As filed with the Securities and Exchange Commission on May 17, 1996
Registration No. 333-_______________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
NETLIVE COMMUNICATIONS, INC.
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(Name of small business issuer in its charter)
Delaware 7373 13-3848652
----------------- ---------------------------- ---------------
(State or Jurisdic- (Primary Standard Industrial (I.R.S. Employer
tion of Incorpora- Classification Code Number) Identification
tion or Organization) No.)
584 Broadway
New York, New York 10012
(212) 343-7082
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(Address and telephone number of principal executive offices)
584 Broadway
New York, New York 10012
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(Address of principal place of business or intended principal place
of business)
Laurence Rosen, President
NETLIVE COMMUNICATIONS, INC.
584 Broadway
New York, New York 10012
(212) 343-7082
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(Name, address and telephone number of agent for service)
Copies to:
Lawrence G. Nusbaum, Esq. Jay M. Kaplowitz, Esq.
Richard A. Friedman, Esq. Gersten Savage Kaplowitz
Gusrae, Kaplan & Bruno & Curtin, LLP
120 Wall Street 575 Lexington Avenue
New York, New York 10005 New York, New York 10022
(212) 269-1400 (212) 752-9700
(212) 809-5449 (FAX) (212) 752-9713 (FAX)
<PAGE>
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
====================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount Of
Class of Securities To Be Price Offering Registration
To Be Registered Registered Per Share(1) Price(1) Fee
====================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.0001
par value............ 1,035,000(2) $ 5.50 $5,692,500 $1,963.93
Common Stock Purchase
Warrants............. 690,000(3) $ .10 $ 69,000 $ 23.79
Common Stock, $.0001
par value(4)........... 690,000 $ 5.50 $3,795,000 $1,308.62
Underwriter's
Warrants(5)............ 1 $10.00 $ 10 $ 0.01
Common Stock, $.0001
par value(6)........... 90,000 $ 6.60 $ 594,000 $ 204.83
Common Stock
Purchase Warrants(7)... 60,000 $ .12 $ 7,200 $ 2.48
Common Stock, $.0001
par value(8)........... 60,000 $ 6.60 $ 396,000 $ 136.55
Common Stock, $.0001
par value(9)........... 417,500 $ 5.50 $2,296,250 $ 791.81
Common Stock Purchase
Warrants(9)............ 1,000,000 $ .10 $ 100,000 $ 34.48
Common Stock, $.0001
par value(10).......... 1,000,000 $ 5.50 $5,500,000 $1,896.55
---------
TOTAL $6,363.05
=========
</TABLE>
<PAGE>
__________________
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457.
(2) Includes 135,000 shares of Common Stock subject to the Underwriter's
over-allotment option.
(3) Includes 90,000 Common Stock Purchase Warrants subject to the
Underwriter's over-allotment option.
(4) Issuable upon exercise of the Common Stock Purchase Warrants.
Includes shares of Common Stock issuable upon exercise of the Underwriter's
over-allotment option.
(5) To be issued to the Underwriter, entitling the Underwriter to purchase
up to 90,000 Shares of Common Stock.
(6) Issuable upon the exercise of the Underwriter's Warrants.
(7) Issuable upon exercise of the Underwriter's Warrants, entitling the
Underwriter to purchase up to 60,000 Common Stock Purchase Warrants.
(8) Issuable upon the exercise of the Warrants included in the
Underwriter's Warrants.
(9) To be sold by the Selling Securityholders.
(10) Issuable upon the exercise of the Common Stock Purchase Warrants to be
sold by the Selling Securityholders.
Pursuant to Rule 416, there are also being registered such additional
shares as may become issuable pursuant to anti-dilution provisions of the
Common Stock Purchase Warrants and the Underwriters' Stock Warrants and
Underwriters' Warrants.
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 said Section 8(a), may determine.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to
be used in connection with an offering by the Company of shares of Common
Stock and Common Stock Purchase Warrants (the "Prospectus") and one to be
used in connection with the sale of shares of Common Stock and Common Stock
Purchase Warrants by certain selling securityholders (the "Selling
Securityholder Prospectus"). The Prospectus and the Selling Securityholder
Prospectus will be identical in all respects except for the alternate pages
for the Selling Securityholder Prospectus included herein which are labeled
"Alternate Page for Selling Securityholder Prospectus."
<PAGE>
NETLIVE COMMUNICATIONS, INC.
----------------------------
Form SB-2 Caption In
Item Prospectus
--------- ----------
PART I
1. Forepart of the Registration Cover Page; Outside
Statement and Outside Front Front Page of
Cover of Prospectus Prospectus
2. Inside Front and Outside Back Inside Front and
Cover Pages of Prospectus Outside Back Cover
Pages of Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Risk Factors;
Underwriting
6. Dilution Dilution
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Underwriting
9. Legal Proceedings Business - Legal
Proceedings
10. Directors, Executive Officers, Management and
Promoters and Control Persons Principal Stockholders
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of
Securities
13. Interest of Named Experts and Legal Matters; Experts
Counsel
14. Disclosure of Commission
Position on Indemnification Not Applicable
for Securities Act Liabilities
(i)
<PAGE>
15. Organization within Last Five Not Applicable
Years
16. Description of Business Business
17. Management's Discussion and Management's Discussion
Analysis or Plan of Operation and Analysis of Financial Condition
and Results of Operations
18. Description of Property Business - Facilities
19. Certain Relationships and Certain Transactions
Related Transactions
20. Market for Common Equity and Not Applicable
Related Stockholder Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
PART II
24. Indemnification of Directors Indemnification of
and Officers Directors and Officers
25. Other Expenses of Issuance and Other Expenses of
Distribution Issuance and Distribution
26. Recent Sales of Unregistered Recent Sales of Un-
Securities registered Securities
27. Exhibits Exhibits
28. Undertakings Undertakings
(ii)
<PAGE>
SUBJECT TO COMPLETION, DATED MAY __, 1996
NETLIVE COMMUNICATIONS, INC.
900,000 Shares of Common Stock and
600,000 Common Stock Purchase Warrants
NetLive Communications, Inc., a Delaware corporation (the "Company")
hereby offers 900,000 shares of common stock, $.0001 par value (the "Common
Stock") of the Company and 600,000 Common Stock Purchase Warrants (the
"Warrants"). The Common Stock and the Warrants offered hereby (sometimes
hereinafter collectively referred to as the "Securities") will be
separately tradeable immediately upon issuance and may be purchased
separately. Each Warrant entitles the holder to purchase one share of
Common Stock at an exercise price of $5.50 (the "Exercise Price"), subject
to adjustment, commencing two years after the date of this Prospectus (the
"Effective Date") or sooner if the Warrants are called for redemption until
the close of business on the fifth year after the Effective Date.
The Warrants are redeemable, in whole or in part, by the Company at a
price of $.05 per Warrant, commencing one year after the Effective Date and
prior to their expiration, provided that (i) prior written notice of not
less than 30 days is given to the Warrantholders, (ii) the closing bid
price (as defined) of the Company's Common Stock for the twenty consecutive
trading days immediately prior to the date on which the notice of
redemption is given, shall have exceeded $7.50 per share, and (iii)
Warrantholders shall have exercise rights until the close of business the
day preceding the date fixed for redemption.
Prior to this offering (the "Offering"), there has been no public
market for the Company's Common Stock and Warrants, and there can be no
assurance that such a public market will develop or be sustained after the
completion of the Offering. The Offering price of the Common Stock and the
exercise price and other terms of the Warrants were established by
negotiations between the Company and May Davis Group, Inc. (the
"Underwriter") and do not bear any direct relationship to the Company's
assets, book value, results of operations or any other criteria of value.
The Company has applied for the listing of the Common Stock and Warrants on
the NASDAQ Stock Market ("NASDAQ") under the symbols "NETL" and "NETLW,"
respectively, and on the Boston Stock Exchange under the symbols "NET" and
"NETW," respectively.
_____________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS," COMMENCING ON PAGE 8 AND
"DILUTION".
1
<PAGE>
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
============================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Share.......... $5.50 $.55 $4.95
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Per Warrant ....... $.10 $.01 $.09
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Total(3)........... $5,010,000 $501,000 $4,509,000
============================================================================
__________________________________________
May Davis Group, Inc.
__________________________________________
The date of this Prospectus is ____________ ____, 1996
__________________
Footnotes to Table
(1) Does not include additional compensation to the Underwriter consisting
of (i) a non-accountable expense allowance equal to 3% of the aggregate
purchase price of the Securities, or $150,300 ($172,845 if the
Underwriter's over-allotment option is exercised in full) of which $25,000
has been paid to date; (ii) warrants to purchase 90,000 shares of Common
Stock at $6.60 per share and 60,000 Common Stock Purchase Warrants at $.12
per Warrant; and (iii) a three year consulting agreement providing for fees
totalling $90,000, which is payable to the Underwriter in full on the
closing of this Offering. For additional information concerning further
agreements between the Company and the Underwriter, including an agreement
to indemnify the Underwriter against certain civil liabilities, including
liabilities under the Securities Act of 1933, see "Underwriting".
(2) After deducting Underwriting discounts and commissions, but before the
payment of the Underwriter's non-accountable expense allowance in the
amount of $150,300 ($172,845 if the Underwriter's over-allotment option is
exercised in full) and other expenses of the Offering payable by the
Company.
2
<PAGE>
(3) The Company has granted the Underwriter an option to purchase up to
135,000 additional shares of Common Stock and 90,000 additional Warrants,
upon the same terms and conditions set forth above, solely to cover over-
allotments, if any (the "Over-allotment Option"). If the Over-allotment
Option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be increased to
$5,761,500, $576,150, and $5,185,350 respectively.
The Common Stock and Warrants are being offered on a "firm commitment"
basis, subject to prior sale, when, as, and if delivered to and accepted by
the Underwriter, and subject to certain other conditions and legal matters.
The Underwriter reserves the right to withdraw, cancel or modify the
Offering and to reject orders in whole or in part. It is expected that
delivery of the certificates representing the shares of Common Stock and
Warrants will be made at the offices of the Underwriter, in New York City,
on or about _____________, 1996.
_____________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AND THE WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
_____________________
The Company intends to distribute to its stockholders annual reports
containing financial statements audited and reported upon by its
independent public accountants after the close of each fiscal year, and
will make such other periodic reports as the Company may determine to be
appropriate or as may be required by law. The Company's fiscal year ends
March 31st of each year.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information, including financial statements and notes thereto
appearing elsewhere in this Prospectus. Each prospective investor is urged
to read this Prospectus in its entirety. Except as otherwise indicated
herein, the information contained in this Prospectus gives no effect to the
exercise of (i) the Over-allotment Option, (ii) the Underwriter's Warrants,
(iii) Warrants offered hereby or issued to private investors, or (iv)
options granted under the Company's stock option plan. All per share
information in this Prospectus has been adjusted to reflect an 837.14 for
one stock split of the Company's Common Stock effected in March 1996.
The Company
NetLive Communications, Inc. (the "Company" ) is a development stage
company recently organized to provide live, one-on-one, videoconferenced
entertainment, educational and counseling services over the Internet. The
Company is developing and intends to utilize technologies that will allow
customers to view and communicate with the Company's professionals and
entertainment performers over the Internet in an interactive and user-
friendly environment. It is intended that, at such time as the Company
either develops or licenses technology from others, customers will be able
to simultaneously view and speak with the Company's live professionals. The
Company plans to bill its customers according to the length of time that
they remain on-line. No assurance can be given as to when, if ever, such
technology will be ready to be used commercially or that it will be
commercially accepted. To date, other than the continued development of its
technology and business plan and raising financing, the Company has not
conducted any business nor generated any revenues or profits and no
assurance can be given, that it will be able to do so in the future.
The Internet is a global web of computer networks. The expansion of
this information and communications medium has created a new consumer
market. The Company plans to service this market by providing live
videoconferenced one-on-one entertainment, educational and counseling
services through the use of technology designed to enable users to view
live, individual, video broadcasts over the Internet. The Company believes
that the convergence of the growing Internet medium and Internet-based
videoconferencing technology presents a unique opportunity to bring the
Company's services directly into consumers' homes.
The Company's proposed entertainment services are initially intended
to include PsychicNet. It is intended that PsychicNet will employ
professional psychics to provide live videoconferenced
4
<PAGE>
psychic advice including tarot card readings, astrological chart analysis
and general psychic guidance.
The Company's proposed educational services are initially intended to
include TutorNet, which will provide customers with instruction in a
variety of academic subjects over the Internet. It is intended that
TutorNet will provide tutoring services for students ranging from
elementary school to graduate school.
The Company's proposed counseling services are initially intended to
include TherapyNet, which will provide customers with a variety of
psychological advice and counseling over the Internet. It is intended that
TherapyNet will provide clients with a full range of psychological
counseling from experienced mental health professionals, who
videoconference directly with the patient in the privacy of his home or
office.
With the exception of having retained the services of consultants, on
a part-time basis, who are helping the Company develop its proposed
PsychicNet, TutorNet and TherapyNet services and World Wide Web ("WWW")
sites, the Company has not, as of the data hereof, entered into any
agreements with any psychics, professionals tutors or mental health
professionals.
Additional proposed entertainment, educational and counseling services
which the Company is considering include FantasyNet, ModelNet, WebClinic
and CookNet. See "Business."
The Company is continuously monitoring and evaluating the proposed
services it has under development in order to establish priorities and
determine the probabilities of success. In addition, the Company is
reviewing additional services which it may consider offering. No assurance
can be given that the Company will fully develop or offer its currently
proposed services, or that, if developed and offered, such proposed
services will be accepted by consumers.
It is intended that computer users will be able to access the
Company's services over the Internet using a Netscape browser based user
interface. The Company intends for its integrated WWW commerce server to
provide for secure transaction processing, efficient scheduling, and
automated billing. The Company also is designing its system to
automatically collect and process market data.
The Company is developing and plans to maintain databases containing
profiles of all customers utilizing the Company's services. The Company
believes that this information will enable the Company to better understand
its customer base, to develop new and innovative services and to create
targeted marketing programs geared toward efficiently selling the Company's
services. The Company also intends to employ focused consumer marketing
tech-
5
<PAGE>
niques and to track marketing effectiveness utilizing advanced database and
analytical methods. It is intended that the Company will initially market
its services worldwide over the Internet and it plans, in the future, to
market through traditional media in targeted markets throughout North
America, Europe and Asia.
The Company was organized in the State of Delaware on August 23, 1995.
The Company's executive offices are located at 584 Broadway, New York, New
York 10012, and its telephone number at that address is (212) 343-7082.
