-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QQIge/q/YsCHfMzkwROoS+rHShSSRu7FbhR0CBxVotyE/3sALxgZajhk3MO6HvC0 GNl0/ZNfBnVCRVDRuYgVTw== 0000931763-99-000707.txt : 19990315 0000931763-99-000707.hdr.sgml : 19990315 ACCESSION NUMBER: 0000931763-99-000707 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19990311 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLIGENT LIFE CORP CENTRAL INDEX KEY: 0001080866 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 650423472 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-74291 FILM NUMBER: 99563587 BUSINESS ADDRESS: STREET 1: 11811 US HIGHWAY ONE STREET 2: STE 101 CITY: N PALM BEACH STATE: FL ZIP: 33408 BUSINESS PHONE: 5616301200 MAIL ADDRESS: STREET 1: 11811 US HIGHWAY ONE STREET 2: STE 101 CITY: N PALM BEACH STATE: FL ZIP: 33408 S-1 1 INTELLIGENT LIFE CORPORATION FORM S-1 As filed with the Securities and Exchange Commission on March 11, 1999 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- INTELLIGENT LIFE CORPORATION (Exact Name of Registrant as Specified in its Charter) Florida 7375 65-0423422 (State or other (Primary Standard (I.R.S. Employer Jurisdiction of Industrial Identification Number) Incorporation or Classification Code Organization) Number) --------------- 11811 U.S. Highway One, Suite 101 North Palm Beach, Florida 33408 (561) 627-7330 (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) --------------- William P. Anderson, III President and Chief Executive Officer Intelligent Life Corporation 11811 U.S. Highway One, Suite 101 North Palm Beach, Florida 33408 (561) 630-1200 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) --------------- Copies to: John F. Sandy Smith, Esq. Kevin Keogh, Esq. Grant W. Collingsworth, Esq. White & Case LLP Morris, Manning & Martin, L.L.P. 1155 Avenue of the Americas 1600 Atlanta Financial Center New York, New York 10036-2787 3343 Peachtree Road, N.E. (212) 819-8200 Atlanta, Georgia 30326 (404) 233-7000 --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective. If any of the securities being registered on this Form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") please 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, 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(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------
Proposed Maximum Title of Each Class of Securities Aggregate Amount of Registered Offering Price (1) Registration Fee - ------------------------------------------------------------------------------ Common Stock, $0.01 par value............ $46,000,000 $12,788 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457 under 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 a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities, and we are not soliciting offers to buy these + +securities, in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED , 1999 PROSPECTUS Shares [COMPANY LOGO] Common Stock ----------- Intelligent Life Corporation is the leading provider of independent, objective research regarding consumer banking and credit products and a significant publisher of original editorial content relating to personal finance matters. We provide this information through our internet sites Bankrate.com, theWhiz.com, Consejero.com and CPNet.com and in print through Bank Rate Monitor and Consumer Mortgage Guide. [LOGO] [LOGO] [LOGO] [LOGO] Bankrate.com theWhiz.com Consejero.com CPNet.com This is our initial public offering, and we are offering shares of our common stock. We anticipate that the initial public offering price will be between $ and $ per share. We have applied to list the common stock on the Nasdaq National Market under the symbol "ILIF." ----------- See "Risk Factors" beginning on page 7 for a discussion of certain factors that you should consider before you invest in the common stock being sold with this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. -----------
Per Share Total --------- ----- Public Offering Price........................................... $ $ Underwriting Discounts and Commissions.......................... $ $ Proceeds to Intelligent Life Corporation........................ $ $
The underwriters may purchase up to an additional shares of common stock from Intelligent Life Corporation at the public price less underwriting discounts solely to cover over-allotments. The underwriters are severally underwriting the shares being offered. The underwriters are offering the shares when, as and if delivered to and accepted by them, subject to various prior conditions, including their right to reject orders in whole or in part. The underwriters expect to deliver the shares against payment in New York, New York on , 1999. ING Baring Furman Selz LLC ----------- This prospectus is dated , 1999. Certain persons participating in this offering may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may overallot in connection with the offering, and may bid for, and purchase, shares of the common stock in the open market. For a description of these activities, see "Underwriting" on page 50. PROSPECTUS SUMMARY You should read the following summary together with the more detailed information and financial statements and notes thereto appearing elsewhere in this prospectus. Except where noted otherwise, all information in this prospectus, including share and per-share information, assumes (1) the conversion of a promissory note issued by Intelligent Life into 6,738 shares of Series B Preferred Stock, (2) the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock into shares of common stock immediately prior to completion of this offering, (3) no exercise of the underwriters' over-allotment option, and (4) a stock dividend of four shares to be paid on each issued and outstanding share of Intelligent Life's common stock immediately prior to completion of this offering. See "Description of Capital Stock" on page 45 and "Underwriting" on page 50. The Company Overview We are the leading provider of independent, objective research regarding consumer banking and credit products and a significant publisher of original editorial content relating to personal finance matters. Since 1984, we have provided this information to leading newspapers and magazines and through our publication Bank Rate Monitor. Today, we publish our data online through our principal web site, Bankrate.com, and through arrangements with more than 60 distribution (or syndication) partners such as Yahoo!, Quicken.com, America Online and Money.com. Information is presented for 120 geographic markets and nationally and includes data regarding mortgage and home equity loans, credit cards, automobile loans, checking accounts, ATM fees and yields on savings instruments. Our unique information, which is compiled by 38 researchers, is accompanied by extensive editorial content designed to assist consumers with their decision-making process. We believe Bankrate.com's audience, which may search for information by product and geographic area using this web site, represents a highly desirable group of target customers for our advertisers. As a result, we believe we are able to obtain premium rates for advertising on Bankrate.com. We are currently using the resources of Bankrate.com to create new online publications that provide personal finance information to additional targeted audiences. These publications include: theWhiz.com, which targets an audience that is younger, more female and more ethnically diverse than typical personal finance publications; Consejero.com, which targets a Spanish-speaking audience; CPNet.com, which targets the college market; and Garzarelli.com, a subscription-based service. Our goal is to develop a broad base of loyal users of our network of web sites who believe our information can improve their personal financial lives. The "Business and Finance Report" compiled by Media Metrix, Inc. for the quarter ended December 31, 1998 indicated that we had 1.3 million unique visitors, compared to 1.1 million for the quarter ended September 30, 1998. Unique visitors are the number of different web users that visited our sites over the course of the reporting period. Our Opportunity We believe many purchasers of financial products and services are relatively uninformed with respect to these products and services, and often rely upon personal relationships when making such purchases. We also believe many of these products and services are not well explained, and alternatives are not typically presented, when marketed to consumers through traditional media. As the sale of many of these products and services moves to the web, where there is little personal contact, we believe that consumers will seek sources of independent, objective information such as Bankrate.com to facilitate and support their buying decisions. Because of the interactive nature of the internet, where web technology allows us to display extensive research on financial products and services that was previously unavailable to consumers, we believe we are able to provide a superior vehicle to educate consumers about how to best select and purchase such products and services. 3 Additionally, we believe consumers are becoming more proactive managers of their financial affairs and, as a result, there is an increasing demand for financial information from a larger proportion of the population concerning a broader range of financial issues than in the past. We believe the majority of the financial information available on the web is oriented toward investment advice and providing business news and financial market information rather than personal and consumer finance data. Our publications are targeted to fulfill the market need for personal and consumer finance information. By expanding our comparative data regarding financial products and related editorial content, we are creating a unique web-based service designed to enable our audience to keep abreast of personal finance developments and better manage their financial affairs. As a result, we believe we can assemble a loyal base of users made up of targeted audiences that are attractive to advertisers. We believe Intelligent Life will benefit significantly from the anticipated growth in internet usage and spending on internet advertising, direct marketing and electronic commerce. Strategy Our objective is to create a series of online publications that are trusted sources of editorial content for consumers in the area of personal finance. Elements of our strategy include: Increase Awareness of Our Publications. We intend to aggressively promote our online publications. Developing greater awareness of our brand names should increase the value of our web sites to potential advertisers and distribution partners. Historically, we have had relatively low levels of promotional expenditures. With the proceeds of this offering, we anticipate increasing our marketing efforts substantially. Expand Existing Publications. We plan to expand and improve our existing online publications by including additional editorial and research content. Recent additions to Bankrate.com include information regarding 30-year jumbo mortgages, VA mortgages, money market accounts, credit unions, Year 2000 issues and bank ratings. We expect forthcoming additions will include new content in the areas of investment and insurance on theWhiz.com and Consejero.com. These additions may incorporate opportunities for consumers to initiate transactions on our sites. Grow Distribution Relationships. We intend to pursue new and expand existing distribution relationships in order to increase site traffic and raise the profile of our brand names. In particular, we intend to focus on increasing the number of distribution relationships we have for theWhiz.com and Consejero.com. Add New Publications. We intend to use our expertise in producing online research and editorial content to develop new online publications similar in concept to Bankrate.com in complementary areas such as property and casualty insurance and tax planning. In addition to developing publications internally, and in order to accelerate our growth, we intend to pursue acquisitions of personal finance companies and products that will extend our network of web sites. Provide High Value Added Solutions to Advertisers. Delivering audiences to our advertisers on a targeted demographic basis, segmented by geographic region and product of interest, provides high value added marketing solutions to advertisers. By expanding the breadth and depth of our online publications and adding to our advertising inventory, we believe we will be able to expand the scope of our services, thereby increasing sales to existing advertisers and attracting new advertisers. Background Intelligent Life commenced internet operations in 1995. In 1997, following the hiring of William P. Anderson, III, our President and Chief Executive Officer, our online activities became our principal focus. Mr. Anderson was formerly the Chief Financial Officer of H&R Block, Inc. and President and Chief Executive Officer of Block Financial Corporation, a subsidiary of H&R Block, Inc., engaged in consumer lending, 4 software and online financial service delivery. Since commencing online operations, we have developed substantial online business capabilities, and now create and host a significant number of web sites and sell and deliver advertising relating to all of these sites. As a result of having developed this infrastructure, we believe we are well-positioned to grow our business. Intelligent Life was incorporated in Florida in 1993 and acquired the assets of its predecessor at that time. Our principal executive office is located at 11811 U.S. Highway One, Suite 101, North Palm Beach, Florida 33408 and our telephone number is (561) 627-7330. The Offering Common stock offered by Intelligent Life............... shares Common stock outstanding after this offering.................. shares(1) Use of proceeds................. For expansion of our business, including marketing and promotional expenditures, investment in editorial and content production resources, and possible future acquisitions, and for general corporate purposes, including working capital. See "Use of Proceeds" on page 13. Proposed Nasdaq Stock Market symbol......................... ILIF
- -------- (1) Includes: (1) conversion of a promissory note issued by Intelligent Life into 6,738 shares of Series B Preferred Stock; (2) 5,696,250 shares of common stock to be issued upon conversion of our Series A and Series B Convertible Preferred Stock at the time this offering is completed; and (3) a change in accounting converting 189,238 shares of redeemable common stock into common stock. Excludes: 807,500 shares of common stock issuable upon the exercise of stock options outstanding as of March 10, 1999, at the weighted average exercise price of $2.51 per share. See "Management--Stock Option and Other Compensation Plans" on page 41. 5 Summary Financial and Operating Data
Six Months Year Ended June 30, Ended December 31, ------------------------------ ---------------------------- 1996 1997 1998 1997 1998 ---------- -------- -------- ------------- ------------- in thousands, except share in thousands, except share and per share data and per share data Statement of Operations Data: Online publishing revenue................ $ 70 $ 485 $ 1,282 $ 508 $ 1,809 Print publishing and licensing revenue...... 1,558 2,058 2,559 1,180 1,660 ---------- -------- -------- ------------- ------------- Total revenue.......... 1,628 2,543 3,841 1,688 3,469 Loss from operations.... (619) (879) (2,828) (939) (2,287) Net loss................ (672) (956) (2,782) (904) (2,095) Basic and diluted net loss per share......... $ (0.67) $ (1.24) $ (3.62) $ (1.18) $ (2.58) Weighted average shares outstanding used in basic and diluted per share calculation(1)... 1,000,000 769,240 769,240 769,240 810,640
As of December 31, 1998 ----------------------- Actual As Adjusted(2) ------- -------------- in thousands Balance Sheet Data: Cash and cash equivalents............................... $ 1,633 $ Working capital......................................... 658 Total assets............................................ 3,099 Long-term liabilities................................... 263 Redeemable convertible preferred stock.................. 12,198 Total stockholders' equity (deficit).................... (10,985)
- -------- (1) Includes: (1) conversion of a promissory note issued by Intelligent Life into 6,738 shares of Series B Preferred Stock; (2) 5,696,250 shares of common stock to be issued upon conversion of our Series A and Series B Convertible Preferred Stock at the time this offering is completed; and (3) a change in accounting converting 189,238 shares of redeemable common stock into common stock. Excludes: 807,500 shares of common stock issuable upon the exercise of options outstanding at March 10, 1999, at a weighted average exercise price of $2.51 per share. See "Management--Stock Option and Other Compensation Plans" on page 41. (2) As adjusted to give effect to the sale by Intelligent Life of the shares of common stock offered hereby at an assumed initial public offering price of $ per share and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds" on page 13 and "Capitalization" on page 14. Selected Monthly Financial and Operating Data
Online Number of Online Publishing Revenue Advertisement Views ------------------ ------------------- in thousands in millions 1998 January........................... $112 3.0 February.......................... 100 4.0 March............................. 116 5.8 April............................. 156 4.9 May............................... 164 5.2 June.............................. 125 6.2 July.............................. 183 6.7 August............................ 286 7.4 September......................... 348 13.9 October........................... 334 18.0 November.......................... 333 14.8 December.......................... 325 13.8 1999 January........................... $458 18.7 February.......................... March.............................
6 RISK FACTORS An investment in our common stock involves a high degree of risk. In addition to the other information in this prospectus, you should carefully read and consider the following risk factors before investing in our common stock. The words "may," "will," "intends," "plans," "expects," "anticipates," "estimates" and similar expressions identify forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties. Actual results could differ materially from those anticipated by such forward- looking statements as a result of the risk factors set forth in this section and the other information provided in this prospectus. We do not intend to update any forward-looking statements. Dependence on Internet Advertising Revenue We expect to derive a substantial amount of our revenues for the foreseeable future through the sale of advertising space on our internet web pages. Any factors that limit the amount advertisers are willing to spend on advertising either on the internet generally or on our web sites in particular could have a material adverse effect on our business. These factors may include: lack of standards for measuring web site traffic or effectiveness of web site advertising; lack of established pricing models for internet advertising; failure of traditional media advertisers to adopt internet advertising; introduction of alternative advertising sources; and lack of significant growth in web site traffic. The internet is a new medium for advertising and its effectiveness as compared with traditional advertising media is unproven. Currently, there are no widely accepted standards to measure the effectiveness of internet advertising, and we cannot be certain that such standards will develop sufficiently to support our growth through internet advertising. We must demonstrate to advertisers that our web sites are an effective means of reaching consumers in order to convince such advertisers to reallocate their budgets from traditional forms of advertising to our web sites. Actual or perceived ineffectiveness of our web sites as advertising vehicles would limit the growth of our revenue and have a material adverse effect on our business. Currently, a number of different pricing models are used to sell advertising on the internet. It is difficult to predict which pricing model, if any, will emerge as the industry standard and we cannot be certain that any other forms of internet advertising will be developed or accepted by the market. Therefore, it is difficult for us to project our future advertising rates and revenues. For instance, banner advertising, from which we currently derive most of our online revenue, may not be an effective advertising method in the future. If we are unable to adapt to new forms of internet advertising and pricing models our business could be adversely affected. Financial services companies account for a substantial majority of our advertising revenues. We will need to sell advertising to customers outside of the financial services industry in order to significantly increase our revenues. To date, relatively few advertisers from industries other than the technology and financial services industries have devoted a significant portion of their advertising budgets to internet advertising. If we do not attract advertisers from other industries, our business could be adversely affected. Dependence on Interest Rate Activity and Mortgage Refinancing A significant majority of our advertisement views and page views are attributable to the Bankrate.com site. Given the profile of the site's visitor traffic and its prominence as a leading source of interest rate information, visitor traffic increases with interest rate movements and decreases with interest rate stability. Factors that have caused significant visitor fluctuations in the past have been Federal Reserve actions and general market conditions affecting home mortgage interest rates. Approximately 40% of visits to Bankrate.com are to its mortgage pages. This traffic is heavily dependent on interest rates and mortgage refinancing activity. A slowdown in mortgage refinancings could have a material adverse effect on our business. 7 We believe that as we continue to develop web sites of broader interest, the percentage of overall site traffic seeking mortgage information will decline. To accelerate the growth of traffic to our other sites, we are working with our syndication partners to program web sites other than Bankrate.com more intensively, and we are promoting these sites aggressively. We cannot assure you that we will be successful in these efforts. Dependence on Distribution Arrangements Our business strategy includes the distribution of our content through the establishment of co-branded web pages with high-traffic business and personal finance sections of online services and web sites, such as America Online, Quicken.com and Money.com. Providing access to these co-branded web pages is a significant part of the value we offer to our advertisers. Although we currently have over 60 co-branded relationships, we compete with other internet content providers to maintain our current relationships and establish new relationships. As a result, we may not be able to maintain these relationships on favorable economic terms or at all. In addition, we cannot assure you that our distribution arrangements will attract a sufficient number of users to support our current advertising model. Moreover, our payments to our distribution partners represent a significant portion of our advertising revenue. In addition, many companies we pursue for distribution arrangements offer competing services. As a result, these competitors may be reluctant to enter into distribution arrangements with us. Occasionally, we enter into agreements with advertisers, content providers or other web sites that require us to feature such parties exclusively in certain sections of our web sites. Existing and future exclusivity arrangements may prevent us from entering into other content, advertising or distribution arrangements. In January 1999, 44% of our traffic originated from co-branded sites. Our business could be adversely affected if we do not establish and maintain distribution arrangements on favorable economic terms. Need to Increase Brand Awareness Although Intelligent Life and its predecessors have been in business since 1976, we commenced our internet operations by introducing Bankrate.com in 1995. Due to the limited operating history of our internet operations, it is important that we develop brand awareness of our web sites in order for them to be attractive to advertisers. The importance of brand recognition will increase as competition in the internet advertising market increases. As a result, developing and maintaining awareness of our web sites by promoting our brand names is critical to maintaining our growth. As competing web sites become established on the internet, the cost of developing brand awareness increases significantly. Successfully promoting and positioning our web sites and brand names will depend largely on the effectiveness of our marketing efforts and our ability to develop favorable traffic patterns to our web sites. Therefore, we may need to increase our financial commitment to creating and maintaining brand awareness among users. We intend to use a portion of the proceeds of this offering to increase our marketing efforts and promote our brand awareness. If we fail to successfully promote our web sites and brand names or if we incur significant expense in doing so, it could have a material adverse effect on our business. Competition We compete for internet advertising revenues with a number of finance- related web sites, such as MarketWatch.com, CNNfn.com and Quicken.com, and traditional publishers and distributors of personal finance content such as MSNBC, CNN, Money Magazine and USA Today. Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than us. Many competitors, such as Quicken.com, also have complementary products or services that drive traffic to their web sites. Increased competition could result in price reductions, reduced margins or loss of market share, any of which would adversely affect our business. We cannot be certain that we will be able to compete successfully against current or future competitors. 8 Potential for Technical Problems and Service Interruptions In the past, our web sites have experienced significant increases in traffic in response to interest rate movements and other business or financial news events. The number of our users has continued to increase over time, and we are seeking to further increase our user base. As a result, our internet servers must accommodate spikes in demand for our web pages in addition to potential significant growth in traffic. Our web sites have in the past and may in the future experience slower response times or other technical problems as a result of increased traffic. These delays or other technical problems could frustrate users and reduce our future web site traffic, which could have a material adverse effect on our business. All of our communications and network equipment is located at our corporate headquarters in North Palm Beach, Florida. Any system failure at this location could lead to interruptions or delays in service for our web sites, which could have a material adverse effect on our business. Our operations are dependent upon our ability to protect our systems against damage from fires, hurricanes, earthquakes, power losses, telecommunications failures, break-ins, computer viruses, hacker attacks and other events beyond our control. Although we maintain business interruption insurance, it may not adequately compensate us for losses that may occur due to failures of our systems. Risks Related to Our Intellectual Property Our intellectual property consists of the content of our web sites and print publications. We rely on a combination of copyrights, trademarks, trade secret laws and our user policy and restrictions on disclosure to protect our intellectual property. We may also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information. Despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our web sites or print publications without authorization. A failure to protect our intellectual property in a meaningful manner could have a material adverse effect on our business. We license certain software, data and content from third parties. In these license agreements, the licensors have generally agreed to defend, indemnify and hold us harmless with respect to any claim that the licensed software or content infringes any person's proprietary rights. We cannot assure you that the outcome of any litigation between a licensor and a third party or between us and a third party will not lead to royalty obligations for which we are not indemnified or for which such indemnification is insufficient, or that we will be able to obtain any additional license on commercially reasonable terms or at all. Because we license some of our data and content from other parties, our exposure to copyright infringement actions may increase because we must rely upon such parties for information as to the origin and ownership of the licensed content. Generally, we obtain representations as to the origin and ownership of licensed content and obtain indemnification to cover any breach of any such representations. However, we cannot assure you that such representations will be accurate or that such indemnification will be sufficient to provide adequate compensation for any breach of such representations. Any future infringement or other claims or prosecutions related to our intellectual property could have a material adverse effect on our business. Any such claims, with or without merit, could be time-consuming, result in costly litigation and diversion of technical and management personnel or require us to introduce new content or trademarks, develop new technology or enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on acceptable terms, if at all. Liability for Information on our Web Sites Much of the information published on our web sites relates to the competitiveness of financial institutions' rates, products and services. We may be subjected to claims for defamation, negligence, copyright or trademark infringement or other theories relating to the information we publish on our web sites. These types of claims 9 have been brought, sometimes successfully, against online services as well as print publications. Our insurance may not adequately protect us against these types of claims. Uncertainties Relating to Government Regulation of the Internet As internet commerce continues to evolve, increasing regulation by federal or state agencies or foreign governments may occur. Such regulation is likely in the areas of user privacy, pricing, content and quality of products and services. Additionally, taxation of internet use or electronic commerce transactions may be imposed. Any regulation imposing fees for internet use or electronic commerce transactions could result in a decline in the use of the internet and the viability of internet commerce, which could have a material adverse effect on our business. Concentration of Ownership Our officers and directors will beneficially own approximately % of Intelligent Life's outstanding common stock after this offering. Peter C. Morse, our largest shareholder, will beneficially own approximately % of Intelligent Life's outstanding common stock after this offering. As a result, our officers and directors will be able to exercise control over all matters requiring shareholder approval. In particular, these controlling shareholders will have the ability to elect all of our directors and approve or disapprove significant corporate transactions. This control could be used to prevent or significantly delay another company or person from acquiring or merging with us. Need to Manage Growth Since we began our internet operations in 1995, we have expanded our operations significantly, and we intend to continue to do so. This expansion may come through internal growth, acquisitions, or both, all of which may place a significant strain on our management. To manage the expected growth of our operations and personnel, we must develop our existing management, operational and financial systems. If we fail to implement and improve these systems in a timely manner, such failure could have a material adverse effect on our business. New Management Team and Dependence Upon Key Employees We have recently added a number of key managerial, technical and operations personnel. We are also significantly increasing our employee base. Our success depends largely upon hiring and training additional employees as well as retaining the continued services of our executive officers and other key management and development personnel. In particular, we rely on William P. Anderson, III, our President and Chief Executive Officer. We maintain key- person life insurance for Mr. Anderson. We also have a number of key employees on whom we depend and who may be difficult to replace. A failure to retain our current key employees or to hire enough qualified employees to sustain our growth could have a material adverse effect on our business. History of Losses We incurred net losses of approximately $2,782,000, $956,000 and $672,000 for the years ended June 30, 1998, 1997 and 1996 and a net loss of $2,095,000 for the six months ended December 31, 1998. We had an accumulated deficit of approximately $10,712,000 as of December 31, 1998. We anticipate that we may incur operating losses in the future due to a high level of planned expenditures. Although our revenue has grown rapidly in recent periods, such growth may not continue and may not lead to profitability. Anti-Takeover Provisions Certain provisions of our Articles of Incorporation and Bylaws may have the effect of delaying or preventing a merger or acquisition, or making such a transaction less desirable to a potential acquirer, even when shareholders may consider the acquisition or merger favorable. For example, our Articles of 10 Incorporation and Bylaws provide that: the board of directors has the authority, without shareholder approval, to issue up to 10,000,000 shares of preferred stock and to determine the rights (including voting rights) associated with such preferred stock (which issuance may adversely affect the market price of the common stock and the voting rights of the holders of common stock); the board of directors is classified and directors have three-year terms; cumulative voting for the election of directors is prohibited; approval by 66 2/3% of the shareholders is required for certain amendments to the Articles of Incorporation or Bylaws; and certain procedures must be followed before matters can be proposed by shareholders for consideration at shareholder meetings. Florida law also contains provisions that may also delay, prevent, or discourage an acquisition of or merger with Intelligent Life. Discretion in the Use of Proceeds from this Offering The net proceeds from the sale of the common stock will become part of our general working capital upon completion of this offering, and we may use these funds in a variety of ways, including increasing our sales and marketing activities, increasing our content development activities and pursuing strategic acquisitions and partnerships. We will have considerable discretion in the application of the net proceeds of this offering to these uses. In addition, the timing of our use of the net proceeds will depend on a number of factors, including the amount of our future revenues. Risks Relating to Possible Future Acquisitions A part of our business strategy is to acquire web sites and other content providers that will be complementary to our current activities. Acquisitions typically involve a number of risks, including the following: acquisitions could divert our management's attention from other business operations; we may not be successful in integrating the operations of acquired companies in a timely and cost-effective manner; we may not be successful in retaining key personnel of acquired companies; acquired companies may be subject to legal liabilities that we could be required to assume; and acquisitions may result in adverse accounting effects. Some or all of these risks could result in a material adverse effect on our business. In addition, we cannot assure you that we will be able to identify suitable acquisition candidates that are available for sale at reasonable prices. We may elect to finance future acquisitions using some or all of the proceeds of this offering. We may also elect to finance future acquisitions with debt financing, which would increase our debt service requirements, or through the issuance of additional common or preferred stock, which could result in dilution to our shareholders. There can be no assurance that we will be able to arrange adequate financing on acceptable terms. Results of Operations Subject to Significant Fluctuations Our results of operations may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control. These factors include: changes in the amount of our advertising revenue; changes in fees paid by advertisers; traffic levels on our web sites, which can fluctuate significantly as a result of financial news events; changes in the demand for internet products and services; changes in fee or revenue-sharing arrangements with our distribution partners; our ability to enter into or renew key distribution agreements; the introduction of new internet advertising services by us or our competitors; changes in our capital or operating expenses as we expand our operations; and general economic conditions. Our future revenues and results of operations may be difficult to forecast due to these factors. As a result, we believe that period-to-period comparisons of our results of operations may not be meaningful, and you should not rely on past periods as indicators of future performance. In future periods, our results of operations may fall below the expectations of securities analysts and investors, which could adversely affect the trading price of the common stock. Possible Volatility of our Stock Price We cannot predict the extent to which investor interest in Intelligent Life will lead to the development of a trading market for our common stock or how liquid that market might become. The initial public offering price for the common stock has been determined by negotiations between us and ING Baring Furman Selz LLC and 11 may not be indicative of prices that will prevail in the trading market. Significant price and volume fluctuations have occurred with respect to the securities of internet-related companies. In the past, following periods of downward volatility in the market price of a company's securities, class action litigation has often been pursued against companies. If such litigation were pursued against Intelligent Life, it could result in substantial costs and a diversion of our management's attention and resources. Shares Eligible for Future Sale Could Adversely Affect Stock Price in the Future Sales of significant amounts of common stock in the public market after this offering, or the perception that such sales may occur, could materially affect the market price of the common stock. We will have shares of common stock outstanding after this offering. Of these shares, the million shares offered hereby will be eligible for immediate sale in the public market without restriction, except shares purchased by our "affiliates" within the meaning of Rule 144 under the Securities Act. The remaining 9,938,688 shares are held by existing stockholders and are "restricted securities" within the meaning of Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if registered or if the sale transaction qualifies for an exemption from registration under the Securities Act. Our directors and officers and certain of our existing stockholders have agreed that they will not sell, directly or indirectly, any common stock without the prior consent of ING Baring Furman Selz LLC for a period of 180 days from the date of this prospectus. As a result, additional shares may become available for sale to the public as follows: 576,000 shares may be eligible for sale pursuant to Rule 144 beginning 90 days after the date of this prospectus; 878,750 and 336,900 shares may be eligible for sale pursuant to Rule 144 on November 25, 1999 and March 9, 2000, respectively; and 8,147,038 shares may be eligible for sale pursuant to Rule 144 upon the expiration of lock-up agreements 180 days after the date of this prospectus. Certain holders of these shares, representing approximately 5,885,488 shares of common stock, have the right, subject to certain conditions, to include their shares in future registration statements relating to our securities and/or to cause us to register certain shares of common stock owned by them. In addition, we have outstanding options to purchase 807,500 shares of common stock, 39,135 of which will be vested and upon exercise will be eligible for sale in the public market beginning 180 days after the date of this prospectus. Dilution If you purchase common stock in this offering, you will incur immediate and substantial dilution in net tangible book value per share. Further dilution may result if options to purchase shares of common stock are exercised by option holders in the future. Year 2000 Compliance Issues The Year 2000 computer problem refers to the potential for system and processing failures of date-related data as a result of computer-controlled systems using two digits rather than four to define the applicable year. For example, software programs that have time-sensitive components may recognize a date represented as "00" as the year 1900 rather than the year 2000. This could result in system failure, causing disruptions to our operations. We may be affected by Year 2000 issues related to non-compliant internal systems developed by us or by third-party vendors. However, we have received assurances from our third-party vendors for certain of our material systems that such systems are Year 2000 compliant, and we intend to take steps to bring the other systems into compliance. We plan to complete remediation efforts and commence testing of all our systems for Year 2000 compliance by April 30, 1999. We do not believe that we have any material systems that contain embedded chips that are not Year 2000 compliant, or that we will not be able to bring into compliance in a timely fashion. Failure of our systems to be Year 2000 compliant could result in an inability of users to view our sites, which would have a material adverse effect on our business. 12 USE OF PROCEEDS The net proceeds to Intelligent Life from the sale of the shares of common stock offered hereby are estimated to be approximately $ ($ if the underwriters exercise their over-allotment option in full), assuming an initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated expenses payable by Intelligent Life in connection with the offering. We intend to use the net proceeds from the offering primarily for expansion of our business, including marketing and promotional expenditures, investment in editorial and content production resources, and possible future acquisitions, and for general corporate purposes, including working capital. We currently have no specific agreements, commitments or understandings with respect to any acquisition. The amounts we actually use for each purpose may vary significantly and are subject to change at our discretion depending upon certain factors, including economic or industry conditions, changes in the competitive environment and strategic opportunities that may arise. In addition, we believe that it is important to create a public market for our common stock to facilitate future access to public market funds and provide the availability of a publicly-traded stock if we decide to issue common stock in connection with future acquisitions. Pending application of the net proceeds as described above, we intend to invest the net proceeds of the offering in short- term, investment-grade, interest-bearing securities. DIVIDEND POLICY We have never declared or paid cash dividends on our capital stock and we do not anticipate declaring or paying any cash dividends for the foreseeable future. We currently expect to retain all earnings, if any, for investment in our business. Our Board of Directors has broad discretion as to whether to pay dividends. Any determination whether to pay dividends will depend on a number of factors, including our results of operations, financial position and capital requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal and regulatory restrictions on the payment of dividends and other factors that our Board of Directors deems relevant. 13 CAPITALIZATION The following table sets forth our capitalization at December 31, 1998, on an actual basis and as adjusted to reflect: (1) the issuance and sale by Intelligent Life of the shares of common stock offered hereby at an assumed offering price of $ per share, after deducting estimated underwriting discounts and commissions and offering expenses; (2) the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock into shares of common stock immediately prior to completion of this offering; (3) the change in accounting of redeemable common stock for common stock; and (4) the application of the estimated net proceeds to Intelligent Life of the offering. This table should be read in conjunction with our financial statements and the notes thereto appearing elsewhere in this prospectus.
As of December 31, 1998 ------------------ Actual Adjusted -------- -------- in thousands Current portion of capital lease obligations................ $ 113 $ ======== ==== Capital lease obligations, long term........................ $ 263 $ Redeemable Convertible Series A Preferred Stock, noncumulative, par value $.01 per share, stated at redemption value--90,000 shares authorized, 89,612 shares issued and outstanding..................................... 10,216 Redeemable Convertible Series B Preferred Stock, par value $.01 per share, stated at redemption value -- 20,000 shares authorized; 17,575 shares issued and outstanding........... 1,983 Redeemable common stock, par value $.01 per share, redemption value $0.52 per share -- 454,170 shares issued and outstanding............................................ 236 Loan receivable for redeemable common stock................. (236) Stockholders' equity (deficit): Common stock, $.01 par value; 10,000,000 shares authorized, 4,053,200 shares issued (actual), shares issued as adjusted (1)................................... 41 Unamortized stock compensation expense.................... (281) Additional paid-in capital.................................. -- Accumulated deficit......................................... (10,712) -------- ---- Total stockholders' equity (deficit).................... (10,985) -------- ---- Total capitalization.................................. $ 1,510 $ ======== ====
- -------- (1) Excludes: 1,500,000 shares of common stock presently reserved for issuance upon exercise of options granted under the Equity Compensation Plan of which options to purchase 807,500 shares were outstanding as of the date of this prospectus at a weighted average exercise price of $2.51 per share. See "Management --Stock Option and Other Compensation Plans" on page 41. 14 DILUTION As of December 31, 1998, the net tangible book value of Intelligent Life was approximately $1,209,000, or $0.27 per share of common stock. Net tangible book value per share represents the amount of Intelligent Life's total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. After giving effect to the sale by Intelligent Life of the shares of common stock offered hereby at an assumed initial public offering price of $ per share and the application of the estimated net proceeds therefrom after deducting the underwriting discounts and estimated offering expenses, the adjusted, net tangible book value of Intelligent Life at December 31, 1998, would have been approximately $ , or $ per share of common stock. This represents an immediate increase in such net tangible book value of $ per share to existing shareholders and an immediate decrease in net tangible book value of $ per share to new investors. The following table illustrates this unaudited per-share dilution to new investors: Assumed initial public offering price per share................. $ Net tangible book value per share as of December 31, 1998..... $0.27 Increase in net tangible book value per share attributable to new investors................................................ $ ----- Adjusted net tangible book value per share after the offering... $ ---- Dilution per share to new investors............................. $ ====
The following table sets forth, as of December 31, 1998, the number of shares of common stock previously issued by Intelligent Life, the total consideration reflected in the accounts of Intelligent Life and the average price per share to the existing shareholders and new investors, assuming the sale by Intelligent Life of shares of common stock at an assumed initial public offering price of $ per share, before deducting estimated underwriting discounts and commissions and offering expenses:
Shares Purchased Total Consideration ---------------- --------------------- Average Price Number Percent Amount Percent Per Share -------- ------- ---------- ---------- ------------- Existing shareholders.. % $ % $ New investors.......... -------- ----- ---------- -------- ------ Total................ 100.0% $ 100.0% $ ======== ===== ========== ======== ======
Assuming full exercise of the underwriters' over-allotment option, the percentage of shares held by existing shareholders would be decreased to % of the total number of shares of common stock to be outstanding after the offering, and the number of shares held by new shareholders would be increased to shares, or % of the total number of shares of common stock to be outstanding after the offering. The foregoing tables and other information excludes shares of common stock issuable upon exercise of options held by certain officers, directors and employees of Intelligent Life. Immediately following completion of this offering, there will be outstanding options to acquire approximately 807,500 shares of common stock at exercise prices ranging from $1.30 to $2.97 per share and a weighted average exercise price of $2.51 per share. The exercise of these options will have the effect of increasing the net tangible book value dilution of new investors in this offering. See "Shares Eligible for Future Sale" on page 48. 15 SELECTED FINANCIAL DATA Our selected financial data set forth below should be read in conjunction with our financial statements, including the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 17 of this prospectus. The statement of operations data for the years ended June 30, 1994 and 1995, and the balance sheet data as of June 30, 1994 and 1995, are derived from unaudited financial statements not included in this prospectus. The statement of operations data for the years ended June 30, 1996 and 1997, and the balance sheet data as of June 30, 1996 and 1997, are derived from, and are qualified by reference to, the financial statements included elsewhere in this prospectus, which have been audited by Thomas & Clough Co., P.A. The statement of operations data for the year ended June 30, 1998, and the balance sheet data as of June 30, 1998 are derived from, and are qualified by reference to, the financial statements included elsewhere in the prospectus, which have been audited by KPMG LLP. The statement of operations data for the six-month periods ended December 31, 1997 and 1998 and the balance sheet data as of December 31, 1998 are derived from unaudited financial data. In the opinion of our management, the unaudited financial statements have been prepared on a basis consistent with the financial statements which appear elsewhere in this prospectus, and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and results of operations for such unaudited periods. Historical results are not necessarily indicative of results to be expected in the future.
Six Months Ended Year Ended June 30, December 31, ------------------------------------------------- ---------------- 1994 1995 1996 1997 1998 1997 1998 -------- ---------- --------- ------- ------- ------- ------- in thousands, except share and per share data in thousands, except share and per share data Statement of Operations Data: Revenue: Online publishing...... $ 0 $ 0 $ 70 $ 485 $ 1,282 $ 508 $ 1,809 Print publishing and licensing............. 871 1,109 1,558 2,058 2,559 1,180 1,660 -------- ---------- --------- ------- ------- ------- ------- Total revenue......... 871 1,109 1,628 2,543 3,841 1,688 3,469 Cost of operations: Online publishing...... 0 0 16 582 862 321 979 Print publishing and licensing............. 668 884 971 1,186 1,962 957 1,101 Sales.................. 0 0 98 90 665 117 817 Marketing.............. 14 23 34 1 145 18 305 Product research....... 258 274 508 721 1,216 493 916 General and administrative........ 288 404 522 768 1,663 695 871 Depreciation and amortization.......... 95 69 98 74 67 25 98 Stock based compensation.......... 0 0 0 0 89 0 669 -------- ---------- --------- ------- ------- ------- ------- Total cost of operations........... 1,323 1,654 2,247 3,422 6,669 2,627 5,756 -------- ---------- --------- ------- ------- ------- ------- Loss from operations.... (452) (545) (619) (879) (2,828) (939) (2,287) Other income (expense).. (13) (410) (53) (77) 46 35 192 -------- ---------- --------- ------- ------- ------- ------- Loss before income taxes.................. (465) (955) (672) (956) (2,782) (904) (2,095) Income taxes............ -- -- -- -- -- -- -- -------- ---------- --------- ------- ------- ------- ------- Net loss................ $ (465) $ (955) $ (672) $ (956) $(2,782) $ (904) $(2,095) ======== ========== ========= ======= ======= ======= ======= Basic and diluted net loss per share......... $ (0.48) $ (0.95) $ (0.67) $ (1.24) $ (3.62) $ (1.18) $ (2.58) Weighted average shares outstanding used in basic and diluted per- share calculation...... 964,384 1,000,000 1,000,000 769,240 769,240 769,240 810,640
As of June 30, As of -------------------------------------- December 31, 1994 1995 1996 1997 1998 1998 ----- ------- ------- ------ ------ ------------ in thousands in thousands Balance Sheet Data: Cash and cash equivalents.............. $ 0 $ (4) $ 0 $1,763 $ 910 $ 1,633 Working capital........... (424) (597) (1,649) 887 164 658 Total assets.............. 695 273 311 2,193 1,768 3,099 Obligations under capital leases, long term........ 379 700 0 0 14 263 Redeemable preferred stock.................... -- -- -- -- -- 12,198 Total stockholders' equity (deficit)................ (140) (1,096) (1,508) 1,035 657 (10,985)
16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements and related notes contained in this prospectus. The following discussion contains forward-looking statements that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words "may," "will," "intends," "plans," "expects," "anticipates," "estimates" and similar expressions identify forward-looking statements. Intelligent Life's actual results may differ significantly from those anticipated by such forward-looking statements. Factors that might cause such a discrepancy include, but are not limited to, those discussed in "Risk Factors" and "Business" and elsewhere in this prospectus. Intelligent Life's fiscal year ends on June 30. The fiscal year ended June 30, 1996 is referred to as fiscal 1996, the fiscal year ended June 30, 1997 is referred to as fiscal 1997 and the fiscal year ended June 30, 1998 is referred to as fiscal 1998. Overview Intelligent Life is the leading provider of independent, objective research regarding consumer banking and credit products and a significant publisher of original editorial content relating to personal finance matters. We provide this information through our internet sites Bankrate.com, theWhiz.com, Consejero.com and CPNet.com and in print through Bank Rate Monitor and Consumer Mortgage Guide. Our online operations are the principal focus of our activities today. Prior to 1995, our principal businesses were the publication of print newsletters and syndication of bank and credit product research to newspapers and magazines. In 1995, we introduced the Consumer Mortgage Guide, which is an advertisement for newspapers consisting of product and rate information in tabular form from local mortgage companies that pay a weekly fee for inclusion in the table. In fiscal 1996, we commenced our online operations by displaying our research through an internet site, Bankrate.com. By putting our information online, we were able to create new revenue opportunities through the sale of graphical and hyperlink advertising associated with our rate and yield tables. In fiscal 1997, we determined that we would concentrate principally on our online operations. Since that time, we have significantly expanded the scope and depth of Bankrate.com and made investments in four new online publications: theWhiz.com, Bankrate.com en Espanol, Consejero.com and CPNet.com. These new publications have not yet created significant revenues. In order to focus on our online activities, we have reduced the number of print newsletters we publish from five to three and eliminated active marketing of our print publications. We have also ceased marketing Consumer Mortgage Guide as a separate product. We now provide this product to newspapers as a part of a broader relationship that is primarily directed toward online activities. We believe that recognition of our research as the leading source of independent, objective information on banking and credit products is essential to our success. As a result, we have sought to maximize distribution of our research to gain brand recognition as a research authority. We are currently seeking to increase traffic to Bankrate.com in order to build our brand awareness and reach among online users. The following are descriptions of the revenue and expense components of our statement of operations: Online publishing revenue represents the sale of advertising, sponsorships and hyperlinks in connection with our web sites. Such advertising is generally sold to advertisers according to the cost per thousand impressions, or CPM, the advertiser receives. The amount of advertising we sell is a function of (1) the number of advertisements we have per page, (2) the number of visitors viewing our pages, and (3) the capacity of our sales force. Revenue from advertising sales is invoiced monthly based on the expected number of advertisement impressions, or number of times that an advertisement is viewed. 17 Revenue is recognized monthly based on the percentage of impressions received to the total number of impressions purchased. Revenue for impressions that have been invoiced but not delivered is deferred. Hyperlinks to various third-party web sites are sold for a fixed monthly fee, which is recognized as revenue in the month earned. For our revenue sharing distribution arrangements with online partners, revenue is recorded on a gross basis, with partner payments being included in online publishing costs. Print publishing and licensing revenue represents advertising revenue from the sale of advertising in Consumer Mortgage Guide rate tables, newsletter subscriptions, and licensing of research information. We charge a commission for placement of Consumer Mortgage Guide in a print publication. Advertising revenue and commission income is recognized when Consumer Mortgage Guide runs in the publication. Revenue from our newsletters is recognized ratably over the period of the subscription, which is generally up to one year. Revenue from the sale of research information is recognized ratably over the contract period. Online publishing costs represent expenses directly associated with the creation of online publishing revenue. These costs include contractual revenue sharing obligations resulting from our distribution arrangements (partner payments), editorial costs, and allocated overhead. Partner payments are made to distribution partners for visitors directed to our web sites. These costs increase with gains in traffic to our sites. Editorial costs relate to writers and editors who create original content for our online publications and associates who build web pages. These costs have increased as we have added online publications and co-branded versions of our sites under distribution arrangements. These sites must be maintained on a daily basis. Print publishing and licensing costs represent expenses directly associated with print publishing revenue. These costs include contractual revenue sharing obligations with newspapers related to Consumer Mortgage Guide, personnel costs, printing and allocated overhead. Sales costs represent direct selling expenses, principally for online advertising, and include sales commissions, personnel costs and allocated overhead. Marketing costs represent expenses associated with expanding brand awareness of our products and services to consumers and include advertising, including banner advertising, marketing and promotion costs. Product research costs represent expenses related to gathering data on banking and credit products and include compensation and benefits, facilities costs, telephone costs and computer systems expenses. General and administrative costs represent compensation and benefits for administration, advertising management, accounting and finance, facilities expenses, professional fees and non-allocated overhead. Depreciation and amortization represents the cost of capital asset acquisitions spread over their expected useful lives. These expenses are spread over three to seven years and are calculated on a straight line basis. Stock based compensation represents expenses associated with stock grants to our officers and employees as additional compensation for their services. Other income (expense) is comprised of interest income and expense and gains and losses on the sale of assets. Results of Operations We have compared our financial results for the year ended June 30, 1996, 1997 and 1998 as well as the six months ended December 31, 1997 and 1998. 18 The following tables displays our results of operations expressed as a percentage of total revenues:
Year Ended June Six Months Ended 30, December 31, --------------------- ------------------- 1996 1997 1998 1997 1998 ----- ----- ----- -------- -------- Revenue: Online publishing........... 4.3 % 19.1 % 33.4 % 30.1 % 52.1 % Print publishing and licensing revenue.......... 95.7 80.9 66.6 69.9 47.9 ----- ----- ----- -------- -------- Total revenue.............. 100.0 100.0 100.0 100.0 100.0 Cost of operations: Online publishing........... 1.0 22.9 22.4 19.0 28.2 Print publishing and licensing revenue.......... 59.6 46.6 51.1 56.7 31.7 Sales....................... 6.0 3.5 17.3 6.9 23.6 Marketing................... 2.1 0.0 3.8 1.1 8.8 Product research............ 31.2 28.4 31.7 29.2 26.4 General and administrative.. 32.1 30.3 43.3 41.2 25.1 Depreciation and amortization............... 6.0 2.9 1.7 1.5 2.8 Stock based compensation.... 0.0 0.0 2.3 0.0 19.3 ----- ----- ----- -------- -------- Total cost of operations..... 138.0 134.6 173.6 155.6 165.9 ----- ----- ----- -------- -------- Loss from operations......... (38.0) (34.6) (73.6) (55.6) (65.9) Other income (expense)....... (3.3) (3.0) 1.2 2.1 5.5 ----- ----- ----- -------- -------- Net loss................... (41.3)% (37.6)% (72.4)% (53.5)% (60.4)% ===== ===== ===== ======== ========
Six Months Ended December 31, 1998 Compared to Six Months Ended December 31, 1997 Revenues Total revenue increased to $3,469,000 for the six months ended December 31, 1998 from $1,688,000 for the six months ended December 31, 1997, representing a 106% increase. Online publishing revenue increased to $1,809,000 for the six months ended December 31, 1998 from $508,000 for the six months ended December 31, 1997, representing a 256% increase. This increase was due to an increase in internet traffic to our web sites resulting primarily from higher overall internet traffic, as well as a greater number of distribution arrangements, sale of more advertisements and higher advertising rates. Print publishing and licensing revenue increased to $1,660,000 for the six months ended December 31, 1998 from $1,180,000 for the six months ended December 31, 1997, representing a 41% increase. This increase resulted from higher advertising sales for Consumer Mortgage Guide. Cost of Operations Online publishing costs increased to $979,000 for the six months ended December 31, 1998 from $321,000 for the six months ended December 31, 1997, representing a 205% increase. The increase was due to greater revenue sharing obligations and personnel costs related to expanded online publishing operations. Print publishing and licensing costs increased to $1,101,000 for the six months ended December 31, 1998 from $957,000 for the six months ended December 31, 1997, representing a 15% increase. The increase resulted from higher payments to newspapers principally because of higher revenues from Consumer Mortgage Guide. Sales costs increased to $817,000 for the six months ended December 31, 1998 from $117,000 for the six months ended December 31, 1997, representing a 598% increase. The increase was primarily the result of an 19 increase in sales personnel, opening of sales offices in California and New York and implementation of a more aggressive sales commission structure. Marketing costs increased to $305,000 for the six months ended December 31, 1998 from $18,000 for the six months ended December 31, 1997. The increase resulted from hiring a public relations firm to promote our online activities, creating and producing sales materials for online advertising and purchasing banner advertising to test the effectiveness of using such advertising to increase visitors to Bankrate.com. Product research costs increased to $916,000 for the six months ended December 31, 1998 from $493,000 for the six months ended December 31, 1997, representing a 86% increase. The increase resulted from additional personnel relating to an expanded number of products in which we conduct research and additional quality control personnel. General and administrative costs increased to $871,000 for the six months ended December 31, 1998 from $695,000 for the six months ended December 31, 1997, representing a 25% increase. The increase was principally related to expenses incurred to allow for anticipated growth, including additional compensation and benefits for new personnel, facilities costs and professional costs. Depreciation and amortization increased to $98,000 for the six months ended December 31, 1998 from $25,000 for the six months ended December 31, 1997, representing a 292% increase. The increase was mainly attributable to higher expenses for software, computer systems and components. Stock-based compensation increased by $669,000 as a result of shares issued in conjunction with the hiring of our President and Chief Executive Officer and stock issued to an employee. In December 1998, we sold one of our print publications, Bank Advertising News, resulting in a gain of $186,000 which is included in other income (expense). The sale was the result of management's assessment that this publication no longer fit our strategy. Year Ended June 30, 1998 Compared to Year Ended June 30, 1997 Revenues Total revenue increased to $3,841,000 in fiscal 1998 from $2,543,000 in fiscal 1997, representing a 51% increase. Online publishing revenue increased to $1,282,000 in fiscal 1998 from $485,000 in fiscal 1997, representing a 164% increase. This increase was due to increased internet traffic to our web sites resulting primarily from higher overall internet traffic, as well as a greater number of distribution arrangements, sale of more advertisements and higher advertising rates. A change of site design for Bankrate.com to allow for a larger number of advertisements per page also contributed to the revenue growth. Print publishing and licensing revenue increased to $2,559,000 in fiscal 1998 from $2,058,000 in fiscal 1997, representing a 24% increase. The increase resulted primarily from growth in the number of newspapers participating in Consumer Mortgage Guide and a gain in the amount of associated advertising sold. Cost of Operations Online publishing costs increased to $862,000 in fiscal 1998 from $582,000 in fiscal 1997, representing a 48% increase. The increase resulted from higher partner payments and additional editorial staff. Print publishing and licensing costs increased to $1,962,000 in fiscal 1998 from $1,186,000 in fiscal 1997, representing a 65% increase. The increase was substantially a result of higher payments to newspapers given the higher level of Consumer Mortgage Guide revenues. 20 Sales costs increased to $665,000 in fiscal 1998 from $90,000 in fiscal 1997, representing a 639% increase. The increase was due to additional sales staff, higher commissions resulting from increased revenues and higher commission rates for our online sales staff. Marketing costs increased to $145,000 in fiscal 1998 from $1,485 in fiscal 1997. The increase was due to the hiring of a public relations firm to promote our expanded online activities and the costs of creating and producing sales materials for online advertising. Additional costs were incurred in fiscal 1998 when we purchased such advertising to test its effectiveness in increasing visitors to Bankrate.com. Product research costs increased to $1,216,000 in fiscal 1998 from $721,000 in fiscal 1997, representing a 69% increase. The increase was principally related to the addition of 20 local markets in which we conducted research and an expansion in the number of products for which we gathered data. General and administrative costs increased to $1,663,000 in fiscal 1998 from $768,000 in fiscal 1997, representing a 117% increase. The increase was principally related to the hiring of new senior management, expansion of office space and additional professional fees. Depreciation and amortization decreased to $67,000 in fiscal 1998 from $74,000 in fiscal 1997, representing a 9% decrease. Year Ended June 30, 1997 Compared to Year Ended June 30, 1996 Revenues Total revenue increased to $2,543,000 in fiscal 1997 from $1,628,000 in fiscal 1996, representing a 56% increase. Online publishing revenue increased to $485,000 in fiscal 1997 from $70,000 in fiscal 1996, representing a 593% increase. In fiscal 1996, Intelligent Life initiated its online publishing operations. In fiscal 1997, Intelligent Life conducted online publishing operations for the full year. Print publishing and licensing revenue increased to $2,058,000 in fiscal 1997 from $1,558,000 in fiscal 1996, representing a 32% increase. The increase was primarily due to the growth of Consumer Mortgage Guide's activities. Cost of Operations Online publishing costs increased to $582,000 in fiscal 1997 from $16,000 in fiscal 1996. The increase was primarily due to higher payments to distribution partners resulting from growth of online publishing revenue. Print publishing and licensing costs increased to $1,186,000 in fiscal 1997 from $971,000 in fiscal 1996, representing a 22% increase. The increase was primarily due to higher payments to newspapers due to growth in Consumer Mortgage Guide revenues. Sales costs decreased to $90,000 in fiscal 1997 from $98,000 for fiscal 1996, representing a 8% decrease. The decrease was primarily due to reduced sales costs while we were changing the focus of our operations. Marketing costs decreased to $1,485 in fiscal 1997 from $34,000 in fiscal 1996. The decrease was due to suspension of marketing activities in anticipation of increased online activities. Product research costs increased to $721,000 in fiscal 1997 from $508,000 in fiscal 1996, representing a 42% increase. The increase was due to conducting research in a greater number of local markets. General and administrative costs increased to $768,000 in fiscal 1997 from $522,000 in fiscal 1996, representing a 47% increase. The increase was principally related to recruiting costs associated with identifying 21 and retaining a new President and Chief Executive Officer, implementing a new accounting system and the costs associated with the acquisition of MoneyWhiz, which subsequently became theWhiz.com. Depreciation and amortization was $74,000 in fiscal 1997, compared to $98,000 in fiscal 1996, representing a decrease of 24%. The decrease was principally related to the elimination of amortization of certain subscription costs and depreciation related to certain assets. Quarterly Results of Operations The following table presents certain unaudited quarterly statement of operations data for each of our last ten quarters through the period ending December 31, 1998. The information has been derived from our unaudited financial statements. In the opinion of our management, the unaudited financial statements have been prepared on a basis consistent with the financial statements which appear elsewhere in this prospectus and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and results of operations for such unaudited periods. Historical results are not necessarily indicative of results to be expected in the future.
