes sole responsibility, based upon its own judgment, for
the selection of the Leased Property and of its suppliers (including Data
General Corporation), and disclaims any reliance on statements made by Lessor
or its agents.
2. SCHEDULES
2.1 Each Lease Schedule shall evidence a separate "Lease Agreement"
covering the Leased Property described therein and incorporating the terms of
this Master Agreement and any additional terms agreed to in the Lease Schedule.
2.2 Each Lease Schedule shall be executed in two or more counterparts,
each bearing a unique number, only one of which shall be "Counterpart No. 1".
Each executed counterpart shall be deemed an original as between the parties,
but if and to the extent that a Lease Schedule constitutes "chattel paper" as
defined in the Uniform Commercial Code, no security interest in the Lease
Schedule may be created through the transfer or possession of any counterpart
other than Counterpart No. 1. This Master Agreement shall not itself be chattel
paper.
3. TERM
3.1 This Master Agreement shall take effect when signed by both parties,
and shall continue in effect so long as any Lease Agreement made hereunder
remains in effect or, if no Lease Agreement is in effect, until either party
gives a notice of cancellation to the other.
3.2 The Lease Term of each Lease Agreement shall have the commencement
date and duration specified in the Lease Schedule. No Lease Agreement shall be
cancelable or terminable by Lessee before the end of its Lease Term except as
provided in this Master Agreement.
4. TITLE AND OWNERSHIP
4.1 Supply Contracts. Lessor shall acquire Leased Property pursuant to
the sale and license terms ("Supply Contracts") of the respective suppliers.
Except while there is an uncured Event of Default, Lessor, to the extent of its
power to do so, assigns to Lessee, and Lessee shall have the benefit of, any
warranties, service agreements and patent and copyright indemnities given to
Lessor with respect to Leased Property under the Supply Contracts. Lessee's sole
remedy for the breach of any such warranty, service agreement or indemnity
shall be against the manufacturer, licensor or supplier by whom it was given
(including, if applicable, Data General Corporation in its capacity as
manufacturer, licensor or supplier) but not against Lessor, nor shall any such
breach alter the respective obligations of Lessor and Lessee under this Master
Agreement or any Lease Agreement.
4.2 Title. Lessee acknowledges Lessor's title to Leased Property. Lessee
has only a lessee's interest and no other right, title or interest in Leased
Property. At Lessee's cost, Lessee shall protect and defend Lessor's ownership
against all claims, liens, charges and legal processes of Lessee, its creditors
and all other persons, and take such action as may be necessary (a) to remove
any such encumbrance, and (b) to prevent any third party from acquiring any
interest in Leased Property including, without limitation, avoiding any action
by which Leased Property may be deemed to be affixed to any real estate. At
Lessor's request, Lessee shall obtain written waiver of the right to secure a
lien on Leased Property from the owner, mortgagee and beneficiaries under deeds
of trust of each Installation Location.
4.3 Security Interest. Lessee agrees that if any Lease Agreement made
hereunder is determined to be other than a true lease, then to secure Lessee's
promises under the Lease Agreement, Lessee grants Lessor a security interest in
the Leased Property and in all proceeds thereof. Lessee grants Lessor power of
attorney to sign financing statements for Lessee and, at Lessee's expense, to
file them against Lessee.
4.4 Identification. Lessee shall, upon the request of Lessor at Lessee's
expense, firmly affix to the Leased Property, in a conspicuous place, such
identification as Lessor may supply showing Lessor as owner and lessor of the
Leased Property. Lessee shall not remove any logos, marks or other such
identification without the prior written consent of Lessor.
5. RENT AND PAYMENT OBLIGATIONS
5.1 Payments. Lessee shall pay Lessor the rental amounts specified in the
pertinent Lease Schedule.
<PAGE> 2
The first rental payment shall be due and payable on the payment date specified
in the Lease Schedule. Subsequent rental payments shall be due on the same day
of each succeeding month of the lease term, unless a longer interval is
specified in the Lease Schedule. A pro-rata rental payment shall be made with
and in addition to the first rental payment for the period, if any, from the
acceptance date to the day preceding the first rental payment date. All rents
and other payments shall be made to Lessor at the address specified in the
Lease Schedule or at such other address as may be designated to Lessee in
writing by Lessor or by an assignee of Lessor pursuant to Section 11.
5.2 Late Payments. Lessee agrees to pay a late charge on any periodic
payment not paid within ten (10) days after its due date, equal to one and
one-half percent (1.5%) of the overdue payment for each payment period that the
payment remains unpaid. Collection of a late payment charge shall not prejudice
any other remedies Lessor may have for default.
5.3 NET LEASE. EACH LEASE AGREEMENT SHALL BE A NET LEASE, AND LESSEE'S
OBLIGATION TO PAY ALL RENT AND OTHER SUMS WHEN DUE AND TO PERFORM ALL OTHER
OBLIGATIONS UNDER EACH LEASE AGREEMENT SHALL BE ABSOLUTE AND UNCONDITIONAL, AND
SHALL NOT BE SUBJECT TO ANY ABATEMENT, REDUCTION, SET-OFF, DEFENSE,
COUNTERCLAIM, INTERRUPTION, DEFERMENT OR RECOUPMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF THE LESSOR, WHICH CONSENT MAY BE WITHHELD IN LESSOR'S SOLE
DISCRETION. No obligation of Lessee shall be affected by any defect in or damage
to or loss or destruction of all or any part of the Leased Property from any
cause whatsoever, or by any interference with Lessee's use of the Leased
Property by any person or for any cause whatsoever. Any claims respecting the
condition or operation of the Leased Property shall be made solely against the
manufacturers, licensors and suppliers of the Leased Property, and Lessee shall
nevertheless pay Lessor or its successors and assigns all amounts due and
payable under the Lease Agreement.
5.4 Waivers. Lessee waives any rights which would allow Lessee to cancel
or repudiate any Lease Agreement, to reject or revoke acceptance of Leased
Property, to grant a security interest in Leased Property, to accept partial
delivery of Leased Property, to "cover" by making any purchase or lease of
substitute equipment, and to seek specific performance against Lessor.
6. TAXES
6.1 Lessee shall pay when due or reimburse to Lessor, and shall defend and
indemnify Lessor against all sales, use, value add, excise, and other taxes,
fees, assessments and all other charges (including interest and penalties)
imposed by any governmental body or agency upon the purchase, ownership,
license, possession, leasing, operation, use or disposition of any Leased
Property, any Lease Agreement or the rentals or other payments, excluding only
taxes on or measured by the net income of Lessor or its suppliers. Lessee shall
prepare and file promptly with the appropriate offices any and all tax and
similar returns required to be filed (sending copies to Lessor) or, if requested
by Lessor, shall notify Lessor of such requirement and furnish Lessor with all
information required by Lessor to effect such filing. Lessee's obligation under
this Sub-section shall commence with the Acceptance Date of each Lease Agreement
and shall survive the expiration or earlier termination of such Lease Agreement.
6.2 Taxable Status. Lessor disclaims all liability arising from Lessee's
treatment of any Lease Agreement or rental payment for financial, accounting or
tax purposes. Lessee represents that it is relying solely on its own legal
counsel and accountants with respect to such matters.
7. MAINTENANCE AND ALTERATIONS
Lessee, at its expense, shall keep all Leased Property in good condition
and working order, ordinary wear and tear from proper use excepted. Lessee
shall keep in force maintenance and support agreements with the suppliers of
Leased Property or with other qualified service vendors reasonably acceptable
to Lessor. Lessee shall not make or suffer any alteration or attachment which
would violate the maintenance and support agreements or relieve the service
vendors of their obligations. Lessor's consent shall be required for all
alterations and attachments except those which do not impair the commercial
value or usefulness of the Leased Property and which can be readily removed
without causing damage. All attachments and alterations requiring Lessor's
consent shall be removed by Lessee before the return of the Leased Property.
All attachments and alterations not removed shall constitute accessions to the
Leased Property owned by Lessor.
8. USE AND LOCATION
Lessee shall use Leased Property only in the ordinary conduct of its
business, operated by qualified employees adhering to instructions of the
manufacturers, licensors and suppliers applicable to operation, condition and
maintenance of the Leased Property. Lessee shall obtain all permits and
licenses necessary for the operation of the Leased Property and comply with all
other applicable laws and regulations. Lessee shall not relocate Leased
Property from its Installation Location, or part with possession or control of
Leased Property, without Lessor's prior written consent. Lessee shall be
responsible for all charges and expenses of such relocation. Lessor shall have
the right to inspect Leased Property during normal business hours any time
after delivery.
9. RETURN
Unless Lessee exercises a purchase or renewal option provided in the Lease
Agreement, Lessee shall at its expense return the Leased Property to the
location specified by Lessor within the contiguous forty-eight United States or
the District of Columbia upon the termination of the Lease Term, unencumbered
and in the same condition and repair as when it was first installed, ordinary
Master Lease Agreement Page 2 of 6.
<PAGE> 3
wear and tear from proper use excepted. Lessee further agrees that the Leased
Property may remain on Lessee's premises for a reasonable period after
termination or expiration of the Lease Term at no charge to Lessor for the
purposes of repair, refurbishing and storage pending return shipment. Lessor
and its representatives may enter upon Lessee's premises for these purposes.
10. LIMITATION OF WARRANTY AND LIABILITY
10.1 Quiet Enjoyment. Lessor warrants that so long as no event of default
has occurred, neither Lessor nor its successors or assigns nor anyone claiming
by, under, or through Lessor will interfere with Lessee's quiet enjoyment and
use of Leased Property.
10.2 DISCLAIMER. LESSOR LEASES THE LEASED PROPERTY "AS IS". EXCEPT FOR
LESSOR'S WARRANTY OF QUIET ENJOYMENT, LESSOR MAKES NO WARRANTIES, EXPRESS OR
IMPLIED, CONCERNING THE LEASED PROPERTY, AND DISCLAIMS ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE OR OF MERCHANTABILITY.
10.3 WAIVER OF CLAIMS. LESSEE HEREBY WAIVES ALL CLAIMS WHICH LESSEE
MIGHT HAVE AGAINST LESSOR FOR ANY LOSS OR DAMAGES, INCLUDING INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON STRICT OR ABSOLUTE LIABILITY
IN TORT.
11. ASSIGNMENT BY LESSOR
11.1 LESSOR'S RIGHTS, TITLE AND INTEREST IN AND TO THIS MASTER AGREEMENT,
OR ANY LEASE AGREEMENT OR LEASED PROPERTY MAY BE TRANSFERRED AND ASSIGNED BY
LESSOR WITHOUT NOTICE, AND LESSOR'S ASSIGNEE SHALL HAVE ALL THE RIGHTS, POWERS,
PRIVILEGES AND REMEDIES OF LESSOR UNDER THIS MASTER AGREEMENT. LESSEE AGREES
THAT ANY ASSIGNMENT BY LESSOR WOULD NOT MATERIALLY CHANGE ITS OBLIGATIONS UNDER
ANY LEASE AGREEMENT OR SUBSTANTIALLY INCREASE LESSEE'S BURDENS OR RISKS, OR
CONSTITUTE A DELEGATION OF MATERIAL PERFORMANCE. LESSEE ALSO AGREES AND
CONSENTS TO FURTHER ASSIGNMENTS OR SALES BY THE THEN ASSIGNEE.
11.2 LESSEE AGREES NOT TO ASSERT AGAINST ANY ASSIGNEE ANY DEFENSE,
SET-OFF, RECOUPMENT, CLAIM OR COUNTERCLAIM WHICH LESSEE MAY HAVE AGAINST
LESSOR, WHETHER ARISING UNDER A LEASE AGREEMENT OR OTHERWISE. ALL SUCH
ASSIGNEES ARE INDEPENDENT CONTRACTORS AND NONE SHALL BE DEEMED TO BE THE
PRINCIPAL, AGENT, REPRESENTATIVE, PARTNER OR JOINT VENTURER OF LESSOR.
11.3 LESSEE SHALL NOT BE ENTITLED TO TERMINATE, AMEND OR ASSIGN THIS
MASTER AGREEMENT OR ANY LEASE AGREEMENT WITHOUT THE WRITTEN CONSENT OF SUCH
ASSIGNEE.
12. ADDITIONAL ASSURANCES
At Lessor's request, Lessee shall execute, acknowledge and deliver such
documents and take such action as Lessor deems necessary to more effectively
evidence Lessor's title to the Leased Property covered by each Lease Agreement
and protect Lessor's interests therein, in accordance with the Uniform
Commercial Code or other applicable law including, without limitation, the
filing of financing and continuation statements. Where permitted by law, Lessee
authorizes Lessor to make such filings without Lessee's signature.
13. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS
If Lessee shall fail to perform its obligations under this Master
Agreement or any Lease Agreement, Lessor or any assignee of Lessor may, at its
option, perform the obligation for the account of Lessee without waiving the
default and without discharging Lessee from the obligation. All expenses paid
or incurred by Lessor in such performance shall be payable by Lessee on demand
in addition to rental payments, together with interest at the rate of one and
one-half percent (1.5%) per month or the highest lawful rate, whichever is less.
14. REPORTS
14.1 Lessee agrees to deliver to Lessor, within ninety (90) days of the
close of each fiscal year of Lessee, Lessee's current Annual Report or other
financial statements satisfactory to Lessor, certified by certified public
accountants. Lessee represents such reports shall be a true and complete
statement of Lessee's financial condition which Lessor may show to financial
institutions of Lessor's choice on a confidential basis.
15. INDEMNITY
15.1 Lessee shall indemnify, defend and hold harmless Lessor, its
successors and assigns from and against all losses, damages, injuries, claims,
fines, liabilities, demands, and expenses, including attorney's fees and court
costs, arising out of or pertaining to any Lease Agreement or Leased Property,
including the purchase, ownership, transportation, delivery, installation,
leasing, possession, use, operation, maintenance, storage and return of the
Leased Property, except any liability resulting from the gross negligence or
willful misconduct of Lessor. Lessee and Lessor each agree to give the other
prompt written notice of any claim or liability indemnified against. This
indemnity shall survive the expiration or termination of this Master Agreement
or any Lease Agreement.
16. RISK OF LOSS
From the delivery of Leased Property until its return pursuant to Section
9, Lessee shall bear the entire risk of loss, damage, theft or destruction of
Leased Property from any and every cause, and no such event shall relieve
Lessee of its obligation to pay rent or perform its other obligations under any
Lease Agreement. In the event of damage to Leased Property, Lessee shall at its
own expense repair the damage and restore the Leased
Master Lease Agreement Page 3 of 6.
<PAGE> 4
Property to its previous condition. If any Leased Property is lost, stolen or
damaged beyond repair, Lessee shall promptly notify Lessor and shall, at
Lessor's option (a) replace the Leased Property with like property in good
condition and working order acceptable to Lessor, and transfer title to the
replacement property to Lessor, free and clear of all liens, claims and
encumbrances, which replacements shall then be subject to the applicable Lease
Agreement; or (b) pay Lessor an amount determined in accordance with Sub-section
19.5, whereupon the Lease Agreement shall terminate as to such Leased Property
and Lessor's interest therein shall pass to Lessee on an "as is" basis, without
recourse or warranty.
17. INSURANCE
17.1 From the delivery of Leased Property until its return pursuant to
Section 9 Lessee shall, at its expense, carry and maintain the insurance
coverage specified in paragraphs 17.2 and 17.3, with insurance companies
reasonably satisfactory to Lessor;
17.2 Property insurance providing "all risk" coverage in an amount not
less than the replacement cost of the Leased Property;
17.3 General liability insurance covering liability for damage to
property, and for death or bodily injury, in amounts satisfactory to Lessor.
Such insurance shall name Lessor (or any successor, assignee or secured party of
Lessor who requests it) as loss payee for the property insurance and as an
additional insured for the liability insurance, and provide thirty (30) days'
written notice to Lessor of any lapse, cancellation or material change of
coverage. Lessee will promptly provide to Lessor evidence of insurance coverage
at the commencement of each Lease Agreement and annually thereafter. As long as
no Event of Default is uncured, Lessor shall remit all risk insurance proceeds
to Lessee when Lessee either provides satisfactory evidence of restoration or
pays Lessor the amount due upon an event of loss under Section 16. At Lessee's
option, coverage under a DGC Business Recovery On-Site Service Addendum will be
acceptable in lieu of the coverage required by paragraph 17.2.
18. DEFAULT
Each of the following shall be deemed an Event of Default:
18.1 Lessee shall default in the payment when due of any rental payment or
other sums payable under any Lease Agreement; or
18.2 Lessee shall default in the observance or performance of any other
obligation in this Master Agreement or any Lease Agreement and such default
shall continue for a period of fifteen (15) days; or
18.3 Lessee shall sell, mortgage, assign, transfer, sub-lease, lend,
relinquish possession of or encumber any Leased Property, or permit or attempt
any of such acts without Lessor's prior written consent; or
18.4 Lessee shall default in the performance of any obligation or in the
payment of any sum due to Lessor under any other Lease Agreement; or
18.5 Lessee (which term, for purposes of this Sub-section and Subsections
18.5, 18.6 and 18.7 below shall mean Lessee and any guarantor or other person
liable upon Lessee's obligations under this Lease) shall dissolve or become
insolvent or bankrupt, commit any act of bankruptcy, make an assignment for the
benefit of creditors, suspend the transaction of its usual business or consent
to the appointment of a trustee or receiver, or a trustee or a receiver shall
be appointed for Lessee or for a substantial part of its property, or
bankruptcy, reorganization, insolvency or similar proceedings shall be
instituted by or against Lessee; or
18.6 An order, judgment, or decree shall be issued by a court of
competent jurisdiction, in connection with any action or proceeding against
Lessee or its property, by which a substantial part of Lessee's property may be
taken or restrained; or
18.7 An attachment, levy, writ, or execution is threatened or levied upon
or against Leased Property; or
18.8 Any warranty, representation or statement made in writing by Lessee
is found to be incorrect or misleading in any material respect as of the date
made; or
18.9 Any insurance carrier cancels the insurance on the Leased Property
and Lessee fails to replace such coverage within the notice period specified
in Section 17; or
18.10 The Leased Property or any part of it is abused, illegally used, or
misused; or
18.11 Any indebtedness of Lessee for borrowed money shall become due and
payable by acceleration of its maturity.
In any such event, Lessor may, by written notice to Lessee, and to the
extent permitted by law, exercise any one or more of the remedies listed in
Section 19 below, as Lessor shall lawfully elect in order to protect the
interests and reasonably expected profits and bargains of Lessor.
19. REMEDIES
Lessor's remedies for the events of default listed in Section 18 are as
follows:
19.1 Upon notice by Lessor, terminate any Lease Agreement, either in its
entirety or as to such items of Leased Property as Lessor shall specify in the
notice. Any Lease Agreement not terminated in its entirety shall continue in
effect as to the remaining items.
19.2 Declare immediately due and payable each and all rental payments and
other amounts due and to become due, including any renewal or purchase
obligations.
19.3 Require Lessee, at its expense, to promptly return Leased Property
to Lessor, or Lessor may enter
Master Lease Agreement Page 4 of 6.
<PAGE> 5
the premises where Leased Property is located and take possession of or disable
any part or all of the Leased Property without demand or notice, without any
court order or other process of law and without liability for any damage
occasioned by taking possession. Such return or taking of possession shall not
constitute a termination of any Lease Agreement unless Lessor expressly so
notifies Lessee in writing. Lessee agrees that Lessor is not required to
repossess or to remarket the Leased Property, and Lessee waives its rights under
any law that provides otherwise.
19.4 Proceed by appropriate court action or actions, either at law or in
equity, to enforce performance by Lessee of the applicable covenants of any
Lease Agreement or to recover damages for its breach.
19.5 With or without terminating any Lease Agreement, recover from Lessee,
not as a penalty, but as liquidated damages, an amount equal to the sum of (a)
any rent accrued and unpaid under the Lease Agreement as of the date of entry of
judgment in favor of Lessor plus interest at the rate of eighteen percent (18%)
per annum or the maximum rate allowed by law, whichever is less; (b) the present
value discounted at four percent (4%) of all future rentals reserved in the
Lease Agreement and contracted to be paid over the unexpired term of the Lease
Agreement; (c) all commercially reasonable costs and expenses, including
reasonable attorney's fees and costs, incurred by Lessor in any repossession,
recovery, storage, or repair, sale, re-lease or other disposition of the Leased
Property in connection with or otherwise resulting from Lessee's default; (d)
the estimated residual value of the Leased Property as of the expiration of the
Lease Agreement or any renewal thereof; and (e) any indemnity, if then
determinable, plus interest at eighteen percent (18%) per annum or the maximum
rate allowed by law, whichever is less.
19.6 In Lessor's sole discretion, re-lease or sell any or all of the Leased
Property at a public or private sale on such terms and notice as Lessor shall
deem reasonable and recover from Lessee, not as a penalty, but as liquidated
damages, an amount equal to the sum of (a) any accrued and unpaid rent as of the
"Default Date" (which shall be the later of the date of default or the date that
Lessor obtains possession of the Leased Property, but not later than the date
Lessee makes an effective tender of possession of the Leased Property back to
Lessor) plus rent at the rate provided for in the Lease Agreement for an
"Additional Period", (which shall be the period commencing on the Default Date
and ending on the earlier of the date all the Leased Property is resold or
re-let by Lessor or the date of entry of judgment in favor of Lessor) (b) the
present value discounted at four percent (4%) of all future rentals reserved in
the Lease Agreement and contracted to be paid over the unexpired term of the
Lease Agreement, and the present value discounted at four percent (4%) of the
estimated residual value of the Leased Property as of the expiration of the
Lease Agreement or any renewal thereof, (c) all commercially reasonable costs
and expenses, including reasonable attorney's fees and costs, incurred by Lessor
in any repossession, recovery, storage, or repair, sale, release or other
disposition of the Leased Property in connection with or otherwise resulting
from Lessee's default, and (d) any indemnity, if then determinable, plus
interest at eighteen percent (18%) per annum or the maximum rate allowed by law,
whichever is less; LESS the amount received by Lessor upon public or private
sale or re-lease of the Leased Property, if any.
The remedies under this provision are not intended to be exclusive, but
shall be cumulative, and in addition to any other remedy available to Lessor at
law or in equity. Lessee shall in all events continue to be liable for all
indemnities under this Master Agreement and any Lease Agreement, and for all
Lessor's legal fees and other costs and expenses resulting from any event of
default or incurred in the enforcement of any right or remedy under this Master
Lease Agreement.
20. MISCELLANEOUS
20.1 Headings used in this Master Agreement or any Lease Schedule are for
reference purposes only and shall not be given any substantive effect.
20.2 Failure of a party to insist in any instance upon strict performance
by the other party of any of the provisions of this Master Agreement or any
Lease Agreement shall not be construed or deemed to be a permanent waiver of
that or any other provision.
20.3 All notices issued in connection with this Master Agreement or any
Lease Agreement shall be in writing and shall be sent (unless otherwise
specifically provided in the Lease Schedule) by (a) certified or registered
mail, postage prepaid; or (b) overnight express courier with receipted delivery.
Notices shall be addressed as follows:
If to Lessor:
Data General Corporation
Attn.: Director, Data General Leasing
4400 Computer Drive, Mail Stop E-111
Westboro, Massachusetts 01580
If to Lessee:
the billing address specified on the pertinent Lease Schedule.
Either party may change its address for notification purposes by notice
given to the other party. All notices shall be effective on the third business
day after issuance unless a different period is specified elsewhere in this
Master Agreement.
20.4 Each Lease Agreement and this Master Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Massachusetts
excluding its conflict of law rules.
20.5 Any provision of this Master Agreement or any Lease Agreement which is
invalid under the law of any state shall, to the extent of such prohibition, be
ineffective in such state only, without invalidating the remaining provisions of
this Master Agreement in such state.
Master Lease Agreement Page 5 of 6.
<PAGE> 6
20.6 Each Lease Agreement, including this Master Agreement, constitutes the
complete and exclusive statement of the agreement of the parties and supersedes
all prior oral and written communications, agreements, representations,
statements, negotiations and undertakings between the parties relating to the
subject matter of that Lease Agreement. No modification, termination, extension,
renewal or waiver of any provision of this Master Agreement or any Lease
Agreement shall be binding upon a party unless made in writing and signed by an
authorized representative of that party. If more than one Lessee is named in
this Master Agreement, their liability shall be joint and several.
LESSOR AND LESSEE ACKNOWLEDGE THAT THEY HAVE READ THIS MASTER AGREEMENT,
UNDERSTAND IT, AND AGREE TO BE BOUND BY IT AS OF THE DATE FIRST ABOVE WRITTEN,
BUT ONLY AFTER ITS EXECUTION BY THEIR AUTHORIZED REPRESENTATIVES. LESSEE FURTHER
ACKNOWLEDGES RECEIPT FROM LESSOR OF A TRUE COPY OF THIS MASTER AGREEMENT.
DATA GENERAL CORPORATION, Lessor SCREAMING MEDIA, INC., Lessee
Signature: /s/ Jane M. Weissman Signature: /s/ Roy Boling
------------------------ ------------------------
Authorized Representative Authorized Representative
Title: OPERATIONS MANAGER Title: Director Financial Operations
DATA GENERAL LEASING -----------------------------
------------------------
Date: 8/30/99 Date: 8/4/99
------------------------ ------------------------
Master Lease Agreement Page 6 of 6.
<PAGE> 7
OFFICER'S CERTIFICATE
The undersigned, Secretary, of Screaming Media, Inc. a New York corporation
hereby certifies as follows to Data General Corporation ("DGC"), issued pursuant
to Master Lease dated July 16, 1999, between Screaming Media, Inc. as Lessee and
DGC as Lessor.
The following persons are, and have been at all times since July 16, 1999,
duly qualified and acting officers or authorized agents of the Corporation, duly
elected or appointed to the offices or positions set forth opposite their
respective names, and are authorized to execute on behalf of the Corporation the
Master Lease Agreement with Exhibits and Riders, and all related documents.
PERSON SIGNING CONTRACT PLEASE COMPLETE BELOW:
Name/Title (Typed) Signatures
Roy Boling - Director Financial Ops /s/ Roy Boling
- ----------------------------------- --------------
William P. Kelly /s/ William P. Kelly
- ----------------------------------- --------------------
IN WITNESS WHEREOF, the undersigned officer has executed this Certificate
as of the 4th day of August, 1999.
--- -------
PERSON CERTIFYING ABOVE SIGNATURE - SIGN BELOW:
Corporate /s/ William P. Kelly
Seal -----------------------------
Secretary Signature
-----------------------------
Title (If other than Secretary)
***SIGNER MAY NOT CERTIFY THEIR OWN SIGNATURE***
------------------------------------------------
<PAGE> 1
2/94 Exhibit 10.4.1
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this ___________ day of ________________ 1999
between 601 WEST ASSOCIATES LLC, HAVING AN ADDRESS AT 601 WEST 26th STREET,
SUITE 900, NEW YORK, NEW YORK 10001, Party of the first part, hereinafter
referred to as OWNER, and SCREAMINGMEDIA.NET, INC, HAVING AN ADDRESS AT 601 WEST
26th STREET NEW YORK, NEW YORK 10001, party of the second part, hereinafter
referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner THE
SPACE KNOWN AS NINTH FLOOR NORTHEAST AS SHOWN ON EXHIBIT A ATTACHED HERETO (THE
"PREMISES") in the building known as 601 WEST 26th STREET in the Borough of
MANHATTAN, City of New York, for the term of TEN (10) YEARS (or until such term
shall sooner and cease and expire as hereinafter provided) to commence on the
COMMENCEMENT DATE* and to end on the 31st day of MARCH, TWO THOUSAND NINE and
both dates inclusive, at an annual rental rate *(HEREINAFTER DEFINED)
SEE ARTICLE 43 OF THE RIDER ANNEXED HERETO AND MADE A PART HEREOF
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction on whatsoever, except that Tenant
shall pay the first ____ monthly installment(s) on the execution hereof (unless
this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
Rent: 1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy: 2. Tenant shall use and occupy demised premises for
provided such use in accordance with the certificate of occupancy for the
building, if any, and for no other purposes.
Alterations: 3. Tenant shall make no changes in or to the demised premises of
any nature without Owner's prior written consent. Subject to the prior written
consent. Subject to the prior written consent of Owner, and to the provisions of
this article, Tenant, at Tenant's expense, may make alterations, installations,
additions or improvements which are nonstructural and which do not affect
utility services or plumbing and electrical lines, in or to the interior of the
demised premises using contractors or mechanics first approved in each instance
by Owner. Tenant shall, at its expense, before making any alterations,
additions, installations or improvements, obtain all permits, approval and
certificates required by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval thereof
<PAGE> 2
and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner. Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within thirty days actual notice thereof at
Tenant's expense, by payment or filing the bond required by law or otherwise.
All fixtures (other than Tenant's trade fixtures) and all paneling, partitions,
railings and like installations, installed in the premises at any time, either
by Tenant or by Owner on Tenant's behalf, shall, upon installation, become the
property of Owner and shall remain upon and be surrendered with the demised
premises unless Owner, by notice to Tenant no later than twenty days prior to
the date fixed as the termination of this lease, elects to relinquish Owner's
right thereto and to have them removed by Tenant, in which event the same shall
be removed from the demised premises by Tenant prior to the expiration of the
lease, at Tenant's expense. Nothing in this Article shall be construed to give
Owner title to or to prevent Tenant's removal of trade fixtures, moveable office
furniture and equipment, but upon removal of any such from the premises or upon
removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense, repair and restore the premises to the condition
existing prior to installation and repair any damage to the demised premises or
the building due to such removal. All property permitted or required to be
removed by Tenant at the end of the term remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the election of Owner,
either be retained as Owner's property or removed form the premises by Owner, at
Tenant's expense.
Repairs: 4. Through the term of this Lease, Owner shall maintain and repair
the structural exterior of and the public portions of the building including,
without limitation, the roof, foundation, footings, exterior, walls,
load-bearing walls, columns, beams, structural floor slabs and all building
systems up to the connection point of the same of the demised premises. Tenant
shall, throughout the term of this lease, take good care of the demised premises
including the bathrooms and lavatory facilities (if the demised premises
encompass the entire floor of the building) and the windows and window frames
and, the fixtures and appurtenances therein and at Tenant's sole cost and
expense promptly make all repairs thereto and to the building, whether
structural or nonstructural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees, invitees, or licenses, and whether or not arising from such
Tenant conduct or omission, when required by other provisions of this lease,
including Article 6. Tenant shall also repair all damage to the building and the
demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If Tenant fails, after ten days notice, to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by the Owner at the expense of Tenant, and the expenses thereof
incurred by Owner shall be collectible, as additional rent, after rendition of
a bill or statement therefor. If the demised premises be or become infested with
vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant
shall give Owner prompt notice of any defective condition in any plumbing,
heating system or electrical lines located in the demised premises and following
such notice, Owner shall remedy the condition with due diligence, but at the
expense of Tenant, if repairs are necessitated by damage or injury attributable
to Tenant. Tenant's servants, agents, employees, invitees or licensees as
aforesaid. Except as specifically provided in Article 9 or elsewhere in this
lease, there shall be no allowance to the Tenant for a diminution of rental
value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business
2
<PAGE> 3
arising from Owner, Tenant or others making or failing to make any repairs,
alterations, additions or improvements in or to any portion of the building or
the demised premises or in and to the fixtures, appurtenances or equipment
thereof. It is specifically agreed that Tenant shall not be entitled to any set
off or reduction of rent by reason of any failure of Owner to comply with the
covenants of this or any other article of this lease. Tenant agrees that
Tenant's sole remedy at law in such instance will be by way of any action for
damages for breach of contract. The provisions of this Article 4 with respect to
the making of repairs shall not apply in the case of fire or other casualty with
regard to which Article 9 hereof shall apply.
Window Cleaning: 5. Tenant will not clean nor require, permit, suffer or allow
any window in the demised premises to be cleaned from the outside in violation
of Section 202 of the New York State Labor Law or any other applicable law or of
the Rules of the Board of Standards and Appeals, or of any other Board or body
having or asserting jurisdiction.
Requirements of Law; Fire Insurance: 6. Prior to the commencement of the lease
term, if Tenant is then in possession, and at all times thereafter Tenant shall,
at Tenant's sole cost and expense, promptly comply with all present and future
laws, orders and regulations of all state, federal, municipal and local
governments, departments, commissions and boards and any direction of any public
officer pursuant to law, and all orders, rules and regulations of the New York
Board of Fire Underwriters, or the Insurance Services Office, or any similar
body which shall impose any violation, order or duty upon Owner or Tenant with
respect to the demised premises, arising out of Tenant's use or manner of use
thereof, or, with respect to the building, if arising out of Tenant's use or
manner of use of the demised premises of the building (including the use
permitted under the lease). Except as provided in Article 30 hereof, nothing
herein shall require Tenant to make structural repairs or alterations unless
Tenant has, by its manner of use of the demised premises or method of operation
therein, violated any such laws, ordinances, orders, rules, regulations or
requirements with respect thereto. Tenant shall not do or permit any act or
thing to be done in or to the demised premises which is contrary to law, or
which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner. Tenant
shall not keep anything in the demised premises except as now or hereafter
permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance
Rating Organization and other authority having jurisdiction, and then only in
such manner and such quantity so as not to increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. If by reason or failure
to comply with the foregoing the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant and parties, a schedule. or "make-up" or rate for the building
or demised premises issued by a body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and changes in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area for which it was designed
to carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient in Owner's judgment, to absorb and prevent
unreasonable vibration, noise and annoyance.
3
<PAGE> 4
Subordination: 7. This lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised promises are a part. In confirmation of such subordination,
Tenant shall from time to time, execute promptly any certificate that Owner may
reasonably request.
Tenant's Liability Insurance Property Loss, Damage, Indemnity: 8. Owner or its
agents shall not be liable for any damage to property of Tenant or of others
entrusted to employees of the building, nor for loss of or damage to any
property of Tenant by theft or otherwise, nor for injury or damage to persons or
property resulting from any cause of whatsoever nature, unless caused by or due
to the negligence of Owner, its agents, servants or employees; Owner or its
agents shall not be liable for any damage caused by other Tenants or persons in,
upon or about said building or caused by operations in connection of any
private, public or quasi public work. If at any time any windows of the demised
premises are temporarily closed, darkened or bricked up (or permanently closed,
darkened or bricked up, if required by law) for any reason whatsoever including,
but not limited to Owner's own acts, Owner shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
therefor nor abatement or diminution of rent nor shall the same release Tenant
from its obligations hereunder nor constitute an eviction. Tenant shall
indemnify and save harmless Owner against and from all liabilities, obligations,
damages, penalties, claims, costs and expenses for which Owner shall not be
reimbursed by insurance, including reasonable attorney's fees, paid, suffered or
incurred as a result of any breach by Tenant, Tenant's agents, contractors,
employees, invitees, or licensees, of any covenant or condition of this lease,
or the carelessness, negligence or improper conduct of Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any sub-tenant, and any agent,
contractor, employee, invitee or licencee of any sub-tenant. In case any action
or proceeding is brought against Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense, resist or defend such
action or proceeding by counsel approved by Owner in writing, such approval not
to be unreasonably withheld.
Destruction, Fire and Other Casualty: 9. (a) If the demised premises or any
part thereof shall be damaged by fire or other casualty, Tenant shall give
immediate notice thereof to Owner and this lease shall continue in full force
and effect except as hereinafter set forth. (b) If the demised premises are
partially damaged or rendered partially unusable by fire or other casualty, the
damages thereto shall be repaired by and at the expense of Owner and the rent
and other items of additional rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises, which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent and other items of additional rent as hereinafter expressly provided shall
be proportionately paid up to the time of casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate
4
<PAGE> 5
this lease by written notice to Tenant, given within 90 days after such fire or
casualty, or 30 days after adjustment of the insurance claim for such fire or
casualty, whichever is sooner, specifying a date for the expiration of the
lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to Owner's rights and remedies
against Tenant under the lease provisions in effect prior to such termination,
and any rent owing shall be paid up to such date and any payments of rent made
by Tenant which were on account of any period subsequent to such date shall be
returned to Tenant. Unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture and other
property. Tenant's liability for rent shall resume five (5) days after written
notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained herein above shall relieve Tenant from
liability that may exist as a result or damage from fire or other casualty.
Notwithstanding the foregoing, including Owner's obligation to restore under
subparagraph (b) above, each party shall look first to any insurance in its
favor before making any claim against the other party for recovery for loss or
damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery with respect to
subparagraphs (b), (d) and (e) above, against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The release
and waiver herein referred to shall be deemed to include any loss or damage to
the demised premises and/or to any personal property, equipment, trade fixtures,
goods and merchandise located therein. The foregoing release and waiver shall be
in force only if both releasors' insurance policies contain a clause providing
that such a release or waiver shall not invalidate the insurance. If, and to the
extent, that such waiver can be obtained only by the payment of additional
premiums, then the party benefitting from the wavier shall pay such premium
within ten days after written demand or shall be deemed to have agreed that the
party obtaining insurance coverage shall be free of any further obligation under
the provisions hereof with respect to wavier of subrogation. Tenant acknowledges
that Owner will not carry insurance on Tenant's furniture and/or furnishings or
any fixtures or equipment, improvements, or appurtenances removable by Tenant
and agrees that Owner will not be obligated to repair any damage thereto or
replace the same. (f) Tenant hereby waives the provisions of Section 227 of the
Real Property Law and agrees that the provisions of this article shall govern
and control in lieu thereof. Notwithstanding the foregoing or anything to the
contrary contained herein, Tenant shall have the right to terminate this lease
upon ten (10) days' written notice to Landlord, if (i) twenty percent (20%) or
more of the demised premises shall be damaged by fire or casualty and if such
damage or destruction shall occur during the last two (2) years of the term of
this lease or any renewal term, or (ii) such damage or destruction is reasonably
estimated to take in excess of one hundred eighty (180) days to complete.
Eminent Domain: 10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this lease shall cease and
terminate from the date of the title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said lease. Tenant shall
have the right to make an independent claim to the condemning authority for the
value of Tenant's moving expenses and personal property, trade fixtures and
equipment, provided Tenant is entitled pursuant to the terms of the lease to
remove such property, trade fixtures and equipment at the end of the term and
provided further such claim does not reduce Owner's award.
5
<PAGE> 6
Assignment, Mortgage, Etc.: 11. Tenant, for itself, its heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
expressly covenants that it shall not assign, mortgage or encumber this
agreement, nor underlet, or suffer or permit the demised premises or any part
thereof to be used by others, without the prior written consent of Owner in each
instance, Transfer of the majority of the stock of a corporate Tenant or the
majority partnership interest of a partnership Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of the assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to an
assignment or underletting shall not in any wise be construed to relieve
Tenant from obtaining the express consent in writing of Owner to any further
assignment or underletting.
Electric Current: 12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical current which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises: 13. Owner or Owner's agents shall have the right (but shall
not be obligated) to enter the demised premises in any emergency at any time,
and, at other reasonable times, upon prior notice to Tenant, to examine the same
and to make such repairs, replacements and improvements as Owner may deem
necessary and reasonably desirable to any portion of the building or which Owner
may elect to perform in the premises after Tenant's failure to make repairs or
perform any work which Tenant is obligated to perform under this lease, or for
the purpose of complying with laws, regulations and other directions of
governmental authorities. Tenant shall permit Owner to use and maintain and
replace pipes and conduits in and through the demised premises and to erect new
pipes therein provided, wherever possible, they are within walls or otherwise
concealed. Owner may, during the progress of any work in the demised premises,
take all necessary materials and equipment into said premises without the same
constituting an eviction nor shall the Tenant be entitled to any abatement of
rent while such work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Landlord shall exercise reasonable
efforts to minimize any inconvenience to Tenant or interference with Tenant's
use and enjoyment of the Demised Premises and its business operations in
connection with any repairs or other work, repairs, replacements and/or
improvements performed by Landlord under the Lease, or in connection with any
rights of access permitted to Landlord under the Lease, and Landlord shall carry
out such repairs, replacements, improvements or other work promptly and
diligently. Landlord acknowledges that such repairs, work or other access may be
intrusive to Tenant's patrons, and agrees, with respect to work within the
Premises, except in case of emergency, to (i) consult with Tenant, and (ii) make
reasonable efforts to schedule any such repairs, work or other access in such
manner, at such times, and in such locations as to create the least practicable
interference with Tenant's business operations. Throughout the term hereof,
Owner shall have the right to enter the demised premises at reasonable hours for
the purpose of showing the same to prospective
6
<PAGE> 7
purchasers or mortgagees of the building, and during the last six months of the
term for the purpose of showing the same to prospective tenants and may, during
said six months period, place upon the demised premises the usual notices "To
Let" and "For Sale" which notices Tenant shall permit to remain thereon without
molestation. If Tenant is not present to open and permit an entry into the
demised premises, Owner or Owner's agents may enter the same in the event of an
emergency by master key or forcibly and provided reasonable care is exercised to
safeguard Tenant's property, such entry shall not render Owner or its agents
liable therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all or
substantially all of Tenant's property therefrom. Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation arid
such act shall have no effect on this lease or Tenant's obligation hereunder.
Vault, Vault Space, Area: 14. No Vaults, vault space or area, whether or not
enclosed or covered, not within the property line of the building is leased
hereunder anything contained in or indicated on any sketch, blue print or plan,
of anything contained elsewhere in this lease to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/ or occupy, is to
be used and/or occupied under a revocable license, and if any such license be
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant, if used by
Tenant, whether or not specifically stated hereunder.
Occupancy: 15. Tenant will not at any time use or occupy the demised premises
in violation of the certificate of occupancy issued for the building of which
the demised premises are a part. Tenant has inspected the premises and accepts
them as is, subject to the riders annexed hereto with respect to Owner's work,
if any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant shall be responsible for
and shall procure and maintain such license or permit.
Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by sending of a written
notice to Tenant within a reasonable time after the happening of any one or more
of the following events: (1) the commencement of a case in bankruptcy or under
the laws of any state naming Tenant as the debtor; or (2) the making by Tenant
of an assignment or any other arrangement for the benefit of creditors under any
state statute. Neither Tenant nor any person claiming through or under Tenant,
or by reason of any statute or order of court, shall thereafter be entitled to
possession of the premises demised but shall forthwith quit and surrender the
premises. If this lease shall be assigned in accordance with its terms, the
provisions of this Article 16 shall be applicable only to the party then owning
Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the
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termination of this lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rental reserved hereunder for the unexpired portion of
the term demised and the fair and reasonable rental value of the demised
premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the demised premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4 %) per annum. If such
premises or any part thereof be relet by the Owner for the unexpired term of
said lease, or any part thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of rent reserved upon
such reletting shall be deemed to be the fair and reasonable rental value for
the part or the whole of the premises so relet during the term of the
reletting. Nothing herein contained shall limit or prejudice the right of the
Owner to prove for and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants the payment of rent or additional rent; or if the
demised premises becomes vacant or deserted "or if this lease be rejected under
Section 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution
or attachment shall be issued against Tenant or any of Tenant's property
whereupon the demised premises shall be taken or occupied by someone other than
Tenant; or if Tenant shall make default with respect to any other lease between
Owner and Tenant; or if Tenant shall have failed, after five (5) days written
notice, to redeposit with Owner any portion of the security deposited hereunder
which Owner has applied to the payment of any rent and additional rent due and
payable hereunder or failed to move into or take possession of the premises
within thirty (30) days after the Commencement Date of which fact Owner shall be
the sole judge; then in any one or more of such events, upon Owner serving a
written fifteen (15) days notice upon Tenant specifying the nature of said
default and upon the expiration of said fifteen (15) days, if Tenant shall have
failed to comply with or remedy such default, or if the said default or omission
complained of shall be of a nature that the same cannot be completely cured or
remedied within said fifteen (15) day period, and if Tenant shall not have
diligently commenced during such default within such fifteen (15) day period,
and shall not thereafter with reasonable diligence and in good faith, proceed to
remedy or cure such default, then Owner may serve a written five (5) days'
notice of cancellation of this lease upon Tenant, and upon the expiration of
said five (5) days this lease and the term thereunder shall end and expire as
fully and completely as if the expiration of such five (5) day period were the
day herein definitely fixed for the end and expiration of this lease and the
term thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the term
shall expire as aforesaid, or if Tenant shall make default in the payment of the
rent reserved herein of any item of additional rent herein mentioned or any part
of either or in making any other payment herein required; then in any of such
events Owner may without notice, re-enter the demised premises either by force
or otherwise, and dispossess
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Tenant by summary proceedings or otherwise, and the legal representative of
Tenant or other occupant of demised premises and remove their effects and hold
the premises as if this lease had not been made, and Tenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end. If tenant shall make default hereunder prior to the date fixed as the
commencement of any renewal or extension of this lease, Owner may cancel and
terminate such renewal or extension agreement by written notice.
Remedies of Owner and Waiver of Redemption: 18. In case of any such default,
re-entry, expiration and/or dispossess by summary proceedings or otherwise, (a)
the rent, and additional rent, shall become due thereupon, and be paid up to the
time of such re-entry, dispossess and/or expiration, (b) Owner may relet the
premises or any part or parts thereof, either in the name of Owner or otherwise,
for a term or terms, which may at Owner's option be less than or exceed the
period which would otherwise have constituted the balance of the term of this
lease and may grant concessions or free rent or charge a higher rent than that
in this lease, (c) Tenant or the legal representatives of Tenant shall also pay
Owner as liquidated damages for the failure of Tenant to observe and perform
said Tenant's covenants herein contained, any deficiency between the rent hereby
reserved and/or covenanted to be paid and the net amount, if any, of the rents
collected on account of the subsequent lease or leases of the demised premises
for each month of the period which would otherwise have constituted the balance
of the term of the lease. The failure of Owner to relet the premises or any part
or part thereof shall not release or affect Tenant's liability for damages. In
computing such liquidated damages there shall be added to the said deficiency
such expenses as Owner may incur in connection with reletting, such as legal
expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the
demised premises in good order or for preparing the same, for reletting. Any
such liquidated damages shall be paid in monthly installments by Tenant on the
rent day specified in this lease and any suit brought to collect the amount of
the deficiency for any month shall not prejudice in any way the rights of Owner
to collect the deficiency for any subsequent month by a similar proceeding.
Owner, in putting the demised premises in good order or preparing the same for
re-rental may, at Owner's option, make such alterations, repairs, replacements,
and/or decorations in the demised premises as Owner, in Owner's sole judgment,
considers advisable and necessary for the purpose of reletting the demised
premises, and the making of such alterations, repairs, replacements, and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as foresaid. Owner shall in no event be liable in any way whatsoever
for failure to re1et the demised premises, or in the event that the demised
premises are relet for failure to collect the rent thereof under such
reletting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were nor herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws.
Fees and Expenses: 19. If Tenant shall default in the observance or performance
of any term or covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of this lease, after
notice if required and upon expiration of any applicable grace period if any,
(except in an emergency), then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with
the foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or incurs any obligations for the
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payment of money, including but not limited to reasonable attorney's fees, in
instituting, prosecuting or defending any action or proceedings, and prevails in
any such action or proceeding, then Tenant will reimburse Owner for such claims
so paid or obligations incurred with interest and costs. The foregoing expenses
incurred by reason of Tenant's default shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition
of any bill or statement to Tenant therefor. If Tenant's lease term shall have
expired at the time of making of such expenditures or incurring of such
obligations, such sums shall be recoverable by Owner as damages.
Building Alterations and Management: 20. Owner shall have the right at any time
without the same constituting an eviction and without incurring liability to
Tenant therefor to change the arrangement and/or location of public entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets or other
public parts of the building and to change the name, number or designation by
which the building may be known. There shall be no allowance to Tenant for
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner or other
Tenant making any repairs in the building or any such alterations, additions and
improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of any controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deem necessary
for the security of the building and its occupants.
No Representations by Owner: 21. Neither Owner nor Owner's agents have made any
representations or promises with respect to the physical condition of the
building, the land upon which it is erected or the demised premises, the rents,
leases, expenses of operation or any other matter or thing affecting or related
to the demised premises or the building except as herein expressly set forth and
no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth in the provisions of this lease. Tenant
has inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same "as is" on the date possession
is tendered and acknowledges that this taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
End of Term: 22. Upon the expiration or other termination of the term of this
lease, Tenant shall quit and surrender to Owner the demised premises, broom
clean, in good order and condition, ordinary wear and damages which Tenant is
not required to repair as provided elsewhere in this lease excepted, and Tenant
shall remove all its property from the demised premises. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of this lease. If the last day of the term of this lease, or any
renewal thereof, falls on Sunday, this lease shall expire at noon on the
proceeding
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Saturday unless it be a legal holiday in which case it shall expire at noon on
the preceding business day.
Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 34 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
Failure to Give Possession: 24. If Owner is unable to give possession of the
demised premises on date of the Commencement Date because of the fact that a
certificate of occupancy has not been procured or if Owner has not completed any
work required to be performed by Owner, Owner shall not be subject to any
liability for failure to give possession on said date and the validity of the
lease shall not be impaired under such circumstances, nor shall the same be
construed in any wise to extend the term of this lease, but the rent payable
hereunder shall be abated (provided Tenant is not responsible for Owner's
inability to obtain possession or complete any work required) until after Owner
shall have given Tenant notice that Owner is able to deliver possession in the
condition required by this lease. If permission is given to Tenant to enter into
the possession of the demised premises or to occupy premises other than the
demised premises prior to the date specified as the commencement of the term of
this lease, Tenant covenants and agrees that such possession and/or occupancy
shall be deemed to be under all the terms, covenants, conditions and provisions
of this lease, except the obligation to pay the fixed annual rent set forth in
page one of this lease. The provisions of this article are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.