The Offering
Securities Offered(1).... 900,000 shares of Common Stock and 600,000
Warrants. Each Warrant entitles the holder to
purchase one share of Common Stock at a price
of $5.50 during a three year period
commencing two years after the date of this
Prospectus. The exercise price and the number
of shares issuable upon exercise of the War-
rants are subject to adjustment in certain
circumstances. See "Description of Securi-
ties."
Common Stock Outstanding
Before Offering........ 1,700,000 shares.
Common Stock Outstanding
After Offering(1)(2)... 2,600,000 shares.
Warrants Outstanding
Before Offering........ 1,000,000.
Warrants Outstanding After
Offering............... 1,600,000 Warrants.
Exercise Terms......... Each Warrant entitles the holder thereof to
purchase one share of Common Stock for $
5.50, during the three year period commencing
two years after the Effective Date, subject
to adjustment in certain circumstances. See
"Description of Securities-Warrants"..
Expiration Date........ _________, 2001 (five years after the
Effective Date).
6
<PAGE>
Redemption............. Redeemable by the Company, in whole or in
part, at a price of $.05 per Warrant,
commencing one year after the Effective Date
upon not less than 30 days prior written
notice to the holders of such Warrants,
provided that the closing bid price (as
defined) of the Company's Common Stock for
the twenty consecutive trading days
immediately prior to the date on which the
notice of redemption is given, shall have
exceeded $7.50 per share.
Use of Proceeds.......... Expansion of operations, development of
proposed business, capital expenditures and
working capital. See "Use of Proceeds".
Risk Factors............. Investment in the securities offered hereby
involves a high degree of risk and immediate
substantial dilution. See "Risk Factors" and
"Dilution".
Proposed NASDAQ Symbols:(2)
Common Stock........... NETL
Warrants............... NETLW
Proposed Boston Stock Exchange
Symbols:
Common Stock........... NLC
Warrants............... NLCW
__________________
(1) Does not include (i) 135,000 shares of Common Stock and 90,000
Warrants, subject to the Underwriter's Over-allotment Option; (ii)
1,000,000 shares of Common Stock issuable upon the exercise of the
outstanding Warrants, (iii) 150,000 shares of Common Stock issuable upon
the exercise of the Underwriter's Warrants; (iv) 800,000 shares of Common
Stock reserved for issuance pursuant to the Company's incentive stock
option plan; or (v) 260,000 shares of Common Stock reserved for issuance
pursuant to certain other options. See "Management", "Underwriting" and
"Description of Securities".
(2) The proposed trading symbols do not imply that a liquid and active
market will be developed or sustained for the securities upon completion of
the Offering.
7
<PAGE>
SUMMARY FINANCIAL INFORMATION
-----------------------------
The following summary of financial information should be read in
conjunction with the Unaudited Financial Statements and notes thereto
appearing elsewhere in this Memorandum.
Statement of Operations Data:
Period from
August 23, 1995
(date of inception)
to March 31, 1996
-------------------
Selling, General and
Administrative Expenses $243,129
Net loss (243,129)
Net loss per share (0.19)
Weighted average number of
common shares outstanding(1) 1,276,762
__________________
(1) Reflects incorporation of the Company on August 23, 1995. See "Certain
Transactions.
Balance Sheet Data:
March 31, 1996
---------------------------------
(Actual) (As Adjusted)(1)(2)
---------- -------------------
Current Assets $162,166 $4,224,616
Total Assets 282,438 4,336,909
Total Liabilities 254,917 143,033
Deficit Accumulated During the
Development Stage (243,129) (427,474)
__________________
(1) Adjusted to give effect to the sale of 900,000 shares of Common Stock
and 600,000 Warrants offered hereby and the receipt of $3,909,200 of net
proceeds, after giving effect to $25,500 of previously paid Offering costs.
(2) Reflects the issuance of 200,000 shares of Common Stock in connection
with the May 1996 private placement and the use of a portion of the
proceeds of such private placement to repay notes payable.
8
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative in
nature, involves a high degree of risk and should not be made by any
investor who cannot afford the loss of his entire investment. Each
prospective purchaser should carefully consider the following risks and
speculative factors associated with this Offering, as well as other factors
described elsewhere in this Prospectus, before making an investment.
Development Stage Company. The Company is in the development stage,
has been engaged primarily in organizational activities and has had limited
operations. As a result, the likelihood of success of the Company's
operations must be considered in view of all of the risks, expenses and
delays inherent in the establishment of a new business, including, but not
limited to, unforeseen expenses, complications and delays, the initiation
of marketing activities, the uncertainty of market acceptance of new
services, intense competition from larger more established competitors and
other factors. Accordingly, there can be no assurance that the business of
the Company will be successful. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Explanatory Paragraph in Independent Auditors Report; Dependence Upon
Offering Proceeds. The Company incurred a net loss of $243,129 for the
period from August 23, 1995 (date of inception) to March 31, 1996. In
addition, the Company had a working capital deficiency of $80,471 and a
deficit accumulated during the development state of $243,129 at such date.
As a result of the Company's working capital deficiency and deficit
accumulated during the development stage, the Company's independent
auditors' report on the Company's financial statements for the period from
August 23, 1995 (date of inception) to March 31, 1996 contains an
explanatory paragraph that discusses the fact that there is substantial
doubt about the Company's ability to continue as a going concern. The
Company has an immediate need for the net proceeds of this Offering, or
other financing in order to continue the development of its proposed
services, and to commence its operations and the marketing of its services.
The Company believes that the proceeds of this Offering will be sufficient
to fund the Company's operations for a period of approximately one year
from the date of this Prospectus, including the commencement of its
operations and marketing of its services. This estimate is based upon the
Company's limited operations to date and its estimates as to cash flow.
However, in the event that such estimates are inaccurate or future events
prevent the Company from implementing its plans as anticipated, the Company
may be materially and adversely effected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Financial
Statements."
9
<PAGE>
Anticipated Initial Losses; Working Capital Deficit; No Assurance of
Profitability. During the period from August 23, 1995 (date of inception)
to March 31, 1996, the Company incurred a net loss of $243,129. In
addition, at March 31, 1996, the Company had a working capital deficit of
$80,471 and a deficit accumulated during the development stage of $243,129.
The Company has not derived any revenues and has continued to incur losses.
There can be no assurance that the Company will be able to profitably
implement and market its proposed services. It is anticipated that until
the Company is able to generate significant revenues, the Company will
sustain additional losses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Use of Proceeds" and
"Proposed Business."
Need for Additional Financing. Although the Company believes that the
net proceeds from the sale of the Securities offered hereby will be
sufficient to fund the Company's operations for a period of approximately
one year, such belief cannot give rise to an assumption that the Company's
cost estimates are accurate or that the proceeds to be received from this
Offering will provide sufficient working capital for at least one year of
operations. In addition, in the event of delays or unanticipated costs or
problems in the development and marketing of the Company's proposed
services, the Company may require substantial additional financing.
Further, the Company's ability to continue operations after one year will
depend substantially upon the availability of cash flow from its operations
or the ability of the Company to raise additional funds through alternative
financing methods, if necessary. There can be no assurance that the Company
will be able to obtain additional funding when needed, or that such
funding, if available, will be obtained on terms acceptable to the Company.
In the event that the Company's operations do not generate sufficient cash
flow, or the Company cannot obtain additional funds if and when needed, the
Company may be forced to curtail or cease its activities, which would
likely result in loss to investors of all or a substantial portion of their
investment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Use of Proceeds."
New and Uncertain Market. The market for Internet services has only
recently begun to develop, is rapidly evolving and is characterized by an
increasing number of market entrants who have developed products and
services for communication and commerce over the Internet. The Company's
future success will depend, in part, upon increased commercial use of the
Internet. While many commercial, educational and governmental networks are
currently connected to the Internet, increased commercial use of the
Internet will depend upon several critical issues (i.e., security,
reliability, cost, ease of use and access, and quality of service). There
can be no assurance that widespread commercial use of the Internet will
develop.
10
<PAGE>
Technological Change and New Services. The market for Internet
services is characterized by rapidly changing technology, evolving industry
standards, changing customer needs and demands, and frequent new product
and service introductions. The Company's future success will depend, in
part, on its ability to develop, maintain and improve new and existing
technology for use in connection with the provision of its videoconferenced
services over the Internet, as well as on its ability to develop and
provide new and desirable services that capitalize on the increased use of
the Internet. In addition, the Company's success will also depend on its
ability to attract and retain talented professionals, and on its ability to
provide extensive support and services to its customers. There can be no
assurance that the Company will be successful in effectively developing or
providing new technologies or services on a timely basis or that such
technologies or services will achieve market acceptance.
Dependence on the Internet. Although it is anticipated that some sales
of the Company's products will be to PC users who are able to use the
Company's services by connecting directly to the Company's network using a
modem, sales of the Company's services will depend in large part upon a
robust industry and infrastructure for providing Internet access and
carrying Internet traffic. The Internet may not prove to be a viable
commercial marketplace because of inadequate development of the necessary
infrastructure, such as a reliable network backbone or timely development
of complementary products, such as high speed modems. Because global
commerce and on-line exchange of information on the Internet and other
similar open wide area networks are new and evolving, it is difficult to
predict with any assurance whether the Internet will prove to be a viable
commercial marketplace. There can be no assurance that the infrastructure
or complementary products necessary to make the Internet a viable commer-
cial marketplace will be developed, or, even if developed, that the
Internet necessarily will become a viable commercial marketplace. If the
necessary infrastructure or complementary products are not developed, or if
the Internet does not become a viable commercial marketplace, the Company's
business, operating results and financial condition will be materially
adversely affected.
Potential Liability and Insurance. The Company may be subject to
substantial liability as a result of claims made by consumers arising out
of services provided by the Company's independent contractors and
employees. The Company is aware that claims have been made against other
companies engaged in providing telephone entertainment services on the
basis of advice or prognostications disseminated through such services.
While the Company does not currently maintain insurance, the Company
intends to attempt to purchase such insurance at such time as it has
sufficient funds available for such purpose. There can be no assurance that
the Company will be able to obtain such insurance, or if obtained, that
11
<PAGE>
such insurance will be sufficient to cover potential claims or that an
adequate level of coverage will be available in the future at a reasonable
cost. The Company will seek to limit any such potential liability by
providing disclaimers in connection with its services. There can be no
assurance, however, that the Company will not face claims resulting in
substantial liability for which the Company is partially or completely
uninsured. A partially or completely uninsured claim against the Company,
if successful and of sufficient magnitude, would have a material adverse
effect on the Company.
Competition. The market for Internet services is new, intensely
competitive, rapidly evolving and subject to rapid technological change.
The Company expects to encounter significant competition from numerous
companies, many of which may possess substantially greater technical,
financial, sales and marketing resources than the Company. The Company
believes that competition from new entrants is expected to increase as
commercial acceptance and use of the Internet expands. Such increased
competition may have a material adverse effect on the Company's ability to
successfully market its services.
The Company's entertainment, educational and counseling services will
also face intense competition from numerous other competing services and
products including, but not limited to, telephone services, in-person
consultations, newspapers, magazines, books, audio and video cassettes, as
well as various other forms of services which may be less expensive or
provide other advantages to consumers. There can be no assurance that the
Company will be able to compete successfully with other such products and
services.
Immediate and Substantial Dilution. This Offering involves immediate
and substantial dilution to investors. As of March 31, 1996, the negative
net tangible book value of the Company was $44,678, or approximately,
($.03) per share of Common Stock. Purchasers of shares of Common Stock in
the Offering will incur immediate dilution in net tangible book value of
$3.89 per share of Common Stock (attributing no value to the Warrants),
which is approximately 70.7% based on the initial public offering price of
$5.50 per share. All of the Company's present stockholders purchased their
shares at a price substantially less than the initial public offering price
of the Common Stock. See "Dilution".
Broad Discretion in Use of Proceeds. Approximately 17.5% of the net
proceeds of this Offering will be applied to working capital and other
general corporate purposes. Accordingly, management of the Company will
have broad discretion as to the application of such proceeds. See "Use of
Proceeds."
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<PAGE>
Dependence Upon Management; No "Key Man Life Insurance"; Attraction
and Retention of Key Personnel. The success of the Company will be
dependent on the efforts of Laurence Rosen, the Company's President and
Chief Executive Officer. The loss of the services of Mr. Rosen could have a
material adverse effect on the Company. The Company intends to purchase
"key man life insurance" on the life of Mr. Rosen in the amount of
$1,000,000. The Company's future success will depend in part on its ability
to attract and retain qualified personnel to manage the development and
future growth of the Company. There can be no assurance that the Company
will be successful in attracting and retaining such personnel.
Control by Management. The Company's officers and directors currently
own and have the power to vote in excess of 61% of the total outstanding
shares of Common Stock. In addition, upon completion of this Offering,
management of the Company will continue to beneficially own shares of
Common Stock representing in excess of 40% of all votes entitled to be
cast. Accordingly, management of the Company will, as a practical matter,
be in a position to elect a majority of the directors of the Company and to
control the Company's affairs.
Potential Conflicts of Interest. The Company's advisors and service
providers may be employed by or work for others, and, accordingly, may
devote only a small portion of their time to the Company. In addition,
these individuals may have entered or may enter into employment, consulting
or other advisory arrangements with other entities and, as a result, their
obligations to these other entities may conflict or compete with their
obligations to the Company. The Company will seek to enter into non-compete
and confidentiality agreements with such persons. See "Management".
Shares Eligible for Future Sale. The Company currently has 1,700,000
shares of Common Stock outstanding that are "restricted securities", as
that term is defined under Rule 144 promulgated under the Securities Act of
1933, as amended (the "Securities Act"). In general, under Rule 144, a
person who has satisfied a two-year holding period may, under certain
circumstances, sell within any three month period a number of shares of
Common Stock that does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume in such shares
during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity or
other limitation by a person who is not an affiliate of the Company and who
has satisfied a three-year holding period. All stockholders of the Company
have agreed not to publicly sell shares of the Company's Common Stock for a
period of two years from the date of this Prospectus without the prior
written consent of the Underwriter. Any substantial sale of restricted
securities under Rule 144 could have a significant adverse effect on the
13
<PAGE>
market price of the Company's securities. See "Shares Eligible for Future
Sale."
No Dividends and None Anticipated. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors, out of funds legally available therefor. To date, no dividends
have been declared or paid on the Common Stock, and the Company does not
intend to declare any dividends in the foreseeable future. It is currently
anticipated that earnings, if any, will be used to develop and finance the
Company's proposed business operations. See "Dividend Policy."
No Assurance of Public Market; Determination of Offering Price;
Volatility of Stock Price. Prior to this Offering, there has been no market
for any of the Company's securities. There can be no assurance that a
trading market will develop after this Offering for any of the Company's
securities or that, if developed, it will be sustained. The initial public
offering price of the Securities and the exercise price and other terms of
the Warrants were established by negotiations between the Company and the
Underwriter and do not bear any direct relationship to the Company's
assets, book value, results of operations or any other criteria of value.