Three Months Ended ----------------------------------------------------------------------------------------- Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 1996 1996 1997 1997 1997 1997 1998 1998 1998 1998 -------- ------- ------- ------- -------- ------- ------- ------- -------- ------- in thousands Revenues: Online publishing...... $ 58 $ 88 $ 166 $ 173 $ 224 $ 284 $ 328 $ 446 $ 817 $ 992 Print publishing and licensing............. 488 490 515 565 592 588 622 757 766 894 ------ ------ ------ ------ ------ ------ ------ ------- ------- ------ Total revenue.......... 546 578 681 738 816 872 950 1,203 1,583 1,886 Cost of operations: Online publishing...... 89 144 154 195 115 206 210 331 458 521 Print publishing and licensing............. 288 277 278 343 448 510 536 468 495 606 Sales.................. 25 23 18 24 47 70 139 409 442 375 Marketing.............. 0 0 0 1 7 11 47 80 49 256 Product research....... 174 186 162 199 210 283 286 437 435 481 General and administrative........ 99 88 93 488 284 411 422 546 426 445 Depreciation and amortization.......... 13 17 20 24 4 21 21 21 42 56 Stock based compensation.......... 0 0 0 0 0 0 0 89 409 260 ------ ------ ------ ------ ------ ------ ------ ------- ------- ------ Total cost of operations............ 688 735 725 1,274 1,115 1,512 1,661 2,381 2,756 3,000 ------ ------ ------ ------ ------ ------ ------ ------- ------- ------ Loss from operations... (142) (157) (44) (536) (299) (640) (711) (1,178) (1,173) (1,114) Other income (expense).. (15) (16) (31) (15) 18 17 8 3 5 187 ------ ------ ------ ------ ------ ------ ------ ------- ------- ------ Net loss............... $ (157) $ (173) $ (75) $ (551) $ (281) $ (623) $ (703) $(1,175) $(1,168) $ (927) ====== ====== ====== ====== ====== ====== ====== ======= ======= ======
Liquidity and Capital Resources We have funded Intelligent Life using capital raised from shareholders. As of December 31, 1998, we had working capital of $658,000 and cash and cash equivalents of $1,633,000. Cash used in operating activities during the six months ended December 31, 1998 was $1,207,000 and during the years ended June 30, 1998, 1997 and 1996 was $2,761,000, $834,000 and $345,000, respectively. The cash used in operating activities was for funding operating losses arising from the expansion of Bankrate.com and the creation of four new online publications. 22 In September 1997, we completed a private placement of Series A Preferred Stock, resulting in gross proceeds of $2,750,000. In October 1997 and June 1998, we completed additional private placements of Series A Preferred Stock, resulting in gross proceeds of $1,575,000. In November 1998, we completed a private placement of Series B Preferred Stock, resulting in gross proceeds of $1,982,000. Each share of Series A and Series B Preferred Stock is convertible into 50 shares of common stock. Peter C. Morse, our Chairman of the Board and a principal stockholder, made loans to Intelligent Life during the years ended June 30, 1997 and 1998 in the amounts of $687,000 and $200,000, respectively. Interest rates for the loans were between 6.5% and 7%. The loans have subsequently been contributed to capital. We believe our existing liquidity and capital resources, and the proceeds resulting from the sale of common stock in this offering, will be sufficient to satisfy our cash requirements for the next twelve months. To the extent that such amounts are insufficient, we will be required to raise additional funds through equity or debt financing. There can be no assurance that we will be able to raise such funds on favorable terms, or at all. Recent Accounting Pronouncements In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued and was adopted by Intelligent Life as of July 1, 1998. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that an enterprise (1) classify items of other comprehensive income by their nature in financial statements and (2) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of statements of financial position. Comprehensive income is defined as the change in equity during the financial reporting period of a business enterprise resulting from non-owner sources such as accretion in the redemption value of preferred stock and preferred stock dividends. Comprehensive income equals the net loss for all periods presented. In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise with Related Information," was issued. SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. SFAS No. 131 is effective for financial statements for periods beginning after December 31, 1997. Intelligent Life will determine the applicability of SFAS No. 131 and apply it in the future if necessary. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in the statement of operations unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statement of operations, and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement the provision of SFAS No. 133 as of the beginning of any fiscal quarter after issuance. SFAS No. 133 cannot be applied retroactively, and must be applied to (1) derivative instruments and (2) certain derivative instruments embedded in hybrid contracts that were issued acquired, or substantively modified after December 31, 1997. Intelligent Life has not yet adopted SFAS No. 133 and presently does not have any derivative instruments. Income Taxes Intelligent Life's effective tax rate differs from the statutory federal income tax rate, primarily as a result of the uncertainty regarding Intelligent Life's ability to utilize its net operating loss carryforwards. Due to the uncertainty surrounding the timing or realization of the benefits of its net operating loss carryforwards in the 23 future tax returns, Intelligent Life has placed a valuation allowance against its otherwise recognizable deferred tax assets. As of June 30, 1998 and December 31, 1998, Intelligent Life had approximately $1,196,000 and $2,036,000 of federal net operating loss carryforwards for tax reporting purposes available to offset future taxable income. Intelligent Life's federal net operating loss carryforwards expire beginning 2012 through 2018 The Tax Reform Act of 1986 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an "ownership change" of a corporation. Due to the change in Intelligent Life's ownership interests in the third quarter of 1997, future utilization of Intelligent Life's net operating loss carryforwards will be subject to certain limitations or annual restrictions. See note 7 of the notes to the financial statements appearing elsewhere in this prospectus. Impact of Year 2000 Computer Issues The Year 2000 computer problem refers to the potential for system and processing failures of date-related data as a result of computer-controlled systems using two digits rather than four to define the applicable year. For example, software programs that have time-sensitive components may recognize a date represented as "00" as the year 1900 rather than the year 2000. This could result in a system failure causing disruptions to our operations. We may be affected by Year 2000 issues related to non-compliant internal systems developed by us or by third-party vendors. However, we have received assurances from our third-party vendors for certain of our material systems in use by us that such systems are Year 2000 compliant, and we intend to take steps to bring the other systems into compliance. We plan to complete remediation efforts and commence testing of all such systems for Year 2000 compliance by April 30, 1999. We do not believe that we have any material systems that contain embedded chips that are not Year 2000 compliant or that we will not be able to bring into compliance in a timely fashion. Our internal operation and business is also dependent upon the computer- controlled systems of third parties such as suppliers, customers and service providers. A systemic failure outside our control, such as a prolonged loss of electrical or telephone service could have a material impact on us. Based on our assessment to date, we do not anticipate that costs associated with remediating our non-compliant internal systems will be material. Our failure to make our computer systems Year 2000 compliant could result in an inability of users to view our sites which would cause a reduction in revenues and the value of the Company. We do not currently have a contingency plan for handling Year 2000 problems that are not detected and corrected prior to their occurrence. There is general uncertainty inherent in the Year 2000 computer problem, resulting from the uncertainty of the Year 2000 readiness of third-party suppliers and vendors. The consequences of Year 2000 failures could have a material adverse effect on our business. 24 BUSINESS Overview We are the leading provider of independent, objective research regarding consumer banking and credit products and a significant publisher of original editorial content relating to personal finance matters. Since 1984, we have provided this information to leading newspapers and magazines and through our publication Bank Rate Monitor. Today, we publish our data online through our principal web site, Bankrate.com, and through arrangements with more than 60 distribution (or syndication) partners such as Yahoo!, Quicken.com, America Online and Money.com. Information is presented for over 120 geographic markets and nationally and includes data regarding mortgage and home equity loans, credit cards, automobile loans, checking accounts, ATM fees and yields on savings instruments. Our unique information, which is compiled by 38 researchers, is accompanied by extensive editorial content designed to assist consumers with their decision-making process. We believe Bankrate.com's audience, which may search for information by product and geographic area using this web site, represents a highly desirable group of target customers for our advertisers. As a result, we believe we are able to obtain premium rates for advertising on Bankrate.com. We are currently using the resources of Bankrate.com to create new online publications that provide personal finance information to additional targeted audiences. These publications include: theWhiz.com, which targets an audience that is younger, more female and more ethnically diverse than typical personal finance publications; Consejero.com, which targets a Spanish-speaking audience; CPNet.com, which targets the college market; and Garzarelli.com, a subscription-based service. Our goal is to develop a broad base of loyal users of our network of web sites who believe our information can improve their personal financial lives. The "Business and Finance Report" compiled by Media Metrix, Inc., for the quarter ended December 31, 1998 indicated that we had 1.3 million unique visitors, compared to 1.1 million for the quarter ended September 30, 1998. Unique visitors are the number of different web users that visited our sites over the course of the reporting period. Our Opportunity We believe many purchasers of financial products and services are relatively uninformed with respect to these products and services, and often rely upon personal relationships when making such purchases. We also believe many of these products and services are not well explained, and alternatives are not typically presented, when marketed to consumers through traditional media. As the sale of many of these products and services moves to the web, where there is little personal contact, we believe that consumers will seek sources of independent, objective information such as Bankrate.com to facilitate and support their buying decisions. Because of the interactive nature of the internet, where web technology allows us to display extensive research on financial products and services that was previously unavailable to consumers, we believe we are able to provide a superior vehicle to educate consumers about how to best select and purchase such products and services. We believe consumers are becoming more proactive managers of their financial affairs and, as a result, there is an increasing demand for financial information from a larger proportion of the population concerning a broader range of financial issues than in the past. Also, we believe the majority of the financial information available on the web is oriented toward investment advice and providing business news and financial market information, rather than personal and consumer finance data. Our publications are targeted to fulfill the market need for personal and consumer finance information. By expanding our comparative data regarding financial products and related editorial content, we are creating a unique web-based service designed to enable our audience to keep abreast of personal finance developments and better manage their financial affairs. As a result, we believe we can assemble a loyal base of users made up of targeted audiences that are attractive to advertisers. 25 We believe that advertising spending by financial products and services components is growing relatively rapidly as compared to advertising spending in other categories. According to Advertising Age, advertising spending by financial products and services companies grew at an annual rate of 17% from 1996 to 1997. We believe Intelligent Life will benefit significantly from the anticipated growth in internet usage and spending on internet advertising, direct marketing and electronic commerce. The following table highlights anticipated growth in these areas. Internet Growth in the United States
1998 2000 2002 ------ ------- ------- in millions Number of internet users........................... 67 92 123 Advertising spending............................... $1,873 $ 4,352 $ 7,672 Direct marketing spending.......................... $ 190 $ 632 $ 1,335 Electronic commerce................................ $7,100 $15,600 $37,500
-------- Source: Jupiter Communications, LLC Strategy Our objective is to create a series of online publications that are trusted sources of editorial content for consumers in the area of personal finance. Elements of our strategy include: Increase Awareness of Our Publications. We intend to aggressively promote our online publications. Developing greater awareness of our brand names should increase the value of our web sites to potential advertisers and distribution partners. Historically, we have had relatively low levels of promotional expenditures. With the proceeds of this offering, we anticipate increasing our marketing efforts substantially. Expand Existing Publications. We plan to expand and improve our existing online publications by including additional editorial and research content. Recent additions to Bankrate.com include information regarding 30-year jumbo mortgages, VA mortgages, money market accounts, credit unions, Year 2000 issues and bank ratings. We expect forthcoming additions will include new content in the areas of investment and insurance on theWhiz.com and Consejero.com. These additions may incorporate opportunities for consumers to initiate transactions on our sites. Grow Distribution Relationships. We intend to pursue new and expand existing distribution relationships in order to increase site traffic and raise the profile of our brand names. In particular, we intend to focus on increasing the number of distribution relationships we have for theWhiz.com and Consejero.com. Add New Publications. We intend to use our expertise in producing online research and editorial content to develop new online publications similar in concept to Bankrate.com in complementary areas such as property and casualty insurance and tax planning. In addition to developing publications internally, and in order to accelerate our growth, we intend to pursue acquisitions of personal finance companies and products that will extend our network of web sites. Provide High Value Added Solutions to Advertisers. Delivering audiences to our advertisers on a targeted demographic basis, segmented by geographic region and product of interest, provides high value added marketing solutions to advertisers. By expanding the breadth and depth of our online publications and adding to our advertising inventory, we believe we will be able to expand the scope of our services, thereby increasing sales to existing advertisers and attracting new advertisers. 26 Bankrate.com Bankrate.com, our flagship web site, provides editorial and research information on banking and credit products to assist consumers in making informed financial decisions. Bankrate.com has its roots in our print publications and content syndication activities, which have provided surveys of interest rate data to consumers and institutions for over 16 years. Our online surveys have been expanded to include data on 46 products collected from more than 3,500 institutions nationwide. This information is gathered and presented by metropolitan area, which provides more valuable information to consumers than aggregated national information and allows advertisers to target prospective customers geographically. Media Metrix, Inc., an independent research firm, lists Bankrate.com as the business site with the twenty-first and fifteenth highest volume of traffic during the third and fourth calendar quarters, respectively, of 1998, with 1.1 million and 1.3 million unique visitors. We believe that Bankrate.com compares favorably to other editorial sites in terms of pages viewed by a visitor during each visit and the resulting time devoted to the site. Bankrate.com may be compared to comparable editorial sites during the third and fourth calendar quarters of 1998 as follows: Comparison of Personal Finance Editorial Sites in 1998
Third Quarter Fourth Quarter ------------------------------- ------------------------------- Average Average Unique Pages Unique Pages Site Visitors(1) Reach(2) Viewed(3) Visitors(1) Reach(2) Viewed(3) ------------------------ ------------ -------- --------- ------------ -------- --------- in thousands in thousands Money (Pathfinder)...... 1,964 3.7% 5 1,783 3.3% 16 Bankrate.com............ 1,070 2.0 26 1,323 2.4 21 Forbes.................. 917 1.7 15 860 1.6 70 Business Week........... 680 1.3 15 897 1.7 6 Red Herring............. 652 1.2 3 436 0.8 9 Fortune (Pathfinder).... 592 1.1 17 828 1.5 10 Smart Money (Wall Street Journal)............... 484 0.9 20 261 0.5 52 Kiplinger's............. 279 0.5 5 189 0.3 20
-------- Source: Media Metrix, Inc. (1) Unique Visitors means the estimated number of different web users that visited the site over the course of the reporting period. (2) Reach means the number of unique web users that visited the site at least once over the course of the reporting period, expressed as a percentage of the total web audience. (3) Average pages viewed means the average number of pages visited during the reporting period per user. 27 Bankrate.com is structured in channels, which are typically organized around banking or credit products and include original content and research. The following chart illustrates how Bankrate.com is structured: [A screen of Bankrate.com's web site. A banner along with a navigation bar is at the top of the page and a navigation bar is on the left side of the page. Balloons are inserted throughout the page with text describing the channels, the information presented on the page and the updating features of the home page.] 28 Users may search for information on the mortgage pages of Bankrate.com by product of interest and geographic location. [A screen of Bankrate.com's web site. An advertisement along with a navigation bar is at the top of the page. A banner is on the left side of the page. Balloons are inserted throughout the page with text explaining the page's features.] 29 Bankrate.com also includes pages in which distribution partners may preview upcoming features to assist with planning advertising campaigns. [A screen of Bankrate.com's web site. A banner along with a navigation bar is at the top of the page and a navigation bar is on the left side of the page. Text in a balloon explains how the site can be utilized]. 30 Bankrate.com also distributes electronic newsletters daily and weekly to approximately 90,000 subscribers covering topics such as mortgages, credit cards, banking, small businesses, CD rates and Federal Funds rates. We also maintain message boards where visitors can post questions for members of the Bankrate.com community to answer. Topics parallel the channels offered by Bankrate.com. Distribution Arrangements A significant portion of the traffic to Bankrate.com, as well as our other web sites, is attributable to the distribution (or syndication) arrangements we have with other web site operators. In January 1999, approximately 44% of the total traffic to Bankrate.com and our other web sites originated from the web sites of our distribution partners. Our distribution arrangements fall into two categories: (1) those in which we establish a "co-branded" site with the distribution partner, and (2) those in which we provide content to the distribution partner's web site together with a hyperlink to our own site. We have found co-branding to be more effective in driving traffic to our sites. A co-branded site is typically a custom version of Bankrate.com with the graphical look and feel of the distribution partner and the partner's navigation. Co-branded sites are created pursuant to agreements with our distribution partners. Generally, agreements relating to co-branded sites provide for us to host, sell and serve advertisements to and collect revenues from the co-branded sites. Distribution partners are paid a percentage of revenues generated by the related co-branded sites. Under distribution arrangements that do not include co-branded sites, we contract to provide content in exchange for a fee. The content identifies Bankrate.com as its source and typically includes a link to Bankrate.com. Our content partners include Yahoo!, SecureTax.com, MicroSoft's MoneyCentral, CNNfn and Standard & Poor's. 31 We believe our distribution network for personal finance information is one of the broadest and deepest on the internet. Intelligent Life has distribution relationships with the seven highest-volume business networks as of the fourth calendar quarter of 1998, as identified by Media Metrix, Inc. According to Media Metrix, business networks and sites reach about 49% of web users, and our distribution partners include every financial site that reaches 4% or more of web users. The table below lists parties with which we have distribution agreements as of March 10, 1999: Access Atlanta Fiera Inc. Providian Online America Online Forbes Quicken.com AT&T Worldnet Go Carolinas RealTimes Austin 360 Go Hamptons Roads Realtor.com Auto-by-Tel Go PBI San Antonio Express Auto Connect Hispanic Online San Diego Insider Auto Site HomeFair ScarsdaleNet.com Black Families Housenet.com SecureTax.com Business Today Houston Chronicle Sign on San Diego Business Week Enterprise Inman New Features Sign on San Diego en Business Week Online Inside New Orleans Espanol CarBuyer.com Intellichoice Smackem.com CarPrices.com Kiplinger's Smart Money Magazine Classified Ventures MarketWatch.com SoFla.com CNNfn.com Microsoft Network Spring Street Compare.net (Carpoint & Money Standard & Poor's Compuserve Central) Tegris Concerto Technologies Milwaukee Journal US News & World Report Credit Info Corp Sentinel Yahoo! (Loan Center & Tax Discover Omaha MindSpring Center) Dollar Stretcher Money Magazine Your New House Edmunds Monster Board YUPI Internet Family Money Motley Fool Zack's NandoNet ZDTV.com Financial Product Research Our research staff is made up of 38 people who track weekly comparative information on 46 financial products and services, including checking accounts, consumer loans, lines of credit, mortgages, certificates of deposit, savings accounts, credit cards, money market accounts and online accounts. We cover both personal and small business accounts offered through individual offices and on the internet by banks, thrifts, credit unions, credit card issuers, mortgage bankers and mortgage brokers. Over 150,000 items of data are gathered each week for over 120 markets across the United States and Puerto Rico from over 3,500 institutions. The information obtained includes not only rates and yields but related data such as lock periods, fees, points, and loan sizes for mortgages and grace period, late penalties, cash advance fees, minimum payments and terms and conditions for credit cards. We adhere to a strict methodology in developing our markets and our institutional survey group. The market universe includes the 100 largest U.S. markets, as defined by the U.S. Census Bureau's Metropolitan Statistical Area categories, along with the largest market in each state that does not include one of the largest 100 markets. We provide a comparative analysis of data by market as well as on a national basis. Institutions in the survey group include the largest banks and thrifts within each market area based on total deposits. The number of institutions tracked within a given market is based on product availability and number of institutions in the market area. In each of the largest 50 markets, ten institutions are tracked. In each of the smaller markets, four or more institutions are tracked. The institutions included in the survey group are verified, and adjusted if necessary, on a quarterly basis using FDIC data. Credit unions are not included in the market 32 survey group since product availability is based on membership. The largest 50 U.S. credit unions are tracked as a separate survey group for comparison purposes. All products included in our database have closely defined criteria so that information provided by institutions is truly comparative in nature. Data undergo three levels of quality control prior to being accepted for inclusion in the database. The first level is automatically performed by our editing software, which tracks unusual changes, the second level is visual proofing, and the third level is a dedicated quality control staff. In addition, anonymous shopping is performed on a weekly basis to validate data. Institutions providing invalid data are contacted by our quality control staff to ensure that future information will be accurate. In addition, institutions listed in our tables on Bankrate.com who purchase hyperlinks to their own sites or other advertising must comply with the criteria for product listings and quotes or they are removed. No special offers are listed on our internet sites. All of our new research employees are provided with a four-week program of classroom and on-the-job training to ensure consistency of data-gathering and validation techniques. At the end of each weekly survey, data are archived as part of our 16 year old cumulative historical data file. This file provides a unique resource for our financial analysts and editorial team in developing trend graphs, charts and narrative analysis. Editorial Content In addition to our research department, we maintain an editorial staff of ten senior editors and 14 full-time reporters. We also have relationships with freelance writers. Most of our editorial staff are experienced journalists with newspaper or broadcast outlet experience. Our editorial staff produces original online content such as "A good deal of credit insurance may be bad for consumers" and "Do your homework before trying to buy that foreclosed home." We believe the quality of our original content plays a critical role in attracting visitors to our sites and co-branded partners to Intelligent Life. While the majority of the content within our web sites is original and produced internally, we also include third-party content. This content is acquired under advertising revenue-sharing agreements which allow us to incorporate relevant information on our web site that would otherwise require additional resources for us to produce. An example of this type of arrangement is the incorporation in Bankrate.com of financial calculators created and owned by SmartMoney. Print Publications We continue to sell traditional print publications to absorb part of the cost of creating research and original content. These publications are as follows: Consumer Mortgage Guide. Consumer Mortgage Guide began publication in May 1995 and generates revenue through the sale of mortgage rate listings in major metropolitan newspapers across the United States. We enter into agreements with the newspapers under which the newspapers provide us with print space in which we publish the mortgage rate listings at no charge. In turn, we sell advertising with the listings and split revenue with the newspapers on a percentage basis. Newsletters. We publish three newsletters: 100 Highest Yields and Jumbo Flash Report, which target individual consumers, and Bank Rate Monitor, which targets an institutional audience. These newsletters provide rate information with minimal editorial content. theWhiz.com theWhiz.com provides original content about personal finance that is easy to understand and entertaining. We believe traditional and online personal finance publications and web sites target white males over 40 years old with relatively high incomes, who are interested in investing. theWhiz.com is designed to address the personal finance needs of a younger, more female and more ethnically diverse audience. As with Bankrate.com, 33 theWhiz.com is divided into channels, each of which includes original editorial content. All of theWhiz.com's stories are archived and easily accessible via our archive home page and site map. The following chart illustrates how theWhiz.com is structured. [A screen of theWhiz.com's web site. A banner along with a navigation bar is at the top of the page and a navigation bar is on the left side of the page. Balloons are inserted throughout with text describing what is on the page]. 34 theWhiz.com also has a community section which encourages readers to interact with other visitors, theWhiz.com's staff and financial experts. Our "Talk to theWhiz" forum allows readers to get expert advice on questions like "Can a credit repair agency help me with my student loan debt?" The questions and answers are archived so that new readers can research their interests. If the answer isn't there, readers can fill out ane-mail form and submit their question. Since theWhiz.com publishes content on various topics and is not intended simply to provide objective information, we expect to use theWhiz.com as a platform for electronic commerce. Other Online Publications Consejero.com Consejero.com provides personal finance information in Spanish and serves as a consumer guide to understanding local and international financial issues. Consejero.com features country-specific personal finance content for the United States as well as Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Panama, Peru, Puerto Rico, Spain and Venezuela. Spanish is the second most common language found on the internet today, yet we believe that little useful content on financial topics in Spanish currently exists on the internet. We aim to satisfy the need for such data and capitalize on the anticipated rapid growth of internet use by people who speak Spanish. Consejero.com provides twice-daily news and feature articles written by established journalists working from major cities in Latin America and Spain. The topics are picked from day-to-day issues consumers face in their particular countries. The site also provides general and entertainment news acquired through partnerships with traditional media. We also expect to add the capability to conduct transactions with distribution partners. Consejero.com also includes information provided by Bankrate.com en Espanol, an extension of Bankrate.com. Bankrate.com en Espanol provides the same information and many of the services of Bankrate.com in Spanish but with supplementary articles and tables to facilitate understanding for those who may not be familiar with U.S. financial products and terms yet must maneuver in a mostly English-language financial system. Both Consejero.com and Bankrate.com en Espanol intend to partner with the small but growing number of internet companies that are emerging to serve Spanish-speaking markets in the United States, Latin America and Europe. CPNet.com Through CPNet.com, our online network of college newspaper web sites, we provide online content and advertising management to hundreds of college newspapers across the country. In addition to creating advertising relationships that will allow us to offer an integrated outlet for advertisers seeking to reach the college market, this gives us the ability to develop user relationships that allow us to cross-promote our publications to young consumers. We believe that college students use the internet more than many other segments of the population. We believe that this network will be highly attractive to advertisers since very few online publications offer a mechanism for national advertisements to reach college students with one advertisement purchase. CPNet aims to fulfill this market need. Garzarelli.com and Possible Future Publications We intend to use our online expertise and relationships to launch new online publications. In October 1998, we launched a new electronic subscription site for Wall Street investment advisor Elaine Garzarelli called Garzarelli.com. We are responsible for the site's design, electronic subscription fulfillment, partner linking, site management and advertising sales. Ms. Garzarelli owns the URL name and the rights to her content. In addition, in March 1999 we entered into a letter of intent with MECA Software, LLC to create a new personal finance destination site and transaction platform using the name "Managing Your Money" and the internet address MYM.com. 35 Consumer Marketing Our expenditures on marketing and promotion to date have been limited. We have principally relied on our co-branded distribution network to increase traffic to our web sites. This approach has been supplemented with public relations activities and limited direct-response expenditures. In addition, Intelligent Life's history of providing editorial content to newspapers and broadcasters has earned it a high level of awareness among journalists. As a result, Bankrate.com is often cited as an authority on banking and credit products in an editorial context. We intend to use part of the proceeds of this offering to further build consumer brand recognition of our web sites. To date, our direct-response marketing has consisted of placing banner advertising on various web sites either by purchasing or bartering advertising impressions. Our strategy is to purchase advertising at either a fixed cost per clickthrough or at a low CPM. We believe that the advertising proceeds from one of our visitors generally allow us to recover much of the per visitor cost of placing our advertising. If substantially all of this cost can be recovered on an initial visit, we may build a substantial base of repeat users at a low cost. We anticipate the majority of our future advertising and promotional expenditures will be allocated to web-based advertising. Advertising Sales Our advertising sales staff consists of 14 salespeople and support staff. Five salespersons are located in our North Palm Beach corporate headquarters, with the remainder in our satellite offices in New York, Chicago and Los Angeles. Each salesperson is responsible for a designated geographic area covering the Southeast, Mid-Atlantic, New England, Great Lakes, Midwest, Great Plains, Northwest or Southwest regions of the United States. Salespeople sell advertising related to all of our publications. We believe our sales force is highly effective. In recent months, we have been able to sell up to approximately 75% of our advertising inventory. Our salespeople present advertising solutions to potential advertisers using inventory created by our own web sites and co-branded web sites. We believe this combined network of sites enhances value for advertisers and direct marketers by (1) alleviating the need to purchase a series of advertising campaigns from numerous web publishers, (2) providing advertisers and direct marketers with access to a wide variety of business and personal finance online content, and (3) providing targeted access to internet users with desirable demographics. Advertisers and direct marketers can enhance the effectiveness of their campaigns by customizing advertising delivery on our networks within a particular content channel or across an entire network. Advertising Alternatives Our advertisers can target prospective customers using three different approaches: . targeting specific geographic and product areas, for example, mortgage rates in Atlanta; . targeting specific product channels, for example, all borrowers interested in the home equity channel; or . general rotation throughout a particular site, such as Bankrate.com. Our most common graphical advertisement sizes are banners (486 x 60 pixels) and badges (125 x 125 pixels). Banners and badges are offered for general rotation or specific sites. List prices for banner and badge advertisements with premium placement may be as high as $90 CPM. We also sell posters, which are oversize advertisements that contain more information than traditional advertisements. We position posters on certain pages so that they dominate the page. List prices average $75 36 CPM. Advertisers may also purchase sponsorship positions on the Bankrate.com home page and the main page for each product channel. The cost of the sponsorship is based on banner rates for impressions received. Advertisers can also sponsor an entire channel. In addition, we offer a reference bar above all rate tables. A reference bar is an advertising feature that contains tab references for consumers on such topics as insurance, credit reports, credit problems and moving rates. Users who click on the tabs are taken to an advertiser's web site for answers to their particular questions or needs. The cost of the advertisement is based on banner rates for number of impressions. Providing effective tools for managing advertising campaigns is essential to maintaining advertising relationships. We use a state-of-the-art program under license that allows our advertisers to monitor their spending on our web sites in real-time for impressions received and clickthrough ratios generated. Hyperlinks Financial institutions that are listed in our rate tables have the opportunity to hyperlink their listings. By clicking on the hyperlink, users are taken to the institution's web site. A substantial benefit to advertisers with the hyperlink rate listing is that the hyperlinks are in fixed placement on the rate pages and are shown every time a user accesses a page. In contrast, banner advertisements are rotated based on the number of impressions purchased. Hyperlink fees are sold for three-month periods. The number of hyperlinked rate listings that can be added to a rate page is limited only by the number of institutions listed, while banner positions are limited by space available. Listed rates for hyperlinks are $45 CPM. Rate Alert E-Mail Sponsorships We issue weekly updates on mortgage rates via e-mail to customers who have requested this free service. Rate alerts are issued for credit card and savings account updates on a less-frequent basis. Advertisers can sponsor the e-mails with text listings that are hyperlinked to their web site. Banner advertisements to be included with each e-mail are under development. The cost for sponsoring a rate alert is $0.25 per subscriber. Chat Room Sponsorships We offer advertisers chat rooms in Bankrate.com and theWhiz.com in which they may promote their spokespeople or products and acquire valuable real-time feedback from consumers. In these chat rooms, a moderator from the theWhiz.com's staff screens questions from visitors. The advertiser or host then answers questions and receives "virtual focus group" feedback from users. We generally charge advertisers $6,000 per session. Advertisers We market to local advertisers targeting a specific audience in a city or state and also to national advertisers targeting the entire country. No advertiser accounts for more than 10% of our revenues. As of January 31, 1999, we had approximately 192 advertisers. A representative sample of our national advertisers includes: Aames Home Loans General Motors American Express Household Finance American Home Loans Intuit, Inc. Auto-by-Tel M&I Mortgage Corp. Barnes and Noble Mackinac Savings Capitol One Microsoft Countrywide Home Loans Mortgage Expo Crestar Mortgage Corp. NationsBank Cybermeals NetBank Downey Savings NextCard First Mortgage Network Pacific Shore Funding First Union Providian Financial First USA Visa Superior Bank Four Web sites United Lending Group
37 Competition Intelligent Life competes for advertising revenues across the broad category of personal finance information provided in traditional media such as newspapers, magazines, radio and television and in the developing market for online financial publications. There are many competitors that have substantially greater resources than Intelligent Life. Our online competition includes the following: . personal finance sections of general interest sites such as Yahoo! and America Online; . personal finance destination sites such as Quicken.com, MoneyCentral and Money.com; and . e-commerce sites that provide bank and credit product information such as e-Loan and GetSmart. Competition in the online segment is generally directed at growing users and revenue using marketing and promotion to increase traffic to our web sites. We believe that original content and objective product information differentiate us from our competitors. Operations Our principal office in North Palm Beach, Florida is where our proprietary web sites are hosted and all of our network operations are controlled. Internet access is maintained through multiple T-1 connections with Cable & Wireless PLC. The computer equipment used to operate our web sites is powered by uninterruptible power supply units and a generator. Proprietary Rights Our proprietary intellectual property consists of our unique research and editorial content. We rely primarily on a combination of copyrights, trademarks, trade secret laws, our user policy and restrictions on disclosure to protect this content. Employees As of March 10, 1999, we had 120 full-time employees, of which 35 were in product and content development, 25 in sales and marketing, 38 in editorial and 22 in administration. We have never had a work stoppage and none of our employees are represented under collective bargaining agreements. We consider our employee relations to be good. Our employees are legally employed by Vincam Human Resources, Inc., and work for us under an employee leasing arrangement. See "Management--Employee Leasing" on page 42. Properties Our principal administrative, sales, marketing and research facilities are located on approximately 14,000 square feet of leased office space in North Palm Beach, Florida. We believe that our facilities are adequate to meet our needs for the foreseeable future. Legal Proceedings Intelligent Life is not a party to any material legal proceeding. 38 MANAGEMENT Directors and Executive Officers Our directors and executive officers and their ages as of the date of this prospectus are as follows:
Name Age Position ---- --- -------- Peter C. Morse(1)....... 52 Chairman of the Board William P. Anderson, III.................... 50 President, Chief Executive Officer and Director Sara Campbell Taylor.... 41 Senior Vice President--Sales and Syndication Peter W. Minford........ 41 Senior Vice President--Administration G. Cotter Cunningham.... 36 Senior Vice President--Marketing Bruns H. Grayson(2)..... 51 Director Randall E. Poliner(1)(2).......... 43 Director
-------- (1) Member of the Audit Committee. (2) Member of the Compensation Committee. Peter C. Morse has served as Chairman of the Board of Directors since July 1993. Since 1982, Mr. Morse has served as President of Morse Partners, Ltd., a private equity firm that acquires operating companies and provides expansion capital. From 1986 to 1990, Mr. Morse was Chairman of FAO Schwarz, the national chain of children's gifts stores. Mr. Morse has also held senior positions at Janney Montgomery Scott, Inc., an investment banking firm. Mr. Morse holds a B.S.B.A. from Georgetown University and an M.B.A. from Columbia University. William P. Anderson, III has served as President and Chief Executive Officer of Intelligent Life and Director since July 1997. From its creation to June 1997, Mr. Anderson served as President and Chief Executive Officer of Block Financial Corporation, a subsidiary of H&R Block, Inc. engaged in consumer lending, software and online financial services delivery. From August 1992 to September 1995, Mr. Anderson served as Chief Financial Officer of H&R Block, Inc. From July 1973 to November 1991, Mr. Anderson worked at KPMG Peat Marwick in various capacities including serving as partner-in-charge of the national corporate finance practice within the management consulting department. Mr. Anderson is a member of the Board of Directors of SecureTax.com, Inc., a privately held company. Mr. Anderson holds a Bachelor of Mechanical Engineering from Auburn University and an M.B.A. from Emory University. Sara Campbell Taylor has served as Intelligent Life's Senior Vice President--Sales and Syndication, responsible for advertising sales and distribution arrangements, since May 1996. From January 1993 to June 1996, Ms. Taylor served as Vice President--Asset Securitization for ABN Amro Securities, Inc., an investment banking firm. Ms. Taylor specialized in mergers and acquisitions, structured finance and asset valuation. Ms. Campbell holds a B.S. in Finance from Pennsylvania State University. Peter W. Minford has served as Intelligent Life's Senior Vice President-- Administration since February 1998. From August 1992 to February 1998, Mr. Minford served as Senior Vice President-Administration at The Bank of Tampa. Mr. Minford has held various senior management positions in commercial banking for over 19 years including roles in credit administration, commercial lending, general administration and operations. Mr. Minford holds a B.S. in Finance from Florida State University and an M.B.A. from the University of South Florida. G. Cotter Cunningham has served as Senior Vice President--Marketing since February 1999. From August 1997 to January 1999, Mr. Cunningham was Vice President of Valentine McCormick Ligibel, Inc., an advertising agency specializing in new media. From August 1992 to July 1997, Mr. Cunningham was Vice President of Block Financial Corporation, where he created, launched and directed the CompuServe Visa and WebCare Visa credit card programs. Mr. Cunningham holds a B.S. in Economics from the University of Memphis and an M.B.A. from Vanderbilt University's Owen Graduate School of Management. 39 Bruns H. Grayson has served as director of Intelligent Life since June 1997. Since 1982, Mr. Grayson has been the managing partner of ABS Ventures, a series of venture capital funds affiliated with BT Alex. Brown Incorporated. Mr. Grayson is also a member of the Board of Directors of Anadigics, Inc., Dialog Software, Inc., Formation Systems, Inc., i-Logix, Inc., Software Corporation of America and Telogy Networks, Inc. Mr. Grayson holds a B.A. from Harvard College, an M.A. from Oxford University and a J.D. from the University of Virginia Law School. Mr. Grayson was a Rhodes Scholar in 1974. Randall E. Poliner has served as a director of Intelligent Life since November 1998. Since April 1993, Mr. Poliner has served as President of Antares Capital Corporation, a private venture capital firm investing equity capital in developmental and expansion stage companies. Mr. Poliner holds a Bachelor of Electrical Engineering from the Georgia Institute of Technology, a M.S. from Carnegie-Mellon University and an M.B.A. from Harvard Business School. Terms of Directors Concurrently with the effective date of this offering, the Board of Directors will be divided into three classes, with members serving for staggered three-year terms. The Board will be comprised of two Class I directors, one Class II director and one Class III director. At each annual meeting of shareholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the initial Class I directors, Class II directors and Class III directors will expire upon the election and qualification of successor directors at the 2000, 2001 and 2002 annual meetings of shareholders, respectively. There are no family relationships between any of the directors or executive officers of Intelligent Life. Committees of the Board of Directors The members of the Audit Committee are Peter C. Morse (Chairman) and Randall E. Poliner. The Audit Committee reviews the scope and timing of our audit services and any other services our independent auditors are asked to perform, the auditor's report on our financial statements following completion of their audit and their policies and procedures with respect to internal accounting and financial control. In addition, the Audit Committee makes annual recommendations to the Board of Directors for the appointment of independent auditors for the following year. The members of the Compensation Committee are Bruns Grayson (Chairman) and Randall E. Poliner. The Compensation Committee reviews and evaluates the compensation and benefits of all our officers, reviews general policy matters relating to compensation and benefits of employees of Intelligent Life and makes recommendations concerning these matters to the Board of Directors. The Compensation Committee also administers our stock option plans. Compensation of Directors Neither employee nor non-employee directors receive compensation for services performed in their capacity as directors. We reimburse each director for reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors and any of its committees. Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee is or will be an executive officer of Intelligent Life. 40 Executive Compensation The following table sets forth the total compensation for 1998 for our President and Chief Executive Officer. No other executive officer of Intelligent Life received total annual salary and bonuses for the fiscal year ended June 30, 1998 in excess of $100,000. Summary Compensation Table
Long-Term Annual Compensation Compensation(1) Awards --------------------------------- Restricted Stock All Other Name and Principal Position Salary Bonus Awards Compensation - --------------------------- --------------------------------- ------------ William P. Anderson, III........ $ 275,000 $ 0 $354,253(2) $30,852(3) President and Chief Executive Officer
- -------- (1) In accordance with the rules of the Securities and Exchange Commission, the compensation set forth in the table does not include compensation in the form of perquisites or other personal benefits because such perquisites and other personal benefits constituted less than the lesser of $50,000 or 10% of the total annual salary and bonus for the named Executive Officer for such year. (2) Consists of a restricted stock award of 454,170 shares of common stock granted in exchange for a promissory note in the amount of $236,168. No such shares were vested as of June 30, 1998. As of March 10, 1999, 189,238 shares had vested and the remaining shares had been reacquired by Intelligent Life. See "Certain Transactions" on page 43. (3) Consists of a one time payment for relocation expenses. Stock Option and Other Compensation Plans 1997 Equity Compensation Plan. Our 1997 Equity Compensation Plan (the "1997 Plan") became effective on July 30, 1997. The aggregate number of shares reserved for issuance under the Equity Compensation Plan is 1,500,000 shares. The purpose of the Equity Compensation Plan is to provide incentives for key employees, officers, consultants and directors to promote the success of Intelligent Life, thereby benefiting shareholders and aligning the economic interests of the participants with those of the shareholders. Awards granted under the Equity Compensation Plan may be restricted stock, options intended to qualify as "incentive stock options" or nonqualified stock options. As of March 10, 1999, options to purchase 449,000 shares of common stock were outstanding under the 1997 Plan at a weighted average exercise price of $2.21 per share. No shares of common stock had been issued upon exercise of options granted under the 1997 Plan. 1999 Equity Compensation Plan. Our 1999 Equity Compensation Plan (the "1999 Plan") became effective on March 10, 1999. The aggregate number of shares reserved for issuance under the Equity Compensation Plan is 100,000 shares. The purpose of the 1999 Plan is to provide incentives for key employees, officers, consultants and directors to promote the success of Intelligent Life, thereby benefiting shareholders and aligning the economic interests of the participants with those of the shareholders. Awards granted under the Equity Compensation Plan may be restricted stock, options intended to qualify as "incentive stock options" or nonqualified stock options. As of March 10, 1999, options to purchase 358,500 shares of common stock were outstanding under the 1999 Plan at a weighted average exercise price of $2.97 per share. No shares of common stock had been issued upon exercise of options granted under the 1999 Plan. Incentive Compensation Plan. We have adopted an incentive compensation plan for our 1999 fiscal year. The plan is administered by the Compensation Committee of the Board of Directors, which determines eligible 41 participants, performance goals, measurement criteria, performance ratings and amount and timing of payments. Awards under the plan are determined annually on the basis of our performance over the year in relation to certain pre- determined financial and operating goals. All awards are paid in full, in cash, following the year of performance. Awards are granted under the plan at the sole discretion of the Compensation Committee. Employee Leasing We lease all of our employees from Vincam Human Resources, Inc. The terms under which we lease our employees are set forth in an agreement between Vincam and us dated February 25, 1999. Our agreement with Vincam is a co-employment arrangement, which allows Vincam to assume some of our rights and responsibilities with respect to our employees. All of our employees have submitted employment applications to Vincam and have been approved for hire by Vincam but assigned to our worksite to perform services under our direction and control. We transfer to Vincam's payroll all employees identified to work at our workplace provided each such employee accepts employment offered by Vincam. Vincam maintains workers' compensation coverage and group health coverage for each employee. Vincam assumes our rights as to the employees, including the right to hire, fire, discipline and pay wages. We do, however, retain the right to reject the assignment of any worker to our worksite by Vincam. Further, we retain such discretion, supervision and control over the employees as is necessary to conduct our business on a day-to-day basis. The agreement has a one-year term. During this time, either party may terminate the agreement by giving thirty days' written notice, unless terminated for cause, which includes non-payment when due of any amount payable under the agreement or breach of a material term. After the first year, the agreement renews automatically on the date the agreement was originally entered into for an additional year. Employment Agreements Mr. Anderson has entered into an employment agreement with Intelligent Life effective as of March 10, 1999. Pursuant to this agreement, Mr. Anderson is entitled to receive an annual base salary of $275,000 and is entitled to a bonus as determined by the Board of Directors. In addition, Mr. Anderson is eligible to participate in Intelligent Life's Management Stock Incentive Program. Under the terms of the agreement, Mr. Anderson has assigned to Intelligent Life all of his copyrights, trade secrets and patent rights that relate to the business of Intelligent Life. Additionally, Mr. Anderson has agreed not to compete with Intelligent Life during the term of his employment and for a period of two years after termination of his employment. Mr. Anderson has also agreed not to solicit customers and employees of Intelligent Life for a period of two years following termination of his employment with Intelligent Life. In connection with any termination of Mr. Anderson's employment, other than voluntary termination, Mr. Anderson will be entitled to receive a severance payment equal to the amount of his base salary and benefits for a 12- month period. Limitation of Liability and Indemnification of Officers and Directors Our Articles of Incorporation provide that the liability of our directors for monetary damages is eliminated to the fullest extent permissible under Florida law and that we may indemnify our officers, employees and agents to the fullest extent permitted under Florida law. Our Bylaws provide that we must indemnify our directors against all liabilities to the fullest extent permitted under Florida law and that we must advance all reasonable expenses incurred in a proceeding where the director was either a party or a witness because he or she was a director. Intelligent Life maintains a directors' and officers' liability insurance policy in the amount of $1,000,000 per occurrence. 42 CERTAIN TRANSACTIONS We entered into three lease agreements with Bombay Holdings, Inc. for our principal corporate offices and facilities. Bombay is wholly owned by Peter C. Morse, our Chairman of the Board. The leases include renewal options and require Intelligent Life to pay a percentage of the common maintenance charges. Rent expense paid to Bombay was $109,872 for the six months ended December 31, 1998 and $164,552, $85,591 and $83,858 for the fiscal years ended 1998, 1997 and 1996, respectively. We believe that the terms of the lease agreements are no less favorable to us than those that could have been obtained from unaffiliated third parties. Mr. Morse made loans to Intelligent Life during the years ended June 30, 1997 and 1998 in the amounts of $687,000 and $200,000, respectively. Interest rates for the loans were between 6.5% and 7%. The loans have subsequently been contributed to capital. As part of a compensation package, we sold 454,170 shares of common stock to William P. Anderson, III, our President and Chief Executive Officer, effective when Mr. Anderson was hired in July 1997. In exchange for such shares, Mr. Anderson executed a promissory note to us for $236,168, which was payable over a ten-year term and bore interest at 6.42%. These shares were subject to vesting provisions, which had lapsed as to 189,238 shares as of March 10, 1999. On that date, Intelligent Life reacquired 264,932 shares of unvested common stock from Mr. Anderson in exchange for cancellation of $137,765 of Mr. Anderson's promissory note. The remaining amount of the note, in the amount of $98,403, was forgiven. On March 9, 1999, Intelligent Life issued Mr. Anderson options to acquire 358,500 shares of common stock at an exercise price of $2.97 per share. The options are intended to qualify as incentive stock options. The options vest in equal monthly installments over a three-year period. On March 9, 1999, Intelligent Life issued a promissory note to Antares Capital Fund II Limited Partnership. Randall E. Poliner, a director of Intelligent Life, is President of the general partner of Antares. Pursuant to the note, Antares loaned Intelligent Life $1,000,000 at an interest rate of 8%, payable on April 9, 1999. The amount borrowed under the note is being used for general corporate purposes. If Intelligent Life does not repay the note by April 9, 1999, it will automatically be converted into 6,738 shares of Series B Preferred Stock at a conversion price of $14.84 per share. Our Board of Directors has adopted a resolution whereby all future transactions with related parties, including any loans from us to our officers, directors, principal stockholders or affiliates, must be approved by a majority of the Board of Directors, including a majority of the independent and disinterested members of the Board of Directors or a majority of the disinterested stockholders and must be on terms no less favorable to us than could be obtained from unaffiliated third parties. 43 PRINCIPAL SHAREHOLDERS The following table sets forth information with respect to the beneficial ownership of our common stock as of the date of this prospectus and as adjusted to reflect the sale by Intelligent Life of the common stock being offered hereby, relating to: (1) each of our directors; (2) our President and Chief Executive Officer; (3) all those known by us to be beneficial owners of more than five percent of the outstanding shares of common stock; and (4) all of our executive officers and directors as a group.