No Waiver: 25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach and no provision of this lease
shall be deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an allotment to Owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or
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Owner's agent shall have any power to accept the keys of said premises prior to
the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of the
premises.
Waiver of Trial by Jury: 26. It is mutually agreed by and between Owner and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of
said premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Owner commences any proceeding or
action for possession including a summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding including a counterclaim under Article 4
except for statutory mandatory counterclaims.
Inability to Perform: 27. This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in no wise be affected, impaired or excused
because Owner is unable to fulfill any of its obligations under this lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment, fixtures or other materials if Owner is prevented or delayed from
doing so by reason of strike or labor troubles or any cause whatsoever beyond
Owner's sole control including, but not limited to, government preemption or
restrictions or by reason of any rule, order or regulation of any department or
subdivision thereof or any government agency or by reason of the conditions
which have been or are affected, either directly or indirectly, by war or other
emergency.
Bills and Notices: 28. Except as otherwise in this lease provided, a bill
statement, notice or communication which Owner may desire or be required to give
to Tenant, shall be deemed sufficiently given or rendered if, in writing,
delivered to Tenant personally or sent by registered or certified mail addressed
to Tenant in accordance with Article 63 of the Rider and the time of the
rendition of such bill or statement and of the giving of such notice or
communication shall be deemed to be the time when the same is delivered to
Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant
to Owner must be served by registered or certified mail addressed to Owner in
accordance with Article 63 of the Rider or at such other address as Owner shall
designate by written notice.
Sprinklers: 30. Anything elsewhere in this lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters or the New York Fire
Insurance Exchange or any bureau, department or official of the federal, state
or city government recommend or require the installation of a sprinkler system
or that any changes, modifications, alterations, or additional sprinkler heads
or other equipment be made or supplied in an existing sprinkler system by reason
of Tenant's business, or the location of partitions, trade
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fixtures, or other contents of the demised premises, or for any other reason, or
if any such sprinkler system installations, modifications, alterations,
additional sprinkler heads or other such equipment, become necessary to prevent
the imposition of a penalty or charge against the full allowance for a sprinkler
system in the fire insurance rate set by any said Exchange or by any fire
insurance company, Tenant shall, at Tenant's expense promptly make such
sprinkler system installations, changes, modifications, alterations, and supply
additional sprinkler heads or other equipment as required whether the work
involved shall be structural or nonstructural in nature. See Article 49.
Elevators, Heat, Cleaning: 31. As long as Tenant is not in default under any
of the covenants of this lease beyond the applicable grace period provided in
this lease for the curing of such defaults, Owner shall: (a) provide necessary
passenger elevator facilities on business days from 8 a .m. to 6 p.m. and on
Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided,
same shall be provided only on regular business days Monday through Friday
inclusive, and on those days only between the hours of 9 a.m. and 12 noon and
between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied
by Owner to the demised premises, when and as required by law, on business days
from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the
public halls and public portions of the building which are used in common by all
tenants. Tenant shall, at Tenant's expense, keep the demised premises, including
the windows, clean and in order, to the reasonable satisfaction of Owner, and
for that purpose shall employ the person or persons, or corporation approved by
Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse
and rubbish from the building. Bills for the same shall be rendered by Owner to
Tenant at such time as Owner may elect and shall be due and payable hereunder,
and the amount of such bills shall be deemed to be, and be paid as, additional
rent. Tenant shall, however, have the option of independently contracting for
the removal of such rubbish and refuse in the event that Tenant does not wish to
have same done by employees of Owner. Under such circumstances, however, the
removal of such refuse and rubbish by others shall be subject to such rules and
regulations as, in the judgment of Owner, are necessary for the proper operation
of the building. Owner reserves the right to stop service of the heating,
elevator, plumbing and electric systems, when necessary, by reason of accident,
or emergency, or for repairs, alterations, replacements or improvements, in the
judgment of Owner desirable or necessary to be made, until said repairs,
alterations, replacements or improvements shall have been completed. If the
building of which the demised premises are a part supplies manually operated
elevator service, Owner may proceed diligently with alterations necessary to
substitute automatic control elevator service without in any way affecting the
obligations of Tenant hereunder.
Captions: 33. The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provision thereof.
Definitions: 34. The term "Owner" as used in this lease means only the owner of
the fee or of the leasehold of the building, or the mortgage in possession, for
the time being of the land and building (or the owner of a lease of the building
or of the land and building) of which the demised premises form a part, so that
in the event of any sale or sales of said land and building or of said lease, or
in the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between
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the parties and the purchaser, at any such sale, or the said lessee of the
building, or of the land and building, that the purchaser or lessee of the
building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums which
shall be due to Owner from Tenant under this lease, in addition to the annual
rental rate. The term 'business days" as used in this lease, shall exclude,
Saturdays, Sundays and all days observed by the State or Federal Government as
legal holidays and those designated as holidays by the applicable building
service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service. Wherever it is expressly
provided in this lease that consent shall not be unreasonably withheld, such
consent shall not be unreasonably delayed.
Adjacent Excavation Shoring: 35. If an excavation shall be made upon land
adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work as
said person shall deem necessary to preserve the wall or the building of which
demised premises form a part from injury or damage and to support the same by
proper foundations without any claim for damages or indemnity against Owner, or
diminution or abatement of rent.
Rules and Regulations: 36. Tenant and Tenant's servants, employees, agents,
visitors, and licensees shall observe faithfully, and comply strictly with, the
Rules and Regulations annexed hereto and such other and further reasonable Rules
and Regulations as Owner or Owner's agents may from time to time adopt. Notice
or any additional rules or regulations shall be given in such manner as Owner
may elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within fifteen (15) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
Glass: 37. Owner shall replace, at the expense of the Tenant, any and all plate
and other glass damaged or broken from any cause whatsoever in and about the
demised premises. Owner may insure, and keep insured, at Tenant's expense, all
plate and other glass in the demised premises for and in the name of the Owner.
Bills for the premiums therefor shall be rendered by Owner to Tenant at such
times as Owner may elect, and shall be due, from, and payable by, Tenant when
rendered, and the amount thereof shall be deemed to be, and be paid, as
additional rent.
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Estoppel Certificate: 38. Tenant, at any time, and from time to time, upon at
least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to
Owner, and/or to any other person, firm or corporation specified by Owner, a
statement certifying that this lease is unmodified in full force and effect (or,
if there have been modifications, that the same is in full force and effect as
modified and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by Owner under this lease, and, if so, specifying each such default.
Directory Board Listing: 39. If, at the request of and as accommodation to
Tenant, Owner shall place upon the directory board in the lobby of the building,
one or more names of persons other than Tenant, such directory board listing
shall not be construed as the consent by Owner to an assignment or subletting by
Tenant to such person or persons.
Successors and Assigns: 40. The covenants, conditions and agreements contained
in this lease shall bind and inure to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this lease, their assigns. Tenant shall look
only to Owner's estate and interest in the land and building for the
satisfaction of Tenant's remedies for the collection of a judgement (or other
judicial process) against Owner in the event of any default by Owner hereunder,
and no other property or assets of such Owner (or any partner, member, officer
or director thereof, disclosed or undisclosed), shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this lease, the relationship of Owner and
Tenant hereunder, or Tenant's use and occupancy of the demised premises.
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner: 601 WEST ASSOCIATES LLC
_____________________________ BY: ______________________ [L.S.]
Name:
Title:
Witness for Tenant: SCREAMINGMEDIA.NET, INC.
_____________________________ BY: ______________________ [L.S.]
Name:
Title:
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<PAGE> 17
ACKNOWLEDGMENTS
CORPORATE TENANT
STATE OF NEW YORK, SS.:
County of
On this day of , 19 , before me
personally came to me known, who being by me duly sworn, did depose and
say that he resides in that he is the of
the corporation described in and which executed the foregoing instrument, as
TENANT; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that is was so affixed by order of the
Board of Directors of said corporation, and that he signed his name thereto by
like order.
INDIVIDUAL TENANT
STATE OF NEW YORK, SS.:
County of
On this day of , 19 , before me
personally came to be known and known to me to be the individual
described in and who, as TENANT, executed the foregoing instrument and
acknowledged to me that he executed the same.
IMPORTANT -- PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE
WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed encumbered by
any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and from ice, snow, dirt and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees; or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any window of
the building; and no Tenant shall sweep or throw or permit to be swept or thrown
from the demised premises any dirt or other substances into any of the corridors
of halls, elevators, or out of the doors or windows or stairways of the building
and Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the demised premises, or permit or suffer the demised
premises to be occupied or used in a manner offensive or objectionable to Owner
or other occupants of the buildings by reason of noise, odors, and or
vibrations, or interfere in any way, with other Tenants or those having business
therein, nor shall any bicycles, vehicles, animals, fish, or birds be kept in or
about the building. Smoking or carrying lighted cigars or cigarettes in the
elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of
the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of
the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, 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,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner 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 of the
lease of which these Rules and Regulations are a part.
9. No tenant shall obtain for use upon the demised premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours and under regulations fixed by Owner. Canvassing, soliciting and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building all persons who do
not present a pass to the building signed by Owner. Owner will furnish passes to
persons for whom any Tenant requests same in writing. Each tenant shall be
responsible for all persons for whom he requests such pass and shall be liable
to Owner for all acts of such persons. Notwithstanding the foregoing, Owner
shall not be required to allow Tenant or any person to enter or remain in the
building, except on business days from 8:00 a.m. to 6:00 p.m. and on Saturdays
from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against Owner by
reason of Owner excluding from the building any person who does not present such
pass.
11. Owner shall have the right to prohibit any advertising by any Tenant which
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a loft building, and upon written notice from Owner, Tenant
shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the demised
promises, any inflammable, combustible, or explosive, or hazardous fluid,
material, chemical or substance, or cause or permit any odors of cooking or
other processes, or any unusual or other objectionable odors to permute in or
emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or
interferes with other Tenants in the beneficial use of their premises.
SEE SUPPLEMENTAL RULES AND REGULATIONS PURSUANT TO ARTICLE 36 ANNEXED HERETO AND
HEREBY MADE A PART HEREOF TO WHICH TENANT AGREES TO BE BOUND BY EXECUTION OF
THIS LEASE.
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RIDER
ANNEXED TO LEASE DATED AS OF MARCH __, 1999
BETWEEN
601 WEST ASSOCIATES, LLC, AS LANDLORD
AND
SCREAMINGMEDIA.NET, INC., AS TENANT
41. RIDER PROVISIONS PREVAIL.
If and to the extent that any of the provisions of this Rider conflict
or are otherwise inconsistent with any of the preceding printed provisions of
this Lease, or of the Rules and Regulations attached to this Lease, whether or
not such inconsistency is expressly noted in this Rider, the provisions of this
Rider shall prevail, and in case of inconsistency with said Rules and
Regulations, shall be deemed a waiver of such Rules and Regulations.
42. COMMENCEMENT OF TERM.
The commencement date of the term of this Lease ("Commencement Date")
shall be the earliest to occur of (i) the date on which Landlord's Work (as
hereinafter defined) to be performed in the Premises is substantially completed
(as hereinafter defined), or (ii) the date on which Landlord's Work in the
Premises would have been substantially completed but for Tenant's Delay (as
hereinafter defined) or, (iii) the date Tenant or anyone claiming under or
through Tenant first occupies the Premises for the conduct of its business.
43. FIXED RENTAL AND ADDITIONAL RENTAL.
43.1 Tenant covenants to pay Landlord, at the above address, or at such
other address as Landlord shall designate:
43.1.1 A fixed rental ("Fixed Rental") at an annual rate of:
(i) $210,000.00 per year ($17,500.00 per month)
for the lease year commencing on the
Commencement Date (defined in Article 42
above and continuing thereafter to and
including March 31, 2002;
(ii) $231,000.00 per year ($19,250.00 per month)
for the lease year commencing April 1, 2002,
and continuing thereafter to and including
March 31, 2006;
(iii) $252,000.00 per year ($21,000.00 per month)
for the lease year commencing April 1, 2006,
and continuing thereafter to and including
March 31, 2009 (the "Termination Date").
Fixed Rental shall be payable by Tenant by check drawn on a bank which
is a member of the New York City Clearing House Association, having an office in
the City of New York, in lawful money of the United States, in equal monthly
installments in advance at the office of Landlord without previous demand
therefor and without any setoff or deduction whatsoever, on the first day of
each and every calendar month throughout the term of this Lease, except that the
first monthly installment of Fixed Rental due hereunder shall be paid on the
execution of this Lease. Provided that Landlord countersigns and delivers a
fully executed copy of this Lease, Landlord may deposit the first monthly
payment of rent. So long as Tenant is not in default hereunder at the time that
the Fixed Rental becomes due and payable, the payment made on this date shall be
applied to the first installment of Fixed Rental due; otherwise, the same shall
be applied to the damages, if any, to which Landlord is entitled upon Tenant's
breach of this Lease. If the payment made on the date of this Lease is
uncollectible, the Lease shall, at Landlord's option, be of no force and effect,
ab initio, whether or not Tenant shall have entered into possession of the
Premises. If the Commencement Date (as defined in Article 42 above) occurs on a
day other than the first day of a calendar month, the Fixed Rental for such
calendar month shall be prorated, and the balance of the first month's Fixed
Rental theretofore paid shall be credited against the next monthly installment
of Fixed Rental.
Tenant's obligation to pay for the cost of
electricity for the Premises shall commence on the Commencement Date,
43.1.2 Additional rental ("Additional Rental"), consisting of
all such monies other than Fixed Rental as shall be due and payable under this
lease by Tenant.
43.2 Provided that Tenant is not then in default under the terms of
this Lease, Tenant shall be entitled to a one-time, nonrecurring credit against
the obligation to pay Fixed Rental, in the amount of $87,500.00, (the "Credit")
to be applied as follows: (i) $52,500.00 against the Fixed Rental due commencing
on the Commencement Date and continuing thereafter through the end of the third
month following the Commencement Date. If the Commencement Date is a date other
than the first day of a month, then this portion of the Credit shall be
prorated, and the balance shall be applied against the Fixed Rental due for the
fourth month following the Commencement Date, (ii) $17,500.00 against the Fixed
Rental due for March 2000, and (iii) $17,500.00 against the Fixed Rental due for
April 2000. Notwithstanding the foregoing, the Credit shall not be applied
against any Additional Rental, electricity charges, or other like sums from time
to time payable by Tenant pursuant to this Lease, which amounts shall be paid
without abatement in accordance with the terms of this Lease,
44. RENT ESCALATION -- CONSUMER PRICE INDEX.
44.1 Definitions: For the purposes of this Article, the following
definitions shall apply:
(a) The term "Price Index" shall mean the "Consumer Price
Index" published by the bureau of Labor Statistics of
the U.S. Department of Labor, All Urban Consumers
("CPI-U") New York-Northern New Jersey-Long
Island-All Items (1982-84 = 100) or a successor or
substitute index appropriately adjusted.
(b) The term "Base Price Index" shall mean the Price
Index for the month of February 1999.
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44.2 Effective as of each April 1 (the "Change Date") throughout the
term of this Lease, commencing April 1, 2000, there shall be made cost of living
adjustments of the Fixed Rental payable hereunder. The adjustment shall be based
on the percentage difference between the Price Index for the applicable
preceding month of February and the Base Price Index.
(a) In the event the Price Index for February in any
calendar year during the term of this Lease reflects
an increase over the Base Price Index, then the Fixed
Rental herein provided to be paid as of the April 1st
following such month of February shall be multiplied
by the percentage increase between the Price Index
for February of such applicable calendar year and the
Base Price Index, and the resulting sum shall be
added to such annual Fixed Rental, effective as of
April 1st. Said adjusted Fixed Rental shall
thereafter he payable hereunder in equal monthly
installments, until it is readjusted pursuant to the
terms of this Lease. Landlord agrees that the
adjusted Fixed Rental in any one-lease year shall not
be greater than One Hundred Four Percent (104%) of
the adjusted Fixed Rental for the previous lease
year.
(b) The following illustrates the intentions of the
parties hereto as to the computation of the
aforementioned cost of living adjustment in the
annual Fixed Rental payable hereunder,
Assuming that said annual Fixed Rental is $10,000,
that the Base Price Index was 102.0 and that the
Price Index for the month of February 2000 was 105.0,
then the percentage increase thus reflected, i.e.,
2.94% (3.0/102.0 multiplied by 100), would be
multiplied by $10,000, and said annual Fixed Rental
would be increased by $294.00 effective as of April
1, 2000 (paid in equal monthly installments).
44.3 In the event that the Price Index ceases to use 1982-84 = 100 as
the basis of calculation, or if a substantial change is made in the terms or
number of items contained in the Price Index, then the Price Index shall be
adjusted to the figure that would have been arrived at had the manner of
computing the Price Index in effect at the date of this Lease not been altered.
In the event such Price Index (or a successor or substitute index) is not
available, a reliable governmental or other nonpartisan publication evaluating
the information theretofore used in determining the Price Index shall be used.
44.4 No adjustments or recomputations, retroactive or otherwise, shall
be made due to any revision which may later be made in the first published
figure of the Price Index for any month.
44.5 Landlord will cause statements of the cost of living adjustments
provided for in Section 44.2 to be prepared in reasonable detail and delivered
to Tenant.
44.6 In no event shall the Fixed Rental provided to be paid under this
Lease (as increased pursuant to this Article 44) be reduced by virtue of the
provisions of this Article.
44.7 Any delay or failure of Landlord, in computing or billing for the
rent adjustments herein above provided, shall not constitute a waiver of or in
any way impair the continuing obligation of Tenant to pay such rent adjustments
hereunder.
44.8 Notwithstanding any expiration or termination of this Lease prior
to the expiration date (except in the case of a cancellation by mutual
agreement) Tenant's obligation to pay Fixed Rental as adjusted under this
Article shall continue and shall cover all periods up to the expiration date,
and shall survive any expiration of this Lease.
45. AS IS CONDITION; LANDLORD'S WORK.
45.1 Tenant has thoroughly examined the Premises (including the
terrace) and is fully familiar with the condition thereof, and, except as
specifically set forth in this Lease, neither Landlord nor Landlord's agents
have made any representations, warranties or promises, either express or
implied, with regard to the physical condition of the Building, or the Premises,
the use or uses to which the Premises may be put, or the condition of any
mechanical, plumbing, electrical, flue, ventilation or exhaust systems servicing
the Premises. It is expressly understood that Landlord shall not be liable for
any latent or patent defects in the Premises. Tenant agrees to accept the
Premises "as is" and in such condition as the same may be in at the Commencement
Date, and, except for the work set forth on Exhibit B attached hereto, Landlord
shall not be obligated or required to do any work or to make any alterations or
decorations or install any fixtures, equipment or improvements, or make any
repairs or replacements to or in the Premises to prepare or fit the same for
Tenant's use or for any other reason whatsoever. Unless specifically agreed
otherwise, all Landlord's Work shall be of material, design, finish and color of
the building standard adopted from time to time by Landlord. The installations,
facilities, materials and work so to be furnished, installed and performed in
the Premises by Landlord at its expense are hereinafter and in Exhibit B
referred to as "Landlord's Work." All other installations, facilities, materials
and work which may be undertaken by or for the account of Tenant to prepare,
equip, decorate and furnish the Premises for Tenant's occupancy, shall be at
Tenant's expense, and are hereinafter called "Tenant's Work." In the event
specific locations or dimensions are not provided for the furnishing or
installation of any particular item of Landlord's Work, the judgment of Landlord
reasonably exercised shall be binding on Tenant. In no event shall Landlord be
required to provide any material, work or installation not specifically
described or included in Landlord's Work.
46. SUBSTANTIAL COMPLETION.
46.1 The Premises shall be deemed ready for occupancy on the date that
Landlord's Work in the Premises shall have been substantially completed. The
Premises shall be substantially completed when all major items of construction
have been substantially completed and the Premises is accessible and reasonably
usable, notwithstanding the fact (i) that minor or insubstantial details of
construction, mechanical adjustment or decoration remain to be performed, the
noncompletion of which do not materially interfere with Tenant's use of the
Premises (so-called "punch-list" items), and (ii) that Landlord's Work has been
substantially completed except for portions thereof which shall be completed
upon the completion of Tenant's Work.
46.2 If the completion of Landlord's Work shall be delayed due to any
act or omission of Tenant or any of its employees, agents or contractors or any
failure to plan or to execute Tenant's Work diligently and expeditiously, for
which Landlord shall give Tenant five (5) days' written notice ("Tenant's
Delay"), the Premises shall be deemed ready for occupancy on the date when they
would have been ready but for the Tenant's Delay.
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46.3 If and when Tenant shall take actual possession of the Premises,
it shall be conclusively presumed that the same were in satisfactory condition
as of the date of such taking of possession, unless within ten (10) days after
such date Tenant shall give Landlord notice specifying the respects in which the
Premises were not in satisfactory condition.
47. TENANT'S INITIAL INSTALLATIONS.
47.1 Tenant agrees, at Tenant's sole cost and expense, to cause the
Premises to be improved in accordance with the plans approved by Landlord in
writing ("Approved Plan") (which improvement is hereinafter referred to as
"Tenant's Initial Installations"), which approval shall not be unreasonably
withheld or delayed. Tenant's obligation hereunder shall include, without
limitation, the obligation to pay for all soft costs, environmental and other
investigatory expenses, construction expenses, filings, architectural fees,
engineering fees and other like items necessary in order to lawfully complete
Tenant's Initial Installations. Tenant's performance of Tenant's Initial
Installations shall be performed with due diligence and in a good and
workmanlike manner so that the same shall be completed (subject to delays beyond
the reasonable control of Tenant; provided that in the event of such delay(s)
Tenant shall use its reasonable efforts to minimize the effect of such delay and
shall resume performance promptly after the cause of such delay has been
eliminated and thereafter shall carry out Tenant's Initial Installations with
due diligence to completion) not later than ninety (90) days following the date
on which Landlord shall have consented to the Approved Plans. Tenant's Initial
Installations shall be performed and the quality, materials and appearance of
Tenant's Initial Installations shall, unless otherwise specifically agreed to by
Landlord, be equivalent to or exceed in all respects, the Building standard
installations of Landlord. Tenant, upon request, shall be provided with a list
of building standard specifications, standards and materials; however, Tenant's
failure to request the same shall not excuse Tenant from compliance with the
foregoing requirement.
47.2 During the period following the date of this Lease and during the
performance by Landlord of Landlord's Work, if any, Tenant agrees to submit to
Landlord for Landlord's review and approval all items mentioned in Article 69
below of this Lease with respect to Alterations as the same may pertain to
Tenant's Initial Installations. Landlord shall either approve or comment on
Tenant's submissions within ten (10) calendar days after receipt, which approval
or comments shall not be unreasonably withheld, delayed, or conditioned (in the
case of an approval). If any of Tenant's submissions are not approved by
Landlord, Tenant shall resubmit any disapproved items within five (5) business
days after receipt of Landlord's comments. Tenant's Initial Installations shall
be commenced promptly after receipt by Tenant of all permits and approvals
necessary for the same to be legally carried out and after delivery to Landlord
of all items that must be delivered prior to the commencement of any
Alterations. All of Tenant's Initial Installations shall be performed in
accordance with the provisions of Article 69 below of this Lease.
47.3 Landlord approves T. Lee Contracting, Inc., having an address at
156 Attorney Street, New York, New York 10002, as the contractor for Tenant's
Initial Installations.
47.4 Tenant agrees to maintain, at Tenant's sole cost and expense,
William Vittaco for the purpose of expediting the filing of building plans and
obtaining its building permit in connection with Tenant's Initial Installation.
48. ESCALATIONS FOR INCREASE IN REAL ESTATE TAXES.
48.1 For each Tax Year or portion thereof occurring in whole or in part
during the term or any renewal term of this Lease, Tenant shall pay, as
Additional Rental, the Tax Payment (hereafter defined) for such Tax Year or
portion thereof.
48.2 "Taxes" shall mean the total of all real estate taxes and
assessments and special assessments, business improvement district charges, and
other levies of a similar nature levied, assessed or imposed upon or against the
land, the Landlord and/or Building located at 601 West 26th Street, New York,
New York (individually referred to hereinafter as the "Land" and the
"Building"). If at any time during the term of this Lease the methods of
taxation prevailing at the commencement of the term hereof shall be altered so
that if and to the extent that in lieu of or as a substitute for the whole or
any part of the taxes, assessments, levies or impositions of charges now levied,
assessed or imposed on real estate and the improvements thereon, there shall be
levied, assessed or imposed: (i) a tax, assessment, levy, imposition or charge
wholly or partially as capital levy or otherwise on the rents received
therefrom; (ii) a tax, assessment, levy, imposition or charge measured by or
based in whole or in part upon the Building or the Land or the Premises and
imposed upon Landlord; (iii) a license fee measured by the rents payable by
Tenant to Landlord; or (iv) any additional or substitute tax assessment, levy,
imposition or charges against the Land and/or the Building; then all such taxes,
assessments, levies, impositions or charges or part thereof so measured or
based, shall be deemed to be included with the term "Taxes." Notwithstanding the
provisions of this Article 48 to the contrary, the term "Taxes" shall not
include corporation, franchise, income, profit or capital levy taxes, or
inheritance, succession, estate, gift or transfer taxes. Landlord shall use its
best efforts to minimize Taxes, including, without limitation, contesting same.
48.3 "Tax Year" shall mean the fiscal year for which Taxes are levied
by the applicable governmental authority.
48.4 "Base Tax" shall mean the Taxes payable in the fiscal year
commencing July 1, 1999 and ending June 30, 2000 (such fiscal year being
hereinafter referred to as the "Base Tax Year").
48.5 "Tenant's Proportionate Share" shall mean 0.50%.
48.6 If the Taxes for any Tax Year occurring wholly or partially within
the term of this Lease or any renewal or extension thereof shall be greater than
the Base Tax, Tenant shall pay as Additional Rental for such Tax Year a sum
equal to Tenant's Proportionate Share of the amount by which the Taxes for such
Tax Year are greater than the Base Tax (which amount is hereinafter called the
"Tax Payment"). Should this Lease commence or terminate prior to the expiration
of a Tax Year, such Tax Payment shall be prorated to correspond with that
portion of a Tax Year occurring within the term of this Lease. Tenant's
obligation to pay such Additional Rental and Landlord's obligation to refund
pursuant to Paragraph 48.7 below, as the case may be, shall survive the
termination or sooner expiration of this Lease.
48.7 Only Landlord shall be eligible to institute proceedings to
contest the Taxes or reduce the assessed valuation of the Land and Building.
Landlord shall be under no obligation to contest the Taxes or the assessed
valuation of the Land and Building for any Tax Year or to refrain from
contesting the same, and may settle any such contest on such terms as Landlord
in its sole judgment considers proper. If Landlord shall receive a refund for
any Tax Year for which a Tax Payment shall have been made by Tenant pursuant to
Paragraph 48.6 above, Landlord shall repay to Tenant, with reasonable
promptness, Tenant's Proportionate Share of such refund after deducting from
such refund Tenant's Proportionate Share of the reasonable costs and expenses
(including experts' and attorneys' fees) of obtaining such refund. If the
assessment for the Base Tax Year shall be reduced from the amount originally
imposed after Landlord shall have rendered a comparative statement (as provided
in Paragraph 48.8 below) to Tenant with respect to a Tax Year, the amount of
each Tax Payment shall be retroactively adjusted in accordance with
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such change, and Tenant, on Landlord's demand, shall pay any retroactive
increase in Additional Rental resulting from such adjustment.
48.8 Landlord shall render to Tenant a comparative statement, with a
copy of the then current tax bill, showing the amount of the Base Tax, the
amount of the Taxes for the then current Tax Year, and the Tax Payment, if any,
due from Tenant for such Tax Year. The Tax Payment shown on such comparative
statement shall be paid in full by Tenant to Landlord within ten (10) days after
Tenant's receipt of such comparative statement, or, at Landlord's option, shall
be paid in two (2) installments on July 1 and January 1 of each Tax Year. At the
election of Landlord, the Tax Payment may be billed by Landlord and paid by
Tenant in equal monthly installments, together with installments of Fixed Rental
payable under this Lease. Tenant shall pay the amount of the Tax Payment shown
on such comparative statement (or the balance of a proportionate installment
thereof, if only an installment is involved) concurrently with the installment
of Fixed Rental then or next due, or if such statement shall be rendered at or
after the termination of this Lease, within ten (10) days after such rendition.
Each comparative statement shall be conclusive and binding on Tenant, unless
within ten (10) days after receipt of such comparative statement, Tenant shall
notify Landlord of any discrepancy in specific detail. Pending the determination
of such dispute, by agreement or otherwise, Tenant shall pay the Tax Payment set
forth on the comparative statement.
49. WATER, SEWER AND SPRINKLER CHARGES.
Tenant shall pay to Landlord, as additional rent hereunder, Tenant's
Proportionate Share of (i) any and all water meter and/or frontage charges and
sewer rents levied, assessed or imposed against the Building and the Land and
(ii) all charges paid by Landlord for sprinkler supervisory services for the
Building. The amounts payable to Tenant under the preceding sentence shall be
payable on the first day of each and every month during the term of this Lease
commencing from and after the Commencement Date.
50. ALL ADDITIONAL RENTAL PAYMENTS.
50.1 Landlord's delay or failure during the term of this Lease to
prepare and deliver any statements or bills required to be delivered to Tenant
under Articles 48, 49 and 50 shall not in any way be deemed to be a waiver of,
or cause Landlord to forfeit or surrender its rights to collect any Additional
Rental which may have become due pursuant to these Articles during the term of
this Lease. Tenant's liability for Additional Rental due under Articles 48, 49
and 50 shall continue unabated during the remainder of the term of this Lease
and shall survive the expiration or sooner termination of this Lease.
50.2 In no event shall any adjustment of any payments payable by Tenant
in accordance with the provisions of Articles 48, 49 and 50 result in a decrease
in the Fixed Rental or any Additional Rental theretofore payable by Tenant
pursuant to these Articles.
50.3 If any Additional Rental is payable with respect to any period
that shall end after the expiration or termination of this Lease, the Additional
Rental payable by Tenant in respect thereof shall be prorated to correspond to
that portion of such Escalation Year occurring within the term of this Lease.
51. ASSIGNMENT AND SUBLETTING.
51.1 Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this Lease or any of
its rights or estates hereunder, sublet the Premises or any part thereof, or
permit the Premises, or any part thereof to be used or occupied by others,
pursuant to a management agreement, license agreement or otherwise, without the
prior written consent of Landlord in each instance. If this Lease be assigned,
or if the Premises or any part thereof be sublet or occupied by anybody other
than Tenant, Landlord may, after default by Tenant, collect rent from the
assignee, subtenant or occupant, and apply the net amount collected to the rent
herein reserved, but no assignment, subletting, occupancy or collection shall be
deemed a waiver of the provisions hereof, the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein contained.
Landlord's consent to an assignment or subletting shall not, in any wise, be
construed to relieve Tenant from obtaining Landlord's express written consent to
any further assignment or subletting. In no event shall any permitted sublessee
assign or encumber its sublease, further sublet all or any portion of its sublet
space or otherwise suffer to permit the sublet space, or any part thereof, to be
used or occupied by others, without Landlord's prior written consent in each
instance. A modification, amendment or extension of a sublease shall be deemed
to be a subletting.
51.2 If Tenant shall, at any time or times during the term of this
Lease, desire to assign this Lease or sublet all or part of the Premises, Tenant
shall give notice thereof to Landlord, which notice shall be accompanied by: (a)
a conformed or photostatic copy of the proposed assignment or sublease, the
effective or commencement date of which shall be not less than fifteen (15) nor
more than forty-five (45) days after the giving of such notice; (b) a statement
setting forth, in reasonable detail, the identity of the proposed assignee or
subtenant and its principals, the nature of its business and its proposed use of
the Premises; and (c) current financial information with respect to the proposed
assignee or subtenant and its principals, including its (and their) most recent
financial report(s).
51.3 No assignment or subletting shall be made:
11.3.1 by the legal representatives of Tenant or by any person
to whom Tenant's interest under this Lease passes by operation of law, except in
compliance with the provisions of this Article; or
51.3.2 to any person or entity for the conduct of a business
which is not in keeping with the Certificate of Occupancy and applicable zoning
laws.
51.4 The sublease shall expressly prohibit the use of the Premises or
any part thereof for any use other than the use set forth in paragraph 2 of the
prefixed printed form.
51.5 In the event that Tenant fails to execute and deliver the
assignment or sublease to which Landlord consented within ninety (90) days after
the giving of such consent, then Tenant shall again comply with all of the
provisions and conditions of Article 51.2 before assigning this Lease or
subletting all or part of the Premises.
51.6 Each subletting pursuant to this Article shall be subject to all
of the applicable covenants, agreements, terms, provisions and conditions
contained in this Lease. Notwithstanding any such subletting and/or acceptance
of rent or additional rent by Landlord from any subtenant, Tenant shall and will
remain fully liable for the payment of the Fixed Rental
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and Additional Rental due, and to become due, hereunder, for the performance of
all of the covenants, agreements, terms, provisions and conditions contained in
this Lease on the part of Tenant to be performed and for all acts and omissions
of any licensee, subtenant, or any other person claiming under or through any
subtenant that shall be in violation of any of the obligations of this Lease,
and any such violation shall be deemed to be a violation by Tenant. Tenant
further agrees that, notwithstanding any such subletting, no other and further
subletting of the Premises by Tenant, or any person claiming through or under
Tenant shall, or will be made, except upon compliance with, and subject to, the
provisions of this Article. If Landlord shall decline to give its consent to any
proposed assignment or sublease, Tenant shall indemnify, defend and hold
Landlord harmless from and against any and all losses, liabilities, damages,
costs and expenses (including reasonable counsel fees) resulting from any claims
that may be made against Landlord by the proposed assignee or subtenant or by
any brokers or other persons claiming a commission or similar compensation in
connection with the proposed assignment or sublease.
51.7 With respect to each and every sublease or subletting, it is
further agreed that:
51.7.1 no subletting shall be for a term ending later than one
day prior to the expiration date of the term of this Lease;
51.7.2 no sublease shall be valid, and no subtenant shall take
possession of the Premises or any part thereof, until an executed counterpart of
such sublease has been delivered to Landlord;
51.7.3 each sublease shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease is or shall be
subordinate, and that, in the event of termination, reentry, or dispossess by
Landlord under this Lease, Landlord may, at its option, take over all of the
right, title and interest of Tenant as sublandlord under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not: (a) be
liable for any previous act or omission of Tenant under such sublease; (b) be
subject to any offset, not expressly provided in such sublease, that theretofore
accrued to such subtenant against Tenant; or (c) be bound by any previous
modification of such sublease or by any previous prepayment of more than one
month's fixed rent or any additional rent then due.
51.8 Any assignment or transfer shall be made only if, and shall not be
effective until, the assignee shall execute, acknowledge and deliver to Landlord
an agreement, in form and substance reasonably satisfactory to Landlord, whereby
the assignee shall assume all of the obligations of this Lease on the part of
Tenant to be performed or observed and whereby the assignee shall agree that the
provisions contained in Article 51.1 shall, notwithstanding such assignment or
transfer, continue to be binding upon it in respect of all future assignments
and transfers. The original named Tenant covenants that, notwithstanding any
assignment or transfer, whether or not in violation of the provisions of this
Lease, and notwithstanding the acceptance of fixed rent and/or additional rent
by Landlord from an assignee, transferee, or any other party, the original named
Tenant shall remain fully liable for the payment of Fixed Rental and Additional
Rental and for the other obligations of this Lease on the part of the Tenant to
be performed or observed.
51.9 In no event shall Tenant be entitled to make, nor shall Tenant
make, any claim, and Tenant hereby waives any claims, for money damages (nor
shall Tenant claim any money damages by way of set-off counterclaim or defense)
based upon any claim or assertion by Tenant that Landlord has unreasonably
withheld or unreasonably delayed its consent or approval to a proposed
assignment or subletting as provided for in this Article. Tenant's sole remedy
shall be an action or proceeding to enforce any such provision, or for specific
performance, injunction or declaratory judgment.
51.10 If applicable, one or more sales or transfers, by operation of
law or otherwise, or creation of new stock, partnership, membership or voting
interests, aggregating in excess of fifty percent (5 0%) of (i) the voting stock
of any corporate tenant, or (ii) the limited or general partnership interest in
any partnership tenant, or (iii) the membership interests in any limited
liability company tenant, whether in a single transaction or in a series of
transactions, shall be deemed an assignment within the meaning of this Article
and shall require Landlord's prior written consent. From time to time, if
applicable, at Landlord's request, Tenant shall provide Landlord with a
statement of Tenant, certified by Tenant's Secretary, of its then current
shareholders and persons having a beneficial interest in the shares of stock of
Tenant, the names of such shareholders and beneficial interest holders, and the
percentage of shares held by each of them.
51.11 The joint and several liability of Tenant and any immediate or
remote successor in interest to Tenant, and the due performance of the
obligations of this Lease on Tenant's part to be performed or observed, shall
not be discharged, released, or impaired in any respect by any agreement or
stipulation made by Landlord extending the time of, or modifying any of the
obligations of this Lease, or by any waiver or failure of Landlord to enforce
any of the obligations of this Lease.
51.12 The listing of any name other than that of Tenant, whether on the
doors of the Premises, or otherwise, shall not operate to vest any right or
interest in this Lease or in the Premises, nor shall it be deemed to be the
consent of Landlord to any assignment or transfer of this Lease, to any sublease
of the Premises, or to the use or occupancy thereof by others.
51.13 If Tenant shall enter into any subleases, assignments or other
agreements for the occupancy of the Premises or any portion thereof, or if there
is a transfer of this Lease by operation of law, or otherwise, and if Tenant
shall receive any consideration from its assignee, subtenant or licensee for or
in connection with the assignment or the subletting, as the case may be, or, if
Tenant shall sublet or otherwise permit occupancy of the Premises at a rental
rate (including Additional Rental) or other periodic aggregate consideration,
Tenant shall pay to Landlord, upon receipt, as Additional Rental hereunder,
one-half of such consideration or excess.
51.14 [IN ORDER TO CHANGE, NEED INSERT] As long as Interactive Media is
the Tenant, Tenant shall have the right, subject to the terms and conditions
hereinafter set forth, without the consent of Landlord, but subject to Tenant's
satisfaction of the conditions set forth in Articles 51.2, 51.3 and 51.8 above,
to assign its interest in this Lease (i) to any corporation which is a successor
to Tenant either by merger or by consolidation, (ii) to a purchaser of all or
substantially all of Tenant's assets (provided such purchaser shall have also
assumed substantially all of Tenant's liabilities), or (iii) to an entity which
shall control, be under the control of, or be under common control with Tenant
(any such entity referred to in this clause (iii) being a Related Entity).
52. LIMITATION OF LIABILITY.
12.1 If Landlord shall be an individual, joint venture, tenancy in
common, co-partnership, limited liability company, unincorporated association,
or other unincorporated aggregate of individuals and/or entities or a
corporation, Tenant shall look only to such Landlord's estate and property in
the Land and the Building for the satisfaction of Tenant's remedies for the
collection of a judgment (or other judicial process) requiring the payment of
money by Landlord in the event of any default by Landlord hereunder, and no
other property or assets of Landlord or any member, partner or principal of
Landlord shall be
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subject to levy, execution or other enforcement procedure for
the satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder or Tenant's use or occupancy of
the Premises.
52.2 If Tenant shall request Landlord's consent or approval pursuant to
any of the provisions of this Lease or otherwise, and Landlord shall fail or
refuse to give, or shall delay in giving, such consent or approval, including,
but not limited to, Article 51 above, Tenant shall in no event make, or be
entitled to make, any claim for damages (nor shall Tenant assert, or be entitled
to assert, any such claim by way of defense, set-off, or counterclaim) based
upon any claim or assertion by Tenant that Landlord unreasonably withheld or
delayed its consent or approval, and Tenant hereby waives any and all rights
that it may have from whatever source derived, to make or assert any such claim.
Tenant's sole remedy for any such failure, refusal, or delay shall be an action
for a declaratory judgment, specific performance, or injunction, and such
remedies shall be available only in those instances where Landlord has expressly
agreed in writing not to unreasonably withhold or delay its consent or approval
or where, as a matter of law, Landlord may not unreasonably withhold or delay
the same.
53. INDEMNIFICATION.
Tenant shall, at all times and at its sole cost and expense, indemnify,
defend and hold Landlord, any holder of a Superior Mortgage (defined below), and
any lessor under a Superior Lease (defined below), together with their
respective agents, affiliates, employees, partners, members, officers, directors
and shareholders (collectively, the "Indemnitees") harmless from and against any
and all claims, suits, actions, damages, fines, charges, penalties, losses,
liens, fees, costs, court costs, expenses (including, but not limited to, all
reasonable fees and disbursements of attorneys, architects, engineers and other
professionals engaged by one or more Indemnitees) and liabilities which may be
incurred by or imposed on any Indemnitee or which may arise in connection with
any claims, suits or actions, the investigation thereof or the defense of any
action or proceeding brought thereon, or from the enforcement of this indemnity,
or from and against any orders, judgments and/or decrees which may be entered or
which may arise, wholly or in part, with respect to or on account of: (a) any
personal injury, bodily injury, loss of life and/or damage to property that may
occur or be claimed by or with respect to any person(s) or property on or about
the Premises or the appurtenances thereto or upon the adjacent vaults (if any),
sidewalks, ramps, curbs or streets, and resulting from the use, misuse,
occupancy, operation and/or management of the Premises by Tenant, its
successors, permitted assigns or any subcontractors, or by other persons or
entities claiming by, through or under Tenant, or by their respective agents,
employees, contractors, licensees, invitees, guests or other such persons or
entities, except to the extent such injury, loss and/or damage is due to
Landlord's willful or grossly negligent acts or omissions, (b) the breach of any
term, covenant or condition of this Lease by Tenant, its successors, permitted
assigns or any subcontractors, or by other persons or entities claiming by,
through or under Tenant, or by their respective agents, employees, contractors,
licensees, invitees, guests or other such persons or entities, (c) the filing of
any mechanic's or materialmen's lien or of any other attachment or encumbrance
against the Land and/or the Building due to work done by or on behalf of Tenant,
(d) the condition of the Premises, including any repairs, replacements, changes
or Alterations which Tenant has or will perform or fail to perform therein, or
(e) Tenant's use or storage of any Hazardous Materials (defined below). All such
actions, suits, claims, damages and/or proceedings shall be resisted and
defended by Tenant at its sole cost and expense. Landlord shall in no event be
liable for any injury or damage to the Premises or to Tenant or any successors,
permitted assigns or subcontractors, or other persons claiming by, through or
under Tenant or their respective agents, employees, licensees, invitees,
business visitors and guests or other such persons, or to any property of any
such persons. Tenant shall promptly reimburse each Indemnitee for any and all
expenditures covered by this indemnity and hold harmless.
54. INSURANCE.
54.1 Tenant shall obtain and keep in full force and effect during the
term of this Lease:
54.1.1 a policy of commercial general public liability insurance,
including bodily injury and property damage coverage, with a broad form
contractual liability endorsement or its equivalent, naming Tenant as insured
and protecting Landlord, Landlord's employees and managing agent, and any
mortgagees or lessors having an interest in the Building, as additional insureds
(issued on an "occurrence" basis and not a "claims made" basis) against claims
for personal injury, death and/or third-party property damage occurring in or
about the Premises or the Building, and under which the insurer agrees to waive
any right of recovery such insurer may have had against Landlord, Landlord's
employees and managing agent, and any mortgagees or lessors having an interest
in the Building and to indemnify, defend and hold Landlord harmless from and
against, among other things, all cost, expense and/or liability (including,
without limitation, reasonable attorneys' fees) arising out of or based upon any
and all claims, accidents, injuries and damages occurring in, on or about the
Premises (whether or not such claims, accidents, injuries and damages occurred
as a result of Landlord's negligence). Such policy shall contain a provision
that no act or omission of Tenant shall affect or limit the obligation of the
insurance company to pay the amount of any loss sustained to Landlord. The
minimum limits of liability applicable exclusively to the Premises shall be a
combined single limit with respect to each occurrence in an amount of not less
than $1,000,000.00 (or in any increased amount (or in the form of an umbrella
liability policy for "excess" liability coverage) required by Landlord in the
exercise of Landlord's commercially reasonable discretion); and
54.1.2 insurance against loss or damage by fire and such other
risks and hazards (including burglary, theft, vandalism, sprinkler leakage,
water damage, explosion, breakage of glass within the Premises and, if the
Premises are located at or below grade, broad form flood insurance) as are
insurable under then available standard forms of "all risk" insurance policies
to Tenant's personal property and business equipment and fixtures (hereinafter,
"Tenant's Property") and, whether or not such alterations or tenant improvements
had been paid for or performed by Tenant, any alterations and tenant
improvements in and to the Premises (hereinafter, "Tenant's Work") for the full
replacement cost value thereof (with such policy having a deductible not in
excess of an amount to be determined by Landlord in the exercise of Landlord's
commercially reasonable discretion) protecting Tenant, Landlord, Landlord's
employees and managing agent, and any mortgagees or lessors having an interest
in the Building; and
54.1.3 business interruption insurance in an amount sufficient to
cover Tenant's lost profits and continuing expenses during the period Tenant is
unable to do business in the Premises.
54.2 Prior to the time such insurance is first required to be carried
by Tenant and thereafter, at least thirty (30) days prior to the expiration or
other termination of any such policies, Tenant agrees to deliver to Landlord
evidence of payment for the policies and true and complete copies of the actual
policies together with certificates evidencing such insurance. All such policies
shall contain endorsements that (a) such insurance may not be modified or
cancelled or allowed to lapse except upon thirty (30) days' written notice to
Landlord by certified mail, return receipt requested, containing the policy
number and the names of the insured and the certificate holder, and (b) Tenant
shall be solely responsible for payment of all premiums under such policies and
Landlord shall have no obligation for the payment thereof notwithstanding that
Landlord is or may be named as an additional insured. Tenant's failure to
provide and keep in force the aforementioned insurance shall be regarded as a
material default hereunder, entitling Landlord to exercise any or all of the
remedies as provided in this Lease in the event of Tenant's default. All
insurance required to be carried by Tenant pursuant to the terms of this Lease
shall be effected under valid and enforceable policies issued by reputable and
independent insurers permitted to do business in the State of New York which
rate, in Best's Insurance Guide, or any successor thereto (or if there be none,
an organization having a national reputation), as having a general policy-holder
rating of "A" and a financial rating of at least "XIII." Tenant shall not carry
separate or additional insurance, whether concurrent or contributing, in the
event of any loss or damage, with any insurance required to be obtained by
Tenant under this Lease.
54.3 All policies to be maintained by Tenant hereunder and by Landlord
with respect to the Building shall contain a provision that no act or omission
of Landlord or Tenant, as the case may be, shall affect or limit the obligation
of the insurer to pay the amount of any loss sustained.
54.4 The parties hereto shall procure an appropriate clause in, or
endorsement on, any "all risk" or fire or extended coverage insurance covering
the Premises, the Building, the personal property, fixtures or equipment located
thereon or therein, pursuant to which the insurance companies waive subrogation
or consent to a waiver of right of recovery by the insured prior to any loss.
The waiver of subrogation or permission for waiver of the right of recovery in
favor of Tenant shall also extend to all other persons or entities occupying or
using the Premises in accordance with the terms of the Lease. If the payment of
an additional premium is required for the inclusion of such waiver of
subrogation provisions or consent to a waiver of right of recovery, each party
shall advise the other of the amount of any such additional premiums by written
notice and the other party shall pay the same or shall be deemed to have agreed
that the party obtaining the insurance coverage in question shall be free of any
further obligations under the provisions hereof relating to such waiver or
consent. It is expressly understood and agreed that Landlord will not be
obligated to carry insurance on Tenant's Property or Tenant's Work or insurance
against interruption of Tenant's business.
54.5 Each party hereby waives all rights of recovery, claim, action,
cause of action and releases the other party with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party for loss, damage or destruction with respect to its property
(including rental value or business interruption) occurring during the term of
this Lease to the extent to which such party is insured under a policy
containing a waiver of subrogation or naming the other party as an additional
assured, as provided in this Article. If notwithstanding the recovery of
insurance proceeds by either party for loss, damage or destruction of its
property (or rental value or business interruption) the other party is liable to
the first party with respect thereto or is obligated under this Lease to make
replacement, repair or restoration, then provided the first party's right of
full recovery under its insurance policies is not thereby prejudiced or
otherwise adversely affected, the amount of the net proceeds of the first
party's insurance against such loss, damage or destruction shall be offset
against the second party's liability to the first party therefor, or shall be
made available to the second party to pay for the replacement, repair or
restoration, as the case may be. Tenant shall advise insurers of the foregoing
and such waiver shall be part of each policy maintained by Tenant which applies
to the Premises, any part of the Premises or Tenant's use and occupancy of any
part thereof.
55. ELECTRIC CURRENT.
55.1 Tenant agrees that Tenant shall not make any electrical or
mechanical installations, alterations, additions or changes to the electrical
equipment or appliances in the Premises (except that Tenant may connect standard
office equipment without Landlord's consent) without the prior written consent
of Landlord, in each such instance and Tenant will at all times comply with the
rules and regulations applicable to the service, equipment, wiring and
requirements of Landlord and of the utility company supplying electricity to the
Building. Tenant covenants and agrees that at all times its use of electricity
will not exceed the capacity of existing feeders to the Building or the risers
or wiring installations therein and Tenant shall not use any electrical
equipment which, in Landlord's sole reasonable judgment, will overload such
installations or interfere with the use thereof by other tenants in the
Building. In the event that Tenant's electrical requirements above those needed
for normal office use necessitate installation of an additional riser, risers or
other proper and necessary equipment or services, including additional
ventilating or air conditioning, the same shall be provided or installed by
Landlord at Tenant's sole expense, provided Tenant's proposed installations
shall be reasonably accommodated in the Building and shall not be detrimental,
in Landlord's sole judgment, to the
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proper and economic functioning of the Building or the use and enjoyment by
other tenants therein. Any such installations shall be paid for by Tenant prior
to Landlord's commencement of the work therefor, such charges shall be
chargeable and collectible as additional rent. In all electrical installations,
rigid conduits only will be allowed.