See "Underwriting".
The stock market has, from time to time, experienced significant price
and volume fluctuations that may be unrelated to the operating performance
of any particular company. In addition, the market prices of the securities
of many publicly-traded companies in the Internet industry have in the past
been, and can in the future be expected to be, especially volatile. Various
factors and events, including future announcements of new service offerings
by the Company or its competitors, developments or disputes concerning,
among other things, government regulations in the United States, and
economic and other external factors, as well as fluctuations in the
Company's financial results, could have a significant impact on the market
price of the Company's securities.
NASDAQ and Boston Stock Exchange Eligibility and Maintenance
Requirements; Possible Delisting of Securities from NASDAQ Market; Risks of
Low-Priced Stocks. Prior to this Offering, there has been no established
public trading market for the Company's securities and there is no
assurance that a public trading market for the Company's securities will
develop after the completion of this Offering. If a trading market does in
fact develop for the securities offered hereby, there can be no assurance
that it will be sustained.
The Company has applied for listing of the Common Stock and Warrants
on the NASDAQ small capitalization market upon the Effective Date. The
Commission has approved rules for imposing
14
<PAGE>
criteria for listing of securities on NASDAQ, including standards for
maintenance of such listing. In order to qualify for initial quotation of
securities on the NASDAQ small capitalization market, a company, among
other things, must have at least $4,000,000 in total assets, $2,000,000 in
stockholders' equity, $1,000,000 in market value of the public float and a
minimum bid price of $3.00 per share. For continued listing, a company,
among other things, must have at least $2,000,000 in total assets,
$1,000,000 in stockholders' equity, $1,000,000 in market value of the
public float and a minimum bid price of $1.00 per share. If the Company is
unable to satisfy NASDAQ maintenance criteria for listing in the future,
its securities may be delisted from NASDAQ. In such event, trading, if any,
in the Company's securities would thereafter be conducted in the over-the-
counter market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board." As a consequence of such delisting, an investor would
likely find it more difficult to dispose of, or to obtain quotations as to,
the price of the Company's securities.
The Company has applied for listing of the Common Stock and Warrants
on the Boston Stock Exchange upon the Effective Date. The Commission has
approved rules for imposing criteria for listing of securities on the
Boston Stock Exchange, including standards for maintenance of such listing.
In order to qualify for initial quotation of securities on the Boston Stock
Exchange, a company, among other things, must have at least $3,000,000 in
total assets, $1,000,000 in stockholders' equity, $1,500,000 in market
value of the public float and a minimum bid price of $2.00 per share. For
continued listing, a company, among other things, must have at least
$1,000,000 in total assets, $500,000 in stockholders' equity, $500,000 in
market value of the public float. If the Company is unable to satisfy the
Boston Stock Exchanges's maintenance criteria for listing in the future, or
if the minimum bid price of the Common Stock falls below $2.00 per share,
its securities may be delisted from the Boston Stock Exchange. As a
consequence of such delisting, an investor would likely find it more
difficult to dispose of, or to obtain quotations as to, the price of the
Company's securities.
Penny Stock Regulation. In the event that the Company is unable to
satisfy the maintenance criteria requirements for the NASDAQ small
capitalization market or the Boston Stock Exchange, or its Common Stock
falls below the minimum bid price of $3.00 per share for the initial
quotation, trading would be conducted in the "Pink Sheets" or the NASD's
Electronic Bulletin Board. In the absence of the Common Stock being quoted
on NASDAQ or the Boston Stock Exchange, or the Company's having $2,000,000
in stockholders' equity, trading in the Common Stock would be covered by
Rule 15g-9 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), for non-NASDAQ and non-exchange listed securities.
15
<PAGE>
Under such rule, broker-dealers who recommend such securities to persons
other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities
are exempt from this rule if the market price is at least $5.00 per share.
The Commission has adopted regulations that generally define a "penny
stock" to be any equity security that has a market price of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include an equity security listed on
NASDAQ, and an equity security issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than
three years, or (iii) average revenue of at least $6,000,000 for the
preceding three years. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of
a risk disclosure schedule explaining the penny stock market and the risks
associated therewith.
If the Company's securities were to become subject to the regulations
applicable to penny stocks, the market liquidity for the securities would
be severely affected, limiting the ability of broker-dealers to sell the
securities and the ability of purchasers in this Offering to sell their
securities in the secondary market. There is no assurance that trading in
the Company's securities will not be subject to these or other regulations
that would adversely affect the market for such securities.
Potential Adverse Effect of Redemption of Warrants. The Warrants
offered hereby are redeemable, in whole or in part, at a price of $.05 per
Warrant, commencing one year after the Effective Date and prior to their
expiration; provided that (i) prior notice of not less than 30 days is
given to the Warrantholders; (ii) the closing bid price of the Company's
Common Stock for the twenty (20) consecutive trading days immediately prior
to the date on which the notice of redemption is given, shall have exceeded
$7.50 per share; and (iii) Warrantholders shall have exercise rights until
the close of the business day preceding the date fixed for redemption.
Notice of redemption of the Warrants could force the holders to exercise
the Warrants and pay the Exercise Price at a time when it may be
disadvantageous for them to do so, or to sell the Warrants at the current
market price when they might otherwise wish to hold them, or to accept the
redemption price, which may be substantially less than the market value of
the Warrants at the time of redemption. The Warrants may not be exercised
unless the registration statement pursuant to the Securities Act covering
the underlying shares of Common Stock is current and such shares have been
qualified for
16
<PAGE>
sale, or there is an exemption from applicable qualification requirements,
under the securities laws of the state of residence of the holder of the
Warrants. Although the Company does not presently intend to do so, the
Company reserves the right to call the Warrants for redemption whether or
not a current prospectus is in effect or such underlying shares are not, or
cannot be, registered in the applicable states. Such restrictions could
have the effect of preventing certain Warrantholders from liquidating their
Warrants. See "Description of Securities - Warrants."
Current Prospectus and State Blue Sky Registration Required to
Exercise Warrants. Holders of the Warrants will have the right to exercise
the Warrants for the purchase of shares of Common Stock only if a current
prospectus relating to such shares is then in effect and only if the shares
are qualified for sale under the securities laws of the applicable state or
states. The Company has undertaken and intends to file and keep current a
prospectus which will permit the purchase and sale of the Common Stock
underlying the Warrants, but there can be no assurance that the Company
will be able to do so. Although the Company intends to seek to qualify for
sale the shares of Common Stock underlying the Warrants in those states in
which the securities are to be offered, no assurance can be given that such
qualification will occur. In addition, purchasers may buy Warrants in the
aftermarket or may move to jurisdictions in which the shares of Common
Stock issuable upon exercise of the Warrants are not so registered or
qualified during the period that the Warrants are exercisable. In such
event, the Company would be unable to issue shares to those persons
desiring to exercise their Warrants unless and until the shares could be
registered or qualified for sale in the jurisdiction in which such
purchasers reside, or an exemption to such qualification exists or is
granted in such jurisdiction. The Warrants may lose or be of no value if a
prospectus covering the shares issuable upon the exercise thereof is not
kept current or if such underlying shares are not, or cannot be, registered
in the applicable states. See "Description of Securities-Warrants."
Lack of Experience of the Underwriter. The Underwriter was organized
in August 1993, was registered as a broker dealer in June 1995, and became
a member firm of the NASD in June 1995. The Underwriter is principally
engaged in retail brokerage and market making activities and various
corporate finance projects. Although the Underwriter has acted as a
placement agent in private offerings and has participated as a member of
the underwriting syndicate or as a selected dealer in one public offering,
it has not acted as the lead managing underwriter in any public offerings
of securities. No assurance can be given that the Underwriter's lack of
experience as a lead managing underwriter of public offerings will not
adversely affect this Offering and the subsequent
17
<PAGE>
development of a liquid public trading market in the Company's securities.
Relationship of Underwriter to Trading. The Underwriter may act as a
broker or dealer with respect to the purchase or sale of the Common Stock
and the Warrants in the over-the-counter market where each is expected to
trade. The Underwriter also has the right to act as the Company's exclusive
agent in connection with any future solicitation of warrantholders to
exercise their Warrants. Unless granted an exemption by the Commission from
Rule 10b-6 under the Exchange Act, the Underwriter will be prohibited from
engaging in any market-making activities or solicited brokerage activities
with regard to the Company's securities during a period beginning nine
business days prior to the commencement of any such solicitation and ending
on the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right the Underwriter may have
to receive a fee for the exercise of the Warrants following such
solicitation. As a result, the Underwriter and soliciting broker/dealers
may be unable to continue to make a market in the Company's securities
during certain periods while the exercise of Warrants is being solicited.
Such a limitation, while in effect, could impair the liquidity and market
price of the Company's securities.
Issuance of Preferred Stock: Anti-Takeover Provisions. The Company's
Certificate of Incorporation permits its Directors to designate the terms
of and issue shares of Preferred Stock. The issuance of shares of Preferred
Stock by the Board of Directors could adversely effect the rights of
holders of Common Stock by, among other matters, establishing preferential
dividends, liquidation rights and voting power. Although the Company has no
present intention to issue shares of Preferred Stock (and is prohibited
from issuing shares of Preferred Stock for two years from the closing date
of this Offering without the consent of the Underwriter), the issuance
thereof might render it more difficult, and therefore discourage, an
unsolicited takeover proposal such as a tender offer, proxy contest or the
removal of incumbent management, even if such actions would be in the best
interest of the Company's stockholders. See "Description of Securities."
Underwriter's Warrants and Registration Rights. In connection with
this Offering, the Company has agreed to sell to the Underwriter, for $10,
the Underwriter's Warrants which entitle the Underwriter to purchase up to
90,000 shares of Common Stock and/or 60,000 Warrants, respectively. The
securities issuable upon exercise of the Underwriter's Warrants are
identical to those offered pursuant to this prospectus. The Underwriter's
Warrants are exercisable at $6.60 and $.12, respectively, for a period of
four years commencing one year from the Effective Date. The exercise of the
Underwriter's Warrants and the Warrants contained in the
18
<PAGE>
Underwriter's Warrants may dilute the value of the shares of Common Stock
to be acquired by holders of the Warrants, may adversely affect the
Company's ability to obtain equity capital, and, if the Common Stock
issuable upon the exercise of the Underwriter's Warrants and the Warrants
contained in the Underwriter's Warrants are sold in the public market, may
adversely affect the market price of the Common Stock. The Underwriter has
been granted certain "piggyback" and demand registration rights for a
period of five years from the Effective Date with respect to the
registration under the Securities Act of the securities directly or
indirectly issuable upon exercise of the Underwriter's Stock Warrants and
Underwriter's warrants. The exercise of such rights could result in
substantial expense to the Company. See "Underwriting."
DILUTION
The difference between the initial public offering price per share of
Common Stock and the pro forma net tangible book value per share of Common
Stock after this Offering constitutes the dilution to investors in this
Offering. Net tangible book value per share is determined by dividing the
net tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding shares of Common stock. The
following discussions allocate no value to the Class A Warrants.
At March 31, 1996, the Company's liabilities exceeded its tangible
assets by $44,678 (giving effect to expenses of the Offering paid at such
date) and accordingly the Company's Common Stock had a negative net
tangible book value of ($.03) per share. After giving effect to the receipt
of the net proceeds from the sale of the Common Stock offered hereby at an
initial public offering price of $5.50 per share of Common Stock (less
underwriting discount and offering expenses) the pro forma net tangible
book value of the Company at March 31, 1996 would have been $4,189,656 or
$1.61 per share, representing an immediate increase in net tangible book
value of $1.64 per share to the existing stockholders, and immediate
dilution of $3.89 per share (70.7%) to new investors. The table on the
following page illustrates dilution to new investors on a per share basis:
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<PAGE>
Public offering price per share............ $5.50
Net tangible book value (deficit) per share
before offering.......................... ($ .03)
Increase attributable to public
investors................................ $1.64
Pro forma net tangible book value per
share after offering..................... $1.61
-----
Dilution per share to public investors..... $3.89
=====
In the event the Underwriter exercises its Over-allotment Option in
full, the pro forma net tangible book value per share would be $1.77 which
would result in dilution to the public investors of $3.73.
The following table sets forth with respect to the existing
stockholders and public investors, a comparison of the number of shares of
Common stock owned by the existing stockholders, the number of shares of
Common Stock to be purchased from the Company by the purchasers of the
Securities offered hereby and the respective aggregate consideration paid
to the Company and the average price per share.
<TABLE><CAPTION>
Shares Purchased Total Consideration Average
---------------------- ---------------------
Approximate Approximate Price
Number Percentage Amount Percentage Per Share
------ ----------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Public Investors....... 900,000 34.62% $4,950,000 86.53% $5.50
Present Stockholders... 1,700,000 65.38% $ 770,650 13.47% $0.45
--------- ------- ---------- -------
Totals.............. 2,600,000 100.00% $5,720,650 100.00%
========= ======= ========== =======
</TABLE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 900,000 Shares of
Common Stock and 600,000 Warrants offered hereby are estimated to be
approximately $3,909,200 ($4,563,005 if the Underwriter's Over-allotment
Option is exercised in full) after deducting underwriting commissions and
discounts and other expenses of the Offering and after giving effect to
$25,500 of previously paid Offering costs. The Company expects to use the
net proceeds over the next twelve months approximately as follows:
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<PAGE>
Approximate
Percentage
Amount of Net Proceeds
------ ---------------
Advertising, Marketing
and Promotion(1)................. $1,050,000 26.9%
On-Line Content Development(2)...... 900,000 23.0%
Software Development(3)............. 700,000 17.9%
Capital Expenditures(4)............. 375,000 9.6%
Licensing Fees(5)................... 200,000 5.1%
Working Capital..................... 684,200 17.5%
---------- ------
TOTAL......................... $3,909,200 100.0%
========== ======
__________________
(1) Represents anticipated costs associated with advertising and
promotion, including purchase of broadcast media, commercials,
infomercials, telemarketing and direct mail advertising.
(2) Includes costs associated with development of multi-media resources
related to content of specific services proposed to be offered by the
Company, including payment of salaries, costs and fees for writers, artists
and materials to be incorporated as part of the Company's WWW sites.
(3) Includes costs associated with development of proprietary internet
software.
(4) Represents anticipated costs associated with purchasing equipment,
including computer hardware and videoconferencing equipment.
(5) Includes fees to be paid to celebrities and trademark owners for use
of their names and/or trademarks.