Shares Beneficially Owned Shares Beneficially Owned Prior to Offering (1) After Offering (1) ----------------------------- ----------------------------- Shares Percent Shares Percent --------------- ------------- --------------- ------------- Peter C. Morse.......... 5,514,800 55.5% 5,514,800 % 200 Four Falls Corporate Center, Suite 205 West Conshohocken, Pennsylvania 19428 Robert H. Lessin(2)..... 1,276,900 12.8 1,276,900 826 Broadway New York, New York 10003 Bruns H. Grayson(3)..... 1,264,950 12.7 1,264,950 1 South Street, Suite 2150 Baltimore, Maryland 21262 William P. Anderson, 209,154 2.1 209,154 III(4)................. 11811 U.S. Highway One, Suite 101 North Palm Beach, Florida 33408 Randall E. Poliner(5)... 776,350 7.8 776,350 7900 Miami Lakes Drive West Miami Lakes, Florida 33016 All directors and executive officers as a group (seven persons)(4)..... 9,092,154 91.3 9,092,154
- -------- (1) For purposes of calculating the percentage beneficially owned, the number of shares of common stock deemed outstanding prior to the offering includes (1) 9,938,688 shares outstanding as of March 10, 1999 and (2) shares issuable upon the exercise of options which may be exercised within 60 days following March 10, 1999 ("Presently Exercisable Options"). The number of shares of common stock deemed outstanding after this offering includes the additional shares that are being offered for sale in this offering. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission that deem shares to be beneficially owned by any person or group that has or shares voting and investment power with respect to such shares. Presently Exercisable Options are deemed to be outstanding and to be beneficially owned by the person or group holding such options for the purpose of computing the percentage ownership of such person or group but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group. (2) Includes shares owned by BRM Holdings LLC. Mr. Lessin is a control person of BRM Holdings LLC and is the beneficial owner of such shares. (3) Consists of shares owned by ABS Ventures IV, L.P. and ABX Fund, L.P. Mr. Grayson is a managing member of Calvert Capital II L.L.C., the general partner of such limited partnerships. Mr. Grayson disclaims beneficial ownership of such shares. (4) Includes 19,916 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of March 10, 1999. (5) Consists of shares owned by Antares Capital Fund II Limited Partnership and ACF II Side Fund Limited Partnership. Mr. Poliner is President of Antares Capital Partners II, Inc., the general partner of such limited partnerships, and is a beneficial owner of such shares. 44 DESCRIPTION OF CAPITAL STOCK General Our authorized capital stock consists of (1) 10,000,000 shares of common stock, $.01 par value per share, and (2) 10,000,000 shares of preferred stock, $.01 par value per share. As of March 10, 1999, we had issued and outstanding 9,938,688 shares of common stock (assuming the conversion of all outstanding shares of preferred stock into shares of common stock). As of March 10, 1999, the outstanding shares of our common stock were held by four shareholders and shares of our Series A and Series B Preferred Stock were held by 15 shareholders. The following description of our capital stock is a summary and is qualified in its entirety by the provisions of our Articles of Incorporation and Bylaws, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part. Common Stock Holders of shares of common stock are entitled to one vote per share for the election of directors and all matters to be submitted to a vote of Intelligent Life's shareholders. Subject to the rights of any holders of preferred stock which may be issued in the future, the holders of shares of common stock are entitled to share ratably in such dividends as may be declared by the Board of Directors and paid by Intelligent Life out of funds legally available therefor. In the event of dissolution, liquidation or winding up of Intelligent Life, holders of shares of common stock are entitled to share ratably in all assets remaining after payment of all liabilities and liquidation preferences, if any. Holders of shares of common stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are, and the shares of common stock to be issued by Intelligent Life in connection with this offering will be, duly authorized, validly issued, fully paid and nonassessable. Preferred Stock The Board of Directors is authorized, subject to certain limitations prescribed by law, without further shareholder approval, to issue from time to time up to an aggregate of 10,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions on the shares of each such series thereof, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of such series. The issuance of preferred stock may have the effect of delaying or preventing a change of control of Intelligent Life. Certain Articles of Incorporation and Bylaw Provisions Intelligent Life's Articles of Incorporation provide that special meetings of shareholders may be called only by: (1) the Board of Directors; (2) the Chairman of the Board of Directors (if one is so appointed); (3) the Chief Executive Officer; (4) the President; or (5) holders of not less than 35% of all votes entitled to be cast on any issue proposed to be considered at the proposed special meeting. The Articles of Incorporation and Bylaws also provide for a classified Board of Directors and permit removal of directors only for cause. See "Management--Directors and Executive Officers" on page 39. Intelligent Life's Bylaws establish an advance notice procedure for the nomination, other than by or at the direction of the Board of Directors or a committee thereof, of candidates for election as directors, as well as for other shareholder proposals to be considered at shareholders' meetings. Notice of shareholder proposals and director nominations must be given in writing to the secretary of Intelligent Life before the meeting at which such matters are to be acted upon or directors are to be elected. Such notice must be received at the principal executive offices of Intelligent Life, with respect to shareholder proposals and elections to be held at the annual meeting, not less than 60 days before the date of the meeting at which the directors are to be elected; however, if less than 70 days' notice or prior public disclosure of the date of the scheduled meeting is given or made, 45 notice by the shareholder, to be timely, must be delivered or received not later than the close of business on the tenth day following the earlier of the day on which notice of the date of the meeting is mailed to shareholders or public disclosure of the date of such meeting is made. Notice to Intelligent Life from a shareholder who intends to present a proposal or to nominate a person for election as a director at a shareholders' meeting must contain certain information about the shareholder giving such notice and, in the case of director nominations, all information that would be required to be included in a proxy statement soliciting proxies for the election of the proposed nominee (including such person's written consent to serve as a director if so elected). If the presiding officer at the meeting determines that a shareholder's proposal or nomination is not made in accordance with the procedures set forth in the Articles of Incorporation, such proposal or nomination, at the direction of such presiding officer, may be disregarded. The notice requirement for shareholder proposals contained in the Articles of Incorporation does not restrict a shareholder's right to include proposals in Intelligent Life's annual proxy materials pursuant to rules promulgated under the Exchange Act. The Articles of Incorporation provide that directors may be removed only for cause and only by the affirmative vote, at any annual or special meeting of the shareholders, of not less than 66 2/3% of the total number of votes of the then-outstanding shares of capital stock of Intelligent Life that are entitled to vote generally in the election of directors, voting together as a single class, but only if notice of such proposed removal was contained in the notice of such meeting. "For cause" shall mean (1) misconduct as a director of Intelligent Life or any subsidiary of Intelligent Life which involves dishonesty with respect to a material corporate activity or material corporate assets, or (2) conviction of an offense punishable by one or more years of imprisonment (other than minor regulatory infractions and traffic violations which do not materially and adversely affect Intelligent Life). The Board of Directors shall have the power to increase or decrease the authorized number of directors, with or without shareholder approval. Newly created directorships resulting from any increase in the number of directors or any vacancy of the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors then in office or, if not filled by the directors, by the shareholders. The Articles of Incorporation provide that in discharging the duties of their respective positions and in determining what is believed to be in the best interests of Intelligent Life, the Board of Directors, any committee of the Board of Directors and any individual director, in addition to considering the effects of any action on Intelligent Life or its shareholders, may, to the extent permitted by applicable Florida law, in his or her or their sole discretion, consider the interests of the employees, customers, suppliers and creditors of Intelligent Life and its subsidiaries, the communities in which offices or other establishments of Intelligent Life and its subsidiaries are located and all other factors such director(s) may consider pertinent. The preceding provisions of the Articles of Incorporation may be changed only upon the affirmative vote of holders of at least 66 2/3% of the total number of the then-outstanding shares of capital stock of Intelligent Life that are entitled to vote generally in the election of directors, voting together as a single class. The provisions of the Articles of Incorporation and Bylaws summarized in the preceding paragraphs and the provisions of the Florida Business Corporations Act ("FBCA") described under "Certain Provisions of Florida Law" contain provisions that may have the effect of delaying or preventing a non-negotiated merger or other business combination involving Intelligent Life. These provisions are intended to encourage any person interested in acquiring Intelligent Life to negotiate with and obtain the approval of the Board of Directors in connection with the transaction. Certain of these provisions may, however, discourage a future acquisition of Intelligent Life not approved by the board of directors in which shareholders might receive a high value for their shares or that a substantial number or even a majority of Intelligent Life's shareholders might believe to be in their best interest. As a result, shareholders who desire to participate in such a transaction may not have the opportunity to do so. Such provisions could also discourage bids for the common stock at a premium, as well as create a depressive effect on the market price of the common stock. 46 Certain Provisions of Florida Law Intelligent Life is subject to several anti-takeover provisions under Florida law that apply to a public corporation organized under Florida law, unless the corporation has elected to opt out of those provisions in its articles of incorporation or bylaws. Intelligent Life has not elected to opt out of those provisions. The FBCA prohibits the voting of shares in a publicly- held Florida corporation that are acquired in a "control share acquisition" unless the holders of a majority of the corporation's voting shares (exclusive of shares held by officers of the corporation, inside directors or the acquiring party) approve the granting of voting rights as to the shares acquired in the control share acquisition. A "control share acquisition" is defined as an acquisition that immediately thereafter entitles the acquiring party to 20% or more of the total voting power in an election of directors. The FBCA also contains an "affiliated transaction" provision that prohibits a publicly-held Florida corporation from engaging in a broad range of business combinations or other extraordinary corporate transactions with an "interested shareholder" unless: (1) the transaction is approved by a majority of disinterested directors before the person becomes an interested shareholder; (2) the interested shareholder has owned at least 80% of the corporation's outstanding voting shares for at least five years; or (3) the transaction is approved by the holders of two-thirds of the corporation's voting shares other than those owned by the interested shareholder. An interested shareholder is defined as a person who together with affiliates and associates beneficially owns more than 10% of the corporation's outstanding voting shares. Registration Rights The holders of 5,696,250 shares of common stock are entitled to require us to prepare and file a registration statement to register such shares under the Securities Act. We must prepare and file such a registration statement upon the request of holders of the number of such shares having an anticipated aggregate offering price of at least $15,000,000. Such request can be made at any time following 180 days after the date of this prospectus. These holders are entitled to demand such registration one time only. Such holders also have certain Form S-3 demand registration rights. In addition, the holders of such 5,696,250 shares of common stock and the holder of an additional 189,238 shares of common stock are entitled to have such shares included in a registration statement filed by Intelligent Life, subject to certain restrictions, for an unlimited time. We are required to bear the expense of such registrations except for any underwriting discounts and commissions, which will be borne by the participating shareholders in proportion to the number of shares sold. Listing Application has been made to include our common stock on the Nasdaq National Market under the trading symbol "ILIF." Transfer Agent and Registrar The transfer agent for our common stock is SunTrust Bank, Inc. 47 SHARES ELIGIBLE FOR FUTURE SALE Sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices of our common stock. Furthermore, since a significant number of our shares will not be available for sale following this offering because of certain contractual and legal restrictions on resale described below, sales of substantial amounts of common stock in the public market after these restrictions lapse could adversely affect the prevailing market price and our ability to raise equity capital in the future. Upon completion of this offering, we will have outstanding an aggregate of shares of our common stock, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options. Of these shares, the shares sold in this offering will be freely tradeable without restriction or registration under the Securities Act, unless such shares are purchased by "affiliates" as that term is defined in Rule 144 under the Securities Act ("Affiliates"). The remaining 9,938,688 shares of common stock are held by existing stockholders and 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, including those under Rule 144 promulgated under the Securities Act, Rule 144 is summarized below. As a result of the contractual restrictions described below and the provisions of Rule 144, the restricted securities could be available for sale in the public market as follows: . 576,000 shares may be eligible for sale in accordance with the requirements of Rule 144 beginning 90 days after the date of this prospectus; . 1,215,650 shares may be eligible for sale in accordance with the requirements of Rule 144 upon expiration of their respective one-year holding periods; and . 8,147,038 shares may be eligible for sale in accordance with the requirements of Rule 144 upon expiration of lock-up agreements, as described below. Lock-Up Agreements. All of our officers and directors and certain of our stockholders have signed lock-up agreements under which they agreed not to transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, for a period of 180 days after the date of this prospectus. Transfers or dispositions can be made sooner with the prior written consent of ING Baring Furman Selz LLC. Rule 144. In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of: . 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or . the average weekly trading volume of the common stock on the Nasdaq National Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such 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 other than an Affiliate, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately upon the completion of this offering. 48 Rule 701. In general, under Rule 701 of the Securities Act as currently in effect, any of our employees, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement is eligible to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144. Registration Rights. Upon completion of this offering, the holders of 5,885,488 shares of our common stock, or their transferees, will be entitled to certain rights with respect to the registration of such shares under the Securities Act. See "Description of Capital Stock--Registration Rights" on page 47. After such a registration, these shares become freely tradeable without restriction under the Securities Act. Stock Options. Immediately after this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering 1,500,000 shares of common stock reserved for issuance under our Equity Compensation Plan. As of March 10, 1999, options to purchase 807,500 shares of common stock were issued and outstanding. Upon the expiration of the lock-up agreements describe above, at least 39,135 shares of common stock are expected to be subject to vested options (based on options outstanding as of March 10, 1999). Such registration statement is expected to be filed and become effective as soon as practicable after the effective date of this offering. Accordingly, shares registered under such 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. 49 UNDERWRITING Subject to the terms and conditions of an underwriting agreement, dated , 1999, the underwriters named below, who are represented by ING Baring Furman Selz LLC and , have severally agreed to purchase from Intelligent Life the number of shares of common stock set forth opposite their names below.
Number Underwriters of Shares ------------ --------- ING Baring Furman Selz LLC....................................... ---- Total.......................................................... ====
The underwriting agreement provides that the obligations of the several underwriters to purchase and accept delivery of the shares of common stock offered hereby are subject to approval by their counsel of certain legal matters and to certain other conditions. The underwriters are obligated to purchase and accept delivery of all the shares of common stock (other than those shares covered by the over-allotment option described below) if any are purchased. The underwriters propose initially to offer the shares of common stock in part directly to the public at the initial public offering price set forth on the cover page of this prospectus and in part to certain dealers (including the underwriters) at such price less a concession not in excess of $ per share. The underwriters may allow, and such dealers may re-allow, to certain other dealers, a concession not in excess of $ per share. The following table shows the underwriting discounts and commissions to be paid to the underwriters by us in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares of common stock.
No Exercise Full Exercise ----------- ------------- Per share........................................ $ $ Total............................................ $ $
Other expenses of this offering (including the registration fees and the fees and expenses of the financial printer, counsel and accountants) payable by us are expected to be approximately $ . We have granted to the underwriters an option, exercisable within 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of additional shares of common stock at the public offering price less the underwriting discounts and commissions. The underwriters may exercise such option solely to cover over-allotments, if any, made in connection with this offering. To the extent that the underwriters exercise such option, each underwriter will become obligated, subject to certain conditions, to purchase its pro rata portion of such additional shares based on such underwriter's percentage underwriting commitment as indicated in the table above. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriters may be required to make in respect of any of those liabilities. Intelligent Life, along with our executive officers and directors and certain of our existing stockholders, has agreed not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, 50 directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock or enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock for a period of 180 days from the date of this prospectus without the prior written consent of ING Baring Furman Selz LLC. Such consent may be given at any time without public notice. In addition, during such period, we have also agreed not to file any registration statement with respect to, and each of our executive officers, directors and all of our stockholders that hold such rights have agreed not to make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock without the prior written consent of ING Baring Furman Selz LLC. No action has been taken by us or the underwriters that would permit a public offering of the shares of common stock offered hereby in any jurisdiction other than the United States where action for that purpose is required. The shares of common stock offered hereby may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such shares of common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of such jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about, and to observe, any restrictions relating to the offering of the common stock and the distribution of this prospectus. This prospectus is not an offer to sell or a solicitation of an offer to buy any shares of common stock offered hereby in any jurisdiction in which such an offer or solicitation is unlawful. ING Baring Furman Selz LLC has advised Intelligent Life that the underwriters do not intend to confirm sales to any account over which they exercise discretionary authority. The underwriters and dealers may engage in passive market-making transactions in the common stock in accordance with Rule 103 under Regulation M promulgated by the SEC. In general, a passive market-maker may not bid for or purchase shares of common stock at a price that exceeds the highest independent bid. In addition, the net daily purchases made by any passive market-maker generally may not exceed 30% of its average daily trading volume in the common stock during a specified two-month prior period, or 200 shares, whichever is greater. A passive market-maker must identify passive market- making bids as such on the Nasdaq electronic inter-dealer reporting system. Passive market-making may stabilize or maintain the market price of the common stock above independent market levels. Underwriters and dealers are not required to engage in passive market-making and may end passive market-making activities at any time. In connection with this offering, the underwriters may engage in transactions on the Nasdaq National Market or the over-the-counter market or otherwise that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may overallot this offering, creating a syndicate short position. In addition, the underwriters may bid for and purchase shares of common stock in the open market to cover syndicate short positions or to stabilize the price of the common stock. In addition, ING Baring Furman Selz LLC, on behalf of the underwriters, may reclaim selling concessions allowed to an underwriter or dealer if the underwriting syndicate repurchases shares distributed by that underwriter or dealer. These activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities and may end any of these activities at any time. Prior to this offering, there has been no public market for the common stock. As a result, the initial public offering price for the common stock has been determined by negotiation between Intelligent Life and ING Baring Furman Selz LLC. Among the factors considered in determining the public offering price were: . prevailing market conditions; . Intelligent Life's results of operations in recent periods; . the present stage of Intelligent Life's development; . the market capitalizations and development stages of other companies that we and the underwriters believe to be comparable to Intelligent Life; and . estimates of Intelligent Life's growth potential. 51 LEGAL MATTERS The validity of the issuance of the shares of the common stock offered hereby will be passed upon for us by Morris, Manning & Martin, L.L.P., Atlanta, Georgia. Certain legal matters in connection with this offering will be passed upon for the underwriters by White & Case LLP, New York, New York. EXPERTS The financial statements of Intelligent Life included in this prospectus to the extent and for the periods indicated in their reports have been audited by KPMG LLP and Thomas & Clough Co., P.A., independent public accountants and are included herein in reliance upon the authority of these firms as experts in accounting and auditing. ADDITIONAL INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus is only a part of the registration statement and does not contain all of the information included in the registration statement. Further information with respect to Intelligent Life and the common stock offered hereby can be found in the registration statement. Statements made in this prospectus as to the contents of any contract, agreement or other document are not necessarily complete. Such documents are filed as exhibits to the registration statement, and all descriptions in this prospectus are qualified in all respects by reference to the registration statement. The registration statement and the exhibits and schedules thereto may be inspected without charge at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, Room 1400, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, at prescribed rates. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, Intelligent Life is required to file electronic versions of these documents with the Commission through the Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The Commission maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. Information concerning Intelligent Life is also available for inspection at the offices of the Nasdaq Stock Market, Reports Section, 1735 K Street, N.W., Washington, D.C. 20006. 52 INTELLIGENT LIFE CORPORATION INDEX TO FINANCIAL STATEMENTS
Page ---- Financial Statements: Reports of Independent Public Accountants................................. F-2 Balance Sheets as of June 30, 1997 and 1998 and December 31, 1998 (unaudited).............................................................. F-4 Statements of Operations for the Years Ended June 30, 1996, 1997 and 1998 and Six Months Ended December 31, 1997 (unaudited) and 1998 (unaudited).. F-5 Statements of Redeemable Stock and Stockholders' Equity (Deficit) for the Years Ended June 30, 1996, 1997 and 1998 and Six Months Ended December 31, 1998 (unaudited)..................................................... F-6 Statements of Cash Flows for the Years Ended June 30, 1996, 1997 and 1998 and Six Months Ended December 31, 1997 (unaudited) and 1998 (unaudited).. F-7 Notes to Financial Statements (All information subsequent to June 30, 1998 is unaudited)............................................................ F-8
F-1 Independent Auditors' Report The Board of Directors and Stockholders Intelligent Life Corporation: We have audited the accompanying balance sheet of Intelligent Life Corporation as of June 30, 1998, and the related statements of operations, redeemable stock and stockholders' equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 financial position of Intelligent Life Corporation as of June 30, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. KPMG LLP Atlanta, Georgia October 1, 1998 F-2 Independent Auditors' Report The Board of Directors and stockholders Intelligent Life Corporation: We have audited the accompanying balance sheets of Intelligent Life Corporation (formerly, Bank Rate Monitor, Inc.), as of June 30, 1997 and 1996, and the related statements of operations, redeemable stock and stockholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Intelligent Life Corporation (formerly, Bank Rate Monitor, Inc.) as of June 30, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Thomas & Clough Co., P.A. Palm Beach, Florida July 23, 1998 F-3 INTELLIGENT LIFE CORPORATION BALANCE SHEETS
June 30, ------------------------ December 31, 1997 1998 1998 ----------- ----------- ------------ (unaudited) Assets Cash and cash equivalents............. $ 1,762,828 $ 910,427 $ 1,633,100 Accounts receivable................... 311,410 346,461 563,383 Less: allowance for doubtful ac- counts............................... (31,346) (23,946) (24,847) ----------- ----------- ------------ Total accounts receivable........... 280,064 322,515 538,536 Other current assets, including prepaid expenses of $1,432, $0 and $74,962 at June 30, 1997, June 30, 1998 and December 31, 1998, respectively ........................ 1,432 27,960 109,488 ----------- ----------- ------------ Total current assets.............. 2,044,324 1,260,902 2,281,124 Furniture, fixtures and equipment, net (Note 4)............................. 142,490 505,275 813,659 Intangible assets, net of accumulated amortization of $146,496, $152,433 and $152,976 at June 30, 1997, June 30, 1998 and December 31, 1998, respectively......................... 5,945 1,722 4,569 ----------- ----------- ------------ Total assets...................... $ 2,192,759 $ 1,767,899 $ 3,099,352 =========== =========== ============ Liabilities, Redeemable Stock and Stockholders' Equity (Deficit) Liabilities: Accounts payable.................... $ 374,005 $ 205,791 $ 308,667 Accrued expenses (Note 4)........... 287,726 406,658 588,212 Deferred revenue.................... 495,535 476,120 612,660 Current portion of obligations under capital leases (Note 8)............ -- 8,011 113,405 ----------- ----------- ------------ Total current liabilities......... 1,157,266 1,096,580 1,622,944 Obligations under capital leases, long term (Note 8)........................ -- 14,237 263,009 ----------- ----------- ------------ Total liabilities................. 1,157,266 1,110,817 1,885,953 Commitments and contingencies (Notes 2, 3, 5, 7, 8, and 9) Redeemable Convertible series A preferred stock, noncumulative, par value $.01 per share, stated at redemption value--90,000 shares authorized; 89,612 shares issued and outstanding at December 31, 1998 (Note 2)............................. -- -- 10,215,768 Redeemable Convertible series B preferred stock, noncumulative, par value $.01 per share, stated at redemption value--20,000 shares authorized; 17,575 shares issued and outstanding at December 31, 1998 (Note 2)............................. -- -- 1,982,535 Redeemable Common Stock (Note 2): Redeemable common stock, par value $.01 per share, redemption value $2.60 per share--90,834 shares issued and outstanding at June 30, 1998 and December 31, 1998......... -- 236,168 236,168 Loan receivable for redeemable common stock....................... -- (236,168) (236,168) Stockholders' equity (deficit) (Notes 2, 3, 5 and 9): Convertible series A preferred stock, noncumulative, par value $.01 per share, liquidation value $65 per share--90,000 shares authorized; 53,846 and 89,612 shares issued and outstanding at June 30, 1997 and June 30, 1998, respectively (Note 2)................................... 3,462,108 5,777,627 -- Common stock, par value $.01 per share--2,900,000 shares authorized; 769,240, 769,240 and 810,640 shares issued and outstanding at June 30, 1997, June 30, 1998 and December 31, 1998, respectively.... 7,692 7,692 8,106 Additional paid in capital.......... 614,290 968,543 -- Unamortized stock compensation expense............................ -- (265,690) (280,690) Accumulated deficit................. (3,048,597) (5,831,090) (10,712,320) ----------- ----------- ------------ Total stockholders' equity (deficit)........................ 1,035,493 657,082 (10,984,904) ----------- ----------- ------------ Total liabilities, redeemable stock and stockholders' equity (deficit)........................ $ 2,192,759 $ 1,767,899 $ 3,099,352 =========== =========== ============
See accompanying notes to financial statements. F-4 INTELLIGENT LIFE CORPORATION STATEMENTS OF OPERATIONS
Six months ended Year ended June 30, December 31, ----------------------------------- ------------------------ 1996 1997 1998 1997 1998 ---------- ---------- ----------- ----------- ----------- (unaudited) (unaudited) Revenue: Online publishing .... $ 70,406 $ 484,511 $ 1,281,284 $ 507,717 $ 1,808,877 Print publishing and licensing ........... 1,557,595 2,058,045 2,559,293 1,180,522 1,660,314 ---------- ---------- ----------- ---------- ----------- Total revenue....... 1,628,001 2,542,556 3,840,577 1,688,239 3,469,191 ---------- ---------- ----------- ---------- ----------- Cost of operations: Online publishing..... 16,476 582,399 862,007 321,216 978,964 Print publishing and licensing............ 971,331 1,185,969 1,961,714 957,447 1,100,693 Sales................. 97,640 89,848 665,007 117,300 817,403 Marketing............. 33,686 1,485 145,632 18,124 304,919 Product research...... 507,975 720,508 1,215,888 493,257 915,961 General and administrative expenses............. 522,056 767,957 1,663,728 695,191 871,057 Depreciation and amortization......... 97,668 73,754 66,666 25,088 98,491 Stock based compensation (Notes 2 and 3)............... -- -- 88,563 -- 669,000 ---------- ---------- ----------- ---------- ----------- Total cost of operations......... 2,246,832 3,421,920 6,669,205 2,627,623 5,756,488 ---------- ---------- ----------- ---------- ----------- Loss from operations......... (618,831) (879,364) (2,828,628) (939,384) (2,287,297) Other income (expense): Interest income....... -- 2,141 52,351 35,269 18,924 Interest expense...... (56,193) (85,870) (6,216) -- (12,433) Other (Note 6)........ 2,584 7,473 -- -- 185,588 ---------- ---------- ----------- ---------- ----------- Other income--net... (53,609) (76,256) 46,135 35,269 192,079 Loss before income taxes................ (672,440) (955,620) (2,782,493) (904,115) (2,095,218) Income taxes (Note 7)... -- -- -- -- -- ---------- ---------- ----------- ---------- ----------- Net loss............ $ (672,440) $ (955,620) $(2,782,493) $ (904,115) $(2,095,218) ========== ========== =========== ========== =========== Basic and diluted net loss per share......... $ (.67) $ (1.24) $ (3.62) $ (1.18) $ (2.58) ========== ========== =========== ========== =========== Weighted average shares outstanding used in basic and diluted per- share calculation...... 1,000,000 769,240 769,240 769,240 810,640 ========== ========== =========== ========== =========== Pro forma provision for income taxes........... -- -- ---------- ---------- Pro forma net loss...... $ (672,440) $ (955,620) ========== ========== Pro forma net loss per share.................. $ (.67) $ (1.24) ========== ==========
See accompanying notes to financial statements. F-5 INTELLIGENT LIFE CORPORATION STATEMENTS OF REDEEMABLE STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Redeemable Redeemable Convertible Convertible Convertible Series A Series B Series A Preferred Stock Preferred Stock Redeemable Common Stock Preferred Stock ------------------ ----------------- --------------------------- -------------------- Note Share Amount Shares Amount Shares Amount Receivable Shares Amount ------ ----------- ------ ---------- ------ --------- ---------- ------- ----------- Balance at July 1, 1995.......... -- $ -- -- $ -- -- $ -- $ -- -- $ -- Stockholder loans contributed to capital (Notes 2 and 5)........... -- -- -- -- -- -- -- -- Net loss........ -- -- -- -- -- -- -- -- -- ------ ----------- ------ ---------- ------ --------- --------- ------- ----------- Balance at June 30, 1996......... -- $ -- -- $ -- -- $ -- $ -- -- $ -- Stockholder loans contributed to capital (Notes 2 and 5).......... -- -- -- -- -- -- -- -- -- Exchange of common stock for preferred stock by principal stockholder (Notes 2 and 5).............. -- -- -- -- -- -- -- 23,076 1,499,940 Issuance of preferred stock, net of issuance costs (Note 2).. -- -- -- -- -- -- -- 30,770 1,962,168 Net loss........ -- -- -- -- -- -- -- -- -- ------ ----------- ------ ---------- ------ --------- --------- ------- ----------- Balance at June 30, 1997......... -- $ -- -- $ -- -- $ -- $ -- 53,846 $ 3,462,108 Issuance of preferred stock, net of issuance costs (Note 2).. -- -- -- -- -- -- -- 28,074 1,815,519 Stockholder loans converted to preferred stock (Notes 2 and 5).......... -- -- -- -- -- -- -- 7,692 500,000 Redeemable common stock issued (Note 2).............. -- -- -- -- 90,834 236,168 (236,168) -- -- Compensation expense relating to common stock vesting (Note 2).............. -- -- -- -- -- -- -- -- -- Net loss........ -- -- -- -- -- -- -- -- -- ------ ----------- ------ ---------- ------ --------- --------- ------- ----------- Balance at June 30, 1998......... -- $ -- -- $ -- 90,834 $ 236,168 $(236,168) 89,612 $ 5,777,627 Issuance of common stock (Note 2) (Unaudited).. -- -- -- -- -- -- -- -- -- Compensation expense relating to common stock grants (Note 2) (Unaudited)..... -- -- -- -- -- -- -- -- -- Issuance of preferred stock, net of issuance costs (Note 2) (Unaudited)..... -- -- 17,575 1,982,535 -- -- -- -- -- Conversion of nonredeemable convertible series A preferred stock to redeemable (Note 2)........ 89,612 10,215,768 -- -- -- -- -- (89,612) (5,777,627) Net loss (Unaudited)..... -- -- -- -- -- -- -- -- -- ------ ----------- ------ ---------- ------ --------- --------- ------- ----------- Balance at December 31, 1998 (Unaudited)...... 89,612 $10,215,768 17,575 $1,982,535 90,834 $ 236,168 $(236,168) -- $ -- ====== =========== ====== ========== ====== ========= ========= ======= =========== Common Stock Unamortized Total ------------------- Additional Stock Stockholders' Paid in Compensation Accumulated Equity Shares Amount Capital Expense Deficit (Deficit) ---------- -------- ----------- ------------ ------------- -------------- Balance at July 1, 1995.......... 1,000,000 $10,000 $ 315,000 $ -- $ (1,420,537) $ (1,095,537) Stockholder loans contributed to capital (Notes 2 and 5)........... -- -- 260,000 -- -- 260,000 Net loss........ -- -- -- -- (672,440) (672,440) ---------- -------- ----------- ------------ ------------- -------------- Balance at June 30, 1996......... 1,000,000 $10,000 $ 575,000 $ -- $ (2,092,977) $ (1,507,977) Stockholder loans contributed to capital (Notes 2 and 5).......... -- -- 1,536,922 -- -- 1,536,922 Exchange of common stock for preferred stock by principal stockholder (Notes 2 and 5).............. (230,760) (2,308) (1,497,632) -- -- -- Issuance of preferred stock, net of issuance costs (Note 2).. -- -- -- -- -- 1,962,168 Net loss........ -- -- -- -- (955,620) (955,620) ---------- -------- ----------- ------------ ------------- -------------- Balance at June 30, 1997......... 769,240 $ 7,692 $ 614,290 $ -- $ (3,048,597) $ 1,035,493 Issuance of preferred stock, net of issuance costs (Note 2).. -- -- -- -- -- 1,815,519 Stockholder loans converted to preferred stock (Notes 2 and 5).......... -- -- -- -- -- 500,000 Redeemable common stock issued (Note 2).............. -- -- 354,253 (354,253) -- -- Compensation expense relating to common stock vesting (Note 2).............. -- -- -- 88,563 -- 88,563 Net loss........ -- -- -- (2,782,493) (2,782,493) ---------- -------- ----------- ------------ ------------- -------------- Balance at June 30, 1998......... 769,240 $ 7,692 $ 968,543 $(265,690) $ (5,831,090) $ 657,082 Issuance of common stock (Note 2) (Unaudited).. 41,400 414 268,586 (269,000) -- -- Compensation expense relating to common stock grants (Note 2) (Unaudited)..... -- -- 415,000 254,000 -- 669,000 Issuance of preferred stock, net of issuance costs (Note 2) (Unaudited)..... -- -- -- -- -- -- Conversion of nonredeemable convertible series A preferred stock to redeemable (Note 2)........ -- -- (1,652,129) -- (2,786,012) (10,215,768) Net loss (Unaudited)..... -- -- -- -- (2,095,218) (2,095,218) ---------- -------- ----------- ------------ ------------- -------------- Balance at December 31, 1998 (Unaudited)...... 810,640 $ 8,106 $ -- $(280,690) $(10,712,320) $(10,984,904) ========== ======== =========== ============ ============= ==============
See accompanying notes to financial statements. F-6 INTELLIGENT LIFE CORPORATION STATEMENTS OF CASH FLOWS
Six months ended Year ended June 30, December 31, ------------------------------------ ------------------------------ 1996 1997 1998 1997 1998 ---------- ---------- ------------ ----------- ------------ (unaudited) (unaudited) Cash flows from operating activities: Net loss............... $ (672,440) $ (955,620) $ (2,782,493) $ (923,790) $ (2,095,218) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization.......... 97,669 73,754 66,666 41,578 98,491 Stock compensation earned................ -- -- 88,563 -- 669,000 Changes in operating assets and liabilities: Increase in accounts receivable.......... (98,062) (109,793) (42,451) (5,228) (216,021) Decrease (Increase) in other current assets.............. 2,401 7,480 (22,305) (255) (84,375) Increase (Decrease) in accounts payable............. 163,640 59,238 (168,214) (252,492) 102,876 Increase in accrued expenses............ 70,618 218,705 118,932 49,062 181,554 Increase (Decrease) in deferred revenue............. 90,747 (127,480) (19,415) (120,199) 136,540 ---------- ---------- ------------ ---------- ------------ Total adjustments.. 327,013 121,904 21,776 (287,534) 888,065 ---------- ---------- ------------ ---------- ------------ Net cash used in operating activities........ (345,427) (833,716) (2,760,717) (1,211,324) (1,207,153) ---------- ---------- ------------ ---------- ------------ Cash flows used in investing activities: Purchases of equipment............. (39,643) (90,501) (407,203) (276,575) (26,875) ---------- ---------- ------------ ---------- ------------ Net cash used in investing activities........ (39,643) (90,501) (407,203) (276,575) (26,875) ---------- ---------- ------------ ---------- ------------ Cash flows from financing activities: Loans from stockholders.......... 385,070 687,000 500,000 15,743 -- Principal payments on capital lease obligations........... -- -- -- -- (25,834) Proceeds from issuance of preferred stock.... -- 2,000,045 1,815,519 822,665 1,982,535 ---------- ---------- ------------ ---------- ------------ Net cash provided by financing activities........ 385,070 2,687,045 2,315,519 838,408 1,956,701 ---------- ---------- ------------ ---------- ------------ Net increase (decrease) in cash and cash equivalents....... -- $1,762,828 (852,401) (649,491) 722,673 Cash and cash equivalents at beginning of year...... -- -- 1,762,828 1,762,828 910,427 ---------- ---------- ------------ ---------- ------------ Cash and cash equivalents at end of year................... $ -- $1,762,828 $ 910,427 $1,113,337 $ 1,633,100 ========== ========== ============ ========== ============ Supplementary disclosures of cash flow information: Cash paid during the year for interest..... $ 25,600 $ 113,200 $ 6,216 $ -- $ 12,433 ========== ========== ============ ========== ============ Supplemental schedule of noncash investing and financing activities: Accounts payable related to recapitalization and issuance of stock..... $ -- $ 37,877 $ -- $ -- $ -- ========== ========== ============ ========== ============ Stockholder loans contributed to capital for preferred stock... $ 260,000 $1,536,922 $ 500,000 $ -- $ -- ========== ========== ============ ========== ============ Equipment acquired under capital leases.. $ -- $ -- $ 18,000 $ -- $ 380,000 ========== ========== ============ ========== ============
See accompanying notes to financial statements. F-7 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS June 30, 1997 and 1998 (All information subsequent to June 30, 1998 is unaudited) (1) Organization and Summary of Significant Accounting Policies (a) Description of Business Intelligent Life Corporation (the "Company"), formerly known as Bank Rate Monitor, Inc., is organized under the laws of the state of Florida. Under the provisions of the Internal Revenue Code of 1986, as amended, the Company elected to be taxed as an S corporation. On June 19, 1997, the Company ceased to be an S corporation and became a C corporation for income tax purposes. The Company is a provider of research regarding consumer banking and credit products and a publisher of original editorial content relating to personal finance matters. The Company provides this information through its internet sites and print publications. (b) Need for Future Capital and Initial Public Offering The Company has sustained losses and negative cash flows from operations for the past five fiscal years and for the six months ended December 31, 1998 and expects these conditions to continue for the foreseeable future. As of December 31, 1998, the Company had an accumulated deficit of approximately $10,712,000. The Company's business plan is dependent on obtaining additional financing. In March 1999, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission ("SEC") that would permit the Company to sell shares of the Company's common stock in connection with a proposed initial public offering ("IPO"). If the IPO is consummated, immediately prior to the proposed offering all of the then outstanding shares of the Company's Convertible Preferred Stock will be converted into shares of common stock. (c) Unaudited Interim Information The interim financial statements of the Company for the six months ended December 31, 1997 and 1998, included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the SEC. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company at December 31, 1998, and the results of its operations and its cash flows for the six months ended December 31, 1997 and 1998. Historical results are not necessarily indicative of the results to be expected in the future. (d) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent gains and losses at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-8 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (e) Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The cost of these investments approximates fair value. (f) Fixed Assets Property and equipment are stated at cost and are depreciated on a straight- line basis over the estimated useful lives of the assets which range from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term (if the Company does not retain ownership of the property or have a bargain purchase price) or the estimated useful lives of the improvements. Equipment under capital leases are stated at the present value of the minimum lease payments. (g) Intangible Assets Intangible assets consist principally of trademarks and deposits in connection with capital leases. The cost of trademarks is being amortized over the trademarks' estimated useful lives of five years on a straight-line basis. (h) Computation of Net Loss Per Share The Company has presented net loss per share pursuant to SFAS No. 128, "Earnings per Share," and the Securities and Exchange Commission Staff Accounting Bulletin No. 98. Pursuant to SEC Staff Accounting Bulletin No. 98, common stock and convertible preferred stock issued for nominal consideration, prior to the anticipated effective date of the IPO, are required to be included in the calculation of basic and diluted net loss per share, as if they were outstanding for all periods presented. To date, the Company has not had any issuances or grants for nominal consideration. Diluted loss per share has not been presented separately, as the outstanding stock options, redeemable common stock and convertible preferred stock are anti-dilutive for each of the periods presented. Securities that could potentially dilute basic earnings per share ("EPS") in the future that were not included in diluted EPS because their effect on periods presented was antidilutive total 0, 538,460 and 896,120 for the years ended June 30, 1996, 1997 and 1998, and 1,138,631 for the six months ended December 31, 1998. (i) Stock-based Compensation The Company accounts for stock-based compensation arrangements in accordance with the provisions of Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," and complies with the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost, if any, for fixed plan accounting, is recognized over the respective vesting period based on the difference, on the date of grant, between the fair value of the Company's common stock and the grant price. (j) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. F-9 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (k) Revenue Recognition The Company generates revenue from two primary sources: online publishing and print publishing and licensing. The Company sells advertisements for its various internet sites (including co-branded sites) including banner and billboard advertisements. Advertising sales are invoiced monthly based on the expected number of advertisement "impressions" or number of times that ad is viewed by users of the Company's internet sites. Revenue is recognized monthly based on the percentage of actual impressions to the total number of impressions contracted. Revenue for impressions invoiced but not delivered is deferred. The Company sells hyperlinks to various third-party internet sites that generate a fixed monthly fee, which is recognized in the month earned. The Company is also involved in revenue sharing arrangements with its online "partners" where the consumer uses hyperlinks to link to co-branded sites principally hosted by the Company. Revenue is effectively allocated to each partner based on the percentage of ad views at each site. The allocated revenue is shared according to the distribution agreements. Revenue is recorded gross and partnership payments are recorded in cost of operations. The Company sells advertisements for consumer mortgage rate tables. The rate tables and advertising are published in various newspapers under revenue sharing arrangements. Revenue is recognized when the tables are run in the respective newspaper. Revenue is recorded gross and revenue sharing payments are recorded in cost of operations. In addition, the Company earns subscription revenue from the three newsletters. Revenue is recognized ratably over the period of the subscription, which is generally up to one year. The Company also earns print revenue through other means including licensing rate tables for insertion into newspapers and by providing product rates and yields to financial institutions for publication. Revenue is recognized ratably over the contract period. Barter transactions are recorded at the lower of estimated fair value of the goods or services received or the estimated fair value of the advertisements given. To date, barter transactions have been immaterial. (l) Marketing Marketing includes advertising costs, which are charged to expense as incurred. (m) Recent Accounting Pronouncements In June 1997, SFAS 130, "Reporting Comprehensive Income," was issued and was adopted by the Company as of July 1, 1998. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. This statement requires that an enterprise (a) classify items of other comprehensive income by their nature in financial statements and (b) display the accumulated balance of other comprehensive income separately from accumulated deficit and additional paid-in capital in the equity section of statements of financial position. Comprehensive income is defined as the change in equity during the financial reporting period of a business enterprise resulting from non-owner sources such as accretion in the redemption values of preferred stock and preferred stock dividends. Comprehensive income approximates the net loss for all periods presented. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise with Related Information." SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to stockholders. SFAS No. 131 is effective for financial statements for fiscal years beginning after December 31, 1997. The Company will determine the applicability of SFAS No. 131 and apply if necessary. F-10 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and for hedging activities. SFAS No. 133 is effective for all fiscal years beginning after June 15, 1999. This statement does not currently apply to the Company as the Company currently does not have any derivative instruments or hedging activities. (n) Stock Splits In June 1997 and August 1997, the Company authorized and executed a 100-for- 1 and a 10-for-1 stock split, respectively. The information in the accompanying financial statements has been retroactively restated to reflect the effects of these stock splits. (2) Capitalization Authorized Shares During 1998, the Company amended and restated its certificate of incorporation. As a result the total number of shares which the Company is authorized to issue is 3,010,000 shares: 2,900,000 of these shares are Common Stock, each having a par value of $.01; and 110,000 shares are Preferred Stock each having a par value of $0.01, of which 90,000 shares are Series A Convertible Preferred Stock and 20,000 shares are Series B Convertible Preferred Stock. Common Stock and Convertible Preferred Stock In 1996 and 1997, the Chairman and majority stockholder, Peter C. Morse ("Morse"), contributed loans due to him to additional paid in capital in the aggregate amount of $260,000 and $1,536,922, respectively. In June 1997, the Company and certain investors entered into a Series A Preferred Stock Purchase Agreement (the "Agreement"). The Series A Preferred Stock is voting, noncumulative and preferred as to the first $4.55 per share per year of funds legally available and declared by the Board of Directors, has a liquidation preference above common stockholders of $65.00 per share, each share is convertible into 10 shares of common stock at a conversion price of $6.50, and has other rights and preferences. On November 24, 1998, the Series A Preferred Stock was converted from nonredeemable Preferred Stock to redeemable Preferred Stock. This transaction was treated as an extinguishment and the new instrument has been recorded at fair value on the conversion date. The difference between the fair value on the conversion date and the carrying value was charged to equity. Pursuant to the Agreement, investors acquired 42,308 shares of Series A Preferred Stock at $65 per share. Additionally, Morse exchanged 230,760 shares of common stock to 23,076 shares of Series A Preferred. In August and September 1997, 11,538 shares of Series A Preferred Stock were issued at $65 per share, resulting in net proceeds to the Company of $740,709. In October 1997, an additional 1,154 shares of Series A Preferred Stock were issued at $65 per share, resulting in net proceeds to the Company of $75,000. Investors agreed to acquire 23,074 shares of Series A Preferred Stock at $65 a share, resulting in proceeds to the Company of $1,499,810. This purchase included the contribution of loans due to Morse in the amount of $200,000 and the contribution of $300,000 in loans due to other investors for an aggregate of 7,692 shares of Series A Preferred Stock. In November 1998, the Company and certain investors entered into a Series B Preferred Stock Purchase Agreement. Pursuant to the agreement, 17,575 shares of Series B Preferred Stock were issued at $113.80 per F-11 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) share, resulting in net proceeds to the Company of $1,982,535. The Series B Preferred Stock is voting, noncumulative and preferred as to the first $8.00 per share per year out of funds legally available and declared by the Board of Directors, has liquidation preferences over the Series A Preferred and common stockholders of $113.80 per share, each share is convertible into 10 shares of common stock at a conversion price of $11.38, and has other right and preferences. The redemption clause of the Series A Preferred and Series B Preferred Stock allows the holders of 20% or more of the aggregate number of shares of Common Stock issuable upon the conversion of the Series A Preferred and Series B Preferred then outstanding to redeem their shares on or after January 2, 2003, provided that the maximum number of shares of Series A Preferred and Series B Preferred which the Company is obligated to redeem does not exceed the aggregate of 35,729 shares prior to January 3, 2004 and 71,458 shares prior to January 3, 2005, and thereafter the Company is obligated to redeem all of such shares outstanding as to which such right has been exercised. The redemption price is equal to the greatest of (as defined in the respective agreement) (x) the Series A Liquidation Preference or Series B Liquidation Preference, applicable to such shares or (y) the Fair Market Value of such shares or (z) an amount per share of Series A Preferred or Series B Preferred equal to ten (10) times the Net After Tax Earnings Per Share for the most recently completed fiscal year of the corporation times the number of shares of Common Stock issuable upon the conversion of one (1) share of Series A Preferred or Series B Preferred and the conversion price then in effect. The Company is recording accretion on the Series A Preferred and Series B Preferred Stock equal to the difference between the net proceeds received and the redemption amount of approximately $14,500,000 based on the estimated fair value at December 31, 1998 using the interest method from the conversion date for the Series A Preferred and original issuance date for the Series B Preferred through the final redemption date of January 3, 2005. The accretion for the Series A Preferred and Series B Preferred for the one month through December 31, 1998 is not significant and was not recorded. Restricted Stock Grants Effective August 1998, the Company entered into a Restricted Stock Grant Agreement (the "Stock Agreement") with an employee of the Company (the "Grantee") that provides for the issuance of restricted stock to the Grantee in accordance with the 1997 Equity Compensation Plan (as discussed in note 3 to the financial statements) in satisfaction of certain obligations as described in an employment agreement between the Company and the Grantee. The Company issued 41,400 shares of its common stock to the Grantee in August 1998, subject to the restrictions set forth in the Stock Agreement. Restrictions lapsed on 27,600 shares during the six-month period ended December 31, 1998 and the remainder will lapse in 1999. Total compensation expense to be recognized by the Company over the vesting period amounts to $269,000 (based on estimated values from other transactions involving sales of the Company's stock) of which $209,000 was recognized during the six-month period ended December 31, 1998. In March 1998, the Company entered into a Restricted Stock Grant Agreement (the "Grant Agreement") with an Officer of the Company (the "Officer") that provides for the issuance of restricted stock to the Officer in accordance with the 1997 Equity Compensation Plan (as discussed note 3 to the financial statements). On March 23, 1998, the Company issued 90,834 shares of its common stock to the Officer for an aggregate consideration of $236,168, which amount was paid by an interest-bearing promissory note from the Officer. The officer has a put right which requires the Company to repurchase his shares at the same price he paid for the shares including interest. Restrictions lapse as follows: 22,708.5 shares on July 1, 1998, and 1,892.375 shares on the first day of each month starting August 1, 1998 and ending July 1, 2001. In accordance with Emerging Issues Task Force 95-16, this arrangement is being accounted for as a variable plan which requires increases or decreases in stock based compensation expense based upon increases or decreases in the Company's fair market value. Compensation expense recognized during 1998 in accordance with FASB Interpretation No. 28 approximated $88,000 and $460,000 for the six-months ended December 31, 1998 based on estimated values from other transactions involving sales of the Company's stock. F-12 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) (3) Stock Option Plan During 1997, the Company adopted the 1997 Equity Compensation Plan (the "Plan") to provide directors, officers, non-employee members of the Board of Directors of the Company and certain consultants and advisors with the opportunity to receive grants of incentive stock options, non-qualified stock options and restricted stock. The Board of Directors has the sole authority to determine who receives such grants, the type, size and timing of such grants, and specify the terms of any noncompetition or other agreements relating to the grants. The aggregate number of shares that may be issued under the Plan is 180,000; 9,310 shares are available for grant as of December 31, 1998. The exercise price of any option grant shall be determined by the Board of Directors and may be equal to, greater than, or less than the fair market value of the stock on the grant date. Provided, however, that the exercise price shall be equal to or greater than the fair market value of the stock on the grant date and an option may not be granted to an employee who at the time of the grant owns more than 10 percent of the total combined voting power of all classes of stock of the Company, unless the exercise price is not less than 110 percent of the fair market value of the stock on the date of the grant. The per share weighted-average fair value of stock options granted during the year ended June 30, 1998 was approximately $2.00 and for the six months ended December 31, 1998 was between $2.00 and $6.50 on the date of grant using the Black-Scholes option pricing model (excluding a volatility assumption) with the following weighted-average assumptions: expected dividend yield of 0 percent, risk-free interest rates of 4.76 percent to 5.67 percent, and expected lives of 5.5 years and 6 years. The Company applies ABP Opinion No. 25 in accounting for its Plan. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net loss would have increased to the pro forma amount indicated below:
Year Ended ------------------------- June 30, Six Months Ended June 30, 1997 1998 December 31, 1998 ------------- ----------- ----------------- (unaudited) Net loss As reported..................... $(955,620) $(2,782,493) $(2,095,218) ========= =========== =========== Pro forma....................... $(955,620) $(2,792,493) $(2,110,218) ========= =========== =========== Basic net loss per common share--as reported............. $ (1.24) $ (3.62) $ (2.58) ========= =========== =========== Basic net loss per common share--pro forma............... $ (1.24) $ (3.63) $ (2.60) ========= =========== ===========
F-13 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) Stock option activity during the years ended December 31, 1997 and 1998 and the six months ended December 31, 1998 is as follows:
Number Weighted average of Shares exercise price --------- ----------------- Balance at June 30, 1996............................ -- -- Granted........................................... -- -- Exercised......................................... -- -- Forfeited......................................... -- -- Expired........................................... -- -- Balance at June 30, 1997............................ -- -- Granted........................................... 17,906 $6.50 Exercised......................................... -- -- Forfeited......................................... -- -- Expired........................................... -- -- Balance at June 30, 1998............................ 17,906 $6.50 Granted........................................... 20,550 $6.50 Exercised......................................... -- -- Forfeited......................................... -- -- Expired........................................... -- -- Balance at December 31, 1998 (unaudited)............ 38,456 $6.50
At June 30, 1998, the exercise price and weighted-average remaining contractual life of outstanding options was $6.50 and 9.5 years, respectively. At June 30, 1998, there were no options exercisable. The above table does not include the 132,234 shares of restricted stock issued under the Plan per note 2 to the financial statements. (4) Financial Statement Details
Year Ended -------------------- Six Months Ended June 30, June 30, December 31, 1997 1998 1998 --------- --------- ---------------- (Unaudited) Furniture, fixtures and equipment consists of the following: Furniture and fixtures................. $ 80,138 $ 157,519 $ 159,673 Computers and software, including assets under capital leases of $0, $0, and $379,887, respectively............ 229,672 469,669 872,163 Equipment including assets under capital leases of $0, $17,950, and $17,950, respectively................. 11,882 106,735 108,417 Leasehold improvements................. 1,596 12,879 12,879 --------- --------- ---------- 323,288 746,802 1,153,132 Less: accumulated depreciation and amortization, including amounts related to assets under capital leases of $0, $496 and $31,194, respectively.......................... (180,798) (241,527) (339,474) --------- --------- ---------- $ 142,490 $ 505,275 $ 813,659 ========= ========= ==========
F-14 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued)
Year Ended ----------------- Six Months Ended June 30, June 30, December 31, 1997 1998 1998 -------- -------- ---------------- (Unaudited) Accrued expenses consist of the following: Partner payments........................... 9,560 75,987 71,068 Commissions payable........................ 130,404 143,123 135,909 Accrued payroll and related costs.......... 67,693 43,074 87,465 Other...................................... 64,999 71,951 164,720 -------- -------- -------- $287,726 $406,658 $588,212 ======== ======== ========
(5) Related Party Transactions As Chairman and majority stockholder, Morse is a related party. The Company leases offices in South Florida from Bombay Holdings, Inc. ("Bombay") which is wholly owned by Morse. Total rent paid to Bombay for the years ended June 30, 1997 and 1998 and the six months ended December 31, 1998 was $85,591, $164,552, and $99,192, respectively (see Note 8). During the six-month period ended December 31, 1998, Bombay entered into an additional lease with the Company totaling $101,000 to be paid over a 19 month period. Morse has from time to time advanced capital to the Company. Such loans for the years ended June 30, 1997 and 1998 and the six months ended December 31, 1998 amounted to $687,000, $200,000 and $0, respectively. Interest rates for the loans were 6.5-7%. During 1996 and 1997, certain stockholder loans were contributed to capital (see Note 2). In 1998, Morse and another stockholder converted stockholder loans to 7,692 shares of Convertible Preferred Stock. In addition, during 1997, Morse exchanged 230,760 shares of Common Stock for 23,076 shares of Convertible Series A Preferred Stock (see Note 2). Morse Partners, Ltd., a partnership controlled by Morse advanced the Company $138,750 for the year ended June 30, 1997. The amount has subsequently been repaid. (6) Sale of Publication In December 1998, the Company sold substantially all of the assets, including the intellectual property of one of its newsletters, Bank Advertising News. The newsletter was sold for $125,000 in cash and assumed liabilities approximating $80,000. The gain on the sale was $185,588, net of $16,524 of selling expenses, and has been recorded in other income. Revenue for Bank Advertising News for the year ended June 30, 1998 and the six months ended December 31, 1998 was $178,270 and $82,953, respectively. Cost of operations for Bank Advertising News for the year ended June 30, 1998 and the six months ended December 31, 1998 was $57,445 and $53,138, respectively. Net assets (liabilities) of Bank Advertising News at June 30, 1998 and date of sale were approximately $(120,000) and $(80,000), respectively. (7) Income Taxes The Company did not record any income tax expense during the years ended June 30, 1996 and 1997 because it was operating as an S Corporation. Further there was no pro forma provision for income taxes for these years because the Company reported operating losses. F-15 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) An increase in the valuation allowance offset the deferred tax asset caused by net operating losses which are not currently usable. This increase is the principal differences between the expected amounts of tax benefits computed by applying the statutory federal income tax rate to the Company's loss before income taxes for the year ended June 30, 1998 and the six months ended December 31, 1998. The Company booked no tax benefit for these periods. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 1997 and 1998 and December 31, 1998 are presented below:
Year ended Six Months Ended --------------------------- December 31, June 30, 1997 June 30, 1998 1998 ------------- ------------- ---------------- (Unaudited) Deferred tax assets: Net operating loss carryforward................... $ 9,811 $ 1,196,975 $ 1,983,228 Intangible assets............... 127,667 143,438 143,438 Allowance for doubtful accounts....................... -- 9,011 9,350 --------- ----------- ----------- Total gross deferred tax assets....................... 137,478 1,349,424 2,136,016 Less valuation allowance.......... (137,478) (1,349,424) (2,136,016) --------- ----------- ----------- Net deferred tax assets........... $ -- $ -- $ -- ========= =========== ===========
The valuation allowance for deferred income tax assets as of June 30, 1997 and 1998 and at December 31, 1998 was $137,478, $1,349,424 and $2,136,016, respectively. The net change in the total valuation allowance for the years ended June 30, 1997, 1998 and the six months ended December 31, 1998 was an increase of $137,478, $1,211,946 and $786,592, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. At December 31, 1998, the Company had net operating loss carryforwards of approximately $5,300,000, which expire beginning in 2012 through 2018. The amount of net operating loss carryforwards may be limited if the Company has an ownership change. In the event of an ownership change, the amount of taxable income of a loss corporation for any postchange year which may be offset by prechange losses shall not exceed the Internal Revenue Code Section 382 limitation for such year. Generally, an ownership change occurs if a 5% shareholder or any equity structure shift increases the percentage of the stock of the loss corporation owned by more than 50 percentage points over the lowest percentage of stock of the loss corporation owned by such shareholders at any time during a three-year look back testing period. The Section 382 limitation is equal to the value of the old loss corporation (before the ownership change) multiplied by the Federal long-term tax-exempt rate. (8)Commitments and Contingencies Leases Bombay is wholly owned by Morse. The Company leases office space from Bombay under the terms of a lease agreement dated May 1, 1994 and amendments dated September 1, 1997 and January 1, 1998. The lease includes renewal options for a period of three years and requires the Company to pay a percentage of the common maintenance charges. The lease payments are subject to an annual increase based upon the consumer price index of the Fort Lauderdale/Miami region. Offices in New York and California are month-to-month leases. F-16 INTELLIGENT LIFE CORPORATION NOTES TO FINANCIAL STATEMENTS--(Continued) Total rent expense amounted to $85,591 and $164,552 for the years ended June 30, 1997 and 1998 and $109,872 for the six months ended December 31, 1998. Future minimum lease payments under noncancelable operating leases and future minimum capital lease payments as of June 30, 1998 were:
Operating Year ending June 30 leases Capital leases ------------------- ---------- -------------- 1999.............................................. $123,700 10,728 2000.............................................. 123,700 9,358 2001.............................................. 20,617 6,820 2002.............................................. -- -- 2003.............................................. -- -- Thereafter........................................ -- -- -------- -------- Total minimum lease payments........................ $268,017 26,906 ======== Less amount representing interest at rates ranging from 11.5% to 16%.................................. (4,658) Present value of net minimum capital lease payments......................................... 22,248 Less current installments of obligations under current leases..................................... (8,011) -------- Obligations under capital leases, excluding current installments....................................... $ 14,237 ========
Distribution arrangements The Company has various agreements with advertisers, content providers and other websites that require it to feature such parties exclusively in certain sections of its internet sites. Legal Proceedings The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position, results of operations, or liquidity. (9)Other Subsequent Events (Unaudited) Purchase of CPNet.com In January 1999, the Company purchased all of the assets of CPNet.com, excluding cash and real or personal property leases for $25,000 in cash. In addition, the sellers were employed by the Company and granted 6,000 options under the 1997 Equity Compensation Plan with an exercise price of $6.50. Based on the estimated values from other stock transactions involving sales of the Company's stock, the Company will incur a total stock compensation charge of $45,000. CPNet.com's historical statements of operations are insignificant to the Company. 1997 Equity Compensation Plan In January 1999, the Company amended the 1997 Equity Compensation Plan (the "Plan") to increase the number of shares of common stock of the Company authorized for issuance under the Plan to 300,000 shares. F-17 1999 Equity Compensation Plan In March 1999, the Company's stockholders approved the 1999 Equity Compensation Plan (the "1999 Plan"), to provide designated employees of the Company and its subsidiaries, certain consultants and non-employee members of the Board of Directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options and restricted stock. The 1999 Plan is authorized to grant options for up to 100,000 shares. In March 1999, the Company granted 71,700 shares to the Officer. Stock Options On March 2, 1999 the Company granted 40,344 options under the 1997 Equity Compensation Plan to purchase common stock at $14.84 per share. These options vest over a 48 month period. Redeemable Common Stock On March 9, 1999 the note receivable for the restricted stock grant to the Officer (see Note 2) was forgiven, the unvested shares (52,987) were effectively forfeited, the Officer's put right was cancelled, and certain other changes were made. Accordingly, "fixed" option accounting treatment was established on this date. The total charge for stock based compensation expense for the period January 1, 1999 through March 9, 1999 totaled approximately $300,000. On March 9, 1999, the Officer was also granted 71,700 options under the 1999 Equity Compensation Plan to purchase 71,700 shares of common stock at $14.84 per share (fair value), which vest over a 36 month period. The fair value of the stock was determined based on estimated values from other transactions involving sales of the Company's stock. Convertible Promissory Note On March 9, 1999, one of the Series B Preferred Stockholders loaned the Company $1 million due April 9, 1999. The loan bears interest at 8% and, if unpaid on April 9, 1999, converts into fully paid Series B Preferred Stock at a conversion price of $14.84 per share. F-18 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- You may rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. Neither the delivery of this prospectus nor the sale of common stock means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or solicitation of an offer to buy common stock in any circumstances under which the offer or solicitation is unlawful. --------------- Table of Contents
Page ---- Prospectus Summary....................................................... 3 Risk Factors............................................................. 7 Use of Proceeds.......................................................... 13 Dividend Policy.......................................................... 13 Capitalization........................................................... 14 Dilution................................................................. 15 Selected Financial Data.................................................. 16 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 17 Business................................................................. 25 Management............................................................... 39 Certain Transactions..................................................... 43 Principal and Selling Shareholders....................................... 44 Description of Capital Stock............................................. 45 Shares Eligible for Future Sale.......................................... 48 Underwriting............................................................. 50 Legal Matters............................................................ 52 Experts.................................................................. 52 Additional Information................................................... 52 Index to Financial Statements............................................ F-1
--------------- Until , 1999 (25 days after the date of this prospectus), all dealers that buy, sell or trade these shares of common stock, 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 underwriters and with respect to their unsold allotments or subscriptions. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Shares [Company Logo] Common Stock --------------- PROSPECTUS --------------- ING Baring Furman Selz LLC - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II Item 13. Other Expenses of Issuance and Distribution Securities and Exchange Commission registration fee.................... $12,788 National Association of Securities Dealers, Inc. fee................... $ 5,100 Nasdaq Stock Market listing fee........................................ $ * Accountants' fees and expenses......................................... $ * Legal fees and expenses................................................ $ * Blue Sky fees and expenses............................................. $ * Transfer Agent's fees and expenses..................................... $ * Printing and engraving expenses........................................ $ * Miscellaneous.......................................................... $ * ------- Total Expenses....................................................... $ * =======
- -------- * To be completed by amendment. All fees other than the SEC registration fee, the NASD fee and the Nasdaq National Market listing fee are estimated. Item 14. Indemnification of Directors and Officers Intelligent Life's Amended and Restated Articles of Incorporation provide that the liability of the directors for monetary damages shall be eliminated to the fullest extent permissible under the Florida Business Corporation Act (the "FBCA"), and Intelligent Life may indemnify our officers, employees and agents to the fullest extent permitted under the FBCA. Intelligent Life's Amended and Restated Bylaws provide that Intelligent Life must indemnify its directors against all liabilities to the fullest extent permitted under the FBCA and that Intelligent Life must advance all reasonable expenses incurred in a proceeding where the director was either a party or a witness because he or she was a director. The FBCA provides that, in general, a corporation may indemnify any person who is or was a party to any proceeding (other than action by, or in the right of, such corporation) by reason of the fact that he or she is or was a director or officer of Intelligent Life, against liability incurred in connection with such proceeding, including any appeal thereof, provided certain standards are met, including that such officer or director acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and provided further that, with respect to any criminal action or proceeding, the officer or director had no reasonable cause to believe his or her conduct was unlawful. In the case of proceedings by or in the right of the corporation, the FBCA provides that, in general, a company may indemnify any person who was or is a party to any such proceeding by reason of the fact that he or she is or was a director or officer of the corporation against expenses and amounts paid in settlement of such proceeding, including any appeal thereof, provided that such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interest of the corporation, except that no indemnification shall be made in respect of any claim as to which such person is adjudged liable unless a court of competent jurisdiction determines upon application that such person is fairly and reasonably entitled to indemnity. To the extent that any officers or directors are successful on the merits or otherwise in the defense of any of the proceedings described above, the FBCA provides that a corporation is required to indemnify such officers or directors against expenses actually and reasonably incurred in connection therewith. However, the FBCA further provides that, in general, indemnification or advancement of expenses shall not be made to or on behalf of any officer or director if a judgment or other final adjudication establishes that his or her actions, or omissions to act, were material to the cause of action so adjudicated and constitute: (1) a violation of the criminal law, unless the director or officer had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe it was II-1 unlawful; (2) a transaction from which the director or officer derived an improper personal benefit; (3) in the case of a director, circumstances under which the director has voted for or assented to a distribution made in violation of the FBCA or such corporation's Articles of Incorporation; or (4) willful misconduct or a conscious disregard for the best interests of the corporation in a proceeding by or in the right of the corporation to procure a judgment in its favor or in a proceeding by or in the right of a shareholder. Section of the Underwriting Agreement filed as Exhibit 1.1 hereto also contains certain provisions pursuant to which certain officers, directors and controlling persons of Intelligent Life may be entitled to be indemnified by the underwriters named therein. Item 15. Recent Sales of Unregistered Securities During the past three years, Intelligent Life has issued the securities set forth below which were not registered under the Securities Act: (1) On June 20, 1997, Intelligent Life issued 10,770 shares of its Series A Preferred Stock to ABS Ventures IV, L.P. for aggregate cash consideration of $1,500,005. (2) On June 26, 1997, Intelligent Life issued 7,693 shares of its Series A Preferred Stock to certain stockholders for aggregate cash consideration of $500,045. (3) On August 27, 1997, Intelligent Life issued 3,846 shares of its Series A Preferred Stock to ABS Ventures IV, L.P. and ABX Fund, L.P. for aggregate cash consideration of $249,990. (4) On September 12, 1997, Intelligent Life issued 7,692 shares of its Series A Preferred Stock to BRM Holdings, LLC for aggregate cash consideration of $499,980. (5) On October 14, 1997, Intelligent Life issued 1,154 shares of its Series A Preferred Stock to certain stockholders for aggregate cash consideration of $75,010. (6) On June 10, 1998, Intelligent Life issued 23,074 shares of its Series A Preferred Stock to ABS Ventures IV, L.P., ABX Fund, L.P. and certain stockholders for aggregate cash consideration of $1,499,810. (7) On November 25, 1998, Intelligent Life issued 17,575 shares of its Series B Preferred Stock to ABS Ventures IV, L.P., ABX Fund, L.P., Antares Capital Fund II Ltd., ACF II Side Fund L.P. and certain stockholders for aggregate cash consideration of $2,000,032. (8) Intelligent Life has issued stock options to purchase an aggregate of 807,500 shares of Common Stock at a weighted average exercise price of $2.51 per share. No shares of common stock have been issued pursuant to the exercise of such options. The issuance of the securities in the transactions described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act and Regulation D promulgated thereunder as transactions by an issuer not involving any public offering and/or in reliance on Rule 701. II-2 Item 16. Exhibits
Exhibit Number Description ------- ----------- 1.1* Form of Underwriting Agreement. 3.1* Form of Amended and Restated Articles of Incorporation of the Registrant. 3.2* Form of Amended and Restated Bylaws of the Registrant. 4.1 See Exhibits 3.1 and 3.2 for provisions of the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws of the Registrant defining rights of the holders of common stock of the Registrant. 4.2* Specimen Stock Certificate. 5.1* Opinion of Morris, Manning & Martin, L.L.P., counsel to the Registrant, as to the legality of the shares being registered. 10.1 Lease Agreement, dated May 1, 1994, between Intelligent Life Corporation and Bombay Holdings, Inc., as amended. 10.2 Lease Agreement, dated October 6, 1997, between Intelligent Life Corporation and Bombay Holdings, Inc. 10.3 Lease Agreement, dated January 31, 1999, between Intelligent Life Corporation and Bombay Holdings, Inc. 10.4 Professional Employer Agreement, dated February 25, 1999, between Intelligent Life Corporation and Vincam Human Resources, Inc. 10.5 Intelligent Life Corporation 1997 Equity Compensation Plan. 10.6 Intelligent Life Corporation 1999 Equity Compensation Plan. 10.7 Form of Stock Option Agreement under the 1997 Equity Compensation Plan. 10.8 Promissory Note, dated March 9, 1999, executed by Intelligent Life Corporation and payable to Antares Capital Fund II Limited Partnership. 10.9 Cancellation and Stock Repurchase Agreement, dated as of March 10, 1999, by Intelligent Life Corporation in favor of William P. Anderson, III. 10.10 Agreement of Cancellation and Release, dated as of March 10, 1999, between Intelligent Life Corporation and William P. Anderson, III. 10.11 Incentive Stock Option Grant Agreement, dated as of March 10, 1999, between Intelligent Life Corporation and William P. Anderson, III. 10.12 Executive Employment Agreement, dated as of March 10, 1999, between Intelligent Life Corporation and William P. Anderson, III. 23.1 Consent of KPMG LLP. 23.2 Consent of Thomas & Clough Co., P.A. 23.3* Consent of Morris, Manning & Martin, L.L.P. (included in Exhibit 5.1). 24.1 Powers of Attorney (included on signature page). 27.1 Financial Data Schedule.
- -------- * To be filed by amendment II-3 Item 17. Undertakings (a) The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The Registrant hereby undertakes that: (i) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the 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 the Registration Statement as of the time it was declared effective. (ii) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of North Palm Beach, State of Florida on the 10th day of March 1999. Intelligent Life Corporation /s/ William P. Anderson, III By: _________________________________ William P. Anderson, III President and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William P. Anderson, III and Peter W. Minford, 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 amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Peter C. Morse Chairman of the Board March 10, 1999 ______________________________________ Peter C. Morse /s/ William P. Anderson, III President, Chief Executive March 10, 1999 ______________________________________ Officer and Director William P. Anderson, III (Principal Executive Officer) /s/ Peter W. Minford Senior Vice President-- March 10, 1999 ______________________________________ Administration and Chief Peter W. Minford Financial Officer (Principal Financial and Accounting Officer) /s/ Bruns H. Grayson Director March 10, 1999 ______________________________________ Bruns H. Grayson /s/ Randall E. Poliner Director March 10, 1999 ______________________________________ Randall E. Poliner
II-5 EX-10.1 2 LEASE AGREEMENT DATED 5/1/94 EXHIBIT 10.1 LEASE AGREEMENT This LEASE is made and entered into as of this FIRST day of MAY, 1994 by and between BOMBAY HOLDINGS, INC., a Florida corporation (hereinafter referred to as "LANDLORD") and FINANCIAL RATES, INC., a Florida corporation (hereinafter referred to as TENANT"). WITNESSETH: LANDLORD does lease unto TENANT, and TENANT does hereby hire and take as lessee under LANDLORD a space consisting of 5,358 square feet, designated as Suites 200 and 205 (hereinafter referred to as the "Demised Premises"), as shown outlined on Exhibit "A" hereto of that certain building and other improvements ("Building") located in Palm Beach County, Florida at 11811 U.S. Highway One, North Palm Beach, Florida. 1. TERM: The term of this Lease shall be for five (5) years commencing on May 1, 1994 unless extended or terminated by other provisions of this Lease. Provided that TENANT is not in default under the terms of this Lease, TENANT shall be given the option to extend the Lease for an additional five (5) years, provided TENANT gives one hundred and eighty (180) days advance notice in writing of its election prior to the end of its initial lease term. All terms and conditions of the Lease would remain unchanged except for the Rent which would be negotiated at that time. 2. RENT: A. TENANT agrees to pay to LANDLORD, without demand, setoff or deduction, base annual rent ("Rent") in the amount of eight dollars and 50/100 ($8.50) per square foot of space in the Demised Premises, payable in equal monthly installments. Rent shall increase annually based upon the change in CPI Index (as hereinafter defined) from the date hereof commencing with the second lease year, but not greater than five (5%) per cent per annum. TENANT will pay its proportionate share of real estate taxes and common area maintenance (CAM) charges. TENANT agrees to pay applicable Florida State sales tax. B. Each monthly installment of Rent shall be payable in advance on the first (1st) day of each calendar month of the term to LANDLORD at such place as LANDLORD may from time to time designate in writing. TENANT shall have a grace period of five (5) days. In the event that any payment is not paid by TENANT within five (5) days of the due date, then, at LANDLORD's option, a late charge of eighteen (18%) per cent per annum of such payment or the highest rate permitted by law for such period shall become immediately due and payable to LANDLORD. 3. USE: TENANT, its successors and assigns, shall use the Demised Premises for administration offices and for no other purpose without the written consent of LANDLORD, which consent may not be unreasonably withheld as long as the use sought is in compliance with the existing zoning. TENANT shall comply with all laws, ordinances, rules and regulations of applicable government authorities respecting the use, operation and activities of the Demised Premises, and TENANT shall not make, suffer or permit any unlawful, improper or offensive use of the Demised Premises or Building, or any part thereof or permit any nuisance thereon. TENANT shall not make any use of the Demised Premises which would make void or voidable any policy of fire or extended coverage insurance covering the Demised Premises. TENANT shall use the Demised Premises only for the purposes stated in this Lease and shall not leave said Demised Premises abandoned or suffer or permit any waste or mistreatment thereof. 4. OPERATING EXPENSE: TENANT shall pay to LANDLORD, as "Additional Rent", an amount representing TENANT's proportionate share of LANDLORD's "Expenses" (as hereinafter defined) associated with operating the Building in accordance with the terms and conditions of this Lease. A. For purposes of this Lease, the following definitions shall apply: 1. The term "Percentage" shall mean 29.18%. The Percentage has been computed on the basis of a Demised Premises and the denominator of which is the agreed upon total square foot area fraction, the numerator of which is the agreed upon square foot area of the of the Building which is eighteen thousand three hundred and sixty (18,360) square feet. 2. The term "Expenses" shall mean the sum of "Taxes", "Insurance" and "Operating Expenses" (as hereinafter defined): (a) The term "Taxes" shall mean the total of all real estate taxes and special or other assessments levied, assessed or imposed at any time by any governmental authority upon or against the Building. (b) The term "Insurance" shall mean the total of all costs and expenses incurred, borne, or accrued by LANDLORD with respect to the Building for insurance for fire, extended coverage, sprinkler apparatus, public liability, property damage including windstorm and hailstorm, rental, plate glass, and any other insurance required by mortgagee with respect to the Building. (c) The term "Operating Expenses" shall mean the total of the costs and expenses incurred, borne or accrued by LANDLORD with respect to the ownership, operation, maintenance and use of the Building other than Taxes and Insurance, which, in, accordance with sound accounting and management principles generally accepted with respect to the operation of the first class office space, would be construed as an -2- operating expense. Such expenses shall not include anything connected with the structure or roof of the Building or for which LANDLORD has a right of reimbursement from others or those occasioned by the act, omission or violation of law by LANDLORD, its agents or employees. B. Commencing on the Lease Commencement Date TENANT shall pay to LANDLORD, as additional rent, an amount equal to the product of the Percentage times the Expenses applicable to the portion of the Term of the Lease specified in a statement from LANDLORD with respect thereto. C. (1) LANDLORD shall render to TENANT a statement containing a computation of additional rent due under this Lease ("Landlord's Statement") at any time and from time to time as such becomes due. Within ten (10) days after the rendition of the Landlord's Statement which shows additional rent to be due and payable, TENANT shall pay to LANDLORD the amount of such additional rent. On the first day of each month following rendition of each Landlord's Projected Annual Statement, TENANT shall pay to LANDLORD, on account of the potential additional rent, a sum equal to one-twelfth (1/12) of the annualized additional rent, which sum shall be subject to adjustment at any time to reflect any increase or decrease in Expenses. (2) The obligations of LANDLORD and TENANT under the provisions of this Lease shall survive the expiration or any early termination of the Term. 5. CONSUMER PRICE INDEX: "Consumer Price Index" means the Consumer Price Index - All Urban Consumers - - Miami/Fort Lauderdale, Florida (all terms) of the U.S. Bureau of Labor Statistics. If the manner in which the Consumer Price Index is determined by the Bureau of Labor Statistics shall be substantially revised, an adjustment shall be made in such revised index which would produce results, equivalent, as nearly as possible, to those which would have been obtained if the Customer Price Index had not been so revised. If the Consumer Price Index shall become unavailable to the public because publication is discontinued, or otherwise, LANDLORD will substitute therefore a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall be available, then a comparable index published by a major bank or other major financial institution or by a major university. The CPI applies to Base Rent only. Operating Expense is on an actual basis. 6. QUIET ENJOYMENT: LANDLORD covenants that so long as TENANT pays the rent reserved in this Lease and performs its agreements hereunder, TENANT shall have the right to quietly enjoy and use the Demised Premises for the term hereof, subject only to the provisions of this Lease. -3- 7. ASSIGNMENT AND SUBLETTING: TENANT, for itself, its successors and assigns expressly covenants that it shall not assign, mortgage or encumber this Lease, nor sublet the Demised Premises or any part thereof, or license or permit the Demised Premises or any party thereof to be used by others, without the prior written consent of the LANDLORD, which shall not be unreasonably withheld. 8. DEFAULT: A. The occurrence of any one or more of the following events shall constitute a default hereunder by TENANT (an "Event of Default"): 1. If Base Rent or Additional Rent is not paid within five (5) days after it is due and payable; 2. If TENANT shall have failed to cure a default in the performance of any of the other terms, covenants or provisions of this Lease (except payment of rent) or any rule or regulation hereinafter set forth within fifteen (15) days after written notice thereof, or if such default is of a nature that it cannot be completely remedied within said fifteen (15) day period, and TENANT shall not commence within said fifteen (15) days and shall not thereafter diligently prosecute to completion all steps necessary to remedy such default; 3. If a petition in bankruptcy shall be filed by or against TENANT or if TENANT shall make a general assignment for the benefit of creditors, or receive the benefit of any insolvency or reorganization act; 4. If a receiver or trustee is appointed for any portion of TENANT's property and such appointment is not vacated within sixty (60) days; 5. If an execution or attachment shall be issued under which the Demised Premises shall be taken or occupied or attempted to be taken or occupied by anyone other than TENANT; 6. If the Demised Premises become and remain vacant, deserted or abandoned for a period of thirty (30) consecutive days; 7. If the Demised Premises are used for some purpose other than the use specifically authorized herein. B. If TENANT shall default in performing any covenant or condition of this Lease, LANDLORD may perform the same for the account of TENANT, and TENANT shall reimburse LANDLORD for any expense incurred therefor as additional rent. -4- 9. REMEDIES: Upon the occurrence of an Event of Default: 1. LANDLORD may re-enter the Demised Premises by summary proceedings or otherwise and re-let the Demised Premises, or any part thereof, as TENANT's agent, in the name of LANDLORD or otherwise for a term shorter or longer than the balance of the term of this Lease, and may grant concessions of free rent, make improvements to the Demised Premises, and may grant any other concessions in connection therewith as are necessary to re-let the Demised Premises. In computing the net amount of rents collected through such re-letting, LANDLORD may deduct all reasonable expenses incurred in obtaining repossession or re-letting the Demised Premises, including rent concessions, attorney's fees, brokerage fees, the cost of restoring or improving the Demised Premises, and the cost of all alterations and decorations deemed necessary by LANDLORD to effect re-letting. In no event shall TENANT be entitled to a credit or repayment for re-rental income which exceeds the sums payable by TENANT hereunder. 2. LANDLORD may give TENANT fifteen (15) days notice of termination of this Lease. Upon the expiration of the fifteen (15) day notice period, this Lease and any rights of renewal or extension thereof shall come to an end and shall terminate as if that were the date originally fixed for the expiration of the term of this LEASE, but TENANT shall remain liable as hereinafter provided. 3. LANDLORD may accelerate and claim and demand, as liquidated and agreed upon damages, immediate payment of a sum equal to the amount by which the Base Rent and all forms of additional rent (as reasonably estimated by LANDLORD), due for the remainder of the term of this Lease and any extensions thereof which may have been exercised by TENANT, exceeds the then fair and reasonable rental value of the Demised Premises for the same period, both discounted to present worth at the rate of twelve (12%) percent per annum. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, the Demised Premises of any part thereof shall have been re-let by LANDLORD for the period which otherwise would have constituted the unexpired portion of the term or any part thereof, the amount of rent reserved upon such re- letting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Demised Premises so re- let during the term of the re-letting. 4. LANDLORD may pursue any other remedy available to it at law or in equity. 10. LIENS: A. TENANT herein shall not have any authority to create any liens for labor or material on LANDLORD's interest in the land, building or Demised Premises. All materialmen, contractors, mechanics, and laborers, and all persons contracting with TENANT, are hereby -5- charged with notice that they must look only to TENANT and TENANT's interests in the Demised Premises to secure any payment. At LANDLORD's request, TENANT agrees to obtain and deliver to LANDLORD written and unconditional waivers and releases of any such liens. B. TENANT agrees that TENANT will pay charges of contractors, subcontractors, mechanics, laborers, materialmen and other items of like character incurred by TENANT with respect to the Demised Premises, and will indemnify, defend and hold LANDLORD harmless from and against any and all expenses, costs and charges, including bond premiums for release of liens and reasonable attorney's fees incurred in connection with the defense of any suit in discharging the said Demised Premises or any party thereof from any liens, judgments or encumbrances caused or suffered by TENANT. In the event any such lien shall be made or filed, TENANT shall bond against or discharge the same within ten (10) days after the same has been made or filed. It is understood and agreed between the parties hereto that the expenses, costs and charges referred to above shall be considered as additional rent and shall be included in any lien for rent. 11. INSURANCE: A. TENANT agrees to maintain, at TENANT's sole cost and expense, comprehensive general liability insurance in standard form in favor of LANDLORD and TENANT against claims for bodily injury or death or property damage occurring in or upon the Demised Premises, effective as of the date TENANT enters into possession of the Demised Premises and throughout the term of this lease. Such occurrence shall be in the amount of not less than one million dollars ($1,000,000) for injury to one person in one accident, occurrence or casualty, and not less than two million dollars ($2,000,000) for injuries to more than one person in one accident, occurrence or casualty. TENANT shall also carry property damage insurance in an amount of not less than fifty thousand dollars ($50,000) for damage to property in any one occurrence. Any insurance policies required hereunder shall name LANDLORD as an additional insured and shall provide that they may not be modified or terminated without thirty (30) days advance notice to LANDLORD. At or prior to possession, TENANT shall furnish to LANDLORD evidence of such insurance coverage by way of either a copy of the actual insurance policy and any amendments and endorsements thereto or a certificate of insurance clearly evidencing each of the coverages and provisions set forth in this section. Upon TENANT's default in obtaining or delivering the policy or certificate for any such insurance or TENANT's failure to pay the charges therefor, LANDLORD may, but shall not be obligated, to procure or pay the charges for any such policies and charge the TENANT therefor as additional rent. B. TENANT shall not do anything, or permit anything to be done, in or about the Demised Premises which shall: 1. Invalidate or be in conflict with the provisions of any fire or other insurance policies covering the building or any property located therein. -6- 2. Result in a refusal by fire insurance companies of good standing to insure the building or any such property in amounts reasonably satisfactory to LANDLORD. 3. Subject LANDLORD to any liability or responsibility for injury to any person or property by reason of any business operation being conducted in the Demised Premises. 4. Cause any increase in the fire insurance rates applicable to the building or property located therein at the beginning of the Lease term or at any time thereafter. TENANT, at TENANT's expense, shall comply with all rules, regulations or requirements of the applicable Board of Fire Underwriters, and the fire insurance rating organizations and any similar bodies. TENANT shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon LANDLORD by reason of TENANT's failure to comply with the provisions of Section B of clause 12 of this Lease and if, by reason of such failure, the fire insurance shall at the beginning of this Lease or at any time thereafter be higher than it otherwise would be, then TENANT shall reimburse LANDLORD, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by LANDLORD which shall have been charged because of such failure by TENANT. 12. SUBROGATION: LANDLORD and TENANT and their respective successors or assigns hereby waive any and all rights of action for negligence against the other party hereto which may hereafter arise for damage to the Demised Premises or to property therein resulting from any fire or other casualty of the kind covered by standard fire insurance policies with extended coverage, regardless of whether or not, or in what amounts, such insurance is now or hereunder carried by the parties hereto, or either of them. The foregoing release and waiver shall be in force only if both releasers' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance and also provided that such a policy can be obtained without additional premiums. 13. COMPLIANCE: A. TENANT shall, at its expense, comply with all Rules and Regulations which may be adopted from time to time and with all laws, orders and regulations of any governmental authority having or asserting jurisdiction in connection with the Demised Premises or the use of occupancy thereof. B. TENANT shall at no time use or occupy the Demised Premises in violation of the certificate of occupancy issued for the Building or Demised Premises. TENANT shall comply with all applicable building, zoning and land use codes and ordinances throughout the term of this Lease. -7- 14. LANDLORD'S REPAIRS AND ALTERATIONS: LANDLORD shall be responsible for all structural repairs to the Demised Premises and all repairs and maintenance for all public areas and facilities, except such repairs (whether structural or otherwise) and maintenance as may be necessitated by the negligence, improper care or use of the Demised Premises and public areas by TENANT, its agents, employees, licensees or invitees, which shall be made by TENANT, at TENANT's expense, and except to the extent such repairs may be recovered by any insurance which TENANT is required to maintain hereunder. 15. TENANT'S REPAIRS AND ALTERATIONS: A. TENANT shall take good care of the Demised Premises and, subject to the provisions of clause 14 hereof, shall make as and when needed all repairs in and about the Demised Premises necessary to preserve them in good order and condition, which repairs shall be in quality and class equal to the original work. Except in the event of condemnation, there shall be no allowance to Tenant for a diminution of rental value and no liability on the part of LANDLORD by reason of inconvenience, annoyance or injury to business arising from LANDLORD, TENANT or others making any repairs, alterations, additions or improvements in or to any portion of the building or the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof, and no liability upon LANDLORD for failure of LANDLORD or others to make any repairs, alterations, additions or improvements in or to any portion of the Building or of the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof. Any repairs which Tenant may be required to carry out pursuant to the terms hereof may, at LANDLORD's option, be made by LANDLORD at the expense of TENANT, and the expenses thereof incurred by LANDLORD shall be collectible as additional rent after the rendition of a bill or statement therefor. B. TENANT shall make no alterations or improvements to the Demised Premises without LANDLORD's prior written consent, which shall not be unreasonably withheld. All installations or work done by or on behalf of TENANT shall be done in a good and workmanlike manner and shall at all times comply with all laws, rules, orders and regulations of all governmental authorities having or asserting jurisdiction in all connection therewith; and with the rules and regulations of LANDLORD. TENANT shall obtain, at its expense all necessary governmental approvals and permits. 16. FIXTURES AND INSTALLATIONS: All appurtenances, fixtures, improvements, additions and other property attached to or built into the Demised Premises, whether by LANDLORD or TENANT or others, and whether at LANDLORD's expense, or TENANT's expense, or the joint expense of LANDLORD and TENANT, shall become and remain the property of LANDLORD, and shall remain upon and be surrendered with the Demised Premises, unless LANDLORD, by notice to TENANT no later than thirty (30) days prior to the date fixed as the termination of this lease, elects to have them removed by TENANT, in which event the same shall be removed by TENANT at TENANT's -8- expense. Nothing in this clause shall be construed to prevent TENANT's removal of trade fixtures but, upon removal of any such trade fixtures from the Demised Premises or upon the removal of other installations as may be required by LANDLORD, TENANT shall immediately, at its expense, repair and restore the Demised Premises to the condition existing prior to installation and shall 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, which remains in the Demised Premises after TENANT's removal, shall be deemed abandoned and may, at the election of LANDLORD, either be retained as LANDLORD's property or may be removed from the Demised Premises at TENANT's expense. 17. CONDEMNATION: LANDLORD reserves unto itself, and TENANT assigns to LANDLORD, all right to damages accruing on account of any taking or condemnation of any part of the building, or by reason of any act of any public or quasi-public authority for which damages are payable. TENANT agrees to execute such instruments or assignments as may be required by LANDLORD, to join with LANDLORD in any petition for the recovery of damages if requested by LANDLORD, and LANDLORD agrees to turn over to TENANT its proportionate share of any such damages that may be recovered in any such proceeding. LANDLORD does not reserve for itself, and TENANT does not assign to LANDLORD, any damages payable for trade fixtures installed by TENANT at its cost and expense and which are not part of the realty, or any moving expense, relocation expense, or loss of business claim. 18. NOTICES: All notices required or contemplated by this Lease shall be in writing and shall be delivered in person or by special courier or by United States Certified Mail, Return Receipt Requested, addressed to the party to whom such notice is directed at the address as shown in this lease or such other address as either LANDLORD or TENANT may designate as its new address for notice purposes. Any such notice shall be deemed to have been rendered or given on the date when it shall have been mailed as provided in this clause. 19. APPLICABLE LAW: This lease is entered into in the State of Florida and shall be governed by the applicable law of such State. 20. CERTIFICATES: A. TENANT will, within 10 (ten) days of written request from LANDLORD, certify in writing to LANDLORD's designee (i) whether or not the lease has been modified or amended; (ii) the date to which rent has been paid; and (iii) whether TENANT has any knowledge of LANDLORD's default hereunder. B. LANDLORD will, within 10 (ten) days of written request from TENANT, certify in writing to TENANT's designee (i) whether or not the Lease has been modified or amended; -9- (ii) the date to which rent has been paid; and (iii) whether LANDLORD has any knowledge of TENANT's default hereunder. 21. EXPANSION OPTION: LANDLORD hereby grants to TENANT the right of first refusal to lease the space occupied on the second floor by Illustrated Properties Realty, Inc., known as Suite 204 and consisting of 1,411 square feet, upon the expiry date of their lease (January 15, 1997) or the agreed upon termination date of their lease, whichever occurs first. 22. ENTIRE AGREEMENT: This Lease contains the entire agreement between the parties. No oral or written statement or representation shall be binding upon either party unless expressly set forth in this Lease. This Lease may not be modified unless such agreement is set forth in writing by LANDLORD and TENANT. IN WITNESS WHEREOF, LANDLORD and TENANT have duly executed this agreement as of the day and year first above written. WITNESS: LANDLORD: BOMBAY HOLDINGS, INC. /s/ Richard King /s/ Peter C. Morse - --------------------- ----------------------- P.C. Morse Chairman WITNESS: TENANT: FINANCIAL RATES, INC. /s/ Jane C. Pike /s/ R. K. Heady - --------------------- ----------------------- R. K. Heady President -10- LEASE MODIFICATION 11811 U.S. HIGHWAY ONE NORTH PALM BEACH, FLORIDA 2nd. FLOOR --------------------------------------------- With reference to the above Lease dated May 1, 1994 wherein the parties agreed to a five year lease on 5,358 square feet on the 2nd. floor from May 1, 1994 to April 30, 1999: 1. The parties agree to amend the terms of the lease as follows: A. The size of the space shall be increased by 132 square feet to 5,490 square feet, effective September 1, 1994, as a result of Financial Rates, Inc. leasing one additional office in the center of the North Wing, as indicated on the attached floor plan, for the same Annual Base Rent and Additional Rent as is contained in the original Lease. 2. Except as set forth in (1) above, all other terms and conditions of the lease shall remain in full force and effect and otherwise be applicable to this lease modification. TENANT: FINANCIAL RATES, INC. BY: /s/ R.K. Heady ---------------------------- TITLE: President ------------------------ DATED: 9/7/94 ------------------------- WITNESS: /s/ Jane C. Pike ----------------------- LANDLORD: BOMBAY HOLDINGS, INC. BY: /s/ Richard King ---------------------------- TITLE: Property Manager ------------------------- DATED: 9/13/94 ------------------------- WITNESS /s/ Judy A. Stegall ------------------------ LEASE AGREEMENT AMENDMENT REFERENCE: Lease Agreement dated May 1, 1994, by and between BOMBAY HOLDINGS, INC., Landlord, and FINANCIAL RATES, INC. (BANK RATE MONITOR, INC.), Tenant, wherein the parties agreed to a five-year lease of Suite 205 of that certain building and other improvements located in Palm Beach County, Florida, at 11811 U.S. Highway One, North Palm Beach, Florida. 1. The parties agree to amend the terms of the lease as follows: A. The term of this lease is hereby amended from the expiration date of April 30, 1999, to the expiration date of August 31, 2000. The Tenant's option to extend the Lease term is hereby amended from an additional five (5) years to an additional three (3) years. 2. Except as set forth in (1.) above, all other terms and conditions of the lease shall remain in full force and effect and otherwise be applicable to this lease modification. DATED this 28th day of July, 1998. TENANT: BANK RATE MONITOR, INC. BY: /s/ Peter C. Minford ------------------------- TITLE: SVP --------------------- LANDLORD: BOMBAY HOLDINGS, INC. BY: /s/ Peter C. Morse ------------------------- TITLE: Chairman ---------------------- EX-10.2 3 LEASE AGREEMENT DATED 10/6/97 EXHIBIT 10.2 LEASE AGREEMENT This LEASE is made and entered into as of this 6th day of October, 1997 by and between BOMBAY HOLDINGS, INC., a Florida corporation (hereinafter referred to as "LANDLORD") and BANK RATE MONITOR, INC., a Florida corporation (hereinafter referred to as "TENANT"). WITNESSETH: LANDLORD does lease unto TENANT, and TENANT does hereby hire and take as lessee under LANDLORD a space consisting of 3,440 square feet, designated as Suite 101 (hereinafter referred to as the "Demised Premises"), as shown outlined on Exhibit "A" hereto of that certain building and other improvements ("Building") located in Palm Beach County, Florida at 11811 U.S. Highway One, North Palm Beach, Florida. 1. TERM: The term of this Lease shall be for three (3) years commencing on September 1, 1997 and will terminate on August 31, 2000. 2. RENT: A. TENANT agrees to pay to LANDLORD, without demand, setoff or deduction, base annual rent ("Rent") in the amount of twelve dollars and 25/100 ($12.25) per square foot of space in the Demised Premises, payable in equal monthly installments. Rent shall increase annually based upon the change in CPI Index (as hereinafter defined) from the date hereof commencing with the second lease year. TENANT will pay its proportionate share of real estate taxes and common area maintenance (CAM) charges. TENANT agrees to pay applicable Florida State sales tax. B. Each monthly installment of Rent shall be payable in advance on the first (1st) day of each calendar month of the term to LANDLORD (except for the first month's rent which is due and payable upon execution of this lease) at such place as LANDLORD may from time to time designate in writing. TENANT shall have a grace period of five (5) days of the due date, then, at LANDLORD's option, a late charge of eighteen (18%) per cent per annum of such payment or the highest rate permitted by law of such period shall become immediately due and payable to LANDLORD. 