If either the quantity or character of the electrical service is
changed by the utility company supplying electrical service to the Building or
is no longer available or suitable for Tenant's requirements, no such change,
unavailability or unsuitability shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of Fixed Rental or Additional Rental, or relieve Tenant from any of its
obligations under this Lease or impose any liability upon Landlord, or its
agents, by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise, unless such change,
unavailability or unsuitability is due to Landlord's negligence or wrongful act,
55.2 Electricity shall be furnished by Landlord to Tenant on a
"submetering" basis, as follows:
55.2.1 If not already installed, Landlord shall, at its sole
cost and expense, install a meter or meters for the purpose of measuring the
electric current consumed in the Premises; and
With respect to the Premises and/or any portion(s) thereof
that constitute less than a full floor of the Building, Landlord may, at its
option, either:
55.2.2 Install a meter to measure the amount of Usage
(hereinafter defined) with respect solely to the Premises and/or to such,
portion(s); or
55.2.3 Measure the amount of Usage with respect thereto
through common meter(s).
Landlord shall, from time to time, furnish 'Tenant with a
statement indicating the appropriate period during which the Usage was measured
and the amount of Tenant's Cost payable by Tenant to Landlord for furnishing
electrical current. Within ten (10) days after receipt of each such statement,
Tenant shall pay to Landlord as Additional Rental hereunder, the amount of
Tenant's Cost as set forth thereon, plus an amount equal to the actual
out-of-pocket costs and expenses incurred by Landlord in connection with reading
such meters and preparing bills therefor, failing which Landlord may, upon ten
(10) days' written notice to Tenant, discontinue the service of electric current
to the Premises without releasing Tenant from any liability under this Lease and
without Landlord or Landlord's agent incurring any liability to Tenant from any
damage or loss sustained by Tenant by reason of such discontinuance of service.
For the purposes of this subsection, "Usage" shall mean the
number of kilowatt hours of electric current consumed in the Premises, as
measured by a meter or meters through which the electric current supplied to the
Premises is drawn, for each calendar month or such other period as Landlord
shall determine during the term of this Lease. In the event that all or a
portion of the Premises is serviced by a meter that also services other space in
the Building, then Usage with respect to the Premises or the portion thereof
serviced by a common meter, as the case may be, shall be deemed to be an amount
equal to the product of:
(x) The number of kilowatt hours measured by such meter,
multiplied by
(y) The result (hereinafter called "Tenant's Electric
Share") of:
(1) The rentable area of the Premises divided by
(2) The aggregate rentable area of the premises
serviced by such meter.
"Rate" shall mean the amount per kilowatt hour that would be
charged, at the time in question, by the public utility company supplying
electric current to the Building, at the rate schedule payable by Landlord from
time to time, including, without limitation, all applicable surcharges, demand
charges, time-of-day charges, energy charges, fuel adjustment charges, rate
adjustment charges, taxes, and other sums payable in respect thereof.
"Tenant's Cost" shall mean an amount equal to 110% of the
product of the Rate multiplied by the Usage. If any tax is imposed upon
Landlord's receipt from the sale or resale of electrical energy or gas or
telephone service to Tenant by any Federal, State or Municipal Authority, Tenant
covenants and agrees that where permitted by law, Tenant's pro-rata share of
such taxes shall be passed on to, and in included in the bill of, and paid by,
Tenant to Landlord.
55.3 Landlord reserves the right to terminate the furnishing of
electricity on a submetering basis upon thirty (30) days' written notice to
Tenant, in which event, Tenant shall not be released from any liability under
this Lease and Tenant may make application directly to the public utility for
the Tenant's entire separate supply of electric current and Landlord shall
permit its wire and conduits, to the extent available and safely compatible, to
be used for such purpose. Any meters, risers or other equipment or connections
necessary to enable Tenant to obtain electric current directly from such
utility, shall be installed at Tenant's sole cost and expense. Rigid conduits
only will be allowed. Landlord, upon the expiration of the aforementioned thirty
(30) days' written notice to Tenant, may discontinue furnishing the electric
current, but this Lease shall otherwise remain in full force and effect on all
of its terms.
55.4 Any meter(s) installed by Landlord pursuant to this Article shall
be maintained and repaired by Tenant at Tenant's sole cost and expense.
56. BROKER.
Tenant represents and warrants to Landlord that Tenant neither
consulted nor negotiated with any broker or finder with regard to the rental of
the Premises from Landlord, other than New mark & Company and S.L. Realty Corp.,
whose commission shall be paid by Landlord pursuant to Landlord's separate
agreement with said broker. The parties agree to indemnify and hold each other
harmless from any damages, costs and expenses (including reasonable attorneys'
fees incurred in defending an action or claim or enforcing this indemnity)
suffered by the other party by reason of any claim or action for a commission by
any other person, partnership or corporation. The provisions of this Article
shall survive the expiration or earlier termination of this Lease.
57. BINDING EFFECT.
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It is specifically understood and agreed that this Lease is offered to
Tenant for signature by the managing agent of the Building solely in its
capacity as such agent and subject to Landlord's acceptance and approval, and
that Tenant shall have affixed its signature hereto with the understanding that
such act shall not, in any way, bind Landlord or its agent until such time as
this Lease shall have been executed by Landlord and delivered to Tenant.
58. LATE FEE.
In the event that any payment to be made by Tenant hereunder shall
become overdue for a period in excess of seven (7) days, a "late charge" equal
to Three Percent (3%) of the overdue payment may be charged by Landlord and
shall be payable by Tenant as Additional Rental on the 1st day of the month
following Landlord's demand therefor.
59. SECURITY.
59.1 It is agreed that in the event Tenant defaults under the terms of
this Lease beyond the expiration of all grace and notice periods, Landlord may
(but shall not be required to) use, apply or return the whole or any part of the
security so deposited for any sum Landlord may expend by reason of Tenant's
default, or for the payment of any past-due rental. In the event Landlord shall
apply all or any portion of Tenant's security in accordance with this lease,
Tenant shall promptly deposit with Landlord an amount sufficient to restore such
security to the amount set forth in Article 34. If Landlord retains or applies
all or a portion of Tenant's security deposit as a result of Tenant's default in
the payment of Fixed Rental or Additional Rental and Tenant fails to restore
the same as aforesaid, Tenant's failure to restore such security deposit shall
be deemed to be a default in the payment of Additional Rental, for default in
the payment of which Landlord shall have the same remedies as for a default in
the payment of Fixed Rental.
59.2 In the event of a sale or lease of the Building, Landlord shall
have the right to transfer the security to the purchaser, and, to the extent
such funds (or letter of credit, if applicable) are or is actually transferred
by Landlord, Landlord shall thereupon be released by Tenant from all liability
for the return of such security.
59.3 Tenant agrees that it shall not assign or encumber the funds
deposited as security hereunder.
59.4 In lieu of depositing all cash for the security deposit hereunder,
Tenant may deliver cash security in the amount of $70,000 and a clean,
irrevocable and unconditional letter of credit issued by and drawn upon a
commercial bank which is a member of the New York Clearing House Association
(hereinafter referred to as the "Issuing Bank") with offices for banking
purposes in the City of New York and having a net worth of not less than
$100,000,000, which letter of credit shall have a term of not less than one
year, be in form and content satisfactory to Landlord, be for the account of
Landlord, and initially be in the amount of $70,000. If Tenant elects to provide
a letter of credit, the letter of credit shall provide that:
59.4.1 The Issuing Bank shall pay to Landlord or its duly
authorized representative an amount up to the face amount of the letter of
credit upon presentation of the letter of credit and a sight draft in the amount
to be drawn, together with a certificate executed on behalf of Landlord.,
stating that as of the date of such certificate, Tenant is in default under this
Lease beyond any applicable period of notice and/or cure and that the amount
drawn by Landlord represents funds that are due and payable to Landlord under
the Lease;
59.4.2 The letter of credit shall be deemed to be
automatically renewed, without amendment (except as provided below with respect
to reduction in face amount), for consecutive periods of one year each during
the entire term of this Lease (the last such automatic renewal to expire not
earlier than a date which is one (1) month after the expiration date of the term
of this Lease) unless the Issuing Bank sends written notice (hereinafter called
the "Non-Renewal Notice") to Landlord by certified or registered mail, return
receipt requested, not less than thirty (30) days next preceding the then
expiration date of the letter of credit, that it elects not to have such letter
of credit renewed;
59.4.3 Landlord, after receipt of the Non-Renewal, Notice,
shall have the right, exercisable by a sight draft and an affidavit indicating
that Tenant is still obligated under the Lease, to receive the monies
represented by the letter of credit (which monies shall be held as a cash
security deposit pursuant to the provisions of Article 32 and this Article); and
59.4.4 Upon Landlord's sale of the Building, or the transfer
of Landlord's interest therein, or a leasing of the Building, the letter of
credit shall be transferable by Landlord to the purchaser, vendee or transferee,
and all expenses of such transfer shall be paid by Landlord.
60. HOLDOVER.
Tenant expressly waives, for itself and for any person claiming through
or under Tenant, any rights which Tenant or any such person may have under the
provisions of Section 2201 of the New York Civil Practice Law and Rules and of
any similar or successor law of same import then in force, in connection with
any holdover proceedings which Landlord may institute to enforce the provisions
of this Lease. If the Premises are not surrendered upon the termination of this
Lease, Tenant hereby indemnifies Landlord against liability resulting from the
delay by Tenant in so surrendering the Premises, including any claims made by
any succeeding tenant or prospective tenant founded upon such delay. In the
event Tenant remains in possession of the Premises after the termination of
this Lease, without the execution of a new lease, Tenant, at the option of
Landlord, shall be deemed to be occupying the Premises as a tenant from month to
month, at a monthly rental equal to two (2) times the Fixed Rental and
Additional Rental payable during the last month of the term, subject to all of
the other terms of this Lease insofar as the same are applicable to a
month-to-month tenancy. Tenant's obligations under this Paragraph shall survive
the termination of this Lease.
61. APPLICABLE LAW.
This Lease shall be governed in all respects by the laws of the State
of New York. Tenant hereby specifically consents to jurisdiction in the State of
New York in any action or proceeding arising out of this Lease and/or the use
and occupation of the Premises and waives any right to trial by jury and the
right to interpose any counterclaim in any summary proceeding commenced by
Landlord. If Tenant at any time after date of execution hereof or during the
term hereof shall not be a New York partnership or a New York corporation or a
foreign corporation qualified to do business in New York State, Tenant shall
designate in writing an agent in New York County for service under the laws of
the State of New York for the entry of a personal judgment against Tenant.
Tenant, by notice to Landlord, shall have the right to change such agent,
provided that at all times there shall be an agent in New York County for
service. In the event of any revocation by Tenant of such agency, such
revocation shall be void and have no force and effect unless and until a new
agent has been designated for service and Landlord notified to such effect. If
any such agency designation shall require a filing in the office of the Clerk of
the County of New York, same shall be promptly accomplished by Tenant, at its
expense, and a certified copy transmitted to Landlord.
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62. HAZARDOUS MATERIALS.
Tenant shall not cause or permit any Hazardous Materials (hereinafter
defined) to be used, stored, transported, released, handled, produced or
installed in, on or from the Premises or the Building. "Hazardous Materials," as
used herein, shall mean any flammables, explosives, radioactive materials,
hazardous wastes, hazardous and toxic substances or related materials, asbestos
or any material containing asbestos, or any other substance or material as
defined by any federal, state or local environmental law, ordinance, rule or
regulation, including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended, and in the regulations adopted and publications promulgated
pursuant to each of the foregoing. Landlord represents and warrants to Tenant
that as of the date hereof, Landlord has not received notification of any kind
from any regulatory agency stating, and has no knowledge or belief, that the
Building is targeted for a Hazardous Materials cleanup. Landlord shall be fully
and completely liable for any and all clean-up costs and any and all other
charges, fees and penalties (civil and criminal) imposed by any governmental
authority with respect to the presence, use, disposal, transportation,
generation or sale of Hazardous Materials on the Premises by any person or
entity other than Tenant or Tenant's agents, employees, licensees or
contractors. For the purpose of this provision, "Hazardous Materials" means and
includes any hazardous, toxic or dangerous waste, substance or material defined
as such in (or for purposes of) the Comprehensive Environmental Response and
Liability Act, any so-called "Superfund" or "Superlien" law, or any other
requirement or any governmental authority regulating, relating to, or imposing
liability or standards of conduct concerning, any asbestos, hazardous,
radioactive, toxic or dangerous waste, substance or material as not or at any
time hereafter in effect.
63. NOTICES.
Any notice or demand which, under the terms of this Lease or under any
statute, must or may be given or made by the parties hereto, shall be in
writing, and shall be given or made by mailing the same by certified mail,
return receipt requested, or by personal delivery, addressed to the parties at
their respective addresses herein above mentioned, with a copy of any notice to
Landlord to be delivered simultaneously in the same manner to Landlord's
attorneys, Greenstein Starr Gerstein & Rinaldi LLP, 57 West 38th Street, New
York, New York 10018, Attention: Victor Gerstein, Esq., and with a copy of any
notice to Tenant to be delivered simultaneously in the same manner to Tenant's
attorneys, Donovan & Giannuzzi, 405 Park Avenue, New York, New York 10022,
Attention: Nicholas T. Donovan, Esq. Either party, however, may designate in
writing such new or other address to which such notice or demand shall
thereafter be so given, made or mailed. Any notice given hereunder shall be
deemed delivered on the third (3rd) day after the notice is deposited in a
United States General branch post office, maintained by the United States
Government in the City of New York, enclosed in a certified, prepaid wrapper
addressed as hereinbefore provided, or, if sent by hand, on the date the same is
actually delivered.
64. ADDENDUM TO ARTICLE 16- BANKRUPTCY.
64.1 If Tenant assumes this Lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq. (the
"Bankruptcy Code") to any person or entity who shall have made a bona fide offer
to accept an assignment of this Lease on terms acceptable to Tenant, then notice
of such proposed assignment, setting forth (i) the name and address of such
person, (ii) all of the terms and conditions of such offer, and (iii) the
adequate assurance to be provided Landlord to assure such person's future
performance under the Lease, including, without limitation, the assurance
referred to in Section 365(b)(3) of the Bankruptcy Code, shall be given to
Landlord by Tenant not later than twenty (20) days after receipt by Tenant, but
in no event later than ten (10) days prior to the date that Tenant shall make
application to a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption, and Landlord shall thereupon have the
prior right and option, to be exercised by notice to Tenant given at any time
prior to the effective date of such proposed assignment, to accept an assignment
of this Lease upon the same terms and conditions and for the same consideration,
if any, as the bona fide offer made by such person, less any brokerage
commissions which may be paid by such person for the assignment of this Lease.
64.2 Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment. Any such assignee shall, upon demand, execute
and deliver to Landlord an instrument confirming such assumption.
64.3 Nothing contained in this Article shall, in any way, constitute a
waiver of the provisions of this Lease relating to assignment. Tenant shall not,
by virtue of this Article, have any further rights relating to assignment other
than those granted in the Bankruptcy Code.
64.4 Notwithstanding anything in this Lease to the contrary, all
amounts payable by Tenant to or on behalf of Landlord under 'this Lease, whether
or not expressly denominated as rent, shall constitute rent for the purposes of
Section 502(b)(7) of the Bankruptcy Code.
64.5 The term "Tenant," as used in this Article, includes any trustee,
debtor in possession, receiver, custodian or other similar officer.
65. RENT CONTROL.
In the event the Fixed Rental or Additional Rental or any part thereof
provided to be paid by Tenant under the provisions of this Lease during the
demised term shall become uncollectible or shall be reduced or required to be
reduced or refunded by virtue of any federal, state, county or city law, order
or regulation, or by any direction of a public officer or body pursuant to law,
or the orders, rules, code or regulations of any organization or entity formed
pursuant to law, whether such organization or entity be public or private, then
Landlord, at its option, may at any time thereafter terminate this Lease by not
less than thirty (30) days' written notice to Tenant, on a date set forth in
said notice, in which event this Lease and the term hereof shall terminate and
come to an end on the date fixed in said notice as if the said date were the
Expiration Date. Landlord shall not have the right to so terminate this Lease if
Tenant, within such period of thirty (30) days, shall, in writing, lawfully
agree that the rentals herein reserved are a reasonable rental and agrees to
continue to pay said rentals, and if such agreement by Tenant shall then be
legally enforceable by Landlord.
66. REPAIRS.
66.1 Notwithstanding anything contained in Articles 3, 4, 6 or
elsewhere in this Lease, all repairs and other work which Tenant is required to
perform under any provision of this Lease may be performed by Landlord at
Tenant's cost, provided, however, that Tenant shall have ten (10) days' notice
prior to Landlord's undertaking of any non-emergency repair which Landlord
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intends to undertake. Tenant shall be permitted to perform such non-emergency
repair if it diligently pursues the undertaking thereof within such ten (10) day
period. Landlord shall exercise reasonable efforts to minimize any inconvenience
to Tenant or interference with Tenant's use and enjoyment of the Demised
Premises, and Landlord shall carry out such repairs, replacements, improvements
or other work promptly and diligently. Tenant shall pay the cost of such repairs
and other work, as Additional Rental, within ten (10) days after rendition of a
statement therefor by Landlord.
66.2 In addition to Tenant's obligations under Article 4, Tenant, at
its sole cost and expense, shall take good care of the Premises and all
improvements and personal property located therein, including, without
limitation, all furniture, fixtures, machinery, equipment and all other personal
property and stock purchased by Tenant and used in connection with the operation
of its business at the Premises (all of the foregoing being hereinafter
collectively referred to as "Tenant's Property"), and Tenant shall make all
necessary repairs to the Premises and/or Tenant's Property in accordance with
the provisions contained herein, whether ordinary, extraordinary, foreseen, or
unforeseen, provided, however, that Tenant shall not be obligated to make any
repairs to the extent that the same is necessitated by the negligent acts or
omissions of Landlord, its agents, employees or contractors. Nevertheless, any
damage to the Building (including, without limitation, the Premises and the
roof), interior and exterior, arising from or caused by the negligence or
omissions of Tenant (or its agents, servants, employees, invitees or
contractors) shall be the liability of Tenant.
66.3 When used in this Article, the term "repairs" shall include
replacements and substitutions of all property when necessary, of a quality,
class and value at least equal to the property replaced or substituted.
66.4 Anything contained in this Lease to the contrary notwithstanding,
Tenant acknowledges that it shall be Tenant's responsibility to clean, maintain
and repair (subject to applicable legal requirements, including the requirements
of the New York City Landmarks Preservation Commission) the windows and window
frames in the Premises and any and all interior bathrooms within the Premises at
Tenant's sole cost and expense.
66.5 Nothing contained herein shall obligate Tenant to make any
structural repairs to the Premises except if caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
employees, contractors, invitees or licensees. Tenant acknowledges that it shall
be Tenant's responsibility to repair any leaks in the bathrooms or emanating
through the windows in the Premises. The obligation to repair any other leaks in
the pipes servicing the Premises shall be that of Landlord, except if the same
are caused by or resulting from the carelessness, omission, neglect or improper
conduct of Tenant, Tenant's employees, contractors, invitees or licensees.
67. CONDITIONAL LIMITATION.
If Tenant shall default in the payment of the rent reserved herein, or
any items of Additional Rental herein mentioned, or any part of either, during
any two (2) months, whether or not consecutive, in any twelve (12) month period,
and Landlord served upon Tenant petitions and notices of petition to dispossess
Tenant by summary proceedings in each such instance, then, notwithstanding that
such defaults may have been cured prior to the entry of a judgment against
Tenant, any further default in the payment of any moneys due Landlord hereunder
which shall continue for more than ten (10) days shall be deemed to be
deliberate, and Landlord may thereafter serve a written ten (10) days' notice of
cancellation of this Lease, and the term hereunder shall end and expire as
fully and completely as if the expiration of such ten (10) day period were the
day herein definitely fixed for the end and expiration of this Lease and the
term thereof, and Tenant shall then quit and surrender the Premises to Landlord,
but Tenant shall remain liable as elsewhere provided in this Lease.
68. LANDLORD'S SERVICES.
68.1 Landlord shall furnish Tenant with the following services:
68.1.1 Non-exclusive passenger elevator service during regular
hours (that is, between the hours of 8:00 a.m. and 6:00 p.m.) of business days
(which term is used to mean all days except Saturdays, Sundays, those days that
are observed by the State or Federal governments as legal holidays, and those
days designated as holidays by the applicable building service union employees'
contract) through the year ("Regular Hours"). At all other times, Landlord shall
have one elevator subject to call.
27.1.2 Non-exclusive freight elevator service during Regular
Hours (that is, between the hours of 8:00 a.m. and 6:00 p.m.) of business days
(which term is used to mean all days except Saturdays, Sundays, those days that
are observed by the State or Federal governments as legal holidays, and those
days designated as holidays by the applicable building service union employees'
contract) through the year ("Regular Hours"). Use of the freight elevator shall
be arranged by Tenant on not less than twenty-four (24) hours prior notice and
shall be provided by Landlord to the extent that no conflict exists with other
tenants or other parties requesting such usage (all such conflicts to be
resolved by Landlord, in Landlord's sole discretion) and Tenant shall reimburse
Landlord for all costs relating thereto. If Tenant's initial occupancy or
relocation into or out of the Building requires the use of the freight elevator
or other standard services at times other than Regular Hours, Tenant shall
reimburse Landlord for all costs relating to such elevator usage or other
services.
68.2 All waste and garbage shall be removed from the Premises to the
outside of the Building, at Tenant's sole cost and expense, on a daily basis, by
a private sanitation company independently contracted for and paid for by
Tenant. Tenant shall not store any garbage, cartons or inventory outside of the
Premises. Tenant covenants and agrees, at its sole cost and expense, to comply
with all present and future laws, orders and regulations of all state, federal,
municipal and local governmental, departments, commissions and boards regarding
the collection, sorting, separation and recycling of waste products, garbage,
refuse and trash. Tenant shall sort and separate such waste products, garbage,
refuse and trash into such categories as provided by law.
68.3 Landlord reserves the right, without any liability to Tenant
(except as otherwise expressly provided in this Lease), to stop operating any of
the heating, ventilating, electric, sanitary, elevator, or other Building
systems serving the Premises, and to stop the rendition of any of the other
services required of Landlord under this Lease, whenever and for so long as may
be necessary by reason of accidents, emergencies, strikes, or the making of'
repairs or changes that Landlord is required by this Lease or by law to make or
in good faith deems necessary, by reason of difficulty in securing proper
supplies of fuel, steam, water, electricity, labor, or supplies, or by reason of
any other cause beyond Landlord's reasonable control.
69. TENANT'S ALTERATIONS.
69.1 Tenant may, without the consent of Landlord, from time to time
during the term of this lease and at Tenant's sole expense, make such
alterations, additions, installations, substitutions, improvements and
decorations (hereinafter collectively
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called changes and, as applied to changes provided for in this Article, Tenant's
Changes) in and to the Premises, the estimated cost of which does not exceed
$40,000.00 as Tenant may reasonably consider necessary for the conduct of its
business therein, on the following conditions:
69.1.1 the outside appearance or strength of the Building, or
of any of its structural parts, shall not be materially and adversely affected;
69.1.2 no part of the Building outside of the Premises shall
be physically affected;
69.1.3 the proper functioning of any of the mechanical,
electrical, sanitary and other service systems of the Building and/or the
Premises shall not be adversely affected, and the usage of such systems by
Tenant shall not be increased, subject to Tenant's right to upgrade the
electrical capacity servicing the Premises;
69.1.4 before proceeding with any change either costing in
excess of $40,000.00 (exclusive of the costs of decorating work and of any
architect's and engineer's fees), or involving any change to the mechanical,
electrical, sanitary, HVAC and/or other service systems, irrespective of cost,
Tenant shall submit to Landlord, for Landlord's prior approval, plans and
specifications for the work to be done, drawn by a registered architect or duly
licensed engineer. Without limiting the generality of the foregoing, Tenant
shall cause to be prepared all drawings, plans and specifications, and all other
reports, applications and materials, required by the Department of Buildings of
the City of New York, the Department of Labor and any other governmental
authorities having jurisdiction with respect to Tenant's Changes and any permits
and special licenses which may be required for or in connection with Tenant's
Changes or the permitted use. Any and all filings of such drawings, plans,
specifications, reports, applications and other materials with the Department of
Buildings of the City of New York, the Department of Labor and any other
governmental authorities having jurisdiction shall be made solely by Tenant at
Tenant's sole cost and expense. Landlord shall reasonably cooperate with Tenant
in connection with the execution and delivery of documents necessary to obtain
work permits. Nothing herein shall be deemed to, or operate to create any
liability or other obligation on the part of Landlord in the event that any such
filings shall not be approved by the Department of Buildings of the City of New
York or any other governmental authority having jurisdiction, unless caused by
Landlord's failure to reasonably cooperate with Tenant's requests. Landlord may,
as a condition of its consent, require Tenant to reimburse Landlord for
Landlord's out-of-pocket cost for an independent architect or engineer to review
the plans and specifications and make revisions in and to the plans and
specifications.
69.2 Tenant shall, at its expense, obtain all necessary governmental
licenses, permits and certificates for the commencement and prosecution of
Tenant's Changes, and, upon completion, obtain all necessary signoffs and
certificates of acceptance and completion which may be required from such
governmental authorities, and Tenant shall cause Tenant's Changes to be
performed in compliance with such licenses, permits and certificates, as well as
with all applicable laws, codes, ordinances, regulations and requirements of
public authorities (including, without limitation, the New York City Landmarks
Commissions [the "Landmarks Commission"]) and all applicable standards and
requirements of insurance bodies, the New York Board of Fire Underwriters, the
National Electric Code, the Occupational Safety and Health Administration, the
American Society of Heating, Refrigeration and Air Conditioning Engineers,
I.S.O., and any similar or successor bodies thereto, in a good and workmanlike
manner, using new materials and equipment of a quality and class at least equal
to the original installations in the Premises. Tenant's Changes shall be
performed during the hours of 9:00 a.m. to 5:00 p.m. on days other than
Saturdays, Sundays and holidays in such a manner as not to unreasonably
interfere with or delay, and (unless Tenant shall indemnify Landlord therefor to
the latter's reasonable satisfaction) so as not to impose any additional expense
upon Landlord in the maintenance or operation of the Premises, and so as not to
interfere with the safety, use, occupancy, comfort or quiet enjoyment of any
other tenant or occupant of the Building. If Landlord incurs any costs or
expenses in connection with the performance of Tenant's Changes, other than
those set forth in the previous sentence, Tenant shall reimburse Landlord for
the actual costs and expenses incurred by Landlord. Throughout the performance
of Tenant's Changes, Tenant shall, at its expense, carry, or cause to be
carried, builder's risk insurance, insuring against loss from fire, vandalism or
other risks as are customarily covered by a broad-form extended coverage
endorsement on a completed value basis for the full insurable value at all
times, workers' compensation insurance in statutory limits, and general
liability insurance for any occurrence in or about the Building, all as set
forth in, and written by insurance companies described in, Article 54 hereof.
All such insurance policies (other than the workers' compensation) shall name
Landlord and its agents as additional parties insured, and shall be in such
limits as Landlord may reasonably prescribe and be placed with insurers
satisfactory to Landlord. Tenant shall furnish Landlord with satisfactory
evidence that such insurance is in effect at or before the commencement of
Tenant's Changes and, on request, at reasonable intervals thereafter during the
continuance of Tenant's Changes. Tenant shall not cause damage to the Building,
building systems or any personal property of Landlord or any other tenant or
occupant of the Building, and in the event of any such damage will promptly
repair any such damage to Landlord's satisfaction. If any of Tenant's Changes
shall involve the removal of any fixtures, equipment, or other property in the
Premises that are not Tenant's property, such fixtures, equipment, or other
property shall be, upon Landlord's request, stored and preserved, and returned
to Landlord upon the expiration or sooner termination of this lease. All
electrical and plumbing work in connection with Tenant's Changes shall be
performed by contractors or subcontractors licensed therefor by all governmental
agencies having or asserting jurisdiction and satisfactory to Landlord.
69.3 For the purposes of this Article 69, Tenant shall select and use
general contractors and subcontractors, and electrical engineers and plumbers,
from a list of those pre-approved by Landlord. In the event Tenant desires to
use a general contractor or subcontractor, or electrical engineer or plumber,
not on Landlord's list, Tenant shall (a) obtain Landlord's prior written
consent, and (b) pay to Landlord, as Additional Rental, a
supervisory/administrative fee in an amount equal to Ten Percent (10%) of the
"hard" costs of the construction.
69.4 Tenant, at its sole cost and expense, shall: (i) furnish evidence
satisfactory to Landlord that all of Tenant's Changes have been completed and
paid for in full and that any and all liens therefor that have been or might be
filed have been discharged of record (by payment, bond, order of a court of
competent jurisdiction, or otherwise) or waived, and that no security interests
relating thereto are outstanding; (ii) pay Landlord for the cost of any Tenant's
Changes done for Tenant by Landlord, and all other charges due hereunder; (iii)
to the extent not previously provided, furnish to Landlord the insurance and
certificates required by this Lease; and (iv) if an architect has been used,
furnish an affidavit in the form recommended by the American Institute of
Architects from Tenant's registered architect certifying that all work performed
in the Premises is substantially in accordance with the plans and
specifications.
69.5 Tenant shall, at its expense and with diligence and dispatch,
procure the cancellation or discharge of all notices of violation arising from,
or otherwise connected with, Tenant's Changes that shall be issued by the
Department of Buildings of the City of New York, the Landmarks Commission, or
any other public or quasi-public authority having or asserting jurisdiction.
Tenant shall defend, indemnify and save Landlord harmless from and against any
and all notices of violation and mechanic's and other liens filed in connection
with Tenant's Changes, including the liens of any security interest in,
conditional
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sales of, or chattel mortgages upon, any materials, fixtures, or articles so
installed in and constituting part of the Premises, and against all costs,
expenses and liabilities incurred in connection with any such lien, security
interest, conditional sale, or chattel mortgage or any action or proceeding
brought thereon. Tenant, at its expense, shall procure the satisfaction or
discharge of, by bonding, payment or otherwise, all such liens within thirty
(30) days after Landlord makes written demand therefor. Notice is hereby given
that neither Landlord, Landlord's agents, nor any mortgagee shall be liable for
any labor or materials furnished or to be furnished to Tenant upon credit, and
that no mechanic's or other lien for such labor or materials shall attach to or
affect any estate or interest of Landlord, or any mortgagee in and to the
Premises or the Building.
69.6 Tenant agrees that the exercise of its rights pursuant to the
provisions of this Article shall not be done in a manner that would, in the
reasonable judgment of Landlord: (a) create any work stoppage, picketing, labor
disruption, or dispute; or (b) violate the Building's union contracts affecting
the Land and/or Building or Landlord's union and/or service contracts, if any,
affecting the Premises. In the event of the occurrence of any condition
described above arising from Tenant's exercise of any of its rights pursuant to
the provisions of this subparagraph 69.7, Tenant shall, immediately upon notice
from Landlord, cease the manner of exercise of such right giving rise to such
condition. In the event that Tenant fails to cease such manner of exercise of
its rights as aforesaid, Landlord, in addition to any rights available to it
under this lease and pursuant to law, shall have the right to seek an
injunction.
69.7 Any approval or consent by Landlord shall in no way obligate
Landlord in any manner whatsoever in respect to the finished product designed
and/or constructed by Tenant, nor be deemed a representation of warranty of
Landlord as to the adequacy or sufficiency of any matter approved or consented
to for Tenant's purposes or otherwise. Any deficiency in design or construction,
although approved by Landlord, shall be solely the responsibility of Tenant.
69.8 Landlord shall have the right to inspect Tenant's Work at any time
to verify compliance by Tenant with the provisions of this Article.
69.9 Subject to the terms of this Article, Tenant may, at its sole cost
and expense (i) install a heating, ventilation and air conditioning unit, in a
location to be approved by landlord, (ii) install restrooms in accordance with
plans prepared or approved by Landlord and (iii) install additional
telecommunication infrastructures.
70. SUBORDINATION AND ATTORNMENT.
70.1 This Lease and all rights of Tenant hereunder are, and shall be,
subject and subordinate to: (i) all mortgages and building loan agreements,
including leasehold mortgages and spreader and consolidation agreements, which
may now or hereafter affect the Land or the Building (collectively, including
the applicable items set forth in subparagraphs 70.4 and 70.5 below, the
"Superior Mortgage") whether or not the Superior Mortgage shall also cover other
lands or buildings or leases, (ii) each advance made or to be made under the
Superior Mortgage; and (iii) all amendments, modifications, supplements,
renewals, substitutions, refinancings and extensions of the Superior Mortgage
and all spreaders and consolidations of the Superior Mortgage. The provisions
of this Article shall be self-operative and no further instrument of
subordination shall be required. Tenant shall promptly execute and deliver, at
its own expense, any instrument, in recordable form, if requested, that Landlord
or the Superior Mortgagee may reasonably request at any time and from time to
time to evidence such subordination; and if Tenant fails to execute, acknowledge
or deliver any such instrument within fifteen (15) days after request therefor,
Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact, coupled with an interest, to execute, acknowledge and deliver
any such instruments for, and on behalf of, Tenant. The Superior Mortgagee may
elect that this Lease shall be deemed to have priority over such Superior
Mortgage, whether this Lease is dated prior to, or subsequent to, the date of
such Superior Mortgage.
70.2 Landlord shall use its best efforts to obtain from the holder of
any Superior Mortgage an agreement in recordable form between the holder of the
Superior Mortgage and Tenant providing in substance that so long as Tenant shall
not be in default under this lease beyond any period of time given to Tenant to
cure such default and shall be in actual occupancy of the Premises, that the
holder of such Superior Mortgage shall not name or join Tenant as a party
defendant or otherwise in any suit, proceeding or action to enforce, nor will
this Lease be terminated by enforcement of any rights given to such holder of
the Superior Mortgage or its successors or assigns pursuant to the terms,
covenants or conditions contained in the Superior Mortgage (including the
foreclosure of the same) or otherwise disturb the right of Tenant to the quiet
enjoyment of the Premises in the event of the enforcement of the terms of the
Superior Mortgage by such holder (including the foreclosure of the same); except
that to the extent required by law, Tenant may be named in such proceeding so
long as the relief requested does not contravene the provisions of this Section,
Provided Landlord shall have used its best efforts to obtain such agreement,
Landlord shall have no liability to Tenant in the event the holder of a Superior
Mortgage shall fail or refuse to issue the agreement referred to in this Section
or shall fail to comply with the terms and provisions thereof. Tenant shall
join in any agreement issued by the holder of the Superior Mortgage to evidence
its agreement and consent thereto and to any other such terms as may be
reasonably required by the holder of the Superior Mortgage as a condition to its
issuance of such agreement, provided that any such agreement shall not increase
the obligations or reduce the rights of Tenant under this Lease. In connection
with Landlord's attempts to obtain a non-disturbance agreement, Landlord shall
in no event be required to (x) make any payment to the holder of any Superior
Mortgage or incur any expense other than reasonable attorneys' fees in
connection with such holder's review of this Lease and the preparation of such
agreement, or (y) alter any of the terms of any existing or future Superior
Mortgage, or (z) commence any action against any holder of a Superior Mortgage.
70.3 Landlord hereby notifies Tenant that this Lease may not be
cancelled or surrendered, or modified or amended so as to reduce the Rentals,
shorten the term or adversely affect in any other respect, to any material
extent, the rights of Landlord hereunder, and that Landlord may not accept
prepayments of any installments of Fixed Rental or Additional Rental except for
prepayments in the nature of security for the performance of Tenant's
obligations hereunder without the consent of any Superior Mortgagee in each
instance, except that said consent shall not be required for the prosecution of
any action or proceedings against Tenant by reason of a default on the part of
Tenant under the terms of this Lease.
70.4 If, at any time prior to the termination of this Lease, any
Superior Mortgagee or any other person or the successors or assigns of the
foregoing (collectively referred to as "Successor Landlord") shall succeed to
the rights of Landlord under this Lease, Tenant agrees, at the election and upon
request of any such Successor Landlord, to fully and completely attorn to and
recognize any such Successor Landlord, as Tenant's Landlord under this Lease
upon the then executory terms of this Lease, provided such Successor Landlord
shall agree in writing to accept Tenant's attornment. The foregoing provisions
of this subparagraph shall inure to the benefit of any such Successor Landlord,
shall be self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions. Upon the request of any such
Successor Landlord, Tenant shall execute and deliver, from time to time,
instruments satisfactory to any such Successor Landlord in recordable form, if
requested, to evidence and confirm the foregoing provisions of this
subparagraph, acknowledging such attornment and setting
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forth the terms and conditions of its tenancy. Tenant hereby constitutes and
appoints Landlord attorney-in-fact for Tenant to execute any such instrument,
for and on behalf of Tenant, such appointment being coupled with an interest.
Upon such attornment this Lease shall continue in full force and effect as a
direct Lease between such Successor Landlord and Tenant upon all of the then
executory terms of this Lease except that such Successor Landlord shall not be:
(i) liable for any previous act or omission or negligence of Landlord under this
Lease; (ii) subject to any counterclaim, defense or offset, not expressly
provided for in this Lease and asserted with reasonable promptness, which
theretofore shall have accrued to Tenant against Landlord; (iii) bound by any
previous modification or amendment of this Lease made after the granting of such
senior interest, or by any previous prepayment of more than one month's Fixed
Rental or Additional Rental, unless such modification or prepayment shall have
been approved in writing by any Superior Mortgagee through or by reason of which
the Successor Landlord shall have succeeded to the rights of Landlord under this
Lease; (iv) obligated to repair the Premises or the Building or any part
thereof, in the event of total or substantial damage beyond such repair as can
reasonably be completed with the net proceeds of insurance actually made
available to Successor Landlord, provided all insurance to be maintained by the
Landlord hereunder is thus maintained; or (v) obligated to repair the Premises
or the Building or any part thereof, in the event of partial condemnation beyond
such repair as can reasonably be completed with the net proceeds of any award
actually made available to Successor Landlord, or consequential damages
allocable to the part of the Premises or the Building not taken. Nothing
contained in this subparagraph shall be construed to impair any right otherwise
exercisable by any such Successor Landlord.
70.5 If any act or omission by Landlord would give Tenant the right,
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, Tenant will not exercise any such right until
(i) it has given written notice of such act or omission to each Superior
Mortgagee, whose name and address shall have previously been furnished to
Tenant, by delivering notice of such act of omission addressed to each such
party at its last address so furnished, and (ii) a reasonable period for
remedying such act or omission shall have elapsed following such giving of
notice and following the time when such Superior Mortgagee shall have become
entitled under such Superior Mortgage, as the case may be, to remedy the same
(which shall in no event be less than the period to which Landlord would be
entitled under this Lease to effect such remedy) provided such Superior
Mortgagee shall, with reasonable diligence, give Tenant notice of its intention
to remedy such act or omission and shall commence and continue to act upon such
intention.
71. MISCELLANEOUS.
71.1 Tenant hereby agrees to pay, as Additional Rental, all attorneys'
fees and disbursements (and all other court costs or expenses of legal
proceedings) which Landlord may incur or pay out by reason of, or in connection
with:
71.1.1 Any action or proceeding by Landlord to terminate this
Lease for reasonable cause;
71.1.2 Any other action or proceeding by Landlord against
Tenant (including, but not limited to, any arbitration proceeding);
71.1.3 Any action or proceeding brought by Tenant against
Landlord (or any officer, partner or employee of Landlord) in which Tenant fails
to secure a final unappealable judgment against Landlord; and
71.1.4 Any other appearance by Landlord (or any officer,
partner or employee of Landlord) as a witness or otherwise in any action or
proceeding whatsoever involving or affecting Tenant or this Lease.
Tenant's obligations under this Paragraph shall survive the
expiration of the term hereof or any other termination of this Lease. This
Paragraph is intended to supplement, and not to limit, other provisions of this
Lease pertaining to indemnities and/or attorneys' fees.
71.2 If any of the provisions of this Lease, or the application thereof
to any person or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
provision or provisions to persons or circumstances other than those as to whom
or which it is held invalid or unenforceable, shall not be affected thereby, and
every provision of this Lease shall be valid and enforceable to the fullest
extent permitted by law.
71.3 No agreement to accept a surrender of all or any part of the
Premises shall be valid unless in writing and signed by Landlord. The delivery
of keys to an employee of Landlord or of its agent shall not operate as a
termination of this Lease or a surrender of the Premises. If Tenant shall, at
any time, request Landlord to sublet the Premises for Tenant's account, Landlord
or its agent is authorized to receive said keys for such purposes without
releasing Tenant from any of its obligations under this Lease, and Tenant hereby
releases Landlord from any liability for loss or damage to any of Tenant's
property in connection with such subletting.
71.4 The receipt by Landlord of rent with knowledge of breach of any
obligation of this Lease shall not be deemed a waiver of such breach.
71.5 No payment by Tenant, or receipt by Landlord, of a lesser amount
than the correct Fixed Rental or Additional Rental due hereunder shall be deemed
to be other than a payment on account, nor shall any endorsement or statement on
any check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance or pursue any other remedy in this Lease or at law provided.
71.6 The terms "person" and "persons" as used in this Lease shall be
deemed to include natural persons, firms, corporations, associations and any
other private or public entities.
71.7 If Tenant is in arrears in the payment of Fixed Rental or
Additional Rental, Tenant waives its right, if any, to designate the items in
arrears against which any payments made by Tenant are to be credited, and
Landlord may apply any of such payments to any such items in arrears as
Landlord, in its sole discretion, shall determine, irrespective of any
designation or request by Tenant as to the items against which any such payments
shall be credited.
71.8 The terms "Owner" and "Landlord" as used in this Lease are
interchangeable. The terms "Article" and "Paragraph" as used in this Lease are
interchangeable.
71.9 If Tenant is a corporation, the person executing this Lease on
behalf of Tenant hereby covenants, represents and warrants that Tenant is duly
incorporated and is authorized to do business in New York State and that the
person executing this Lease on behalf of Tenant is an officer of the corporation
authorized to execute this Lease.
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72. LEASE NOT BINDING UNLESS EXECUTED.
Submission by Landlord of this Lease for execution by Tenant shall
confer no rights nor impose any obligations on either party unless and until (i)
Tenant shall have submitted to Landlord (a) at least four copies of this Lease
to Landlord, duly executed by or on behalf of Tenant (and in the case that
Tenant is a corporation, Tenant shall submit to Landlord a duly executed
resolution of Tenant's board of directors authorizing this Lease), (b) separate
checks payable to the direct order of Landlord on a bank account in Tenant's
name in the amount of the first monthly installment of Fixed Rental payable upon
the execution of this Lease and the security deposit, (c) a certificate of
insurance in form required in this Lease and (d) any other deliveries
specifically called for under this Lease to be submitted to Landlord on or prior
to the commencement date of the Term and (ii) Landlord shall have countersigned
this Lease and duplicate originals thereof shall have been delivered by Landlord
to Tenant. In the event Landlord countersigns and delivers this Lease to Tenant
at a time when any of the aforementioned deliveries have not been received by
Landlord or are not in proper form, this Lease shall be effective, but Tenant
shall remain obligated to provide such deliveries, the same not being waived by
Landlord, unless Landlord specifically waives receipt of the same in writing.
73. SUBMISSION TO JURISDICTION.
This Lease shall be deemed to have been made in New York County, City
and State of New York, and shall be construed in accordance with the laws of the
State of New York. All actions or proceedings relating, directly or indirectly,
to this Lease, shall be litigated only in courts located within the County of
New York. Tenant, any guarantor of the performance of its obligations hereunder,
and their successors and assigns, hereby subject themselves to the jurisdiction
of any state or federal court located within such county, waive personal service
of any process upon them in any action or proceeding therein, and consent that
such process be served by certified or registered mail, return receipt
requested, directed to the Tenant and any successor at Tenant's address herein
above set forth, or to Guarantor and any successor at the address set forth in
the instrument of guaranty and to any assignee at the address set forth in the
instrument of assignment. Such service shall be deemed made three (3) days after
such process is so mailed.
74. QUALIFICATIONS AS TO USE.
Tenant shall not suffer or permit the Premises or any part thereof to
be used in any manner or anything to be done therein, or suffer or permit
anything to be brought into or kept therein, which would in any way, (i) violate
any of the provisions of any Superior Mortgage or Superior Lease, or the
requirements of public authorities, (ii) make void or voidable any fire or
liability insurance policy, then in force with respect to the Building; (iii)
make unobtainable from reputable insurance companies authorized to do business
in the State of New York any fire insurance with extended coverage, or
liability, elevator, boiler, or other insurance required o be furnished by
Landlord under the terms of any Superior Mortgage or Superior Lease at standard
rates, if obtainable at such rates prior to the execution and delivery of this
Lease; (iv) cause or in Landlord's reasonable opinion be likely to cause
physical damage to the Building or any part thereof; (v) constitute a public or
private nuisance or otherwise violate any law relating to the protection of the
environment or requiring manufacture, treatment or disposal of any material used
by Tenant at the Premises in any particular manner; (vi) impair, in the sole
opinion of Landlord, the appearance, character or reputation of the Building;
(vii) discharge objectionable fumes, vapors or odors into the Building air
conditioning system or into the Building flues or vents not designed to receive
them or otherwise in a manner as may offend other tenants or occupants of the
Building; (viii) impair or interfere with any of the Building services or the
proper and economic heating, cleaning, air conditioning or other servicing of
the Building or the Premises, or impair or interfere with or tend to impair or
interfere with the use of any of the other areas of the Building by, or occasion
discomfort, annoyance or inconvenience to, Landlord or any of the other tenants
or occupants of the Building, any such impairment or interference to be in the
sole judgment of Landlord; (ix) violate any provision of law pursuant to which
Landlord may incur civil or criminal liability as a result of Tenant's action,
including, without limitation, civil or criminal forfeiture, padlocking or other
restraint of the Premises or the Building by governmental authority; (x)
increase the pedestrian traffic in and out of the Premises and/or the Building
above an ordinary level or (xi.) engage in the sale of any product from the
Premises or the Building in violation of 15 U.S.C.A. Section 1051 et seq. or any
similar federal or state law. Landlord shall not be liable for the violation by
any tenant or other party of the rules and regulations of the Building or for
such other party's breach of its lease.
75. PARTNERSHIP TENANT.
If Tenant is a partnership (or is comprised of two [2] or more persons,
individually and as co-partners of a partnership), or if Tenant's interest in
this Lease shall be assigned to a partnership (or to two [2] or more persons,
individually and as co-partners of a partnership) pursuant to Article 51 (any
such partnership and such persons are referred to in this Article as
"Partnership Tenant"), the following provisions of this Article shall apply to
such Partnership Tenant: (i) the liability of each of the parties comprising
Partnership Tenant shall be joint and several, and (ii) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any written instrument which may hereafter be executed, changing,
modifying or discharging this Lease, in whole or in part, or surrendering all or
any part of the Premises to Landlord, and by any notices, demands, requests or
other communications which may hereafter be given by Partnership Tenant or by
any of the parties comprising Partnership Tenant, and (iii) any bills,
statements, notices, demands, requests or other communications given or rendered
to Partnership Tenant and all such parties shall be binding upon Partnership
Tenant and all such parties, and (iv) if Partnership Tenant shall admit new
partners, all of such new partners shall, by their admission to Partnership
Tenant, be deemed to have assumed performance of all of the terms, covenants
and conditions of this Lease on Tenant's part to be observed and performed, and
(v) Partnership Tenant shall give prompt notice to Landlord of the admission of
any such new partners, and upon demand of Landlord, shall cause each such new
partner to execute and deliver to Landlord an agreement in form satisfactory to
Landlord, wherein each such new partner shall assume performance of all the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed (but neither Landlord's failure to request any such agreement nor
the failure of any such new partner to execute or deliver any such agreement to
Landlord shall vitiate the provisions of subdivision (iv) of this Article).
76. CERTIFICATE OF OCCUPANCY.
Tenant shall not at any time use or occupy the Premises in violation of
the Certificate of Occupancy issued for the Premises or for the Building, and in
the event that any department of the City or State of New York shall hereafter
at any time contend and/or declare by notice, violation, order or in any other
manner whatsoever that the Premises are used for a purpose which is a violation
of such Certificate of Occupancy, Tenant shall, upon ten (10) days' written
notice from Landlord, immediately discontinue such use of the Premises. Failure
by Tenant to discontinue such use after such notice shall be considered a
default in the fulfillment of a covenant of this Lease, and Landlord shall have
the right to terminate this Lease immediately, and in addition thereto shall
have the right to exercise any and all rights and privileges and remedies given
to Landlord by and pursuant to the provisions of Articles 17 and 18 hereof.
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77. ACCESS TO PREMISES
Tenant understands and agrees that all parts (except surfaces facing
the interior of the Premises) of all walls, windows and doors bounding the
Premises (including exterior Building walls, core corridor walls, doors and
entrances), all balconies, terraces and roofs adjacent. to the Premises, all
space in or adjacent to the Premises used for shafts, stacks, stairways, chutes,
pipes, conduits, ducts, fan rooms, heating, air cooling, plumbing and other
mechanical facilities, service closets and other Building facilities are not
part of the Premises, and Landlord shall have the use thereof, as well as access
thereto, subject to Article 13 of this Lease, through the Premises for the
purposes of operation, maintenance, alteration and repair.