The foregoing represents the Company's current estimate of the
allocation of the net proceeds of the Offering based upon certain
assumptions relating to the costs associated with the implementation of the
Company's proposed business operations. Future events, including the
problems, delays, expenses and complications frequently encountered by
companies which seek to establish new services or introduce services to a
new market, as well as changes in economic conditions, regulatory or
competitive conditions, and the success of the Company's marketing
activities, may make shifts in the allocation of funds necessary or
desirable. There can be no assurance that the Company's estimates will
prove to be accurate or that unforeseen expenses will not be incurred.
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<PAGE>
The Company believes that the net proceeds of this Offering will
satisfy the Company's capital requirements for approximately twelve months.
During those twelve months, the Company's efforts will be directed at
developing and implementing its proposed business operations.
Prior to expenditure, the net proceeds of this Offering will be
invested principally in high grade short-term interest-bearing investments.
Any proceeds received upon exercise of the Over-allotment Option or any of
the Company's warrants will be used for working capital.
DIVIDEND POLICY
The Company has never paid any cash dividends. The payment of
dividends, if any, in the future is within the discretion of the Board of
Directors and will depend upon the Company's earnings, its capital
requirements and financial condition, and other relevant factors. The Board
does not presently intend to declare any dividends in the foreseeable
future, but instead intends to retain all earnings, if any, for use in the
Company's business operations. See "Description of Securities".
CAPITALIZATION
The following table sets forth the capitalization of the Company at
March 31, 1996 and such capitalization as adjusted to give effect to (i)
the sale of the Securities offered hereby, and (ii) the anticipated use of
the net proceeds of this Offering in the manner contemplated under "Use of
Proceeds". This table should be read in conjunction with the historical
financial statements and notes thereto appearing elsewhere in this
Prospectus.
March 31, 1996
-----------------------------
Actual As Adjusted(1) (2)
------ ------------------
Liabilities
Total liabilities..................... $254,917 $143,033
======== ========
Stockholders' Equity
Preferred Stock, $.0001 par value:
Authorized 1,000,000 shares;
none issued............................... -- --
Common Stock, $.0001 par value:
Authorized 19,000,000 shares;
Issued and Outstanding-1,700,000
and 2,600,000, respectively............. 150 260
Additional paid in capital.................. 285,375 4,621,090
Deficit accumulated during the
development stage ........................ (243,129) (427,474)
Deferred offering costs relating to
Common Stock issued for services
related to intended IPO................... (14,875) 0
------ ----------
Stockholders' equity.................. $27,521 $4,193,876
======= ==========
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<PAGE>
__________________
(1) Gives effect to the sale of the Common Stock and Warrants offered
hereby and the receipt of $3,909,200 of net proceeds therefrom, after
giving effect to $25,500 of previously paid Offering costs.
(2) Reflects the issuance of 200,000 shares of Common Stock in connection
with the May 1996 private placement and the use of a portion of the
proceeds of such private placement to repay notes payable.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
Prospectus.
Overview
The Company was incorporated on August 23, 1995. The Company is
currently developing an integrated World Wide Web commerce and
videoconferencing system that the Company intends to use to deliver live
one-on-one videoconferenced entertainment, educational and counseling
services over the Internet. In tandem with its ongoing technology
development, the Company is developing the content of the services that it
proposes to deliver to consumers over the Internet. It is anticipated that
the Company's revenues will predominantly consist of fees paid by consumers
for delivery of entertainment, educational and counseling services over the
Internet. The Company intends, as part of its research and development
process, to continually evaluate the market viability of its proposed
services and a number of new and innovative services. This process includes
engaging experts in various disciplines to conduct preliminary analyses and
build prototypes of the various proposed services that the Company is
considering introducing into the marketplace.
From inception on August 23, 1995 to the present time, the Company's
operating activities have related primarily to recruiting personnel,
raising capital, purchasing operating assets and performing research and
development.
The Company has not yet completed development of its integrated web
commerce and videoconferencing system. Consequently, the Company has not
had any sales or revenues to date.
The basic component of the Company's business is the delivery of live
one-on-one videoconferenced entertainment, educational and
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<PAGE>
counseling services on a pay per minute basis to consumers via the
Internet. The Company's strategy is to identify certain niche service areas
that offer consumers high added value and therefore produce high profit
margins for the Company. This strategy is designed to maximize the revenue
per minute that the Company's service professionals will generate when they
are on-line with customers.
All of the Company's planned services will utilize the same integrated
web commerce and videoconferencing system that the Company is currently
developing. The Company also plans to seek licensees for its web commerce
and videoconferencing system for use in service content areas that do not
compete with those in which the Company intends to operate.
Results of Operations
Operating Expenses: The Company's operating expenses for the period
from August 23, 1995 (date of inception) to March 31, 1996 were $243,129.
The Company believes that continued expansion of operations is essential to
achieving and maintaining market leadership. As a consequence, the Company
expects its operating expenses to increase.
The Company has recorded accrued compensation of approximately $90,000
related to the difference between the stated salaries and consulting fees
for certain of the Company's employees and consultants and the actual cash
compensation that has been paid to such persons to date. See Notes to
Consolidated Financial Statements.
Research and Development: Research and development expenses consist
primarily of salaries and consulting fees to support technology and
services content development. To date all of the software development costs
have been expensed as incurred. The Company believes that significant
investment in research and development will be required to remain
competitive with respect to its technology and the content of its services.
As a consequence, the Company intends to increase the absolute amount of
its research and development expenditures in the future.
Sales and Marketing: Sales and marketing expenses currently consist
primarily of salaries and consulting fees paid to develop the Company's
marketing strategy. It is anticipated that marketing expenses will in the
future include salaries, as well as an extensive national advertising
campaign in both traditional media such as direct sales, television, radio
and print media, as well as a significant expenditure on Internet
advertising. The Company expects that marketing expense will be the single
largest expense for the Company, averaging approximately $1,050,000
annually,
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including salaries, once the Company begins to market its services to
consumers.
Income Taxes
As of March 31, 1996, the Company had federal net operating loss
carryforwards of approximately $240,000. The federal net operating loss
carryforwards will expire in 2011 if not utilized. See Notes to
Consolidated Financial Statements.
Factors Affecting Operating Results
As a result of the Company's limited operating history, the Company
does not have historical financial data for a significant number of periods
on which to base planned operating expenses. Additionally, the Company has
not yet generated any revenues from operations. Accordingly, the company's
expense levels are based entirely on its expectations as to future revenues
and to a large extent are fixed. The Company may be unable to adjust
spending in a timely manner to compensate for any unexpected delay in the
development of its web commerce and videoconferencing system or for any
delay in the commencement of revenues from operations. Accordingly, any
unexpected delay in the completion of the development of the Company's web
commerce and videoconferencing system will have a material adverse impact
on the Company's business, operating results and financial condition. The
Company plans to increase its operating expenses to fund greater levels of
research and development and increase its marketing and business
development efforts. To the extent that such expenses are not immediately
followed by an infusion of capital from either financing activities or from
operating revenues, the Company's business, operating results and financial
condition will be materially adversely affected.
The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors, including
demand for the Company's services, introduction of new technological
developments, the introduction, enhancement and market acceptance of new
and existing services, the introduction of competing services, and general
economic conditions. As a result, the Company believes that period to
period comparisons of its results of operations will not necessarily be
meaningful and should not be relied upon as any indication of future
performance. Because of all of the foregoing factors, it is likely that in
some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the
Company's Common Stock would likely be materially adversely affected.
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Liquidity and Capital Resources
To date, the Company has primarily financed it operations through
private sales of equity and debt securities and through the contribution of
capital by its founders. The Company has not generated any revenues or
other cash through operations since its inception and it is unlikely that
it will generate any cash from operations in the foreseeable future. The
Company completed a bridge financing on March 20, 1996 which consisted of
the sale of $250,000 in two year promissory notes, 200,000 shares of Common
Stock and 1,000,000 warrants to purchase Common Stock. This initial bridge
financing provided net proceeds to the Company of approximately $199,500
after investment banking and legal fees. The Company completed a second
bridge financing on May 9, 1996 which consisted of the sale of 200,000
shares of Common Stock at a price of $2.50 per share for total gross
proceeds to the Company of $500,000. This second financing provided net
proceeds to the Company of approximately $385,000. The Company used
approximately $262,000 to repay the principal and interest due on the
$250,000 of promissory notes issued in the first bridge financing, and to
pay investment banking, legal and accounting fees.
Capital expenditures were approximately $33,000 for the period from
August 23, 1995 (date of inception) to March 31, 1996. The Company has no
material commitments other than employment and consulting agreements,
obligations to UUNET Technologies Corporation, equipment leases and
operating leases. The Company estimates that 1996 capital expenditures will
be approximately $375,000 of which approximately $130,000 is related to
video station equipment and related expenditures for the implementation of
its first offering of commercial service content. See Notes to Consolidated
Financial Statements.
The Company believes that the net proceeds from this Offering,
together with available funds will be sufficient to meet its anticipated
cash needs for working capital and capital expenditures for at least the
next 12 months. Thereafter, if the Company is unable to generate sufficient
cash from operations to satisfy the Company's liquidity requirements, the
Company may sell additional equity or debt securities or obtain new credit
facilities. The sale of additional equity or convertible debt securities
will result in additional dilution to the Company's stockholders.
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BUSINESS
--------
NetLive Communications, Inc. (the "Company" ) is a development stage
company recently organized to provide live, one-on-one, videoconferenced
entertainment, educational and counseling services over the Internet. The
Company is developing and intends to utilize technologies that will allow
customers to view and communicate with the Company's professionals and
entertainment performers over the Internet in an interactive and user-
friendly environment. It is intended that, at such times as the Company
either develops technology or licenses such technology from others,
customers will be able to simultaneously view and speak with the Company's
live professionals. The Company plans to bill its customers according to
the length of time that they remain on-line. No assurance can be given as
to when, if ever, such technology will be ready to be used commercially or
that it will be commercially accepted. To date, other than the continued
development and integration of its technology and business plan, and
raising financing, the Company has not conducted any business nor generated
any revenues or profits and no assurance can be given, that it will be able
to do so in the future. See "Risk Factors".
The Internet is a global web of computer networks. The expansion of
this information and communications medium has created a new consumer
market. The Company plans to service this market by providing live
videoconferenced one-on-one entertainment, educational and counseling
services through the use of technology designed to enable users to view
live, individual, video broadcasts over the Internet. The Company believes
that the convergence of the growing Internet medium and Internet-based
videoconferencing technology presents a unique opportunity to bring the
Company's services directly into consumers' homes.
It is intended that the Company's proposed entertainment, educational
and counseling services will initially include PsychicNet, TutorNet and
TherapyNet. However, the Company is continuously monitoring and evaluating
the proposed services it has under development in order to establish
priorities and determine the probabilities of each service's success. In
addition, the Company is reviewing additional services which it may
consider offering. No assurance can be given that the Company will fully
develop or offer its currently proposed services, or that, if developed and
offered, such proposed services will be accepted by consumers.
It is intended that computer users will be able to access the
Company's services over the Internet using a Netscape browser-based user
interface. The Company is developing its integrated WWW commerce server to
provide for secure transaction processing, efficient scheduling, and
automated billing. The Company also is
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designing its system to automatically collect and process market data.
The Company is developing and plans to maintain databases containing
profiles of all customers utilizing the Company's services. The Company
believes that this information will enable the Company to better understand
its customer base, to develop new and innovative services and to create
targeted marketing programs geared toward efficiently selling the Company's
services. The Company also intends to employ focused consumer marketing
techniques and to track marketing effectiveness utilizing advanced database
and analytical methods. It is intended that the Company will initially
market its services worldwide over the Internet and it plans, in the
future, to market through traditional media in targeted markets throughout
North America, Europe and Asia.
PsychicNet
It is intended that PsychicNet will employ professional psychics to
provide live videoconferenced psychic advice including tarot card readings,
astrological chart analysis and general psychic guidance over the Internet.
With the exception of having retained the services of a consultant, on a
part-time basis, who is helping the Company develop its proposed PsychicNet
service and WWW site, the Company has not, as of the date hereof, entered
into any written or other agreements with any psychics. The Company plans
to incorporate computer generated special visual and audio effects to
enhance the nature of the service. It is intended that PsychicNet customers
will be able to actually see the results of their personalized astrological
and tarot card readings on their computer screen. No assurance can be given
when, if ever, such technology will be developed and available for large
scale commercial applications. Moreover, no assurance can be given that
such technology will ever be accepted by consumers. See "Risk Factors - New
and Uncertain Market" and "-Technological Change and New Services".
TutorNet
It is intended that TutorNet will provide live videoconferenced
tutoring services for students ranging from elementary school through
graduate school. It is intended that TutorNet will provide students first-
rate professional instruction in a variety of academic subjects on demand.
The Company plans to employ professional tutors to provide live tutoring
services to today's computer literate students. It is intended that
TutorNet's staff will assist students with homework questions, writing
assignments and exam preparation in a variety of subjects. TutorNet also
intends to offer instruction on popular standardized tests, such as the
PSAT, SAT, LSAT, GRE, GMAT and MCAT. The Company plans
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to integrate whiteboard and document sharing technology that is intended to
allow the Company tutor and the customer to view and work together on the
same written documents. With the exception of having retained the services
of two consultants, on a part-time basis, who are helping the Company
develop its proposed TutorNet service and WWW site, the Company has not, as
of the date hereof, entered into any agreements with any professional
tutors. No assurance can be given when, if ever, such technology will be
developed and available for large scale commercial applications. Moreover,
no assurance can be given that such technology will ever be accepted by
consumers. See "Risk Factors - New and Uncertain Market" and "-
Technological Change and New Services".
TherapyNet
It is intended that TherapyNet will provide customers with counseling
from persons experienced in the mental health profession who will
videoconference directly to consumers in the privacy of their home or
office. It is intended that customers will be able to schedule regular
weekly therapy sessions and may also avail themselves of the Company's
therapy services on demand. It is intended that TherapyNet's staff will
provide customers with a range of immediate counseling from crisis
intervention to advice for the lovelorn. With the technology that the
Company is in the process of developing, it is intended that the consumer
will initially be able to simultaneously view, listen and communicate with
the therapist. With the exception of having retained the services of one
consultant, on a part-time basis, who is helping the Company develop its
proposed TherapyNet service and WWW site, the Company has not, as of the
date hereof, entered into any agreement with any mental health
professionals, and no assurance can be given that it will be able to do so,
or that TherapyNet will be accepted by consumers. See "Risk Factors - New
and Uncertain Market" and "-Technological Change and New Services".
Additional proposed entertainment, educational and counseling services
which the Company is considering include FantasyNet, ModelNet, WebClinic
and CookNet. The following is a brief description of each of these proposed
services.