3. USE: TENANT, its successors and assigns, shall use the Demised Premises for administration offices and for no other purpose without the written consent of LANDLORD, which consent may not be unreasonably withheld as long as the use sought is in compliance with the existing zoning. TENANT shall comply with all laws, ordinances, rules and regulations of applicable government authorities respecting the use, operation and activities of the Demised Premises, and TENANT shall not make, suffer or permit any unlawful, improper or offensive use of the Demised Premises or Building, or any part thereof or permit any nuisance thereon. TENANT shall not make any use of the Demised Premises which would make void or voidable any policy of fire or extended coverage insurance covering the Demised Premises. TENANT shall use the Demised Premises only for the purposes stated in this Lease and shall not leave said Demised Premises abandoned or suffer or permit any waste or mistreatment thereof. 4. OPERATING EXPENSE: TENANT shall pay to LANDLORD, as "Additional Rent", an amount representing TENANT's proportionate share of LANDLORD's "Expenses" (as hereinafter defined) associated with operating the Building in accordance with the terms and conditions of this Lease. A. For purposes of this Lease, the following definitions shall apply: 1. The term "Percentage" shall mean 18.74%. The Percentage has been computed on the basis of a fraction, the numerator of which is the agreed upon square foot area of the Demised Premises and the denominator of which is the agreed upon total square foot area of the Building which is eighteen thousand six hundred and fifteen (18,360) square feet. 2. The term "Expenses" shall mean the sum of "Taxes", "Insurance" and "Operating Expenses" (as hereinafter defined): (a) The term "Taxes" shall mean the total of all real estate taxes and special or other assessments levied, assessed or imposed at any time by any governmental authority upon or against the Building. (b) The term "Insurance" shall mean the total of all costs and expenses incurred, borne, or accrued by LANDLORD with respect to the Building for insurance for fire, extended coverage, sprinkler apparatus, public liability, property damage including windstorm and hailstorm, rental, plate glass, and any other insurance required by mortgagee with respect to the Building. (c) The term "Operating Expenses" shall mean the total of the costs and expenses incurred, borne or accrued by LANDLORD with respect to the ownership, operation, maintenance and use of the Building other than Taxes and Insurance, which, in, accordance with sound accounting and management principles generally accepted with respect to the operation of the first class office space, would by construed as an operating expense. Such expenses shall not include anything connected with the structure or roof of the Building or for which LANDLORD has a right of reimbursement from others or those occasioned by the act, omission or violation of law by LANDLORD, its agents or employees. B. Commencing on the Lease Commencement Date TENANT shall pay to LANDLORD, as additional rent, an amount equal to the produce of the Percentage times the Expenses applicable to the portion of the Term of the Lease specified in a statement from LANDLORD with respect thereto. -2- C. (1) LANDLORD shall render to TENANT a statement containing a computation of additional rent due under this Lease ("LANDLORD's Statement") at any time and from time to time as such becomes due. Within ten (10) days after the rendition of the LANDLORD's Statement which shows additional rent to be due and payable, TENANT shall pay to LANDLORD the amount of such additional rent. On the first day of each month following rendition of each LANDLORD's Projected Annual Statement, TENANT shall pay to LANDLORD, on account of the potential additional rent, a sum equal to one-twelfth (1/12) of the annualized additional rent, which sum shall be subject to adjustment at any time to reflect any increase or decrease in Expenses. (2) The obligations of LANDLORD and TENANT under the provisions of this Lease shall survive the expiration or any early termination of the Term. 5. CONSUMER PRICE INDEX: "Consumer Price Index" means the Consumer Price Index - All Urban Consumers - Miami/Fort Lauderdale, Florida (all items) of the U.S. Bureau of Labor Statistics. If the manner in which the Consumer Price Index is determined by the Bureau of Labor Statistics shall be substantially revised, an adjustment shall be made in such revised index which would produce results , equivalent, as nearly as possible, to those which would have been obtained if the Customer Price Index had not been so revised. If the Consumer Price Index shall become unavailable to the public because publication is discontinued, or otherwise, LANDLORD will substitute therefore a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall be available, then a comparable index published by a major bank or other major financial institution or by a major university. The CPI applies to Base Rent only. Operating Expense is on an actual basis. 6. QUIET ENJOYMENT: LANDLORD covenants that so long as TENANT pays the rent reserved in this Lease and performs its agreements hereunder, TENANT shall have the right to quietly enjoy and use the Demised Premises for the term hereof, subject only to the provisions of this Lease. 7. ASSIGNMENT AND SUBLETTING: TENANT, for itself, its successors and assigns expressly covenants that it shall not assign, mortgage or encumber this Lease, nor sublet the Demised Premises or any part thereof, or license or permit the Demised Premises or any party thereof to be used by others, without the prior written consent of the LANDLORD, which shall not be unreasonably withheld. 8. DEFAULT: A. The occurrence of any one or more of the following events shall constitute a default hereunder by TENANT (an "Event of Default"): -3- 1. If Base Rent or Additional Rent is not paid within five (5) days after it is due and payable; 2. If TENANT shall have failed to cure a default in the performance of any of the other terms, covenants or provisions of this Lease (except payment of rent) or any rule or regulation hereinafter set forth within fifteen (15) days after written notice thereof, or if such default is of a nature that it cannot be completely remedied within said fifteen (15) day period, and TENANT shall not commence within said fifteen (15) days and shall not thereafter diligently procure to completion all steps necessary to remedy such default; 3. If a petition in bankruptcy shall be filed by or against TENANT or if TENANT shall make a general assignment for the benefit of creditors, or receive the benefit of any insolvency or reorganization act; 4. If a receiver or trustee is appointed for any portion of TENANT's property and such appointment is not vacated within sixty (60) days; 5. If an execution or attachment shall be issued under which the Demised Premises shall be taken or occupied or attempted to be taken or occupied by anyone other than TENANT; 6. If the Demised Premises become and remain vacant, deserted or abandoned for a period of thirty (30) consecutive days; 7. If the Demised Premises are used for some purpose other than the use specifically authorized herein. B. If TENANT shall default in performing any covenant or condition of this Lease, LANDLORD may perform the same for the account of TENANT, and TENANT shall reimburse LANDLORD for any expense incurred therefor as additional rent. 9. REMEDIES: Upon the occurrence of an Event of Default: 1. LANDLORD may re-enter the Demised Premises by summary proceedings or otherwise and re-let the Demised Premises, or any part thereof, as TENANT's agent, in the name of LANDLORD or otherwise for a term shorter or longer than the balance of the term of this Lease, and may grant concessions of free rent, make improvements to the Demised Premises, and may grant any other concessions in connection therewith as are necessary to re-let the Demised Premises. In computing the net amount of rents collected through such re-letting, LANDLORD may deduct all reasonable expenses incurred in obtaining repossession or re- letting the Demised Premises, including rent concessions, attorney's fees, brokerage fees, the cost of restoring or improving the Demised Premises, and the cost of all alterations and decorations deemed necessary by LANDLORD to effect re-letting. In no event shall TENANT be entitled to a credit or repayment for re-rental income which exceeds the sums payable by TENANT hereunder. -4- 2. LANDLORD may give TENANT fifteen (15) days notice of termination of this Lease. Upon the expiration of the fifteen (15) day notice period, this Lease and any rights of renewal or extension thereof shall come to an end and shall terminate as if that were the date originally fixed for the expiration of the term of this LEASE, but TENANT shall remain liable as hereinafter provided. 3. LANDLORD may accelerate and claim and demand, as liquidated and agreed upon damages, immediate payment of a sum equal to the amount by which the Base Rent and all forms of additional rent (as reasonably estimated by Landlord), due for the remainder of the term of this Lease and any extensions thereof which may have been exercised by TENANT, exceeds the then fair and reasonable rental value of the Demised Premises for the same period, both discounted to present worth at the rate of twelve (12%) percent per annum. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, the Demised Premises of any part thereof shall have been re-let by LANDLORD for the period which otherwise would have constituted the unexpired portion of the term or any party thereof, the amount of rent reserved upon such re-letting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Demised Premises so re-let during the term of the re-letting. 4. LANDLORD may pursue any other remedy available to it at law or in equity. 10. LIENS: A. TENANT herein shall not have any authority to create any liens for labor or material on LANDLORD's interest in the land, building or Demised Premises. All materialmen, contractors, mechanics, and laborers, and all persons contracting with TENANT, are hereby charged with notice that they must look only to TENANT and TENANT's interests in the Demised Premises to secure any payment. At LANDLORD's request, TENANT agrees to obtain and deliver to LANDLORD written and unconditional waivers and releases of any such liens. B. TENANT agrees that TENANT will pay charges of contractors, subcontractors, mechanics, laborers, materialmen and other items of like character incurred by TENANT with respect to the Demised Premises, and will indemnify, defend and hold LANDLORD harmless from and against any and all expenses, costs and charges, including bond premiums for release of liens and reasonable attorney's fees incurred in connection with the defense of any suit in discharging the said Demised Premises or any party thereof from any liens, judgments or encumbrances caused or suffered by TENANT. In the event any such lien shall be made or filed, TENANT shall bond against or discharge the same within ten (10) days after the same has been made or filed. It is understood and agreed between the parties hereto that the expenses, costs and charges referred to above shall be considered as additional rent and shall be included in any lien for rent. 11. CHANGE IN OWNERSHIP OF TENANT: A. Corporation or Partnership; LANDLORD's Right to Terminate. -5- If TENANT is a corporation or partnership and if the ownership thereof shall materially change at any time during the term of this lease from the present composition of same as it may exist at any time, or if a substantial portion of the assets of TENANT shall be sold, assigned or transferred with or without a specific assignment of this lease; or, if TENANT shall merge or consolidate with any other firm or corporation, LANDLORD may, at its option, by giving thirty (30) days prior written notice to TENANT, declare such change a breach of this Lease subject to the remedies provided for breach in paragraph 9 hereof. 1. Corporation. ----------- Ownership of a corporation shall be deemed to have materially changed if the number of its voting shares of any class or series, constituting one third (33.3%) of the number thereof outstanding from time to time shall be transferred by either the owners thereof or by the corporation, and such transfer of shares shall not first be approved in advance in writing by LANDLORD, such approval not to be unreasonably withheld. Notwithstanding the foregoing, said approval shall not be required if all of the following conditions are met: A. TENANT shall become or remain liable as a guarantor of the assignee's obligation under the Lease, as assigned, and B. The proposed assignees, shall be of such character and financial standing and responsibility at the time of the assignment so as to give reasonable assurance to LANDLORD of the payment of all rents and other assignments issued hereunder and compliance with all of the terms and conditions of the Lease. 2. Partnership. ----------- Partnership ownership shall be deemed to have materially changed if partners holding one third or more of the partnership interests have changed at any time during the term of this Lease, or one or more general partners of a limited partnership have changed at any time during the term hereof and such change has not been approved in advance in writing by LANDLORD. B. Proprietorship; LANDLORD's Right to Terminate. If TENANT is a sole proprietorship, LANDLORD shall have the option, without prejudice to the remedies available to it hereunder or otherwise, to terminate this Lease in the event of TENANT's incapacity, death or cessation of day-to- day management upon sixty (60) days prior written notice to TENANT or his legal representative. C. Notice to LANDLORD. TENANT shall immediately give written notice to LANDLORD of any change in ownership contemplated by this Paragraph 11. 12. INSURANCE. -6- A. TENANT agrees to maintain, at TENANT's sole cost and expense, comprehensive general liability insurance in standard form in favor of LANDLORD and TENANT against claims for bodily injury or death or property damage occurring in or upon the Demised Premises, effective as of the date TENANT enters into possession of the Demised Premises and throughout the term of this lease. Such occurrence shall be in the amount of not less than one million dollars ($1,000,000) for injury to one person in one accident, occurrence or casualty, and not less than two million dollars ($2,000,000) for injuries to more than one person in one accident, occurrence or casualty. TENANT shall also carry property damage insurance in an amount of not less than fifty thousand dollars ($50,000) for damage to property in any one occurrence. Any insurance policies required hereunder shall name LANDLORD as an additional insured and shall provide that they may not be modified or terminated without thirty (30) days advance notice to LANDLORD. At or prior to possession, TENANT shall furnish to LANDLORD evidence of such insurance coverage by way of either a copy of the actual insurance policy and any amendments and endorsements thereto or a certificate of insurance clearly evidencing each of the coverages and provisions set forth in this section. Upon TENANT's default in obtaining or delivering the policy or certificate for any such insurance or TENANT's failure to pay the charges therefor, LANDLORD may, but shall not be obligated, to procure or pay the charges for any such policies and charge the TENANT therefor as additional rent. B. TENANT shall not do anything, or permit anything to be done, in or about the Demised Premises which shall: 1. Invalidate or be in conflict with the provisions of any fire or other insurance policies covering the building or any property located therein. 2. Result in a refusal by fire insurance companies of good standing to insure the building or any such property in amounts reasonably satisfactory to LANDLORD. 3. Subject LANDLORD to any liability or responsibility for injury to any person or property by reason of any business operation being conducted in the Demised Premises. 4. Cause any increase in the fire insurance rates applicable to the building or property located therein at the beginning of the Lease term or at any time thereafter. TENANT, at TENANT's expense, shall comply with all rules, regulations or requirements of the applicable Board of Fire Underwriters, and the fire insurance rating organizations and any similar bodies. TENANT shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon LANDLORD by reason of TENANT's failure to comply with the provisions of Section B of clause 12 of this Lease and if, by reason of such failure, the fire insurance shall at the beginning of this Lease or at any time thereafter be higher than it otherwise would be, then TENANT shall reimburse LANDLORD, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by LANDLORD which shall have been charged because of such failure by TENANT. 13. SUBROGATION: -7- LANDLORD and TENANT and their respective successors or assigns hereby waive any and all rights of action for negligence against the other party hereto which may hereafter arise for damage to the Demised Premises or to property therein resulting from any fire or other casualty of the kind covered by standard fire insurance policies with extended coverage, regardless of whether or not, or in what amounts, such insurance is now or hereunder carried by the parties hereto, or either of them. The foregoing release and waiver shall be in force only if both releasers' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance and also provided that such a policy can be obtained without additional premiums. 14. COMPLIANCE: A. TENANT shall, at its expense, comply with all Rules and Regulations which may be adopted from time to time and with all laws, orders and regulations of any governmental authority having or asserting jurisdiction in connection with the Demised Premises or the use of occupancy thereof. B. TENANT shall at no time use or occupy the Demised Premises in violation of the certificate of occupancy issued for the Building or Demised Premises. TENANT shall comply with all applicable building, zoning and land use codes and ordinances throughout the term of this Lease. 15. LANDLORD'S REPAIRS AND ALTERATIONS: LANDLORD shall be responsible for all structural repairs to the Demised Premises and all repairs and maintenance for all public areas and facilities, except such repairs (whether structural or otherwise) and maintenance as may be necessitated by the negligence, improper care or use of the Demised Premises and public areas by TENANT, its agents, employees, licensees or invitees, which shall be made by TENANT, at TENANT's expense, and except to the extent such repairs may be recovered by any insurance which TENANT is required to maintain hereunder. 16. TENANT'S REPAIRS AND ALTERATIONS: A. TENANT shall take good care of the Demised Premises and, subject to the provisions of clause 15 hereof, shall make as and when needed all repairs in and about the Demised Premises necessary to preserve them in good order and condition, which repairs shall be in quality and class equal to the original work. Except in the event of condemnation, there shall be no allowance to Tenant for a diminution of rental value and no liability on the part of LANDLORD by reason of inconvenience, annoyance or injury to business arising from LANDLORD, TENANT or others making any repairs, alterations, additions or improvements in or to any portion of the building or the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof, and no liability upon LANDLORD for failure of LANDLORD or others to make any repairs, alterations, additions or improvements in or to any portion of the Building or of the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof. Any repairs which Tenant may be required to carry out pursuant to the -8- terms hereof may, at LANDLORD's option, be made by LANDLORD at the expense of TENANT, and the expenses thereof incurred by LANDLORD shall be collectible as additional rent after the rendition of a bill or statement therefor. B. TENANT shall make no alterations or improvements to the Demised Premises without LANDLORD's prior written consent, which shall not be unreasonably withheld. All installations or work done by or on behalf of TENANT shall be done in a good and workmanlike manner and shall at all times comply with all laws, rules, orders and regulations of all governmental authorities having or asserting jurisdiction in all connection therewith; and with the rules and regulations of LANDLORD. TENANT shall obtain, at its expense all necessary governmental approvals and permits. 17. FIXTURES AND INSTALLATIONS. All appurtenances, fixtures, improvements, additions and other property attached to or built into the Demised Premises, whether by LANDLORD or TENANT or others, and whether at LANDLORD's expense, or TENANT's expense, or the joint expense of LANDLORD and TENANT, shall become and remain the property of LANDLORD, and shall remain upon and be surrendered with the Demised Premises, unless LANDLORD, by notice to TENANT no later than thirty (30) days prior to the date fixed as the termination of this lease, elects to have them removed by TENANT, in which event the same shall be removed by TENANT at TENANT's expense. Nothing in this clause shall be construed to prevent TENANT's removal of trade fixtures but, upon removal of any such trade fixtures from the Demised Premises or upon the removal of other installations as may be required by LANDLORD, TENANT shall immediately, at its expense, repair and restore the Demised Premises to the condition existing prior to installation and shall 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, which remains in the Demised Premises after TENANT's removal, shall be deemed abandoned and may, at the election of LANDLORD, either be retained as LANDLORD's property or may be removed from the Demised Premises at TENANT's expense. 18. CONDITION OF PREMISES: TENANT's taking possession of the Demised Premises shall be conclusive evidence as against TENANT that the Demised Premises were in good order and satisfactory condition when the TENANT took possession. At the termination of this Lease, the TENANT shall return the Demised Premises broom-clean and in as good condition as when the TENANT took possession, ordinary wear and tear or loss by fire or other casualty expected, failing which the LANDLORD may restore the Demised Premises to such condition and the TENANT shall pay the cost thereof on demand. The air conditioning, heating, electrical and plumbing systems should be in good working order prior to TENANT taking possession. 19. SIGNAGE: TENANT is allowed to display the name of its business on the front door of its Demised Premises; the front door is defined as being on the east side of the building. The location and -9- type of signs shall be mutually agreed upon by TENANT and LANDLORD. The TENANT shall not display, inscribe, print, pain, maintain or affix on any place above the building any sign, notice, legend, direction, figure or advertisement, except on the front door of the Demised Premises and on the director board, and then only such name(s) and matter, and in such color, size, style, place and materials as shall first have been approved by LANDLORD. The listing of any name other than that of TENANT, whether on the front door of the Demised Premises or on the directory board, shall not vest any interest in the Lease or in the Demised Premises, it being expressly understood that any such listing is a privilege extended by LANDLORD revocable at will by written notice to TENANT. 20. HOLDING OVER: If the TENANT retains possession of the premises or any part thereof after the termination date of this Lease, the TENANT shall pay to LANDLORD rent at double the monthly rate payable by the TENANT with respect to the last full calendar month prior to the termination date of this Lease for the time the TENANT remains in possession and, in additional thereto, shall pay the LANDLORD for all damages, consequential as well as direct, sustained by reason of the TENANT's retention of possession. 21. CERTIFICATES: A. TENANT will, within 10 (ten) days of written request from LANDLORD, certify in writing to LANDLORD's designee (i) whether or not the lease has been modified or amended; (ii) the date to which rent has been paid; and (iii) whether TENANT has any knowledge of LANDLORD's default hereunder. B. LANDLORD will, within 10 (ten) days of written request from TENANT, certify in writing to TENANT's designee (i) whether or not the Lease has been modified or amended; (ii) the date to which rent has been paid; and (iii) whether LANDLORD has any knowledge of TENANT's default hereunder. 22. CONDEMNATION. LANDLORD reserves unto itself, and TENANT assigns to LANDLORD, all right to damages accruing on account of any taking or condemnation of any part of the building, or by reason of any act of any public or quasi-public authority for which damages are payable. TENANT agrees to execute such instruments or assignments as may be required by LANDLORD, to joint with LANDLORD in any petition for the recovery of damages if requested by LANDLORD, and LANDLORD agrees to turn over to TENANT its proportionate share of any such damages that may be recovered in any such proceeding. LANDLORD does not reserve for itself, and TENANT does not assign to LANDLORD, any damages payable for trade fixtures installed by TENANT at its cost and expense and which are not part of the realty, or any moving expense, relocation expense, or loss of business claim. 23. SUBORDINATION OF LEASE. -10- This Lease is and shall be subject and subordinate to any and all mortgages or deeds of trust now existing upon or that may be hereafter placed upon the Demised Premises or the property and to all advances made or to be made thereon, and all renewals, modifications, consolidations, replacements or extensions thereof and the lien of such mortgages, deed of trust and land leases shall be superior to all rights hereby and hereunder vested in TENANT, to the full extent of all sums secured hereby. This provision shall be self-operative and no further instrument of subordination shall be necessary to effectuate such subordination and the recording of any such superior and prior in lien to this Lease, irrespective of the date of recording. In confirmation of such subordination, TENANT shall on request of LANDLORD or the holder of any such mortgage or deed of trust execute the deliver to LANDLORD within ten (10) days any instrument that LANDLORD or such holder may reasonably request. Should any prospective mortgagee or ground lessor require a modification of this Lease, which modification will not cause an increased cost or expense to TENANT or in any other way materially change the rights and obligations of TENANT hereunder in the reasonable judgment of TENANT, then and in such event, TENANT agrees that this Lease may be so modified and agrees to promptly execute whatever documents are required therefor. Should any prospective mortgagee or ground lessor require execution of a short form of lease for recording (containing the names of the parties, a description of the Demised Premises, and the term of this Lease) or a certification from the TENANT concerning the Lease in such form as may be required by a prospective mortgagee or ground lessor, TENANT agrees to promptly execute such short form of lease or certificate and deliver same to LANDLORD within ten (10) days following the request therefore. 24. NOTICES: All notices required or contemplated by this Lease shall be in writing and shall be delivered in person or by special courier or by United States Certified Mail, Return Receipt Requested, addressed to the party to whom such notice is directed at the address as shown in this lease or such other address as either LANDLORD or TENANT may designate as its new address for notice purposes. Any such notice shall be deemed to have been rendered or given on the date when it shall have been mailed as provided in this clause. 25. APPLICABLE LAW: This lease is entered into in the State of Florida and shall be governed by the applicable law of such State. 26. OPTION TO RENEW: Provided that this Lease shall be in full force and effect and TENANT shall not be in default under any provision of the Lease at the time that the right herein granted is exercised, TENANT shall have the right to renew this Lease for one (1) additional term of three (3) years (the "Extension Term") commencing the day after the Termination Date at the then prevailing rental rate for space in the Building of equivalent quality, size, utility and location with the length of the lease term and credit of the TENANT taken into account. Said right shall be -11- exercisable by TENANT upon written notice to LANDLORD delivered at least one hundred and eighty (180) days prior to the Termination Date of the initial term of the Lease. If LANDLORD and TENANT cannot agree on the rental rate for the Extension Term within forty-five (45) days of TENANT's exercise of said right, then TENANT's right to extend hereunder shall expire and the Lease shall terminate on the Termination Date of the initial term of the Lease. During the Extension Term, the parties hereto shall be subject to all of the terms and conditions contained in this Lease, other than the amount of Base Annual Rent. Exercise of this right to extend shall not accord TENANT any further right to extend nor interfere with any rights of the LANDLORD to terminate this Lease. 27. ENTIRE AGREEMENT. This Lease contains the entire agreement between the parties. No oral or written statement or representation shall be binding upon either party unless expressly set forth in this Lease. This Lease may not be modified unless such agreement is set forth in writing by LANDLORD and TENANT. IN WITNESS WHEREOF, LANDLORD and TENANT have duly executed this agreement as of the day and year first above written. LANDLORD: BOMBAY HOLDINGS, INC. By: /s/ Peter C. Morse ---------------------------- P. C. Morse Chairman TENANT: BANK RATE MONITOR, INC. By: /s/ William P. Anderson ---------------------------- William P. Anderson President -12- EX-10.3 4 LEASE AGREEMENT DATED 1/31/99 EXHIBIT 10.3 LEASE AGREEMENT This LEASE is made and entered into as of this 31st day of January, 1999 by and between BOMBAY HOLDINGS, INC., a Florida corporation (hereinafter referred to as "LANDLORD") and INTELLIGENT LIFE CORPORATION, a Florida corporation (hereinafter referred to as TENANT"). WITNESSETH: LANDLORD does lease unto TENANT, and TENANT does hereby hire and take as lessee under LANDLORD a space consisting of 3,357 square feet, designated as Suite 104 (hereinafter referred to as the "Demised Premises"), as shown outlined on Exhibit "A" hereto of that certain building and other improvements ("Building") located in Palm Beach County, Florida at 11811 U.S. Highway One, North Palm Beach, Florida. 1. TERM: The term of this Lease shall be for one (1) year and seven (7) months commencing on February 1, 1999 and will terminate on August 31, 2000. 2. RENT: A. TENANT agrees to pay to LANDLORD, without demand, setoff or deduction, base annual rent ("Rent") in the amount of twelve dollars and 43/100 ($12.43) per square foot of space in the Demised Premises, payable in equal monthly installments. Rent shall increase annually based upon the change in CPI Index (as hereinafter defined) from the date hereof commencing with the second lease year. TENANT will pay its proportionate share of real estate taxes and common area maintenance (CAM) charges. TENANT agrees to pay applicable Florida State sales tax. B. Each monthly installment of Rent shall be payable in advance on the first (1st) day of each calendar month of the term to LANDLORD (except for the first month's rent which is due and payable upon execution of this lease) at such place as LANDLORD may from time to time designate in writing. TENANT shall have a grace period of five (5) days. In the event that any payment is not paid by TENANT within five (5) days of the due date, then, at LANDLORD's option, a late charge of eighteen (18%) per cent per annum of such payment or the highest rate permitted by law for such period shall become immediately due and payable to LANDLORD. 3. USE: TENANT, its successors and assigns, shall use the Demised Premises for administration offices and for no other purpose without the written consent of LANDLORD, which consent may not be unreasonably withheld as long as the use sought is in compliance with the existing zoning. TENANT shall comply with all laws, ordinances, rules and regulations of applicable government authorities respecting the use, operation and activities of the Demised Premises, and TENANT shall not make, suffer or permit any unlawful, improper or offensive use of the Demised Premises or Building, or any part thereof or permit any nuisance thereon. TENANT shall not make any use of the Demised Premises which would make void or voidable any policy of fire or extended coverage insurance covering the Demised Premises. TENANT shall use the Demised Premises only for the purposes stated in this Lease and shall not leave said Demised Premises abandoned or suffer or permit any waste or mistreatment thereof. 4. OPERATING EXPENSE: TENANT shall pay to LANDLORD, as "Additional Rent", an amount representing TENANT's proportionate share of LANDLORD's "Expenses" (as hereinafter defined) associated with operating the Building in accordance with the terms and conditions of this Lease. A. For purposes of this Lease, the following definitions shall apply: 1. The term "Percentage" shall mean 18.03%. The Percentage has been computed on the basis of a fraction, the numerator of which is the agreed upon square foot area of the Demised Premises and the denominator of which is the agreed upon total square foot area of the Building which is eighteen thousand six hundred and fifteen (18,615) square feet. 2. The term "Expenses" shall mean the sum of "Taxes", "Insurance" and "Operating Expenses" (as hereinafter defined): (a) The term "Taxes" shall mean the total of all real estate taxes and special or other assessments levied, assessed or imposed at any time by any governmental authority upon or against the Building. (b) The term "Insurance" shall mean the total of all costs and expenses incurred, borne, or accrued by LANDLORD with respect to the Building for insurance for fire, extended coverage, sprinkler apparatus, public liability, property damage including windstorm and hailstorm, rental, plate glass, and any other insurance required by mortgagee with respect to the Building. (c) The term "Operating Expenses" shall mean the total of the costs and expenses incurred, borne or accrued by LANDLORD with respect to the ownership, operation, maintenance and use of the Building other than Taxes and Insurance, which, in, accordance with sound accounting and management principles generally accepted with respect to the operation of the first class office space, would be construed as an operating expense. Such expenses shall not include anything connected with the structure or roof of the Building or for which LANDLORD has a right of reimbursement from others or those occasioned by the act, omission or violation of law by LANDLORD, its agents or employees. B. Commencing on the Lease Commencement Date TENANT shall pay to LANDLORD, as additional rent, an amount equal to the product of the Percentage times the Expenses applicable to the portion of the Term of the Lease specified in a statement from LANDLORD with respect thereto. -2- C. 1. LANDLORD shall render to TENANT a statement containing a computation of additional rent due under this Lease ("LANDLORD's Statement") at any time and from time to time as such becomes due. Within ten (10) days after the rendition of the LANDLORD's Statement which shows additional rent to be due and payable, TENANT shall pay to LANDLORD the amount of such additional rent. On the first day of each month following rendition of each LANDLORD's Projected Annual Statement, TENANT shall pay to LANDLORD, on account of the potential additional rent, a sum equal to one-twelfth (1/12) of the annualized additional rent, which sum shall be subject to adjustment at any time to reflect any increase or decrease in Expenses. 2. The obligations of LANDLORD and TENANT under the provisions of this Lease shall survive the expiration or any early termination of the Term. 5. CONSUMER PRICE INDEX: "Consumer Price Index" means the Consumer Price Index - All Urban Consumers - Miami/Fort Lauderdale, Florida (all items) of the U.S. Bureau of Labor Statistics. If the manner in which the Consumer Price Index is determined by the Bureau of Labor Statistics shall be substantially revised, an adjustment shall be made in such revised index which would produce results, equivalent, as nearly as possible, to those which would have been obtained if the Customer Price Index had not been so revised. If the Consumer Price Index shall become unavailable to the public because publication is discontinued, or otherwise, LANDLORD will substitute therefore a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall be available, then a comparable index published by a major bank or other major financial institution or by a major university. The CPI applies to Base Rent only. Operating Expense is on an actual basis. 6. QUIET ENJOYMENT: LANDLORD covenants that so long as TENANT pays the rent reserved in this Lease and performs its agreements hereunder, TENANT shall have the right to quietly enjoy and use the Demised Premises for the term hereof, subject only to the provisions of this Lease. 7. ASSIGNMENT AND SUBLETTING: TENANT, for itself, its successors and assigns expressly covenants that it shall not assign, mortgage or encumber this Lease, nor sublet the Demised Premises or any part thereof, or license or permit the Demised Premises or any party thereof to be used by others, without the prior written consent of the LANDLORD, which shall not be unreasonably withheld. 8. DEFAULT: A. The occurrence of any one or more of the following events shall constitute a default hereunder by TENANT (an "Event of Default"): 1. If Base Rent or Additional Rent is not paid within five (5) days after it is due and payable; -3- 2. If TENANT shall have failed to cure a default in the performance of any of the other terms, covenants or provisions of this Lease (except payment of rent) or any rule or regulation hereinafter set forth within fifteen (15) days after written notice thereof, or if such default is of a nature that it cannot be completely remedied within said fifteen (15) day period, and TENANT shall not commence within said fifteen (15) days and shall not thereafter diligently procure to completion all steps necessary to remedy such default; 3. If a petition in bankruptcy shall be filed by or against TENANT or if TENANT shall make a general assignment for the benefit of creditors, or receive the benefit of any insolvency or reorganization act; 4. If a receiver or trustee is appointed for any portion of TENANT's property and such appointment is not vacated within sixty (60) days; 5. If an execution or attachment shall be issued under which the Demised Premises shall be taken or occupied or attempted to be taken or occupied by anyone other than TENANT; 6. If the Demised Premises become and remain vacant, deserted or abandoned for a period of thirty (30) consecutive days; 7. If the Demised Premises are used for some purpose other than the use specifically authorized herein. B. If TENANT shall default in performing any covenant or condition of this Lease, LANDLORD may perform the same for the account of TENANT, and TENANT shall reimburse LANDLORD for any expense incurred therefor as additional rent. 9. REMEDIES: Upon the occurrence of an Event of Default: 1. LANDLORD may re-enter the Demised Premises by summary proceedings or otherwise and re-let the Demised Premises, or any part thereof, as TENANT's agent, in the name of LANDLORD or otherwise for a term shorter or longer than the balance of the term of this Lease, and may grant concessions of free rent, make improvements to the Demised Premises, and may grant any other concessions in connection therewith as are necessary to re-let the Demised Premises. In computing the net amount of rents collected through such re-letting, LANDLORD may deduct all reasonable expenses incurred in obtaining repossession or re- letting the Demised Premises, including rent concessions, attorney's fees, brokerage fees, the cost of restoring or improving the Demised Premises, and the cost of all alterations and decorations deemed necessary by LANDLORD to effect re-letting. In no event shall TENANT be entitled to a credit or repayment for re-rental income which exceeds the sums payable by TENANT hereunder. 2. LANDLORD may give TENANT fifteen (15) days notice of termination of this Lease. Upon the expiration of the fifteen (15) day notice period, this Lease and any rights of renewal or extension thereof shall come to an end and shall terminate as if that were the date originally fixed -4- for the expiration of the term of this LEASE, but TENANT shall remain liable as hereinafter provided. 3. LANDLORD may accelerate and claim and demand, as liquidated and agreed upon damages, immediate payment of a sum equal to the amount by which the Base Rent and all forms of additional rent (as reasonably estimated by LANDLORD), due for the remainder of the term of this Lease and any extensions thereof which may have been exercised by TENANT, exceeds the then fair and reasonable rental value of the Demised Premises for the same period, both discounted to present worth at the rate of twelve (12%) percent per annum. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, the Demised Premises of any part thereof shall have been re-let by LANDLORD for the period which otherwise would have constituted the unexpired portion of the term or any part thereof, the amount of rent reserved upon such re-letting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Demised Premises so re-let during the term of the re-letting. 4. LANDLORD may pursue any other remedy available to it at law or in equity. 10. LIENS: A. TENANT herein shall not have any authority to create any liens for labor or material on LANDLORD's interest in the land, building or Demised Premises. All materialmen, contractors, mechanics, and laborers, and all persons contracting with TENANT, are hereby charged with notice that they must look only to TENANT and TENANT's interests in the Demised Premises to secure any payment. At LANDLORD's request, TENANT agrees to obtain and deliver to LANDLORD written and unconditional waivers and releases of any such liens. B. TENANT agrees that TENANT will pay charges of contractors, subcontractors, mechanics, laborers, materialmen and other items of like character incurred by TENANT with respect to the Demised Premises, and will indemnify, defend and hold LANDLORD harmless from and against any and all expenses, costs and charges, including bond premiums for release of liens and reasonable attorney's fees incurred in connection with the defense of any suit in discharging the said Demised Premises or any party thereof from any liens, judgments or encumbrances caused or suffered by TENANT. In the event any such lien shall be made or filed, TENANT shall bond against or discharge the same within ten (10) days after the same has been made or filed. It is understood and agreed between the parties hereto that the expenses, costs and charges referred to above shall be considered as additional rent and shall be included in any lien for rent. 11. CHANGE IN OWNERSHIP OF TENANT: A. Corporation or Partnership; LANDLORD's Right to Terminate. If TENANT is a corporation or partnership and if the ownership thereof shall materially change an any time during the term of this lease from the present composition of same as it may exist at any time, or if a substantial portion of the assets of TENANT shall be sold, assigned or -5- transferred with or without a specific assignment of this lease; or, if TENANT shall merge or consolidate with any other firm or corporation, LANDLORD may, at its option, by giving thirty (30) days prior written notice to TENANT, declare such change a breach of this Lease subject to the remedies provided for breach in paragraph 9 hereof. 1. Corporation. ----------- Ownership of a corporation shall be deemed to have materially changed if the number of its voting shares of any class or series, constituting one third (33.3%) of the number thereof outstanding from time to time shall be transferred by either the owners thereof or by the corporation, and such transfer of shares shall not first be approved in advance in writing by LANDLORD, such approval not to be unreasonably withheld. Notwithstanding the foregoing, said approval shall not be required if all of the following conditions are met: A. TENANT shall become or remain liable as a guarantor of the assignee's obligation under the Lease, as assigned, and B. The proposed assignees, shall be of such character and financial standing and responsibility at the time of the assignment so as to give reasonable assurance to LANDLORD of the payment of all rents and other assignments issued hereunder and compliance with all of the terms and conditions of the Lease. 2. Partnership. ----------- A. Partnership ownership shall be deemed to have materially changed if partners holding one third or more of the partnership interests have changed at any time during the term of this Lease, or one or more general partners of a limited partnership have changed at any time during the term hereof and such change has not been approved in advance in writing by LANDLORD. B. Proprietorship; LANDLORD's Right to Terminate. If TENANT is a sole proprietorship, LANDLORD shall have the option, without prejudice to the remedies available to it hereunder or otherwise, to terminate this Lease in the event of TENANT's incapacity, death or cessation of day-to-day management upon sixty (60) days prior written notice to TENANT or his legal representative. C. Notice to LANDLORD. TENANT shall immediately give written notice to LANDLORD of any change in ownership contemplated by this Paragraph 11. 12. INSURANCE. A. TENANT agrees to maintain, at TENANT's sole cost and expense, comprehensive general liability insurance in standard form in favor of LANDLORD and TENANT against claims for bodily injury or death or property damage occurring in or upon the Demised Premises, effective as of the date TENANT enters into possession of the Demised Premises and throughout the term of this lease. Such occurrence shall be in the amount of not less than one million dollars -6- ($1,000,000) for injury to one person in one accident, occurrence or casualty, and not less than two million dollars ($2,000,000) for injuries to more than one person in one accident, occurrence or casualty. TENANT shall also carry property damage insurance in an amount of not less than fifty thousand dollars ($50,000) for damage to property in any one occurrence. Any insurance policies required hereunder shall name LANDLORD as an additional insured and shall provide that they may not be modified or terminated without thirty (30) days advance notice to LANDLORD. At or prior to possession, TENANT shall furnish to LANDLORD evidence of such insurance coverage by way of either a copy of the actual insurance policy and any amendments and endorsements thereto or a certificate of insurance clearly evidencing each of the coverages and provisions set forth in this section. Upon TENANT's default in obtaining or delivering the policy or certificate for any such insurance or TENANT's failure to pay the charges therefor, LANDLORD may, but shall not be obligated, to procure or pay the charges for any such policies and charge the TENANT therefor as additional rent. B. TENANT shall not do anything, or permit anything to be done, in or about the Demised Premises which shall: 1. Invalidate or be in conflict with the provisions of any fire or other insurance policies covering the building or any property located therein. 2. Result in a refusal by fire insurance companies of good standing to insure the building or any such property in amounts reasonably satisfactory to LANDLORD. 3. Subject LANDLORD to any liability or responsibility for injury to any person or property by reason of any business operation being conducted in the Demised Premises. 4. Cause any increase in the fire insurance rates applicable to the building or property located therein at the beginning of the Lease term or at any time thereafter. TENANT, at TENANT's expense, shall comply with all rules, regulations or requirements of the applicable Board of Fire Underwriters, and the fire insurance rating organizations and any similar bodies. TENANT shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon LANDLORD by reason of TENANT's failure to comply with the provisions of Section B of clause 12 of this Lease and if, by reason of such failure, the fire insurance shall at the beginning of this Lease or at any time thereafter be higher than it otherwise would be, then TENANT shall reimburse LANDLORD, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by LANDLORD which shall have been charged because of such failure by TENANT. 13. SUBROGATION: LANDLORD and TENANT and their respective successors or assigns hereby waive any and all rights of action for negligence against the other party hereto which may hereafter arise for damage to the Demised Premises or to property therein resulting from any fire or other casualty of the kind covered by standard fire insurance policies with extended coverage, regardless of -7- whether or not, or in what amounts, such insurance is now or hereunder carried by the parties hereto, or either of them. The foregoing release and waiver shall be in force only if both releasers' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance and also provided that such a policy can be obtained without additional premiums. 14. COMPLIANCE: A. TENANT shall, at its expense, comply with all Rules and Regulations which may be adopted from time to time and with all laws, orders and regulations of any governmental authority having or asserting jurisdiction in connection with the Demised Premises or the use of occupancy thereof. B. TENANT shall at no time use or occupy the Demised Premises in violation of the certificate of occupancy issued for the Building or Demised Premises. TENANT shall comply with all applicable building, zoning and land use codes and ordinances throughout the term of this Lease. 15. LANDLORD'S REPAIRS AND ALTERATIONS: LANDLORD shall be responsible for all structural repairs to the Demised Premises and all repairs and maintenance for all public areas and facilities, except such repairs (whether structural or otherwise) and maintenance as may be necessitated by the negligence, improper care or use of the Demised Premises and public areas by TENANT, its agents, employees, licensees or invitees, which shall be made by TENANT, at TENANT's expense, and except to the extent such repairs may be recovered by any insurance which TENANT is required to maintain hereunder. 16. TENANT'S REPAIRS AND ALTERATIONS: A. TENANT shall take good care of the Demised Premises and, subject to the provisions of clause 15 hereof, shall make as and when needed all repairs in and about the Demised Premises necessary to preserve them in good order and condition, which repairs shall be in quality and class equal to the original work. Except in the event of condemnation, there shall be no allowance to Tenant for a diminution of rental value and no liability on the part of LANDLORD by reason of inconvenience, annoyance or injury to business arising from LANDLORD, TENANT or others making any repairs, alterations, additions or improvements in or to any portion of the building or the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof, and no liability upon LANDLORD for failure of LANDLORD or others to make any repairs, alterations, additions or improvements in or to any portion of the Building or of the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof. Any repairs which Tenant may be required to carry out pursuant to the terms hereof may, at LANDLORD's option, be made by LANDLORD at the expense of TENANT, and the expenses thereof incurred by LANDLORD shall be collectible as additional rent after the rendition of a bill or statement therefor. -8- B. TENANT shall make no alterations or improvements to the Demised Premises without LANDLORD's prior written consent, which shall not be unreasonably withheld. All installations or work done by or on behalf of TENANT shall be done in a good and workmanlike manner and shall at all times comply with all laws, rules, orders and regulations of all governmental authorities having or asserting jurisdiction in all connection therewith; and with the rules and regulations of LANDLORD. TENANT shall obtain, at its expense all necessary governmental approvals and permits. 17. FIXTURES AND INSTALLATIONS: All appurtenances, fixtures, improvements, additions and other property attached to or built into the Demised Premises, whether by LANDLORD or TENANT or others, and whether at LANDLORD's expense, or TENANT's expense, or the joint expense of LANDLORD and TENANT, shall become and remain the property of LANDLORD, and shall remain upon and be surrendered with the Demised Premises, unless LANDLORD, by notice to TENANT no later than thirty (30) days prior to the date fixed as the termination of this lease, elects to have them removed by TENANT, in which event the same shall be removed by TENANT at TENANT's expense. Nothing in this clause shall be construed to prevent TENANT's removal of trade fixtures but, upon removal of any such trade fixtures from the Demised Premises or upon the removal of other installations as may be required by LANDLORD, TENANT shall immediately, at its expense, repair and restore the Demised Premises to the condition existing prior to installation and shall 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, which remains in the Demised Premises after TENANT's removal, shall be deemed abandoned and may, at the election of LANDLORD, either be retained as LANDLORD's property or may be removed from the Demised Premises at TENANT's expense. 18. CONDITION OF PREMISES: TENANT's taking possession of the Demised Premises shall be conclusive evidence as against TENANT that the Demised Premises were in good order and satisfactory condition when the TENANT took possession. At the termination of this Lease, the TENANT shall return the Demised Premises broom-clean and in as good condition as when the TENANT took possession, ordinary wear and tear or loss by fire or other casualty expected, failing which the LANDLORD may restore the Demised Premises to such condition and the TENANT shall pay the cost thereof on demand. The air conditioning, heating, electrical and plumbing systems should be in good working order prior to TENANT taking possession. 19. SECURITY DEPOSIT: TENANT has deposited with LANDLORD the sum of $-0- as security for the full and faithful performance of every provision of this Lease to be performed by TENANT. If TENANT defaults with respect to any provision of this Lease, including but not limited to the provisions relating to the payment of Rent, LANDLORD may use, apply or retain all or any part of this security deposit for the payment of any Rent or other sum in default or for the payment of any -9- other amount which LANDLORD may spend or become obligated to spend by reason of TENANT's default, or to compensate LANDLORD for any other loss, cost or damage which LANDLORD may suffer by reason of TENANT's default. If any portion of said deposit is so used or applied, TENANT shall, within five (5) days after written demand therefor, deposit cash with LANDLORD in an amount sufficient to restore the security deposit to its original amount and TENANT's failure to do so shall constitute a breach of this Lease. LANDLORD shall not, unless required by law, be required to pay interest on the security deposit to the TENANT. If TENANT shall fully and faithfully perform every provision of this Lease, the security deposit or any balance thereof shall be returned to TENANT (or at LANDLORD's option, to the last transferee of TENANT's interest hereunder) within fifteen (15) days after the expiration of the Lease term, provided TENANT has vacated the premises. In the event the building is sold, the security deposit will be transferred to the new owner. 20. SIGNAGE: TENANT is allowed to display the name of its business on the front door of its Demised Premises; the front door is defined as being on the east side of the building. The location and type of signs shall be mutually agreed upon by TENANT and LANDLORD. The TENANT shall not display, inscribe, print, pain, maintain or affix on any place above the building any sign, notice, legend, direction, figure or advertisement, except on the front door of the Demised Premises and on the director board, and then only such name(s) and matter, and in such color, size, style, place and materials as shall first have been approved by LANDLORD. The listing of any name other than that of TENANT, whether on the front door of the Demised Premises or on the directory board, shall not vest any interest in the Lease or in the Demised Premises, it being expressly understood that any such listing is a privilege extended by LANDLORD revocable at will by written notice to TENANT. 21. HOLDING OVER: If the TENANT retains possession of the premises or any part thereof after the termination date of this Lease, the TENANT shall pay to LANDLORD rent at double the monthly rate payable by the TENANT with respect to the last full calendar month prior to the termination date of this Lease for the time the TENANT remains in possession and, in additional thereto, shall pay the LANDLORD for all damages, consequential as well as direct, sustained by reason of the TENANT's retention of possession. 22. CERTIFICATES: A. TENANT will, within 10 (ten) days of written request from LANDLORD, certify in writing to LANDLORD's designee (i) whether or not the lease has been modified or amended; (ii) the date to which rent has been paid; and (iii) whether TENANT has any knowledge of LANDLORD's default hereunder. -10- B. LANDLORD will, within 10 (ten) days of written request from TENANT, certify in writing to TENANT's designee (i) whether or not the Lease has been modified or amended; (ii) the date to which rent has been paid; and (iii) whether LANDLORD has any knowledge of TENANT's default hereunder. 23. CONDEMNATION: LANDLORD reserves unto itself, and TENANT assigns to LANDLORD, all right to damages accruing on account of any taking or condemnation of any part of the building, or by reason of any act of any public or quasi-public authority for which damages are payable. TENANT agrees to execute such instruments or assignments as may be required by LANDLORD, to join with LANDLORD in any petition for the recovery of damages if requested by LANDLORD, and LANDLORD agrees to turn over to TENANT its proportionate share of any such damages that may be recovered in any such proceeding. LANDLORD does not reserve for itself, and TENANT does not assign to LANDLORD, any damages payable for trade fixtures installed by TENANT at its cost and expense and which are not part of the realty, or any moving expense, relocation expense, or loss of business claim. 