78. USE OF PREMISES.
Supplementing Article 2, under no circumstances whatsoever shall the
Premises or any part thereof be used: (1) as a multiple tenancy; (2) by a
foreign or domestic governmental agency; (3) as a betting parlor or gambling
casino; (4) by a utility company; (5) as a restaurant, luncheonette or coffee
shop; (6) for the on-premises or off-premises sale of alcoholic beverages or as
a catering or events facility; (7) for the sale of candy or cigarettes; (8) as
an amusement arcade or for use of video games, pinball machines or other
customer-attracting devices; (9) for the playing of amplified music, for live
entertainment, for dancing or as a discotheque or club; (10) for the sale,
display or rental of "adult" or pornographic books, magazines or videos; (11) as
a medical, psychiatric, abortion, drug or alcohol clinic; (12) as an employment
agency or search firm; (13) for retail, manufacturing or residential use; and/or
(14) for any use other than the use set forth in Article 2.
79. EXCLUSION OF PERSONS FROM PREMISE AND DELIVERY SYSTEMS.
Landlord reserves the right to exclude from all portions of the
Building at any time or times during the term hereof, all messengers, couriers
and delivery people other than those who are employees of Tenant. In such event
Landlord shall accept on behalf of Tenant all deliveries of mail, air courier
packages, express packages and other packages sent by similar means (including
any hand deliveries of such mail and packages), shall permit messengers and
couriers to pick up mail or packages left by Tenant, and shall provide an area
to be used for such purposes to which Tenant's employees shall deliver mail and
packages to be picked up by others and from which such employees shall pick up
and distribute mail and packages to be delivered to Tenant, provided, however,
that Landlord may elect to provide such distribution to Tenant at Tenant's
expense. Tenant shall comply with Landlord's rules relating to such area and
services. Neither Landlord nor Landlord's agents or security personnel shall be
liable to Tenant or Tenant's agents, employees, contractors, customers, clients,
invitees or licensees or to any other person for, and Tenant hereby indemnifies
Landlord and Landlord's agents and security personnel against, liability in
connection with or arising out of damage to mail or packages, or the performance
or non-performance by Landlord or any person acting by, through or under the
direction of Landlord of the services set forth in this Paragraph (including any
liability in respect of the property of such persons), unless due to the gross
negligence or willful misconduct of Landlord or Landlord's agents or security
personnel. No representation, guaranty or warranty is made or assurance given
that the communications or security systems, devices or procedures of the
Building will be effective to prevent injury to Tenant or any other person or
damage to, or loss (by theft or otherwise) of, any property of Tenant or of any
other person, and Landlord reserves the right to discontinue or modify at any
time such communications or security systems or procedure without liability to
Tenant.
80. ADDENDUM TO RULES AND REGULATIONS.
The following additional Rules and Regulations are hereby incorporated
into and made a part of the Rules and Regulations set forth at the end of the
printed form of the Lease:
80.1 Fire exits and stairways are for emergency use only, and they
shall not be used for any other purpose by Tenant or Tenant's employees,
licensees or invitees. Landlord reserves the right to control and operate the
public portions of the Building and the public facilities, as well as facilities
furnished for the common use of the tenants, in such manner as it deems best for
the benefit of the tenants generally.
80.2 Notwithstanding anything provided to the contrary in this Lease,
Tenant shall not cause any machinery, equipment, sign, banner, or any other
thing to protrude from the Premises to the exterior of the Building beyond the
horizontal plane of the exterior windows of the Premises or beyond the Premises
within the interior of the Building.
80.3 Attached hereto as Exhibit C is a copy of additional Rules and
Regulations for the Building.
81. SCAFFOLDING.
In the event Landlord shall desire (or becomes obligated) to modify
portions of the Building or to alter or renovate the same or clean, repair or
waterproof the Building's facade (whether at Landlord's option or to comply with
law), Landlord may erect scaffolding, "bridges" and other temporary structures
to accomplish the same, notwithstanding that such structures may obscure signs
or windows forming a part of the Premises, and notwithstanding that access to
portions of the Premises may be temporarily diverted or partially obstructed,
provided, however, that Landlord agrees to use reasonable efforts to minimize
impairment of access to the Premises. Landlord shall not be liable to Tenant or
any party claiming through Tenant for loss of business or other consequential
damages arising out of any change in the Building or temporary diversion or
partial obstruction resulting from such alteration, renovation, repair or
cleaning, out of the foregoing structures, or out of any noise, dust and debris
from the performance of work in connection therewith, nor out of the disruption
of Tenant's business or access to the Premises necessary to perform such
repairs, nor shall any matter arising out of any of the foregoing be deemed a
breach of Landlord's covenant of quiet enjoyment or entitle Tenant to any
abatement of rent.
82. TENANT'S CANCELLATION OPTION:
Provided that Tenant is not then in default in respect of all of its
material obligations hereunder, Tenant shall have the one-time option (the
"Termination Option") to cancel this Lease effective as of March 31, 2005 (the
"Option Termination Date") exercisable by Tenant's giving irrevocable written
notice ("Tenant's Notice") to Landlord of Tenant's exercise on or before
December 1, 2004 (time being of the essence as to Tenant's obligation to give
Tenant's Notice by such date). If Tenant duly and timely serves the Termination
Notice and on the further condition that (i) Tenant shall pay to Landlord when
due Fixed Rental and Additional Rental through the Option Termination, (ii)
Tenant shall pay to Landlord in certified or bank funds the sum of $70,000.00,
and (iii) Tenant shall surrender vacant and broom-clean possession of the
Premises to Landlord on the Option Termination Date in accordance with the
provisions of this Lease, free and clear of all tenancies, subtenancies and
occupancy rights, then this Lease shall cease and expire on the Option
Termination Date with the same force and effect as if the Option
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Termination Date were the Termination Date. After delivery of Tenant's Notice,
Landlord shall not be obligated to thereafter offer to Tenant the right to lease
the Other Space.
83. ACCOMMODATION RIGHT OF FIRST OFFER.
Provided this Lease is in full force and effect and Tenant is not in
material default in respect of its obligations hereunder after notice and beyond
any applicable period of grace, if at any time Landlord determines that space on
the ninth (or seventh if landlord exercises its option under Article 84 below)
floor of the Building (the "Other Space") will be offered for lease, Landlord
shall send a notice to Tenant specifying the rent at which and the other terms
and conditions upon which the Other Space is being offered. Tenant shall then
have the right, exercisable within thirty (30) days after the date of Landlord's
notice, to notify Landlord in writing of Tenant's desire to lease the Other
Space for the rent and on the other terms and conditions set forth in Landlord's
notice, in which event Landlord and Tenant shall promptly execute a lease (or a
modification of this Lease) for such space at the rent and other terms and
conditions specified in Landlord's notice. In the event Tenant fails to exercise
its option for the space specified in the notice, within such thirty (30) day
period, or if Tenant exercises such option within such thirty (30) day period
but Landlord and Tenant have not entered into a lease (or a modification of this
Lease) within thirty (30) days after the date of Tenant's notice of exercise
because of Tenant's unwillingness or failure so to do, then Landlord shall
thereafter be free to lease the Other Space to any third party at such rent and
upon such conditions as Landlord may determine in its sole discretion.
84. THE PREMISES.
Landlord shall have the right, in its sole discretion, to substitute
the Demised Premises for a space on the seventh floor of the northeast portion
of the Building, which right Landlord shall exercise by written notice delivered
to Tenant within thirty (30) days of the date of this Lease, time being of the
essence, provided, however, that Landlord fulfills the following obligations:
84.1 the Alternate Space shall be substantially the same size and
quality of the Demised Premises set forth on Exhibit A, and Landlord otherwise
complies with the terms of this Lease;
84.2 the Alternate Space is delivered to Tenant in the manner, and on
the date, set forth in this Lease;
84.3 the Base Rent payable by Tenant shall be reduced by $1.00 per
rentable square foot of the Alternate Space throughout the Term of the Lease;
and
84.4 all of the remaining terms and conditions of this Lease shall
apply to the Alternate Space.
85. LANDLORD'S WORK TO COMMON AREAS
85.1 Landlord shall complete the following work to the common areas of
the Building within twenty-four (24) months from the date of this Lease:
85.1.1 Build a new common corridor on the 9th Floor by April 30, 1999;
85.1.2 Renovate the lobby of the Building by July 30, 2001; and
85.1.3 Install new elevators serving the 9th Floor by July 30, 2001.
85.2 In the event any of the above listed items of work is not
substantially completed within six (6) months of the respective dates set forth
in Section 85.1 (except 'for the work described in Section 85.1.1, which
abatement will commence on the date which is two (2) months after April 1,
1999), then Tenant shall be entitled to an abatement against its obligation to
pay Fixed Rent only for the item of work not so completed, in an amount equal to
five percent (5%) of the Fixed Rent (prorated on a daily basis). Each abatement
(to the extent Tenant is entitled to same) shall commence on the date which is
six months after the date by which the item of work was to have been completed
(except for the work described in Section 85.1.1, which abatement will commence
on the date which is two (2) months after April 1, 1999) and shall terminate on
the date the work is substantially completed, as determined by Landlord. In no
event (i) shall Tenant be entitled to an abatement greater than fifteen percent
(15%) of the Fixed Rental or (ii) shall Tenant be entitled to an abatement for
any item of work if it is completed within six (6) months of the date provided
in 85.1 above.
86. TENANT ACCESS TO BUILDING CONDUIT
To the extent present in the Building, and to the extent accessible
from the Premises, and provided Tenant and Landlord do not incur any costs in
connection therewith, Landlord shall permit Tenant to have access for the
purpose of connecting to the fiber optic lines and copper telecommunications
lines in the Building. Tenant shall obtain all necessary consents from Bell
Atlantic for the connection to the lines, and Landlord shall not charge Tenant a
usage fee for use of the lines.
LANDLORD
601 WEST ASSOCIATES, LLC
BY: SLB MANAGER, LLC
BY: /s/ SLB MANAGER, LLC
--------------------
Name:
Title:
TENANT:
SCREAMINGMEDIA.NET, INC.,
BY: /s/ Alan S. Ellman
--------------------
Name: Alan S. Ellman
Title: President
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EXHIBIT A
DESCRIPTION OF PREMISES
[This drawing of the Premises is only an approximation of the space demised, and
Landlord makes no representation that the dimensions indicated on this drawing
are the actual dimensions of the Premises.]
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EXHIBIT B
TO LEASE BETWEEN
601 WEST ASSOCIATES, LLC, AS LANDLORD,
AND SCREAMINGMEDIA.NET, INC., AS TENANT
LANDLORD'S WORK
1. Paint entire Premises.
2. Acid clean all windows and paint all window frames.
3. Repair, re-putty or replace any damaged window panes.
4. Erect demising wall or walls necessary to create the Premises in
"shell" condition.
5. Install a heating, ventilation and air conditioning unit to serve the
Premises. Tenant shall be responsible and shall pay for the
installation of ductwork.
6. Provide electric lines to connection point of the Premises.
7. Provide 300 amps of electricity servicing the Premises to the
connection point thereof.
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EXHIBIT C
ADDITIONAL RULES & REGULATIONS OF BUILDING
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STARRETT LEHIGH BUILDING
601 West 26th Street
New York, New York 10001
------------------------
SUPPLEMENTAL RULES AND REGULATIONS
PURSUANT TO LEASE ARTICLE 36
Note: The following constitute SUPPLEMENTAL RULES AND REGULATIONS (collectively
"SUPPLEMENTAL Rules ") pursuant to Article 36 of each Tenant's lease ("Lease").
These SUPPLEMENTAL RULES are in addition to Rules and Regulations 1 through 13,
which are set forth on the Lease form itself, and are intended to and shall
remain in full force and effect notwithstanding the promulgation of these
SUPPLEMENTAL RULES.
14. No Tenant shall sponsor or hold an Event (as hereinafter defined)
in the Building without (i) the express prior written consent of the Owner, (ii)
the payment, in advance, of any and all expenses, costs and fees specified by
the Owner in connection therewith, and (iii) otherwise in conformity with these
SUPPLEMENTAL RULES. As used in these SUPPLEMENTAL RULES, the term "Event" shall
include a show, party, reception, or other gathering of people, held solely in
accordance with the "use" clause for Tenant's premises as set forth in Tenant's
lease, which has been consented to by Owner in accordance herewith, at which any
of the following occur: invitations are issued; the Event is the subject of
pre-Event publicity in trade or general news media; music or any other form of
entertainment is presented; a sound system is employed; food and/or liquor is
served, or more than fifty (50) people are present. Any request for Owner's
consent to an Event shall be on such form(s) and accompanied by such
documentation establishing compliance with these SUPPLEMENTAL RULES and
applicable provisions of law as Owner may from time-to-time prescribe or
require.
15. No Tenant shall sponsor or hold an Event in the Building (A) which
is not permitted under the Certificate of Occupancy for the Building or is
otherwise in violation of any applicable law, and (B) without first obtaining
(i) a Temporary Place of Assembly Permit from The New York City Department of
Buildings, and (ii) a Temporary On-Premises Liquor or Caterer's License from the
New York State Liquor Authority. Any prior written consent of the Owner to any
proposed Event shall be deemed conditioned upon Tenant obtaining such Temporary
Place of Assembly Permit and Temporary On-Premises Liquor License, and
compliance by Tenant in all other respects with all applicable provisions of law
and these SUPPLEMENTAL RULES.
16. An Event shall be held only in the space demised to the Tenant
under the Lease or in such other space within the Building, if any, as may be
expressly designated by Owner in writing. Ingress and egress to/from the
Building for an Event shall only be through the main entrance/exit to/from the
Building and common areas (such as the lobby, passenger elevator, and directly
connecting hallways), or such other entrance/exit and interior portions of the
Building, if any, as may be expressly designated by Owner.
17. Owner may condition consent to an Event upon the Event being
attended by a maximum number of people fixed by Owner, fewer than the maximum
number permitted by law.
18. No Event shall be held or sponsored by a Tenant which in army way,
shape, manner or form (A) constitutes a nuisance or danger of any kind, (B)
gives rise to a hazardous condition of any kind, or (C) violates Temporary Place
of Assemble Permit, the Temporary On-Premises Liquor or Caterer's License, the
New York City Building Code, the New York City Fire Code, the New York Alcoholic
Beverage Control Law, the New York Penal Law, or any other applicable provision
of law. Without in any way limiting the generality of the foregoing, no Tenant
shall: (i) invite or permit a greater number of people to attend an Event than
the greatest number permitted under (a) the Temporary Place of Assembly Permit
or any other applicable provision of law, and without (b) the Owner's consent;
(ii) hold or sponsor an Event which includes the use of open flames to cook
food, or for any other purpose; nor (iii) hold or sponsor an Event which (a)
involves the playing of music (whether live or produced or broadcast through any
medium) on weekdays, prior to 9:00 A.M. or after 6:00 P.M., or on weekends and
legal holidays, prior to 9:00 A.M. or after 6:00 P.M., (b) results in loud or
offensive noises of any kind; and (c) involves or results in the illegal use of
sale of controlled substances or the illegal serving of alcohol to minors within
the Building
19. Any Tenant holding or sponsoring an Event in the Building shall be
responsible for all clean-up and restoration to pre-Event condition of all
Building common areas used for the Event. Such clean-up and restoration shall be
completed with three (3) hours after the conclusion of the Event, but in no case
later than 8:00 A.M. the following morning.
36
<PAGE> 38
20. An Event may be attended only by Tenant's employees, independent
contractors and invitees. Tenant shall not suffer or permit any of its invitees
to trespass into areas of the Building in which the Event is not being held or
which are not designated by the Owner for ingress/egress to/from the Event. Any
Tenant holding or sponsoring an Event in the Building shall arrange for an
adequate number of professional licensed Security personnel to be continuously
present at the Building, from no later than one (1) hour prior to the scheduled
starting time of the Event; to no earlier than one (1) hour after the scheduled
ending time of the Event, for the purposes of limiting attendance to Tenant's
employees, independent contractors and invitees, preventing trespassing, crowd
control, and to insure compliance with these SUPPLEMENTAL RULES and applicable
law. Such arrangements shall include (A) one security guard at each
entrance/exit to the Building to be utilized in connection with the Event, one
(1) security guard stationed at the Event itself; and one (1) security guard to
patrol the elevator and hallways to be used in connection with the Event, and
(B) such additional number of security personnel as shall be appropriate taking
into account the nature of the Event, the number of invitees, the extent of
Event publicity and any and all other relevant circumstances.
21. No Tenant holding or sponsoring an Event in the Building shall use
the words "Starrett," "Lehigh" or "Starrett-Lehigh" (or any abbreviation or
variation thereof) on any invitation to, or publicity for, or advertisement of,
such Event without the express prior written consent of the Owner.
22. No Tenant shall hold or sponsor an Event in the Building without
first obtaining and delivering to Owner a Certificate of Insurance (or other
proof of insurance acceptable to Owner) with respect to such Event, naming Owner
as an additional insured thereunder and otherwise acceptable to Owner in form
and substance, and with such coverage limits as Owner determines to be
acceptable taking into account the nature of the Event, the number of invitees,
the extent of pre-Event publicity and any and all other relevant circumstances.
23. Any Tenant who holds or sponsors an Event in the Building shall be
fully responsible for any and all injury or damages caused by, or arising out of
or in connection with, the Event, including but not limited to personal injury
and property damage. In the case of physical damage to the Building, other than
damage in the premises demised to Tenant under the Lease, Owner shall have the
exclusive right (but not the obligation) to have such damage repaired, in which
case Tenant shall pay or reimburse Owner for the cost of such repair(s) within
three (3) business days of demand therefor accompanied by a copy of the bill for
the repair(s). No Tenant shall hold or sponsor an Event in the Building without
first executing and delivering to Owner a duly executed waiver, release and
indemnity and hold harmless agreement, in a form acceptable to Owner, providing
that Tenant waives and releases Owner with respect to, and agrees to indemnify,
defend and hold Owner free and harmless from and against any and all costs,
demands, claims, suits, actions, proceedings, orders, judgments, writs, decrees,
forfeitures, subpoenas, warrants, and the like, arising out of or in connection
with the Event (collectively "Claims"), including but not limited to demands for
the payment of principal sums, interest and penalties, and including but not
limited to the legal expenses incurred by Owner (including legal fees, costs,
disbursements, and expenses) in enforcing rights against Tenant or defending
against any such Claim through counsel of Owner's choice.
24. No Tenant shall hold or sponsor an Event in the Building without
first delivering to Owner, in a form acceptable to Owner, a duly executed and
acknowledged statement that violation of these SUPPLEMENTAL RULES shall be
deemed a material breach of the Lease.
25. No noise or other activity, including the playing of musical
instruments, radio, television or other sound reproduction system, which would,
in Owner's judgment, disturb other tenants in the Building, shall be made or
permitted by Tenant.
26. The Owner may refuse admission to the Building outside of ordinary
business hours (8:00 A.M. to 6:00 P.M.) to any person not having a pass issued
by the Owner or not properly identified, and may require all persons admitted to
or leaving the Building, outside of ordinary business hours, to register.
27. All entrance doors in Tenant's demised premises shall be left
locked by Tenant when the demised premises are not in use. Entrance doors shall
be kept closed at all times.
28. All locks affording access to Tenant's demised premises and to
circulation within the demised premises shall be conformed to Owner's master key
system.
29. The requirements of Tenant will be attended to only upon
application to the Building Superintendent at his office in the Building.
Building employees shall not be requested by Tenant, and will not be permitted,
to perform any work or services specifically for Tenant, unless expressly
authorized to do so by the Building Superintendent.
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<PAGE> 39
30. Tenant shall not at any time store or keep any material, supplies,
furniture, furnishings or equipment of any kind in any machine room or in any
mechanical or electrical equipment room in the Building whether such room be
within or outside the demised premises.
31. Owner may charge Tenant for changes to the Building's
directory(ies) subsequent to the initial listings. All requests for directory
listings shall be in writing on Tenant's letterhead signed by an authorized
officer of Tenant.
32. In no event and under no circumstances shall freight, furniture,
business equipment and bulky matters of any description be brought into or used
in any passenger elevators in the Building, it being understood that such items
shall be moved into and, out of the Building and between floors therein only on
the freight elevator and otherwise in accordance with other applicable Rules.
33. All Tenant's employees, will be issued Building ID cards.
Replacement cards are $10.00 each. Cards can be obtained at the Building
Manager's office during regular office hours. All cards will be numbered and
controlled by the Building Manager.
34. Effective 9:00 A.M., November 23, 1998, loading dock and freight
elevator hours are from 8:00 A.M. to 6:00 P.M., Monday through Friday. The use
of a freight elevator at any other time shall be subject to Owner's prior
written consent and shall be conditioned Upon payment of overtime charges
therefor at such hourly rate and minimum hours as Owner may specify.
35. Effective January 1, 1999:
(a) All major deliveries must be coordinated with the Building
Manager to insure proper handling.
(b) No messengers or deliveries of any kind will be allowed
beyond the Concierge Desk at the main Building entrance on 26th Street during
Off hours. The Tenant will be notified of the delivery and must come to the
lobby and accept or refuse the package.
(c) All messengers must register in the Lobby at the Building
Entrance on 26th Street prior to making delivery to Tenant.
(d) Hand trucks and luggage carriers must only use freight
elevator.
(e) No equipment, furniture, typewriters, etc. may be removed
from the Building at any time unless a pass authorizing such removal has been
signed by the Tenant's authorized officer. Passes may be in the form of written
authorization on Tenant's letterhead and signed by an authorized official or on
a Building pass.
(f) Trucks entering the Building or using the freight elevator
shall be limited to a maximum length of twenty (20) feet bumper-to-bumper.
36. At no time shall animals be brought or kept in the
Building.
37. At no time shall bicycles be brought or kept in the
Building, nor shall roller blades and/or roller skates be used in any portion of
the Building.
38. No smoking shall be allowed in any public areas of this
Building.
39. Owner reserves the right to rescind, alter, waive, expand
or add any rule or regulation at any time prescribed for the Building when, in
its judgment, it deems it necessary, desirable or proper for its best interest
and for the best interests of the tenants thereof, and no alteration or waiver
of any rule or regulation in favor of one tenant shall operate as an alteration
or waiver in favor of any other tenant. Owner shall not be responsible to Tenant
for the non-observance or violation by any other tenant of any of' the rules and
regulations at any time prescribed for the Building.
40. If attendance of Owner's personnel and/or service
contractors shall be required, as determined by Owner in its sole discretion, in
connection with the use by Tenant of freight elevators or other Building
services or equipment, Tenant shall pay to Owner on demand, as additional rent,
such amount as Owner shall determine to be appropriate as a charge for Owner's
personnel and/or service contractors but there shall be no charge for Tenant's
initial move into the Building.
38
<PAGE> 40
41. These SUPPLEMENTAL RULES shall be effective on the date
hereof.
Dated: New York, New York
November 20, 1998
601 WEST ASSOCIATES LLC, OWNER
601 West 26th Street
New York, New York 10001
39
<PAGE> 41
The City of New York
DEPARTMENT OF BUILDINGS
Executive Offices
60 Hudson Street, New York 10013\
SATISH K. BABBAR, R.A.
Assistant Commissioner
Technical Affairs
(212) 312-8324
--------------------------
TECHNICAL
POLICY AND PROCEDURE NOTICE #7/96
--------------------------
TO Distribution
FROM: Satish K. Babbar, R.A.
Assistant Commissioner
DATE: June 24, 1996
SUBJECT: Temporary Places of Assembly
EFFECTIVE: immediately
PURPOSE: To establish uniform requirements for the issuance of a letter
of acceptance to have a temporary place assembly.
SPECIFICS: The following procedure shall be implemented:
I. The applicant, a Professional Engineer or Registered Architect
(P.E./RA), should submit a request letter for a Temporary Place of
Assembly permit at least ten (10) business days in advance of the
planned event at the respective borough office. A request received less
than three (3) business days prior to the event cannot be assured
review and acceptance.
The following documents shall be submitted:
A. The request letter shall be filed in the Borough
Commissioner's Office and include: event description,
date(s), time(s), place of event, maximum occupancy
and owner's authorization for the use of the
premises.
B. Plans in triplicate, which shall include:
1. Seal & signature of the P.E./R.A.
2. Layout details showing seating, aisles,
travel distances, exits, etc.
3. Construction details for tent(s),
bleacher(s), booth(s), stage(s),
structure(s), etc. (DOB application for
construction shall also be filed in this
case).
4. Fire protection to be available at the
premises, such as sprinklers, standpipes,
hand fire extinguishers, and location of
nearest fire hydrants.
5. Emergency measures such as emergency
lighting, emergency generator, fire alarm
system, etc.
6. Parking area location and layout, when
necessary.
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<PAGE> 42
7. Sanitary facilities unless waived by the
Borough Commissioner.
8. Provisions for access to and use of the
premises by people with physical
disabilities.
C. A description of the safety measures to be provided
for review by the Borough Commissioner:
1. F.D. N.Y. Certified Fire Guards
2. Communication lines to be made available
during the event to the Fire and Police
Departments.
D. A Signed and Sealed Statement by the P.E.-R.A.
ensuring that the premises will be in accordance with
the accepted plans.
E. Controlled Inspections, where required by the Borough
Commissioner must be hand delivered or faxed to the
Department during business hours prior to the event.
II. The Borough Office shall:
A. Charge a fee of two hundred fifty dollars ($250) For
processing of the request received at least ten (10) business
days prior to the scheduled event. Additional charge of one
hundred dollars ($100) per day will be due for each day that
the request letter is received less than the ten (10) business
days prior to the event.
B. For a major event, through the Chief Plan Examiner or higher
level staff consult the Fire arid Police Departments and other
emergency services prior to acceptance, as appropriate.
C. Retain the original documents filed.
D. Return two copies of the accepted documents to the P.E./R.A.,
of which one copy shall be made available at the site before
and during the event for consultation by the appropriate
authorities.
E. Fax copies of the acceptance letter to the:
1. Local police precinct and firehouse.
2. Emergency Response Team
60 Hudson Street, 14th Floor
Attn.: James O'Malley
(212) 312-8013 - Fax (212) 312-8012
3. New York City Police Department
One Police Plaza
Operations Division, 8th Floor
New York, New York 10038
Attn.: Inspector Thomas Mullen, Commanding Officer
(212) 374-5500 Fax (212) 374-3840
(for events with over 500 people)
41
<PAGE> 43
STARRETT LEHIGH BUILDING EVENT APPROVAL APPLICATION
TO: 601 WEST ASSOCIATES, LLC
PURSUANT TO THE SUPPLEMENTAL RULES OF THE STARRETT LEHIGH BUILDING (BUILDING)
CONCERNING EVENTS HELD IN THE BUILDING. THE TENANT IDENTIFIED BELOW HEREBY
REQUESTS THE CONSENT OF THE OWNER TO THE EVENT DESCRIBE BELOW. ALL ITALICIZED
TERMS HAVE THE SAME MEANING AS IN THE SUPPLEMENTAL RULES ATTACHED TO AND WHICH
FORM PART OF THE TENANT'S LEASE.
Name of Tenant _________________________________________________________________
Leased Space # ______ Name of Responsible Individual ___________________________
Tenant's Telephone # ____ __________ Tenant's FAX # ____________________________
Date of Proposed Event _______________ Time of Proposed Event __________________
Nature of Proposed Event _______________________ # of invitees _________________
Proposed Location of Event within Building: Tenant's Space ___ Other (specify)__
________________________________________________________________________________
Has Tenant obtained a Temporary Place of Assembly Permit from the NYC Dept. of
Buildings? ____ Yes _____ No. If yes, attach copy of NYC Dept. of Buildings
Permit Application and Permit to this application. If no, NYC Dept. of
Buildings Permit Application and Permit MUST be submitted to Owner prior to
approval of application.
Will liquor be served at the proposed Event? ____Yes ____ No. If yes, has Tenant
obtained a Temporary On-Premises Liquor or Caterer's License from the NYS Liquor
Authority? ___ Yes ____ No. If yes, attach to application. If no, License MUST
be submitted to Owner prior to approval of application.
Has Tenant prepared a detailed Statement of the type(s) and source(s) of all
food to be served at the proposed Event (or Statement that no food will be
service)? ___Yes ___No If yes, attach to application. If no, Statement MUST be
submitted to Owner prior to approval of application.
Has Tenant prepared an accurate Plan showing all means of ingress and egress
(including designation of corridors and other common areas) proposed to be
utilized in connection with the proposed Event? ___Yes ____ No If yes, attach to
application. If no, Plan MUST be submitted to Owner prior to approval of
application.
Has Tenant obtained a Certificate of Insurance with respect to the proposed
Event? ____ Yes ____ No If yes, attach to application. If no, Certificate MUST
be submitted to Owner prior to approval of application.
Has Tenant arranged for professional licensed security personnel to be present
at the Building in connection with the proposed Event? ____Yes ____No If yes,
attach a copy of Tenant Contract with the security agency or personnel, together
with proof of licensing. If no, the Contract and proof of licensing MUST be
submitted to Owner prior to approval of application.
Has Tenant executed an Indemnification of Owner with respect to the proposed
Event on the form prescribed by Owner for that purpose? ____Yes ____No If yes,
attach to application. If no, Indemnification MUST be submitted to Owner prior
to approval of application.
Tenant acknowledges and agrees to pay the following fees and costs of Owner in
connection with the proposed Event. Non-Refundable Application Processing Fee -
$500; Maintenance/Clean Up Crew Fee - $200 minimum plus $50/hour for each hour
(or part thereof) after 4 hour's; Elevator Overtime (6 PM - 9 AM) - $300 minimum
plus $75/hour for Maintenance/Clean Up Crew Fee -$200 minimum plus $50/hour for
each hour (or part thereof) after 4 hours; Elevator Overtime (6 PM - 9 AM) -
$300 minimum plus $75/hour for each hour (or part thereof) after 4 hours;
Building Security Overtime (6 PM - 9 AM) - $200 minimum plus $50/hour for each
hour (or part thereof) after 4 hours.
Is the Non-Refundable Application Processing Fee being paid by Tenant at this
time?
___Yes ____ No If yes, attach to application. If no, Fee MUST be paid prior to
processing of application by Owner.
Does Tenant anticipate incurring Overtime expenses? ____Yes ____No If yes,
Tenant acknowledge that approval of application, is expressly conditional upon
payment, of minimum costs and fees of $700 in accordance with above schedule,
prior to date of
42
<PAGE> 44
proposed Event. If no, Tenant acknowledges that approval of application, is
expressly conditional upon payment of minimum costs and fees of $200 in
accordance with above schedule, prior to date of proposed Event. Such minimum
fees and costs are in addition to the Non-Refundable Application Processing Fee.
Tenant shall have no right to hold or sponsor the Event if such fees and costs
are not paid.
Tenant agrees that additional fees and costs, over and above the minimum fees
and costs set forth above, if any, shall be paid as follows: if ascertainable
and billed by Owner prior to the proposed Event. Immediately upon billing and in
any event prior to the Event; if not ascertainable prior to the proposed Event,
as soon as practicable after being ascertained and billed, and in any event not
later than the 1st day of the month immediately following the month in which
such fees and costs are billed by Owner to Tenant (Fees and costs billed alter
the Event shall be deemed additional rent under the Lease.)
Tenant certifies that it has read and is familiar with the Supplemental Rules;
that it agrees that the proposed Event shall in all respects be governed by the
same; and that violation of the Supplemental Rules shall be deemed a material
breach of Tenant's Lease. Tenant acknowledges that Owner retains no rights to
approve or disapprove submissions and/or this application, as the case may be,
in accordance with the Supplemental Rules and applicable Law.
Date of Application: _____________________
AUTHORIZED SIGNATORY FOR TENANT/APPLICANT:
__________________________________________
PRINT NAME & TITLE BELOW:
__________________________________________
FOR OWNER:
Date: _________________________
____ APPROVED _____ DISAPPROVED
____ APPROVED ON CONDITION THAT TENANT ______________________
______________________________________________________________
AUTHORIZED SIGNATORY FOR OWNER:
__________________________________________
PRINT NAME & TITLE BELOW:
__________________________________________
43
<PAGE> 45
INDEMNIFICATION
To induce 601 West Associates LLC, Owner ("Owner") of the Starrett
Lehigh Building, located at 601 West 26th Street, New York, New York 10001
("Building") to accept process and approve an application by _________________
____________________ ("Tenant") to hold an event in the Building on _________
_______ ("Event"), pursuant to the Supplemental Rules and Regulations of the
Building attached to and part of Tenant's Lease, Tenant hereby agrees to waive
and release Owner with respect to, and indemnify, defend and hold Owner harmless
from and against, any and all costs, demands, claims, suits, actions,
proceedings, orders, judgments, writs, decrees, forfeitures, subpoenas,
warrants, and the like, arising out of or in connection with the Event
(collectively, "Claims"), including but not Limited to demands for the payment
of principal sums, interest and penalties, and including but not limited to the
legal expenses incurred by Owner (including legal fees, costs, disbursements and
expenses) in enforcing rights against Tenant or defending against any such Claim
through counsel of Owner's choice.
IN WITNESS WHEREOF, the undersigned has executed this Indemnification
at New York, New York on the ___ day of ___________, _____.
________________________________________
TYPE/PRINT NAME OF TENANT
By: ____________________________________
(Authorized Signatory) (Title)
________________________________________
TYPE/PRINT NAME OF AUTH. SIGN.
44
<PAGE> 46
Acknowledgment - Individual
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the _____day of ______________ before me personally appeared
_________ _______, known to me, who, being by me duly sworn, did depose and say
that (s)he is the Tenant named in and who executed the foregoing
indemnification.
________________________________________
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the _____day of ______________ before me personally appeared
_________ _______, known to me, who, being by me duly sworn, did depose and say
that (s)he resides at _________________________; that (s)he is the
____________________ of __________________________________, the Tenant named in
and on behalf of whom/which (s)he executed the foregoing Indemnification that
(s)he signed his/her name thereto by order of the Tenant; and that if the Tenant
is a corporation the scale of which has been affixed to the foregoing
instrument, that the same is by order of the Board of Directors of such
corporation.
________________________________________
Notary Public
45
<PAGE> 47
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. RIDER PROVISIONS PREVAIL.................................................................. 18
2. COMMENCEMENT OF TERM...................................................................... 18
3. FIXED RENTAL AND ADDITIONAL RENTAL........................................................ 18
4. RENT ESCALATION -CONSUMER PRICE INDEX..................................................... 18
5. AS IS CONDITION; LANDLORD'S WORK.......................................................... 19
6. SUBSTANTIAL COMPLETION.................................................................... 19
7. TENANT'S INITIAL INSTALLATIONS............................................................ 20
8. ESCALATIONS FOR INCREASE IN REAL ESTATE TAXES............................................. 20
9. WATER, SEWER AND SPRINKLER CHARGES........................................................ 21
10. ALL ADDITIONAL RENTAL PAYMENTS............................................................ 21
11. ASSIGNMENT AND SUBLETTING................................................................. 21
12. LIMITATION OF LIABILITY................................................................... 23
13. INDEMNIFICATION........................................................................... 23
14. ELECTRIC CURRENT.......................................................................... 23
15. BROKER.................................................................................... 24
16. BINDING EFFECT............................................................................ 25
17. LATE FEE.................................................................................. 25
18. SECURITY.................................................................................. 25
19. HOLDOVER.................................................................................. 25
20. APPLICABLE LAW. .......................................................................... 25
21. HAZARDOUS MATERIALS....................................................................... 26
22. NOTICES................................................................................... 26
23. ADDENDUM TO ARTICLE 16-BANKRUPTCY......................................................... 26
24. RENT CONTROL.............................................................................. 26
25. REPAIRS................................................................................... 27
26. CONDITIONAL LIMITATION.................................................................... 27
27. LANDLORD'S SERVICES....................................................................... 27
28. TENANT'S ALTERATIONS...................................................................... 28
</TABLE>
46
<PAGE> 48
<TABLE>
<S> <C>
29. SUBORDINATION AND ATTORNMENT.............................................................. 29
30. MISCELLANEOUS............................................................................. 30
31. LEASE NOT BINDING UNLESS EXECUTED......................................................... 31
32. SUBMISSION TO JURISDICTION................................................................ 31
33. QUALIFICATIONS AS TO USE.................................................................. 31
34. PARTNERSHIP TENANT........................................................................ 31
35. CERTIFICATE OF OCCUPANCY.................................................................. 31
36. ACCESS TO PREMISES........................................................................ 32
37. USE OF PREMISES........................................................................... 32
38. EXCLUSION OF PERSONS FROM PREMISE AND DELIVERY SYSTEMS.................................... 32
39. ADDENDUM TO RULES AND REGULATIONS......................................................... 32
40. SCAFFOLDING............................................................................... 32
41. TENANT'S CANCELLATION OPTION.............................................................. 32
42. ACCOMMODATION RIGHT OF FIRST OFFER........................................................ 33
43. THE PREMISES.............................................................................. 33
44. LANDLORD'S WORK TO COMMON AREAS........................................................... 33
45. TENANT ACCESS TO BUILDING CONDUIT......................................................... 33
</TABLE>
47
<PAGE> 1
Exhibit 10.4.2
FIRST
LEASE MODIFICATION AGREEMENT
AGREEMENT, made as of the 18th day of June, 1999, by and between 601 West
Associates LLC, having an address at 601 West 26th Street, Suite 900, New York,
New York 10001 ("Lessor"), and Screamingmedia.com, Inc., having an address c/o
55 Broad St., 23rd Floor, New York, New York 10004 ("Lessee").
W I T N E S S E T H:
By lease dated _______, 1999 (which lease, together with all exhibits thereto
are hereinafter referred to as the "Lease"), Lessor leased to Lessee the
following space: Ninth Floor North East (the "Premises") in the building known
as 601 West 26th Street, New York, New York (the "Building").
Lessee desires to rent the space known as 13 North East Columns 1 through 10
instead of Ninth Floor North East.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
other good and valuable consideration by each party to the other paid, the
receipt and sufficiency whereof are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Landlord hereby leases to Tenant the following space: 13th Floor North
East Columns 1-10 (as shown on Exhibit A attached hereto), so that as
of this date the term "Premises" or "Demised Premises" in the
"Witnesseth" section of the Lease shall mean 13th Floor North East
Columns 1-10. Tenant hereby surrenders any and all rights it may have
had in and to the Ninth Floor North East space.
2. Article 43 of the Lease is hereby amended so that Sections 43.1.1 (i)
through (iii) and 43.2 are deleted and replaced with the following:
43.1.1 A fixed rental ("Fixed Rental") at an annual rate of:
(i) $523,940.00 per lease year ($43,661.67 per month) for
each lease year during the period commencing on the
Commencement Date (defined in Article 42 above) arid
continuing thereafter to and including March 31,
2002;
<PAGE> 2
(ii) $576,334.00 per lease year ($48,027.83 per month) for
each lease year during the period commencing April 1,
2002 and continuing thereafter to and including March
31, 2006;
(iii) $628,728.00 per lease year ($52,394.00 per month) for
each lease year during the period commencing April 1,
2006 and continuing thereafter to and including March
31, 2009 (the "Termination Date").
43.2 Provided that Tenant is not then in default under the terms of
this Lease, Tenant shall be entitled to a one-time,
non-recurring credit against the obligation to pay Fixed
Rental, in the amount of $238,308.35 (the "Credit"), to be
applied as follows: (i) $130,985.01 against the Fixed Rental
due commencing on the Commencement Date and continuing
thereafter through the end of the third month following the
Commencement Date. If the Commencement Date is a date other
than the first day of a month, then this portion of the Credit
shall be prorated, and the balance shall be applied against
the Fixed Rental due for the fourth month following the
Commencement Date, (ii) $43,661.67 against the Fixed Rental
due for March 2000, (iii) $43,661.67 against the Fixed Rental
due for April 2000, and (iv) $20,000.00 against the Fixed
Rental due for May 2000. Notwithstanding the foregoing, the
Credit shall not be applied against any Additional Rental,
electricity charges, or other like sums from time to time
payable by Tenant pursuant to this Lease, which amounts shall
be paid without abatement in accordance with the terms of this
Lease.
3. Tenant hereby authorizes and directs Greenstein Starr Gerstein &
Rinaldi LLP to release from escrow and deliver to Landlord a check in
the amount of $57,500.00 payable to Hellerstein, Inc. in consideration
of Hellerstein, Inc. surrendering its lease for part of the Premises.
Landlord shall not deliver the check to Hellerstein, Inc. until such
time as Hellerstein, Inc. has delivered to Landlord a fully executed
surrender of lease for the portion of the Premises occupied by it.
4. The definition of Tenants Proportionate Share at Article 48, Section
48.5 is hereby changed from 0.50% to 1.25%.
<PAGE> 3
5. The amount of the security deposit required under Article 32 is
$174,646. Simultaneously herewith, Tenant shall deliver to Landlord
either a check or a letter of credit in the amount of $104,646
representing the difference between the new security deposit, and the
amount of the security already held by Landlord.
6. The Other Space defined in Article 83 of the Lease shall mean space on
the thirteenth floor of the Building, and not the ninth floor.
7. Tenant shall deliver to Landlord, as Additional Rent, the sum of
Eighteen Thousand Dollars ($18,000.00) in exchange for which Landlord
shall pay for acquiring and installing a water cooled air conditioning
unit or units aggregating 60 tons in the Premises and for bringing a
condenser water line from Landlord's facility to the Premises. The
Landlord's installation shall include the electrical, plumbing and
condenser water hookups. Tenant shall be responsible, at its sole cost
and expense for the distribution of the cooled air throughout the
Premises, and for the installation of all ductwork. Landlord shall
supply the Premises with temporary air conditioning service commencing
August 1, 1999.
8. Item 7 of Exhibit B "Landlord's Work" is hereby modified to provide
that Landlord shall increase the electrical service to the Premises
from 300 amperes to 600 amperes.
9. Item number 5 of Exhibit B "Landlord's Work" is hereby deleted in its
entirety.
10. Tenant shall pay to Landlord as Additional Rent for the use of
Landlord's condenser water, an annual fee of $250.00 per ton capacity
of the HVAC unit. The fee shall be payable on April 1st of each year
during the term of this Lease. The fee for the first lease year shall
be paid April 1,2000.
11. Tenant shall not core drill at Column 2 of the Premises, or from any
point east of said Column.
12. Except as herein specifically modified, all of the terms, covenants and
conditions of the Lease are and shall remain the same, in full force
and effect, and are hereby ratified and confirmed.
<PAGE> 4
13. This First Lease Modification Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
14. A facsimile copy of the signatures of the parties hereto shall be
binding.
IN WITNESS WHEREOF, the parties hereto have executed this Second Lease
Modification Agreement as of the day and year first above written.
LESSOR:
601 WEST ASSOCIATES LLC
BY: SLB MANAGER LLC, A NY
LIMITED LIABILITY COMPANY
By: /s/ Mark Karasick
Name: Mark Karasick
Title: Managing Member
LESSEE:
SCREAMINGMEDIA.NET, INC.
By: /s/ Alan S. Ellman
Name: Alan S. Ellman
Title: President
<PAGE> 5
EXHIBIT A
---------
DEXCRIPTION OF PERMISES
<PAGE> 1
Exhibit 10.5
SUBLEASE
This SUBLEASE made as of February 4, 2000 (this "Sublease") by and between
Tomar Studios, Inc., a New York corporation having an address at 601 West 26th
Street, 13th Floor, New York, New York 10001, as sublandlord ("Sublandlord"),
and Screaming Media.com, Inc., a Delaware corporation having an address at 601
West 26th Street, 13th Floor, New York, New York 10001, as subtenant
("Subtenant").
Sublandlord is a party to that certain Agreement of Lease, dated December
30, 1998, between 601 West Associates LLC, as landlord ("Landlord," which term
shall include any successor to the interests of Landlord in the Premises), and
Sublandlord, as tenant (the "Agreement of Lease"), as supplemented by that
certain letter agreement, dated December 29, 1998, between the Landlord and the
Sublandlord (the "Letter Agreement"), and as modified by that certain Lease
Modification and Extension Agreement, dated as of April 28, 1999, between
Landlord and Sublandlord (the "Modification") (the Agreement of Lease, as so
supplemented and so modified (and including the Rules and Regulations referred
to in Paragraphs 36 and 79 of the Agreement of Lease as such Rules and
Regulations may be modified from time to time as provided in Paragraph 36 of the
Agreement of Lease), the "Master Lease"), with regard to certain premises known
as Suite SE1-7 on the thirteenth (13th) floor of the building known as 601 West
26th Street, in the Borough of Manhattan, City of New York (the "Building"), all
as more fully set forth in the Master Lease (such premises the "Premises"). A
copy of the Master Lease is attached to this Sublease as Exhibit A. Sublandlord
wishes to sublease to Subtenant, and Subtenant wishes to sublease from
Sublandlord, the Premises. The Premises are approximately as shown on Exhibit B
to this Sublease.
Accordingly, Sublandlord and Subtenant, for themselves and their successors
and assigns, hereby agree as follows:
1. AGREEMENT. Sublandlord subleases the Premises to Subtenant, and
Subtenant subleases the Premises from Sublandlord, upon the terms and conditions
set forth in this Sublease. Subject to the exception set forth at the beginning
of the second sentence of Paragraph 10 hereof and except for those terms,
covenants, conditions and other provisions of the Master Lease referred to in
the last sentence of Paragraph 10 hereof, the terms, covenants, conditions and
<PAGE> 2
other provisions of the Master Lease (including, without limitation, the terms,
covenants, conditions and other provisions of Paragraph 52 thereof), are
incorporated into this Sublease as the agreement of Sublandlord and Subtenant as
though Sublandlord were Landlord as the landlord under the Master Lease and
Subtenant were Sublandlord as the tenant under the Master Lease, all as more
fully set forth in Paragraph 10 hereof (provided that any references in the
Master Lease to any subtenant shall also refer to Subtenant and any references
in Paragraph 52,53 or 69 of the Master Lease to Landlord shall be deemed to be
references to both Landlord and Sublandlord).
2. TERM. The term of this Sublease will begin on the date hereof (such date
the "Commencement Date") and will end on the day immediately preceding the last
day of the term of the Master Lease, inclusive, unless sooner terminated
pursuant to any of the terms, covenants or conditions of this Sublease or
pursuant to law. The term referred to in the preceding sentence (whether ending
on the day immediately preceding the last day of the term of the Master Lease or
sooner because sooner terminated pursuant to any of the terms, covenants or
conditions of this Sublease or pursuant to law) is referred to herein as the
"Term."
3. RENT
(a) Rent. As used in this Sublease, the term "Rent" shall mean and
include all Base Rent (as defined in subparagraph (b) of this Paragraph 3, and
all Additional Rent (as defined in subparagraph (c) of this Paragraph 3).
(b) Base Rent
(i) Amount. Subtenant will pay Sublandlord as base rent (the
"Base Rent") for the Premises in each year during the term hereof the
annual amount set forth on Exhibit C hereto.
(ii) Base Rent Payable Monthly In Advance. All amounts of Base
Rent shall be payable in equal monthly installments as set forth on Exhibit C
hereto without notice, demand, offset, or counterclaim, each such installment of
Base Rent to be paid in advance on the first day of each month (except that the
Base Rent for the month beginning on the Commencement Date shall be payable
simultaneously with the execution and delivery hereof by Subtenant).
(iii) Pro-Ration. If the Commencement Date hereof shall occur on
other than the first day of a month, any payment of Base Rent payable with
respect to any partial calendar month will be prorated on a per diem basis.
<PAGE> 3
(c) Additional Rent.