FantasyNet
It is intended that FantasyNet will offer an interactive, video
theater broadcast directly to consumers' homes throughout the world. It is
intended that customers will initially select from among a wide range of
frequently changing fantasy narratives, whereupon they will first engage in
a free, recorded interactive fantasy over the Internet's WWW. At a critical
juncture in the interactive fantasy, the consumer will then be encouraged
to continue the fantasy via a live video and voice connection with an
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on-line performer. It is intended that the Company's videoconferencing
technology will allow the customer to segue from the multi-media
interactive fantasy to live role-playing with a professional actor. As of
the date hereof, the Company has not entered into any agreements or hired
any persons experienced in the dramatic arts, and no assurance can be given
that it will in the future be able to do so, or that FantasyNet will be
accepted by consumers. See "Risk Factors - New and Uncertain Market" and "-
Technological Change and New Services".
ModelNet
It is intended that ModelNet will allow customers to engage in live
videoconferenced conversations with professional models on subjects
including the modeling industry, beauty tips or the life of a high fashion
model. It is intended that ModelNet will offer customers the rare and
highly-coveted opportunity to interact live with top agency models as they
view them on their computer screen. With this service, the Company intends
to capitalize upon the current fascination and glorification of fashion
models in American society, demonstrated by the top celebrity status of
today's super-models. As of the date hereof, the Company has not entered
into any agreements or hired any persons experienced in the modeling
industry, and no assurance can be given that it will in the future be able
to do so, or that ModelNet will be accepted by consumers. See "Risk Factors
- New and Uncertain Market" and "-Technological Change and New Services".
WebClinic
It is intended that WebClinic will make medical information accessible
on the desktop computers of the millions of Internet users. It is intended
that WebClinic will offer consumers a complete, teleconferenced managed
care center. The Company plans to provide teleconferenced health
professionals to screen medical problems and help customers determine the
appropriate level of consultation or evaluation. It is intended that
patients will ask questions regarding diagnosis, treatment and prevention
of disease, as well as regarding screening tests and immunizations. The
Company also plans to offer an on-line health and wellness store that will
allow patients to purchase medication, home diagnostic equipment and
supplies over the Internet. As of the date hereof, the Company has not
entered into any agreements or hired any persons experienced in clinical
medicine, and no assurance can be given that it will in the future to able
to do so, or that WebClinic will be accepted by consumers. See "Risk
Factors - New and Uncertain Market" and "-Technological Change and New
Services".
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CookNet
It is intended that CookNet will provide a resource on the Internet
for cooking aficionados. It is intended that CookNet will employ its
videoconferencing system to create a video cooking school on the Internet.
It is also intended that CookNet will provide a large database of recipes
which will be searchable by ingredients and will provide shopping lists and
nutritional analyses. The Company also intends for CookNet to provide
customers with a variety of nutritional information and the ability to
videoconference, one to one, with a qualified nutritionist. With the
exception of having retained the services of a consultant, on a part-time
basis, who is helping the Company develop its proposed CookNet service and
WWW site, the Company has not, as of the date hereof, entered into any
written or other agreements with any nutritionists, and no assurance can be
given that it will be able to do so, or that CookNet will be accepted by
consumers. See "Risk Factors -New and Uncertain Market" and "-Technological
Change and New Services".
Industry Background
The Internet
Developed over 25 years ago, the Internet is a global web of computer
networks that allows personal computer users to access a variety of
information and services. The Internet was developed for use by academic
institutions, the Department of Defense and government agencies primarily
for obtaining remote access to host computers, for transferring files, and
for sending and receiving e-mail. This early Internet usage has changed
substantially. The Company believes that the number of commercial domains
on the Internet has surpassed the number of government and academic
domains. The Internet has been experiencing rapid growth as industry and
individuals discover its substantial information access abilities.
Individuals are connecting to the Internet directly through Internet
access services such as those provided by MCI, NETCOM, Performance Systems
International, Inc. ("PSI"), and UUNET Technologies, Inc. ("UUNET"). The
Company believes these services are growing since easy-to-use software
packages make accessing the Internet as easy as getting onto the popular
consumer on-line services. Also, the consumer on-line services, including
America On-line, Inc. ("AOL"), CompuServe, Inc. ("CompuServe") and Prodigy
Services Co. ("Prodigy"), previously independent computer networks, as well
as Microsoft Corporation (the Microsoft Network) have now introduced
Internet access gateways for their subscribers. With these gateways, the
on-line services effectively become large
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Internet "on-ramps," bringing great numbers of their subscribers onto the
Internet.
Videoconferencing Technology
The Company's intended business has been brought about by the recent
development of videoconferencing technology. One group of providers offers
videoconferencing systems that operate over the Internet. These systems
require that users possess only low cost Internet lines, a personal
computer, a modem and the provider's software. Because of the low cost,
this technology makes videoconferencing available to the consumer market. A
second group of system providers transmit video over "plain old telephone
service" (POTS) lines. These systems are also low cost, but are subject to
the additional charge of long distance telephone service. The final group
of providers, composed chiefly of large long distance telephone carriers
such as AT&T, Sprint and MCI, as well as other large scale enterprises,
provide videoconferencing over Integrated Service Digital Network (ISDN)
lines and Local Area Networks (LANs). These lines must be connected
individually to each videoconference participant. Such systems, the Company
believes, can cost in excess of $25,000 for each user, and thus are used
principally by businesses. Because of the substantial growth of the
Internet, its low cost, its relative ease of use, and the proliferation of
high bandwidth connections, the Company believes that the Internet will
become the primary medium for videoconferenced services.
The Company has entered into an agreement with UUNET Technologies
("UUNET") pursuant to which UUNET will provide the Company with high speed
access to the Internet, enabling the Company to deliver its
videoconferencing services through the Internet. The agreement requires the
Company to make monthly payments of $1,500 to UUNET. The agreement expires
in January 1997.
Company Strategies
Offer a Complete Line of High Quality, Live One-on-One Internet Services
The Company's goal is to be the leading provider of live, one-on-one
videoconferenced entertainment, educational and counseling services over
the Internet. The Company intends to recruit professionals in each service
area and to train them to work with, and communicate effectively over, the
Internet.
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Develop and Maintain Industry Leading Proprietary Technology
The Company is developing an integrated, commercial videoconferencing
system for use over the Internet. This proprietary system has several
components, including a Netscape Navigator-based user interface, an
advanced real time video and audio delivery platform, and an automated
marketing database and analytic system. This advanced architecture is being
designed to allow the customer to access the Company's services directly
from an Internet browser with a simple point and click of a mouse. It is
intended that PC users without Internet access will be able to use the
Company's services by connecting directly to the Company's network using a
modem.
The Company integrates an advanced video compression-decompression
("CODEC") technology into its videoconferencing and WWW commerce system.
The Company's system incorporates variable bandwidth capabilities. The
Company believes this will allow the Company to capture today's market of
low bandwidth modem connections, while positioning itself to capitalize on
the rapid movement towards high bandwidth Internet connections.
The Company intends for its WWW commerce server to allow for secure
transaction processing through an encrypted credit card validation and
automated billing system. The server also will include on-line scheduling
software that will efficiently route incoming customer calls to the
appropriate professional. The Company intends to develop a video station
management system that will allow scheduling control, status monitoring and
transaction processing for videoconference stations in remote studios from
a central management base.
As it becomes commercially viable, the Company further plans to
incorporate Java, a new programming language recently introduced by Sun
Microsystems, for its WWW presence, as well as virtual reality modeling
language ("VRML"), which allows for the realistic presentation of three-
dimensional spaces and images over the Internet.
Maintaining state-of-the art technology is essential to the Company's
success. The Company intends to continue to increase the performance,
functionality and flexibility of all of its technologies to meet the
evolving needs of its customers. The Company is developing and integrating
an enhanced version of its videoconferencing systems and WWW commerce
software which will offer higher performance, greater stability, easier
installation, and easier integration with other applications. The Company
will attempt to maintain a leadership position by continually improving the
performance and versatility of its technology, including the enhancement of
its video, graphics and audio capabilities.
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Provide Strong Customer Support
A key element in the Company's proposed business strategy is a
commitment to provide extensive support and service to its customers. This
element of the Company's proposed strategy is particularly important to the
Company's success since many of the Company's clients are, and much of the
Internet community over the next few years will be, new to the Internet.
With the focus of the Company's products on individualized service, the
Company believes that maintaining a strong customer support group will be
vital to its success. The Company believes that its high level of support
will enable the Company to distinguish itself from its competitors.
Provide Consistent Interfaces and Multi-Platform Support
All of the Company's proposed services are intended to utilize the
same broad technology. The Company intends to position itself to cross-sell
existing services and to introduce new services to its existing customer
base. The Company is designing its software to operate on most popular
computer operating systems.
Create and Leverage Brand Awareness
Although certain other companies may provide one or more of such
services, the Company believes that since it will be an early provider of a
combined package of live, one-on-one videoconferenced entertainment,
educational and counseling services over the Internet it will be well
positioned to build customer awareness of its brand name and logo. The
Company's ability to capitalize on its early entrance into the market is
subject to several factors, including its ability to raise sufficient funds
to develop and market its technology and services, and the viability and
commercial acceptance of its services. No assurance can be given that the
Company's strategies will be successful.
Provide Enhanced Security
The Company's products will employ leading standards for data and
communications security and are designed to enable secure commerce and
communications over the Internet.
Marketing, Sales & Distribution
The Company intends to utilize various media and marketing programs to
stimulate demand for its services. These programs will be intended to focus
on the target market of individual PC users that have either gateway or
direct Internet connections . The Company's marketing operations will
include market research, marketing services and strategic partnerships.
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Information on existing and proposed Company products and services
will be collected through a variety of sources. An automated customer
registration process contained in the Company's WWW site will provide a
formatted and quantifiable source of such information. Such information
will also be collected through automated follow-up e-mail to existing
customers. Internet newsgroups as well as responses to the Company's active
postings in such newsgroups provide further product feedback.
The Company is in the process of developing and plans to maintain
databases containing profiles of all customers utilizing its services.
Customer biographical, credit and preference information will be input
directly from the WWW home-page at the time of sale. Additional customer
information will be collected in conjunction with the offering of free
trial memberships and other promotions. The goal of these promotions is
intended to identify and analyze current and potential users of the
Company's services, create an awareness of new service offerings and
generate leads for additional sales to other customers and new services to
existing customers.
This marketing information is intended to enable the Company to better
understand its customer base, to develop new and innovative services for
its customers and to create targeted marketing programs geared toward
efficiently selling the Company's services. The Company believes that these
databases will provide the Company with a distinct competitive advantage
over new companies entering this market and will permit the Company to
evaluate the effectiveness of its operations utilizing advanced database
and analytical methods.
The Company intends to initially market its services over the Internet
itself utilizing several WWW sites. Customers will be able to initially
visit the WWW home page of the particular Company service that they intend
to use. Customers will then be able to avail themselves of the Company's
live entertainment, educational or counseling services.
The Company intends to maintain a high profile on the Internet by
actively participating in various Internet user newsgroups. The Company
also intends to publish several "zines," or electronic magazines, to
increase its marketing exposure. These zines will highlight issues related
to the particular service, promote new company services, offer items of
special value and feature news of interest to the Company's customers. The
Company has also developed specially designed "mailbots," or mail robots,
which are intended to automatically respond to inquiries twenty-four hours
a day. The Company intends to offer membership options, pre-paid services
and other marketing programs designed to increase customer awareness and
usage.
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The Company also intends to utilize print media, cable television and
radio advertisements to promote its services. The Company plans to market
its services though various computer, technology and Internet-related
publications, such as Wired and Internet World, as well as other
appropriate publications geared to the Company's target markets for each of
its individual services. The Company also plans to market its services at
computer and entertainment conventions and trade shows.
Competition
The Company's business is subject to significant competition. The
Company believes that it will face initial direct competition for its live,
one-on-one videoconferenced services over the Internet, as well as
additional competition in the future from companies that possess
substantially greater technical, financial, sales and marketing resources
than that which the Company has. Because the Internet is an open system
designed to be freely available to computer users worldwide and because of
the increasing popularity of the Internet, the Company anticipates that it
will encounter substantial competition from new entrants as the market for
Internet services expands. Such increased competition may have a material
adverse effect on the Company's ability to successfully market its
services.
Competitive factors in the Internet-based entertainment, educational
and counseling market include core technology, product content, product
quality, marketing, distribution resources and customer support and
services.
The Company's entertainment, educational and counseling services will
also face intense competition from numerous other competing services and
products including, but not limited to, telephone services, in-person
consultations, newspapers, magazines, books, audio and video cassettes, as
well as various other forms of services which may be less expensive or
provide other advantages to consumers. There can be no assurance that the
Company will be able to compete successfully with other such products and
services.
Customer Support and Services
A key element of the Company's business is its commitment to provide
extensive customer support and service. The Company intends to hire, train
and maintain a customer support staff and to track all support requests
through a series of customer databases that will maintain current status
reports as well as historical logs of customer interaction. These reports
will be evaluated by management to determine how to best serve customer
needs.
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Proprietary Rights
The Company's success and ability to compete will depend in part upon
its ability to maintain the most up-to-date portfolio of videoconferencing
and related technologies. The Company is developing, and intends to license
and maintain such technologies and to enter into co-development
arrangements for the advancement of such systems with other corporations
and research groups.
While the Company will rely partly upon its proprietary technology,
the Company believes that factors such as the technological and creative
skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance will be
more essential to establishing and maintaining an industry leadership
position. The Company also intends to rely on trademark, trade secret and
copyright laws to protect the creative elements of its services. The
Company intends to enter into confidentiality or license agreements with
its employees, consultants and vendors and to control access to and
distribution of this proprietary information. The Company has and will
continue to file as servicemarks the names and logos of the Company and
each of the existing services.
Properties
----------
The Company's executive offices comprise approximately 3,500 gross
square feet and are located at 584 Broadway, New York, New York. The
Company occupies two offices at such location pursuant to separate leases
that expire February 1, 1997 and November 30, 1998. The lease expiring
February 1, 1997 covers approximately 1,500 gross square feet and requires
the Company to pay $1,270 per month.
The lease expiring November 30, 1998 covers approximately 2,000 gross
square feet and requires the Company to pay $1,975 per month for the year
ending November 30, 1996. This amount is scheduled to increase
incrementally throughout the course of the lease to approximately $2,136
per month for the lease's final year.
The Company believes that its facilities are adequate for its current
needs and that additional space will be available on acceptable terms when
it is required.
Employees
---------
As of May 1, 1996, the Company employed 17 persons, including 6 in
marketing and on-line content development, 6 in research and development
and 5 administrative personnel. Of such 17 persons, 7 persons are full-time
and 10 persons are part-time. None of these employees is covered by a
collective bargaining agreement. The Company believes that its labor
relations are good.
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Legal Proceedings
-----------------
The Company is not party to any material legal proceedings.