24. SUBORDINATION OF LEASE: This Lease is and shall be subject and subordinate to any and all mortgages or deeds of trust now existing upon or that may be hereafter placed upon the Demised Premises or the property and to all advances made or to be made thereon, and all renewals, modifications, consolidations, replacements or extensions thereof and the lien of such mortgages, deed of trust and land leases shall be superior to all rights hereby and hereunder vested in TENANT, to the full extent of all sums secured hereby. This provision shall be self-operative and no further instrument or subordination shall be necessary to effectuate such subordination and the recording of any such mortgage or deed of trust shall have preference and precedence and be superior and prior in lien to this Lease, irrespective of the date of recording. In confirmation of such subordination, TENANT shall on request of LANDLORD or the holder of any such mortgage or deed of trust execute and deliver to LANDLORD within ten (10) days any instrument that LANDLORD or such holder may reasonably request. Should any prospective mortgagee or ground lessor require a modification of this Lease, which modification will not cause an increased cost or expense to TENANT or in any other way materially change the rights and obligations of TENANT hereunder in the reasonable judgment of TENANT, then and in such event, TENANT agrees that this Lease may be modified and agrees to promptly execute whatever documents are required therefor. Should any prospective mortgagee or ground lessor require execution of a short form of lease for recording (containing the names of the parties, a description of the Demised Parties, and the term of this Lease) or a certification from the TENANT concerning the Lease in such form as may be required by a prospective mortgagee or ground lessor, TENANT agrees to promptly execute such short form of lease or certificate and deliver same to LANDLORD within ten (10) days following the request therefore. -11- 25. NOTICES: All notices required or contemplated by this Lease shall be in writing and shall be delivered in person or by special courier or by United States Certified Mail, Return Receipt Requested, addressed to the party to whom such notice is directed at the address as shown in this lease or such other address as either LANDLORD or TENANT may designate as its new address for notice purposes. Any such notice shall be deemed to have been rendered or given on the date when it shall have been mailed as provided in this clause. 26. APPLICABLE LAW: This lease is entered into in the State of Florida and shall be governed by the applicable law of such State. 27. OPTION TO RENEW: Provided that this Lease shall be in full force and effect and TENANT shall not be in default under any provision of the Lease at the time that the right herein granted is exercised, TENANT shall have the right to renew this Lease for one (1) additional term of three (3) years (the "Extension Term") commencing the day after the Termination Date at the then prevailing rental rate for space in the Building of equivalent quality, size, utility and location with the length of the lease term and credit of the TENANT taken into account. Said right shall be exercisable by TENANT upon written notice to LANDLORD delivered at least one hundred and eighty (180) days prior to the Termination Date of the initial term of the Lease. If LANDLORD and TENANT cannot agree on the rental rate for the Extension Term within forty-five (45) days of TENANT's exercise of said right, then TENANT's right to extend hereunder shall expire and the Lease shall terminate on the Termination Date of the initial term of the Lease. During the Extension Term, the parties hereto shall be subject to all of the terms and conditions contained in this Lease, other than the amount of Base Annual Rent. Exercise of this right to extend shall not accord TENANT any further right to extend nor interfere with any rights of the LANDLORD to terminate this Lease. 28. ENTIRE AGREEMENT. This Lease contains the entire agreement between the parties. No oral or written statement or representation shall be binding upon either party unless expressly set forth in this Lease. This Lease may not be modified unless such agreement is set forth in writing by LANDLORD and TENANT. -12- IN WITNESS WHEREOF, LANDLORD and TENANT have duly executed this agreement as of the day and year first above written. WITNESS: LANDLORD: BOMBAY HOLDINGS, INC. /s/ Jean Utley By: /s/ Peter C. Morse ------------------------ --------------------------- P. C. Morse Chairman WITNESS: TENANT: BANK RATE MONITOR, INC. /s/ Peter C. Minford By: /s/ William P. Anderson ------------------------ --------------------------- William P. Anderson President -13- EX-10.4 5 PROFESSIONAL EMPLOYER AGREEMENT DATED 2/25/99 EXHIBIT 10.4 Client Services & Co-Employment Agreement This Client Services & Co-Employment Agreement ("Agreement") is entered into by and between Vincam Human Resources, Inc. and any of its subsidiaries or affiliates to which it may assign this Agreement ("Vincam"), and Intelligent Life Corporation (the "Client Company") is effective on 12:01 a.m. of the first day of first payroll period which Vincam begins its service (the "Effective Date"). 1. THE PARTIES' INTENT: THE CO-EMPLOYMENT ARRANGEMENT: By entering into this Agreement, the parties intend to create a co-employment arrangement to better facilitate the Client Company's core business by achieving certain economies of scale and scope in human resource-related areas. Because the co- employment arrangement is a special way of addressing complicated human resource issues, this Agreement allocates between Vincam and the Client Company the areas of responsibility and liability associated with the co-employment arrangement. 2. THE CREATION OF THE CO-EMPLOYMENT ARRANGEMENT: A co-employment arrangement is established by Vincam assuming some of the Client Company's rights and responsibilities with respect to the "Worksite Employees." The term "Worksite Employees" means individuals who have submitted a completed employment application to Vincam, been approved for hire by Vincam, and been assigned by Vincam to the Client Company's worksite to perform their services under the Client Company's direction and control. The term excludes 1) those employees hired by Vincam only (and not the Client Company) to provide the services offered by Vincam (i.e., Vincam Corporate Employees), or 2) individuals who may be providing services to the Client Company through a temporary staffing arrangement, as independent contractors, or any other arrangement. During the term of the Agreement, the Worksite Employees are employees of both Vincam and the Client Company. Vincam intends the term "co-employment" to have the same meaning as designated by some legal authorities in which a company (i.e., Vincam) by contract reserves and exercises a right of direction and control over the Worksite Employees assigned to the Client Company's location with the Client Company retaining sufficient direction and control over these employees as is necessary to conduct the Client Company's business and without which the Client Company would be unable to conduct business, discharge fiduciary responsibilities, or comply with the law. 2(A) THE CONVERSION PROCESS: Upon execution of the Agreement, Vincam undertakes the conversion process during which the parties mutually reach an agreement as to which of the Client Company's employees will become Worksite Employees. The parties agree that Vincam will not employ any Client Company employee who is not authorized to work by law. The Client Company agrees to transfer to Vincam's payroll all employees identified to become Worksite Employees provided each such employee accepts employment offered by Vincam. The Client Company retains the sole responsibility for any employee not chosen as a Worksite Employee if the person provides services to the Client Company during the term of this Agreement. When the conversion process is completed, Vincam assigns the Worksite Employees to the Client Company's worksite to perform the job duties required by the Client Company at that worksite. The addition of Vincam as a co-employer is communicated in writing to the employees so that everyone has a clear understanding of the co-employment arrangement. Because the co-employment arrangement begins with the Effective Date, the Client Company acknowledges that it is solely responsible for any employment-related investigation, demand, claim, and/or litigation that existed or accrued, or which relates to facts or circumstances which occurred before the Effective Date. The Client Company acknowledges that such responsibility includes, but is not limited to, payment of attorneys' fees, investigation costs, damages, liability, or similar changes, costs, or expenses, and that the Legal Defense Benefit, Section 11, is not --------------------------------- available under these circumstances. 3. HOW THE CO-EMPLOYMENT ARRANGEMENT AFFECTS THE CLIENT COMPANY'S BUSINESS: With the creation of the co-employment arrangement, Vincam assumes employer's rights as to the Worksite Employees, including without limitation, the right to hire, fire, discipline and pay wages. Although the Client Company no longer has sole employer rights, it retains the right to reject the assignment of any worker to its worksite by Vincam, provided that such rejection does not violate any law. The Client Company retains such direction, supervision, and control over the Worksite Employees as is necessary to conduct its business on a day-to-day basis. Further, the Client Company retains full responsibility for its business, products, and services; the determination of the level of wages to be paid above the Fair Labor Standards Act (FLSA) minimum wage and salary requirements; worksite premises; and any third party, subcontractor, independent contractor or non-Worksite Employee. At all times of this Agreement, Client Company shall have access to all personnel files of Worksite Employees and shall have the right, at Client Company's expense, to make copies of any and all materials contained in said files. 4. MUTUAL DUTY TO COOPERATE; SHARING OF INFORMATION: In recognition of the effort necessary to provide the services described in this Agreement, both parties agree to cooperate with each other. The parties acknowledge that the duty to cooperate is a material term of this Agreement. Vincam agrees to keep the Client Company informed about potential and actual employee problems KNOWN TO THE CLIENT COMPANY as they arise. Vincam will also provide the Client Company with copies of documents contained in a Worksite Employee's file at a reasonable cost provided that the Client Company gives Vincam reasonable notice of the need for such files. The Client Company agrees that it will cooperate with Vincam in the following fashion: A) promptly and accurately inform Vincam of all employees issues, KNOWN TO OR REASONABLY SHOULD HAVE BEEN KNOWN BY THE CLIENT COMPANY, including, but not limited to, employee work-related injuries or accidents, the employees' job functions and duties, number of hours worked, any union organizational activities, any formal or informal work-related complaints, including complaints of harassment or unfair treatment, charges of discrimination, governmental investigations, threatened employment-related lawsuits, or any similar employment-related developments; -2- B) assist, as necessary, in addressing employee issues, including, but not limited to, implementing policies and procedures recommended by Vincam, participating in any employment-related investigations, providing reasonable accommodations when required by the Americans with Disabilities Act (ADA) or other comparable laws, and taking steps REASONABLY required OR MANDATED BY OSHA for workplace safety; C) give Vincam (or its designated agents and/or attorneys) reasonable access to the worksite as well as access to information, data, files, etc., pertaining to the employees, UNLESS PROHIBITED OR PROSCRIBED BY LAW, which access includes the right to audit such information or examine the premises on a periodic basis; D) consult with Vincam before taking any employment action which could be construed as adverse to the employee (e.g., firing, demoting, changing job functions or responsibilities, transferring, etc.); E) cooperate in the defense of any employment-related claim, charge, lawsuit, investigation, audit, etc., which may be filed against Vincam, the Client Company, or both; and F) provide any other assistance reasonably necessary to perform the duties of this Agreement. This duty survives the termination or expiration of the Agreement as long as the cause of action arose during the existence of the Agreement. This duty to cooperate does not apply if the parties are litigating against the Client Company's failure to abide by this provision is a material breach for which Vincam could immediately terminate the Agreement pursuant to Termination, Section 10. 4(A) SHARING OF INFORMATION: 1) INFORMATION PROVIDED TO VINCAM BEFORE THE EFFECTIVE DATE. Before entering into this Agreement, the Client Company agreed to provide and has provided Vincam with all pertinent information regarding the Worksite Employees and the benefits provided to them, including the Client Company's ownership structure, the employees' compensation packages or information relating to the Client Company as a federal contractor, if applicable, such as the amount of a certified payroll. This information was gathered to assess whether the Client Company was an appropriate candidate for Vincam's services. In recognition of the sensitive nature of the information, Vincam represents to the Client Company that it has kept that information confidential and promises that it will continue to do so. By executing this Agreement, the Client Company represents to Vincam that the information was and continues to be accurate, to the best of the Client Company's knowledge. 2) SHARING INFORMATION DURING THE AGREEMENT'S EXISTENCE. The Client Company further agrees that the duty to cooperate includes the duty to share with Vincam, to the extent permitted by law, all information relating to the Worksite Employees and the worksite on an ongoing basis, including but not limited to, promptly providing Vincam with complete and accurate information pertaining to anything affecting the worksite and the Worksite Employees (e.g., hours worked, eligibility for benefits, non-qualified pension plans, employee accidents and injuries, classification of an employee for workers' compensation purposes, rejection of the -3- assignment of a Worksite Employee). The Client Company agrees to collect, verify, and transmit to Vincam's administrative office not less than three (3) business days before each payroll date any information required to determine accurately the amount due to the Worksite Employees and Vincam. The Client Company agrees to give Vincam written notice before it closes a plant, facility, or takes any other action which would require compliance with the federal Worker Adjustment Retraining Notification Act (WARN), or makes an assignment for the benefit of creditors, files for relief under the U.S. Bankruptcy Code, or seeks the appointment of a receiver. The Client Company agrees that it will notify Vincam at least ten (10) days before a WARN notification is required to be given to the Worksite Employees. The Client Company agrees to continue to make complete and truthful disclosures to Vincam of any employment-related information Vincam needs to perform the duties of this Agreement. Each party agrees to notify the other immediately of any claim to which the indemnification may apply (see Indemnification, Section 8). -------------------------- 4(B) CONFIDENTIAL, PROPRIETARY INFORMATION, TRADE SECRETS, AND INTELLECTUAL PROPERTY. Because each party will have access to information which may be confidential, proprietary, and/or trade secrets of the other party, the parties agree that they will treat confidentially any such information identified to the other as being confidential and not disclose the information to any third party (except a trusted advisor, such as the party's attorney, accountant, or financial advisor) unless required by law. The parties agree that, if a party gives its trusted advisor any confidential, proprietary information, and/or trade secrets of the other party, it will take all reasonable steps to ensure that its trusted advisor preserves the confidential nature of the information. Any information, data, etc., which the other party advises the other is confidential, proprietary, and/or a trade secret is included in this Section, whether such information is considered as such under the law. The parties agree that this Agreement and information contained in any attachments to the Agreement, all Vincam forms, manuals, handbooks, or other materials prepared by Vincam and used to perform the duties of this Agreement for the Client Company are considered proprietary. The Client Company is responsible for taking the necessary precautions to designate and safeguard information it considers confidential, proprietary and/or a trade secret. The parties agree to use the Confidential Information to facilitate the performance or enforcement of this Agreement and for no other purposes. If the Agreement is terminated or expires, this provision survives for five (5) years after such event or until the information becomes known to the general public. The parties acknowledge that a breach of this provision would create irreparable harm and, therefore, the non-breaching party would be entitled to an injunction or similar remedy to specifically enforce this provision. The parties specifically acknowledge that money damages alone may not be an adequate remedy for any damage which might be suffered as a result of a breach of this provision. Nothing in this provision shall be construed as prohibiting the non-breaching party from any other remedy or remedies including, but not limited to, recovery of damages. The parties also acknowledge that the Client Company is the owner of any intellectual property existing before the term of this Agreement or created during the term of the Agreement relating to the business of the Client Company, including but not limited to, inventions, patents, copyrights, and trade secrets. The Client Company, as the owner of the intellectual property, is responsible for ensuring that these are protected as well as for payment of any associated costs. -4- 5. VINCAM'S SERVICES AND RESPONSIBILITIES: Vincam will co-employ Worksite Employees and will provide the Client Company with human resource services, employment practices management, and other services more particularly described below. 5(A) VINCAM'S RESPONSIBILITY REGARDING THE PAYMENT OF WAGES AND OTHER EMPLOYMENT-RELATED COSTS: As a co-employer of the Worksite Employees, Vincam assumes sole responsibility for paying wages to Worksite Employees without regard to payment by the Client Company to Vincam and collecting and paying employment-related taxes (including those pertaining to the Federal Insurance Contributions Act, Federal Unemployment Tax Act, the applicable income tax withholdings, State Unemployment Insurance, etc.) and providing mandatory employee benefits (including workers' compensation), and other voluntary employment benefits as may be provided to the Worksite Employees. (See Subsection 5C) employee benefits.) However, the Client Company acknowledges that, to perform these responsibilities, Vincam relies on the Client Company to supply it with correct information regarding hours worked, job classifications, and other data Vincam needs to compute accurately wages, taxes, and other employment costs. The Client Company agrees to provide Vincam with complete and accurate information and agrees to reimburse Vincam for any costs it incurs if such information is wrong (whether intended or not). This remedy is in addition to any other remedy available to Vincam under this Agreement. 5(B) VINCAM'S MANAGEMENT OF EMPLOYMENT PRACTICES: Part of the service Vincam provides to the Client Company is guidance regarding good management techniques and compliance with various employment laws. For any Worksite Employee covered by this Agreement, Vincam will assist the Client Company by providing compliance guidance regarding the following laws, as amended from time to time: 1) the FLSA and/or comparable state or local laws; 2) the Consolidated Omnibus Budget Reconciliation Act (i.e., COBRA, the federal group health plan continuation coverage); 3) the Immigration and Nationality Act and the immigration Reform and Control Act (the Client Company is considered the employer for purposes of petitioning and applying for immigration benefits under these laws); [CHANGE FOR 1998] 4) the Consumer Credit Protection Act and/or comparable state or local laws; 5) the Employee Retirement Income Security Act (ERISA) and other laws covering employee benefit plans (e.g., group health, cafeteria, and 401(k) Plans); 6) the Family and Medical Leave Act and similar state or local leave laws; 7) the Occupational Safety and Health Act (OSHA) and comparable state or local laws, regulations, or ordinances. Vincam retains a right of direction and control over the management of safety, risk, and hazard control at the worksite affecting the Worksite Employees, including -5- responsibility for performing safety inspections of the Client Company equipment and premises, and promulgating employment and safety policies; 8) the National Labor Relations Act. The parties acknowledge that the Client Company is the employer which would be the party to any collective bargaining agreement because the Client Company exercises control over the primary employment conditions subject to a collective bargaining agreement. Vincam acknowledges that the union is the exclusive bargaining representative for employees covered by any valid collective bargaining agreement. Vincam will abide by the terms and conditions of any valid collective bargaining agreement whether in existence as of the Effective Date or if subsequently entered into by the Client Company and a union; and 9) all other applicable federal, state, or local employment laws (e.g., Title VII of the Civil Rights Act, the ADA, the Age Discrimination in Employment Act, etc., as well as those pertaining to federal contractors if the Client Company is a government contractor), except for those obligations which the responsibility of the Client Company as set forth in Client Company's ---------------- Responsibilities, Section 6, below. Vincam does not provide services relating - --------------------------- to Title III of the ADA (e.g., making the facility accessible to the public, etc.), however, and Vincam is not responsible for the cost of reasonable accommodation under Title III. 5(C) WORKERS' COMPENSATION COVERAGE. Vincam will maintain workers' compensation coverage for each Worksite Employee employed as of the Effective Date in accordance with the laws of the states in which Vincam provides services under this Agreement. For a person hired after the Effective Date to be covered under Vincam's workers' compensation policy, the Client Company must submit to Vincam the person's completed employment application within two (2) business days from the date the Client Company selected the person for employment, and --- Vincam must approve the person for employment as well as assign the person to the Client Company's worksite. If these two conditions are not met, the Client Company is responsible for providing workers' compensation coverage for that person. (See Section 6(E) for Client Company's responsibilities regarding workers' compensation.) 5(D) EMPLOYEE BENEFITS: 1) THE CONVERSION PROCESS AND EMPLOYEE BENEFITS. As a part of the conversion process, Vincam will provide group health plan coverage to all of the Client Company's identified COBRA participants who are covered under the Client Company's active group health plan provided the following conditions are met: a) the participants were covered under the Client Company's plan on the day before the Effective Date, b) Vincam hires all of the employees at the Client Company's worksite at the time of the conversion following the procedure described in The Creation of the Co-Employment --------------------------------- Arrangement, Section 2, c) the Client Company terminates the group health - ---------------------- insurance plan covering these employees, and d) the Worksite Employees immediately thereafter become covered under a group health plan sponsored by Vincam. Such coverage will be in accordance with the general COBRA rules. If these conditions are not met, then the Client Company continues to be responsible under COBRA for these individuals. -6- 2) EMPLOYEE BENEFITS DURING THE ARRANGEMENT'S EXISTENCE. Vincam agrees to assist in administering the Client Company's policies as they may from time to time be amended, regarding employee benefits such as vacation, sick leave, family leave, and other comparable benefits. Vincam further agrees to offer to Worksite Employees certain employee benefits, such as group health insurance, 401(k), and other benefits as identified in the Employee Benefit Attachment to this Agreement provided and for so long as all eligibility requirements and governing laws for the specific plan are satisfied. The parties acknowledge that Vincam is the only sponsor of such plans and is solely responsible for their administration and compliance with the law. The Client Company agrees that it does not and will not co-sponsor any of Vincam's employee benefit plans. If the eligibility requirements of a particular plan cannot be met, Vincam retains the discretion not to provide, or to discontinue, the benefits of that particular Vincam plan while this Agreement is in effect or to terminate the Agreement. 5(E) LICENSES; ACCREDITATION: Because Vincam operates in some states which require professional employer organizations such as Vincam to obtain a license or registration to perform these services, Vincam agrees to maintain any applicable licenses or state registration. Vincam agrees to operate in the unregulated states using, as a minimum, the standards imposed by the regulated states. Vincam is also accredited by the Institute for the Accreditation of Professional Employer Organizations (IAPEO) which has established service standards. As part of its dedication to quality service, Vincam agrees to maintain such accreditation and to use its best efforts to comply with such service standards. 5(F) INSURANCE. Vincam agrees to maintain all required employment-related insurance to perform the services of this Agreement, such as workers' compensation insurance. The parties acknowledge and agree that Vincam is not an insurer, procurer or broker of insurance products, or agent selling the Client Company insurance or insurance products. As an employer, Vincam provides the Worksite Employees with workers' compensation and other employee benefits. The Client Company is not a party to any of Vincam's insurance contracts which insure any of Vincam's employer obligations or employee benefit plans. Additionally, the Client Company acknowledges that it is not a co-sponsor of such plans. The Client Company understands that the cost of the employee benefits or Vincam's employer obligations is a part of Vincam's cost of doing business and does not constitute an additional expense charged to the Client Company. 6. CLIENT COMPANY'S RESPONSIBILITIES. The co-employment arrangement involves a shifting of certain responsibilities between two employers. Because the co-employment arrangement does not create identical corresponding responsibilities between the parties, the Client Company has some responsibilities which Vincam does not and vice versa. To have a clear understanding of these duties, this Section sets forth the Client Company's responsibilities under this Agreement. The Client Company agrees to comply with the laws described in the Vincam Services and Responsibilities, Section 5, ----------------------------------------------- listed above. The Client Company recognizes that Vincam's provision of services does not relieve the Client Company of responsibility and liability for those matters over which it has control. Additionally, the Client Company agrees to comply with any other laws affecting or regulating its business, including, but not limited to, professional licensing, etc. The following is a list of the Client Company's responsibilities: -7- 6(A) FOLLOWING VINCAM'S POLICIES AND PROCEDURES: The Client Company agrees to follow Vincam's policies and procedures relating to the Worksite Employees, such as reporting changes of employment status, request for leave, workers' compensation injuries, termination, etc. The Client Company agrees to follow the procedure for hiring individuals described in Vincam's Services and --------------------- Responsibilities, Section 5(C). The Client Company agrees to use Vincam- - ------------------------------ provided forms (e.g., employment application, change of status, etc.) for the Worksite Employees. The Client Company acknowledges that Vincam has the right to retain and reassign a Worksite Employee who has been terminated by the Client Company (i.e., a Worksite Employee whose assignment to the Client Company's worksite has been rejected). 6(B) WORKSITE SAFETY. Because the Client Company owns and controls the worksite, the Client Company agrees to comply with all federal and state health and safety laws, regulations, ordinances, rules, etc., as amended, including, but not limited to, those governing OSHA, workers' compensation, etc. The Client Company agrees to pay for, provide, and ensure the Worksite Employee's use of any equipment required by law or reasonably required by Vincam or its insurers for worksite safety. If Vincam informs the Client Company of an unsafe working condition or a violation of any applicable law, the Client Company agrees to take the necessary steps to rectify the unsafe condition or correct the violation within a reasonable time and acknowledges it is responsible for payments associated with remedying the problem. Failure of the Client Company to make the necessary correction means that the Client Company assumes all responsibility associated with the condition or violation and that Vincam has the right to terminate the Agreement immediately in accordance with the provisions set forth in Termination, Section 10. ----------------------- 6(C) WAGE AND HOUR LAWS. Because the Client Company controls the worksite and the scheduling of the Worksite Employees, it agrees to obtain and accurately report to Vincam the total number of hours worked by each Worksite Employee in accordance with FLSA. If the Client Company fails to comply with the FLSA and similar state laws or fails to disclose to Vincam a practice that results in an employee not being paid for all time worked, this will be a material breach of the Agreement, and the Agreement may be terminated in accordance with Termination, Section 10. Failure of the Client Company to make the necessary - ----------------------- corrections for a noted violation of the FLSA means that the Client Company assumes all responsibility associated with the condition or violation. 6(D) PREVENTION OF THEFT, DESTRUCTION OF PROPERTY, ETC. The Client Company is responsible for implementing and enforcing worksite procedures necessary to prevent the misuse, destruction, misappropriation, theft, or embezzlement of personal, real, or intellectual property of the Client Company or its customers or clients. 6(E) WORKERS' COMPENSATION. To contain the cost of workers' compensation insurance, the Client Company agrees to participate in a modified (or light) duty program. The Client Company agrees that, during this Agreement, it will not employ anyone outside the co-employment arrangement (e.g., non-Worksite Employees) without Vincam's knowledge, except for independent contractors. The Client Company agrees that, if it hires anyone outside the co-employment arrangement (after having informed Vincam), it will obtain full workers' -8- compensation coverage and name Vincam as a certificate holder. Under those circumstances, the Client Company will provide Vincam with a certificate reflecting the same and which contains a provision requiring the insurer to notify Vincam in advance of any termination of coverage. The Client Company agrees to require all independent contractors to provide evidence of workers' compensation coverage before the contractor starts work at the worksite. (See Section 5(C) for Vincam's responsibilities regarding workers' compensation). 6(F) COMPLIANCE WITH THE ADA AND OTHER COMPARABLE LAWS. Because the ADA and comparable laws impose affirmative obligations on employers to provide a reasonable accommodation to a qualified individual with a disability, UNLESS THIS WOULD CAUSE AN UNDUE HARDSHIP, and to make a public facility accessible, IF READILY ACHIEVABLE, the Client Company agrees that it will pay the costs associated with complying with these laws. The Client Company acknowledges that it, and not Vincam, assumes the responsibility for providing regulatory compliance with Title III of the ADA (i.e., public access to facilities). 6(G) EMPLOYMENT TAXES. The Client Company agrees not to make any taxable payment of any kind, except profit sharing or pension plan distributions pursuant to the terms of a qualified plan, to any Worksite Employee without Vincam's knowledge. This requirement is necessary because Vincam assumes the responsibility under Vincam's Services and Responsibilities, Section 5(A) for ---------------------------------------------------- complying with laws regarding the payment of wages. If the Client Company makes such a payment, it has materially breached the Agreement which may not be terminated in accordance with the provisions set forth in Termination, Section -------------------- 10. - -- 6(H) EMPLOYEE BENEFIT PLANS. The Client Company agrees and acknowledges that it is not authorized to offer or continue any welfare benefit (e.g., medical, dental, life or disability, 401(k) plan, cafeteria plan, profit sharing plan, or retirement plan) to any Worksite Employee without Vincam's knowledge and prior written consent. The Client Company agrees to integrate and coordinate any Client Company-sponsored benefit plans with those sponsored and maintained by Vincam. 6(I) WORKSITE EMPLOYEES' PERFORMANCE; THE SUCCESS OF THE CLIENT COMPANY'S BUSINESS. The Client Company acknowledges that Vincam does not guarantee the Worksite Employees' performance because Vincam does not direct, supervise, or control the day-to-day operations of the Client Company's business. If any law requires a Worksite Employee to have or maintain a special license or be supervised by a Worksite Employee with such a license, the Client Company will ensure that the Worksite Employee is so licensed or supervised. The Client Company will pay for the costs associated with obtaining such license. Further, because the Client Company controls its business affairs, it acknowledges that Vincam is not responsible for any loss of revenue, product, business, or injury to the Client Company or a third party due to any act or omission of a Worksite Employee. 6(J) INSURANCE. In recognition of the co-employment arrangement, the Client Company agrees to maintain the types of insurance listed below with a minimum combined single limit of One Million Dollars. The Client Company agrees to provide Vincam with a copy of the insurance certificate regarding the applicable insurance when requested. The Client -9- Company agrees to inform Vincam immediately if any of the Client Company's insurers materially modify the terms of the insurance discussed below, inform the Client Company of a pending termination of coverage, or terminate coverage. 1) Automobile coverage for all vehicles used in connection with the business, whether or not owned by the Client Company. Such insurance must also cover public liability for bodily injury and property damage for each vehicle up the above-stated limit and uninsured motorist or PIP equivalent coverage of at least the minimum limits required by state law. 2) General liability coverage for the premises, operations, products, completed operations, contract and broad form property damage, independent contractors, personal injury with coverage for host liquor, dram shop, and full liquor liability as applicable. 3) Professional licensing, malpractice, and/or liability coverage if the Client Company renders professional services and provides services which require employees to be licensed. 4) Any fidelity bond reasonably required because of the Client Company's business. 6(K) THE NATIONAL LABOR RELATIONS ACT. The Client Company agrees to abide by the National Labor Relations Act. Because the decision to operate as a union or a non-union business is a core business decision belonging solely to the Client Company, the Client Company is responsible for all decisions related to a union organizing campaign, the negotiation of a collective bargaining agreement, and the processing of grievances and arbitrations under the collective bargaining agreement. 7. PAYMENT. The Client Company agrees to pay the amount specified in the Pricing Attachment which amount will be invoiced in advance of the Client Company's payroll dates. The Client Company agrees to pay Vincam's invoice no later than forty-eight (48) hours before the Client Company's regularly scheduled payroll. The Client Company agrees to pay through Automatic Clearing House ("ACH") debit transfer or with a bank wire transfer. Any amount not paid when due will be assessed a late charge of five (5) percent or the maximum allowable by law. The payment of a late charge does not prevent a default under this Agreement, or the enforcement of any remedies upon default including termination of this Agreement as provided in the Termination, Section 10. The ----------------------- Client Company acknowledges that the price is subject to adjustment (i.e., upward or downward) on the anniversary date of the Effective Date, except that the portion of Vincam's fee that relates to employee benefits will always adjust in accordance with the benefit plan or insurance policy renewal or anniversary date. Any change in price (exclusive of the employee benefits portion) will remain fixed until the next anniversary date of the Effective Date. Because of Vincam's obligation to pay the Worksite Employees, Vincam retains the discretion to require the Client Company to give Vincam a deposit or letter of credit in an amount equal to one invoice. If the Client Company defaults on its payment obligation to Vincam, any deposit immediately becomes Vincam's money or, if the Client Company provided a letter of credit, Vincam has the immediate right to draw down on the letter in the amount of the default. On each anniversary date of the Effective Date, Vincam will evaluate the Client -10- Company's payment history and financial wherewithal to determine whether a deposit should be obtained, the amount of deposit should be adjusted or be returned to the Client Company, or, if applicable, if the letter of credit should be canceled. When the Agreement is terminated, Vincam agrees to return any unused deposit or cancel the letter of credit, if any. Vincam agrees to maintain any deposit in an account segregated for that purpose, accruing an interest rate as set forth in the Pricing Attachment. Because Vincam's obligations to pay the Worksite Employees is derived from this Agreement, the Client Company agrees that Vincam's only obligation is to pay the FLSA or state minimum wage or salary required to any Worksite Employee where the Client Company has breached the Agreement by failing to pay the invoice when due. None of the remedies contained in this Section constitutes a waiver of any other remedies available to Vincam in the event of a default of the Agreement. 8. INDEMNIFICATION. These Sections describe the scope of each party's indemnification obligations. The parties agree that the indemnification provision shall not be limited to claims, expenses, or liabilities of which one of the parties is solely liable, but also applies to claims, expenses, or liabilities for which the parties are jointly liable. In the event of joint liability, if either party pays funds in connection with a claim, expense, or liability which is subject to the indemnification provision in excess of its prorate share, the other party will indemnify that party for the excess amounts. Each party agrees to notify the other of any claim or judgment to which this indemnification provision may apply. Further, the parties agree not to settle any claim to which the indemnity provision may apply or in which we are both named as defendants without the prior written consent of the other party, which consent will not be unreasonably withheld. Each party's indemnification obligation survives the termination or expiration of the Agreement. 8(A) SCOPE OF THE CLIENT COMPANY'S INDEMNIFICATION. The Client Company agrees to indemnify, protect, defend, release, and hold Vincam, its parent, subsidiaries, affiliates, employees, directors, officers, and agents harmless from and against any and all liability, expenses (including attorneys' fees and court costs), losses, and claims for damage of any nature whatsoever, whether direct or indirect, as though expressly set forth and described herein, which Vincam may incur, suffer, become liable for or which may be asserted against Vincom arising from or in connection with (i) the Client Company's negligent, fraudulent, willful, or reckless performance or nonperformance of any of its responsibilities or obligations under this Agreement; (ii) any actions or inactions of the Client Company's employees, officers, directors, agents, or independent contractors, including, without limitation, negligence, errors or omissions, tortious conduct, violation of any statue, law, or regulation, or criminal or dishonest activity, while under the supervision, direction, or control of the Client Company; (iii) the Client Company's noncompliance with any of the responsibilities enumerated in Client Company's Responsibilities, Section ------------------------------------------ 6, to the extent that the Client Company has direction and control of such - - responsibility; (iv) the Client Company's business, product, or service, claims for defective products or services rendered at or produced by the operations at the worksite, and the fiscal integrity of the Client Company; (v) any negligence, tortious conduct, violation of statute, law, or regulation, criminal or dishonest activity attributed to the Client Company; (vi) any claims based on facts or circumstances relating to the Client Company's activities that occurred or existed -11- prior to the Effective Date; or (vii) the Client Company's failure to adhere to Vincam's procedures or recommendations regarding employment practices. 8(B) SCOPE OF VINCAM'S INDEMNIFICATION. Vincam agrees to indemnify, protect, defend, release, and hold the Client Company, its parent, subsidiaries, affiliates, employees, directors, officers, and agents harmless from and against any and all liability, expenses (including attorney's fees and court costs), losses, and claims for damage of any nature whatsoever, whether direct or indirect, as though expressly set forth and described herein, which the Client Company may incur, suffer, become liable for or which may be asserted against the Client Company arising from or in connection with (i) Vincam's negligent, fraudulent, willful, or reckless performance or nonperformance of any of its responsibilities or obligations under this Agreement; (ii) any actions or inactions of any of Vincam's Corporate Employees, Vincam's officers or directors, as well as agents or independent contractors engaged by Vincam, including, without limitation, negligence, errors or omissions, tortious conduct, violation of any statute, law, or regulation, criminal or dishonest activity, while under the supervision, direction, or control of Vincam; (iii) Vincam's noncompliance with any of the responsibilities enumerated in Vincam's -------- Services and Responsibilities, Section 5 to the extent that Vincam has direction - ---------------------------------------- and control of such responsibility; (iv) any negligence, tortious conduct, violation of statute, law, or regulation, criminal or dishonest activity attributed to Vincam, or (v) any claims based on facts or circumstances relating to Vincam's activities that occurred or existed prior to the Effective Date. 9. MISCELLANEOUS PROVISIONS. 9(A) THE PARTIES' AUTHORITY TO EXECUTE THE AGREEMENT. The parties represent that each is a legal entity authorized to conduct business in the state where the services of this Agreement will be performed and that the officers who sign on behalf of the party are duly authorized to enter into this Agreement. 9(B) THE SCOPE OF THE CLIENT COMPANY'S AUTHORITY. The Client Company cannot hold itself out as an agent of Vincam, directly or indirectly, and is not authorized to bind Vincam in any fashion (either through representations or its actions) unless such action is specifically authorized and ratified by Vincam in writing. 9(C) ASSIGNMENT; THIRD PARTY RIGHTS. This Agreement is a personal services contract and is not transferable or assignable by the Client Company without Vincam's prior written consent. The Client Company cannot assign the services of a Worksite Employee to anyone without Vincam's prior written consent except as needed in the normal course of business. Vincam may, however, assign this Agreement to any of its subsidiaries or affiliates without the prior written consent of the Client Company. For purposes of this Agreement, a merger of the Client Company will constitute a transfer which requires Vincam's prior written consent. This Agreement is for the mutual benefit of the parties and does not create rights of any kind in a third party. 9(D) INTEGRATION; MODIFICATION; WAIVER. This Agreement constitutes the entire agreement between the parties regarding this subject matter and supersedes any other agreement between them, whether oral or written. Any modification to the Agreement must be in writing -12- and signed by the party against which enforcement is to be sought. Failure by either party to act when required or to claim a breach of any provision of this Agreement will not be construed as a waiver of any subsequent breach. 9(E) MEDIATION AND ARBITRATION. If a dispute arises between the parties relating to the terms of this Agreement, either party may inform the other by giving written notice that it desires to have the dispute mediated by a mediator selected in accordance with the procedures of the Federal Mediation and Conciliation Service, or by a procedure as agreed by the parties to the dispute. Once mediation is elected, the parties agree to allow a minimum of sixty (60) calendar days to resolve the dispute through mediation. Any mediation hearing shall be conducted in Miami, Florida, or any other location which is mutually agreed to by the parties in writing. If the dispute is not resolved through mediation, either party to the dispute may elect to arbitrate the dispute by serving written notice upon the other within fifteen (15) calendar days after the mediation. Once arbitration is elected, the dispute shall be resolved by a committee of arbitrators (one appointed by Vincam, one appointed by Client Company, and one appointed by the two so appointed). Any arbitration proceeding conducted shall be conducted in Miami, Florida, pursuant to the Commercial Arbitration Rules of the American Arbitration Association and using the Florida Rules of Civil Procedure and the Florida Rules of Evidence. 9(F) REMEDIES NOT EXCLUSIVE; SEVERABILITY. The rights and remedies provided by this Agreement are not exclusive. Vincam is entitled to any rights or remedies created by law (whether currently existing or created in the future) as well as those contained in this Agreement. Institution of an action to collect payment of an amount in default at law or the obtaining of a judgment in such action shall not be deemed to be an election of remedies by Vincam. Such action will not prevent Vincam from pursuing other remedies available to it at law or in equity. Should any part of this Agreement be held to be invalid or unenforceable, the balance of this Agreement remains in force and stands as if the unenforceable part did not exist. 9(G) GOVERNING LAW. This Agreement is governed by, and shall be construed in accordance with, the laws of Florida, both substantive and remedial, without reference to the choice of law principles. All suits and special proceedings arising out of the Agreement must be brought in the courts in and for Dade County, Florida, or the United States District Court for the Southern District of Florida unless the parties agree to mediate or arbitrate as provided in subsection 9(E) above. Each party agrees to the exercise of personal jurisdiction by any court of competent jurisdiction described in the prior sentences. 9(H) ATTORNEY'S FEES AND COSTS. In the event of any litigation arising out of or related to this Agreement, the prevailing party shall be entitled to an award of attorneys' fees and costs incurred at all trial and appellate levels. Further, if any payments are not made when due and the payments are collected by or through an attorney, the Client Company agrees to pay all expenses and costs of collection, including attorney's fees and court costs. 9(I) ATTACHMENTS; COUNTERPARTS; NOTICE; CAPTIONS. Any attachments described in this Agreement are specifically incorporated into and made a part of this Agreement. This Agreement may be executed in two or more counterparts, each of which will constitute an -13- original but taken together constitutes an entire agreement. Any notice by this Agreement shall be delivered to Vincam and to Client Company at the respective address and person designated below. The captions in this Agreement are provided for convenience only and are not part of the terms and conditions of this Agreement. 9(J) SURVIVAL. No termination or expiration of this Agreement affects or impairs the obligation, duties, indemnities, and liabilities of the Client Company, or the rights of Vincam relating to any unpaid obligations. These obligations, duties, indemnities, and liabilities shall not terminate or expire, but rather survive such termination or expiration and continue in full force and effect until the longer of (i) such time as all the obligations have been paid in full, or (ii) such time as is expressly provided in this Agreement. 10. TERMINATION. This Agreement has an initial one (1) year term starting on the Effective Date. During the first year, either party may terminate the Agreement by giving thirty (30) days' written notice unless terminated for Cause, as defined below. After the first year, the Agreement renews automatically on its anniversary date for an additional year's term unless a party provides the other with written notice of non-renewal not later than thirty (30) days before the next anniversary date of the Effective Date. Either party may terminate this Agreement at any time if there is Cause. Cause includes, but is not limited to, non-payment when due of any amount payable under this Agreement, a material violation of law, non-performance of any obligation of this Agreement, breach of a material term of this Agreement, or the Client Company's filing for relief under the Bankruptcy Code or seeking the appointment of a receiver or trustee. Upon termination, Vincam shall have all of the rights and remedies available under applicable law, whether in law or in equity, including, but not limited to, and without further notice or demand to the Client Company; (i) all obligations evidenced hereby, together with all accrued but unpaid charges, shall immediately become due and payable and may be collected forthwith, regardless of due date; (ii) to set off and deduct any amount due under this Agreement form any account or deposit that the Client Company may have with Vincam or other monies to which Vincam may be entitled from the Client Company (including pursuant to a draw on a letter of credit); (iii) to institute legal proceedings against the Client Company, and any other individual or entity which may be primarily or secondarily liable under this Agreement, to collect any amounts owed under this Agreement; and (iv) to declare all other obligations of the Client Company to Vincam to be immediately due and payable. Interest shall accrue on any outstanding balance of the obligations due under this Agreement from the date of any default hereunder and for so long as such default continues at the highest default rate allowable under applicable law. 10(A) EFFECT OF TERMINATION OF THE AGREEMENT ON THE WORKSITE EMPLOYEES; THE PARTIES' OBLIGATIONS UPON TERMINATION. Upon termination of the Agreement, the co-employment arrangement ends. If the termination is for any reason other than the Client Company's breach, including for non-payment, the Client Company has the right to offer continued employment to the former Worksite Employees. If the Client Company rejects any person, Vincam has the right to offer continued employment and to reassign that individual to another worksite. If the termination is because the Client Company breached the Agreement, including for non-payment, Vincam has the first right to offer continued employment and to -14- reassign the former Worksite Employees. Upon termination of the Agreement, the Worksite Employees are no longer employees of Vincam unless Vincam has offered continued employment. Vincam will communicate the change in employment status to the employees in writing. Vincam will cause the termination of all policies and/or endorsements covering the Client Company and the Worksite Employees. At the termination, the Client Company becomes responsible for payroll, workers' compensation, employee benefits, etc., for the employees. The Client Company agrees to pay Vincam immediately an amount for any unused, accrued paid time off (e.g., vacation, sick, personal days) to which any Worksite Employee is entitled upon the termination of the Agreement. If the Client Company terminates the Agreement or breaches it, the Client Company is solely responsible for obtaining replacement health care coverage for the Worksite Employees. If the Client Company fails to obtain replacement health insurance (or comparable) coverage for the Worksite Employees, the Client Company shall immediately pay Vincam a fee of $500 per worker which cannot be used as an offset against any fee due Vincam or any money due to Worksite Employees. The Client Company acknowledges that this amount is reasonable to cover Vincam's expense in extending continued health care coverage to the Worksite Employees and that this amount is not a penalty. The Client Company further agrees that the payment of this sum does not constitute an election of remedies and that Vincam may obtain money damages for a breach of the Agreement in addition to this amount. Vincam agrees to assist the Client Company during the transaction period by giving the Client Company information regarding workers' compensation coverage, the health insurance plans and other benefits, and the carryover balances (such as accrued vacation). Vincam is not obligated to provide this information if the termination of the Agreement is because the Client Company failed to pay Vincam. 11. THE LEGAL DEFENSE BENEFIT. Even in the absence of wrongdoing, employers can be sued. Because of that possibility and Vincam's belief in its services, Vincam provides the Client Company the legal defense benefit. This benefit is not additional indemnification; it is not to be used as a fund to --- --- settle disputes between the Client Company, Vincam, and a Worksite Employee (former or current). This is a "value-added" benefit for which the Client Company pays no additional fee. It is Vincam's promise to pay up to $75,000 in attorney's fees under the circumstances described below. 11(A) CONDITIONS RELATED TO OBTAIN THE LEGAL DEFENSE BENEFIT. To obtain a legal defense benefit, the Client Company must fulfill all of the following requirements for the particular claim: 1) comply with applicable law, 2) observe Vincam's procedures for employment practices (both in general and for that worksite), 3) follow Vincam's recommendation(s) regarding the incident from which the claim arose, 4) use only Vincam-provided forms, 5) comply with this Agreement, and 6) permit Vincam to exercise its responsibilities pursuant to law and this Agreement. To obtain this benefit, the Client Company agrees to accept Vincam's choice of counsel. If the Client Company prefers to select its own counsel, it is free to do so. In that event, this benefit is not available to cover the legal fees associated with that retention. If there is a conflict between the Client Company and Vincam, this benefit is not available. -15- 11(B) SCOPE OF THE LEGAL DEFENSE BENEFIT. If the Client Company fulfills the above requirements, Vincam will pay up to $75,000 for attorney's fees to cover any employment practices claim filed under one of the laws enumerated in Vincam's Services and Responsibilities, Section 5, between a Worksite Employee - ------------------------------------------------- and the Client Company, Vincam, or both while this Agreement is in effect. Specifically excluded are third party liability claims of any kind, including, but not limited to, those arising from automobile accidents and/or personal injury litigation. The legal fees for this benefit will be based on the hourly rate that the law firm selected by Vincam charges Vincam. 12. VINCAM'S SERVICE GUARANTEE. Vincam is confident about the quality of its services. As a result, we make the following guarantee: if the Client Company is not satisfied with Vincam's services and the Client Company wishes to terminate the Agreement within the first six months of the initial Effective Date, Vincam will refund all fees the Client Company paid Vincam excluding wages, direct expenses, payroll taxes, employee benefits, workers' compensation costs, and other mandatory insurance (e.g., State Unemployment Insurance). Vincam will provide, at no cost, assistance to the Client Company so that it may resume full employer responsibilities. This assistance includes giving the Client Company information necessary to obtain workers' compensation coverage, health insurance plans and other benefits, arranging for payroll service, and furnishing all carryover balances (such as accrued vacation). This benefit is not available if the Client Company breaches the Agreement, including failure to pay. 13. EMPLOYMENT PRACTICES LIABILITY (EPL) INSURANCE. Vincam has purchased an EPL insurance policy with an endorsement that extends coverage to the Client Company for claims brought by a Workplace Employee against the Client Company alleging wrongful employment practices, as defined in the policy. The Client Company's coverage is subject to annual aggregate limits and a deductible, among other terms and conditions contained in the policy. A copy of the policy may be obtained from our EPL carrier. Vincam and the Client Company execute this Agreement, in their respective corporate names by their duly authorized officers, on the 25th day of February, 1999. INTELLIGENT LIFE CORP. VINCAM HUMAN RESOURCES, INC. By: /s/ Peter W. Minford By: /s/ Jose M. Sanchez -------------------------- ----------------------------- Name: Peter W. Minford Name: Jose M. Sanchez ------------------------ -------------------------- Title: S. V. P. Title: President --------------------- ------------------------ -16- ADDENDUM -------- Access to Personnel Files At all times during the term of this Agreement, Client Company shall have access to all personnel files of Worksite Employees and shall have the right, at Client Company's expense, to make copies of any and all materials contained in said files. PRICING ATTACHMENT VINCAM HUMAN RESOURCES, INC. CLIENT SERVICES & CO-EMPLOYMENT AGREEMENT FOR BANK RATE MONITOR