(i) Items Constituting Additional Rent. Subtenant shall pay as
additional rent the following amounts (the "Additional Rent"), each such amount
of Additional Rent to be paid as and when indicated:
(A) all amounts payable by Sublandlord to Landlord under the
Master Lease in respect of increases in "Taxes" (as defined in Paragraph 46 of
the Master Lease) over the amount of such Taxes for the tax year commencing on
July 1, 1999 and ending on June 30, 2000, any such amount to be payable by
Subtenant to Sublandlord as and when the same is payable by Sublandlord pursuant
to the Master Lease;
(B) all amounts from time to time payable by Sublandlord
under the Master Lease in respect of the water, sprinkler and sewer charges,
such amounts to be payable as and when installments of Base Rent are payable
hereunder, and such amounts to be subject to increase in the event of any
increase in the corresponding amount payable under the Master Lease;
(C) all amounts payable by Sublandlord for electricity
furnished to the Premises, any such amount to be payable by Subtenant to
Sublandlord upon Sublandlord's presentation to Subtenant of a copy of any bill
showing any amount payable by Sublandlord for electricity furnished to the
Premises;
(D) all amounts payable under the lease and maintenance
agreement with respect to the alarm system in the Premises, such amounts to be
payable as and when payments are required to be made by Subtenant under such
agreement; provided, that Subtenant shall be have the option, by notice to such
effect given to Sublandlord not later than the sixtieth (60th) day after the
Commencement Date, to elect to discontinue its use of such alarm system not
later than such sixtieth (60th) day, whereupon (provided that Subtenant in fact
discontinues such use) Subtenant shall have no further obligation to make
payments with respect to such alarm system for any period after such date of
discontinuance; and provided, further, that Subtenant hereby agrees that in the
event that Subtenant shall not give the notice referred to above in this
subparagraph (D) to Sublandlord by the sixtieth (60th) day after the
Commencement Date, then Subtenant shall be substituted for Sublandlord as a
party under such agreement and Subtenant shall
<PAGE> 4
assume all of Sublandlord's obligations under such agreement;
(E) all amounts payable under the lease and maintenance
agreement with respect to the telephone system in the Premises, such amounts to
be payable as and when payments are required to be made by Subtenant under such
agreement; provided, that Subtenant shall be have the option, by notice to such
effect given to Sublandlord not later than the sixtieth (60th) day after the
Commencement Date, to elect to discontinue its use of such telephone system not
later than such sixtieth (60th) day, whereupon (provided that Subtenant in fact
discontinues such use) Subtenant shall have no further obligation to make
payments with respect to such telephone system for any period after such date of
discontinuance; and provided, further, that Subtenant hereby agrees that in the
event that Subtenant shall not give the notice referred to above in this
subparagraph (E) to Sublandlord by the sixtieth (60th) day after the
Commencement Date, then Subtenant shall be substituted for Sublandlord as a
party under such agreement and Subtenant shall assume all of Sublandlord's
obligations under such agreement;
(F) all amounts payable to BellAtlantic with respect to all
BellAtlantic lines serving the Premises, such amounts to be payable as and when
payments are required to be made by Subtenant to BellAtlantic; provided, that
Subtenant shall be have the option, by notice to such effect given to
Sublandlord not later than the sixtieth (60th) day after the Commencement Date,
to elect to discontinue its use of such lines not later than such sixtieth
(60th) day, whereupon (provided that Subtenant in fact discontinues such use)
Subtenant shall have no further obligation to make payments with respect to such
lines for any period after such date of discontinuance; and provided, further,
that Subtenant hereby agrees that in the event that Subtenant shall not give the
notice referred to above in this subparagraph (B) to Sublandlord by the sixtieth
(60th) day after the Commencement Date, then Subtenant shall assume all of
Sublandlord's obligations to BellAtlantic with respect to such lines; and
(G) if, pursuant to the provisions of the Master Lease,
Sublandlord is charged for additional rent or other amounts other than the
amounts referred to above in subparagraphs (i)(A), (B), (C), (D), (B) and (F) of
this Paragraph 3 (including, without limitation, any amounts payable in respect
of any additional services procured by Subtenant from Landlord), then, in
addition to such amounts referred to in such subparagraphs, Subtenant will be
liable for such additional rent or other amounts, such additional rent or other
amounts to be paid to the Sublandlord as Additional Rent.
<PAGE> 5
(ii) Pro-Ration. If the Commencement Date shall occur
on other than the first day of a month, any payment of Additional Rent payable
with respect to any partial calender month will be prorated on a per diem basis.
4. SECURITY DEPOSIT. Subtenant has deposited with Sublandlord the sum of
One Hundred Twenty-Eight Thousand Two Hundred Fifty Dollars ($128,250.00) which
Sublandlord will hold in an interest bearing account as a security deposit in
accordance with, and subject to the terms and provisions of, Paragraphs 32 and
58 of the Master Lease. In the event that Sublandlord shall at any time apply
any of such security deposit as provided herein or in the Master Lease, then,
upon the request of Sublandlord to Subtenant specifying the amount so applied,
Subtenant shall immediately deposit with Sublandlord, as an additional security
deposit, the amount so applied, so that the security deposit held by Sublandlord
shall at all times during the term hereof be equal to One Hundred Twenty-Eight
Thousand Two Hundred Fifty Dollars ($128,250.00). Sublandlord shall pay
subtenant the interest earned on such amount, less the one percent (1%)
administrative fee referred to in Section 7-103 of the General Obligations Law,
at the end of the term of the Sublease (subject to application of such interest
as provided in paragraph 2 of Section 7-103 of the General Obligations Law). In
the event that this Sublease is terminated (a) due to a default by Sublandlord
under this Sublease or (b) due to a default by Landlord or Sublandlord under the
Master Lease, then Sublandlord shall immediately return to Subtenant any
unapplied portion of the Security Deposit and any unapplied portion of prepaid
rent along with all accrued interest thereon (but less the one percent (1%)
administrative fee referred to in Section 7-103 of the General Obligations Law).
Sublandlord agrees to take such actions as may reasonably be requested by
Sublandlord to provide that all amounts of interest earned on the security
deposit (less the one percent (1%) administrative fee retained by Sublandlord)
shall be deemed to be income of the Subtenant for all income tax purposes.
5. USE OF PREMISES. Subtenant shall use the Premises for the purposes
permitted under the Master Lease and for such additional purposes as may be
consented to by Landlord, and for no other purposes. Under no circumstances
shall Subtenant use the Premises or permit the Premises to be used for
manufacturing or for the creation, display or distribution of pornographic
materials.
6. ACCEPTANCE OF PREMISES. Subject only to the fourth sentence of this
Paragraph 6, Subtenant acknowledges that it has inspected the Premises and that
it accepts the Premises in their present condition. Without limiting the
generality of the
<PAGE> 6
foregoing, Subtenant acknowledges that it or its consultants have determined
that the electrical service in the Premises will meet the Subtenant's needs.
Sublandlord makes no representation as to the suitability or adequacy of the
Building or the Premises (including, without limitation, the electrical service
in the Building or the Premises) for any use to be made of the Premises by
Subtenant. Notwithstanding the foregoing in this Paragraph 6, but subject to the
last sentence of this Paragraph 6, Sublandlord hereby indemnifies Subtenant and
holds Subtenant harmless from and against, and agrees to pay for, all costs or
expenses whatsoever which Subtenant may incur in order to correct any latent
defect in work performed by Sublandlord on the Premises that caused such work
not to be in compliance with applicable law as in effect on the date upon which
such work was completed (such a latent defect, hereinafter, a "Latent Defect");
provided, however, that such indemnity shall cover only such costs and expenses
as must necessarily be incurred in order to render the work affected by a Latent
Defect in compliance with applicable law as in effect on the date upon which
such work was completed. Nothing in the immediately preceding sentence shall be
deemed to provide for indemnification of Subtenant by Sublandlord against any
costs or expenses incurred by Subtenant (a) with respect to any Latent Defect
that arises as a result of any alternations made to the Premises by Subtenant,
(b) with respect to any Latent Defect that arises as a result of any use of the
Premises by Subtenant that differs from Sublandlord's use of the Premises, (c)
in connection with any inspection of the work performed by Sublandlord on the
Premises, (d) for attorneys' fees or expenses; (e) in connection with obtaining
any permit (including, without limitation, any building permit) or any
certificate of occupancy (except for those costs and expenses incurred in
correcting a Latent Defect so as to render the work affected thereby in
compliance with applicable law as in effect on the date upon which such work was
completed); or (f) in connection with any patent defect in any work performed by
Sublandlord.
7. SERVICES; RESTORATION OF PREMISES AFTER FIRE OR OTHER CASUALTY
(a) Services. Sublandlord shall provide to Subtenant such services as
are provided to it by Landlord pursuant to the Master Lease, to the extent of
Landlord's provision of such services from time to time. Subtenant shall have
the right, at its sole cost and expense, in its name or in the name of
Sublandlord, to take any action, as provided in the Master Lease or by law, to
enforce the rights of Subtenant as the tenant under the Master Lease as against
the Landlord and Sublandlord shall execute any and all documents which may be
reasonably necessary in order to enable Subtenant to enforce such rights under
this Paragraph 7(a).
<PAGE> 7
(b) Fire or Other Casualty. In the event that the Premises shall be
damaged by fire or other casualty, Sublandlord shall have no liability for
repair or restoration of the Premises. In the event that the occurrence of such
fire or other casualty shall give rise to a right of Sublandlord to elect to
terminate the Master Lease, Subtenant shall have the same right as against
Sublandlord (but Subtenant shall have no right to exercise such right of
Sublandlord under the Master Lease). In the event that the occurrence of such
fire or other casualty shall give rise to a right of Sublandlord to reoccupy the
Premises upon the restoration thereof, and Subtenant desires to repossess the
Premises upon the restoration thereof, then Subtenant shall have the right to
exercise Sublandlord's right to elect to reoccupy the Premises.
(c) Abatement. For any period in which Rent or other charges are abated
under the Master Lease for fire, other casualty, or disruption of services, Rent
of the same type under this Sublease and charges of the same type under this
Sublease shall abate for the same period.
8. INSURANCE. Without limiting the generality of Paragraph 1 or Paragraph
10 hereof, the Subtenant shall at all times during the term hereof carry the
policies of insurance referred to in Paragraph 53 of the Master Lease, all
references to "Landlord" in such Paragraph 53 shall be deemed to be references
to both Landlord and Sublandlord, and both the Landlord and the Sublandlord
shall be named as additional insured parties (or loss payees, if Paragraph 53
provides in a particular instance that Landlord shall be designated a loss
payee) under the policies referred to in such Paragraph 53. In addition to the
insurance referred to in such Paragraph 53, throughout the term hereof Subtenant
shall maintain with insurers of the type described in such Paragraph 53 a policy
or policies of "special form" insurance covering any alterations made on the
Premises on or after the date hereof and covering all personal property (whether
or not affixed and whether belonging to Landlord, Sublandlord or Subtenant)
located from time to time in or upon the Premises, in an amount sufficient to
cover the full replacement value of such alterations and such property. The
Landlord and the Sublandlord shall be loss payees under such "special form"
polies or policies, as their interests may appear, and any such policy shall
provide that it shall not be canceled without thirty (30) days written notice to
Landlord and Sublandlord. Upon the request of Landlord or Sublandlord, Subtenant
shall obtain waivers of subrogation with respect to any liability or "special
form" policy or policies referred to in this Paragraph 8.
9. PERMITS AND CERTIFICATES
<PAGE> 8
(a) Certificate of Occupancy. Subtenant acknowledges that Sublandlord
has not obtained a certificate of occupancy with respect to or in connection
with Sublandlord's alterations to, or Sublandlord' s installation of leasehold
improvements in, the Premises and Subtenant agrees that Sublandlord shall have
no obligation to apply for or to obtain, or to pay any amount in connection with
Subtenant's application for or Subtenant's obtaining, any such certificate of
occupancy. Subtenant acknowledges that it is familiar with the certificate of
occupancy applicable to the Premises and Subtenant agrees that Sublandlord shall
have no obligation to apply for or to obtain, or to pay any amount in connection
with Subtenant's application for or Subtenant's obtaining, any changes to such
certificate of occupancy.
(b) Air Conditioner Permit. Subtenant acknowledges that Sublandlord has
not obtained any permits in connection with Sublandlord's installation of the
air conditioning system in the Premises and Subtenant agrees that Sublandlord
shall have no obligation to apply for or to obtain, or to pay any amount in
connection with Subtenant's application for or Subtenant's obtaining, any such
permit(s).
(c) Public Assembly Permit. Subtenant acknowledges that no public
assembly permit has been issued with respect to the Premises and Subtenant
agrees that Sublandlord shall have no obligation to apply for or to obtain or to
pay any amount in connection with Subtenant's application for or Subtenant's
obtaining, any such public assembly permit.
10. MASTER LEASE
(a) Sublease and Master Lease. This Sublease is subject and subordinate
to the Master Lease. Except for those provisions of the Master Lease that
conflict with provisions hereof, except as provided in the last sentence of this
Paragraph 10 and except that in no event shall Subtenant have any grace or other
cure period with respect to defaults in the payment of Rent or of any other
amounts payable under this Sublease, all of the terms, covenants, conditions and
other provisions of the Master Lease (including, without limitation, the terms,
covenants, conditions and other provisions of Paragraph 52 thereof) are
incorporated into this Sublease as the agreement of Sublandlord and Subtenant as
though Sublandlord were Landlord as the landlord under the Master Lease and
Subtenant were Sublandlord as the tenant under the Master Lease (provided that
any references in the Master Lease to any subtenant shall also refer to
Subtenant and any references in Paragraph, 52, 53
<PAGE> 9
or 69 of the Master Lease to Landlord shall be deemed to be references to both
Landlord and Sublandlord); provided that Subtenant shall make no alterations to
the Premises that would under the Master Lease require the consent of Landlord
without the prior written consent of Landlord and Sublandlord (the consent of
Sublandlord not to be unreasonably withheld). Notwithstanding the foregoing,
provided that Sublandlord promptly gives Subtenant a copy of any notice from
Landlord with respect to any default under the Master Lease that relates to any
action or inaction of Subtenant and advises Subtenant of the date upon which
such notice was given to Sublandlord, then any cure period (if any) afforded
Subtenant with respect to such default shall be deemed to have commenced upon
the date upon which Sublandlord received such notice. Subtenant has received a
copy of the Master Lease and Subtenant represents that it has read and is
familiar with the terms of the Master Lease. Subtenant will not cause or allow
to be caused any default under the Master Lease, and Subtenant will comply with
and perform all applicable terms and conditions of the Master Lease to be
complied with or performed by Sublandlord. References in specific instances
herein to the Master Lease shall not be construed as limiting the generality of
Paragraph 1 hereof or of the first or third sentences of this Paragraph 10.
Without limiting the generality of the exception set forth at the beginning of
the second sentence of this subparagraph (a), the following provisions and parts
of the Master Lease shall not be applicable to this Sublease: Paragraphs 42, 43,
44 (other than the first sentence of such Paragraph 44), 45, 50 (other than
subparagraph 50.12 of such Paragraph 50), 55 or 83 of the Agreement of Lease;
the entire Letter Agreement; and the entire Modification.
(b) Subtenant's Right to Enforce Master Lease. Except to the extent of
Subtenant's obligation to pay rent hereunder and except as otherwise provided in
subparagraph (b) of Paragraph 7 hereof, and subject to the terms and conditions
of this Sublease, Subtenant shall be entitled to enforce all the rights of the
Sublandlord provided for in the Master Lease, Sublandlord hereby agreeing to
cooperate fully with Subtenant in the enforcement thereof.
(c) Sublandlord's Compliance with Master Lease. Sublandlord shall not
do any act, matter or thing, or fail to do any act, matter or thing, if such
action or failure to act would result in, or constitute a violation or breach by
Sublandlord as tenant under the Master Lease of or a default under, the Master
Lease or otherwise result in the disturbance of Subtenant's possession of the
Premises.
(d) Subtenant's Right to Make Payments to Landlord. Provided that
Subtenant is not in default hereunder, in the event that Sublandlord fails to
make
<PAGE> 10
payments of rent or any other charges due under the Master Lease (unless
Sublandlord shall be permitted under the Master Lease or by law to withhold such
payments of rent or other charges), Subtenant shall be entitled to make any such
payments directly to Landlord and deduct any amounts paid from its Rent and
other charges due under this Sublease.
(e) Sublandlord's Indemnity in the Event that Subtenant Cures Default
of Subtenant under Master Lease. In the event that the Master Lease would have
been terminated by reason of Sublandlord's default thereunder but for the fact
that Subtenant cured such default, Sublandlord shall indemnify Subtenant and
hold Subtenant harmless from and against all loss, damage or expense incurred by
Subtenant in effecting such cure, including, without limitation, reasonable
attorneys' fees and the additional monies by way of rent or otherwise expended
by Subtenant.
(f) Termination of Master Lease. In the event that the Master Lease is
terminated, then, as between Sublandlord and Subtenant, this Sublease shall
terminate at the same time without any liability on the part of Sublandlord to
Subtenant.
(g) Default under Warrant Default Hereunder. In the event that
Subtenant shall default in making any payment referred to in Section 7 of the
Warrant of even date herewith of Subtenant in favor of Sublandlord, then, at the
option of Sublandlord exercisable by notice to such effect given to Subtenant,
such default shall be deemed to be and shall be a payment default by Subtenant
under this Sublease.
(h) Commercial Rent Tax. Subtenant shall furnish to Sublandlord, upon
the request of Sublandlord, such information and such copies of documents as
Sublandlord may reasonably request in order to permit Sublandlord to receive a
commercial rent tax credit for the commercial rent tax paid by Subtenant.
11. GUARANTY. The obligations of Subtenant hereunder shall be guaranteed by
guaranty of Jay Chiat, the Chairman and Chief Executive Officer of Subtenant, in
the form of Exhibit D.
12. CERTAIN DAMAGES; RESTORATION OF PREMISES BY SUBTENANT
(a) Liquidated Damages upon Failure of Subtenant to Surrender Premises.
In the event that Subtenant were to fail to surrender the Premises in the
<PAGE> 11
manner provided in this Sublease upon the expiration or earlier termination of
this Sublease, the amount of damages that Sublandlord would suffer would be
difficult or impossible to ascertain. Therefore, the parties agree that in the
event that Subtenant shall fail to surrender the Premises in the manner provided
in this Sublease upon the expiration or earlier termination of this Sublease,
then Subtenant shall pay to Sublandlord for each day on which Subtenant occupies
the Premises after the expiration or earlier termination of this Sublease, as
liquidated damages and in addition to any Additional Rent payable with respect
to such period, Base Rent at a rate equal to twice the per diem rate at which
Base Rent was payable on the day upon which the expiration or earlier
termination of this Sublease occurred. The parties hereto acknowledge and agree
that the liquidated damages provided for in this subparagraph represent a
reasonable estimate by the parties of the damages that would be suffered by
Sublandlord were Subtenant to fail to surrender the Premises in the manner
provided in this Sublease upon the expiration or earlier termination of this
Sublease and that they do not constitute a penalty. Nothing in this subparagraph
shall limit any other damages to which Sublandlord may be entitled in respect of
any breach of any term or provision of this Sublease by Subtenant.
(b) Reimbursement of Costs of Enforcement. Without limiting the
generality of Paragraph 52 of the Master Lease, Subtenant shall reimburse
Sublandlord for all legal fees and disbursements incurred by Sublandlord in
enforcing any provision of this Sublease. Sublandlord shall reimburse Subtenant
for all legal fees and disbursements incurred by Subtenant in enforcing any
provision of this Sublease.
(c) Restoration of Premises by Subtenant. In the event that Subtenant
shall close off or otherwise alter the door or doorway to the Premises or shall
alter or remove the demising wall between the Premises and the premises that
Subtenant presently occupies in the Building (which shall be subject to the
consent of Sublandlord and Landlord), then, prior to its surrender of the
Premises (whether upon the expiration or earlier termination of this Sublease),
Subtenant shall, in addition to taking any action required to be taken by
Subtenant under Paragraph 3 of the Master Lease, restore such door and doorway
and such demising wall to the condition they were in on the Commencement Date.
13. BROKER. Each party represents and warrants to the other that in
connection with the transactions contemplated by this Sublease it did not deal
directly or indirectly with any broker or finder, the representation and
warranty in this sentence to survive the expiration or earlier termination of
this Sublease. Each
<PAGE> 12
party hereby indemnifies the other and holds the other harmless from and against
any and all damages, costs, losses, liabilities or expenses arising out of or
related to claims arising out of any breach of the representation contained in
this Paragraph 13, such indemnity and hold harmless to include, without
limitation, the obligation to provide all costs of defense against any such
claims.
14. ASSIGNMENT
(a) Prohibition against Assignment or Subletting by Subtenant.
Subtenant will not, without the prior written consent of Sublandlord and the
prior written consent of Landlord, assign this Sublease or further sublet the
Sublet Premises in whole or in part; nor will Subtenant permit Subtenant's
interest in this Sublease to be vested in any third party by operation of law or
otherwise. Without limiting the generality of the foregoing or of Paragraphs 1
and 10 hereof, Subtenant acknowledges that, in the event that Sublandlord and
Landlord shall consent to any assignment hereof or further subletting of the
Sublet Premises, such assignment or further subletting shall be subject to the
terms and provisions of the Master Lease.
(b) Sublandlord's Assignment of this Sublease. Sublandlord shall be
permitted to assign this Sublease provided that prior to any assignment hereof
the assignee hereof delivers to Subtenant an instrument whereby such assignee
(i) agrees to recognize Subtenant's rights hereunder and (ii) expressly assumes
all of Sublandlord's obligations hereunder. In connection with such assignment,
Sublandlord and any assignee of this Sublease shall, with respect to the
security deposit deposited with Sublandlord hereunder, comply with the
provisions of Section 7-105 of the General Obligations Law regarding transfers
of security deposits.
(c) Sublandlord Released upon Assignment. In the event that Sublandlord
shall surrender or otherwise voluntarily terminate the Master Lease, or shall
assign this Sublease in compliance with subparagraph (b) of this Paragraph 14,
then Sublandlord shall have no further duties or obligations whatsoever
hereunder, and Landlord or the assignee hereof shall for all purposes be the
Sublandlord hereunder.
15. MERGER; AMENDMENT. All prior understandings and agreements between
Sublandlord and Subtenant are merged within this Sublease, which fully and
completely sets forth their understanding. This Sublease may not be changed or
terminated orally or in any other manner than by an agreement in writing signed
by the party against which enforcement of the change or termination is sought.
<PAGE> 13
16. NOTICES
(a) Manner of Giving Notices. Any notice required or permitted to be
given hereunder shall be in writing and may be given by telecopier, by certified
mail, return receipt requested, or by personal delivery (including by reputable
overnight courier service such as Federal Express). Any notice given by
telecopier shall be deemed given when confirmation of transmission has been
received, provided that if such notice is transmitted at any time other than
during Normal Business Hours (as such term is defined below) such notice shall
be deemed given at the next commencement of Normal Business Hours. Any notice
given by certified mail, return receipt requested, shall be deemed given on the
fourth (4th) day after the date upon which it is mailed, postage paid. Any
notice given by personal delivery shall be deemed given when delivered, provided
that if such notice is delivered at any time other than during Normal Business
Hours such notice shall be deemed given at the next commencement of Normal
Business Hours. As used in this Paragraph 16, the term "Normal Business Hours"
means the hours between 9:00 a.m. and 4:30 p.m. in the time zone covering the
recipient's address as set forth below, Monday through Friday, exclusive of any
day that is not a Business Day (the term "Business Day" meaning any day other
than a day when banks in the State of New York are required or permitted to be
closed). Any notice given hereunder shall be given to Sublandlord or Subtenant,
as the case may be, at the following address or telecopier number (and whether
to an address or a telecopier number, to the attention of the person indicated):
If to Sublandlord:
Tomar Studios, Inc.
601 West 26th Street
13th Floor
New York, New York 10001
Attn.: Tom Marrazza
President
Telecopier: (212) 627-1987
and from and after the Commencement Date:
Tomar Studios, Inc.
c/o Tom Marrazza
<PAGE> 14
1 Irving Place
Apartment V9A
New York, New York 10003
with a copy to:
Terrence M. Bennett
Bennett & Samios, LLP
845 Third Avenue - 21st Floor
New York, New York 10022
Telecopier: (212) 753-6262
If to Subtenant:
Screaming Media.com, Inc.
601 West 26th Street
New York, New York 10001
Attn.: William P. Kelly
General Counsel
Telecopier: (212) 422-1761
with a copy to:
Alan J. Bernstein, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Telecopier: (212) 732-3232
(b) Change of Address for Notices. Either party may change its address
for notices as set forth above by notice to such effect to the other party given
in the manner provided in subsection (a) of this Paragraph 16.
(c) Forwarding Copies of Notices from Landlord. Subtenant shall
promptly give Sublandlord written notice, and a copy, of any notices served by
Landlord upon Subtenant pursuant to the terms, conditions and provisions of the
Master Lease. Sublandlord shall promptly give Subtenant written notice, and a
copy, of any notice of default served by the Landlord upon Sublandlord pursuant
to the terms, provisions and conditions of the Master Lease. Sublandlord shall
promptly
<PAGE> 15
forward to Subtenant any notices of changes in the building rules (as set forth
in the Master Lease), unless at the time that Sublandlord receives any such
notice Subtenant shall be in possession of premises in the Building other than
the Premises.
17. GOVERNING LAW. This Sublease shall be governed by and construed in
accordance with the law of the State of New York applicable to agreements made
and to be performed wholly within the State of New York.
18. SUBMISSION TO JURISDICTION. The parties hereto agree that any action or
proceeding arising out of or relating to this Sublease shall be brought only in
a federal court sitting in New York City or a New York State court sitting in
New York City, and each of the parties hereto submits to the jurisdiction of any
such court in the event that such any such action or proceeding shall be
brought. Each of the parties hereto agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such court and
waives any objection that it may now or hereafter have as to the venue of any
such action or proceeding brought in any such court or that any such court is an
inconvenient forum. Each of the parties hereto consents to the service of
process upon it in any such action or proceeding in any such court by the
mailing of copies of such process to it, by certified or registered mail, return
receipt requested, at its address specified in Paragraph 16.
19. BINDING EFFECT. Without limiting the effect of Paragraph 14 hereof, the
covenants and agreements in this Sublease shall bind and inure to the benefit of
Sublandlord and Subtenant and their successors and assigns.
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this
Sublease as of on the date first written above.
TOMAR STUDIOS, INC.
/s/ Terrence Bennett By: /s/ Tom Marrazza
______________________________ ____________________________
Witness Tom Marrazza
Print Name: Terrence Bennett President
SCREAMING MEDIA.COM INC.
<PAGE> 16
/s/ William P. Kelly /s/ Jay Chiat
_____________________________ By:______________________________
Witness Jay Chiat
Print Name: William P. Kelly Chairman
<PAGE> 17
Exhibit A
Copy of Master Lease
<PAGE> 1
Exhibit 10.6
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC
OFFERINGS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR
SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL OR STATE
SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION
REQUIREMENTS.
Void after 5:00 p.m. New York Time, on June 7, 2004.
WARRANT TO PURCHASE COMMON STOCK
SCREAMING MEDIA.NET, INC.
This is to certify that, FOR VALUE RECEIVED, DEUTSCHE BANK SECURITIES,
INC. or its registered assigns pursuant to Section 4 hereof (the "Holder"), is
entitled to purchase, subject to the provisions of this Warrant, from SCREAMING
MEDIA.NET, INC., a Delaware corporation (the "Company"), ONE HUNDRED TWENTY
THOUSAND FIVE HUNDRED THIRTY-FIVE (120,535) fully paid, validly issued and
non-assessable shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), at the exercise price of $11.20 per share until June 7, 2004.
The number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares," and the exercise price
of a share of Common Stock as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
1. EXERCISE OF WARRANT; NOTIFICATION OF EXPIRATION DATE OF WARRANT. The
Warrant may be exercised as to a minimum of 1,000 Warrant Shares, at any time
or from time to time, until 5:00 p.m. New York City time on June 7, 2004 (the
"Expiration Date"), provided, however, that if such day is a day on which
banking institutions in the State of New York are authorized by law to close,
then on the next succeeding day which shall not be such a day. The Warrant may
be exercised by presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer agent, if any, with
the Purchase Form annexed hereto duly executed (with signature guaranteed if
required by the Company or its stock transfer agent) and accompanied by payment
of the Exercise Price for the number of Warrant Shares specified in such form
and any applicable taxes. The purchase price for any Warrant Shares purchased
pursuant to the exercise of this Warrant shall be paid in full upon such
exercise in cash or by certified or bank check or pursuant to a cashless
exercise procedure whereby the Warrant Shares
<PAGE> 2
issued upon exercise of this Warrant will be sold with the Holder receiving the
difference between the aggregate Exercise Price and the aggregate sale price, in
cash, and the Company receiving the aggregate Exercise Price for the Warrant
Shares, in cash, or any combination of the foregoing methods of paying the
Exercise Price. In the alternative, the Warrant may be exchanged for Warrant
Shares as described herein. As soon as practicable after each such exercise of
this Warrant, but not later than seven business days from the date of such
exercise, the Company shall issue and deliver to the Holder a certificate or
certificates for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or the Holder's designee (except in the case of a
cashless exercise). If the Warrant should be exercised in part only, the Company
shall, upon surrender of the Warrant for cancellation, execute and deliver a new
Warrant evidencing the rights of the Holder thereof to purchase the balance of
the Warrant Shares purchasable thereunder. In the event of a cash exercise, upon
receipt by the Company of the Warrant at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise, together with
the exercise price thereof and taxes as aforesaid in cash or certified or bank
check and the investment letter described below, the Holder shall be deemed to
be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder. In order to assure the
availability of an exemption from registration under the federal or applicable
state securities laws, the Company may condition the exercise of the Warrant
upon the Holder delivering to the Company an investment letter in the form as
customarily used by the Company from time to time in connection with the
exercise of non-registered options and warrants that are issued by the Company.
It is further understood that certificates for the Warrant Shares, if any, to be
issued upon exercise of the Warrant may contain a restrictive legend in
accordance with Section 9 hereof.
Notwithstanding anything herein to the contrary, the Company shall
mail to the Holder, by certified mail, return receipt requested, notice of the
Expiration Date of the Warrant, no later than 60 days prior to the Expiration
Date. To the extent the Company shall fail to send the required notice at the
time and in the manner set forth in the preceding sentence, the Expiration Date
of the Warrant shall be extended to a date 60 days following the date that a
written notice of the Expiration Date of the Warrant from the Company is
received by the Holder.
2. Reservation of Shares. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
hereof. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect such exercise, the Company shall take
such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose. If the Common Stock is or becomes listed on any national
securities exchange or Nasdaq, the Company shall also cause such shares to be
listed on such exchange subject to notice of issuance or maintain the listing of
its Common Stock on Nasdaq, as the case may be.
<PAGE> 3
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Warrant. With respect to
any fraction of a share called for upon any exercise hereof, the Company shall
pay to the Holder an amount in cash equal to such fraction multiplied by the
current market value of a share, determined as follows:
(i) if the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on Nasdaq, the current market value shall be the last reported sale
price of the Common Stock on such exchange or system on the last business
day prior to the date of exercise of this Warrant, or if no such sale is
made on such day, the average closing bid and asked prices for such day on
such exchange or system;
(ii) if the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of this
Warrant; or
(iii) if the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than the book value
thereof as at the end of the most recent fiscal year of the Company ending
prior to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company.
4. Exchange, Transfer, Assignment or Loss of Warrant. The Warrant
is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other Warrants of different denominations entitling
the Holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to Section 9 hereof, the Holder may
transfer or assign the Warrant, in whole or in part and from time to time. Upon
surrender of this Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed (with signature guaranteed, if required by the Company or
its stock transfer agent) and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant in the name of
the assignee or assignees named in such instrument of assignment, and this
Warrant shall promptly be canceled. This Warrant may be divided by or combined
with other Warrants that carry the same rights upon presentation hereof at the
principal office of the Company or at the office of its stock transfer agent,
if any, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, which notice shall be signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrants into
which this Warrant may be divided or exchanged. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor, date and amount. Any such new Warrant executed and delivered shall
constitute an additional
<PAGE> 4
contractual obligation on the part of the Company, whether or not the original
Warrant shall be at any time enforceable by anyone.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Adjustment of Exercise Price and/or Number of Warrant Shares. So long
as this Warrant shall be outstanding, the Exercise Price in effect at any time
and the number and kind of securities purchasable upon the exercise hereof
shall be subject to adjustment from time to time upon the happening of certain
events as set forth in this Section 6.
(a) Upon the happening of any of (i) the issuance of additional shares
of Common Stock as a dividend or other distribution with respect to outstanding
shares of Common Stock, (ii) the subdivision of outstanding shares of Common
Stock into a greater number of shares of Common Stock, or (iii) the combination
of outstanding shares of Common Stock into a smaller number of shares of Common
Stock, in each case whether by reclassification of shares of Common Stock,
recapitalization of the Company or otherwise (each an "Extraordinary Common
Stock Event"), the Exercise Price shall, simultaneously with the happening of
such Extraordinary Common Stock Event, be adjusted by multiplying the
then-applicable Exercise Price by a fraction, the numerator of which shall be
the number of shares of the Common Stock outstanding immediately prior to such
Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events. Whenever the Exercise Price payable
upon exercise of this Warrant is adjusted as provided in this paragraph, the
number of Warrant Shares purchasable upon exercise of the Warrant shall
simultaneously be adjusted to the number obtained by multiplying the number of
Warrant Shares issuable upon exercise of this Warrant by the Exercise Price
in effect on the date hereof and dividing the product so obtained by the
Exercise Price, as adjusted pursuant hereto.
(b) In the event that the Exercise Price is increased above the Exercise
Price in effect on the date hereof for any reason (other than as contemplated
by paragraph (a) above), the number of Warrant Shares purchasable upon the
exercise hereof shall be increased to a number such that (i) the product of (x)
such number multiplied by (y) the difference between the fair market value of a
share of Common Stock and the Exercise Price (as so adjusted) is equal to (ii)
the product of (x) the number of Warrant Shares purchasable upon the exercise
hereof (without giving effect to such increase) multiplied by (y) the
difference between the fair market value of a share of Common Stock and the
Exercise Price in effect immediately prior to such increase. Such adjustment of
the number of Warrant Shares purchasable upon the exercise hereof shall be
effective as of the date of such increase in the Exercise Price.
(c) Whenever the number of shares of Common Stock with respect to which
this Warrant is exercisable is adjusted as provided in this Section 6, the
Corporation shall
<PAGE> 5
promptly mail to the Holder at its address, as the same shall appear on the
books of the Company, a notice stating that the number of shares of Common
Stock with respect to which this Warrant is exercisable has been adjusted and
setting forth the new number of shares of Common Stock (or describing the new
stock, securities, cash or other property) with respect to which this Warrant
is exercisable as a result of such adjustment, a brief statement of the facts
requiring such adjustment and the computation thereof, and when such adjustment
became effective.
(d) All calculations under this Section 6 shall be made to the nearest
cent or to the nearest Warrant Share, as the case may be.
(e) In the event that at any time, as a result of an adjustment made
pursuant to this Section 6, the Holder of this Warrant thereafter shall become
entitled to receive any shares of the Company other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained herein.
(f) Irrespective of any adjustments in the Exercise Price or the number
or kind of Warrant Shares purchasable upon exercise of this Warrant, this
Warrant and any Warrant thereafter issued may continue to express the same
price and number and kind of shares as are initially stated herein upon its
issuance.
7. Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock, or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any shares of any class or any
other rights, or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or exchange of all
or substantially all of the property and assets of the Company in one
transaction or as a part of a series of related transactions, or voluntary or
involuntary dissolution, liquidation or winding-up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least 20 days prior to the date specified in
clause (x) or clause (y) below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which (x) a record is
to be taken for the purpose of such dividend, distribution or rights, or (y)
such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding-up is to take place and the date, if
any is to be fixed, as of which the holders of Common Stock or other securities
shall receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding-up.
8. Reclassification, Reorganization or Merger. (a) If the shares of
Common Stock issuable upon the exercise of this Warrant shall be changed into
the same or a different number of shares of any other class or classes or
series of capital stock of the Company, whether by recapitalization,
reclassification or otherwise (other than pursuant to a merger, consolidation,
share exchange, or sale, lease, exchange or transfer of property and assets
described in paragraph
<PAGE> 6
(b) below), then, and in each such event, the holder hereof shall have the right
thereafter to exercise this Warrant with respect to the kind and amount of
shares of capital stock and other securities and property receivable upon such
reorganization, reclassification or other change by holders of the number of
shares of the Common Stock with respect to which this Warrant could have been
exercised immediately prior to such recapitalization, reclassification or other
change. No adjustments or provision for adjustments shall be made with respect
to the Exercise Price as a result of any of the events described in this
paragraph (a). The provisions of this paragraph (a) shall apply similarly to any
successive event of a type described in this paragraph.
(b) If, at any time or from time to time, the Company shall be a party
to a merger or consolidation of the Company with or into another person, then,
as a condition to the consummation of such transaction, adequate provision shall
be made so that the holder shall thereafter be entitled to purchase upon
exercise of this Warrant (x) the number of shares of capital stock or other
securities or property of the Company, or of the successor corporation,
resulting from such merger or consolidation, that would have been received by
such holder had this Warrant been exercised with respect to shares of Common
Stock immediately prior to the consummation of such transaction multiplied by
(y) the number of shares of Common Stock with respect to which this Warrant
could have been exercised immediately prior to the consummation of such
transaction. Except as provided in Section 6, no adjustments or provision for
adjustments shall be made with respect to the Exercise Price as a result of any
of the events described in this paragraph (b). The provisions of this paragraph
(b) shall apply similarly to any successive event of a type described in this
paragraph.
9. Securities Law Compliance. (a) The Holder of this Warrant, by
acceptance hereof, acknowledges that the Warrant and the shares of Common Stock
to be issued upon exercise hereof or conversion thereof are being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell, transfer, assign
or otherwise dispose of this Warrant or any shares of Common Stock to be issued
upon exercise hereof or conversion thereof except under circumstances that will
not result in a violation of the Act or any state securities laws. Upon exercise
of the Warrant, the Holder shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of Common Stock
so purchased are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
(b) If appropriate, the Warrant and any Warrants issued upon exercise
or substitution or upon assignment or transfer as provided herein and all shares
of Common Stock issued upon exercise hereof shall be stamped or imprinted with
legends setting forth the restrictions on transfer arising under applicable
federal and state securities laws.
10. Registration Rights. (a) Commencing the date hereof, the Company
shall advise the Holder of this Warrant and any Warrant Shares by written notice
at least 21 days prior to the filing of any registration statement or
post-effective amendment thereto ("Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act"), covering an underwritten public
offering of equity securities of the Company and shall register in
<PAGE> 7
any such Registration Statement the number of Warrant Shares that the Holder
shall notify the Company it desires to register and shall include in any such
Registration Statement such information as may be required to permit a public
offering of such Warrant Shares by the Company's underwriter(s). The Company
shall supply prospectuses and other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of such
Warrant Shares. The Company shall bear the entire cost and expense of a
registration of securities initiated by it under this paragraph (a). The Holder
shall, however, bear the fees of its own counsel and any transfer taxes and
underwriting discounts or commissions applicable to the Warrant Shares sold by
it. The Company may include other securities in any such registration statement.
The Company shall do any and all other acts and things which may be necessary or
desirable to enable the Holder to consummate the public sale or other
disposition of the Warrant Shares, and furnish indemnification in the manner as
set forth in paragraph (b)(i) of this Section 10, but shall not be required to
qualify as a foreign corporation to qualify the Warrant Shares for sale under
the securities laws of any state. The Holder shall furnish information and
indemnification as set forth in paragraph (b)(ii) of this Section 10. All
decisions as to whether and when to proceed with any Registration Statement
shall be made solely by the Company.
Notwithstanding the foregoing paragraph, in the event that there is an
underwritten offering of the Company's securities offered pursuant to said
registration statement pursuant to the immediately preceding paragraph, the
underwriter(s) shall have the right to refuse to permit any Warrant Shares, or
to limit the amount of Warrant Shares, to be sold by the Holder to such
underwriter(s) on the same basis as other holders of piggyback or other similar
registration rights with respect to Common Stock, and the Holder shall refrain
from selling such remainder of its Warrant Shares covered by such registration
statement for the period of 90 days immediately following the effective date and
shall also refrain at any time when notified by the Company that an amendment or
supplement to the prospectus is required. The Company shall not be obligated to
keep any Registration Statement effective for a total of more than 180 days.
(b)(i) In the event of any registration of any securities of the Company
under the Securities Act, the Company shall indemnify and hold harmless each
Holder selling Warrant Shares, its officers and directors, each underwriter,
broker or any other person acting on behalf of such seller and each other
person, if any, who controls any of the foregoing persons within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto or any document incident to registration or qualification of
any Warrant Shares or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by the
Company of the Securities Act or state securities or blue sky laws applicable
<PAGE> 8
to the Company and relating to action or inaction required of the Company in
connection with such registration or qualification under such state securities
or blue sky laws; and the Company will reimburse such seller and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by such seller,
specifically stating that it is for use in the preparation thereof and, provided
further, that the Company shall not be liable to any person who participates as
an underwriter in the offering or sale of Warrant Shares or any other person, if
any, who controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities and/or the Common Stock to
such person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such director,
officer, underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(ii) The Company may require, as a condition to including any Warrant
Shares in any Registration Statement, that the Company shall have received an
undertaking satisfactory to it from the prospective sellers of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subparagraph (ii)) the Company, each director of the Company, each
officer of the Company and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such sellers specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, provided that the
obligation to indemnify shall be several, and not joint and several, among such
sellers of and the liability of each such seller shall be in proportion to and
limited to the net amount received by such seller from the sale of Warrant
Shares pursuant to such registration statement. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller.
(iii) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding
<PAGE> 9
subdivisions of this paragraph (b), such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action, provided that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
paragraph (b), except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgement a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and alter notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable for any
settlement made by the indemnified party without its consent (which consent will
not be unreasonably withheld) or for any legal or other expenses subsequently
incurred by the indemnified party in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of any judgement or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(iv) Indemnification similar to that specified in the preceding
subdivisions of this paragraph (b) (with appropriate modifications) shall be
given by the Company and each seller of Warrant Shares with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of any governmental authority other than the Securities
Act.
(v) The indemnification required by this paragraph (b) shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(c) If the indemnification provided for herein shall for any reason be
unavailable or insufficient to an indemnified party under paragraph (b) hereof
in respect of any loss, claim, damage or liability, or any action in respect
thereof, or referred to therein, then each indemnifying party shall, in lieu of
indemnifying such party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, in such proportion as shall be appropriate to reflect
(i) the relative benefits received by the Company, on the one hand, and the
holders of the Warrant Shares included in the offering, on the other hand, from
the offering of the Warrant Shares and (ii) the relative fault of the Company,
on the one hand, and the holders of the Warrant Shares included in offering, on
the other hand, with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand and the holders of the Warrant Shares, on the other
hand, with respect to such offering shall be deemed to be in the same proportion
as the sum of the total Exercise Price paid to the Company in respect of the
Warrant Shares plus the total net proceeds from the offering of the securities
(before deducting expenses) received by the Company bears to the amount by which
the total net proceeds from the
<PAGE> 10
offering of the securities (before deducting expenses) received by the holders
of the Warrant Shares with respect to such offering exceeds the Subscription
Price paid to the Company in respect of the Warrant Shares and in each case the
net proceeds received from such offering shall be determined as set forth on
the table of the cover page of the prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the holders of
the Warrant Shares, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the holders of the Warrant Shares agree that it would
not be just and equitable if contribution pursuant to this paragraph (c) were
to be determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to in
this paragraph (c) shall be deemed to include, for purposes of this paragraph,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. 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.
(d) The Company shall not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the holders
of Warrant Shares to include such Warrant Shares in any registration of its
securities contemplated by this Section 10 or the marketability of such
Warrant Shares under any such registration.
(e) 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 shall file the
reports required to be filed by it under the Securities Act and the Exchange
Act (or, if the Company is not required to file such reports, shall, upon the
request of any holder of Warrant Shares, make publicly available other
information) and shall take such further action as any holder of Warrant Shares
may reasonably request, all to the extent required from time to time to enable
such holder to sell such holder's securities without registration under the
Securities Act but within the limitations of the exemptions provided by (i) Rule
144, or (ii) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Holder, the Company shall deliver to such
holder a written statement as to whether it has complied with such requirements.
11. Right to Convert Warrant into Common Stock. (a) The Holder shall have
the right to require the Company to convert this Warrant provided in this
Section 11, into Common Stock (the "Net Conversion Right"). Upon exercise of
the Net Conversion Right, the Company shall deliver to the Holder (without
payment by the Holder of any Exercise Price or of any other cash or
consideration) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the value of this Warrant (determined by multiplying
(A) the number of Warrant Shares issuable upon exercise in full of this Warrant
by (B) the difference between the fair market value of a share of Common Stock
and the Exercise Price then in effect) at the time the Conversion Right is
exercised (determined by subtracting the aggregate Exercise Price in
<PAGE> 11
effect immediately prior to the exercise of the Conversion Right from the
aggregate fair market value of the shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the exercise of the Conversion
Right) by (y) the fair market value of one share of Common Stock immediately
prior to the exercise of the Conversion Right.
(b) The Net Conversion Right may be exercised by the Holder by the
surrender of this Warrant at the principal office of the Company together with
a written statement specifying that the Holder thereby intends to exercise the
Net Conversion Right. Certificates for the shares of Common Stock issuable upon
exercise of the Net Conversion Right shall be delivered to the Holder within
five days following the Company's receipt of this Warrant together with the
aforesaid written statement.
(c) For purposes of this Section, fair market value of a share of Common
Stock as of a particular date (the "Determination Date") shall be determined in
accordance with Section 3 of this Warrant.
12. Amendments. Neither the Warrant nor any term hereof may be changed,
waived, discharged or terminated without the prior written consent of Holder.
13. No Impairment. The Company will not avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of any Holder.
14. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of New York.
15. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class mail, postage
prepaid, addressed as follows:
(a) if to Holder, to Deutsche Bank Securities, Inc., One South Street,
Baltimore, Maryland 21202, Attention: Donald Notman, or
(b) if to the Company, to Screaming Media.Net, Inc., 601 West 26th
Street, 13th Floor, New York, New York 10001, Attention: Alan Ellman, or at
such other address as to the Company shall have furnished to the Holder in
writing.
<PAGE> 12
IN WITNESS WHEREOF, Screaming Media.Net, Inc. has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated as of June 7, 1999 SCREAMING MEDIA.NET, INC.
By: /s/ Alan S. Ellman
-------------------------------
Name: Alan S. Ellman
Title: President
<PAGE> 13
PURCHASE FORM
Dated_______
The undersigned hereby irrevocably elects to exercise its rights pursuant
to this Warrant to the extent of purchasing_______shares of Common Stock of
Screaming Media.Net, Inc. and hereby makes payment of $______, in cash, in
payment of the exercise price thereof.
[The undersigned hereby irrevocably elects to exercise its rights pursuant
to this Warrant to the extent of purchasing_______shares of Common Stock and
hereby authorizes you to deliver such shares of Common Stock for sale to_____,
and to retain from the proceeds of such sale $______, in cash, in payment of
the exercise price thereof and to remit to the undersigned the balance of such
proceeds.]
------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name:
----------------------------------------------------------
(Please type or print in block letters)
Address:
-------------------------------------------------------
Signature:
-----------------------------------------------------
<PAGE> 14
ASSIGNMENT FORM
FOR VALUE RECEIVED, hereby sells,
------------------------------------------
assigns and transfers unto
Name:
--------------------------------------------------------------------
(Please type or print in block letters)
Address:
-----------------------------------------------------------------
the right to purchase Common Stock of Screaming Media.Net, Inc. (the
"Company"), represented by this Warrant to the extent of shares as
---------
to which such right is exercisable and does hereby irrevocably constitute and
appoint as Attorney, to transfer the same on the books of
----------------------
the Company with full power of substitution in the premises.
Date:
-----------
Signature:
-------------------------
<PAGE> 1
EXHIBIT 10.7
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE REGISTERED HOLDER OF THIS WARRANT HAS AGREED THAT NO SALE,
PLEDGE OR OTHER TRANSFER OF THIS WARRANT OR ANY OF SAID SHARES MAY BE
MADE WITHOUT REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, UNLESS THE HOLDER SHALL DELIVER TO THE ISSUER AN
OPINION (IN FORM SATISFACTORY TO THE ISSUER) OF COUNSEL SATISFACTORY TO
THE ISSUER THAT NO SUCH REGISTRATION IS REQUIRED.
SCREAMINGMEDIA.NET, INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. 1 7,143 Shares
This certifies that, for value received,
CARTER, LEDYARD & MILBURN
or its assigns, are entitled, subject to the terms and conditions hereinafter
set forth, at or before 5:00 p.m., New York time, on June 10, 2004, but not
thereafter, to purchase up to 7,143 shares (the "Shares") of Common Stock, par
value $.01 per share ("Common Stock"), of ScreamingMedia.Net, Inc., a Delaware
corporation (the "Company"). The purchase price payable upon the exercise of
this Warrant shall initially be $7.00 per share, said amount being subject to
adjustment as described herein (the "Warrant Price").
Upon delivery of this Warrant with the Purchase Form attached
hereto duly executed, together with payment of the Warrant Price for the shares
of Common Stock thereby purchased, at the principal office of the Company or at
such other address as the Company may designate by notice in writing to the
registered holder hereof (the "Holder"), the Holder shall be entitled to receive
a certificate or certificates for the Shares so purchased. All Shares issued
upon the exercise of this Warrant will, upon issuance, be paid and nonassessable
and free from all taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
<PAGE> 2
1. SECTION TRANSFERABILITY AND FORM OF WARRANT
1.1 Registration. This Warrant is numbered and registered on the books of the
Company. The Company shall be entitled to treat the Holder as the sole owner of
this Warrant for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in this Warrant on the part of any other person,
and shall not be liable for any registration of transfer of this Warrant which
is to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration of transfer.
1.2 Transfer. This Warrant shall be transferable only on the books of the
Company maintained at its principal office in New York, New York, or wherever
its principal office may then be located, upon delivery of this Warrant either
duly endorsed by the Holder or by the Holder's duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Upon any
registration of transfer, the Company shall execute and deliver a new Warrant to
the person entitled thereto.
2. SECTION EXCHANGE OF WARRANT CERTIFICATE
This Warrant certificate may be exchanged for another certificate or
certificates entitling the Holder to purchase a like aggregate number of Shares
as this certificate then entitles the Holder to purchase. Any Holder of this
Warrant desiring to exchange this Warrant certificate shall make such request in
writing delivered to the Company, and shall surrender this certificate, properly
endorsed, to the Company. Thereupon, the Company shall execute and deliver to
the person entitled thereto a new Warrant certificate or certificates, as the
case may be, as so requested.
3. SECTION TERM OF WARRANT; EXERCISE OF WARRANT
Subject to the terms of this Warrant, the Holder shall have the right,
at any time during the period commencing at 9:00 a.m., New York time, on the
date hereof, until 5:00 p.m., New York time, on June 10, 2004 (the "Termination
Date"), to purchase from the Company the number of fully paid and nonassessable
Shares to which the Holder may at the time be entitled to purchase pursuant to
this Warrant, upon surrender, to the Company at this principal office, of this
Warrant certificate, together with the Purchase Form attached hereto duly
completed and signed, and upon payment to the Company of the Warrant Price for
the number of Shares in respect of which this Warrant is then being exercised.