MANAGEMENT
----------
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
---- --- --------
Laurence Rosen 32 President, Chief
Executive Officer,
Treasurer and
Director
Michael Kharitonov 32 Chairman of the Board,
Director of Technology
and Secretary
Jeffrey Wolf 32 Director
Set forth below is a brief background of the executive officers and
directors of the Company, based on information supplied by them.
Laurence Rosen is a co-founder of the Company. He has been the
President and a Director of the Company since December 1995, Chief
Executive Officer since February 1996, and Treasurer since April 1996. From
September 1995 through December 1995, Mr. Rosen served as the Chief
Financial Officer and General Counsel of the Company. From October 1994
through August 1995, Mr. Rosen worked in the corporate finance group at
CIBC Wood Gundy, an investment banking firm. From April 1992 through June
1993, Mr. Rosen was employed as an attorney at McCarter & English, a New
Jersey based law firm. From August 1991 through April 1992, Mr. Rosen was
employed as an Assistant Federal Defender in the Office of the Federal
Defender. From October 1990 through August 1991, Mr. Rosen was employed as
a law clerk to the acting chief Judge of the United States District Court
of the Virgin Islands. From August 1988 through January 1990, Mr. Rosen was
employed as an attorney at Skadden, Arps, Slate, Meagher & Flom, a New York
City based law firm. Mr. Rosen received an M.B.A. from The University of
Chicago Graduate School of
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Business in 1994, a J.D. from New York University School of Law in 1988 and
a B.A. in economics from Emory University in 1985.
Michael Kharitonov, Ph.D., is a co-founder of the Company. He has been
the Chairman of the Board, Director of Technology and Secretary of the
Company since April 1996. From November 1992 to April 1996, Mr. Kharitonov
served as a vice president at D.E. Shaw & Co., an investment management
firm. From January 1986 through September 1987, Mr. Kharitonov was
appointed as a scientific associate at CERN, the European Laboratory for
Particle Physics. Dr. Kharitonov received a Ph.D. in computer science from
Stanford University in 1993 and a B.A. in computer science and mathematics
from the University of California at Berkeley in 1985.
Jeffrey Wolf is a co-founder of the Company. He has been a Director of
the Company since September 1995. From September 1995 through December
1995, Mr. Wolf served as the President of the Company, and from September
1995 through April 1996, Mr. Wolf served as the Treasurer of the Company.
Mr. Wolf has been a managing director of Athena Ventures, LLC, a New York
City based venture capital firm, since January 1996. From November 1994
through December 1995, Mr. Wolf was the head of Berenson Minella Ventures,
the venture capital division of Berenson Minella and Company, a New York
City based merchant bank. From July 1991 through November 1994, Mr. Wolf
was a vice president and managing director of The Castle Group, Ltd., a New
York-based venture capital firm. Prior thereto, Mr. Wolf was a vice
president of D.H. Blair & Co., Inc., a New York city based broker-dealer
registered with the NASD. Mr. Wolf co-founded Xenometrix, a public company
specializing in the development of novel biological-based information
systems, in February 1994, and served as a director of such company from
February 1994 through November 1994. Mr. Wolf also co-founded Avigen, a San
Francisco based gene-therapy company in February 1994, and he served as a
director of such company from February 1994 through November 1994. Mr. Wolf
also co-founded Conversion Technologies, an environmental technology
company focusing on the treatment and conversion of hazardous waste, in
February 1994, and he served as chairman of such company from February 1994
through November 1994. Mr. Wolf received an M.B.A. from Stanford Business
School in 1990, a J.D. from New York University School of Law in 1988 and a
B.A. in economics from The University of Chicago in 1985. Mr. Wolf devotes
only a portion of his time to the Company.
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the
discretion of the Board of Directors. Directors do not currently receive
fees for their services as directors, but are reimbursed for travel
expenses.
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<PAGE>
Executive Compensation
The following table sets forth certain summary information with
respect to the compensation paid to the Company's President and Chief
Executive Officer for services rendered in all capacities to the Company
for the period ended March 31, 1996. The Company had no executive officer
whose total annual salary and bonus exceeded $100,000 for such fiscal year:
Summary Compensation Table:
<TABLE><CAPTION>
Fiscal All Other
Name and Period Ended Salary Bonus Compensation
Principal Position March 31, ($) ($) Options ($)
------------------ ------------ ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Laurence Rosen 1996 $35,000 $29,167 330,648(2) (1)
Chief Executive
Officer and President
</TABLE>
__________________
(1) Represents accrued salary and bonus, $25,000 of which was paid in
March 1996. Mr. Rosen has agreed to defer the payment of the bonus until
the completion of the Company's proposed public offering. See "Employment
Agreements" below.
(2) Represents Non-Plan Options to purchase an aggregate of 93,158 shares
of Common Stock and options granted under the Company's Option Plan to
purchase an aggregate of 237,490 shares of Common Stock, all of which are
not currently exercisable or exercisable within 60 days. See "Management -
1996 Stock Option Plan" and "-Non-Plan Stock Options".
Employment Agreements
Effective as of September 1, 1995, the Company entered into employment
agreements with Laurence Rosen and Jeffrey Wolf. In addition, effective as
of April 5, 1996, the Company entered into an employment agreement with
Michael Kharitonov. The employment agreement with Jeffrey Wolf was amended
effective May 1, 1996.
Pursuant to the agreement with Mr. Rosen, the Company's President,
Chief Executive Officer, and Director, Mr. Rosen will receive a base salary
of $105,000 per year through August 31, 1996, and a salary of $115,000 per
year for the year commencing September 1, 1996 and $125,000 per year for
the year commencing September 1, 1997. In addition, Mr. Rosen will receive
93,158 options, 50% of which are exercisable upon the earlier of (i) the
Company achieving certain earnings standards or (ii) five years from the
date of grant. See "Management - Non-Plan Stock Options." The agreement
40
<PAGE>
with Mr. Rosen includes certain confidentiality and non-competitive
provisions.
Pursuant to the agreement with Mr. Kharitonov, the Chairman of the
Board, Director of Technology, Secretary and Treasurer of the Company, Mr.
Kharitonov will receive a base annual salary of $100,000 per year through
August 31, 1996, and a salary of $110,000 per year for the year commencing
September 1, 1996 and $120,000 per year for the year commencing September
1, 1997. In addition, Mr. Kharitonov will receive 55,789 options, 50% of
which are exercisable upon the earlier of (i) the Company achieving certain
earnings standards or (ii) five years from the date of grant. See
"Management-Non-Plan Stock Options." The agreement with Mr. Kharitonov
includes certain confidentiality and non-competitive provisions.
Pursuant to the agreement with Jeffrey Wolf, which was amended
effective as of May 1, 1996, Mr. Wolf will receive a consulting fee of
$50,000 per year through August 31, 1996 and provides for a consulting fee
of $55,000 per year for the year commencing September 1, 1996 and $60,000
per year for the year commencing September 1, 1997. In addition, Mr. Wolf
will receive 73,860 options, 50% of which are exercisable upon the earlier
of (i) the Company achieving certain earnings standards or (ii) five years
from the date of grant. See "Management-Non-Plan Stock Options." The
agreement does not currently require Mr. Wolf to devote his time
exclusively to the Company and also subjects Mr. Wolf to certain
confidentiality and non-competitive provisions.
1996 Stock Option Plan
----------------------
Effective as of February 1996, the Board of Directors and stockholders
of the Company adopted the Company's 1996 Stock Option Plan (the "Option
Plan"). The Option Plan is intended to recognize the contributions made to
the Company by key employees, officers and directors of the Company, to
provide such persons with additional incentive to devote themselves to the
future success of the Company, and to improve the ability of the Company to
attract, retain, and motivate individuals upon whom the Company's sustained
growth and financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the
Company through receipt of rights to acquire the Company's Common Stock.
The Company has reserved 800,000 shares of Common Stock for issuance
upon the exercise of options available for future grant under the Option
Plan designated as either (i) incentive stock options ("ISO's") under the
Internal Revenue Code of 1986, as amended (the "Code") or (ii) non-
qualified stock options ("NQSO's"). ISO's may be granted under the Option
Plan to employees
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<PAGE>
(including directors) and officers of the Company. NQSO's may be granted to
non-employee directors, employees and officers of the Company. In certain
circumstances, the exercise of options granted under the Option Plan may
have an adverse effect on the market price of the Common Stock.
It is intended that the Option Plan will be administered by the
Compensation Committee (the "Committee"), composed of two or more persons
appointed by the Company's Board of Directors who are "disinterested
persons" as defined under Rule 16b-3 under the Exchange Act or "outside
directors" as defined under Section 162(m) of the Code. The Committee shall
grant options in its discretion and may consider the nature of the
optionee's services and responsibilities, the optionee's present and
potential contribution to the Company's success and such other factors as
it may deem relevant. ISO's granted under the Option Plan may not be
granted at a price less than the fair market value of the Common Stock on
the date of grant (or 110% of fair market value in the case of persons
holding 10% or more of the voting stock of the Company). The aggregate fair
market value of shares for which ISO's granted to any employee are
exercisable for the first time by such employee during any calendar year
(under all stock option plans of the Company and any related corporation)
may not exceed $100,000. Options granted under the Option Plan will expire
not more than ten years from the date of grant (five years in the case of
ISO's granted to persons holding 10% or more of the voting stock for the
Company). Options granted under the Option Plan are not transferable during
an optionee's lifetime but are transferable at death by will or by the laws
of descent and distribution.
As of April 1996, the Company granted options under the Option Plan
exercisable for the purchase of an aggregate of 622,854 shares of Common
Stock, including (i) options to purchase 40,000 and 50,000 shares granted
to Messrs. Laurence Rosen and Michael Kharitonov, respectively, exercisable
at a price of $2.50 per share, and (ii) options to purchase 90,000 and
20,000 to Messrs. Laurence Rosen and Michael Kharitonov, respectively,
exercisable at a price of $5.00 per share. None of such options are
exercisable until the date one year following the effective date of the
Company's initial public offering, and said options become exercisable
incrementally every six (6) months over a three (3) year period commencing
from their respective date of grant. In addition, the Company also has
granted options under the Option Plan to purchase 107,490, 64,372 and
85,223 shares to Messrs. Rosen, Kharitonov and Jeffrey Wolf, respectively,
at a purchase price of $2.50 per share as to an aggregate of 150,000 of
such options (subject to a lock-up on sales of shares underlying such
options for a period of three (3) years from the effective date of the
initial public offering), and $5.50 per share for the balance of such
options. All such options vest immediately, but are not
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<PAGE>
exercisable for a period of one (1) year from the effective date of the
initial public offering. See "Principal Shareholders."
The Option Plan also contains certain change in control provisions
which could cause options and other awards to become immediately
exercisable, and restrictions and deferral limitations applicable to other
awards to lapse, in the event any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, including a "group" as
defined in Section 13(d), but excluding certain shareholders of the
Company, acquires beneficial ownership of more than 50.1% of the Company's
outstanding shares of Common Stock.
Non-Plan Stock Options
----------------------
As of the date of this Prospectus , the Company has issued options to
purchase up to an aggregate of 260,000 shares of Common Stock (the "Non-
Plan Options") outside of the Option Plan to certain executive officers,
non-employee directors and consultants. The Non-Plan Options are
exercisable at a price of $2.50 per share of Common Stock. Of the Non-Plan
Options granted to date, options to purchase 93,158, 73,860 and 55,789
shares of Common Stock were granted to Messrs. Laurence Rosen, Jeffrey Wolf
and Michael Kharitonov, respectively. Although all of such Non-Plan Options
have vested, 50% of such options are not exercisable until one year
following their date of grant and the right to exercise the remaining 50%
of such Non-Plan Options become exercisable on the earlier of (i) the
Company achieving an after-tax net income of at least $1,250,000 for a full
fiscal year or (ii) five years following their date of grant. See
"Principal Stockholders."
The Company may, in the future, file a registration statement on Form
S-8 under the Securities Act registering the options and shares of Common
Stock underlying the options that may be issued under the plans.
Indemnification of Officers and Directors
-----------------------------------------
The Delaware General Corporation Law contains various provisions
entitling directors, officers, employees or agents of the Company to
indemnification from judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys's fees, as the result of an action
or proceeding (whether civil, criminal, administrative or investigative) in
which they may be involved by reason of being or having been a director,
officer, employee or agent of the Company provided said persons acted in
good faith and in a manner reasonably believed to be in or not opposed to
the best interest of the Company (and, with respect to any criminal action
or proceeding, had no reasonable cause to believe that the conduct
complained of was unlawful). The By-Laws of the Company provide
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<PAGE>
that the indemnification provisions of any applicable law are to be
utilized to the fullest extent permitted.
Limitation on Liability of Directors
The Delaware General Corporation Law permits a corporation, through
its Certificate of Incorporation, to exonerate its directors from personal
liability to the corporation, or to its stockholders, for monetary damages
for breach of fiduciary duty of care as a director, with certain
exceptions. The exceptions include a breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declarations of dividends,
and transactions from which the directors derived an improper personal
benefit. The Company's Certificate of Incorporation exonerates its
directors from monetary liability to the extent permitted by this statutory
provision. The Company has been advised that it is the position of the
Securities and Exchange Commission that insofar as the foregoing provision
may be invoked to disclaim liability for damages arising under the Act,
that provision is against public policy as expressed in the Act and is
therefore unenforceable.
PRINCIPAL STOCKHOLDERS
----------------------
The following table sets forth, assuming the successful sale of the
maximum number of shares offered hereby, certain information concerning
beneficial ownership of shares of Common Stock with respect to (i) each
person known to the Company to own 5% or more of the outstanding shares of
Common Stock, (ii) each director of the Company, (iii) the executive
officer(s) named in the Summary Compensation table, and (iv) all directors
and officers of the
Company as a group:
Number of Approximate Approximate
Shares Percentage of Percentage of
Beneficially Common Stock Common Stock
Name Owned Before Offering After Offering
---- ------------ --------------- --------------
Laurence Rosen(1)(2) 438,662 25.8% 16.9%
Jeffrey Wolf(1)(3) 341,553 20.1% 13.1%
Michael Kharitonov(1)(4) 266,210 15.7% 10.2%
Scott Wolf(5) 177,474 10.4% 6.8%
Dennis Sal (6) 90,000 5.3% 3.5%
All Officers and
Directors as a
Group (3 persons)(7) 1,046,427 61.6% 40.2%
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<PAGE>
__________________
Except as noted above, the address for the above identified officers and
directors of the Company is c/o NetLive Communications, Inc., 584 Broadway,
Suite 806, New York, New York 10012.
(1) May be deemed to be a "parent" and "promoter" of the Company as
defined in the Rules and Regulations of the Commission promulgated under
the Act.