WORKER'S COMP CURRENT CURRENT CURRENT PROPOSED NEW PROPOSED NEW CODE PAYROLL SERVICE FEE COSTS SERVICE FEE COSTS CA8810 $ 8,323 117.11% $ 9,748 115.61% $ 9,623 8742 $ 17,500 114.88% $ 20,104 112.88% $ 19,754 8810 $312,274 114.40% $357,236 112.40% $350,990 IL8810 $ 6,250 116.36% $ 7,273 114.86% $ 7,179 NJ8810 $ 6,667 117.74% $ 7,850 116.24% $ 7,750
VINCAM'S PERCENTAGE OF GROSS PAYROLL WILL DECREASE PROPORTIONALLY WHEN EMPLOYEES REACH LIMITS FOR PAYROLL TAXES AS PRESCRIBED BY LAW. FEES: - ---- (1) Vincam's percentage of gross payroll will decrease proportionately when employees reach the limits for payroll taxes as prescribed by law. Vincam agrees that it will only charge 1.45% (FICA-Medicare) for any employee that exceeds the FICA-Social Security wage limits. (2) The Client Company will be charged a fee of $20 for each newly hired employee and $10 for each rehired employee who has been terminated for more than 30 days. (3) The Client Company will be charged $30 per employee, as a replacement fee, for each lost/stolen payroll check. (4) Vincam charges $12 for each site where payroll checks and/or reports are delivered. OPTIONAL SERVICE AND FEES - ------------------------- Vincam will offer participation in a 401(k) retirement saving plan and will test on a periodic basis to ensure that contributions made by highly compensated employees do not exceed levels established by federal law. Vincam does not require a minimum contribution from the Client Company. There is NO CHARGE for set-up of the 401(k) or an annual maintenance fee thereafter. Individual employees will be assessed a 401(k) account service fee of $23.50 per year. EX-10.5 6 INTELLIGENT LIFE CORP. 1997 EQUITY COMP. PLAN EXHIBIT 10.5 BANK RATE MONITOR, INC. 1997 EQUITY COMPENSATION PLAN ----------------------------- The purpose of the Bank Rate Monitor, Inc. 1997 Equity Compensation Plan (the "Plan") is to provide (i) designated employees (including employees who are also officers or directors) of Bank Rate Monitor, Inc. (the "Company") and its subsidiaries, (ii) certain consultants and advisors who perform services for the Company or its subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the "Board") with the opportunity to receive grants of incentive stock options, nonqualified stock options, and restricted stock. The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company's shareholders, and will align the economic interests of the participants with those of the shareholders. 1. Administration -------------- (a) Board. The Plan may be administered and interpreted by the Board or by ----- a committee appointed by the Board. If the Company has an initial public offering of its stock (a "Public Offering"), the Plan shall thereafter be administered and interpreted by a committee consisting of two or more persons appointed by the Board, all of whom may be "outside directors" as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and related Treasury regulations, and "non-employee directors" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Notwithstanding anything in the Plan to the contrary, the Board may ratify or approve any grants made to non-employee directors. If a committee is appointed, all references in the Plan to the "Board," as they relate to administration of the Plan, shall be deemed to refer to the committee, except to the extent that the Board approves or ratifies grants. (b) Board Authority. The Board shall have the sole authority to (i) --------------- determine the individuals to whom grants shall be made under the Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) determine the terms of any applicable noncompetition or other agreements relating to grants, and (v) deal with any other matters arising under the Plan. (c) Board Determinations. The Board shall have full power and authority to ------------------- administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Board's interpretations of the Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. 2. Grants ------ Awards under the Plan may consist of grants of incentive stock options as described in Section 5 ("Incentive Stock Options"), nonqualified stock options as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as "Options") or restricted stock as described in Section 6 (Restricted Stock") (hereinafter collectively referred to as "Grants"). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Board deems appropriate and as are specified in writing by the Board to the individual in a grant instrument (the "Grant Instrument") or an amendment to the Grant Instrument. The Board shall approve the form and provisions of each Grant Instrument. Grants under a particular Section of the Plan need not be uniform as among the grantees. 3. Shares Subject to the Plan -------------------------- (a) Shares Authorized. Subject to the adjustment specified below, the ----------------- aggregate number of shares of common stock of the Company ("Company Stock") that may be issued or transferred under the Plan is 18,000 shares. If a Public Offering occurs, the maximum aggregate number of shares of Company Stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 9,000 shares. The shares may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any shares of Restricted Stock are forfeited, the shares subject to such Grants shall again be available for purposes of the Plan. (b) Adjustments. If there is any (i) capital contribution without the ----------- issuance of additional shares of Company Stock or (ii) change in the number or kind of shares of Company Stock outstanding (w) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (x) by reason of a merger, reorganization or consolidation in which the Company is the surviving corporation, (y) by reason of a reclassification or change in par value, or (z) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock that any individual participating in the Plan may be granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under the Plan, and the price per share of such Grants shall be appropriately adjusted by the Board to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such -2- adjustment shall be eliminated. Any adjustments determined by the Board shall be final, binding and conclusive. Notwithstanding the foregoing, no adjustment shall be authorized or made to an Incentive Stock Option pursuant to this Section to the extent that such authority or adjustment would cause the Incentive Stock Option to fail to comply with section 422 of the Code. 4. Eligibility for Participation ----------------------------- (a) Eligible Persons. All employees of the Company and its subsidiaries ---------------- ("Employees"), including Employees who are officers or members of the Board, and members of the Board who are not Employees ("Non-Employee Directors") shall be eligible to participate in the Plan. Consultants and advisors who perform services to the Company or any of its subsidiaries ("Key Advisors") shall be eligible to participate in the Plan if the Key Advisors render bona fide services and such services are not in connection with the offer or sale of securities in a capital-raising transaction. (b) Selection of Grantees. The Board shall select the Employees, Non- --------------------- Employee Directors and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Board determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as "Grantees". 5. Granting of Options ------------------- (a) Number of Shares. The Board shall determine the number of shares of ---------------- Company Stock that will be subject to each Grant of Options to Employees, Non- Employee Directors and Key Advisors. (b) Type of Option and Price. ------------------------ (i) The Board may grant Incentive Stock Options that are intended to qualify as "incentive stock options" within the meaning of section 422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees. Nonqualified Stock Options may be granted to Employees, Non-Employee Directors and Key Advisors. (ii) The purchase price (the "Exercise Price") of Company Stock subject to an Option shall be determined by the Board and may be equal to, greater than, or less than the Fair Market Value (as defined below) of a share of Company Stock on the date the Option is granted; provided, however, that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or greater than, the Fair Market Value of a share of Company Stock on the date the Incentive Stock Option is granted and (y) an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company, unless -3- the Exercise Price per share is not less than 110% of the Fair Market Value of Company Stock on the date of grant. (iii) If the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported "bid" and "asked" prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Board determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or "bid" or "asked" quotations as set forth above, the Fair Market Value per share shall be as determined by the Board. (c) Option Term. The Board shall determine the term of each Option. The ----------- term of any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five years from the date of grant. (d) Exercisability of Options. Options shall become exercisable in ------------------------- accordance with such terms and conditions, consistent with the Plan, as may be determined by the Board and specified in the Grant Instrument or an amendment to the Grant Instrument. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason. (e) Termination of Employment, Disability or Death. ---------------------------------------------- (i) Except as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Company as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be employed by, or provide service to, the Company for any reason other than a "disability", death, or "termination for cause", any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within 90 days after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (ii) In the event the Grantee ceases to be employed by, or provide service to, the Company on account of a "termination for cause" by the Company, any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Company. -4- (iii) In the event the Grantee ceases to be employed by, or provide service to, the Company because the Grantee is "disabled", any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (iv) If the Grantee dies while employed by, or providing service to, the Company or within 90 days after the date on which the Grantee ceases to be employed, or provide service, on account of a termination of employment specified in Section 5(e)(i) above (or within such other period of time as may be specified by the Board), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (v) For purposes of this Section 5(e) and Section 6: (A) The term "Company" shall mean the Company and its parent and subsidiary corporations. (B) "Employed by, or providing service to, the Company" shall mean employment as an Employee or the provision of services to the Company or a subsidiary as a Key Advisor or member of the Board (so that, for purposes of exercising Options and satisfying conditions with respect to Restricted Stock, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor and member of the Board), unless the Board determines otherwise. (C) "Disability" shall mean a Grantee's becoming disabled within the meaning of section 22(e)(3) of the Code. (D) "Termination for cause" shall mean, except to the extent specified otherwise by the Board, a finding by the Board that the Grantee has breached his or her employment or service contract with the Company or any noncompetition agreement, or has been engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her employment or service, or has disclosed trade secrets or confidential information of the Company to persons not entitled to receive such information. In the event a Grantee's employment is terminated for cause, in addition to the immediate termination of all -5- Grants, the Grantee shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares. (f) Exercise of Options. A Grantee may exercise an Option that has become ------------------- exercisable, in whole or in part, by delivering a notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for an Option as specified by the Board (x) in cash, (y) with the approval of the Board, by delivering shares of Company Stock owned by the Grantee (including Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Board deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price or (z) by such other method as the Board may approve, including, after a Public Offering, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. Shares of Company Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 7) at the time of exercise. (g) Limits on Incentive Stock Options. Each Incentive Stock Option shall --------------------------------- provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code). If and to the extent that an Option designated as an Incentive Stock Option fails so to qualify under the Code, the Option shall remain outstanding according to its terms as a Nonqualified Stock Option. 6. Restricted Stock Grants ----------------------- The Board may issue or transfer shares of Company Stock to an Employee, Non-Employee Director or Key Advisor under a Grant of Restricted Stock, upon such terms as the Board deems appropriate. The following provisions are applicable to Restricted Stock: (a) General Requirements. Shares of Company Stock issued or transferred -------------------- pursuant to Restricted Stock Grants may be issued or transferred for consideration or for no consideration, as determined by the Board. The Board may establish conditions under which restrictions on shares of Restricted Stock shall lapse over a period of time or according to such other criteria as the Board deems appropriate. The period of time during which the Restricted Stock will remain subject to restrictions will be designated in the Grant Instrument as the "Restriction Period." (b) Number of Shares. The Board shall determine the number of shares of ---------------- Company Stock to be issued or transferred pursuant to a Restricted Stock Grant and the restrictions applicable to such shares. -6- (c) Requirement of Employment. If the Grantee ceases to be employed by, or ------------------------- perform service to, the Company (as defined in Section 5(e)) during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Restricted Stock Grant shall terminate as to all shares covered by the Grant as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Board may, however, provide for complete or partial exceptions to this requirement as it deems appropriate. (d) Restrictions on Transfer and Legend on Stock Certificate. During the -------------------------------------------------------- Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of Restricted Stock except to a Successor Grantee under Section 8(a). Each certificate for a share of Restricted Stock shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Board may determine that the Company will not issue certificates for shares of Restricted Stock until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for shares of Restricted Stock until all restrictions on such shares have lapsed. (e) Right to Vote and to Receive Dividends. Unless the Board determines -------------------------------------- otherwise, during the Restriction Period, the Grantee shall have the right to vote shares of Restricted Stock and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Board. (f) Lapse of Restrictions. All restrictions imposed on Restricted Stock --------------------- shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions imposed by the Board. The Board may determine, as to any or all Restricted Stock Grants, that the restrictions shall lapse without regard to any Restriction Period. 7. Withholding of Taxes -------------------- (a) Required Withholding. All Grants under the Plan shall be subject to -------------------- applicable federal (including FICA), state and local tax withholding requirements. The Company may require the Grantee or other person receiving shares in connection with Grants to pay to the Company the amount of any such taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants. (b) Election to Withhold Shares. If the Board so permits, a Grantee may --------------------------- elect to satisfy the Company's income tax withholding obligation with respect to an Option or Restricted Stock by having shares withheld up to an amount that does not exceed the Grantee's applicable tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Board and shall be subject to the prior approval of the Board. -7- 8. Transferability of Grants ------------------------- (a) Nontransferability of Grants. Except as provided below, only the ---------------------------- Grantee may exercise rights under a Grant during the Grantee's lifetime. A Grantee may not transfer those rights except by will or by the laws of descent and distribution or, with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Board, pursuant to a domestic relations order (as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the regulations thereunder). When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee's will or under the applicable laws of descent and distribution. (b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, -------------------------------------- the Board may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members or other persons or entities according to such terms as the Board may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer. 9. Right of First Refusal ---------------------- (a) Offer. Prior to a Public Offering, if at any time an individual ----- desires to sell, encumber, or otherwise dispose of shares of Company Stock distributed to him under this Plan, the individual shall first offer the shares to the Company by giving the Company written notice disclosing: (a) the name of the proposed transferee of the Company Stock; (b) the certificate number and number of shares of Company Stock proposed to be transferred or encumbered; (c) the proposed price; (d) all other terms of the proposed transfer; and (e) a written copy of the proposed offer. Within 60 days after receipt of such notice, the Company shall have the option to purchase all or part of such Company Stock at the then current Fair Market Value (as defined in Section 5(b)) and may pay such price in installments over a period not to exceed four years, at the discretion of the Board. (b) Sale. In the event the Company (or a shareholder, as described below) ---- does not exercise the option to purchase Company Stock, as provided above, the individual shall have the right to sell, encumber, or otherwise dispose of his or her shares of Company Stock on the terms of the transfer set forth in the written notice to the Company, provided such transfer is effected within 15 days after the expiration of the option period. If the transfer is not effected within such period, the Company must again be given an option to purchase, as provided above. (c) Pass Through of Rights. The Board, in its sole discretion, may waive ---------------------- the Company's right of first refusal pursuant to this Section 9 and the Company's repurchase right pursuant to Section 10 below. If the Company's right of first refusal or repurchase right is so waived, the Board may, in its sole discretion, pass through such right to the remaining -8- shareholders of the Company in the same proportion that each shareholder's stock ownership bears to the stock ownership of all the shareholders of the Company, as determined by the Board. To the extent that a shareholder has been given such right and does not purchase his or her allotment, the other shareholders shall have the right to purchase such allotment on the same basis. (d) Public Offering. If a Public Offering occurs, the Company shall have --------------- no further right to purchase shares of Company Stock under this Section 9 and Section 10 below, and its limitations shall be null and void. (e) Shareholder's Agreement. Notwithstanding the foregoing, the Board may ----------------------- require that a Grantee execute a shareholder's agreement, with such terms as the Board deems appropriate, with respect to any Company Stock distributed pursuant to this Plan, in which case the provisions of this Section 9 and Section 10 below shall not apply to such Company Stock. 10. Purchase by the Company ----------------------- Prior to a Public Offering, if a Grantee ceases to be employed by the Company, the Company shall have the right to purchase all or part of any Company Stock distributed to the Grantee under this Plan at its then current Fair Market Value (as defined in Section 5(b)); provided, however, that such repurchase shall be made in accordance with applicable accounting rules to avoid adverse accounting treatment. 11. Change of Control of the Company -------------------------------- As used herein, a "Change of Control" shall be deemed to have occurred if: (a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than a person who is a shareholder of the Company as of the effective date of the Plan) becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; or (b) The shareholders of the Company approve (or, if shareholder approval is not required, the Board approves) an agreement providing for (i) the merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of directors, (ii) the sale or other disposition of all or substantially all of the assets of the Company, or (iii) a liquidation or dissolution of the Company. -9- 12. Consequences of a Change of Control ----------------------------------- (a) Notice and Acceleration. Upon a Change of Control, unless the Board ----------------------- determines otherwise, (i) the Company shall provide each Grantee with outstanding Grants written notice of such Change of Control, (ii) all outstanding Options shall automatically accelerate and become fully exercisable, and (iii) the restrictions and conditions on all outstanding Restricted Stock shall immediately lapse. (b) Assumption of Grants. In addition, upon a Change of Control where the -------------------- Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options by, the surviving corporation. Any replacement options shall entitle the Grantee to receive the same amount and type of securities as the Grantee would have received as a result of the Change of Control had the Grantee exercised the Options immediately prior to the Change of Control. (c) Other Alternatives. Notwithstanding the foregoing, subject to ------------------ subsection (d) below, in the event of a Change of Control, the Board may take one or both of the following actions: the Board may (i) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or Company Stock as determined by the Board, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Grantee's unexercised Options exceeds the Exercise Price of the Options, or (ii) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised Options at such time as the Board deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or such other date as the Board may specify. (d) Limitations. Notwithstanding anything in the Plan to the contrary, in ----------- the event of a Change of Control, the Board shall not have the right to take any actions described in the Plan (including without limitation actions described in Subsection (c) above) that would make the Change of Control ineligible for pooling of interests accounting treatment or that would make the Change of Control ineligible for desired tax treatment if, in the absence of such right, the Change of Control would qualify for such treatment and the Company intends to use such treatment with respect to the Change of Control. 13 Requirements for Issuance or Transfer of Shares ----------------------------------------------- (a) Shareholder's Agreement. The Board may require that a Grantee execute ----------------------- a shareholder's agreement, with such terms as the Board deems appropriate, with respect to any Company Stock distributed pursuant to this Plan. (b) Limitations on Issuance or Transfer of Shares. No Company Stock shall --------------------------------------------- be issued or transferred in connection with any Grant hereunder unless and until all legal requirements -10- applicable to the issuance or transfer of such Company Stock have been complied with to the satisfaction of the Board. The Board shall have the right to condition any Grant made to any Grantee hereunder on such Grantee's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Board shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued or transferred under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. 14 Amendment and Termination of the Plan ------------------------------------- (a) Amendment. The Board may amend or terminate the Plan at any time; --------- provided, however, that, if a Public Offering occurs, the Board shall not amend the Plan without shareholder approval if such approval is required by Section 162(m) of the Code and if Section 162(m) is applicable to the Plan. (b) Termination of Plan. The Plan shall terminate on the day immediately ------------------- preceding the tenth anniversary of its effective date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the shareholders. (c) Termination and Amendment of Outstanding Grants. A termination or ----------------------------------------------- amendment of the Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Board acts under Section 20(b). The termination of the Plan shall not impair the power and authority of the Board with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 20(b) or may be amended by agreement of the Company and the Grantee consistent with the Plan. (d) Governing Document. The Plan shall be the controlling document. No ------------------ other statements, representations, explanatory materials or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns. 15 Funding of the Plan ------------------- This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants. -11- 16 Rights of Participants ---------------------- Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director or other person to any claim or right to receive a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Company or any other employment rights. 17 No Fractional Shares -------------------- No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Board shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 18 Headings -------- Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control. 19 Effective Date of the Plan. -------------------------- (a) Effective Date. Subject to the approval of the Company's shareholders, -------------- the Plan shall be effective on July 30, 1997. (b) Public Offering. The provisions of the Plan that refer to a Public --------------- Offering, or that refer to, or are applicable to persons subject to, section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at all, upon the initial registration of the Company Stock under section 12(g) of the Exchange Act, and shall remain effective thereafter for so long as such stock is so registered. 20 Miscellaneous ------------- (a) Grants in Connection with Corporate Transactions and Otherwise. -------------------------------------------------------------- Nothing contained in this Plan shall be construed to (i) limit the right of the Board to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Board may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of its subsidiaries in substitution for a stock option or restricted stock grant made by such corporation. The terms and conditions of the substitute grants may vary from the -12- terms and conditions required by the Plan and from those of the substituted stock incentives. The Board shall prescribe the provisions of the substitute grants. (b) Compliance with Law. The Plan, the exercise of Options and the ------------------- obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, after a Public Offering, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. The Board may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole discretion, agree to limit its authority under this Section. (c) Governing Law. The validity, construction, interpretation and effect ------------- of the Plan and Grant Instruments issued under the Plan shall exclusively be governed by and determined in accordance with the law of the State of Florida. -13- EX-10.6 7 INTELLIGENT LIFE CORP. 1999 EQUITY COMP. PLAN EXHIBIT 10.6 INTELLIGENT LIFE CORPORATION 1999 EQUITY COMPENSATION PLAN ----------------------------- The purpose of the Intelligent Life Corporation 1999 Equity Compensation Plan (the "Plan") is to provide (i) designated employees (including employees who are also officers or directors) of Intelligent Life Corporation (the "Company") and its subsidiaries, (ii) certain consultants and advisors who perform services for the Company or its subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the "Board") with the opportunity to receive grants of incentive stock options, nonqualified stock options, and restricted stock. The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company's shareholders, and will align the economic interests of the participants with those of the shareholders. 1. Administration -------------- (a) Board. The Plan may be administered and interpreted by the Board or by ----- a committee appointed by the Board. If the Company has an initial public offering of its stock (a "Public Offering"), the Plan shall thereafter be administered and interpreted by a committee consisting of two or more persons appointed by the Board, all of whom may be "outside directors" as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and related Treasury regulations, and "non-employee directors" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Notwithstanding anything in the Plan to the contrary, the Board may ratify or approve any grants made to non-employee directors. If a committee is appointed, all references in the Plan to the "Board," as they relate to administration of the Plan, shall be deemed to refer to the committee, except to the extent that the Board approves or ratifies grants. (b) Board Authority. The Board shall have the sole authority to (i) --------------- determine the individuals to whom grants shall be made under the Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) determine the terms of any applicable noncompetition or other agreements relating to grants, and (v) deal with any other matters arising under the Plan. (c) Board Determinations. The Board shall have full power and authority to ------------------- administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Board's interpretations of the Plan and all determinations made by the Board pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Board shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. 2. Grants ------ Awards under the Plan may consist of grants of incentive stock options as described in Section 5 ("Incentive Stock Options"), nonqualified stock options as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as "Options") or restricted stock as described in Section 6 (Restricted Stock") (hereinafter collectively referred to as "Grants"). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Board deems appropriate and as are specified in writing by the Board to the individual in a grant instrument (the "Grant Instrument") or an amendment to the Grant Instrument. The Board shall approve the form and provisions of each Grant Instrument. Grants under a particular Section of the Plan need not be uniform as among the grantees. 3. Shares Subject to the Plan -------------------------- (a) Shares Authorized. Subject to the adjustment specified below, the ----------------- aggregate number of shares of common stock of the Company ("Company Stock") that may be issued or transferred under the Plan is 300,000 shares. If a Public Offering occurs, the maximum aggregate number of shares of Company Stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 150,000 shares. The shares may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any shares of Restricted Stock are forfeited, the shares subject to such Grants shall again be available for purposes of the Plan. (b) Adjustments. If there is any (i) capital contribution without the ----------- issuance of additional shares of Company Stock or (ii) change in the number or kind of shares of Company Stock outstanding (w) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (x) by reason of a merger, reorganization or consolidation in which the Company is the surviving corporation, (y) by reason of a reclassification or change in par value, or (z) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock that any individual participating in the Plan may be granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under the Plan, and the price per share of such Grants shall be appropriately adjusted by the Board to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such -2- adjustment shall be eliminated. Any adjustments determined by the Board shall be final, binding and conclusive. Notwithstanding the foregoing, no adjustment shall be authorized or made to an Incentive Stock Option pursuant to this Section to the extent that such authority or adjustment would cause the Incentive Stock Option to fail to comply with section 422 of the Code. 4. Eligibility for Participation ----------------------------- (a) Eligible Persons. All employees of the Company and its subsidiaries ---------------- ("Employees"), including Employees who are officers or members of the Board, and members of the Board who are not Employees ("Non-Employee Directors") shall be eligible to participate in the Plan. Consultants and advisors who perform services to the Company or any of its subsidiaries ("Key Advisors") shall be eligible to participate in the Plan if the Key Advisors render bona fide services and such services are not in connection with the offer or sale of securities in a capital-raising transaction. (b) Selection of Grantees. The Board shall select the Employees, Non- --------------------- Employee Directors and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Board determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as "Grantees". 5. Granting of Options ------------------- (a) Number of Shares. The Board shall determine the number of shares of ---------------- Company Stock that will be subject to each Grant of Options to Employees, Non- Employee Directors and Key Advisors. (b) Type of Option and Price. ------------------------ (i) The Board may grant Incentive Stock Options that are intended to qualify as "incentive stock options" within the meaning of section 422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees. Nonqualified Stock Options may be granted to Employees, Non-Employee Directors and Key Advisors. (ii) The purchase price (the "Exercise Price") of Company Stock subject to an Option shall be determined by the Board and may be equal to, greater than, or less than the Fair Market Value (as defined below) of a share of Company Stock on the date the Option is granted; provided, however, that (x) the Exercise Price of an Incentive Stock Option shall be equal to, or greater than, the Fair Market Value of a share of Company Stock on the date the Incentive Stock Option is granted and (y) an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company, unless -3- the Exercise Price per share is not less than 110% of the Fair Market Value of Company Stock on the date of grant. (iii) If the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported "bid" and "asked" prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Board determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or "bid" or "asked" quotations as set forth above, the Fair Market Value per share shall be as determined by the Board. (c) Option Term. The Board shall determine the term of each Option. The ----------- term of any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five years from the date of grant. (d) Exercisability of Options. Options shall become exercisable in ------------------------- accordance with such terms and conditions, consistent with the Plan, as may be determined by the Board and specified in the Grant Instrument or an amendment to the Grant Instrument. The Board may accelerate the exercisability of any or all outstanding Options at any time for any reason. (e) Termination of Employment, Disability or Death. ---------------------------------------------- (i) Except as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Company as an Employee, Key Advisor or member of the Board. Notwithstanding the provisions of this Section 5(e) to the contrary, at the option of the Board, or Compensation Committee, at the time of a grant of an Option, such Board or Compensation Committee may determine to waive expressly in writing the termination provisions set forth in this Section 5(e), in which case the Option shall not terminate until the end of the option term (or such earlier date as designated by the Board or the Committee). In the event that a Grantee ceases to be employed by, or provide service to, the Company for any reason other than a "disability", death, or "termination for cause", any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within 90 days after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. -4- (ii) In the event the Grantee ceases to be employed by, or provide service to, the Company on account of a "termination for cause" by the Company, any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Company. (iii) In the event the Grantee ceases to be employed by, or provide service to, the Company because the Grantee is "disabled", any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (iv) If the Grantee dies while employed by, or providing service to, the Company or within 90 days after the date on which the Grantee ceases to be employed, or provide service, on account of a termination of employment specified in Section 5(e)(i) above (or within such other period of time as may be specified by the Board), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Board), but in any event no later than the date of expiration of the Option term. Any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (v) For purposes of this Section 5(e) and Section 6: (A) The term "Company" shall mean the Company and its parent and subsidiary corporations. (B) "Employed by, or providing service to, the Company" shall mean employment as an Employee or the provision of services to the Company or a subsidiary as a Key Advisor or member of the Board (so that, for purposes of exercising Options and satisfying conditions with respect to Restricted Stock, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor and member of the Board), unless the Board determines otherwise. (C) "Disability" shall mean a Grantee's becoming disabled within the meaning of section 22(e)(3) of the Code. (D) "Termination for cause" shall mean, except to the extent specified otherwise by the Board, a finding by the Board that the Grantee has breached his or her employment or service contract with the Company or any noncompetition agreement, or has been -5- engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her employment or service, or has disclosed trade secrets or confidential information of the Company to persons not entitled to receive such information. In the event a Grantee's employment is terminated for cause, in addition to the immediate termination of all Grants, the Grantee shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares. (f) Exercise of Options. A Grantee may exercise an Option that has become ------------------- exercisable, in whole or in part, by delivering a notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for an Option as specified by the Board (x) in cash, (y) with the approval of the Board, by delivering shares of Company Stock owned by the Grantee (including Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Board deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price or (z) by such other method as the Board may approve, including, after a Public Offering, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. Shares of Company Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due (pursuant to Section 7) at the time of exercise. (g) Limits on Incentive Stock Options. Each Incentive Stock Option shall --------------------------------- provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code). If and to the extent that an Option designated as an Incentive Stock Option fails so to qualify under the Code, the Option shall remain outstanding according to its terms as a Nonqualified Stock Option. 6. Restricted Stock Grants ----------------------- The Board may issue or transfer shares of Company Stock to an Employee, Non-Employee Director or Key Advisor under a Grant of Restricted Stock, upon such terms as the Board deems appropriate. The following provisions are applicable to Restricted Stock: (a) General Requirements. Shares of Company Stock issued or transferred -------------------- pursuant to Restricted Stock Grants may be issued or transferred for consideration or for no consideration, as determined by the Board. The Board may establish conditions under which restrictions on shares of Restricted Stock shall lapse over a period of time or according to such other criteria as -6- the Board deems appropriate. The period of time during which the Restricted Stock will remain subject to restrictions will be designated in the Grant Instrument as the "Restriction Period." (b) Number of Shares. The Board shall determine the number of shares of ---------------- Company Stock to be issued or transferred pursuant to a Restricted Stock Grant and the restrictions applicable to such shares. (c) Requirement of Employment. If the Grantee ceases to be employed by, or ------------------------- perform service to, the Company (as defined in Section 5(e)) during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Restricted Stock Grant shall terminate as to all shares covered by the Grant as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Board may, however, provide for complete or partial exceptions to this requirement as it deems appropriate. (d) Restrictions on Transfer and Legend on Stock Certificate. During the -------------------------------------------------------- Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of Restricted Stock except to a Successor Grantee under Section 8(a). Each certificate for a share of Restricted Stock shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Board may determine that the Company will not issue certificates for shares of Restricted Stock until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for shares of Restricted Stock until all restrictions on such shares have lapsed. (e) Right to Vote and to Receive Dividends. Unless the Board determines -------------------------------------- otherwise, during the Restriction Period, the Grantee shall have the right to vote shares of Restricted Stock and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Board. (f) Lapse of Restrictions. All restrictions imposed on Restricted Stock --------------------- shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions imposed by the Board. The Board may determine, as to any or all Restricted Stock Grants, that the restrictions shall lapse without regard to any Restriction Period. 7. Withholding of Taxes -------------------- (a) Required Withholding. All Grants under the Plan shall be subject to -------------------- applicable federal (including FICA), state and local tax withholding requirements. The Company may require the Grantee or other person receiving shares in connection with Grants to pay to the Company the amount of any such taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants. -7- (b) Election to Withhold Shares. If the Board so permits, a Grantee may --------------------------- elect to satisfy the Company's income tax withholding obligation with respect to an Option or Restricted Stock by having shares withheld up to an amount that does not exceed the Grantee's applicable tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Board and shall be subject to the prior approval of the Board. 8. Transferability of Grants ------------------------- (a) Nontransferability of Grants. Except as provided below, only the ---------------------------- Grantee may exercise rights under a Grant during the Grantee's lifetime. A Grantee may not transfer those rights except by will or by the laws of descent and distribution or, with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Board, pursuant to a domestic relations order (as defined under the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the regulations thereunder). When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee's will or under the applicable laws of descent and distribution. (b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, -------------------------------------- the Board may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members or other persons or entities according to such terms as the Board may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer. 9. Right of First Refusal ---------------------- (a) Offer. Prior to a Public Offering, if at any time an individual ----- desires to sell, encumber, or otherwise dispose of shares of Company Stock distributed to him under this Plan, the individual shall first offer the shares to the Company by giving the Company written notice disclosing: (a) the name of the proposed transferee of the Company Stock; (b) the certificate number and number of shares of Company Stock proposed to be transferred or encumbered; (c) the proposed price; (d) all other terms of the proposed transfer; and (e) a written copy of the proposed offer. Within 60 days after receipt of such notice, the Company shall have the option to purchase all or part of such Company Stock at the then current Fair Market Value (as defined in Section 5(b)) and may pay such price in installments over a period not to exceed four years, at the discretion of the Board. (b) Sale. In the event the Company (or a shareholder, as described below) ---- does not exercise the option to purchase Company Stock, as provided above, the individual shall have the right to sell, encumber, or otherwise dispose of his or her shares of Company Stock on the terms of the transfer set forth in the written notice to the Company, provided such transfer is effected -8- within 15 days after the expiration of the option period. If the transfer is not effected within such period, the Company must again be given an option to purchase, as provided above. (c) Pass Through of Rights. The Board, in its sole discretion, may waive ---------------------- the Company's right of first refusal pursuant to this Section 9 and the Company's repurchase right pursuant to Section 10 below. If the Company's right of first refusal or repurchase right is so waived, the Board may, in its sole discretion, pass through such right to the remaining shareholders of the Company in the same proportion that each shareholder's stock ownership bears to the stock ownership of all the shareholders of the Company, as determined by the Board. To the extent that a shareholder has been given such right and does not purchase his or her allotment, the other shareholders shall have the right to purchase such allotment on the same basis. (d) Public Offering. If a Public Offering occurs, the Company shall have --------------- no further right to purchase shares of Company Stock under this Section 9 and Section 10 below, and its limitations shall be null and void. (e) Shareholder's Agreement. Notwithstanding the foregoing, the Board may ----------------------- require that a Grantee execute a shareholder's agreement, with such terms as the Board deems appropriate, with respect to any Company Stock distributed pursuant to this Plan, in which case the provisions of this Section 9 and Section 10 below shall not apply to such Company Stock. 10. Purchase by the Company ----------------------- Prior to a Public Offering, if a Grantee ceases to be employed by the Company, the Company shall have the right to purchase all or part of any Company Stock distributed to the Grantee under this Plan at its then current Fair Market Value (as defined in Section 5(b)); provided, however, that such repurchase shall be made in accordance with applicable accounting rules to avoid adverse accounting treatment. 11. Change of Control of the Company -------------------------------- As used herein, a "Change of Control" shall be deemed to have occurred if: (a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than a person who is a shareholder of the Company as of the effective date of the Plan) becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; or (b) The shareholders of the Company approve (or, if shareholder approval is not required, the Board approves) an agreement providing for (i) the merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or -9- consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of directors, (ii) the sale or other disposition of all or substantially all of the assets of the Company, or (iii) a liquidation or dissolution of the Company. -10- 12. Consequences of a Change of Control ----------------------------------- (a) Notice and Acceleration. Upon a Change of Control, unless the Board ----------------------- determines otherwise, (i) the Company shall provide each Grantee with outstanding Grants written notice of such Change of Control, (ii) all outstanding Options shall automatically accelerate and become fully exercisable, and (iii) the restrictions and conditions on all outstanding Restricted Stock shall immediately lapse. (b) Assumption of Grants. In addition, upon a Change of Control where the -------------------- Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Board determines otherwise, all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options by, the surviving corporation. Any replacement options shall entitle the Grantee to receive the same amount and type of securities as the Grantee would have received as a result of the Change of Control had the Grantee exercised the Options immediately prior to the Change of Control. (c) Other Alternatives. Notwithstanding the foregoing, subject to ------------------ subsection (d) below, in the event of a Change of Control, the Board may take one or both of the following actions: the Board may (i) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or Company Stock as determined by the Board, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Grantee's unexercised Options exceeds the Exercise Price of the Options, or (ii) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised Options at such time as the Board deems appropriate. Such surrender or termination shall take place as of the date of the Change of Control or such other date as the Board may specify. (d) Limitations. Notwithstanding anything in the Plan to the contrary, in ----------- the event of a Change of Control, the Board shall not have the right to take any actions described in the Plan (including without limitation actions described in Subsection (c) above) that would make the Change of Control ineligible for pooling of interests accounting treatment or that would make the Change of Control ineligible for desired tax treatment if, in the absence of such right, the Change of Control would qualify for such treatment and the Company intends to use such treatment with respect to the Change of Control. 13. Requirements for Issuance or Transfer of Shares ----------------------------------------------- (a) Shareholder's Agreement. The Board may require that a Grantee execute ----------------------- a shareholder's agreement, with such terms as the Board deems appropriate, with respect to any Company Stock distributed pursuant to this Plan. (b) Limitations on Issuance or Transfer of Shares. No Company Stock shall --------------------------------------------- be issued or transferred in connection with any Grant hereunder unless and until all legal requirements -11- applicable to the issuance or transfer of such Company Stock have been complied with to the satisfaction of the Board. The Board shall have the right to condition any Grant made to any Grantee hereunder on such Grantee's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Board shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued or transferred under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. 14. Amendment and Termination of the Plan ------------------------------------- (a) Amendment. The Board may amend or terminate the Plan at any time; --------- provided, however, that, if a Public Offering occurs, the Board shall not amend the Plan without shareholder approval if such approval is required by Section 162(m) of the Code and if Section 162(m) is applicable to the Plan. (b) Termination of Plan. The Plan shall terminate on the day immediately ------------------- preceding the tenth anniversary of its effective date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the shareholders. (c) Termination and Amendment of Outstanding Grants. A termination or ----------------------------------------------- amendment of the Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Board acts under Section 20(b). The termination of the Plan shall not impair the power and authority of the Board with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 20(b) or may be amended by agreement of the Company and the Grantee consistent with the Plan. (d) Governing Document. The Plan shall be the controlling document. No ------------------ other statements, representations, explanatory materials or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns. 15. Funding of the Plan ------------------- This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants. -12- 16. Rights of Participants ---------------------- Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director or other person to any claim or right to receive a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Company or any other employment rights. 17. No Fractional Shares -------------------- No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Board shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 18. Headings -------- Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control. 19. Effective Date of the Plan. -------------------------- (a) Effective Date. Subject to the approval of the Company's shareholders, -------------- the Plan shall be effective on March 10, 1999. (b) Public Offering. The provisions of the Plan that refer to a Public --------------- Offering, or that refer to, or are applicable to persons subject to, section 16 of the Exchange Act or section 162(m) of the Code, shall be effective, if at all, upon the initial registration of the Company Stock under section 12(g) of the Exchange Act, and shall remain effective thereafter for so long as such stock is so registered. 20. Miscellaneous ------------- (a) Grants in Connection with Corporate Transactions and Otherwise. -------------------------------------------------------------- Nothing contained in this Plan shall be construed to (i) limit the right of the Board to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Board may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of its subsidiaries in substitution for a stock option or restricted stock grant made by such corporation. The terms and conditions of the substitute grants may vary from the -13- terms and conditions required by the Plan and from those of the substituted stock incentives. The Board shall prescribe the provisions of the substitute grants. (b) Compliance with Law. The Plan, the exercise of Options and the ------------------- obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, after a Public Offering, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. The Board may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Board may also adopt rules regarding the withholding of taxes on payments to Grantees. The Board may, in its sole discretion, agree to limit its authority under this Section. (c) Governing Law. The validity, construction, interpretation and effect ------------- of the Plan and Grant Instruments issued under the Plan shall exclusively be governed by and determined in accordance with the law of the State of Florida. -14- EX-10.7 8 FORM OF STOCK OPTION AGREEMENT EXHIBIT 10.7 BANK RATE MONITOR, INC. 1997 EQUITY COMPENSATION PLAN INCENTIVE STOCK OPTION GRANT ---------------------------- This STOCK OPTION GRANT, dated as of ____________________ (the "Date of Grant"), is delivered by Intelligent Life Corporation (formerly "Bank Rate Monitor, Inc.") (the "Company") to ________________________, an employee of the Company (the "Grantee"). RECITALS -------- The Bank Rate Monitor, Inc. 1997 Equity Compensation Plan (the "Plan") provides for the grant of options to purchase shares of common stock of the Company. The Board of Directors of the Company (the "Board") has decided to make a stock option grant as an inducement for the Grantee to promote the best interests of the Company and its stockholders. NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows: 1. Grant of Option. --------------- (A) Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company hereby grants to the Grantee an incentive stock option (the "Option") to purchase ________ shares of common stock of the Company ("Shares") at an option price of $_______ per Share. The Option shall become exercisable according to Paragraph 2 below. (B) The Option is designated as an incentive stock option, as described in Paragraph 5 below. However, if and to the extent the Option exceeds the limits for an incentive stock option, as described in Paragraph 5, the Option shall be a nonqualified stock option. 2. Exercisability of Option. The Option shall become exercisable as of the ------------------------ following dates, if the Grantee is employed by, or providing service to, the Company (as defined in the Plan) as of the applicable date: Shares for Which the Date Option is Exercisable ---- --------------------- ________________ ____________ The first day of each month starting __________________ and ending __________________ ____________ The right to exercise the Option shall be cumulative. 