Payment of the aggregate Warrant Price shall be made in cash, or by certified or
cashier's check, or by delivery of shares of Common Stock
<PAGE> 3
valued at their Current Market Price (as hereinafter defined) on the date of
exercise, or a combination thereof.
In lieu of exercising this Warrant as provided above, the Holder may
elect to receive Shares equal to value (as determined below) of any or all of
the Warrants represented by this Warrant, upon surrender to Company, at its
principal office, of all or a portion of this Warrant, together with notice of
such election (a "Cashless Exercise"), in which event the Company shall issue to
the Holder a number of Shares computed using the following formula:
X = Y(A-B)
A
where X = the number of Shares to be issued pursuant
to this paragraph.
Y = the number of Shares issuable upon
exercise of the surrendered Warrants.
A = the Current Market Price, as defined in
Section 8.1(d) hereof, on the date when this
Warrant evidencing the surrendered Warrants
is received by the Company at its principal
office.
B = the Warrant Price.
Upon surrender of this Warrant and payment of the Warrant Price (or
upon a Cashless Exercise) as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch, to or upon the written order of the
Holder and (subject to the restrictive Legend on the first page of this Warrant)
in such name or names as the Holder may designate, a certificate or certificates
for the number of full Shares so purchased upon the exercise of this Warrant,
together with cash, as provided in Section 9 hereof; in respect of any
fractional Shares otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Shares as of the date of the surrender of this Warrant arid payment of the
Warrant Price (or making of a Cashless Exercise) as aforesaid; provided that if,
at the date of surrender of this Warrant and payment of such Warrant Price (or
making of a Cashless Exercise), the transfer books for the Shares or other class
of stock purchasable upon the exercise of this Warrant shall be closed, the
certificates for the Shares in respect of which this Warrant is then exercised
shall be issuable as of the date on which such books shall next be opened
(whether before or after the Termination Date) and until such date the Company
shall be under no duty to deliver any certificate for such Shares; and provided
further that the transfer books of record, unless otherwise required by law,
shall not be closed at any one time for a period longer than twenty days. The
rights of purchase represented by this Warrant shall be exercisable, at the
election of the Holder, either in full or from time to time in part and in the
event that this Warrant is
3
<PAGE> 4
exercised in respect of fewer than all of the Shares at any time prior to the
date of expiration of this Warrant, a new Warrant certificate to purchase the
remaining Shares will be issued.
4. SECTION PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Shares upon the exercise of this Warrant provided
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in such issuance.
5. SECTION MUTILATED OR MISSING WARRANT
In case the certificate evidencing this Warrant shall be mutilated,
lost, stolen or destroyed, the Company may, in its discretion, issue and deliver
in exchange and substitution for and upon cancellation of this certificate if it
is mutilated, or in lieu of and substitution for this certificate if it is lost,
stolen or destroyed, a new Warrant certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of this Warrant and indemnity, if
requested, also satisfactory to the Company. Applicants for such substitute
Warrant certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company may prescribe.
6. SECTION RESERVATION OF SHARES
There have been reserved, and the Company shall at all times keep
reserved, out of its authorized Common Stock a number of shares of Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant. Any transfer agent for the Common Stock or for any other shares of
the Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be requisite for such purpose.
The Company will keep a photocopy of this Warrant on file with any transfer
agent for the Common Stock or for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by this
Warrant.
7. SECTION PURCHASE BY THE COMPANY
7.1 Purchase of Warrant. The Company shall have the right, except as limited by
law, other agreements or herein, to purchase or otherwise acquire this Warrant
at such times, in such manner and for such consideration as it may deem
appropriate and as shall be agreed with the Holder of this Warrant.
8. SECTION ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES
4
<PAGE> 5
8.1 Adjustments. The Warrant Price and the number and kind of securities
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder of this Warrant shall be entitled
to receive the kind and number of Shares or other securities of the Company
which he would have owned or have been entitled to receive after the happening
of any of such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event
(b) In case the Company shall issue rights, options or warrants to all or
substantially all holders of its shares of Common Stock, without any charge to
such holders, entitling them to subscribe for or purchase shares of Common Stock
at a price per share which is lower at the record date mentioned below than the
Current Market Price per share of Common Stock (as defined in paragraph (d)
below), the number of Shares thereafter purchasable upon the exercise of this
Warrant shall be determined by multiplying the number of Shares theretofore
purchasable upon exercise of this Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus the number of shares
which the aggregate offering price of the total number of shares of Common Stock
so offered would purchase at such Current Market Price. Such adjustment shall be
made whenever such rights, options or warrants are issued, and shall become
effective retroactively immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants.
(c) In case the Company shall distribute to all or substantially all holders of
its shares of Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions out or earnings) or rights, options or warrants
or convertible securities containing the right to subscribe for or purchase
shares of Common Stock (excluding those referred to in paragraph (b) above),
then in each such case the number of Shares thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon exercise of this Warrant by a fraction, of which
the numerator shall be the then Current Market Price per share of Common Stock
(as defined in paragraph (d) below) on the date of such distribution, and of
which the denominator shall be such Current Market Price per share of Common
Stock, less the then fair value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible securities applicable to one share
of Common Stock. Such adjustment shall be made
5
<PAGE> 6
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
(d) For the purposes of this Warrant, the Current Market Price per share of
Common Stock of the Company at any date shall be deemed to be (i) if the shares
of Common Stock are traded in the over-the-counter market and not on any
national securities exchange and not in the NASDAQ National Market System, the
average of the mean between the bid and asked price per share, as reported by
The National Quotation Bureau, Incorporated, or an equivalent generally accepted
reporting service, for the twenty (20) consecutive trading days immediately
preceding the date for which the determination of Current Market Price is to be
made, or, (ii) if the shares of Common Stock are traded on a national securities
exchange or in the NASDAQ National Market System, the average daily per share
closing price on the principal national securities exchange on which they are so
listed or in the NASDAQ National Market System, as the case may be, for the
twenty (20) consecutive trading days immediately preceding the date for which
the determination of Current Market Price is to be made. The closing price
referred to in clause (ii) above shall be the last reported sales price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case on the principal national
securities exchange on which the shares of Common Stock are then listed or in
the NASDAQ National Market System. If the Current Market Price cannot be
determined in accordance with the foregoing, it shall be the fair market value
per share of Common Stock as determined in good faith by the Company's Board of
Directors.
(e) No adjustment in the number of shares purchasable hereunder shall be
required unless such adjustment would require an increase or decrease of at
least 1 percent in the number of Shares purchasable upon the exercise of this
Warrant; provided that any adjustments which by reason of this paragraph (e) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of this Warrant
is adjusted as herein provided, the Warrant Price per Share payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately thereafter.
(g) In case the Company shall sell and issue shares of Common Stock, or rights,
options, warrants or convertible securities containing the right to subscribe
for or purchase shares of Common Stock, at a price per share of Common Stock
(determined in the case of such rights, options, warrants or convertible
securities, by dividing (1) the total amount received or receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants or convertible securities, plus the total consideration payable to the
Company upon exercise or conversion thereof, by (ii) the total number of shares
of Common Stock covered by such rights, options, warrants or convertible
securities) lower than the Current Market Price (as
6
<PAGE> 7
defined in paragraph (d) above) in effect immediately prior to such sale and
issuance, then the Warrant Price shall be reduced to a price (calculated to the
nearest cent) determined by dividing (i) an amount equa1 to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such sale and
issuance multiplied by the then existing Warranty Price, plus (2) the
consideration received by the Company upon such sale and issuance, by (ii) the
total number of shares of Common Stock outstanding immediately after such sale
and issuance; provided that adjustments pursuant to this paragraph (g) shall
only be made if such sale or issuance is to an officer, director or other
affiliate of the Company, or any relative of any of the above, and if no
adjustment for such sale or issuance is made pursuant to paragraph (c) above.
The number of Shares purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Shares issuable upon exercise
immediately prior to such adjustment by a fraction, of which the numerator is
the Warrant Price in effect immediately prior to such adjustment and the
denominator is the Warrant Price as so adjusted. For the purposes of such
adjustments, the shares of Common Stock which the holders of any such rights,
options, warrants or convertible securities shall be entitled to subscribe for
or purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance, and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such rights,
options, warrants or convertible securities, plus the consideration or premiums
stated in such rights, options, warrants, or convertible securities to be paid
for the shares of Common Stock covered thereby. In case the Company shall sell
and issue shares of Common Stock, or rights, options, warrants, or convertible
securities containing the right to subscribe for or purchase shares of Common
Stock, for a consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the "price per share of Common
Stock" and the "consideration received by the Company" for purposes of the first
sentence of this paragraph (g), the Board of Directors shall determine, in its
discretion, the fair value of said property and such determination, if made in
good faith, shall be binding upon the Holder of this Warrant. There shall be no
adjustment of the Warrant Price pursuant to this paragraph (g) if the amount of
such adjustment would be less than $.05 per Share; provided that any adjustment
which by reason of this provision is not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(h) When the number of Shares purchasable upon the exercise of this Warrant or
the Warrant Price is adjusted as herein provided, the Company shall promptly
mail to the Holder by first class mail, postage prepaid, notice of such
adjustment or adjustments together with a certificate of a firm of independent
public accountants selected by the Board of Directors of the Company (who may be
the regular accountants employed by the Company) setting forth the number of
Shares purchasable upon the exercise of this Warrant and the Warrant Price of
such Shares after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made. Such
certificate shall be conclusive evidence of the correctness of such adjustment.
The Company shall be entitled to rely on such certificate and shall be under no
duty or responsibility with respect to any such certificate, except to exhibit
the same, from time to time, to the Holder during reasonable business hours.
7
<PAGE> 8
(i) For the purpose of this subsection 8.1, the term "shares of Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the Company
on the date of this Warrant, or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to this subsection 8.1, the Holder shall become entitled to purchase
any shares of the Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of this Warrant, and
the Warrant Price of such shares, shall be subject to adjustment from time to
time in manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in paragraphs (a) though (h),
inclusive, above, and the provisions of Section 3 and subsections 8.2 through
8.4, inclusive, with respect to the shares shall apply on like terms to any such
other shares.
(j) Upon the expiration of any rights, options, warrants or conversion
privileges, if any thereof shall not have been exercised, the number of shares
purchasable upon exercise of this Warrant and the Warrant Price, to the extent
this Warrant shall not then have been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had it been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (1) the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants or conversion rights and (2) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company for the issuance, sale or grant of all of such rights,
options, warrants or conversion rights, whether or not exercised; provided that
no such readjustment shall have the effect of increasing the Warrant Price by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or convertible
rights.
8.2 No Adjustment for Dividends. Except as provided in subsection 8.1, no
adjustment in respect of any dividends shall be made during the term of this
Warrants or upon the exercise of this Warrant.
8.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant to
this Section 8, in connection with the issuance of (a) such number of shares of
Common Stock (as adjusted for all stock dividends, stock splits, subdivisions
and combinations) as are issued to employees, officers, Directors, consultants
or members of the Advisory Board of the Company, or other persons performing
services for the company, pursuant to any stock option plan, stock purchase plan
or management incentive plan, agreement or arrangement approved by the Board,
and (b) any shares of Common Stock (or securities convertible into shares of
Common Stock) as consideration for the acquisition by the Company of assets or
equity interests in any business entity.
8.4 Preservation of Purchase Rights upon Reclassification, Consolidation, etc.
In case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or conveyance to another corporation
of the property, assets or business of the
8
<PAGE> 9
company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, as the case may be, shall execute an
agreement with the Holder that the Holder shall have the right thereafter upon
payment of the Warrant Price in effect immediately prior to such action to
purchase upon exercise of this Warrant the kind and amount of Shares and other
securities and property which he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had this Warrant been exercised immediately prior to such action. Such agreement
shall provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 8. The Company shall
mail an executed copy of any such agreement by first class mail, postage
prepaid, to the Holder. The provisions of this subsection 8.4 shall similarly
apply to successive consolidations, mergers, sales, or conveyances.
9. SECTION FRACTIONAL INTERESTS
The company shall not be required to issue fractional Shares on the
exercise of this Warrant. If more than one of the Redeemable Warrants shall be
presented for exercise in full at the same time by the same Holder, the number
of full Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by this
Warrant and the Other Redeemable Warrants so presented. If any fraction of a
Share would, except for the provisions of this Section 9, be issuable on the
exercise of this Warrant (or specified portion thereof), the Company shall pay
an amount in cash equal to the Current Market Price per Share (as defined in
paragraph 8.1(d) above) multiplied by such fraction.
10. SECTION NO RIGHT AS STOCKHOLDERS; NOTICES TO HOLDER
Nothing contained in this Warrant shall be construed as conferring upon
the Holder or the Holder's transferees the right to vote or to receive dividends
or to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. If, however, at any
time prior to the expiration of this Warrant and prior to its exercise, any of
the following events shall occur:
(a) any action which would require an adjustment pursuant to
subsections 8.1 or 8.4, or
(b) a dissolution, liquidation, or winding up of the Company
(other than in connection with a consolidation, merger, or
sale of all or substantially all of its property, assets, and
business as an entirety) shall be proposed;
the Company shall in each such case give notice in writing of such event to the
Holders as provided in Section 11 hereof. Failure to publish or mail such notice
or any defect therein or in the publication or mailing thereof shall not affect
the validity of any action taken in connection with such dividend, distribution,
or subscription rights, or proposed dissolution, liquidation or winding up.
9
<PAGE> 10
11. SECTION NOTICES
11.1 Any notice to the Company pursuant to this Warrant shall be in writing and
shall be deemed to have been duly given if delivered or mailed certified mail,
return receipt requested, to the Company at IT Center, 55 Broad Street, 23rd
Floor, New York, New York 10004, Attention: President. The Company may from time
to time change the address to which such notices are to be delivers or mailed
hereunder by notice to the Holder in accordance with paragraph (b) below.
11.2 Any notice pursuant to this Warrant by the Company to the Holder shall be
in writing and shall be deemed to have been duly given if mailed, postage
prepaid, to the Holder at the Holder's address on the books of the Company.
12. SECTION SUPPLEMENTS AND AMENDMENTS
The Company may from time to time supplement or amend this Warrant,
without the approval of the Holder, in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not be inconsistent with the provisions
of this Warrant and which shall not adversely affect the interest of the Holder.
Any other amendment to this Warrant may be made only by a written instrument
executed by the Company and the Holder.
13. SECTION SUCCESSORS
All the covenants and provisions of this Warrant by or for the benefit
of the Company or the Holder shall bind and inure to the benefit of their
respective successors and assigns hereunder.
14. SECTION MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other entity
unless the entity resulting from such merger or consolidation (if not the
Company) shall expressly assume the due and punctual performance and observance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company.
15. SECTION APPLICABLE LAW
This Warrant shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance with
the laws of said state.
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be affixed thereto.
Date: June 10, 1999
SCREAMINGMEDIA.NET, INC.
ATTEST:
By: /s/ Alan S. Ellman
______________________________
/s/ William P. Kelly Alan S. Ellman, President
__________________________________
William P. Kelly, Secretary
11
<PAGE> 12
SCREAMINGMEDIA.NET, INC.
COMMON STOCK PURCHASE WARRANT
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by (the within Warrant Certificate for, and to purchase
thereunder, _____________ shares (the "Shares") provided for therein, and
requests that certificates for the Shares be issued in the name of:
_______________________________________
(Please Print or Type Name, Address and Social Security Number)
_______________________________________
_______________________________________
_______________________________________
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the unpurchased Shares be
registered in the name of the undersigned Warrant holder as below indicated and
delivered to the address stated below:
(Please Print)
Dated:__________________________________
Name of Warrantholder:__________________
Address:________________________________
________________________________
Signature:______________________________
12
<PAGE> 13
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed: __________________________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
13
<PAGE> 1
Exhibit 10.8
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE REGISTERED HOLDER OF THIS WARRANT HAS AGREED THAT
NO SALE, PLEDGE OR OTHER TRANSFER OF THIS WARRANT OR ANY OF SAID
SHARES MAY BE MADE WITHOUT REGISTRATION UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW, UNLESS THE HOLDER SHALL DELIVER TO
THE ISSUER AN OPINION (IN FORM SATISFACTORY TO THE ISSUER) OF COUNSEL
SATISFACTORY TO THE ISSUER THAT NO SUCH REGISTRATION IS REQUIRED.
SCREAMING MEDIA.COM INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. 3 50,000 Shares
This certifies that, for value received,
TOMAR ASSOCIATES, INC.
or its assigns, are entitled, subject to the terms and conditions hereinafter
set forth, at or before 5:00 p.m., New York time, on February 4, 2005, but not
thereafter, to purchase up to 50,000 shares (the "Shares") of Common Stock, par
value $.01 per share ("Common Stock"), of Screaming Media.com Inc., a Delaware
corporation (the "Company"). The purchase price payable upon the exercise of
this Warrant shall initially be $5.60 per share, said amount being subject to
adjustment as described herein (the "Warrant Price").
Upon delivery of this Warrant with the Purchase Form attached hereto duly
executed, together with payment of the Warrant Price for the shares of Common
Stock thereby purchased, at the principal office of the Company (which is
located at the Company's address as set forth in Section 11) or at such other
address as the Company may designate by notice in writing to the registered
holder hereof (the "Holder"), the Holder shall be entitled to receive a
certificate or certificates for the Shares so purchased. All Shares issued upon
the exercise of this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
<PAGE> 2
Section 1. Transferability and Form of Warrant
l.l. Registration. This Warrant is numbered and registered on the books of
the Company. The Company shall be entitled to treat the Holder as the sole owner
of this Warrant for all purposes and, unless the provisions of Section 1.2 shall
be complied with, shall not be bound to recognize any equitable or other claim
to or interest in this Warrant on the part of any other person, and shall not be
liable for any registration of transfer of this Warrant which is to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer.
1.2. Transfer. This Warrant shall be transferable only on the books of the
Company maintained at its principal office in New York, New York, or wherever
its principal office may then be located, upon delivery of this Warrant either
duly endorsed by the Holder or by the Holder's duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment, or
authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Upon any
registration of transfer, the Company shall execute and deliver a new Warrant to
the person entitled thereto.
Section 2. Exchange of Warrant Certificate
This Warrant certificate may be exchanged for another certificate or
certificates entitling the Holder to purchase a like aggregate number of Shares
as this certificate then entitles the Holder to purchase. Any Holder of this
Warrant desiring to exchange this Warrant certificate shall make such request in
writing delivered to the Company, and shall surrender this certificate, properly
endorsed, to the Company. Thereupon, the Company shall execute and deliver to
the person entitled thereto a new Warrant certificate or certificates, as the
case may be, as so requested.
Section 3. Term of Warrant; Exercise of Warrant
Subject to the terms of this Warrant, the Holder shall have the right, at
any time during the period commencing at 9:00 a.m., New York time, on the date
hereof, until 5:00 p.m., New York time, on February 4, 2005 (the "Termination
Date"), to purchase from the Company the number of fully paid and nonassessable
Shares to which the Holder may at the time be entitled to purchase pursuant to
this Warrant, upon surrender, to the Company at this principal office, of this
Warrant certificate, together with the Purchase Form attached hereto duly
completed and signed, and upon payment to the Company of the Warrant Price for
the number of Shares in respect of which this Warrant is then being exercised.
Payment of the aggregate Warrant Price shall be made in cash, or be certified or
cashier's check, or by delivery of shares of Common Stock valued at their
Current Market Price (as hereinafter defined) on the date of exercise, or a
combination thereof.
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<PAGE> 3
Upon surrender of this Warrant and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch, to or upon the written order of the Holder and (subject to the
restrictive legend on the first page of this Warrant) in such name or names as
the Holder may designate, a certificate or certificates for the number of full
Shares so purchased upon the exercise of this Warrant, together with cash, as
provided in Section 9 hereof, in respect of any fractional Shares otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Shares as of the date of the
surrender of this Warrant and payment of the Warrant Price as aforesaid;
provided that if, at the date of surrender of this Warrant and payment of such
Warrant Price, the transfer books for the Shares or other class of stock
purchasable upon the exercise of this Warrant shall be closed, the certificates
for the Shares in respect of which this Warrant is then exercised shall be
issuable as of the date on which such books shall next be opened (whether before
or after the Termination Date) and until such date the Company shall be under no
duty to deliver any certificate for such Shares; and provided further that the
transfer books of record, unless otherwise required by law, shall not be closed
at any one time for a period longer than twenty days. The rights of purchase
represented by this Warrant shall be exercisable, at the election of the Holder,
either in full or from time to time in part and, in the event that this Warrant
is exercised in respect of fewer than all of the Shares at any time prior to the
date of expiration of this Warrant, a new Warrant certificate to purchase the
remaining Shares will be issued.
Section 4. Payment of Taxes
The Company will pay all documentary stamp taxes, if any, attributable to
the initial issuance of Shares upon the exercise of this Warrant; provided that
the Company shall not be required to pay any tax or taxes which may be payable
in respect of any transfer involved in such issuance.
Section 5. Mutilated or Missing Warrant
In case the certificate evidencing this Warrant shall be mutilated, lost,
stolen or destroyed, the Company may, in its discretion, issue and deliver in
exchange and substitution for and upon cancellation of this certificate if it is
mutilated, or in lieu of and substitution for this certificate if it is lost,
stolen or destroyed, a new Warrant certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of this Warrant and indemnity, if
requested, also satisfactory to the Company. Applicants for such substitute
Warrant certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company may prescribe.
Section 6. Reservation of Shares
There have been reserved, and the Company shall at all times keep reserved,
out of its authorized Common Stock, a number of shares of Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant. Any transfer agent for the Common
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<PAGE> 4
Stock or for any other shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be irrevocably
authorized and directed at all times to reserve such number of authorized
shares as shall be requisite for such purpose. The Company will keep a
photocopy of this Warrant on file with any transfer agent for the Common Stock
or for any shares of the Company's capital stock issuable upon the exercise of
the rights of purchase represented by this Warrant.
SECTION 7. PURCHASE BY THE COMPANY; REGISTRATION
7.1 Right to Require Repurchase of Warrant by the Company. The Holder
shall, at any time prior to the Termination Date, have the right, subject to the
terms and conditions set forth in this subsection 7.1, to cause the Company to
purchase this Warrant, in whole or in part (such right being the "Warrant Put"),
at a price of $14.40 per share (payable in cash), as adjusted in the manner of
the Warrant Price in Section 8 hereof (the "Warrant Put Price"), by delivery to
the Company of the Warrant and written notice of the exercise of the Warrant Put
(the "Warrant Put Notice"). The Company shall, within 30 days of receipt of the
Warrant and the Warrant Put Notice, pay the Warrant Put Price to the Holder, or
such person or persons as the Holder may designate in the Warrant Put Notice.
7.2 Right to Require Repurchase of Shares by the Company.
(a) The following terms used in this Section 7.2 and in Section 7.3 hereof
shall have the indicated definitions:
(1) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(2) "Rule 144" shall mean Rule 144 issued by the Securities and
Exchange Commission under the Securities Act, 17 CFR Section 230.144, or
any successor to such rule.
(3) "Warrant Derived Shares" shall mean the Warrant Shares and any
Shares that were issued to Holder by reason of its ownership of Warrant
Shares or Warrant Derived Shares due to Subtenant's stock split, stock
dividend, recapitalization or similar corporate action. Any Shares that are
sold, exchanged, or otherwise transferred out of the beneficial or record
ownership of Holder shall no longer be considered Warrant Derived Shares
and shall entitle the owner thereof to no rights under this Agreement.
(4) "Warrant Shares" shall mean the Shares owned beneficially and of
record by Holder that were obtained upon the exercise of this Warrant.
(5) "Always Restricted Shares" shall mean that number of Warrant
Derived Shares for which neither the set of conditions in subparagraph (i)
following nor the condition in subparagraph (ii) following has have ever
been satisfied:
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<PAGE> 5
(i) (x) there is available current public information with respect to
the Company that satisfies the conditions of subsection (c) of Rule 144;
(y) the Holder has held such Warrant Derived Shares for the
holding period required in subsection (d) of Rule 144; and
(z) the Holder would have been be able to sell such number of
Warrant Derived Shares under the volume limitations of subsection (e)
of Rule 144 (considering the period of time that conditions (x) and
(y) hereof have been satisfied); or
(ii) such Warrant Derived Shares are registered pursuant to the
Securities Act.
(b) The Holder shall have the right at any time and from time to
time, subject to the terms and conditions set forth in this section 7.2, to
cause the Company to purchase from it a number of Warrant Derived Shares in an
amount less than or equal to the total number of Holder's Always Restricted
Shares (such right being the "Share Put"). The purchase price for such Warrant
Derived Shares shall be $20.00 per share (payable in cash), as adjusted in the
manner of the Warrant Price in Section 8 hereof, with such adjustment taking
into consideration all events both prior to and subsequent to the exercise of
this Warrant (the "Share Put Price"). The Share Put shall be exercised by
delivery to the Company of the Shares and written notice of the exercise of the
Share Put (the "Share Put Notice"). The Company shall, within 30 days of
receipt of the Shares and the Share Put Notice, pay the Share Put Price to the
Holder, or such person or persons as the Holder may designate in the Share Put
Notice.
7.3 Right to Participate in Share Registration. If the Company at any time
or times later than one year after the effective date of the Company's initial
offering of equity securities determines to prepare and file a registration
statement under the Securities Act (except a registration statement connection
with the acquisition of any entity or business or any employee benefit plan,
including any stock option plan, or on Form S-4 or Form S-8 under the Securities
Act or any successor forms thereto) in connection with the proposed offer of
sale of Shares, which registration statement does not consist exclusively of
securities to be sold for the account of the Company, the Company shall notify
the Holder of such event and shall permit Holder to include in such registration
statement such number of Warrant Derived Shares as determined by multiplying (i)
the number of Warrant Derived Shares held by the Holder by (ii) the Highest
Shareholder Percentage. The Highest Shareholder Percentage shall be the highest
number determined by comparing the numbers computed for each other shareholder
for whom shares of Stock are being registered in the registration statement by
dividing (x) the number of shares of Stock to be included in such registration
by such shareholder by (y) the total number of Shares beneficially owned by such
shareholder. In all cases the Holder shall be subject to the same rights and
agree to be bound by the same restrictions, if any, as other shareholders may be
subject to with respect to the sales pursuant to the subject registration
statement as provided herein. In the event that other shareholders are required
to pay registration expenses, the Holder shall only be responsible for its pro
rata share of
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<PAGE> 6
such expenses based on the number of Shares to be registered by Holder and by
the total number of shares to be registered by all shareholders. If the offering
that is subject of such registration is underwritten, in whole or in part, and
the managing underwriter advises the Company in writing that the inclusion of
Holder's Shares proposed to be included in such registration would interfere
with the successful marketing (including pricing) of the securities proposed to
be registered by the Company, than the number of Holder's Shares to be included
in the underwritten offering may be reduced or excluded altogether.
SECTION 8. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES
8.1 Adjustments. The Warrant Price and the number and kind of securities
purchasable upon the exercise of this Warrant shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common Stock
or make a distribution in shares of Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder of this Warrant shall be entitled
to receive the kind and number of Shares or other securities of the Company
which he would have owned or have been entitled to receive after the happening
of any of such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) In case the Company shall issue rights, options or warrants to all or
substantially all holders of its shares of Common Stock, without any charge to
such holders, entitling them to subscribe for or purchase shares of Common Stock
at a price per share which is lower at the record date of such issuance than the
Current Market Price per share of Common Stock (as defined in paragraph (d)
below) at the date of such issuance, the number of Shares thereafter purchasable
upon the exercise of this Warrant shall be determined by multiplying the number
of Shares theretofore purchasable upon exercise of this Warrant by a fraction,
of which the numerator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and of
which the denominator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options or warrants plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at such Current Market Price. Such
adjustment shall be made whenever such rights, options or warrants are issued,
and shall become effective retroactively immediately after the record date for
the determination of stockholders entitled to receive such rights, options or
warrants.
(c) In case the Company shall distribute to all or substantially all
holders of its shares of Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions
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<PAGE> 7
out of earnings) or rights, options or warrants or convertible securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding those referred to in paragraph (b) above), then in each such case
the number of Shares thereafter purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of Shares theretofore purchasable
upon exercise of this Warrant by a fraction, of which the numerator shall be
the then Current Market Price per share of Common Stock (as defined in
paragraph (d) below) on the date of such distribution, and of which the
denominator shall be such Current Market Price per share of Common Stock, less
the then fair value (as determined by the Board of Directors of the Company,
whose determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to receive such
distribution.
(d) For the purposes of this Warrant, the Current Market Price per share of
Common Stock of the Company at any date shall be deemed to be (i) if the shares
of Common Stock are traded in the over-the-counter market and not on any
national securities exchange and not in the GNOSTIC National Market System, the
average of the mean between the bid and asked price per share, as reported by
The National Quotation Bureau, Incorporated, or an equivalent generally accepted
reporting service, for the twenty (20) consecutive trading days immediately
preceding the date for which the determination of Current Market Price is to be
made, or (ii) if the shares of Common Stock are traded on a national securities
exchange or in the GNOSTIC National Market System, the average daily per share
closing price on the principal national securities exchange on which they are so
listed or in the GNOSTIC National Market System, as the case may be, for the
twenty (20) consecutive trading days immediately preceding the date for which
the determination of Current Market Price is to be made. The closing price
referred to in clause (ii) above shall be the last reported sales price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case on the principal national
securities exchange on which the shares of Common Stock are then listed or in
the GNOSTIC National Market System. If the Current Market Price cannot be
determined in accordance with the foregoing, it shall be the fair market value
per share of Common Stock as determined in good faith by the Company's Board of
Directors.
(e) No adjustment in the number of shares purchasable hereunder shall be
required unless such adjustment would require an increase or decrease of at
least 1 percent in the number of Shares purchasable upon the exercise of this
Warrant; provided that any adjustments which by reason of this paragraph (e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of this
Warrant is adjusted as herein provided, the Warrant Price per Share payable
upon exercise of this Warrant shall be adjusted by multiplying such Warrant
Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon the exercise of this
Warrant
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<PAGE> 8
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately thereafter.
(g) When the number of Shares purchasable upon the exercise of this
Warrant or the Warrant Price is adjusted as herein provided, the Company shall
promptly mail to the Holder by first class mail, postage prepaid, notice of such
adjustment or adjustments together with a certificate of a firm of independent
public accountants selected by the Board of Directors of the Company (who may be
the regular accountants employed by the Company) setting forth the number of
Shares purchasable upon the exercise of this Warrant and the Warrant Price of
such Shares after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made. Such
certificate shall be conclusive evidence of the correctness of such adjustment
absent manifest error.
(h) For the purpose of this subsection 8.1, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company on the date of this Warrant, or (ii) any other class of stock resulting
from successive changes or reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to this subsection 8.1, the Holder shall become entitled to purchase
any shares of the Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of this Warrant, and
the Warrant Price of such shares, shall be subject to adjustment form time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in paragraphs (a) through (g),
inclusive, above, and the provisions of Section 3 and subsections 8.2 through
8.4, inclusive, with respect to the shares shall apply on like terms to any such
other shares.
(i) Upon the expiration of any rights, options, warrants or conversion
privileges, if any thereof shall not have been exercised, the number of shares
purchasable upon exercise of this Warrant and the Warrant Price, to the extent
this Warrant shall not then have been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had it been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (1) the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants or conversion rights and (2) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company for the issuance, sale or grant of all of such rights,
options, warrants or conversion rights, whether or not exercised; provided that
no such readjustment shall have the effect of increasing the Warrant Price by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or convertible
rights.
8.2 No Adjustment for Dividends. Except as provided in subsection 8.1, no
adjustment in respect of any dividends shall be made during the term of this
Warrant or upon the exercise of this Warrant.
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<PAGE> 9
8.3 No Adjustment in Certain Cases. No adjustments shall be made pursuant
to this Section 8 in connection with the issuance of (a) such number of shares
of Common Stock (as adjusted for all stock dividends, stock splits, subdivisions
and combinations) as are issued to employees, officers, directors, consultants
or members of the Advisory Board of the Company, or other persons performing
services for the Company, pursuant to any stock option plan, stock purchase plan
or management incentive plan, agreement or arrangement approved by the Board,
and (b) any shares of Common Stock (or securities convertible into shares of
Common Stock) as consideration for the acquisition by the Company of assets or
equity interests in any business entity.
8.4 Preservation of Purchase Rights upon Reclassification, Consolidation,
etc. In case of consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or conveyance to another corporation
of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall execute an agreement with the Holder that
the Holder shall have the right thereafter upon payment of the Warrant Price in
effect immediately prior to such action to purchase upon exercise of this
Warrant the kind and amount of Shares and other securities and property which he
would have owned or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had this Warrant been exercised
immediately prior to such action. Such agreement shall provide for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 8. The Company shall mail an executed copy of any
such agreement by first class mail, postage prepaid, to the Holder. The
provisions of this subsection 8.4 shall similarly apply to successive
consolidations, mergers, sales, or conveyances.
SECTION 9. FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Shares on the
exercise of this Warrant. If more than one of the Warrants shall be presented
for exercise in full at the same time by the same Holder, the number of full
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Shares represented by this Warrant and the
other Warrants so presented. If any fraction of a Share would, except for the
provisions of this Section 9, be issuable on the exercise of this Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
Current Market Price per Share (as defined in paragraph 8.1(d) above) multiplied
by such fraction.
SECTION 10. NO RIGHT AS STOCKHOLDERS; NOTICES TO HOLDER
Nothing contained in this Warrant shall be construed as conferring upon the
Holder or the Holder's transferees the right to vote or to receive dividends or
to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. If, however, at any
time prior to the expiration of this Warrant and prior to its exercise, any of
the following events shall occur:
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<PAGE> 10
(a) any action which would require an adjustment pursuant to subsections
8.1 or 8.4, or
(b) a dissolution, liquidation, or winding up of the Company (other than
in connection with a consolidation, merger, or sale of all or
substantially all of its property, assets, and business as an
entirety) shall be proposed;
the Company shall in each such case give notice in writing of such event to the
Holders as provided in Section 11 hereof. Failure to publish or mail such
notice or any defect therein or in the publication or mailing thereof shall not
affect the validity of any action taken in connection with such dividend,
distribution, or subscription rights, or proposed dissolution, liquidation or
winding up.
SECTION 11. NOTICES
(a) Any notice to the Company pursuant to this Warrant shall be in writing
and shall be deemed to have been duly given if delivered or mailed certified
mail, return receipt requested, to the Company at 601 West 26th Street, 13th
Floor, New York, New York 10001, Attention: President. The Company may from time
to time change the address to which such notices are to be delivered or mailed
hereunder by notice to the Holder in accordance with paragraph (b) below.
(b) Any notice pursuant to this Warrant by the Company to the Holder shall
be in writing and shall be deemed to have been duly given if mailed, postage
prepaid, to the Holder at the Holder's address on the books of the Company.
SECTION 12. SUPPLEMENTS AND AMENDMENTS
The Company may from time to time supplement or amend this Warrant, without
the approval of the Holder, in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable and which shall not be inconsistent with the provisions of this
Warrant and which shall not adversely affect the interest of the Holder. Any
other amendment to this Warrant may be made only by a written instrument
executed by the Company and the Holder.
SECTION 13. SUCCESSORS
All the covenants and provisions of this Warrant by or for the benefit of
the Company or the Holder shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 14. MERGER OR CONSOLIDATION OF THE COMPANY
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<PAGE> 11
The Company will not merge or consolidate with or into any other
entity unless the entity resulting from such merger or consolidation (if not
the Company) shall expressly assume the due and punctual performance and
observance of each and every covenant and condition of this Warrant to be
performed and observed by the Company.
Section 15. Applicable Law
This Warrant shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance
with the laws of said state.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by the officer named below and its corporate seal to be affixed thereto.
Date: February 4, 2000
SCREAMING MEDIA.COM INC.
By: /s/ Jay Chiat
--------------------
Name: Jay Chiat
Title: Chairman
11
<PAGE> 12
SCREAMING MEDIA.COM INC.
COMMON STOCK PURCHASE WARRANT
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares (the "Shares") provided for therein, and requests that
certificates for the Shares be issued in the name of:
----------------------------------------
(Please Print or Type Name, Address and Social Security Number)
----------------------------------------
----------------------------------------
----------------------------------------
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the unpurchased Shares be
registered in the name of the undersigned Warrantholder as below indicated and
delivered to the address stated below:
(Please Print)
Dated:
--------------------------------------------------------------
Name of Warrantholder:
----------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
Signature:
----------------------------------------------------------
<PAGE> 13
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration
or enlargement or any change whatever.
Signature Guaranteed: ______________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
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<PAGE> 1
EXHIBIT 10.9
Ms. Marianne Howatson
100 United Nations Plaza
New York, New York 10017
Dear Marianne,
We are delighted to welcome you to the ScreamingMedia team. We believe
your background and skills will be a great fit for the company at this crucial
growth stage.
We offer the following terms for your employment with
ScreamingMedia.Net, Inc. Your salary will be paid at the rate of $180.000 per
year. We will pay you a signing bonus of $70,000 when you accept this offer. The
company agrees to grant you a stock option to purchase 300,000 shares of the
company's Common Stock at an exercise price of $3.60 per share. The option will
vest at the rate of 36 equal monthly installments of 8,333 shares (8.345 for the
36th month). Vesting will continue for so long as you remain an employee of the
company, but will stop if your employment with the company terminates. You will
participate on standard terms in the company medical plan and future benefits as
they become available.
If this offer is acceptable to you, please sign the attached copy of
this letter in the space provided below. Upon your signature, this letter will
act as our final and complete agreement as to the terms of your employment with
the company, and any prior agreements or understandings with respect to such
terms will be superseded. As part of our standard company policy, we ask that
all new employees sign a confidentiality agreement in the form attached to this
letter.
We look forward to accomplishing great things with you,
Very truly yours,
/s/ Alan S. Ellman
------------------
Alan S. Ellman
President
Accepted and agreed:
Marianne Howatson
/s/ Marianne Howatson
<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 8, 1999 between Screaming Media.Net, Inc.,
a Delaware corporation (the "Company"), and Kevin Clark (the "Executive").
WHEREAS the parties desire to enter into an employment agreement, on the
terms and conditions hereinafter set forth, providing for the employment of the
Executive by the Company for the term herein specified,
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT AND TERM.
The Company hereby employs the Executive, and the Executive hereby agrees
to serve, as an executive employee of the Company with the duties set forth in
Section 2, for a term (hereinafter called the "Term of Employment") beginning
November 8, 1999, and ending on November 8, 2002, unless sooner terminated as
provided herein.
SECTION 2. DUTIES.
(a) The Executive agrees that during the Term of Employment, he will hold
the office of Chief Executive Officer of the Company reporting to the Company's
Board of Directors. The Executive agrees that he will perform faithfully and to
the best of his ability such duties and assignments relating to the business of
the Company, as the Board of Directors of the Company shall direct and
consistent with the office of Chief Executive Officer, except that the Executive
shall not be required to perform any duty or assignment inconsistent with his
experience and qualifications or not customarily performed by a senior corporate
officer. The Company represents to the Executive that the Board of Directors
has authorized the making of this agreement and has approved the appointment of
Executive as Chief Executive Officer of the Company.
(b) If the Board of Directors of the Company so requests, the Executive
shall, in addition to his duties as Chief Executive Officer, serve as an officer
of one or more subsidiaries of the Company (if, but only if, the duties of such
position are not inconsistent with the Executive's experience and qualifications
and are duties customarily performed by a senior corporate officer). Part or
all of the compensation to which the Executive is entitled hereunder may be paid
by such subsidiary or subsidiaries. However, such
<PAGE> 2
employment or payment of the Executive by a subsidiary or subsidiaries shall be
guaranteed by the Company and shall not relieve the Company from any of its
obligations under this agreement.
(c) During the Term of Employment, the Executive shall, except during
customary vacation periods and periods of illness, devote all of his business
time and attention to the performance of his duties hereunder and to the
business and affairs of the Company and to promoting the best interests of the
Company and he shall not, either during or outside of normal business hours,
engage in any activity inimical to such best interests. Notwithstanding the
foregoing, Executive may serve as a Director on Boards of organizations which
do not compete with the Company and may engage in charitable or civic pursuits
provided that such service or pursuits do not interfere with Executive's
obligations under the Agreement.
SECTION 3. COMPENSATION DURING TERM OF EMPLOYMENT.
(a) BASE SALARY. During the Term of Employment, the Company shall pay to
the Executive compensation (in addition to the compensation provided for
elsewhere in this agreement) in equal monthly installments at the rate of
$300,000 per Contract Year (such amount being herein called "Base Salary").
Executive's base salary shall be review at least annually during the term of the
Agreement with regard to potential increases as authorized by the Board of
Directors. The Base Salary shall be paid in such periodic installments as the
Company may determine, but not less often than monthly. In addition, Executive
shall be eligible to participate in bonus plans applicable to senior executives
of the Company to the extent such bonus plans are formed during the term of
this Agreement.
<PAGE> 3
(b) STOCK OPTIONS. Effective as of the first day of the Term of
Employment, the Company shall grant to the Executive a seven-year non-qualified
stock option (the "Option") to purchase 450,000 shares of Common Stock of the
Company, par value $.01 per share, at an exercise price of $6.50 per share. The
form of the Option shall be in the form attached as Exhibit A. In the event it
is determined that any payment or distribution made, or benefit provided
(included, without limitation, the acceleration of any payment, distribution or
benefit and the acceleration of vesting of any stock option, restricted stock or
other award), by the Company to or for your benefit (whether paid or payable or
distributed or distributable pursuant to the terms of this letter or otherwise,
but determined without regard to any additional payments required under this
provision (a "payment") would be subject to the excise tax imposed by Section
4999 of the Code (or any similar excise tax) or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively referred to as the
"Excise Tax"), then Executive will be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any Excise Tax, income tax or payroll tax) imposed upon the
Gross-Up Payment, and any interest or penalties imposed with respect to such
taxes caused by the Company's negligence, Executive will retain from the
Gross-Up Payment an amount equal to the Excise Tax imposed upon the Payments.
(c) FRINGE BENEFITS AND PERQUISITES. During the Term of Employment,
the Executive shall enjoy the customary perquisites of office, including but not
limited to office space and furnishings, secretarial services, expense
reimbursements and any similar emoluments customarily afforded to senior
executive officers of the Company as authorized or approved by the Board of
Directors. The Company shall provide Executive with a full-time Executive
Assistant and will reimburse him for car service to his residence in the event
that he works beyond 6 p.m. The Executive shall also be entitled to receive or
participate in the highest level of all "fringe benefits" and employee benefit
plans, if any, now or hereafter provided or made available by the Company to
its executives or management personnel generally, such as, but not limited to,
group hospitalization, medical, life and disability insurance, and pension,
retirement, profit-sharing and medical reimbursement plans, all as the Board of
Directors shall determine. In addition, the Company will reimburse Executive
for annual membership in the YPO.
(d) VACATIONS. The Executive shall be entitled each year to a paid
vacation of four weeks. The Company shall not pay the Executive any additional
compensation for any vacation time not used by the Executive.
(e) REIMBURSEMENT. The Company shall reimburse the Executive for up
to $10,000 for actual, out-of-pocket expenses incurred by the
<PAGE> 4
Executive in connection with the closing of the Executive's office in Rowayton,
Connecticut.
SECTION 4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR TOTAL DISABILITY. The employment of the Executive will
terminate upon his death or if, by reason of partial or total disability,
Executive is incapable of performing his principal duties hereunder for a period
of 90 consecutive working days or for more than 120 working days in any 12 month
period ("Disability"). If, during the Term of Employment, the employment of the
Executive is terminated due to death or Disability, the Executive or his estate
shall receive, within 30 days of such termination, Base Salary provided for in
Section 3 as then in effect, accrued through the date of termination of
Executive's employment ("Date of Termination"). Upon the Date of Termination all
unvested Stock Options and all other benefits under this Agreement shall lapse,
expire and be forfeited (other than the proceeds of any insurance or disability
policy or medical coverage provided by the Company which are or become payable
by reason of the Executive's death or Disability, as the case may be).
(b) FOR CAUSE OR FOR LACK OF GOOD REASON. The employment of the Executive
may be terminated by the Company at any time for Cause, as defined below. If,
during the Term of Employment, the employment of the Executive is terminated by
the Company for Cause or by the Executive without Good Reason, as defined
below, the Executive shall receive, within 30 days of such termination, Base
Salary provided for in Section 3 as then in effect, accrued through the Date of
Termination. Upon the Date of Termination (i) all unvested Stock Options and
all other benefits under this Agreement shall lapse, expire and be forfeited.
(c) WITHOUT CAUSE OR WITH GOOD REASON. (i) The employment of the Executive
may also be terminated by the Company at any time without Cause or by the
Executive at any time with Good Reason. If, during the Term of Employment, the
employment of the Executive is terminated by the Company without Cause, or by
the Executive with Good Reason, the Executive shall continue to receive Base
Salary provided for in Section 3 as then in effect and medical and other
insurance coverage in effect on the Date of Termination for the six months
following termination. Upon the Termination of Executive under this Section,
all options scheduled to vest within one year of the Date of Termination shall
accelerate and immediately vest and all vested options shall become exercisable
as provided in Executive's Option Agreement. Subject to the severance
arrangements described herein, all other benefits under this Agreement shall
lapse, expire and be forfeited.
<PAGE> 5
(d) DEFINITION OF "CAUSE" AND "GOOD REASON". "Cause" means (i) willful
failure of the Executive to perform his duties with the Company which have been
duly assigned to the Executive and which duties are commensurate with the
position for which Executive is then employed, (ii) the engaging by the
Executive in willful conduct which is materially injurious to the Company,
(iii) the conviction of the Executive of any crime or offense constituting a
felony; or (iv) a failure by the Executive to comply with any material
provision of this Agreement, which failure is not cured (if capable of cure)
within 30 days after receipt of written notice of such non-compliance by the
Executive. Termination of the Executive for "cause" shall mean termination by
action of at least a majority of the Company's Board of Directors, at a meeting
duly called and held upon at least 30 days written notice to the Executive
specifying the particulars of the action or inaction alleged to constitute
"cause" and at which meeting the Executive and his counsel were entitled to be
present and given adequate opportunity to be heard. Action or inaction by the
Executive shall not be considered "willful" unless done or omitted by him
intentionally or not in good faith and without reasonable belief that his
action or inaction was in the best interest of the Company, and shall not
include failure to act by reason of total or partial incapacity due to physical
or mental illness.
"Good Reason" means (i) a material adverse alteration in the nature or
status of the Executive's position, duties or responsibilities from those in
effect as of the inception of the Term of Employment; (ii) a reduction in or
failure to pay or provide any of the compensation set forth in this Agreement
which is not cured within 30 days after receipt by the Company of written
notice thereof; or (iii) a change in the principal place of the Executive's
employment to a location more than 75 miles from the place of the Executive's
principal residence as of the date of this Agreement, excluding required travel
on the Company's business.
<PAGE> 6
SECTION 5. COVENANT NOT TO COMPETE.
In the case of termination of the Executive's employment pursuant to
Section 4(b) above, for a period of six months after the Date of Termination,
the Executive shall not, in The City of New York, render services to any
corporation, individual or other entity engaged in any activity, or himself
engage directly or indirectly in any activity, which is competitive to any
material extent with the then business of the Company or any of its
subsidiaries. In the case of any termination of Executive's employment under
this Agreement, for a period of six months after the end of the Term of
Employment, the Executive shall not solicit for the purpose of diverting
business from the Company, for himself or a business competitive with that of
the Company or any of its then subsidiaries, business from any person, firm or
corporation which shall, at the time that the Term of Employment ends, be an
existing customer of the Company or any such subsidiary or solicit, raid or
entice or induce any employee of the Company or any of its subsidiaries to
become employed by any other business enterprise. It is understood that general
and trade advertising is not to be deemed a form of "solicitation" for purposes
of this agreement. As used herein, "existing customer" means any person, firm or
corporation which is on the list or lists maintained by the Company or any
subsidiary of its customers, as well as any person, firm or corporation which
has made a purchase from the Company or a subsidiary within the preceding year.
SECTION 6. COMPANY'S RIGHT TO INJUNCTIVE RELIEF.
The Executive acknowledges that his services to the Company consisting
of senior managerial executive, with an intimate knowledge of and day to day
dealing with the Company's customers, distributors, suppliers and the key
employees of the Company and its subsidiaries, as well as an intimate knowledge
of the plans and strategies of the Company and its subsidiaries for present and
future businesses and extensions thereof are of a unique character, which gives
them a peculiar value to the Company, the loss of which cannot be reasonably or
adequately compensated in damages in an action at law, and that therefore, in
addition to any other remedy which the Company may have at law or in equity, the
Company and each relevant subsidiary shall be entitled to injunctive relief for
a breach of this agreement by the Executive.
<PAGE> 7
SECTION 7. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
The Executive shall not, either directly or indirectly, except as
required in the course of his employment by the Company disclose or use at any
time, whether during or subsequent to the Term of Employment, any information
of a proprietary nature owned by the Company or any of its subsidiaries
including, but not limited to, (i) lists of customers, clients and contacts or
any of them, (ii) contracts with customers, programmers, developers, suppliers,
distributors and other dealers, marketing plans, financial condition and
results of operation, and (iii) records, data, formulae, documents,
specifications, inventions, processes, methods and intangible rights which are
acquired by him in the performance of his duties for the Company or any
subsidiary thereof and which are of a confidential information or trade secret
nature. All inventions, processes, methods and intangible rights, lists of
customers, clients and contacts or any of them, contracts with customers,
suppliers and distributors, records, files, drawings, documents, equipment and
the like, relating to the business of the Company or a subsidiary, which the
Executive shall invent, develop, conceive, produce, prepare, use, construct or
observe, shall be and remain the sole property of the Company or the relevant
subsidiary. Upon the termination of his employment (or earlier upon the request
of the Company), the Executive shall return to the possession of the Company
all materials (and all copies thereof) involving any and all confidential
information or trade secrets of, and shall not take any material or copies
thereof from the possession of, the Company or any subsidiary.