(2) Does not include Non-Plan Options to purchase an aggregate of 93,158
shares of Common Stock or options granted under the Company's Option Plan
to purchase an aggregate of 237,490 shares of Common Stock, all of which
are not currently exercisable or exercisable within 60 days. See
"Management-1996 Stock Option Plan" and "-Non-Plan Stock Options".
(3) Does not include Non-Plan Options to purchase an aggregate of 73,860
shares of Common Stock, or options granted under the Company's Stock Option
Plan to purchase an aggregate of 85,223 shares of Common Stock, all of
which are not currently exercisable or exercisable within 60 days. See
"Management-1996 Stock Option Plan" and "-Non-Plan Stock Options".
(4) Does not include Non-Plan Options to purchase an aggregate of 55,789
shares of Common Stock or options granted under the Company's Option Plan
to purchase an aggregate of 134,372 shares of Common Stock, all of which
are not currently exercisable or exercisable within 60 days. See
"Management-1996 Stock Option Plan" and "-Non-Plan Stock Options".
(5) Does not include performance options to purchase an aggregate of
37,193 shares of Common Stock, all of which are not currently exercisable
or exercisable within 60 days. See "Management-Non-Plan Stock Options".
Scott Wolf is the brother of Jeffrey Wolf, the treasurer and a director of
the Company.
(6) Does not include options to purchase an aggregate of 250,000 shares of
Common Stock, all of which are not currently exercisable or exercisable
within 60 days.
(7) Does not include Non-Plan Options to purchase an aggregate of 222,807
shares of Common Stock or options granted under the Company's Option Plan
to purchase an aggregate of 457,085 shares of Common Stock, all of which
are not currently exercisable or exercisable within 60 days. See
"Management-1996 Stock Option Plan" and "-Non-Plan Stock Options".
45
<PAGE>
CERTAIN TRANSACTIONS
--------------------
The Company was originally incorporated under the laws of the State of
Delaware under the name of Netvisions Incorporated and subsequently changed
its name to NetLive Communications, Inc. Effective as of September 1995,
Messrs. Scott Wolf, Laurence Rosen, Jeffrey Wolf, Andrew Schwartz and
Michael Kharitonov purchased 132,268, 263,699, 263,699, 45,206 and 132,268
shares of the Company's Common Stock, respectively, for aggregate
consideration of $10.00. Effective as of December 1995, Messrs. Scott Wolf,
Laurence Rosen, Jeffrey Wolf, Andrew Schwartz and Michael Kharitonov
purchased 45,206, 88,737, 88,737, 45,206 and 132,268 shares of the
Company's Common Stock, respectively, for an aggregate consideration of
approximately $5.00. Effective as of January 1996, Messrs. Laurence Rosen
and Michael Kharitonov each purchased 1,674 shares of the Company's Common
Stock for an aggregate consideration of $1.00. In February 1996, Mr. Robert
Friedman purchased 41,857 shares of the Company's Common Stock for an
aggregate consideration of $50,000. In addition, in February 1996, Mr.
Robert Friedman purchased 5,860 and 10,883 shares of the Company's Common
Stock from Messrs. Laurence Rosen and Jeffrey Wolf, respectively. In
February 1996, Mr. Laurence Rosen purchased 90,412 shares of the Company's
Common Stock from Mr. Andrew Schwartz.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
------------
The Company is authorized to issue up to 19,000,000 shares of Common
Stock, $.0001 par value per share. The holders of Common Stock are entitled
to receive dividends equally when, as and if declared by the Board of
Directors, out of funds legally available therefor.
The holders of the Common Stock have sole voting rights, one vote for
each share held of record, and are entitled upon liquidation of the Company
to share ratably in the net assets of the Company available for
distribution. Shares of the Company's Common Stock do not have cumulative
voting rights and vote as a class on all matters requiring stockholder
approval. Therefore, the holders of a majority of the shares of Common
Stock may elect all of the directors of the Company, control its affairs
and day to day operations. The shares of Common Stock are not redeemable
and have no preemptive or similar rights. All outstanding shares of the
Company's Common Stock are fully paid for and non-assessable.
46
<PAGE>
Warrants
--------
Each Warrant entitles its holder to purchase one share of Common Stock
at an exercise price of $5.50 per share, subject to adjustment, commencing
two years after the Effective Date until _______, 2001.
The Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement") among the Company, the Underwriter and Olde Monmouth
Stock Transfer Co., Inc., the warrant agent, and will be evidenced by
warrant certificates in registered form.
The exercise price of the Warrants and the number and kind of shares
of Common Stock or other securities and property issuable upon exercise of
the Warrants are subject to adjustment in certain circumstances, including
stock splits, stock dividends, subdivisions, combinations,
reclassification, or issuances of stock at a price lower than the current
market price. Additionally, an adjustment will be made upon the sale of all
or substantially all of the assets of the Company in order to enable the
holders of the Warrants to purchase the kind and number of shares of stock
or other securities or property (including cash) receivable in such event
by a holder of the number of shares of Common Stock that might otherwise
have been purchased upon exercise of the Warrants.
The Warrants do not confer upon the holder any voting or any other
rights of a stockholder of the Company. Upon notice to the holders of the
Warrants, the Company has the right to reduce the exercise price or extend
the expiration date of the Warrants.
Warrants may be exercised upon surrender of the Warrant certificate
evidencing those Warrants on or prior to the expiration date (or earlier
redemption date) of the Warrants to the Warrant Agent, with the form of
"Election to Purchase" on the reverse side of the Warrant certificate
completed and executed as indicated, accompanied by payment of the full
exercise price (in United States funds, by cash or certified bank check
payable to the order of the Warrant Agent) for the number of Warrants being
exercised.
No fractional shares will be issued upon exercise of the Warrants.
However, if a holder of a Warrant exercises all Warrants then owned of
record by him, the Company will pay to that holder, in lieu of the issuance
of any fractional share which would otherwise be issuable, an amount in
cash based on the market value of the Common Stock on the last trading day
prior to the exercise date.
No Warrant will be exercisable unless at the time of exercise the
Company has filed with the Commission a current prospectus covering the
issuance of shares of Common Stock issuable upon
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<PAGE>
exercise of the Warrants and the issuance of shares has been registered or
qualified or is deemed to be exempt from registration or qualification
under the securities laws of the state of residence of the holder of the
Warrant. The Company has undertaken to use its best efforts to maintain a
current prospectus relating to the issuance of shares of Common Stock upon
the exercise of the Warrants until the expiration of the Warrants, subject
to the terms of the Warrant Agreement. While it is the Company's intention
to maintain a current prospectus, there is no assurance that it will be
able to do so. See "Risk Factors-Current Prospectus and State Blue Sky
Registration Required to Exercise Warrants."
The Warrants are redeemable, in whole or in part, by the Company at a
price of $.05 per Warrant, commencing one year after the Effective Date and
prior to their expiration, provided that (i) prior written notice of not
less than 30 days is given to the Warrantholders, (ii) the closing bid
price (as defined) of the Company's Common Stock for the twenty consecutive
trading days immediately prior to the date on which the notice of
redemption is given, shall have exceeded $7.50 per share, and (iii) Warran-
tholders shall have exercise rights until the close of business the day
preceding the date fixed for redemption. The Warrants shall be exercisable
until the close of the business day preceding the date fixed for
redemption. In addition, subject to the rules of the NASD, the Company has
agreed to engage the Underwriter as warrant solicitation agent, in
connection with which it would be entitled to a 5% fee upon exercise of the
Warrants. See "Underwriting."
Preferred Stock
---------------
The Company is authorized to issue 1,000,000 shares of "blank check"
Preferred Stock par value $.0001 per share ("Preferred Stock"). The
Preferred Stock may be issued from time to time, in one or more series,
upon authorization by the Company's Board of Directors. The Board of
Directors, without further approval of the stockholders, will be authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of
Preferred Stock. The issuance of Preferred Stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of
the holders of the Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of the Company, discourage
bids for the Company's Common Stock at a premium or otherwise adversely
effect the market price of the Common Stock, if the Common Stock is ever
publicly traded, of which there are no assurances. As of the date hereof,
the Company has no plans to issue, or any present intention to issue any
such shares.
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<PAGE>
Transfer Agent and Warrant Agent
--------------------------------
The Transfer Agent for the Company's Common Stock and the Warrant
Agent for the Company's A Warrants is Olde Monmouth Stock Transfer Co.,
Inc., Middletown, New Jersey.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this Offering, the Company will have 2,600,000
shares of Common Stock outstanding (2,735,000 shares if the Underwriter's
over-allotment option is exercised in full). All of the shares of Common
Stock sold in this Offering will be freely tradeable without restriction or
further registration under the Securities act of 1933, as amended (the
"Securities Act"), except for any shares purchased by an "affiliate" of the
Company which will be subject to certain limitations of Rule 144 adopted
under the Securities Act.
The 1,700,000 presently outstanding shares of Common Stock are
restricted securities and will be subject to the resale limitations
provided for in Rule 144. Under Rule 144, as currently in effect, subject
to the satisfaction of certain other conditions, a person, including an
affiliate of the company, who has owned restricted shares of Common Stock
beneficially for at least two years, is entitled to sell, within any three
month period, a number of shares that does not exceed the greater of 1% of
the total number of outstanding shares of the same class or, if the Common
stock is quoted on an exchange, the average weekly trading volume during
the four calendar weeks preceding the sale. A non-affiliate who has not
been an affiliate of the Company for at least the three months immediately
preceding the sale and who has beneficially owned shares of Common Stock
for at least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above. In meeting the
two and three year holding periods described above, a holder who has
purchased shares can include the holding periods of a prior owner who was
not an affiliate of the Company.
All Company's securityholders, on the date hereof, have agreed not to
publicly sell, for a period of 2 years from the date of this Prospectus,
any shares of the Company's Common Stock without the prior written consent
of the Underwriter .
Prior to this Offering, there has been no market for any securities of
the Company. The effect, if any, of public sales of the restricted shares
of Common Stock or the availability of such shares for future sale at
prevailing market prices cannot be predicted. Nevertheless, the possibility
that substantial amounts of restricted shares may be resold in the public
market may adversely affect prevailing market prices for the Common Stock
and the Class A Warrants, if any such market should develop.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement between the Company and the Underwriter (a copy of which
agreement is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part), the Company has agreed to sell to the
Underwriter 900,000 shares of Common Stock and 600,000 Warrants. All
900,000 shares and 600,000 Warrants offered must be purchased by the
Underwriter if any are purchased. The shares and Warrants are being offered
by the Underwriter subject to prior sale, when, as and if delivered to and
accepted by the Underwriters and subject to approval of certain legal
matters by counsel and to certain other conditions.
The Underwriter has advised the Company that it proposes to offer the
shares of Common Stock and the Warrants to the public at the offering
prices set forth on the cover page of this Prospectus and that the
Underwriter may allow to certain dealers who are members in good standing
with the National Association of Securities Dealers, Inc. ("NASD")
concessions, not in excess of $______ per share of Common Stock and $______
per Warrant. After the initial public offering, the public offering price
and concessions may be changed by the Underwriter.
The Company has granted the Underwriter an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 135,000 Shares and
90,000 Warrants from it, at the public offering price less the underwriting
discounts set forth on the cover page of this Prospectus. The Underwriters
may exercise this option solely to cover over-allotments in the sale of the
shares of Common Stock and Warrants offered hereby.
The Company has agreed to pay the Underwriter a non-accountable
expense allowance of 3% of the gross proceeds of the shares of Common Stock
and Warrants sold in this Offering, of which $25,000 has been paid prior to
the date hereof.
The underwriting agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.
The Company has agreed to sell to the Underwriter or its designees, at
a price of $10, the Underwriter's Warrants, which entitle the Underwriter
to purchase up to 90,000 shares of Common Stock of the Company and/or 60,000
Warrants, respectively. The Underwriter's Warrants will be exercisable at a
price of $6.60 per share and $.12 per Warrant, respectively, for a period of
four years commencing one year from the date of this Prospectus and they will
not be transferable except to underwriters and selected dealers and officers
and partners thereof. Any profit realized upon any resale of the Underwriter's
Warrants or upon any sale of the shares of Common Stock or Warrants underlying
same may be deemed to
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<PAGE>
be additional underwriter's compensation. The Company has agreed to register (or
file a post-effective amendment with respect to any registration statement
registering) the Underwriter's Warrants and the underlying securities under the
Securities Act at its expense on one occasion, and at the expense of the holders
thereof on another occasion, upon the request of a majority of the holders
thereof. The Company has also agreed to certain "piggy-back" registration rights
for the holders of the Underwriter's Warrants and the underlying securities.
The Company has agreed that for a period of three years, the
Underwriter will have the right to designate a person to be a Director of the
Company, or a non-voting advisor to the Company's Board of Directors who will
receive the same compensation as a member of the Board of Directors and who
will be indemnified by the Company against any claims arising out of his
participation at meetings of the Board of Directors. The identity of such
person has not been determined as of the date hereof, and it is not
expected that such right will be exercised in the immediate future.
The Underwriters have informed the Company that they do not expect
sales of shares and the Class A Warrants to be made to discretionary
accounts to exceed 1% of the shares of Common Stock and Warrants offered
hereby.
The Company will pay the Underwriter a commission equal to five
percent (5%) of the exercise price of the Warrants exercised, of which a
portion may be reallowed to any dealer who solicited the exercise, provided
that (i) at the time of exercise the market price of the Common Stock is
greater than the exercise price of the Warrants, (ii) the exercise of the
Warrants was solicited by the Underwriter , (iii) the Warrants exercised
are not held in discretionary accounts, (iv) disclosure of the compensation
arrangements have been made both at the time of this Offering and at the
time of exercise, and (v) the solicitation of the exercise of the Warrants
is not in violation of Rule 10b-6 under the Securities Exchange Act of
1934. The Company has agreed not to solicit the exercise of the Warrants
other than through the Underwriter.
The Offering is subject to the agreement by all present stockholders
of the Company that they will not sell any shares of Common Stock to the
public without the prior written consent of the Underwriter for a period of
twenty-four months.
The Company has agreed to enter into an agreement with the Underwriter
retaining them as a financial consultant for a period of three years from
the date hereof, pursuant to which they will receive fees aggregating
$90,000 which fees will be payable in full at closing.
51
<PAGE>
CONCURRENT REGISTRATION OF SECURITIES
Concurrently with this Offering, 417,500 shares of Common Stock and
1,000,000 Warrants have been registered under the Securities Act for
immediate resale. The holders of such securities have agreed not to sell
any of the registerable securities for a period of 2 years from the
Effective Date, without the prior written consent of the Underwriter.