3. Term of Option. -------------- (A) The Option shall have a term of ____ years from the Date of Grant and shall terminate at the expiration of that period (________________), unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan. (B) The Option shall automatically terminate upon the happening of the first of the following events: (i) The expiration of the 90-day period after the Grantee ceases to be employed by, or provide service to, the Company, if the termination is for any reason other than disability (as defined in the Plan), death or cause (as defined in the Plan); (ii) The expiration of the one-year period after the Grantee ceases to be employed by, or provide service to, the Company on account of the Grantee's disability (as defined in the Plan); (iii) The expiration of the one-year period after the Grantee ceases to be employed by, or provide service to, the Company, if the Grantee dies while employed by, or providing service to, the Company or within 90 days after the Grantee ceases to be so employed or provide such service on account of a termination described in subparagraph (i) above; or (iv) The date on which the Grantee ceases to be employed by, or provide service to, the Company for cause (as defined in the Plan). Notwithstanding the foregoing, in no event may the Option be exercised after the date that is ten years from the Date of Grant. Any portion of the Option that is not exercisable at the time the Grantee ceases to be employed by, or provide service to, the Company shall immediately terminate. 4. Exercise Procedures. ------------------- (a) Subject to the provisions of Paragraphs 2 and 3 above, after the Option has become exercisable, the Grantee may exercise part or all of the exercisable Option by giving the Board written notice of intent to exercise in the manner provided in Paragraph 14 below, specifying the number of Shares as to which the Option is to be exercised. On the delivery date, the Grantee shall pay the exercise price (i) in cash, (ii) with the approval of the Board, by delivering Shares of the Company which shall be valued at their fair market value on the date of delivery, or (iii) by such other method as the Board may approve, including, after a public offering of the Company's stock, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. The Board may impose from time to -2- time such limitations as it deems appropriate on the use of Shares of the Company to exercise the Option. (b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Board, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. The Company may require that the Grantee (or other person exercising the Option after the Grantee's death) represent that the Grantee is purchasing Shares for the Grantee's own account and not with a view to or for sale in connection with any distribution of the Shares, or such other representation as the Board deems appropriate. All obligations of the Company under this Agreement shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable. Subject to Board approval, the Grantee may elect to satisfy any income tax withholding obligation of the Company with respect to the Option by having Shares withheld up to an amount that does not exceed the applicable withholding tax rate for federal (including FICA), state and local tax liabilities. 5. Designation as Incentive Stock Option. ------------------------------------- (a) This Option is designated an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). If the aggregate fair market value of the stock on the date of the grant with respect to which incentive stock options are exercisable for the first time by the Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a nonqualified stock option that does not meet the requirements of Section 422. if and to the extent that the Option fails to qualify as an incentive stock option under the Code, the Option shall remain outstanding according to its terms as a nonqualified stock option. (b) The Grantee understands that favorable incentive stock option tax treatment is available only if the Option is exercised while the Grantee is an employee of the Company or a parent or subsidiary or within a time specified in the Code after the Grantee ceases to be an employee. The Grantee should consult with his or her tax adviser regarding the tax consequences of the Option. 6. Change of Control. Except as provided herein, the provisions of the Plan ----------------- applicable to a Change of Control shall apply to the Option. In the event of a Change of Control, (i) the Company shall provide the Grantee written notice of such Change of Control, (ii) the Option shall become fully exercisable, and (iii) the provisions of Section 9 of the Plan shall no longer be applicable to the Shares. 7. Right of First Refusal; Repurchase Right; Shareholder's Agreement. As a ----------------------------------------------------------------- condition of receiving this Option and subject to Paragraph 6 above, the Grantee hereby agrees that all Shares issued under the Plan shall be subject to a right of first refusal and repurchase right as described in the Plan, and the Board may require that the Grantee (or other person exercising the Option -3- after the Grantee's death) execute a shareholder's agreement, in such form as the Board determines, with respect to all Shares issued upon the exercise of the Option before a public offering of the Company's stock. 8. Restrictions on Exercise. Only the Grantee may exercise the Option during ------------------------ the Grantee's lifetime. After the Grantee's death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives of the Grantee, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement. 9. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, -------------------------------- the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. The grant and exercise of the Option are subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan established form time to time by the Board in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the Shares, (iii) capital or other changes of the Company and (iv) other requirements of applicable law. The Board shall have the authority to interpret and construe the Option pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder. 10. No Employment Rights. The grant of the Option shall not confer upon the -------------------- Grantee any right to be retained by or in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Grantee's employment or service at any time. The right of the Company to terminate at will the Grantee's employment or service at any time for any reason is specifically reserved. 11. No Shareholder Rights. Neither the Grantee, nor any person entitled to --------------------- exercise the Grantee's rights in the event of the Grantee's death, shall have any of the rights and privileges of a shareholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option. 12. Assignment and Transfers. The rights and interests of the Grantee under ------------------------ this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company's parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Grantee's consent. -4- 13. Applicable Law. The validity, construction, interpretation and effect of -------------- this instrument shall be governed by and determined in accordance with the laws of the State of Florida. 14. Notice. Any notice to the Company provided for in this instrument shall be ------ addressed to the Company in care of the President at 11811 U.S. Highway One, North Palm Beach, Florida 33408, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Company, or to such other address as the Grantee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service. IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant. Attest: INTELLIGENT LIFE CORPORATION ___________________________ By:_____________________________ Accepted:_______________________ _______________________ -5- EX-10.8 9 PROMISSORY NOTE DATED MARCH 9, 1999 EXHIBIT 10.8 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS. INTELLIGENT LIFE CORPORATION CONVERTIBLE PROMISSORY NOTE $1,000,000.00 North Palm Beach, Florida March 9, 1999 FOR VALUE RECEIVED, the undersigned, Intelligent Life Corporation, a Florida corporation (the "Company"), hereby promises to pay to Antares Capital Fund II Limited Partnership ("Antares") at such place as Antares shall designate to the Company in writing, a total of One Million Dollars ($1,000,000.00) with daily interest from the date hereof to and including the date of conversion or maturity hereof at the rate set forth in Section 1 of this Note, said principal and interest being payable in accordance with Section 1. 1. Principal and Interest. The principal amount hereof shall become due ---------------------- and payable on April 9, 1999 (the "Maturity Date"). Interest on the principal amount hereof shall begin to accrue as of the date hereof at a rate of 8.0% per annum. Interest accruing hereunder shall be simple interest and shall be computed on the basis of a 360-day year. Accrued interest shall be due and payable upon the Maturity Date. 2. Method of Payment. The Company will pay principal and interest in ----------------- money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company may pay principal and interest by its check payable in such money. 3. Unsecured Obligation. This Note is an unsecured debt of the Company. -------------------- 4. Prepayable. This Note may be prepaid in part or in full at any time ---------- without the consent of the holder hereof. 5. Conversion. If all or any part of the unpaid principal amount of this ---------- Note and any accrued but unpaid interest thereon remain unpaid as of the Maturity Date, such principal and/or interest shall automatically convert, at the conversion price per share of One Hundred Forty-Eight Dollars and Forty Cents ($148.40) (the "Conversion Price"), into the number of fully paid and nonassessable shares of the Company's Series B Preferred Stock (the "Shares") as determined by dividing the principal and/or interest amount to be so converted by the Conversion Price. As promptly as practicable after the conversion of this Note, and in any event within 10 days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will issue and deliver to the holder of this Note, or instruct its transfer agent to issue and deliver to the holder of this Note as expeditiously as possible but not later than fifteen (15) days after notice, a certificate or certificates for the number of full Shares issuable upon such conversion, plus, in lieu of any fractional shares to which such holder would otherwise be entitled, cash equal to such fraction, multiplied by the Conversion Price of one full share. 6. Time of Essence. Time is of the essence with respect to all of the --------------- Company's obligations and agreements under this Note. 7. Governing Law. This Note shall be governed by and construed in ------------- accordance with the internal laws of the State of Florida without regard to principles of conflicts of law. Intelligent Life Corporation By: /s/ William P. Anderson, III ------------------------------- William P. Anderson, III President -2- EX-10.9 10 CANCELLATION AND STOCK REPURCHASE AGREEMENT EXHIBIT 10.9 CANCELLATION AND STOCK REPURCHASE AGREEMENT ------------------------------------------- THIS CANCELLATION AND STOCK REPURCHASE AGREEMENT ("Agreement") is effective as of noon March 10, 1999, by Intelligent Life Corporation, a Florida corporation ("the Company") in favor William P. Anderson, III, an individual resident of the state of Florida and employee of the Company ("Anderson"). W I T N E S S E T H : - - - - - - - - - - - WHEREAS, the Company has granted to Anderson 90,834 shares of common stock, subject to restrictions set forth in the Restricted Stock Grant made by and between the Company and Anderson on March 23, 1998 (the "Restricted Stock"); and such grant was made pursuant to the Bank Rate Monitor, Inc. 1997 Equity Compensation Plan (the "Plan"); and WHEREAS, as of the date hereof 37,847.50 shares of the Restricted Stock have vested, (the "Vested Shares") and the remaining 52,986.50 shares of Restricted Stock are unvested pursuant to the Plan (the "Unvested Shares"); and WHEREAS, the Company and Anderson have entered into that certain Promissory Note dated March 23, 1998, whereby Anderson promised to pay the Company the principal amount of $263, 168.40 plus simple interest (the "Note"); and WHEREAS, the Company and Anderson wish to forgive in part and cancel in part that certain Note, and the Company desires to accept the Unvested Shares in satisfaction of the cancellation of part of the Note. NOW, THEREFORE, in consideration of the promises and covenants contained herein, and other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, the parties agrees as follows: 1. Cancellation. ------------ (a) Forgiveness of Note as to Vested Shares The Company and Anderson --------------------------------------- hereby acknowledge and agree to the forgiveness of the Note as to the Vested Shares, such part of the Note equaling $98,403 (the "Forgiven Portion"), and the Company agrees release Anderson from any and all obligation under the Forgiven Portion, deeming such portion null and void. The Company will fund any applicable taxes (including without limitation, employment and federal and state income taxes) applicable as to the Forgiven Portion (and upon such payment for taxes) when such taxes become due and payable. (b) Purchase of Unvested Stock. Anderson agrees to sell, and the Company -------------------------- agrees to purchase from Anderson all of the Unvested Stock, for a purchase price of $2.60 per share totaling $137,765 (the "Purchase Price") and such payment of the Purchase Price is satisfied by cancellation of $137,765 of indebtedness, representing the sum owed by Anderson as to such Unvested Shares under the Note. Such satisfaction will serve to cancel the remainder of the Note in included in the Forgiven Portion (the "Canceled Portion"). The combined effect of the forgiveness in part and cancellation in part will serve to render the Note canceled in its entirety and deemed null and void. in its entirety. Upon execution of this Agreement, the Company agrees to mark the Note "Canceled" and return it to Anderson. 2. Tax Consequences. Anderson understands that Anderson may suffer ---------------- adverse tax consequences as a result of the cancellation of the note. Anderson represents that He has consulted with any tax consultant(s) he deems advisable in connection with the cancellation of the note or disposition of the unvested stock and that Executive is not relying on the Company for any tax, financial or legal advice. 3. No Investment Decision Anderson has such knowledge and experience in ---------------------- financial and business matters that Recipient is capable of evaluating the merits and risks of the sale of the Unvested Stock herein referenced, as well as the cancellation of the Note and any related transactions or consequences, and Anderson is able to bear the economic risk of such transactions or consequences. 4. Entire Agreement; Amendment; Governing Law. This Agreement contains ------------------------------------------ the entire agreement of the parties hereto relating to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those made herein. No amendment or modification of this Agreement shall be valid or binding unless made in writing and duly executed by the party against whom enforcement of any such amendment or modification is sought and making specific references to this Agreement. This Agreement and the rights and obligations of the parties hereunder shall be governed by the laws of the State of Florida, without regard to its conflicts of laws principles. 5. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of such counterparts shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. This Agreement may be executed and delivered by fax (telecopier); any original signatures that are initially delivered by fax shall be physically delivered with reasonable promptness thereafter. 6. Further Assurances. The parties hereto will at any time after the date ------------------ hereof, sign, execute, and deliver, or cause others so to do, all such powers of attorney, deeds, stock powers, assignments, documents, and instruments and do or cause to be done all such other acts and things as may be necessary or proper to carry out the transactions contemplated by this Agreement. -2- IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written. INTELLIGENT LIFE CORPORATION, a Florida corporation By: /s/ Peter W. Minford ------------------------------- Name: Peter W. Minford Title: Senior Vice President WILLIAM P. ANDERSON, III /s/ William P. Anderson, III ----------------------------------- William P. Anderson, III -3- EX-10.10 11 AGREEMENT OF CANCELLATION AND RELEASE EXHIBIT 10.10 AGREEMENT OF CANCELLATION ------------------------- AND RELEASE ----------- THIS AGREEMENT OF CANCELLATION ("Agreement") is effective as of noon on March 10, 1999, by and between INTELLIGENT LIFE CORPORATION, a Florida corporation ("the Company") and WILLIAM P. ANDERSON, III, an individual resident of the state of Florida and employee of the Company ("Anderson"). W I T N E S S E T H : - - - - - - - - - - - WHEREAS, the Company and Anderson desire to cancel those agreements entered into by and between Intelligent Life Corporation and William P. Anderson, III, which are listed on Exhibit A and incorporated by reference herein. --------- NOW, THEREFORE, in consideration of the promises and covenants contained herein, one dollar ($1.00) and other good and valuable consideration, the receipt and adequacy of which hereby are acknowledged, the parties agrees as follows: 1. Cancellation. The parties hereto cancel, terminate and nullify all ------------ those certain agreements specified on Exhibit A (hereinafter defined as "Prior Agreements"). The parties forfeit any and all rights under the Prior Agreements and to the extent any agreements grant rights in futuro, those rights are deemed null and void. 2. Release. The parties hereto are estopped from asserting, and hereby ------- release fully and completely, any rights, claims, and benefits under any and all Prior Agreements whether in law or in equity. Notwithstanding the foregiving, in any event in which the terms of Prior Agreements are deemed to survive the termination of such agreements; those terms are deemed null and void. 3. No Other Agreements. The parties agree that there are no other ------------------- agreements, arrangements or understandings, written or oral, regarding the employment or compensation of Anderson by the Company other than those listed on Exhibit A attached hereto. - --------- 4. Further Assurances. The parties hereto will at any time after the date ------------------ hereof, sign, execute, and deliver, or cause others so to do, all such powers of attorney, stock powers, assignments, documents, and instruments and do or cause to be done all such other acts and things as may be necessary or proper to carry out the actions and understandings contemplated by this Agreement. IN WITNESS WHEREOF, the undersigned has executed this Agreement of Cancellation effective as of the date first above written. EXECUTIVE: COMPANY: WILLIAM P. ANDERSON, III INTELLIGENT LIFE CORPORATION /s/ William P. Anderson, III By: /s/ Peter W. Minford - -------------------------------- ----------------------------- William P. Anderson, III Name: Peter W. Minford --------------------------- Title: Senior Vice President -------------------------- -2- EXHIBIT A --------- 1. Restricted Stock Grant between the Company and Executive dated as of March 23, 1998 2. Promissory Note dated March 23, 1998, that certain Severance Agreement between the Company and the Executive dated as of March 23, 1998 3. Noncompetition Agreement between the Company and the Executive dated as of November 28, 1998 4. Employee Nondisclosure and Developments Agreement between the Company and Executive dated as of November 28, 1998 5. Cancellation and Stock Purchase Agreement between the Company and the Executive dated March 10, 1999. -3- EX-10.11 12 INCENTIVE STOCK OPTION GRANT AGREEMENT EXHIBIT 10.11 INTELLIGENT LIFE CORPORATION 1999 EQUITY COMPENSATION PLAN INCENTIVE STOCK OPTION GRANT ---------------------------- This STOCK OPTION GRANT, dated as of March 10, 1999 (the "Date of Grant"), is delivered by INTELLIGENT LIFE CORPORATION (formerly Bank Rate Monitor, Inc.), a Florida corporation (the "Company"), to WILLIAM P. ANDERSON, III, an employee of the Company (the "Grantee"). RECITALS -------- The Intelligent Life Corporation 1999 Equity Compensation Plan (the "Plan") provides for the grant of options to purchase shares of common stock of the Company. The Board of Directors of the Company (the "Board") has decided to make a stock option grant as an inducement for the Grantee to promote the best interests of the Company and its stockholders. NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows: 1. Grant of Option. --------------- (A) Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company hereby grants to the Grantee an incentive stock option (the "Option") to purchase 71,700 shares of common stock of the Company ("Shares") at an option price of $14.84 per Share. The Option shall become exercisable according to Paragraph 2 below. (B) The Option is designated as an incentive stock option, as described in Paragraph 5 below. However, if and to the extent the Option exceeds the limits for an incentive stock option, as described in Paragraph 5, the Option shall be a nonqualified stock option. 2. Exercisability of Option. The Option shall vest and become exercisable as ------------------------ to one-thirty-sixth (1/36) of the underlying shares on the fifteenth day of each month, beginning on April 15, 1999 and ending on March 15, 2002, provided the Grantee is employed by, or providing service to, (as defined in the Plan) the Company at all times from the Date of Grant until the applicable date. The right to exercise the Option shall be cumulative. Notwithstanding the foregoing, in the event that the Grantee's employment with the Company is terminated by the Company for any reason or is terminated by the Grantee for Good Reason (as defined in that certain Executive Employment Agreement between the Company and the Grantee of even date herewith), this Option shall continue to vest and become exercisable in accordance with the vesting schedule for a period of nine (9) months following the date of termination of employment. 3. Term and Termination of Option. ------------------------------ The Option shall have a term of 10 years from the Date of Grant and shall terminate at the expiration of that period (March 10, 2009) regardless of any earlier cessation of the Grantee's employment with Company, unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan. The Board has expressly waived the provisions of Section 5(e) of the Plan regarding termination following cessation of employment in accordance with its authority under Section 5(e) of the Plan. 4. Exercise Procedures. ------------------- (a) Subject to the provisions of Paragraphs 2 and 3 above, after the Option has become exercisable, the Grantee may exercise part or all of the exercisable Option by giving the Board written notice of intent to exercise in the manner provided in Paragraph 14 below, specifying the number of Shares as to which the Option is to be exercised. On the delivery date, the Grantee shall pay the exercise price (i) in cash, (ii) with the approval of the Board, by delivering Shares of the Company which shall be valued at their fair market value on the date of delivery, or (iii) by such other method as the Board may approve, including, after a public offering of the Company's stock, payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. The Board may impose from time to time such limitations as it deems appropriate on the use of Shares of the Company to exercise the Option. (b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Board, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations. The Company may require that the Grantee (or other person exercising the Option after the Grantee's death) represent that the Grantee is purchasing Shares for the Grantee's own account and not with a view to or for sale in connection with any distribution of the Shares, or such other representation as the Board deems appropriate. All obligations of the Company under this Agreement shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable. Subject to Board approval, the Grantee may elect to satisfy any income tax withholding obligation of the Company with respect to the Option by having Shares withheld up to an amount that does not exceed the applicable withholding tax rate for federal (including FICA), state and local tax liabilities. -2- 5. Designation as Incentive Stock Option. ------------------------------------- (a) This Option is designated an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). If the aggregate fair market value of the stock on the date of the grant with respect to which incentive stock options are exercisable for the first time by the Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a nonqualified stock option that does not meet the requirements of Section 422. If and to the extent that the Option fails to qualify as an incentive stock option under the Code, the Option shall remain outstanding according to its terms as a nonqualified stock option. (b) The Grantee understands that favorable incentive stock option tax treatment is available only if the Option is exercised while the Grantee is an employee of the Company or a parent or subsidiary or within a time specified in the Code after the Grantee ceases to be an employee. The Grantee should consult with his or her tax adviser regarding the tax consequences of the Option. 6. Change of Control. Except as provided herein, the provisions of the Plan ----------------- applicable to a Change of Control shall apply to the Option. In the event of a Change of Control, (i) the Company shall provide the Grantee written notice of such Change of Control, (ii) the Option shall become fully exercisable, and (iii) the provisions of Section 9 of the Plan shall no longer be applicable to the Shares. 7. Right of First Refusal; Repurchase Right; Shareholder's Agreement. As a ----------------------------------------------------------------- condition of receiving this Option and subject to Paragraph 6 above, the Grantee hereby agrees that all Shares issued under the Plan shall be subject to a right of first refusal and repurchase right as described in the Plan, and the Board may require that the Grantee (or other person exercising the Option after the Grantee's death) execute a shareholder's agreement, in such form as the Board determines, with respect to all Shares issued upon the exercise of the Option before a public offering of the Company's stock. 8. Restrictions on Exercise. Only the Grantee may exercise the Option during ------------------------ the Grantee's lifetime. After the Grantee's death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives of the Grantee, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement. 9. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, -------------------------------- the terms of which are incorporated herein by reference (except to the extent such provisions have been expressly waived by the Board, as noted herein), and in all respects shall be interpreted in accordance with the Plan. The grant and exercise of the Option are subject to the provisions of the Plan and to interpretations, regulations and determinations concerning the Plan established form time to time by the Board in accordance with the provisions of the Plan, including, but not -3- limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the Shares, (iii) capital or other changes of the Company and (iv) other requirements of applicable law. The Board shall have the authority to interpret and construe the Option pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder. 10. No Employment Rights. The grant of the Option shall not confer upon the -------------------- Grantee any right to be retained by or in the employ of the Company and shall not interfere in any way with the right of the Company to terminate the Grantee's employment or service at any time. The right of the Company to terminate at will the Grantee's employment or service at any time for any reason is specifically reserved. 11. No Shareholder Rights. Neither the Grantee, nor any person entitled to --------------------- exercise the Grantee's rights in the event of the Grantee's death, shall have any of the rights and privileges of a shareholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option. 12. Assignment and Transfers. The rights and interests of the Grantee under ------------------------ this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company's parents, subsidiaries, and affiliates. This Agreement may be assigned by the Company without the Grantee's consent. 13. Applicable Law. The validity, construction, interpretation and effect of -------------- this instrument shall be governed by and determined in accordance with the laws of the State of Florida. 14. Notice. Any notice to the Company provided for in this instrument shall be ------ addressed to the Company in care of the President at 11811 U.S. Highway One, North Palm Beach, Florida 33408, and any notice to the Grantee shall be addressed to such Grantee at the current address shown on the payroll of the Company, or to such other address as the Grantee may designate to the Company in writing. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the United States Postal Service. -4- IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant. INTELLIGENT LIFE CORPORATION By: /s/ Peter W. Minford --------------------------------- Name: Peter W. Minford Title: Senior Vice President Accepted: /s/ William P. Anderson, III ---------------------------- William P. Anderson, III -5- EX-10.12 13 EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.12 EXECUTIVE EMPLOYMENT AGREEMENT THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 10th day of March, 1999 between WILLIAM P. ANDERSON, III, an individual resident of the State of Florida ("Executive"), and INTELLIGENT LIFE CORPORATION, a Florida corporation with its principal place of business located in North Palm Beach, Florida (the "Company"). WHEREAS, the Company desires to employ Executive as the Chief Executive Officer of the Company, and Executive desires to accept said employment from the Company; and WHEREAS, the Company and Executive have agreed upon the terms and conditions of Executive's employment with the Company and the parties desire to express the terms and conditions in this employment agreement. WHEREAS, the Company and the Executive have entered into that certain Restricted Stock Grant between the Company and Executive dated as of March 23, 1998; that certain Promissory Note dated March 23, 1998, that certain Severance Agreement between the Company and the Executive dated as of March 23, 1998 (the "Severance Agreement"), that certain Noncompetition Agreement between the Company and the Executive dated as of November 28, 1998 (the "Noncompetition Agreement"), that certain Employee Nondisclosure and Developments Agreement between the Company and Executive dated as of November 28, 1998 ("Nondisclosure Agreement") and that certain Cancellation and Stock Purchase Agreement between the Company and the Executive dated March 10, 1999 (the "Cancellation Agreement") (the Severance Agreement, Noncompetition Agreement, Nondisclosure Agreement and the Cancellation Agreement and all other prior agreements between the Company and Executive not otherwise stated herein are collectively referred to as "Prior Agreements") and desire to more fully expand the terms and conditions of the Executives employment with the Company. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereby agree as follows: 1. Employment of Executive. The Company hereby employs Executive, and ----------------------- Executive hereby accepts such employment from the Company, under the terms of this Agreement for a period beginning on the Effective Date and terminating on the second anniversary thereof (the "Term"), unless this Agreement is otherwise extended or terminated pursuant to the provisions of Section 6 hereof. This Agreement replaces and supersedes all Prior Agreements as herein defined, and is, in its entirety, the sole agreement of employment between the Company and the Executive. 2. Duties. During the Term of this Agreement, Executive shall be employed as ------ the Chief Executive Officer of the Company. Executive's responsibilities as Chief Executive Officer shall include the management of the affairs of the Company, including without limitation, oversight of the Company's strategic technology and market development programs, and other duties as may be assigned to Executive by the Board of Directors from time to time. The Executive shall devote his full business time, attention, skill, energies and efforts to the diligent performance of his duties hereunder, except during periods of illness or periods of vacation and leaves of absence consistent with the Company's policy. 3. Base Salary. Executive's base salary commencing on March 10, 1999 and ----------- during the Term and any Renewal Term(s) (as defined below) of this Agreement shall be equal to $275,000 per annum (the "Base Salary"), which amount may be subject to adjustment annually at the discretion of the Company. The Base Salary shall be paid to Executive by the Company monthly in arrears or in accordance with the Company's regular payroll practice as in effect from time to time. 4. Annual Bonus. Immediately following completion of each fiscal year of the ------------ Company and no later than four (4) months after such date, Executive may receive, in the sole discretion of the Board of Directors, an annual bonus ("Annual Bonus") for such year in addition to the Base Salary. 5. Benefits and other Compensation. Commencing on the date of this Agreement ------------------------------- and during the Term of this Agreement, the Company shall provide the benefits described below. (a) Management Stock Incentive Program. The Executive shall be eligible to ---------------------------------- participate in the Company's stock option, stock purchase or other stock incentive plan(s) to the extent generally available to executive officers of the Company and shall be eligible for the grant of stock options, restricted stock and other awards thereunder as determined by the Board of Directors. The Executive shall be granted an option under the Intelligent Life Corporation 1999 Equity Compensation Plan (the "Equity Plan") to acquire 71,700 shares of the Company's common stock at an exercise price of $14.84 per share, subject to such other terms as specifically provided in the Incentive Stock Option Grant, dated of even date herewith. (b) Vacation. Executive shall receive four (4) weeks paid vacation time -------- each year. (c) Medical Insurance. The Company shall provide Executive with medical ----------------- insurance coverage for Executive and his immediate family in accordance with and subject to the terms of the Company's medical insurance plan, if any, as it exists from time to time. (d) Expenses. Executive shall be reimbursed monthly by the Company for the -------- ordinary and necessary business expenses incurred by him in the performance of his duties for the Company; provided that Executive shall first document said business expenses in the manner generally required by the Company under its policies and procedures, and in any event, the manner required to meet applicable regulations of the Internal Revenue Service relating to the deductibility of such expenses. -2- 6. Term and Termination. Term and Termination are as follows: -------------------- (a) The term of this Agreement (the "Term") shall commence on the Effective Date and end on the second anniversary thereof. The term shall be automatically extended for successive two (2) year periods ("Renewal Term(s)") unless either party hereto delivers to the other written notice three (3) months prior to the end of the Term of its desire to terminate this Agreement. (b) Any termination of employment, including an Involuntary Termination of Employment, shall be communicated by a written notice of termination (a "Notice of Termination") in accordance with Section 21 hereof. 7. Severance Compensation upon Termination. In the event of Executive's --------------------------------------- Involuntary Termination of Employment, the Company shall pay to Executive, upon the Executive's execution and delivery of a release in form and substance reasonably satisfactory to the Chairman of the Board, subject to customary employment taxes and deductions, compensation as follows: (a) If such Involuntary Termination of Employment occurs during the first, second, third or fourth year of Executive's employment, the Company shall pay Executive his Base Salary and Benefits (as described in Section 5 hereof), in accordance with standard Company payroll policy for a period of six (6) months following Termination Date. (b) Any payments due under this Section 7 shall be in addition to and not in lieu of any payments or benefits accrued for Executive through the Termination Date under any other plan, policy or program of the Company. (c) Notwithstanding anything to the contrary, whether by the terms contained herein or in the Equity Plan or Incentive Stock Option Grant, upon cessation of his employment with the Company for any reason, Executive shall retain the incentive stock option granted to him pursuant to that certain Incentive Stock Option Grant of even date herewith until the end of the option term. In the event Executive's employment with the Company is terminated by the Company for any reason or is terminated by the Executive for Good Reason, this Option shall continue to vest and become exercisable in accordance with the vesting schedule set forth in the Stock Option Grant for a period of nine (9) months following the date of termination of employment. 8. Executive Works. Executive agrees that Executive will promptly disclose to --------------- the Company all Executive Works. Executive hereby irrevocably assigns to the Company all right, title and interest in and to any and all Executive Works that relate to the Business of the Company, including all worldwide copyrights, trade secrets, patent rights, and all confidential, proprietary and property rights therein, and Executive will execute, without -3- requiring the Company to provide any further consideration therefor, such confirmatory assignments, instruments and documents as the Company deems necessary or desirable in order to effect such assignment. 9. Works Made for Hire. The Company and Executive acknowledge that in the ------------------- course of Executive's employment by the Company, Executive may from time to time create for the Company or its customers certain works of authorship. Such works may consist of manuals, documentation, pamphlets, instructional materials, videodisks, computer programs, user interfaces, tapes or other copyrightable material, or portions thereof, and may be created within or without the Company's facilities and before, during or after normal business hours. All such works related to or useful in the business of the Company are specifically intended to be works made for hire by Executive and owned by the Company or its customers, as applicable, and Executive shall cooperate with the Company in the protection of the Company or its customer's, as applicable, copyrights therein and, to the extent deemed desirable by the Company or its customers, as applicable, the registration of such copyrights. 10. Products, Notes, Records and Software. All memoranda, notes, records and ------------------------------------- other documents and computer software made or compiled by Executive or made available to him during the Term of this Agreement concerning the Company, including, without limitation, all customer data, billing information, service data, and other technical material, confidential information and trade secrets of the Company and its affiliates, shall be the Company's property and Executive shall deliver all such materials (and all copies thereof) to the Company within three (3) days after any termination of his employment with the Company. 11. Nondisclosure. Executive acknowledges and agrees that during the Term or ------------- any Renewal Term of this Agreement, he will have access to trade secrets and other confidential or proprietary information peculiar to the Company, the disclosure or use of which would injure the Company. Therefore, Executive agrees that he will not at any time during or after the Term or any Renewal Term of his employment by the Company reveal to any person or entity any of the trade secrets or confidential information concerning the organization, business, technology or finances of the Company or of any third party that the Company is under and obligation to keep confidential (including but not limited to trade secrets or confidential information respecting inventions, products, designs, specifications, methods, know-how, techniques, systems processes, software programs, works of authorship, customer lists projects, plans and proposals), except as may be required in the ordinary course of performing his duties as an employee of the Company. Executive shall keep secret all matters entrusted to him and shall not use or attempt to use any such information in any manner which could reasonably be expected to injure or cause loss or may be calculated to injure or cause loss whether directly or indirectly to the Company. 12. Noncompetition. During the time Executive is employed by the Company and -------------- for a period of two (2) years after termination of his employment, Executive will not singly, -4- jointly, or as a partner, member, employee, agent, officer, director, stockholder (except as a holder of not more than five percent (5%) of the outstanding stock of any company listed on the a national securities exchange, or actively traded in a national over the counter market), consultant, independent contractor, or joint venturer of another Person, or in any other capacity, directly or beneficially, own manage, operate, join control, or participate in the ownership, management, operation or control of, or permit the use of his name by, or work for, or provide consulting, financial or other assistance to, or be connected in any manner with a Competing Business; 13. Nonsolicitation. --------------- (a) Customers. During Executive's employment with the Company, --------- Executive shall not, directly or indirectly without the Company's prior written consent, contact any customer of the Company with whom Executive had material contact by reason of his employment with the Company ("Customer"), in the Territory for business purposes unrelated to furthering the Business of the Company. For a period of two (2) years following any termination of Executive's employment with the Company, Executive shall not, directly or indirectly, in the Territory, (i) contact, solicit, divert or take away, any Customer for purposes of, or with respect to, selling a product or service which competes with the Business of the Company, or (ii) take any affirmative action in regard to establishing or continuing a relationship with a Customer for purposes of making, or which directly or indirectly results in, a sale of a product or service which competes with the Business of the Company. (b) Employees. During the Term of Executive's employment with the --------- Company and for a period of two (2) years following termination of Executive's employment with the Company, Executive shall not, directly or indirectly, recruit or hire, or attempt to recruit or hire, any other employees of the Company who were employed by the Company during the Term of Executive's employment with the Company and who are actively employed at the time of the solicitation or attempted solicitation. 14. Remedy for Breach. Executive agrees that the Company's remedies at law ----------------- of the Company for any actual or threatened breach by Executive of any of the covenants contained in Paragraphs 8 through 13 of this Agreement would be inadequate and that the Company shall be entitled to specific performance by Executive of the covenants in such paragraphs or injunctive relief against activities in violation of such paragraphs, or both, by temporary or permanent injunction or other appropriate judicial remedy, writ or order, in addition to any damages and legal expenses (including attorney's fees) which the Company may be legally entitled to recover. Executive acknowledges and agrees that the covenants contained in Paragraphs 8 through 13 of this Agreement shall be construed as agreements independent of any other provision of this or any other contract between the parties hereto, and that the existence of any claim or cause of action by Executive against the Company, whether predicated upon this or any other contract, shall not constitute a defense to the enforcement by the Company of said covenants. -5- 15. Survival. The provisions of Paragraphs 8 through 14 shall survive -------- termination of this Agreement. 16. Invalidity of Any Provision. It is the intention of the parties hereto --------------------------- that Sections 8 through 14 of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies of each state and jurisdiction in which such enforcement is sought, but that the unenforceability (or the modification to conform with such laws or public policies) of any provision hereof shall not render unenforceable or impair the remainder of this Agreement which shall be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions. The parties further agree to alter the balance of this Agreement in order to render the same valid and enforceable. 17. Applicable Law. This Agreement is being executed in the State of Florida -------------- and shall be construed and enforced in accordance with the internal laws of the Florida without giving effect to the conflicts laws of such state. 18. Waiver of Breach. The waiver by the Company of a breach of any provision ---------------- of this Agreement by Executive shall not operate or be construed as a waiver of any subsequent breach by Executive. 19. Successors and Assigns. ---------------------- (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its Successors and Assigns, and the Company shall require any Successors and Assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative under all circumstances. 20. Entire Agreement. This Agreement, together with any grants of stock option ---------------- as provided in that certain Incentive Stock Option Grant of even date herewith, under the Equity Plan contains the entire agreement of the parties. This Agreement may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, changes, modification, extension, or discharge is sought. 21. Definitions. ----------- For purposes of this Agreement, the following terms shall have the following meanings: -6- (a) "Act" shall mean the Securities Act of 1933, as amended. (b) "Accrued Compensation" shall mean an amount, including all amounts earned or accrued through the Termination Date but not paid as of the Termination Date including, (i) base salary of the Executive, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Company as of the Termination Date, and (iii) bonuses and incentive compensation owed to the Executive. (c) "Board" shall mean the Board of Directors of the Company. (d) "Business of the Company" shall mean conducting research on banking and credit products and providing such information to consumers in print and electronic form and any other financial research business in which the Company has engaged in substantial activities. (e) The termination of the Executive's employment shall be for "Cause" if it is a result of: (i) any act that (A) constitutes, on the part of the Executive, fraud, dishonesty, gross malfeasance of duty, or conduct grossly inappropriate to the Executive's office, and (B) is demonstrably likely to lead to material injury to the Company or resulted or was intended to result in direct or indirect gain to or personal enrichment of the Executive including the misappropriation of funds or any act of common law fraud; or (ii) habitual insobriety or substance abuse; or (iii) the conviction (from which no appeal may be or is timely taken) of the Executive of a felony or any crime involving moral turpitude; or (iv) willful misconduct or gross negligence by Executive in the performance of his duties, the willful failure of Executive to perform a material function of Executives duties hereunder, or Executive's engaging in a conflict of interest or other breach of fiduciary duty. provided, however, that in the case of clause (i) above, such conduct shall -------- ------- not constitute Cause unless (A) there shall have been delivered to the Executive a written notice setting forth with specificity the reasons that the Board believes the Executive's conduct constitutes the criteria set forth in clause (i), (B) the Executive shall have been provided the opportunity to be heard in person by the Board (with the assistance of the Executive's counsel if the Executive so desires), and (C) after such hearing, the termination is evidenced by a resolution adopted in good faith by two-thirds of the members of the Board (other than the Executive). (f) A "Change in Control" shall mean the occurrence during the Term of any of the following events: -7- (i) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")) immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of the combined voting power of the Company's then outstanding Voting Securities; provided, however, -------- ------- that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) or the acquisition of voting securities by a Person who, immediately prior to such acquisition, had Beneficial Ownership of 20% or more of the combined voting power of the Company's then outstanding voting securities shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (1) an employee benefit plan (or a trust forming a part thereof) maintained by (x) the Company or (y) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a "Subsidiary"), (2) the Company or any Subsidiary, or (3) any Person in connection with a "Non- Control Transaction" (as hereinafter defined). (ii) The individuals who, as of the date of this Agreement, are members of the Board (the "Incumbent Board") cease for any reason to constitute at least two-thirds of the Board; provided, however, that if the -------- ------- election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered a member of the Incumbent Board; provided, further, however, -------- ------- ------- that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (iii) Approval by stockholders of the Company of: (A) A merger, consolidation or reorganization involving the Company, unless (1) the stockholders of the Company, immediately before such merger, consolidation or reorganization, own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least two-thirds of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting -8- Securities immediately before such merger, consolidation or reorganization, and (2) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation.(A transaction described in clauses (1) and (2) shall herein be referred to as a "Non-Control Transaction.") (B) A complete liquidation or dissolution of the Company; or (C) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary). (iv) Notwithstanding anything contained in this Agreement to the contrary, if the Executive's employment is terminated prior to a Change in Control and the Executive reasonably demonstrates that such termination (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control (a "Third Party") or (B) otherwise occurred in connection with, or in anticipation of, a Change in Control which actually occurs, then for all purposes of this Agreement, the date of a Change in Control with respect to the Executive shall mean the date immediately prior to the date of such termination of the Executive's employment. (g) "Competing Business" shall mean those businesses conducting research on banking and credit products and providing such information to consumers in print and electronic form and any other financial research business in which the Company has engaged in substantial activities. (h) "Disability" shall mean a physical or mental infirmity which impairs the Executive's ability to substantially perform his duties with the Company for a period of 180 consecutive days, as determined by an independent physician selected with the approval of both the Company and the Executive. (i) "Effective Date" shall mean March 10, 1999 (j) "Executive Works" shall mean any and all works of authorship, inventions, discoveries, improvements, designs, techniques, and work product, whether or not patentable, and in whatever form, which are created, made, developed or reduced to practice, or caused to be created, made, developed or reduced to practice by Executive during the period of time that Executive is employed by the Company and that relate in -9- any way to the current or future business of the Company or that result from any work performed by Executive for the Company. (k) "Good Reason" shall mean the occurrence after a Change in Control of any of the events or conditions described in subsections (i) through (viii) hereof: (v) a material change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which, in the Executive's reasonable judgment, represents an adverse change from his status, title, position or responsibilities as in effect at any time within ninety days preceding the date of a Change in Control or at any time thereafter; the assignment to the Executive of substantial duties or responsibilities which, in the Executive's reasonable judgment, are materially inconsistent with his status, title, position or responsibilities as in effect at any time within ninety days preceding the date of a Change in Control or at any time thereafter; any removal of the Executive from or failure to reappoint or reelect him to any of such offices or positions, except in connection with the termination of his employment for Disability, Cause, as a result of his death or by the Executive other than for Good Reason, or any other change in condition or circumstances that in the Executive's reasonable judgment makes it materially more difficult for the Executive to carry out the duties and responsibilities of his office than existed at any time within ninety days preceding the date of Change in Control or at any time thereafter; (vi) a reduction in the Executive's base salary or any failure to pay the Executive any compensation or benefits to which he is entitled within five days of the date due; (vii) the Company's requiring the Executive to be based at any place outside a 30-mile radius from the Executive offices occupied by the Executive immediately prior to the Change in Control, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (viii) the failure by the Company to (A) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation or Executive benefit plan in which Executive was participating at any time within ninety days preceding the date of a Change in Control or at any time thereafter, unless such plan is replaced with a plan that provides substantially equivalent compensation or benefits to the Executive or (B) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other Executive benefit plan, program and practice in which the Executive was participating at any time within ninety days preceding the date of a Change in Control or at any time thereafter; (ix) the insolvency or the filing (by any party, including the Company) of a petition for bankruptcy of the Company, which petition is not dismissed within sixty days; -10- (x) any material breach by the Company of any provision of this Agreement; (xi) any purported termination of the Executive's employment for Cause by the Company which does not comply with the terms of this Agreement; or (xii) the failure of the Company to obtain an agreement, satisfactory to the Executive, from any Successors and Assigns to assume and agree to perform this Agreement, as contemplated in Section 18 hereof. Any event or condition described in clause (i) through (viii) above which occurs prior to a Change in Control but which the Executive reasonably demonstrates (A) was at the request of a Third Party, or (B) otherwise arose in connection with, or in anticipation of, a Change in Control which actually occurs, shall constitute Good Reason for purposes of this Agreement, notwithstanding that it occurred prior to the Change in Control. The Executive's right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. (l) "Involuntary Termination" shall mean (1) the termination of Anderson's actual employment relationship with the Company by the Company for any reason other than Cause, (2) the termination of Anderson's actual employment relationship with the Company by Anderson within thirty days following a material reduction in total compensation, a material reduction in duties or authority, a change in principal place of employment or a Change of Control, or (3) Anderson's death or permanent and total disability (as defined in the Company's benefit plans in effect at the time). (m) "Notice of Termination" shall mean a written notice of termination from the Company or the Executive which specifies an effective date of termination, indicates the specific termination provision in this Agreement relied upon, and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. (n) "Successors and Assigns" shall mean a corporation or other entity acquiring all or substantially all the assets and business of the Company (including this Agreement), whether by operation of law or otherwise. (o) "Termination Date" shall mean, in the case of the Executive's death, his date of death, and in all other cases, the date specified in the Notice of Termination. -11- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. EXECUTIVE: COMPANY: WILLIAM P. ANDERSON, III INTELLIGENT LIFE CORPORATION By: /s/ Peter W. Minford /s/ William P. Anderson, III ---------------------------- - ----------------------------- Name: Peter W. Minford William P. Anderson, III Title: Senior Vice President -12- EX-23.1 14 CONSENT OF KPMG LLP EXHIBIT 23.1 The Board of Directors and Stockholders Intelligent Life Corporation: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus. KPMG LLP Atlanta, Georgia March 10, 1999 EX-23.2 15 CONSENT OF THOMAS & CLOUGH CO. EXHIBIT 23.2 ACCOUNTANTS' CONSENT The Board of Directors and Stockholders Intelligent Life Corporation: We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus. Thomas & Clough Co., P.A. Palm Beach, Florida March 10, 1999 EX-27 16 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTELLIGENT LIFE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS 6-MOS JUN-30-1998 DEC-31-1998 JUL-01-1997 JUL-01-1998 JUN-30-1998 DEC-31-1998 910,427 1,633,100 0 0 346,461 563,383 23,946 24,847 0 0 1,260,902 2,281,124 746,802 1,153,132 241,527 339,474 1,767,899 3,099,352 1,096,580 1,622,944 0 0 5,777,627 7,760,162 0 0 7,692 8,102 (5,128,237) (8,206,998) 1,767,899 3,099,352 3,840,577 3,469,191 3,840,577 3,469,191 0 0 6,669,205 5,756,488 0 0 0 0 6,216 12,433 (2,782,493) (2,095,218) 0 0 (2,782,493) (2,095,218) 0 0 0 0 0 0 (2,782,493) (2,095,218) (3.62) (2.58) (3.62) (2.58)
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