SECTION 8. MERGERS AND CONSOLIDATIONS; ASSIGNABILITY.
In the event that the Company, or any entity resulting from any
merger or consolidation referred to in this Section 8 or which shall be a
purchaser or transferee so referred to, shall at any time be merged or
consolidated into or with any other entity or entities, or in the event that
substantially all of the assets of the Company or any such entity shall be sold
or otherwise transferred to another entity, the provisions of this agreement
shall be binding upon and shall inure to the benefit of the continuing entity
in or the entity resulting from such merger or consolidation or the entity to
which such assets shall be sold or transferred. The Company will not enter into
any such transaction unless, as a condition thereof, all of the obligations of
the Company under this agreement are duly and validly assumed by the
continuing or resulting entity or the entity to which such assets shall be sold
or transferred. Except as provided in this Section 8, this agreement shall not
be assignable by the Company or by any entity referred to in this Section 8.
This agreement shall not be assignable by the Executive, but in the event of
his death it shall be binding upon and inure to the benefit of his legal
representatives to the extent required to effectuate the terms hereof.
924088-1
CATEMPW636152 V1 - CLARK - EMPLOYMENT AGREEMENT.DOC
<PAGE> 8
SECTION 9. MISCELLANEOUS.
(a) The captions in this agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
agreement, and if any caption is inconsistent with any provisions of this
agreement, such provisions shall govern.
(b) This agreement is made in, and shall be governed by and construed in
accordance with the internal laws of, the State of New York.
(c) This agreement contains a complete statement of all of the
arrangements between the parties with respect to the subject matter hereof; and
there are no representations, agreements, arrangements or understandings, oral
or written, between the parties relating to the subject matter of this
agreement which are not fully expressed in this agreement. This agreement may
not be waived, changed, modified or discharged orally, but only by an agreement
in writing signed by the party against whom any waiver, change, modification or
discharge is sought.
(d) All notices given hereunder shall be in writing and shall be sent by
registered or certified mail, return receipt requested, and, if intended for
the Company, shall be addressed to it at its principal office at 601 West 26th
Street, New York, New York 10021 for the attention of William P. Kelly, Esq.,
General Counsel of the Company with a copy to Alan S. Ellman, President of the
Company, or at such other address and for the attention of such other person of
which the Company shall have given notice to the Executive in the manner herein
provided, and, if intended for the Executive, shall be addressed to him at his
then current residence address as shown by the employment records of the
Company, or at such other address or to such designee of which the Executive
shall have given notice to the Company in the manner herein provided. Each such
notice shall be deemed to be given on the date received at the address of the
addressee.
(e) The Company and the Executive will treat this agreement as
confidential, and neither of them will disclose the contents of this agreement
to any person, except as may be required by law and except as the Company may
need to do so in its dealings with banks or other lenders or otherwise in the
normal course of business.
(f) The Executive irrevocably (i) consents to the jurisdiction and venue
of the Southern District Federal court located in New York State (or, if
jurisdiction is not available in such forum, to the jurisdiction of the courts
of the State of New York located in New York City) in connection with any
<PAGE> 9
action, suit or other proceeding arising out of or relating to this agreement
or any act taken or omitted hereunder, (ii) waives and agrees not to assert in
any such action, suit or other proceeding that he is not personally subject to
the jurisdiction of such courts, that the action, suit or other proceeding is
brought in an inconvenient forum or that the venue of the action, suit or other
proceeding is improper, (iii) waives personal service of any summons, complaint
or other process and (iv) agrees that the service thereof may be made by
certified or registered mail directed to the Executive at his address for
purposes of notices hereunder. Should the Executive fail to appear or answer
within the time prescribed by law, he shall be deemed in default and judgment
may be entered by the Company against him for the amount or other relief as
demanded in any summons, complaint or other process so served. Nothing
contained herein shall affect the rights of the Company to bring such an
action, suit or other proceeding in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
SCREAMING MEDIA.NET, INC.
By: /s/ Jay Chiat
Name: Jay Chiat
Title: Chairman
Kevin Clark
/s/ Kevin Clark
<PAGE> 1
Exhibit 10.11
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
DATED AS OF
JUNE 8, 1999
AMONG
i-RECALL, INC.
AND
THE INVESTORS IDENTIFIED HEREIN
<PAGE> 2
i-RECALL, INC.
37 West 28th Street, 12th Floor
New York, New York 10001
As of June 8, 1999
To each of the parties listed
on Schedule I hereto
i-Recall, Inc.
Series A Convertible Preferred Stock Purchase Agreement
Dear Ladies and Gentlemen:
The undersigned, i-RECALL, INC., a Delaware corporation (the
"Corporation") presently intends to issue shares of convertible preferred stock
$.01 par value, of the Corporation (the "Series A Preferred Stock") to each of
the parties identified on Schedule 1 hereto (each an "Investor" and,
collectively, the "Investors"), and hereby agrees with the Investors as
follows:
SECTION 1. FILING OF CERTIFICATE OF DESIGNATION; ISSUANCE AND SALE OF SERIES A
PREFERRED STOCK; CLOSING.
1.1 FILING OF CERTIFICATE OF DESIGNATION. Immediately prior to the
execution and delivery of this Agreement, the Corporation is filing with the
Secretary of State of the State of Delaware a Certificate of Designation,
Preference and Rights of the Series A Preferred Stock, substantially in the form
of Exhibit B attached hereto (the "Certificate of Designation").
1.2 ISSUANCE AND SALE OF SERIES A PREFERRED STOCK. Simultaneously with
the execution and delivery of this Agreement, the Corporation is selling to each
Investor, and each such Investor is purchasing from the Corporation, upon the
terms and subject to the conditions hereinafter set forth, that number of shares
of Series A Preferred Stock, of the Corporation (collectively, the "Initial
Shares") set forth opposite such Investor's name on Schedule I hereto
(representing an aggregate of 8,246 shares of Series A Preferred Stock being
issued and sold to and purchased by all Investors hereunder at the Closing (as
hereinafter defined)) for a cash purchase
<PAGE> 3
price of $16.67 per share of Series A Preferred Stock (representing an aggregate
purchase price of $137,460.82 (the "Aggregate Purchase Price") for all of the
shares of Series A Preferred Stock being issued and sold to and purchased by the
Investors at the Closing).
1.3 INITIAL CLOSING. The closing (the "Closing") of the sale and
purchase of the Initial Shares is taking place at the offices of Orrick,
Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York 10103,
simultaneously with the execution and delivery of this Agreement (the "Closing
Date"). At the Closing, the Corporation is issuing and delivering to each
Investor a certificate representing the Initial Shares being purchased by such
Investor hereunder, registered in the name of such Investor, against delivery to
such Investor of a certified check payable to the Corporation, or a wire
transfer of immediately available funds to an account designated by the
Corporation, in an amount equal to the full amount of the purchase price for
such Initial Shares being purchased by such Investor hereunder at the Closing.
1.4 ADDITIONAL CLOSINGS.
(a) Subject to paragraph (b) below, the Corporation shall sell
additional shares for cash of Series A Preferred Stock (the "Additional Shares")
pursuant to the terms and conditions set forth herein to the Investors at two
closings hereunder after the Closing (each of said closings being sometimes
hereinafter referred to as an "Additional Closing") which shall take place at
the office of OHS at the address set forth in Section 1.2 on June 1 and July 1,
respectively, each said date being sometimes hereinafter referred to as an
"Additional Closing Date").
(b) The Investors agree to purchase that number of Additional
Shares set forth opposite such Investor's name on Schedule I hereto
(representing an aggregate number of 4,122 Additional Shares being issued and
sold to and purchased by all Investors hereunder at each Additional Closing) for
an aggregate purchase price of $68,713.74 on each Additional Closing Date if the
Corporation attains the following milestones with respect to each Additional
Closing Date:
(i) On or before June 15, the Corporation shall
deliver a software control that allows a user to display and edit digital ink
downloaded from the CrossPad.
(ii) On or before July 15, the Corporation shall
deliver an application built using the control mentioned above that allows a
user to access particular moments in a media recording.
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<PAGE> 4
(c) Upon the satisfaction of each milestone, the respective
Additional Closing shall occur, and the Corporation shall (i) issue to each
Investor a certificate representing the number of Additional Shares being
purchased by such Investor at such Additional Closing, registered in the name of
such Investor and (ii) deliver to such Investor an officer's certificate
certifying that, except as disclosed in the certificate the representations and
warranties of the Corporation are true and correct in all material respects as
of such Additional Closing Date (as the same may be updated on such Additional
Closing Date) against delivery to such Investor of a certified check payable to
the Corporation, or a wire transfer of immediately avail able funds to an
account designated by the Corporation, in an amount equal to the full amount of
the purchase price for such Additional Shares being purchased by such Investor
at such Additional Closing.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
hereby represents and warrants to the Investors as follows:
2.1 ORGANIZATION. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
The Corporation has all requisite corporate power and authority to own and
operate its properties. The Corporation has duly qualified and is in good
standing in all jurisdictions in which the failure to be so qualified would
have a material adverse effect on the business of the Corporation. The
Corporation has no subsidiaries. The Corporation has delivered to the Purchaser
complete and correct copies of its Certificate of Incorporation and By-Laws in
effect as of the date hereof.
2.2 CAPITALIZATION. (a) The authorized capital stock of the Corporation
immediately prior to the Closing consisted of (i) 4,000,000 shares of common
stock, $0.1 par value, (the "Common Stock") of which 100,000 shares were
outstanding and (ii) 1,000,000 shares of Preferred Stock, $.01 par value, of
which there were no shares outstanding. Immediately prior to the date hereof,
there were no (i) outstanding warrants, options, agreements or other securities
pursuant to which the Corporation is or may become obligated to issue or sell
any shares of capital stock or other securities of the Corporation, or (ii)
preemptive or similar rights to purchase or otherwise acquire shares of capital
stock of the Corporation pursuant to any provision of law, the Certificate of
Incorporation or By-laws of the Corporation or any agreement to which the
Corporation is party. As of the date hereof, no third party has the right to
anti-dilution protection from the Corporation (other than in connection with
stock splits, stock dividends, stock combinations, recapitalizations and like
occurrences). The names of the record holders of shares of Common Stock of the
Corporation and the number of issued and outstanding shares of Common
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<PAGE> 5
Stock of the Corporation held by each of them are set forth on Schedule 2.2. The
delivery of the certificates to the Investor representing Initial Shares and/or
Additional Shares pursuant to Sections 1.3 and 1.4(c) will result in the
Investor's immediate acquisition of record ownership of the Initial Shares and
Additional Shares purchased by such Investor hereunder, free and clear of all
liens, charges or other encumbrances of any nature created by the Corporation,
other than restrictions imposed under the Securities Act of 1933, as amended
(the "Securities Act"), any applicable state securities or "blue-sky" laws or
under the Co-Sale Agreement (as hereinafter defined).
(b) The Company has reserved, and at all times from and after
the date hereof will keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion into shares of Common Stock of all shares of Series A
Preferred Stock, sufficient shares of Common Stock to provide for the full
conversion into shares of Common Stock of all shares of Series A Preferred
Stock.
2.3 AUTHORIZATION. The execution, delivery and performance by the
Corporation of this Agreement and the Co-Sale Agreement dated the date hereof
(the "Co-Sale Agreement") among the Corporation and the Investors in the form
attached hereto as Exhibit C have been duly authorized by all requisite
corporate action on the part of the Corporation, and this Agreement has been
duly executed and delivered by the Corporation and constitutes the valid and
binding obligation of the Corporation, enforceable in accordance with its terms,
except (i) as limited by (A) applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws relating to or affecting the
rights and remedies of creditors and debtors and (B) equitable principles
generally, regardless of whether such principles are considered in a proceeding
at equity or at law. The execution, delivery and performance of this Agreement
and the Co-Sale Agreement and compliance with the provisions hereof by the
Corporation will not (a) violate in any material respect any law or statute or
order, judgment or decree of any court, administrative agency or other
governmental body applicable to the Corporation or its properties or assets, (b)
conflict in any material respect with or result in any material breach of any of
the terms or provisions or constitute (with due notice or lapse of time, or
both) a default under the Certificate of Incorporation or By-laws of the
Corporation or any note, indenture, mortgage, lease agreement or other material
agreement, contract or instrument to which the Corporation is a party or by
which it or any of its properties or assets may be bound or affected or (c)
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the Corporation's properties or
assets.
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<PAGE> 6
2.4 CONSENTS. Subject to the truth and accuracy of the representations
and warranties of the Investors contained in Section 3 hereof, no authorization,
consent, approval or other order of, or declaration to or filing with, any
governmental agency or body or other person or entity is required for the valid
authorization, execution, delivery and performance by the Corporation of this
Agreement or the offer, sale or issuance of the Series A Preferred Stock or the
consummation of the transactions contemplated hereby or, if so required, the
same have been or will be obtained or made.
2.5 AUTHORIZATION OF SERIES A PREFERRED STOCK. The issuance, sale and
delivery of the Series A Preferred Stock, have been duly authorized by all
requisite corporate action of the Corporation, and when issued, sold and
delivered in accordance with the terms of this Agreement and the Certificate of
Designation, the Series A Preferred Stock will be validly issued and
outstanding, fully paid and nonassessable and will not be subject to preemptive
or other similar rights of the stockholders of the Corporation or others, except
as set forth in this Agreement or in the Co-Sale Agreement, and will be free and
clear of all liens, charges, restrictions, claims and encumbrances imposed by
the Corporation.
2.6 AGREEMENTS. Each written agreement, lease, contract or commitment
("contract") to which the Corporation is a party or by which the Corporation or
its properties or assets are bound or affected involving an aggregate
consideration in excess of $5,000 is listed on Schedule 2.6 hereto (copies of
which have been delivered to counsel for the Investor). The Corporation is not
in default in any material respect under any such contract. The Corporation has
not received any written notice of cancellation or termination in connection
therewith and each such contract is a valid and binding obligation of the
Corporation and in full force and effect. No consent (except for any consent(s)
which have been or will be obtained by the Closing) of the other party or
parties thereto is required to be obtained by the Corporation to consummate the
transactions contemplated hereby.
2.7 LITIGATION. There are no actions, suits, proceedings, or
investigations pending nor, to the knowledge of the Corporation, threatened
against the Corporation by or before any court or governmental agency which, if
adversely determined, would have an effect on the Corporation.
2.8 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS. The Corporation
is in compliance with all laws, statutes or decrees that, if violated, would
have a material adverse effect on the Company.
2.9 PATENTS TRADEMARKS AND COPYRIGHTS, ETC. The Corporation
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<PAGE> 7
believes it possesses adequate licenses or other rights to use all patents,
trademarks, service marks, trade names, copyrights, manufacturing processes,
formulae, trade secrets, customer lists and know-how (collectively,
"Intellectual Property") necessary to the conduct of its business as presently
conducted or can acquire the same on commercially reasonable terms. No claim is
pending and the Corporation has not received written notice from any third party
to the effect that the operations of the Corporation infringe upon or conflict
with the asserted rights of any person under any Intellectual Property. The
Corporation has not received any written notice or claim alleging that such
trade name, trademark, copyright, patent or other right infringes upon any trade
name, trademark, copyright, patent or other right of any third party. The
Corporation has no knowledge of any infringement by any third party upon any
such trade name, trademark, copyright, patent or other right of the Corporation,
and the Corporation has not taken or omitted to take any action which would have
the effect of waiving any of its rights with respect thereto. Each of Anselm
Spoerri, Nathaniel Polish and Daniel Magill have executed an Employee
Non-Disclosure, Non-Competition and Assignment of Inventions Agreement with the
Corporation, a form of which is attached hereto as EXHIBIT D.
2.10 TAXES. The Corporation has filed all tax returns when due, if any,
and paid all taxes shown thereon to be due, if any, that are required to have
been filed on or before the Closing with appropriate Federal, state, county and
local governmental agencies or instrumentalities, including any and all payroll
taxes, except where the failure to do so would not have a material adverse
effect upon the business of the Corporation taken as a whole. The Corporation
has not been advised in writing (a) that any of its returns, Federal, state or
other, have been or are being audited as of the date hereof, or (b) of any
deficiency in assessment or proposed adjustment to its Federal, state or other
taxes.
2.11 TITLE TO ASSETS. All assets (if any) owned by the Corporation are
owned outright free and clear of mortgages, pledges, security interests, liens,
charges and other encumbrances, except (a) for liens for current taxes not yet
due and (c) minor imperfections of title, if any, not material in amount and not
materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Corporation.
2.12 REAL PROPERTY. The Corporation does not own any real property. The
Corporation presently subleases space from Daedalus Technology Group, Inc.
located at 37 West 28th Street, 12th Floor, New York, New York 10001 pursuant to
an oral agreement for $200.00 per month.
2.13 LABOR CONTRACTS; EMPLOYMENT CONTRACTS, ETC. The Corporation is
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<PAGE> 8
in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and has not been notified by any governmental entity or
instrumentality of, charged with, or found to be engaged in, any unfair labor
practice.
2.14 BENEFIT PLANS. The Corporation does not have, none of the
Corporation's employees are covered by, and the Corporation has no obligations
with respect to, any bonus, deferred compensation, pension, profit-sharing,
retirement, insurance, stock purchase, stock option, or other fringe benefit
plan, arrangement or practice, or any other employee benefit plan (as defined in
section 3(3) of the Employee Retire ment Income Security Act of 1974, as amended
("ERISA"), whether formal or informal (collectively, "Plans").
2.15 MILLENNIUM COMPLIANCE. To the knowledge of the Corporation, all
software systems, machinery, equipment and other technology (collectively,
"Technology") owned by the Corporation is Millennium Compliant. "Millennium
Compliant" means as to the Technology that it correctly performs all
date-related operations (i) without human intervention, other than original data
entry of any date, (ii) without regard to whether any date involved in the
operation occurs in the 20th or 21st Century and (iii) without regard to the
system date at the time the calculation is performed.
2.16 NO UNDISCLOSED LIABILITIES. As of the date hereof, to the
knowledge of the Corporation, except as disclosed on Schedule 2.16 hereto, the
Corporation does not have any material indebtedness or liabilities, fixed or
contingent, liquidated or unliquidated, secured or unsecured, accrued or
absolute, including, without limitation, liabilities on account of taxes, other
governmental charges or lawsuits brought, that would be required by generally
accepted accounting principles to be set forth on a balance sheet of the
Corporation as at such date in order for such balance sheet to fairly present
the financial condition of the Corporation as at such date.
2.17 DISCLOSURE. Neither this Agreement nor any Schedule hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
2.18 USE OF PROCEEDS. The Corporation intends to utilize the net
proceeds from the sale of the Series A Preferred Stock for working capital,
operating and general corporate purposes and payment of professional expenses
(including legal and accounting fees and expenses).
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<PAGE> 9
2.19 BROKERS AND FINDERS. No person or entity acting on behalf or under
the authority of the Corporation is or will be entitled to any broker's,
finder's, or similar fee or commission in connection with the transactions
contemplated by this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor, as to
itself, himself or herself, as the case may be, represents and warrants to the
Corporation as follows:
3.1 AUTHORITY. Such Investor has full power and authority to execute,
deliver and perform this Agreement and the Co-Sale Agreement and to consummate
the transactions contemplated hereby and thereby; and this Agreement and the Co-
Sale Agreement constitute the valid and binding obligations of such Investor,
enforceable in accordance with their respective terms, except as limited by (A)
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws relating to or affecting the rights and remedies of
creditors and debtors and (B) equitable principles generally, regardless of
whether such principles are considered in a proceeding at equity or at law.
3.2 ACCREDITED INVESTOR. If such Investor has checked the box located
on the signature page hereto, such Investor is an "accredited investor" (as such
term is defined in Rule 501 of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act")).
3.3 INVESTOR INTENT. Such Investor is acquiring the Series A Preferred
for his, her or its own account, for investment and not with a view to, or for
resale in connection with, any distribution thereof, nor with any present
intention of distributing or reselling the same or any part thereof in any
transactions that would be in violation of the Securities Act of or any state
securities or "blue-sky" laws.
3.4 RESTRICTED SECURITIES. Such Investor understands (i) that the
Series A Preferred Stock being acquired by him, her or it hereunder and any
shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, will not be registered under the Securities Act or any state securities
or "blue-sky" laws by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act or any state securities or
"blue-sky" laws, (ii) that the Series A Preferred Stock and any shares of Common
Stock issuable upon conversion thereof must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or any
state securities or "blue-sky" laws or is exempt from such registration, (iii)
that the Corporation is under no obligation to so register any shares of Series
A Preferred Stock and any shares of Common Stock issuable upon
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<PAGE> 10
conversion thereof and (iv) that the certificate(s) evidencing the shares of the
Series A Preferred Stock and any shares of Common Stock issuable upon conversion
thereof will be imprinted with a legend that prohibits the transfer
substantially as set forth in Section 4.2(b) hereof unless they are registered
or such registration is not required.
3.5 RULE 144. Such Investor understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
person) promulgated under the Securities Act ("Rule 144") depends on the
satisfaction of various conditions and that, if applicable, Rule 144 may only
afford the basis for sales under certain circumstances only in limited amounts.
3.6 ACCESS TO INFORMATION; EXPERIENCE. Such Investor has been furnished
with or has had access during the course of this transaction and prior to the
sale of the Series A Preferred Stock to all information necessary to enable such
Investor to evaluate the merits and risks of a prospective investment in the
Corporation and such Investor has had an opportunity to discuss with
representatives of the Corporation the business and financial affairs of the
Corporation and the terms and conditions of the offering and to obtain such
additional information, to the extent that the Corporation possesses such
information or could acquire it without unreasonable effort or expense,
necessary to verify the accuracy of the information to which such Investor has
had access and all questions raised by such Investor have been answered to the
full satisfaction of such Investor. Such Investor has conducted his own
investigation and analysis of the business and his investment in the Series A
Preferred Stock and is not relying on the Corporation's business plan or
executive summary (if any) or any other written material or any information or
opinions that may be contained therein in making its or his decision to purchase
the Series A Preferred Stock. Such Investor has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Corporation so that it or he is capable of evaluating
the merits and the risks of its investment in the Corporation and has the
capacity to protect its or his own interests in making his investment in the
Corporation. Such Investor can afford to suffer a complete loss of its or his
investment in the Series A Preferred Stock.
3.7 NO PUBLIC MARKET. Such Investor understands that no public market
now exists for the Series A Preferred Stock or any shares of Common Stock
issuable on conversion thereof, that it is unlikely that a public market will
ever exist therefor, and that even if a public market exists at the time such
Investor wishes to sell the Series A Preferred Stock or any shares of Common
Stock issuable on conversion thereof, the Corporation may not be satisfying the
current public information requirements of Rule 144, and that, in such event,
such Investor would be precluded
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<PAGE> 11
from selling the securities under Rule 144 even if the applicable minimum
holding period provided thereunder had been satisfied.
3.8 SPECULATIVE INVESTMENT. Such Investor understands that the
Corporation has a limited financial and operating history, that the shares of
Series A Preferred Stock being purchased by him, her or it are a speculative
investment which involve a high degree of financial risk, and that there is no
assurance of any eco nomic, income or tax benefit from such investment.
3.9 REVIEW OF AGREEMENT. Such Investor has carefully read and re viewed
this Agreement and, to the extent he, she or it believed necessary, such
Investor has discussed with his legal, accounting and other professional
advisors the representations, warranties and agreements which such Investor is
making herein and the terms and conditions of the investment contemplated
hereby.
SECTION 4. AFFIRMATIVE COVENANTS.
4.1 CONFIDENTIALITY. Each Investor hereby agrees to and shall keep
strictly confidential and will not disclose or divulge any confidential,
proprietary or secret information which such Investor may obtain from the
Corporation, including, by way of example and not in limitation thereof,
financial statements, reports and other materials submitted by the Corporation
as required hereunder, unless required to be disclosed by law or pursuant to any
judgment, order, subpoena or decree of any court having competent jurisdiction,
or unless such information is or becomes publicly known (other than as a result
of this Section 4.1), or unless the Corporation gives its written consent to
such Investor's release of such information, except that no such written consent
shall be required (and such Investor shall be free to release such information)
if such information is to be provided to such Investor's lawyer or accountant
who are instructed to comply with this provision. Each Investor shall be
responsible for making sure its lawyer and accountant comply.
4.2 LETTER AGREEMENTS.
(a) Currently herewith, the Corporation, Robin Neustein and
Jacob Goldfield (the "GS Investors") are entering into a letter agreement
governing the non-disclosure of the identities of the GS Investors in any public
announcement and/or press release of the transaction contemplated hereby.
(b) Currently herewith, the Corporation and Screaming
Media.Net, Inc. are entering into a letter agreement governing, among other
things, the public announcement and/or press release of the transaction
contemplated hereby.
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4.3 FINANCIAL INFORMATION. Until the consummation of the initial public
offering of Common Stock of the Corporation registered under the Securities Act
(the "IPO"), the Corporation shall provide each Investor with the following:
(a) QUARTERLY REPORTS. As soon as available, but not later than 30
days after the end of each quarterly accounting period commencing with the
quarterly period ending on June 30, 1999, an unaudited balance sheet and income
statement of the Corporation,
(b) ANNUAL REPORTS. As soon as available, but not later than 90
days after the end of each fiscal year of the Corporation, unaudited financial
statements of the Corporation, which shall include a balance sheet as at the
last day thereof and an income statement for the year then ended.
4.4 TRANSFER OF SECURITIES.
(a) RESTRICTIONS ON TRANSFER. Each Investor acknowledges that the
Series A Preferred Stock and the shares of Common Stock issuable upon conversion
thereof purchased hereunder have not been registered under the Securities
Act, that such shares are being or will be issued pursuant to an exemption from
registration under the Securities Act and that such shares constitute
"restricted securities" under Rule 144. Accordingly, the Series A Preferred
Stock and the shares of Common Stock issuable upon conversion thereof held by
such Investor shall not be sold, transferred, assigned, pledged, encumbered or
otherwise disposed of (each, a "Transfer") except upon the conditions specified
in this Section 4.4 or Section 4.6 (which provides for certain additional
restrictions on transfer), which conditions are intended to ensure compliance
with the provisions of the Securities Act and this Agreement.
(b) RESTRICTIVE LEGEND. Each certificate for Series A Preferred
Stock and all shares of Common Stock issuable upon conversion thereof held by
each Investor and each certificate for any such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 4.4(c) and 4.4(d)) be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE
STATE
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SECURITIES OR "BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THERE FROM UNDER SAID ACT OR LAWS. ADDITIONALLY,
THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN SECTIONS 4.4 AND 4.6 OF THE STOCK PURCHASE
AGREEMENT DATED AS OF JUNE ___, 1999, AMONG I-RECALL, INC.
AND THE INVESTORS IDENTIFIED THEREIN, AND NO TRANSFER OF
THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF ALL
APPLICABLE CONDITIONS, I-RECALL, INC. HAS AGREED TO DELIVER
TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS
LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN
THE NAME OF THE HOLDER HEREOF."
(c) NOTICE OF TRANSFER. Each Investor agrees, prior to any Transfer
of Series A Preferred Stock or shares of Common Stock issued upon conversion
thereof to give written notice to the Corporation of such Transfer and to comply
in all other respects with the provisions of this Section 4.4. Each such notice
shall describe the manner and circumstances of the proposed Transfer and shall
be accompanied by the written opinion, addressed to the Corporation, of counsel
for the holder of such shares, stating that in the opinion of such counsel
(which opinion and counsel shall be reasonably satisfactory to the Corporation),
such proposed Transfer does not involve any transaction requiring registration
or qualification of such shares under the Securities Act or the securities blue
sky laws of any relevant state of the United States. Each such Investor shall
thereupon be entitled to Transfer such shares in accordance with the terms of
the notice delivered by it to the Corporation. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such shares
(and each certificate or other instrument evidencing any untransferred balance
of such shares) shall bear the legend set forth in Section 4.4(b) unless (a) in
such opinion of counsel registration of any future Transfer is not required by
the applicable provisions of the Securities Act and applicable state securities
laws or (b) the Corporation shall have waived the requirement of such legends.
No Investor shall Transfer any shares of Series A Preferred Stock, or shares of
Common Stock issuable on conversion thereof until such opinion of counsel has
been given (unless waived by the Corporation or unless such opinion is not
required in accordance with the provisions of this Section 4.4).
13
<PAGE> 14
(d) REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing
provisions of this Section 4.2, the restrictions imposed by this Section 4.4
upon the transferability of any shares of the capital stock of the Corporation
held by an Investor shall cease and terminate when (a) any such shares are sold
or otherwise disposed of pursuant to an effective registration statement under
the Securities Act or as otherwise contemplated by Section 4.4(c) and, pursuant
to Section 4.4(c), the securities so transferred are not required to bear the
legend set forth in Section 4.4(b) the holder of such shares has received an
opinion of counsel stating that such holder has met the requirements for
Transfer of such shares pursuant to subparagraph (k) of Rule 144. Whenever the
restrictions imposed by this Section 4.4 shall terminate, as herein provided,
each Investor holding shares as to which such restrictions have terminated shall
be entitled to receive from the Corporation, without expense, a new certificate
not bearing the restrictive legend set forth in Section 4.4(b) and not
containing any other reference to the restrictions imposed by this Section 4.4.
4.5 INDEMNIFICATION. Each Investor acknowledges that he, she or it
understands the meaning and legal consequences of the representations,
warranties and acknowledgments he, she or it has made in Section 3 and elsewhere
in this Agreement and he, she or it understands that the Corporation is relying
upon the truth and accuracy thereof. Accordingly, each Investor hereby agrees to
indemnify and hold harmless the Corporation, its officers, agents and
representatives, from and against any and all loss, damage or liability due to
or arising out of a breach of any representation or warranty of any Investor
contained in this Agreement. The Corporation hereby agrees to indemnify and hold
harmless each Investor, its officers, agents and representatives, from and
against any and all loss, damage or liability due to or arising out of a breach
of any representation or warranty of the Corporation contained in this
Agreement.
4.6 RIGHT OF FIRST REFUSAL. Until the consummation of the IPO, no
Investor shall sell or in any other way directly or indirectly transfer, assign,
pledge, distribute, bequeath, devise, encumber or otherwise dispose of, either
voluntarily or involuntarily, with or without consideration (each, a "Sale") any
of the shares of Series A Preferred Stock or shares of Common Stock issued on
conversion thereof (the "Investor Shares") except in accordance with the
following procedures:
(a) In the event that such Investor (such Investor being referred
to in this Section 4.6 as a "Selling Stockholder") receives a bona fide written
offer from a third party (the "Prospective Purchaser") to purchase all or any
portion of the Investor Shares owned by the Selling Stockholder, the Selling
Stockholder shall deliver to the Corporation a written notice (the "Offer
Notice"), which shall be
14
<PAGE> 15
irrevocable, subject to Section 4.6(b), for a period of 30 days after delivery
thereof (the "Offer Period"), offering (the "Offer") all of the Investor Shares
proposed to be Sold by the Selling Stockholder to the Prospective Purchaser at
the purchase price and on the terms of the proposed Sale to the Prospective
Purchaser (such Offer Notice to include the foregoing information and all other
relevant terms of the proposed Sale, including the identification of the
Prospective Purchaser). The Corporation, and/or its assignee(s), shall have the
right and option, for a period of 30 days after delivery of the Offer Notice, to
accept all or any part of the Investor Shares so offered at the purchase price
and on terms comparable to those stated in the Offer Notice. Such acceptance
shall be made by delivering a written notice to the Selling Stockholder within
said 30-day period.
(b) Anything contained herein to the contrary notwithstanding, the
Selling Stockholder may withdraw from the proposed Sale to a Prospective
Purchaser and, accordingly, may rescind the Offer by delivering written notice
of such withdrawal to the Corporation and/or its assignee(s) within the Offer
Period, subject to the reinstatement of the provisions of this Section 4.4 in
the event an Investor subsequently intends to sell the Investor Shares.
(c) Sales of Investor Shares under the terms of Section 4.6(a)
shall be made at the offices of the Corporation on a mutually satisfactory
business day within 30 days after the expiration of the Offer Period. Delivery
of certificates or other instruments evidencing such Investor Shares duly
endorsed for transfer shall be made to the Corporation on such date against
payment of the purchase price therefor.
(d) If an effective acceptance shall not be received pursuant to
Section 4.6(a) with respect to all Investor Shares offered for Sale pursuant to
the Offer Notice, then at any time within 30 days after the expiration of the
Offer Period the Selling Stockholder may Sell all or any part of the remaining
Investor Shares that were not accepted for purchase by the Corporation and/or
its assignees as aforesaid to the Prospective Purchaser at a purchase price no
less than that, and on the terms no more favorable to the Prospective Purchaser
than those, stated in the Offer Notice; provided, however, that the Selling
Stockholder may not, under any circumstances, Sell any Investor Shares to the
Prospective Purchaser if the Board of Directors determines in good faith, within
the Offer Period, that the Prospective Purchaser is a competitor of the
Corporation. In the event that the Investor Shares are not Sold by the Selling
Stockholder to the Prospective Purchaser during such 45-day period, the right of
the Selling Stockholder to Sell such remaining Investor Shares to the
Prospective Purchaser shall expire and the obligations of this Section 4.6 shall
be reinstated. "Affiliate" shall mean any (a) corporation or other entity in
which the subject person owns, directly or indirectly, more than 50% of the
capital stock or
15
<PAGE> 16
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other entity and (b) any other person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with, the subject person.
(e) Anything contained herein to the contrary notwithstanding, any
purchaser of Investor Shares pursuant to this Section 4.6 who is not an Investor
shall agree in writing in advance with the parties hereto to be bound by and
comply with all applicable provisions of this Agreement and shall be deemed to
be an Investor for all purposes of this Agreement.
(f) The provisions of this Section 4.6 shall not apply to the
transfer of Investor Shares by an Investor to the spouse or lineal descendants
of such Investor or an Affiliate thereof or any trust for the benefit of such
persons, provided such transferee has agreed in writing in advance to be bound
by and comply with all provisions of this Agreement to the same extent as the
transferring Investor.
(g) The provisions of this Section 4.7 shall not be applicable to
and shall terminate upon consummation of the IPO.
4.7 PREEMPTIVE RIGHTS.
(a) In the event that the Corporation shall propose to issue or
sell any shares of capital stock of the Corporation in connection with an equity
financing of the Corporation for cash consideration (a "Sale Event"), the
Corporation shall at any time during the period commencing 20 days prior to the
consummation of the transactions constituting a Sale Event and ending on the
20th day thereafter offer to sell (the "Offer") to each Investor who then owns
shares of Series A Preferred Stock or Common Stock issued upon conversion
thereof a percentage of the Offered Securities (as hereinafter defined) equal to
its Pro Rata Amount (as hereinafter defined) immediately prior to such Sale
Event, at the same price and on the same terms as shall be applicable to the
Sale-Event, which Offer by its terms shall remain open and irrevocable for a
period of 10 days from the date it is delivered by the Corporation to each such
Investor.
(b) Notice of the intention of any Investor to accept, in whole or
in part, an Offer shall be evidenced by a writing signed by such Investor (the
"Notice of Acceptance") and delivered to the Corporation within the foregoing
10-day period, setting forth such portion of its Proportionate Percentage of the
Offered Securities as such Investor elects to purchase (the "Accepted
Securities").
16
<PAGE> 17
(c) If the Sale Event does not occur for any reason, the right of
each Investor pursuant to this Section 4.5 shall terminate. If the Sale Event
does occur, the closing of the purchase of any Accepted Securities shall take
place within 15 days following the delivery of the Notice of Acceptance with
respect thereto at such time as the parties to such purchase shall mutually
agree upon. Such purchase is subject in all respects to the preparation,
execution and delivery of a purchase agreement relating to the Accepted
Securities, satisfactory in form and substance to the parties to such purchase.
(d) The rights of the Investors under this Section 4.5 shall not
apply to the following securities:
(i) Common Stock issued to officers, employees or directors of,
or consultants to, the Corporation, pursuant to any agreement, plan or
arrangement approved by the Board of Directors, or options to purchase or rights
to subscribe for such Common Stock, or securities by their terms convertible
into or exchangeable for such Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, in each case as
approved by the Board of Directors of the Corporation;
(ii) securities issued pursuant to commercial transactions
approved by the Board of Directors including but not limited to, equipment
leases or bank lines of credit; provided, that the specific issuance is approved
by the Board of Directors of the Corporation;
(iii) securities issued to parties entering into "corporate
partnering", "strategic investment" or other similar types of transactions or
relation ships with the Corporation, provided, that the specific issuance is
approved by the Board of Directors of the Corporation;
(iv) shares of Common Stock issued upon conversion of Series A
Preferred Stock;
(v) shares of any class of capital stock of the Company issued
on a pro rata basis to all holders of such class as a stock dividend or upon any
stock split, stock combination, recapitalization, spin-off or other subdivision
of shares of capital stock; and
(vi) shares of capital stock of the Company issued as
consideration in connection with the acquisition by the Company of all or
17
<PAGE> 18
substantially all assets or all capital stock of any person or entity.
(e) "Offered Securities" shall mean the number of securities of the
kind issued in a Sale Event required to be issued to all Investors who own any
shares of Series A Preferred Stock to assure that immediately following such
Sale Event and assuming the exercise by all Investors of their right pursuant to
this Section 4.5 to in connection therewith, each Investor owns the same Pro
Rata Amount of all shares of Common Stock issued and outstanding on a fully
diluted basis as it owned immediately prior to such Sale Event.
(f) "Pro Rata Amount" shall mean for any Investor the fraction, the
numerator of which is the number of shares of Common Stock into which the shares
of Series A Preferred Stock owned by such Investor are then convertible and the
denominator of which is the aggregate number of shares of Common Stock issued
and outstanding on a fully diluted basis, in each case as of the date of
determination. Any determination on a fully diluted basis shall assume
conversion, exercise or exchange in to shares of Common Stock all of the vested
options, warrants, rights or other securities convertible into or exchangeable
for, directly or indirectly, shares of Common Stock.
4.8 INSURANCE. The Corporation shall obtain insurance for its
properties of a character usually insured by persons engaged in similar
businesses against loss or damage resulting from fire or other risks insured
against by extended coverage and public liability insurance of a kind
customarily insured against by such persons.
SECTION 5. MISCELLANEOUS.
5.1 NOTICES. All notices, advices and communications to be given or
otherwise made to any party to this Agreement shall be deemed to be sufficient
if contained in a written instrument delivered in person or by telecopier or
duly sent by first class registered or certified mail, return receipt requested,
postage prepaid, or by overnight courier, addressed to such party at the address
set forth below or at such other address as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
(i) if to the Corporation, to:
i-Recall, Inc.
37 West 28th Street, 12th Floor
New York, New York 10001
Attention: Anselm Spoerri
18
<PAGE> 19
Telecopier: (212) 684-3875
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151
(ii) if to an Investor, to the address as set
forth on Schedule
I hereto
with a copy to:
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Attention: Alan J. Bernstein, Esq.
Telecopier: (212) 732-3232
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and received
(i) in the case of personal delivery or delivery by telecopier, on the date of
such delivery, (ii) in the case of nationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted. As used in this Section 5, "business day" shall
mean any day other than a day on which banking institutions in the State of New
York are legally closed for business.
5.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the parties hereto
and the respective successors and assigns of the parties hereto; provided,
however, that the rights and obligations of the Investor shall not be assignable
without the prior written consent of the Corporation.
5.3 SURVIVAL. All representations and warranties of the Corporation
contained in this Agreement shall survive the Closing until the first
anniversary hereof. All representations and warranties of each Investor
contained in this Agreement shall survive indefinitely.
19
<PAGE> 20
5.4 AMENDMENTS. The terms and provisions of this Agreement may only be
amended with the written consent of the Corporation and the Investors holding
eighty percent (80%), by voting power, of the outstanding shares of Preferred
Stock and any shares of Common Stock issued on conversion thereof then held by
all Investors.
5.5 ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
5.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
5.7 HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
5.8 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW
YORK, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW
OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION
WOULD ORDINARILY APPLY. THE ISSUANCE AND DELIVERY OF THE INITIAL SHARES AND
ADDITIONAL SHARES SHALL BE GOVERNED BY THE DELAWARE GENERAL CORPORATION LAW.
5.9 JURISDICTION AND VENUE. SUBJECT TO THE TERMS OF THIS AGREEMENT,
EACH INVESTOR HEREBY AGREES THAT ANY AND ALL ACTIONS ARISING UNDER OR IN RESPECT
OF THIS AGREEMENT MAY BE LITIGATED IN THE FEDERAL OR STATE COURTS IN NEW YORK.
BY EXECUTING AND DELIVERING OF THIS AGREEMENT, EACH INVESTOR IRREVOCABLY SUBMITS
TO THE PERSONAL JURISDICTION OF SUCH
20
<PAGE> 21
COURTS FOR ITSELF, HIMSELF, OR HERSELF AND IN RESPECT OF ITS, HIS OR HER
PROPERTY WITH RESPECT TO SUCH ACTION. EACH INVESTOR AGREES THAT VENUE WOULD BE
PROPER IN ANY OF SUCH COURTS, AND HEREBY WAIVES ANY OBJECTION THAT ANY SUCH
COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF ANY SUCH
ACTION. EACH INVESTOR FURTHER AGREES THAT THE MAILING BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL
CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT THE
NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.
* * * * *
21
<PAGE> 22
[COUNTERPART SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Stock Purchase
Agreement to be executed as of the date first written above.
i-RECALL, INC.
By:
--------------------------
Name: Anselm Spoerri
Title: President
INVESTORS:
[Name of Investor]
By:
--------------------------
Name:
Title:
Investor Social Security Number
Investor Address
Investor Home Phone
Investor Office Phone
Please check if correct:
22
<PAGE> 23
[ ] Investor is an "accredited
investor" (as defined under Rule 501
of Regulation D promulgated under
the Securities Act of 1933, as
amended). Please complete Investor
Suitability Questionnaire attached
hereto as Exhibit A.
23
<PAGE> 24
[COUNTERPART SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Stock Purchase
Agreement to be executed as of the date first written above.
i-RECALL, INC.
By: /s/ Anselm Spoerri
--------------------------
Name: Anselm Spoerri
Title: President
INVESTORS:
Screaming Media.Net, Inc. Screaming Media.Net Inc.
------------------------------
[Name of Investor]
By: /s/ Alan S. Ellman
By: --------------------------
Name: Alan S. Ellman
Title: President
Investor Social Security Number
Investor Address
Investor Home Phone
Investor Office Phone
Please check if correct:
24
<PAGE> 25
[ ] Investor is an "accredited
investor" (as defined under Rule 501
of Regulation D promulgated under
the Securities Act of 1933, as
amended). Please complete Investor
Suitability Questionnaire attached
hereto as Exhibit A.
25
<PAGE> 26
EXHIBIT A
I-RECALL, INC.
INVESTOR SUITABILITY QUESTIONNAIRE
i-Recall, Inc. (the "Company"), desires to sell to the Purchaser shares
of Series A Preferred Stock, par value $.01 per share (the "Preferred Stock"),
of the Company on the terms and conditions to be set forth in a Stock Purchase
Agreement to be entered into between the Company and you (hereinafter referred
to as the "Purchaser").
The following is an investor questionnaire to be completed by the
Purchaser to qualify the Purchaser as a suitable investor in the Company under
the Federal and state securities and blue-sky law.
2. Accredited Investor Certification. The Purchaser represents and
warrants that he comes within one category marked below, and that for any
category marked, he has truthfully set forth, where applicable, the factual
basis or reason the Purchaser comes within that category. ALL INFORMATION IN
RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned
agrees to furnish any additional information which the Company deems necessary
in order to verify the answers set forth below.
Category A _____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or
joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation: In calculating net worth you
may include equity in personal property and
real estate, including your principal
residence, cash, short-term investments,
stock and securities. Equity in personal
property and real estate should be based on
the fair market value of such property less
debt secured by such property.
Category B _____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or
joint income with his or her spouse in excess of
$300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
Category C _____ The undersigned is a director or executive officer of
the Company.
26
<PAGE> 27
Category D _____ The undersigned is a bank, a savings and loan
association, insurance company, registered investment
company, registered business development company,
licensed small business investment company ("SBIC"),
or employee benefit plan within the meaning of Title
1 of ERISA and (a) the investment decision is made by
a plan fiduciary which is either a bank, savings and
loan association, insurance company or registered
investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that
are accredited investors.
(describe entity)
Category E_____ The undersigned is a private business development
company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
(describe entity)
Category F_____ The undersigned is a corporation, partnership,
business trust, or non-profit organization within the
meaning of Section 501(c)(3) of the Internal Revenue
Code, in each case not formed for the specific
purpose of acquiring the Securities and with total
assets in excess of $5,000,000.
(describe entity)
Category G_____ The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Securities, where the
purchase is directed by a "sophisticated person" as
defined in Regulation 506 (b)(2)(ii).
Category H_____ The undersigned is an entity all the equity owners of
which are "accredited investors" (as such term is
defined in Rule 501(a) as promulgated under the
Securities Act of 1933, as amended (the "Securities
Act")) within one or more of the above categories. If
relying upon this Category alone, each
27
<PAGE> 28
equity owner must complete a separate copy of this
Agreement.
(describe entity)
Category I_____ The undersigned is not within any of the categories
above and is therefore not an "accredited investor".
3. MANNER IN WHICH TITLE TO BE HELD. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of Survivorship (both parties must sign)
(d) Partnership
(e) Tenants in Common
(f) Company
(g) Trust
(h) Other
28
<PAGE> 29
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Signature Signature (if purchasing jointly)
- ----------------------------------------------------------------------------------------------------------------------
Name (Typed or Printed) Name (Typed or Printed)
- ----------------------------------------------------------------------------------------------------------------------
Residence (Typed or Printed) Residence (Typed or Printed)
- ----------------------------------------------------------------------------------------------------------------------
City, State and Zip Code City, State and Zip Code
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Tax Identification or Social Security Number Tax Identification or Social Security Number
- ----------------------------------------------------------------------------------------------------------------------
Telephone No.: Telephone No.:
Business Business
Home Home
- ----------------------------------------------------------------------------------------------------------------------
Name in which securities should be issued:
- ----------------------------------------------------------------------------------------------------------------------
Dated: , 1999 Dated: 1999
----------------------------- -----------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Schedule I
Number of Shares being Purchased by each Investor at the Closing and each Additional Closing
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investor Number of Shares Number of Shares Number of Shares
being purchased on being purchased at being purchased at
the date of this Additional Closing Additional Closing
Agreement and dated June 15, 1999 dated July 15, 1999
Purchase Price and Purchase Price and Purchase Price
therefor therefor therefor
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Jay Chiat
Screaming Media.Net, Inc. 5,998 Shares 2,999 Shares 2,999 Shares
55 Broad Street, 23rd floor ($99,986.66) ($49,993.33) ($49,993.33)
New York, New York 10004
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Robin Neustein
Goldman Sachs & Co. 1499 Shares 749 Shares 749 Shares
85 Broad Street, 22nd floor ($24,988.33) ($12,485.83) ($12,485.83)
New York, New York 10004
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Jacob Goldfield
Goldman Sachs & Co. 749 Shares 374 Shares 374 Shares
85 Broad Street, 22nd floor ($12,485.83) ($6,234.58) ($6,234.58)
New York, New York 10004
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
TOTALS: 8246 Shares 4122 Shares 4122 Shares
($137,460.82) ($68,713.74) ($68,713.74)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Ex 10.12
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of May
14, 1999, by and between SoftCom, Inc., a Delaware corporation ("Seller") and
each purchaser executing a signature page hereto (collectively, the "Buyers",
and each individually a "Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell to Buyers, and the Buyers desire to
purchase from Seller, the number of shares of Series A Convertible Preferred
Stock, par value $.001 per share (the "Preferred Stock") set forth under each
such Buyer's name on a signature page hereto (the "Shares"), subject to the
terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties hereby
agree as follows:
1. Terms of Acquisition.
1.1 Stock Purchase. Upon the terms and subject to the conditions
of this Agreement, on the Closing Date (as hereinafter defined), each Buyer
shall purchase from Seller, and Seller shall sell, convey and deliver to each
Buyer, the Shares, free and clear of any and all charges, liens, claims,
security interests, adverse interests, pledges and encumbrances. The
certificates evidencing the Shares shall be delivered at the Closing (as
hereinafter defined) by Seller to each Buyer. Seller's agreement with each of
the Buyers is a separate agreement, and the sale of Shares to each Buyer is a
separate sale notwithstanding the fact that the terms of such sales are
contained in one agreement.
1.2 Purchase Price. As the purchase price for the Shares, each
Buyer shall pay to Seller, at the Closing, the aggregate sum set forth under
each such Buyer's name on a signature page hereto (the "Purchase Price"). Such
amount shall be payable by check, wire transfer or delivery of other
immediately available funds.
1.3 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kirkpatrick &
Lockhart LLP, 1251 Avenue of the Americas, New York, New York 10020, on such
dates as funds for the Shares are received from each Buyer or at such other
time and place as Seller and Buyers shall mutually agree (the "Closing Date").
At each Closing, upon payment of the Purchase Price by a Buyer, Seller shall
deliver to such Buyer a certificate representing the amount of Shares purchased
by such Buyer.
<PAGE> 2
1.4 Subsequent Sale of Preferred Stock. At any time on or before May 19,
1999, Seller may sell up to an aggregate of 5,769,231 shares of Preferred Stock
(including shares sold on the date hereof) to new investors in Seller (each a
"New Investor"). In addition, the sale of up to an additional 641,026 shares of
Preferred Stock may be made after May 18, 1999 to an additional investor (also
referred to herein as a "New Investor"), subject to the limitation provided in
the second sentence of Section 7 below. All sales described herein shall be
made on the terms and conditions set forth in this Agreement, and each New
Investor shall execute and deliver a counterpart of this Agreement. All shares
of Preferred Stock sold pursuant to this Section 1.4 shall be deemed to be
"Shares" for all purposes under this Agreement, and each New Investor, upon
consummation of the purchase of such Shares, shall be deemed to be a "Buyer"
for all purposes under this Agreement.
2. Representations and Warranties.
2.1 Representations and Warranties of Seller. Seller hereby represents,
warrants, and covenants to the Buyers as follows:
(a) Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary power and authority to carry on its business as
now being conducted and presently proposed to be conducted.
(b) Requisite Power and Authorization. Seller has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. All corporate action of Seller required for
the execution, delivery and performance of this Agreement has been duly taken.
This Agreement constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditor's rights in general
and (ii) as limited by general principles of equity that restrict the
availability of equitable remedies.
(c) No Conflicts. The execution, delivery and performance of this
Agreement will not (i) conflict with, result in a breach of, or constitute a
default under the Certificate of Incorporation (the "Certificate") or By-laws
of Seller, or any agreement or other obligation to which Seller is a party or
by which Seller or any of its assets are bound, or any judgment, decree, order,
writ, injunction, determination or award of any court or other governmental
agency, instrumentality or body applicable to Seller, or (ii) violate any law,
rule or regulation applicable to Seller or its property.
(d) No Consents. No consent, authorization, approval of, or order of
any governmental agency or court or any other person or entity is required in
connection with Seller's execution and delivery and performance of this
Agreement.
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(e) Qualification. Except as set forth on Schedule 2.1(e) attached
hereto, Seller is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure so to qualify could have a material
adverse effect on its Condition (as defined below).
(f) Capitalization. The capital stock of Seller, as authorized by the
Certificate, will consist of: (i) 33,000,000 shares of Common Stock, 10,000,000
shares of which will be issued and outstanding and 6,615,384 shares of which
will be reserved for issuance upon conversion of the Shares and the conversion
of shares issued upon exercise of the Warrants described in Section 4 below (the
"Warrants") (the shares issued upon conversion of the Shares, upon exercise of
the Warrants or upon conversion of shares issued upon exercise of the Warrants
are sometimes hereinafter referred to, collectively, as "Conversion Shares");
and (ii) 7,000,000 shares of preferred stock, par value $0.01 per share of
Seller, of which 6,800,000 shares shall have been designated a Preferred Stock.
The rights, privileges and preferences of the Common Stock and Preferred Stock
are as stated in the Certificate and the Certificate of Designations relating to
the Preferred Stock, true and complete copies of which are attached hereto as
Exhibit A. Except as specifically set forth on Schedule 2.1(e) hereto, and
except for options to purchase up to 6,910,830 shares of Common Stock pursuant
to outstanding stock options, as of the Closing, Seller will not (i) have
outstanding any capital stock or other securities convertible into or
exchangeable for any shares of its capital stock and, except for the preemptive
rights contained in the Certificate, no person or entity will have any right to
subscribe for or to purchase (including conversion or preemptive rights), or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or other claims of any
character relating to, any capital stock or any stock or securities convertible
into or exchangeable for any capital stock of Seller; (ii) have any capital
stock, equity interests or other securities reserved for issuance for any
purpose (other than an aggregate of 6,910,832 shares of Common Stock reserved
for issuance upon exercise of options issued or issuable pursuant to the
Company's existing stock options or stock option or incentive plans); or (iii)
be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any convertible
securities, rights or options of the type described in the immediately preceding
clause (i). No outstanding options, warrants or other security directly or
indirectly exercisable for or convertible into any class or series of Seller's
capital stock require anti-dilution adjustments by reason of the transactions
contemplated by this Agreement. All of the issued and outstanding shares of
Common Stock have been duly and validly issued, are fully paid and nonassessable
and were issued in compliance with all applicable federal and state securities
laws. All of the shares of Preferred Stock and Conversion Shares, when issued,
(i) will be duly and validly issued, fully paid and nonassessable, (ii) except
as set forth in the Shareholders Agreement in the form of Exhibit D hereto (the
"Shareholders Agreement"), and except for certain Preferred Stock subject to
irrevocable proxies, will be free of any liens or encumbrances of any kind, and
(iii) will be issued in compliance with all applicable federal and state
securities laws. To the best knowledge of Seller, there are no agreements among
Seller's stockholders with respect to the voting or transfer of Seller's capital
stock, other than the agreements regarding voting and transfer contained in the
Shareholders Agreement. Schedule 2.1(e) sets forth a complete and correct list
of the name of each holder of Seller's stock, options or other securities and
the number of shares, options or other securities (and type, class and series of
capital stock owned by such stock, option or other security holder (and exercise
price, if applicable)). In addition Seller has agreed to issue warrants to
purchase 205,128 Shares of Preferred Stock to PS Capital Ventures, LP. Prior to
consummation of the transactions contemplated hereby, Seller shall amend its
Certificate of Incorporation and Certificate of Designations related to the
Preferred Stock to increase its authorized shares of preferred stock and the
authorized Series A Preferred Stock to be 7,500,000 shares.
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(g) Subsidiaries. Seller does not presently own or control, directly or
indirectly, any interest in any partnership, corporation or other business
entity.
(h) Financial Information. To the extent Seller has previously provided to
a Buyer its unaudited balance sheet as of December 31, 1998, and the related
unaudited statements of operations, stockholders' equity and cash flows for the
year then ended (the "Financials") such Financials are complete and correct in
all material respects; are in accordance with the books of account, ledgers and
records of Seller; have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis (subject to
ordinary year-end adjustments not individually, or in the aggregate, material to
the Condition of the Company); and present fairly the consolidated financial
position, results of operations and cash flows of Seller as of the respective
dates thereof. Except as reflected in the Financials, the Seller does not have
as of the Closing any obligation or liability, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business and consistent
with past practice since the date of the Financials, which liabilities are not,
individually or in the aggregate, material to the Condition of Seller, and (ii)
obligations and liabilities which, individually or in the aggregate, are not
material to the Condition of Seller and are not required under GAAP to be
reflected in the Financials.
(i) Certain Changes or Events. Since December 31, 1998, the business of
Seller has been operated only in the ordinary course, consistent with past
practice, and in addition to, and not in limitation of the foregoing: (i) there
has not been any significant adverse change in the business, properties,
operations, earnings, assets, liabilities, condition (financial or otherwise) or
prospects (collectively, "Condition") of Seller, except for changes in the
ordinary course of business consistent with past practice which have not been,
in the aggregate, materially adverse to Seller; (ii) there has been no change of
laws, rules or regulations applicable to Seller, or revocation or change in any
contract, permit or right to do business, and no other event or occurrence of
any character which has resulted, or could reasonably be expected to result, in
a material adverse change in the Condition of Seller; (iii) Seller has not
authorized or made any distributions, or declared or paid any dividends, upon or
with respect to any of its capital stock, or other equity interests, nor has
Seller redeemed, purchased or otherwise acquired, any of its capital stock or
other equity interests; (iv) except as set forth on Schedule 2.1(i) attached
hereto, there has been no material change in any compensation, arrangement or
agreement with any employee, director, stockholder or Affiliate (as defined
below); and (v) there has been no agreement or commitment by Seller to do or
perform any of the acts described in this Section 2.1(i). "Affiliate" of a
specified person or entity shall mean a person or entity that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the person or entity specified.
(j) Title to Assets. Seller has good title to all of its assets and
properties, free and clear of any liens or encumbrances of any kind, except for
such liens and encumbrances which arise in the ordinary course of business and
do not materially impair Seller's use or ownership of such assets. With respect
to any assets or properties it leases, Seller holds a valid and subsisting
leasehold interest therein, free and clear of any liens or encumbrances of any
kind, and is in compliance, in all material respects, with the terms of the
applicable lease.
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(k) Contracts. Seller is not a party to, nor is its assets
or properties bound by, or subject to, any contracts, agreements, notes,
instruments, leases, licenses, commitments, arrangements or understandings,
written or oral (collectively, "Contracts") of the following types, except for
those listed in Schedule 2.1(k) attached hereto:
any Contract pursuant to which Seller, or another
party thereto, is obligated to pay in excess of twenty-five thousand dollars
($25,000) in any twelve-month period;
any Contract pursuant to which Seller acquired
the right to use any Intellectual Property (defined below) or information that
is material to or necessary in the business of Seller, or pursuant to which
Seller has granted to others the right to use, or which otherwise relates to,
its Intellectual Property;
any Contract (other than advances of expenses to
employees in the ordinary course of business) involving loans, loan agreements,
debt securities, mortgages, deeds of trust, security agreements, suretyships or
guarantees;
any Contract between Seller, on the one hand, and
any of its officers, directors, employees or persons or entities that
beneficially own in excess of 1.0% of the outstanding equity interest of
Seller, or any Affiliate or relative, or Affiliate of a relative, of any of the
foregoing, on the other;
any deferred compensation agreements, bonus,
pension, profit sharing, stock option and incentive plans or arrangements,
hospitalization, medical and insurance plans, agreements and policies,
retirement and severance plans and other employee compensation policies and
agreements affecting employees of Seller;
any Contract with any labor union affecting
employees of Seller;
any Contract which restricts Seller from freely
engaging in business or competing anywhere; or
any Contract which otherwise is material to the
Condition of Seller.
All of such Contracts are in full force and effect and constitute
legal, valid and binding obligations of Seller and, to the best knowledge of
Seller, the other parties thereto; the Seller and, to the best knowledge of
Seller, each other party thereto, has performed in all material respects all
obligations required to be performed by it under such Contracts.
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(l) Intellectual Property. Seller has sufficient title, ownership or
other rights in all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes (the "Intellectual
Property") necessary for its business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of others
known to Seller. Except as set forth on Schedule 2.1(l) attached hereto, there
are no outstanding option, license or agreement of any kind relating to the
foregoing, nor is Seller bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. Seller has not received any
communications alleging that Seller has violated or, by conducting its business
as proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity, nor is Seller aware of any such violations. To Seller's
knowledge, none of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of the employee's best efforts to promote the
interests of Seller or that would conflict with Seller's business as proposed to
be conducted. Neither the execution nor delivery of this Agreement and the
consummation of the transactions contemplated hereby, nor the carrying on of
Seller's business by the employees of Seller, nor the conduct of Seller's
business as proposed, will, to Seller's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, covenant or instrument under which any of such employees is now
obligated. Seller does not believe it is or will be necessary to utilize any
inventions of any of its employees (or people it currently intends to hire) made
prior to their employment by Seller.
(m) Insurance. Seller has in full force and effect fire and casualty
insurance policies, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed. Seller also has in full force and effect comprehensive
general liability insurance providing coverage in such amounts as are
customary for responsible companies engaged in the same or similar business.
(n) Litigation. There is no action, suit, proceeding, investigation
or governmental approval process pending or, to the knowledge of Seller,
threatened against Seller or affecting any of the properties or assets of
Seller which individually or in the aggregate could have a material adverse
effect on the Condition of Seller, nor is Seller aware of any basis for any
such action. Neither Seller nor any of its assets or properties, nor, to
Seller's knowledge, in connection with its business, any stockholder, director,
officer or employee of Seller, is subject to any action, order, judgment, writ,
injunction, decree, ruling or decision of any governmental authority which is
material to the Condition of Seller. There is no action or suit by Seller
currently pending or which Seller intends to initiate which is material to the
Condition of Seller.
(o) Compliance with Laws; Permits. Seller has not violated or failed
to comply with, in any material respect, any statute, law, ordinance, rule,
regulation or policy to which it or any of its properties or assets is
subject. Seller has all permits, licenses, orders, certificates, authorizations
and approvals that are material to the conduct of its business as presently
conducted and as proposed to be conducted and is not in violation thereof; all
such permits, licenses, orders, certificates, authorizations and approvals are,
and as of the Closing will be, in full force and effect.
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<PAGE> 7
(p) Taxes. Seller has timely filed all tax returns and reports as
required by law. These returns and reports are true and correct in all material
respects. Seller has paid all taxes and other assessments due. The provision for
taxes of Seller as shown in the Financials is adequate for taxes due or accrued
as of the date thereof.
(q) Registration Rights. Except as otherwise provided in this
Agreement, no person or entity has, and as of the Closing no person or entity
will have, demand, "piggy-back," or other rights to cause Seller to file any
registration statement under the Securities Act of 1933, as amended, relating to
any securities of Seller or to participate in any such registration statement.
(r) No Brokers or Finders. Except for certain options issuable to
David Mitchell to purchase up to 510,832 shares in his capacity as an advisor to
Seller, Seller has not entered into any agreement pursuant to which Seller or
any Buyer will be liable, as a result of the transactions contemplated by this
Agreement or the transactions contemplated hereby, for any claim of any person
or entity for any commission, fee or other compensation as finder or broker.
(s) Employee Confidentiality Agreements/Highly-Compensated Employees.
Each employee and officer of Seller has executed an agreement protecting
Seller's confidential and proprietary information in customary form. No employee
or officer of Seller has received compensation, or is currently compensated at a
rate, in excess of $150,000 per annum.
(t) Disclosure. In connection with the purchase of the Shares by the
Buyers as contemplated hereby, Seller has disclosed to the Buyers all material
facts and information known to Seller concerning Seller, its Condition and the
Shares, and has not in any of the representations or warranties contained in
this Agreement made any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements contained in such
representations and warranties not misleading.
(u) ERISA. Except as set forth in Schedule 2.1(u) attached hereto,
Seller does not maintain (nor has it ever maintained) nor does it have (nor has
it ever had) any obligation under any employee benefit plan, program or policy,
whether written or unwritten, including without limitation an employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended.
2.2 Representations and Warranties of the Buyers. Each Buyer hereby
severally, and not jointly, represents, warrants and covenants to Sellers as
follows, provided, that nothing contained in this Section 2.2 shall in any
respect limit or modify the representations and warranties of Seller in Section
2.1 or the right of each Buyer to rely thereon:
(a) Requisite Power and Authorization. Such Buyer has full power and
authority and/or legal capacity to enter into this Agreement and this Agreement
constitutes such Buyer's valid and
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<PAGE> 8
binding obligation, enforceable in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other laws of general application affecting enforcement of creditors' rights in
general and (ii) as limited by general principles of equity that restrict the
availability of equitable remedies.
(b) Purchase Entirely for Own Account. The Shares purchased by such
Buyer under this Agreement are being acquired for investment for such Buyer's
own account, and not with a view to the resale or distribution of any part
thereof in violation of any applicable securities laws. Such Buyer has no
present intention of selling, granting any participation in, or otherwise
distributing any of the Shares purchased by such Buyer. By executing this
Agreement, each Buyer further represents that such Buyer does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares in violation of any applicable securities laws.
(c) Disclosure of Information. Each Buyer has reviewed the
Certificate of Designation of Seller attached hereto as Exhibit A which sets
forth the rights of the Preferred Stock. Each Buyer believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares.
(d) Investment Experience. Each Buyer is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Shares. If other than
an individual, the Buyer represents it has not been organized for the purpose
of acquiring the Shares.
(e) Restricted Securities. Each Buyer understands that the Shares
have not been, and will not be, registered under the Securities Act of 1933, as
amended (the "Securities Act"), by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of each
Buyer's representations as expressed herein. Each Buyer understands that the
Shares are "restricted securities" under applicable Federal and state
securities laws and that, pursuant to these laws, each Buyer must hold the
Shares indefinitely unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from such
registration and qualification requirements is available. Each Buyer
acknowledges that, except as set forth herein, Seller has no obligation to
register or qualify the Shares for resale. Each Buyer further acknowledges that
if an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Shares and on requirements relating
to Seller which are outside of such Buyer's control, and which Seller is under
no obligation and may not be able to satisfy. In this connection, each Buyer
represents that it is familiar with Securities and Exchange Commission Rule 144
("Rule 144"), as presently in effect, and understands the resale limitations
imposed thereby.
(f) Legends. It is understood that the certificates evidencing the
Shares may bear one or all of the following legends:
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<PAGE> 9
(i) "These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with the
respect to the securities under such Act or an opinion of counsel satisfactory
to the Company that such registration is not required or unless sold pursuant to
Rule 144 of such Act."
(ii) "The Shares evidenced hereby are subject to a Shareholders Agreement
(a copy of which may be obtained upon written request from the Company), and by
accepting any interest in such Shares the person accepting such interest shall
be deemed to agree to and shall become bound by all the provisions of said
Shareholders Agreement."
(g) Accredited Investor. Each Buyer is an "accredited investor" as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act.
3. Conditions Precedent.
(a) Conditions to Seller's Obligation. The obligation of Seller to
complete the Closing is subject to the fulfillment on or prior to the Closing
Date of all of the following conditions, any one or more of which may be waived
by Seller in writing:
(i) Representation and Warranties. The representations and
warranties of each Buyer purchasing at the Closing contained in this Agreement
shall be true and correct on and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date.
(ii) Purchase Price. Each of the Buyers purchasing at the
Closing shall have delivered to Seller such Buyer's respective portion of the
Purchase Price.
(iii) Minimum Sales. Buyers shall have purchased Shares having an
aggregate minimum purchase price of at least $1,000,000.
(iv) Shareholders Agreement. The Shareholders Agreement,
substantially in the form attached hereto as Exhibit D, shall have been executed
by Seller and each of the Buyers.
(b) Conditions to the Buyer's Obligation. The obligation of each Buyer
to complete the Closing is subject to the fulfillment on or prior to the Closing
Date of all of the following conditions, any one or more of which may be waived
by such Buyer in writing:
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(i) Representations and Warranties. The representations and
warranties of Seller shall be true and correct on and as of the Closing Date
with the same force and effect as though such representations and warranties
have been made on and as of the Closing Date.
(ii) Share Certificates. Each Buyer purchasing at the Closing shall
have received from Seller stock certificates evidencing the Shares purchased by
such Buyer.
(iii) Certificate of Designation. The Certificate of Designation,
substantially in the form attached hereto as Exhibit A, shall have been filed
with the Secretary of State of the State of Delaware and shall be in full force
and effect.
(iv) Stock Split. Seller shall have consummated a 100:1 split of its
currently outstanding common stock.
(v) Founder's Note. Seller and Kevin O'Brien shall have executed the
Founder's Note, substantially in the form attached hereto as Exhibit B.
(vi) Deferred Compensation Subordination Agreement. The Deferred
Compensation Subordination Agreement, substantially in the form attached hereto
as Exhibits C-1 and C-2, shall have been fully executed by all signatories
thereto.
(vii) Shareholders Agreement. The Shareholders Agreement,
substantially in the form attached hereto as Exhibit D, shall have been executed
by Seller and each of the Buyers.
(viii) Founder Non-Compete Agreement. Chris O'Brien and Kevin O'Brien
shall have each entered a Founder Non-Compete Agreement, substantially in the
form attached hereto as Exhibit E.
(ix) By-laws. Seller's By-laws shall have been amended substantially
in the form attached hereto as Exhibit F, to require a supermajority vote by
Seller's Board of Directors on certain corporate governance issues.
(x) Minimum Sales. Buyers shall have purchased Shares having an
aggregate minimum purchase price of at least $1,000,000.
(xi) Legal Opinion. Buyers shall have received a legal opinion in
form and substance satisfactory to the Buyers.
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4. Warrants. Seller shall issue warrants to purchase Preferred Stock
to each Buyer ("Threshold Buyer") purchasing $800,000 or more in Preferred
Stock. The number of shares which such warrants shall entitle each such Buyer
to purchase shall equal fifteen (15%) percent of the number of shares of
Preferred Stock purchased by such Buyer. Seller shall also issue warrants to
purchase Preferred Stock to each group of Buyers (other than any Threshold
Buyers) purchasing $800,000 or more in Preferred Stock. The number of shares
which such warrants shall entitle such group of buyers to purchase shall equal
five (5%) percent of the number of shares of Preferred Stock purchased by such
group. Such warrants shall otherwise contain the terms and conditions set forth
in the Preferred Stock Purchase Warrant attached hereto as Exhibit G.
5. Intentionally omitted.
6. Registration Rights. Each Buyer will have the following
registration rights with respect to Shares purchased hereunder:
(a) If during any time any Buyer owns any Shares, Seller shall
determine to register for its own account or the account of others under the
Securities Act any of its equity securities, it shall send to each Buyer
written notice of such determination and, if within twenty (20) days after
receipt of such notice, any Buyer shall so request in writing, Seller shall
include in such registration statement all of the Shares held by such Buyer,
and requested to be registered by such Buyer. Notwithstanding the foregoing, in
the event that any registration shall be in whole or in part an underwritten
offering, the number of registrable securities to be included in such an
underwriting may be reduced (pro rata among the Buyers and the holders of the
other registrable securities requested to be registered by each of them) if and
to the extent that the managing underwriter shall be of the good faith opinion
that such inclusion would reduce the number of registrable securities to be
offered by Seller. Nothing herein shall be construed so as to require Seller,
in connection with any proposed offering, to engage the services of an
underwriter, as, for example, if Seller shall file a registration statement
under Rule 415 of the Securities Act without the services or engagement of any
underwriter. This "piggy-back" registration right shall not apply to an
offering of equity securities on Forms S-4 or S-8 (or their then equivalents)
relating to securities to be issued solely in connection with an acquisition of
any entity or business or securities issuable in connection with a stock option
or other employee benefit plan. At such time of any registration each Buyer and
Seller shall enter into customary reciprocal indemnification provisions with
respect to such registration; provided, that in no event shall any Buyer be
obligated to indemnify Seller for any amount in excess of the proceeds received
by such Buyer in such offering.
(b) If and to the extent Seller grants registration rights to
any group of investors in the future that are more favorable to such investors
than the registration rights granted to Buyers hereunder, the Buyers hereunder
shall be entitled to such registration rights granted to such investors on a
pari passu basis.
7. Maximum Sales. Subject to the next succeeding sentence, Seller
shall not sell Shares having an aggressive purchase price in excess of
$2,250,000. Notwithstanding the immediately preceding sentence, Seller shall be
permitted to sell additional Shares having an aggregate purchase price
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<PAGE> 12
of $250,000 (for a total maximum or $2,500,000) with the unanimous consent of
Seller's board of directors (as such board of directors is constituted as set
forth in the Shareholders Agreement).
8. Financial Information. Seller shall within forty-five (45) days after
the end of each financial quarter provide its members of the board of directors
with quarterly unaudited financial statements including (a) an unaudited balance
sheet as of the last day of such quarter, (b) an unaudited statement of income
for such quarter and (c) a cash flow statement for such quarter. In addition,
Seller shall provide each Buyer on a current basis copies of financial
statements or other financial information that it provides to any other of its
stockholders.
9. Miscellaneous Provisions.
(a) Amendments. This Agreement may be amended or modified but only by
a written instrument executed by all of the parties hereto.
(b) Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof.
(c) Applicable Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to contracts made and to be
wholly performed therein.
(d) Survival of Representations. The parties hereto agree that the
representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the consummation of the transaction
contemplated hereby.
(e) Binding Effect; Benefits. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
successors and permitted assigns.
(f) 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.
(g) Severability. If any provision or party thereof contained in this
Agreement is declared invalid by any court of competent jurisdiction or a
government agency having jurisdiction, such declaration shall not affect the
remainder of the provision or the other provisions and each shall remain in full
force and effect.
(h) Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect or limit the meaning or
interpretation of this Agreement.
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(i) Expenses. Each party hereto shall bear its own expenses incurred in
connection with the consummation of the transactions contemplated in this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Preferred Stock
Purchase Agreement as of the day and year first above written.
SELLER:
SOFTCOM, INC.
By: /s/Chris O'Brien
--------------------------
Name: Chris O'Brien
Title: Chief Executive Officer
BUYER:
SCREAMINGMEDIA NET, INC.
By: /s/ Alan Ellman
-------------------------
Name: Alan Ellman
Title: President
384,615 $.39 $150,000
Number of Shares purchased x purchase price per share = Aggregate purchase
price
<PAGE> 1
Exhibit 10.16
[ROBINSON LERER & MONTGOMERY LETTERHEAD]
April 22, 1999
Mr. Alan S. Ellman
President
Screaming Media.Net, Inc.
55 Broad Street, 23rd Floor
New York, NY 10004
Dear Mr. Ellman:
This letter, when signed by both Screaming Media.Net, Inc. ("you" or "your")
and Robinson Lerer & Montgomery, LLC ("we," "us" or "our"), will constitute an
agreement (the "Agreement") between you and us with regard to our appointment
by you as a consultant for certain of your corporate communications work.
1. Fees: For our services on your behalf, you agree to pay us a fixed monthly
retainer of $20,000 (the "Fee"). For your reference, our standard hourly
time charges are as follows:
Partner $400-$475
Principal $350
Executive Vice President $325
Senior Vice President $285
Vice President $225
Senior Associate $185
Associate $150
Assistant $ 65
The above referenced hourly charges shall be subject to change on
January 1 of each year.
Reimbursements: For our outlays on your behalf, you agree to reimburse us
for reasonable disbursements and other charges we incur in connection with
providing services to you under this Agreement. We shall bill you monthly,
in arrears, for such disbursements and other charges.
Interest on Late Payments: On invoices for fees or reimbursements for
which payment is not received within thirty (30) days of invoice date, you
agree to pay us simple interest, computed monthly, at one and one-half
percent (1 1/2 percent) over the prime rate of interest in effect at Chase
Manhattan Bank, in New York City, on the undisputed amount outstanding at
the end of such 45-day period, until such payment is received. In the event
of a disputed charge, you shall notify us in writing of the disputed amount
and reason for the
<PAGE> 2
Mr. Alan S. Ellman
Screaming Media.Net, Inc.
Page 2
dispute, and you agree to pay all undisputed amounts owed while the dispute
is under negotiation.
2. Term: This Agreement shall commence as of April 22, 1999, and will continue
unless and until terminated by either party on prior written notice to the
other, by registered or certified mail. Upon termination of this Agreement,
you agree to pay all fees, disbursements and other charges incurred prior
to the effective date of such termination.
3. Indemnity: You hereby agree to indemnify and hold harmless us and our
officers, directors, members, agents, and employees (each of the foregoing,
including us, being hereinafter referred to as an "Indemnified Person") to
the fullest extent permitted by law from and against any and all losses,
claims, damages, actions, proceedings, arbitrations or investigations or
threats thereof, and expenses related thereto (including reasonable fees,
disbursements, and other charges of counsel) (all of the foregoing being
hereinafter referred to as "Liabilities"), based upon, relating to or
arising out of our engagement by you to perform services hereunder or any
Indemnified Person's role therein; provided, however, that you shall not be
liable under this paragraph: (a) for any amount paid in settlement of
claims without your consent, unless your consent is unreasonably withheld,
or (b) to the extent that it is finally judicially determined, or expressly
stated in an arbitration award, that such Liabilities resulted primarily
from the willful misconduct or gross negligence of the Indemnified Person
seeking indemnification. In connection with your obligation to indemnify
for expenses as set forth above, you further agree to reimburse each
Indemnified Person for all such expenses (including reasonable fees,
disbursements, and other charges of counsel) as they are incurred by such
Indemnified Person; provided, however, that if any Indemnified Person is
reimbursed hereunder for any expenses, the amount so paid shall be refunded
if and to the extent it is finally judicially determined, or expressly
stated in an arbitration award, that the Liabilities in question resulted
primarily from the willful misconduct or gross negligence of such
Indemnified Person. You hereby also agree that neither we nor any other
Indemnified Person shall have any liability to you (or anyone claiming
through you or in your name) in connection with our engagement by you
except to the extent that such Indemnified Person has engaged in willful
misconduct or been grossly negligent. The provisions of this paragraph
shall survive the termination of this Agreement.
4. Applicable Law: This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without
regard to the principles of conflicts of law. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject
matter hereof and supersedes all prior agreements, arrangements, and
understandings, written or oral, relating thereto. No representation,
promise, or inducement has been made by either party that is not embodied
in this Agreement and neither party shall be bound by or liable for any
alleged representation, promise, or inducement not so set forth. Neither
party shall have the right to assign any of its rights or obligations under
this Agreement. No amendment or waiver of this Agreement shall be
effective, binding, or enforceable unless in writing and signed by both you
and us or, in the case of a waiver, by the party granting the waiver.
<PAGE> 3
Mr. Alan S. Ellman
Screaming Media.Net, Inc.
Page 3
Please confirm that the foregoing correctly sets forth our understanding by
signing and returning to us the enclosed duplicate copy of this letter.
Very truly yours,
By: /s/ Patrick S. Gallagher
-------------------------
Patrick S. Gallagher
Chief Financial Officer
ACCEPTED AND AGREED:
By: /s/ Alan S. Ellman
----------------------------
Alan S. Ellman
President
Screaming Media.Net, Inc.
<PAGE> 1
EXHIBIT 10.17
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. THE REGISTERED HOLDER OF THIS WARRANT HAS AGREED THAT NO SALE,
PLEDGE OR OTHER TRANSFER OF THIS WARRANT OR ANY OF SAID SHARES MAY BE
MADE WITHOUT REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, UNLESS THE HOLDER SHALL DELIVER TO THE ISSUER AN
OPINION (IN FORM SATISFACTORY TO THE ISSUER) OF COUNSEL SATISFACTORY TO
THE ISSUER THAT NO SUCH REGISTRATION IS REQUIRED.
SCREAMING MEDIA.COM INC.
COMMON STOCK PURCHASE WARRANT
Warrant No. 1 7,143 Shares
This certifies that, for value received,
HUT SACHS STUDIO
or its assigns, are entitled, subject to the terms and
conditions hereinafter set forth, at or before 5:00 p.m., New
York time, on June 15, 2004, but not thereafter, to purchase
up to 7,143 shares (the "Shares") of Common Stock, par value
$.01 per share ("Common Stock"), of Screaming Media.com Inc.,
a Delaware corporation (the "Company"). The purchase price
payable upon the exercise of this Warrant shall initially be
$7.00 per share, said amount being subject to adjustment as
described herein (the "Warrant Price").
Upon delivery of this Warrant with the Purchase Form attached
hereto duly executed, together with payment of the Warrant Price for the shares
of Common Stock thereby purchased, at the principal office of the Company or at
such other address as the Company may designate by notice in writing to the
registered holder hereof (the "Holder"), the Holder shall be entitled to receive
a certificate or certificates for the Shares so purchased. All Shares issued
upon the exercise of this Warrant will, upon issuance, be paid and nonassessable
and free from all taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
<PAGE> 2
1.SECTION TRANSFERABILITY AND FORM OF WARRANT
1.1 Registration. This Warrant is numbered and registered on the books
of the Company. The Company shall be entitled to treat the Holder as the sole
owner of this Warrant for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in this Warrant on the part of any other
person, and shall not be liable for any registration of transfer of this Warrant
which is to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration of transfer.
1.2 Transfer. This Warrant shall be transferable only on the books of
the Company maintained at its principal office in New York, New York, or
wherever its principal office may then be located, upon delivery of this Warrant
either duly endorsed by the Holder or by the Holder's duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, the original
letter of attorney, duly approved, or an official copy thereof, duly certified,
shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and remain with the Company in its discretion. Upon any
registration of transfer, the Company shall execute and deliver a new Warrant to
the person entitled thereto.
2. SECTION EXCHANGE OF WARRANT CERTIFICATE
This Warrant certificate may be exchanged for another certificate or
certificates entitling the Holder to purchase a like aggregate number of Shares
as this certificate then entitles the Holder to purchase. Any Holder of this
Warrant desiring to exchange this Warrant certificate shall make such request in
writing delivered to the Company, and shall surrender this certificate, properly
endorsed, to the Company. Thereupon, the Company shall execute and deliver to
the person entitled thereto a new Warrant certificate or certificates, as the
case may be, as so requested.
3. SECTION TERM OF WARRANT; EXERCISE OF WARRANT
Subject to the terms of this Warrant, the Holder shall have the right,
at any time during the period commencing at 9:00 a.m., New York time, on the
date hereof, until 5:00 p.m., New York time, on June 15, 2004 (the "Termination
Date"), to purchase from the Company the number of fully paid and nonassessable
Shares to which the Holder may at the time be entitled to purchase pursuant to
this Warrant, upon surrender, to the Company at this principal office, of this
Warrant certificate, together with the Purchase Form attached hereto duly
completed and signed, and upon payment to the Company of the Warrant Price for
the number of Shares in respect of which this Warrant is then being exercised.
Payment of the aggregate Warrant Price shall be made in cash, or by certified or
cashier's check, or by delivery of shares of Common Stock
<PAGE> 3
valued at their Current Market Price (as hereinafter defined) on the date of
exercise, or a combination thereof.
In lieu of exercising this Warrant as provided above, the Holder may
elect to receive Shares equal to value (as determined below) of any or all of
the Warrants represented by this Warrant, upon surrender to Company, at its
principal office, of all or a portion of this Warrant, together with notice of
such election (a "Cashless Exercise"), in which event the Company shall issue to
the Holder a number of Shares computed using the following formula:
X = Y(A-B)
- - ------
A
where X = the number of Shares to be issued pursuant
to this paragraph.
Y = the number of Shares issuable upon
exercise of the surrendered Warrants.
A = the Current Market Price, as defined in
Section 8.1(d) hereof, on the date when
this Warrant evidencing the surrendered
Warrants is received by the Company at its
principal office.
B = the Warrant Price.
Upon surrender of this Warrant and payment of the Warrant Price (or
upon a Cashless Exercise) as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch, to or upon the written order of the
Holder and (subject to the restrictive Legend on the first page of this Warrant)
in such name or names as the Holder may designate, a certificate or certificates
for the number of full Shares so purchased upon the exercise of this Warrant,
together with cash, as provided in Section 9 hereof; in respect of any
fractional Shares otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Shares as of the date of the surrender of this Warrant arid payment of the
Warrant Price (or making of a Cashless Exercise) as aforesaid; provided that if,
at the date of surrender of this Warrant and payment of such Warrant Price (or
making of a Cashless Exercise), the transfer books for the Shares or other class
of stock purchasable upon the exercise of this Warrant shall be closed, the
certificates for the Shares in respect of which this Warrant is then exercised
shall be issuable as of the date on which such books shall next be opened
(whether before or after the Termination Date) and until such date the Company
shall be under no duty to deliver any certificate for such Shares; and provided
further that the transfer books of record, unless otherwise required by law,
shall not be closed at any one time for a period longer than twenty days. The
rights of purchase represented by this Warrant shall be exercisable, at the
election of the Holder, either in full or from time to time in part and in the
event that this Warrant is
3
<PAGE> 4
exercised in respect of fewer than all of the Shares at any time prior to the
date of expiration of this Warrant, a new Warrant certificate to purchase the
remaining Shares will be issued.
4.SECTION PAYMENT OF TAXES
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of Shares upon the exercise of this Warrant provided
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in such issuance.
5.SECTION MUTILATED OR MISSING WARRANT
In case the certificate evidencing this Warrant shall be mutilated,
lost, stolen or destroyed, the Company may, in its discretion, issue and deliver
in exchange and substitution for and upon cancellation of this certificate if it
is mutilated, or in lieu of and substitution for this certificate if it is lost,
stolen or destroyed, a new Warrant certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company of such loss, theft or destruction of this Warrant and indemnity, if
requested, also satisfactory to the Company. Applicants for such substitute
Warrant certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as the Company may prescribe.
6.SECTION RESERVATION OF SHARES
There have been reserved, and the Company shall at all times keep
reserved, out of its authorized Common Stock a number of shares of Common Stock
sufficient to provide for the exercise of the rights of purchase represented by
this Warrant. Any transfer agent for the Common Stock or for any other shares of
the Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be requisite for such purpose.
The Company will keep a photocopy of this Warrant on file with any transfer
agent for the Common Stock or for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by this
Warrant.
7.SECTION PURCHASE BY THE COMPANY
7.1 Purchase of Warrant. The Company shall have the right, except as
limited by law, other agreements or herein, to purchase or otherwise acquire
this Warrant at such times, in such manner and for such consideration as it may
deem appropriate and as shall be agreed with the Holder of this Warrant.
8.SECTION ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES
4
<PAGE> 5
8.1 Adjustments. The Warrant Price and the number and kind of
securities purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events, as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company,
the number of Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder of this Warrant shall be entitled
to receive the kind and number of Shares or other securities of the Company
which he would have owned or have been entitled to receive after the happening
of any of such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) In case the Company shall issue rights, options or warrants to all
or substantially all holders of its shares of Common Stock, without any charge
to such holders, entitling them to subscribe for or purchase shares of Common
Stock at a price per share which is lower at the record date mentioned below
than the Current Market Price per share of Common Stock (as defined in paragraph
(d) below), the number of Shares thereafter purchasable upon the exercise of
this Warrant shall be determined by multiplying the number of Shares theretofore
purchasable upon exercise of this Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus the number of shares
which the aggregate offering price of the total number of shares of Common Stock
so offered would purchase at such Current Market Price. Such adjustment shall be
made whenever such rights, options or warrants are issued, and shall become
effective retroactively immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants.
(c) In case the Company shall distribute to all or substantially all
holders of its shares of Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions out or earnings) or rights, options
or warrants or convertible securities containing the right to subscribe for or
purchase shares of Common Stock (excluding those referred to in paragraph (b)
above), then in each such case the number of Shares thereafter purchasable upon
the exercise of this Warrant shall be determined by multiplying the number of
Shares theretofore purchasable upon exercise of this Warrant by a fraction, of
which the numerator shall be the then Current Market Price per share of Common
Stock (as defined in paragraph (d) below) on the date of such distribution, and
of which the denominator shall be such Current Market Price per share of Common
Stock, less the then fair value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible securities applicable to one share
of Common Stock. Such adjustment shall be made
5
<PAGE> 6
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
(d) For the purposes of this Warrant, the Current Market Price per
share of Common Stock of the Company at any date shall be deemed to be (i) if
the shares of Common Stock are traded in the over-the-counter market and not on
any national securities exchange and not in the NASDAQ National Market System,
the average of the mean between the bid and asked price per share, as reported
by The National Quotation Bureau, Incorporated, or an equivalent generally
accepted reporting service, for the twenty (20) consecutive trading days
immediately preceding the date for which the determination of Current Market
Price is to be made, or, (ii) if the shares of Common Stock are traded on a
national securities exchange or in the NASDAQ National Market System, the
average daily per share closing price on the principal national securities
exchange on which they are so listed or in the NASDAQ National Market System, as
the case may be, for the twenty (20) consecutive trading days immediately
preceding the date for which the determination of Current Market Price is to be
made. The closing price referred to in clause (ii) above shall be the last
reported sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices, in either case on the
principal national securities exchange on which the shares of Common Stock are
then listed or in the NASDAQ National Market System. If the Current Market Price
cannot be determined in accordance with the foregoing, it shall be the fair
market value per share of Common Stock as determined in good faith by the
Company's Board of Directors.
(e) No adjustment in the number of shares purchasable hereunder shall
be required unless such adjustment would require an increase or decrease of at
least 1 percent in the number of Shares purchasable upon the exercise of this
Warrant; provided that any adjustments which by reason of this paragraph (e) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(f) Whenever the number of Shares purchasable upon the exercise of this
Warrant is adjusted as herein provided, the Warrant Price per Share payable upon
exercise of this Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Shares purchasable upon the exercise of this Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately thereafter.
(g) In case the Company shall sell and issue shares of Common Stock, or
rights, options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock, at a price per share of Common
Stock (determined in the case of such rights, options, warrants or convertible
securities, by dividing (1) the total amount received or receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants or convertible securities, plus the total consideration payable to the
Company upon exercise or conversion thereof, by (ii) the total number of shares
of Common Stock covered by such rights, options, warrants or convertible
securities) lower than the Current Market Price (as
6
<PAGE> 7
defined in paragraph (d) above) in effect immediately prior to such sale and
issuance, then the Warrant Price shall be reduced to a price (calculated to the
nearest cent) determined by dividing (i) an amount equa1 to the sum of (1) the
number of shares of Common Stock outstanding immediately prior to such sale and
issuance multiplied by the then existing Warranty Price, plus (2) the
consideration received by the Company upon such sale and issuance, by (ii) the
total number of shares of Common Stock outstanding immediately after such sale
and issuance; provided that adjustments pursuant to this paragraph (g) shall
only be made if such sale or issuance is to an officer, director or other
affiliate of the Company, or any relative of any of the above, and if no
adjustment for such sale or issuance is made pursuant to paragraph (c) above.
The number of Shares purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Shares issuable upon exercise
immediately prior to such adjustment by a fraction, of which the numerator is
the Warrant Price in effect immediately prior to such adjustment and the
denominator is the Warrant Price as so adjusted. For the purposes of such
adjustments, the shares of Common Stock which the holders of any such rights,
options, warrants or convertible securities shall be entitled to subscribe for
or purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance, and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such rights,
options, warrants or convertible securities, plus the consideration or premiums
stated in such rights, options, warrants, or convertible securities to be paid
for the shares of Common Stock covered thereby. In case the Company shall sell
and issue shares of Common Stock, or rights, options, warrants, or convertible
securities containing the right to subscribe for or purchase shares of Common
Stock, for a consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the "price per share of Common
Stock" and the "consideration received by the Company" for purposes of the first
sentence of this paragraph (g), the Board of Directors shall determine, in its
discretion, the fair value of said property and such determination, if made in
good faith, shall be binding upon the Holder of this Warrant. There shall be no
adjustment of the Warrant Price pursuant to this paragraph (g) if the amount of
such adjustment would be less than $.05 per Share; provided that any adjustment
which by reason of this provision is not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(h) When the number of Shares purchasable upon the exercise of this
Warrant or the Warrant Price is adjusted as herein provided, the Company shall
promptly mail to the Holder by first class mail, postage prepaid, notice of such
adjustment or adjustments together with a certificate of a firm of independent
public accountants selected by the Board of Directors of the Company (who may be
the regular accountants employed by the Company) setting forth the number of
Shares purchasable upon the exercise of this Warrant and the Warrant Price of
such Shares after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made. Such
certificate shall be conclusive evidence of the correctness of such adjustment.
The Company shall be entitled to rely on such certificate and shall be under no
duty or responsibility with respect to any such certificate, except to exhibit
the same, from time to time, to the Holder during reasonable business hours.
7
<PAGE> 8
(i) For the purpose of this subsection 8.1, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company on the date of this Warrant, or (ii) any other class of stock resulting
from successive changes or reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to this subsection 8.1, the Holder shall become entitled to purchase
any shares of the Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of this Warrant, and
the Warrant Price of such shares, shall be subject to adjustment from time to
time in manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in paragraphs (a) though (h),
inclusive, above, and the provisions of Section 3 and subsections 8.2 through
8.4, inclusive, with respect to the shares shall apply on like terms to any such
other shares.
(j) Upon the expiration of any rights, options, warrants or conversion
privileges, if any thereof shall not have been exercised, the number of shares
purchasable upon exercise of this Warrant and the Warrant Price, to the extent
this Warrant shall not then have been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had it been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (1) the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants or conversion rights and (2) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company for the issuance, sale or grant of all of such rights,
options, warrants or conversion rights, whether or not exercised; provided that
no such readjustment shall have the effect of increasing the Warrant Price by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale or grant of such rights, options, warrants or convertible
rights.
8.2 No Adjustment for Dividends. Except as provided in subsection 8.1,
no adjustment in respect of any dividends shall be made during the term of this
Warrants or upon the exercise of this Warrant.
8.3 No Adjustment in Certain Cases. No adjustments shall be made
pursuant to this Section 8, in connection with the issuance of (a) such number
of shares of Common Stock (as adjusted for all stock dividends, stock splits,
subdivisions and combinations) as are issued to employees, officers, Directors,
consultants or members of the Advisory Board of the Company, or other persons
performing services for the company, pursuant to any stock option plan, stock
purchase plan or management incentive plan, agreement or arrangement approved by
the Board, and (b) any shares of Common Stock (or securities convertible into
shares of Common Stock) as consideration for the acquisition by the Company of
assets or equity interests in any business entity.
8.4 Preservation of Purchase Rights upon Reclassification,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the
8
<PAGE> 9
company as an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation, as the case may be, shall execute an
agreement with the Holder that the Holder shall have the right thereafter upon
payment of the Warrant Price in effect immediately prior to such action to
purchase upon exercise of this Warrant the kind and amount of Shares and other
securities and property which he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had this Warrant been exercised immediately prior to such action. Such agreement
shall provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 8. The Company shall
mail an executed copy of any such agreement by first class mail, postage
prepaid, to the Holder. The provisions of this subsection 8.4 shall similarly
apply to successive consolidations, mergers, sales, or conveyances.
9. SECTION FRACTIONAL INTERESTS
The company shall not be required to issue fractional Shares on the
exercise of this Warrant. If more than one of the Redeemable Warrants shall be
presented for exercise in full at the same time by the same Holder, the number
of full Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Shares represented by this
Warrant and the Other Redeemable Warrants so presented. If any fraction of a
Share would, except for the provisions of this Section 9, be issuable on the
exercise of this Warrant (or specified portion thereof), the Company shall pay
an amount in cash equal to the Current Market Price per Share (as defined in
paragraph 8.1(d) above) multiplied by such fraction.
10. SECTION NO RIGHT AS STOCKHOLDERS; NOTICES TO HOLDER
Nothing contained in this Warrant shall be construed as conferring upon
the Holder or the Holder's transferees the right to vote or to receive dividends
or to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. If, however, at any
time prior to the expiration of this Warrant and prior to its exercise, any of
the following events shall occur:
(a) any action which would require an adjustment pursuant to
subsections 8.1 or 8.4, or
(b) a dissolution, liquidation, or winding up of the Company
(other than in connection with a consolidation, merger, or
sale of all or substantially all of its property, assets, and
business as an entirety) shall be proposed;
the Company shall in each such case give notice in writing of such event to the
Holders as provided in Section 11 hereof. Failure to publish or mail such notice
or any defect therein or in the publication or mailing thereof shall not affect
the validity of any action taken in connection with such dividend, distribution,
or subscription rights, or proposed dissolution, liquidation or winding up.
9
<PAGE> 10
11.SECTION NOTICES
11.1 Any notice to the Company pursuant to this Warrant shall be in
writing and shall be deemed to have been duly given if delivered or mailed
certified mail, return receipt requested, to the Company at 601 West 26th
Street, 13th Floor, New York, New York 10001, Attention: President. The Company
may from time to time change the address to which such notices are to be
delivered or mailed hereunder by notice to the Holder in accordance with
paragraph (b) below.
11.2 Any notice pursuant to this Warrant by the Company to the Holder
shall be in writing and shall be deemed to have been duly given if mailed,
postage prepaid, to the Holder at the Holder's address on the books of the
Company.
12. SECTION SUPPLEMENTS AND AMENDMENTS
The Company may from time to time supplement or amend this Warrant,
without the approval of the Holder, in order to cure any ambiguity or to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not be inconsistent with the provisions
of this Warrant and which shall not adversely affect the interest of the Holder.
Any other amendment to this Warrant may be made only by a written instrument
executed by the Company and the Holder.
13. SECTION SUCCESSORS
All the covenants and provisions of this Warrant by or for the benefit
of the Company or the Holder shall bind and inure to the benefit of their
respective successors and assigns hereunder.
14. SECTION MERGER OR CONSOLIDATION OF THE COMPANY
The Company will not merge or consolidate with or into any other entity
unless the entity resulting from such merger or consolidation (if not the
Company) shall expressly assume the due and punctual performance and observance
of each and every covenant and condition of this Warrant to be performed and
observed by the Company.
15. SECTION APPLICABLE LAW
This Warrant shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in accordance with
the laws of said state.
10
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be affixed thereto.
Date: June 15, 1999
SCREAMINGMEDIA.COM, INC.
ATTEST:
By: /s/ Alan S. Ellman
----------------------------------
/s/ William P. Kelly Alan S. Ellman, President
- ----------------------------------
William P. Kelly, Secretary
11
<PAGE> 12
SCREAMINGMEDIA.COM, INC.
COMMON STOCK PURCHASE WARRANT
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by (the within Warrant Certificate for, and to purchase
thereunder, _____________ shares (the "Shares") provided for therein, and
requests that certificates for the Shares be issued in the name of:
---------------------------------------
(Please Print or Type Name, Address and Social Security Number)
---------------------------------------
---------------------------------------
---------------------------------------
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant Certificate for the balance of the unpurchased Shares be
registered in the name of the undersigned Warrant holder as below indicated and
delivered to the address stated below:
(Please Print)
Dated: ---------------------------------------
Name of Warrantholder:--------------------------
Address:----------------------------------------
----------------------------------------
Signature:---------------------------------------
12
<PAGE> 13
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed:
---------------------------------------
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
13
<PAGE> 1
Exhibit 16
February 15, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have read the section entitled "Change in Accountants" in the Registration
Statement on Form S-1 of Screaming Media.com Inc., to be filed with Securities
and Exchange Commission and are in agreement with the statements contained
therein.
Sincerely,
/s/ DAVID TARLOW & CO., P.C.
David Tarlow & Co., P.C.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Screaming Media.com Inc.
on Form S-1 of our report dated January 19, 2000 (February 1, 2000 as to Note
12), appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
February 16, 2000
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Screaming Media.com Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated December 28, 1999, relating to the
financial statements of Screaming Media.com Inc., which is contained in that
Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
Sincerely,
/s/ DAVID TARLOW & CO., P.C.
------------------------------
David Tarlow & Co., P.C.
New York, New York
February 15, 2000