LEGAL MATTERS
The legality of the shares offered hereby will be passed upon for the
Company By Gusrae, Kaplan & Bruno, Esqs., New York, New York. Certain legal
matters in connection with this Offering will be passed upon for the
Underwriter by Gersten Savage Kaplowitz & Curtin, LLP, New York, New York.
EXPERTS
The financial statements of the company at March 31, 1996 and for the
period from August 23, 1995 (date of inception) to March 31, 1996 included
in this Prospectus have been included in reliance upon the report of
Goldstein Golub Kessler & Company, P.C., independent certified public
accountants, given upon the authority of said firm as experts in auditing
and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Washington, D.C. office of the
Securities and Exchange Commission a Registration Statement (the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all
the information set forth in the Registration State-ment, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
Offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be inspected without charge or copies
made at prescribed rates from the Commission at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549 or at its Northeast Regional
Office located at 7 World Trade Center, New York, New York 10048.
Statements contained in the Prospectus as to the contents of any contract
or other document are not necessarily complete and reference is made to
each such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference.
52
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
================================================================================
INDEPENDENT AUDITOR'S REPORT F-1
FINANCIAL STATEMENTS:
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 - F-10
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
NetLive Communications, Inc.
We have audited the accompanying balance sheet of NetLive Communications, Inc.
(a development stage company) as of March 31, 1996 and the related statements of
operations, stockholders' equity, and cash flows for the period from August 23,
1995 (date of inception) to March 31, 1996. 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 NetLive Communications, Inc. as
of March 31, 1996 and the results of its operations and its cash flows for the
period from August 23, 1995 (date of inception) to March 31, 1996 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has had limited operations, has a working
capital deficiency and a deficit accumulated during the development stage that
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
/s/ GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
New York, New York
April 25, 1996, except for Note 8, as to
which the date is May 9, 1996
F-1
<PAGE>
<TABLE><CAPTION>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
=================================================================================================
MARCH 31, 1996
-------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 1) $ 160,395
Prepaid expenses and other current assets 1,771
-------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 162,166
Property and Equipment, net (Notes 1 and 2) 46,001
Deferred Income Tax Asset, net of valuation allowance of $36,000 (Notes 1 and 5) -
Debt Issue Costs (Notes 1 and 4) 24,479
Deferred Offering Costs (Note 1) 43,500
Other Assets (Note 1) 6,292
-------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 282,438
=================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses (Note 6) $ 144,813
Notes payable (Note 4) 92,634
Current portion of obligations under capital leases (Note 3) 5,190
-------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 242,637
Obligations under Capital Leases, net of current portion (Note 3) 12,280
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 254,917
-------------------------------------------------------------------------------------------------
Commitments (Notes 3, 4 and 6)
Stockholders' Equity (Notes 7, 8 and 9):
Preferred stock - $.0001 par value; authorized 1,000,000 shares, none issued
Common stock - $.0001 par value; authorized 19,000,000 shares, issued
and outstanding 1,500,000 shares 150
Additional paid-in capital 285,375
Deficit accumulated during the development stage (243,129)
Deferred offering costs relating to common stock issued for services related
to intended IPO (Note 1) (14,875)
-------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 27,521
=================================================================================================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 282,438
=================================================================================================
The accompanying notes and independent
auditor's report should be read in
conjunction with the financial statements
F-2
</TABLE>
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
===============================================================================
PERIOD FROM AUGUST 23, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
-------------------------------------------------------------------------------
Selling, general and administrative expenses:
Salaries (Note 6) ............................................ $ 160,714
Professional fees ............................................ 27,812
Rent (Note 6) ................................................ 9,724
Depreciation and amortization ................................ 4,727
Interest expense and financing costs ......................... 5,189
Other ........................................................ 34,963
-----------
Net loss ....................................................... $ (243,129)
===========
Net loss per common share ...................................... $ (.19)
===========
Weighted average number of common shares outstanding (Note 1) .. 1,276,762
===========
The accompanying notes and independent
auditor's report should be read in
conjunction with the financial statements
F-3
<PAGE>
<TABLE><CAPTION>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
===============================================================================================================
PERIOD FROM AUGUST 23, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
---------------------------------------------------------------------------------------------------------------
DEFERRED OFFERING
DEFICIT COSTS RELATING TO
ACCUMULATED COMMON STOCK
COMMON STOCK ADDITIONAL DURING THE ISSUED FOR
NUMBER PAID-IN DEVELOPMENT SERVICES RELATED STOCKHOLDERS'
OF SHARES AMOUNT CAPITAL STAGE TO INTENDED IPO EQUITY
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common
stock for cash 1,282,500 $128 $ 79,512 - - $ 79,640
Contributed property and
equipment and expenses
paid by stockholders,
contributed to the Company - - 30,296 - - 30,296
Issuance of common
stock for services
related to intended IPO 17,500 2 14,873 - $(14,875) -
Issuance of common stock
in connection with private
placement (Note 4) 200,000 20 160,694 - - 160,714
Net loss - - - $(243,129) - (243,129)
---------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 1,500,000 $150 $285,375 $(243,129) $(14,875) $ 27,521
===============================================================================================================
The accompanying notes and independent
auditor's report should be read in
conjunction with the financial statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
==========================================================================================
PERIOD FROM AUGUST 23, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net loss $(243,129)
Adjustments to reconcile net loss to net cash used in operating activities:
Expenses paid by stockholders, contributed to the Company 12,006
Depreciation and amortization 4,727
Amortization of debt issue costs and discount on notes payable 3,869
Changes in operating assets and liabilities:
Increase in prepaid expenses and other current assets (1,771)
Increase in other assets (2,175)
Increase in accounts payable and accrued expenses 144,813
------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (81,660)
------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (14,703)
Acquisition of intangibles (4,220)
------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (18,923)
------------------------------------------------------------------------------------------
Cash flows from financing activities:
Capital contributions 79,640
Principal payments on obligations under capital leases (162)
Proceeds from issuance of notes payable 250,000
Debt issue costs (25,000)
Deferred offering costs (43,500)
------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 260,978
------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 160,395
==========================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 70
==========================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Contributed property and equipment $ 18,290
==========================================================================================
Capital lease obligations incurred $ 17,632
==========================================================================================
Common stock issued for services related to intended IPO $ 14,875
==========================================================================================
The accompanying notes and independent
auditor's report should be read in
conjunction with the financial statements
F-5
</TABLE>
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
==========================================================================
1. PRINCIPAL NetLive Communications, Inc. (a development stage
BUSINESS company) (the "Company") was incorporated on
ACTIVITY AND August 23, 1995 under the laws of the State of
SIGNIFICANT Delaware. The Company is developing and intends to
ACCOUNTING utilize technologies that will provide live,
POLICIES: one-on-one, videoconferenced entertainment,
educational and counseling services over the
Internet.
Property and equipment are recorded at cost.
Depreciation is provided for by the straight-line
method over the estimated useful lives of the property
and equipment.
Trademarks are being amortized over 10 years using the
straight-line method and are included in other assets
in the accompanying balance sheet.
The Company recognizes revenue when services are
provided.
Research and development expenses, consisting
primarily of salaries and consulting fees to support
technology and services content development, are
expensed as incurred.
The Company employs the liability method of accounting
for income taxes pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 109, under which
method recorded deferred income taxes reflect the tax
consequences on future years of temporary differences
(differences between the tax basis of assets and
liabilities and their financial amounts at year-end).
The Company provides a valuation allowance that reduces
deferred tax assets to their net realizable value.
Debt issue costs associated with the March 1996 private
placement financing described in Note 4 will be
amortized by the straight-line method over the terms of
the related debt. Accumulated amortization was $521 at
March 31, 1996.
Deferred offering costs represent costs incurred
through March 31, 1996 attributable to the April 1996
private placement offering and an intended initial
public offering ("IPO") (see Notes 8 and 9). The
Company intends to offset these costs against the
proceeds from these transactions. In the event that
these transactions are not completed, these costs will
be charged to operations.
The Company considers all highly liquid investments
with a maturity of three months or less when purchased
to be cash equivalents.
The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such
accounts.
The preparation of financial statements in accordance
with generally accepted accounting principles requires
the use of estimates by management.
Net loss per share of common stock has been computed
using the weighted average number of shares of common
stock outstanding. Common stock equivalents are not
included in the weighted average number of shares since
the effect would be antidilutive.
F-6
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
===============================================================================
The Company intends to measure compensation cost using
APB Opinion No. 25 as is permitted by SFAS No. 123,
"Accounting for Stock-Based Compensation," effective
for financial statements with fiscal years beginning
after December 31, 1995.
The Company intends to adopt SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," for its 1997
fiscal year. Management of the Company believes that
the adoption of this pronouncement will not have a
material effect on the Company's financial statements.
2. PROPERTY AND Property and equipment, at cost, consists of the
EQUIPMENT: following:
<TABLE><CAPTION>
Estimated
Useful Life
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Furniture and equipment $ 1,364 5 years
Computer and video equipment 31,629 3 years
Equipment acquired under capital leases (Note 3) 17,632 3 years
-------------------------------------------------------------------------------------------------
50,625
-------------------------------------------------------------------------------------------------
Less accumulated depreciation and amortization:
Equipment acquired under capital leases 97
Other 4,527
-------------------------------------------------------------------------------------------------
4,624
-------------------------------------------------------------------------------------------------
$46,001
=================================================================================================
</TABLE>
3. OBLIGATIONS UNDER The Company is the lessee of equipment acquired
CAPITAL LEASES: under capital leases expiring in 1999. The Company
is required to make monthly payments aggregating
$585 with interest at 12% per annum.
Minimum future payments under these leases are as
follows:
Year ending March 31,
1997 $ 7,029
1998 7,029
1999 6,794
--------------------------------------------------------------------------------
20,852
Less amount representing interest 3,382
--------------------------------------------------------------------------------
$17,470
================================================================================
F-7
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
================================================================================
4. NOTES In March 1996, the Company completed a private
PAYABLE: placement for which it received in the aggregate
$250,000 and in exchange issued 200,000 shares of
common stock, 1,000,000 redeemable common stock
purchase warrants and $250,000 aggregate principal
amount of its 12% redeemable promissory notes with
interest payable upon repayment. The notes are due and
payable at the earlier of the completion of the
Company's proposed IPO, March 1998, or the date of
closing of a sale of securities by the Company in an
amount of $500,000 or greater, as defined. Accordingly,
the notes were repaid in May 1996 (see Note 8). The
Company will record a charge to operations of
approximately $160,000 in May 1996. In connection with
this private placement, the Company incurred costs
amounting to $25,000.
It is not practicable for the Company to estimate the
fair value of these notes payable since there is no
quoted market price available.
The redeemable common stock purchase warrants are not
exercisable until one year from the effective date of
the proposed IPO and expire three years from the
effective date of the proposed IPO. Each warrant
entitles the holder to purchase one share of common
stock for $5.50 per share. The Company may call these
warrants for redemption on the earlier of one year from
the effective date of the IPO or any time after
September 1, 1996, provided the Company has not
consummated an IPO of its securities by that time, as
defined.
In the event the Company does not consummate an IPO by
September 1, 1996, the Company may redeem the
promissory notes, common stock and common stock
purchase warrants at an aggregate redemption price
equal to 85% of the principal amount remaining
outstanding on the promissory note.
5. INCOME TAXES: The tax effects of loss carryforwards and the
valuation allowance that give rise to deferred tax
assets at March 31, 1966 are as follows:
Net operating losses $ 36,000
Less valuation allowance (36,000)
-------------------------------------------------------------------------------
Deferred Tax Assets $ - 0 -
================================================================================
As of March 31, 1996, the Company had net operating
loss carryforwards available to offset future taxable
income of approximately $240,000 which expire in the
year 2011. The Company uses the lowest marginal U.S.
corporate tax of 15% to determine deferred tax amounts
and the related valuation allowance because the Company
has had no taxable earnings through March 31, 1996.
F-8
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
================================================================================
6. COMMITMENTS: The Company leases office space under
noncancelable operating leases which expire at
various dates through November 1998. A lease is
subject to escalations for the Company's share of
increases in real estate taxes.
Minimum future obligations under the leases are as
follows:
Year ending March 31,
1997 $36,616
1998 24,976
1999 17,090
--------------------------------------------------------------------------------
$78,682
================================================================================
Rent expense charged to operations for the period from
August 23, 1995 (date of inception) to March 31, 1996
amounted to $9,724.
The Company has entered into employment agreements with
a consultant and executive officers of the Company
which provide for compensation through August 31, 1998
as follows:
Year ending March 31,
1997 $269,583
1998 294,583
1999 127,084
--------------------------------------------------------------------------------
$691,250
================================================================================
At March 31, 1996, approximately $90,000 of such
compensation has been accrued and included in accounts
payable and accrued expenses.
7. STOCKHOLDERS' Effective March 5, 1996, the Company's Board of
EQUITY: Directors approved an approximate 837.14 for 1
stock split, whereby the number of shares of
outstanding common stock was increased from 1,532 to
1,282,500. The stated par value of each share was not
changed from $.0001. A total of $130 was reclassified
from the Company's additional paid-in capital account
to the Company's common stock account. All share and
per share amounts have been restated to retroactively
reflect the stock split.
During February 1996, the Board of Directors of the
Company adopted the 1996 Stock Option Plan (the "Plan")
which authorizes the granting of options to purchase up
to an aggregate of 800,000 shares of common stock to
employees, officers and directors of the Company. Both
nonqualified options and options intended to qualify as
incentive stock options ("ISOs") under the Internal
Revenue Code of 1986, as amended, may be granted under
the Plan. ISOs granted under the Plan may not be
granted at a price less than the fair market value of
the common stock on the date of the option grant,
provided that the exercise price of such option granted
to a stockholder owning more than 10% of the
outstanding common stock of the Company may not be less
than 110% of the fair market value
F-9
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
================================================================================
of the common stock on the date of the option grant.
The term of each option and the manner of exercise are
determined by a committee appointed by the Board of
Directors, but in no case can the options be exercised
in excess of 10 years beyond the grant date, as
defined.
In March 1996, options to purchase 622,854 shares of
common stock at exercise prices ranging from $2.50 to
$5.00 per share were granted under the Plan. A portion
of the options become exercisable one year following
the effective date of the Company's intended IPO and
the balance of the options become exercisable
incrementally every six months for a three-year period.
In February 1996, the Company issued options to
purchase an aggregate of 260,000 shares of common stock
outside the Plan to certain executive officers,
nonemployee directors and consultants. The options will
be exercisable at $2.50 per share of common stock
commencing one year from the date of grant. Options
to purchase 130,000 shares of common stock are
exercisable at the earlier of five years from the date
of grant or when the Company achieves net income, as
defined, of at least $1,250,000 for a full fiscal year.
Options to purchase the remaining 130,000 shares are
exercisable one year from the date of grant.
8. SUBSEQUENT During May 1996, the Company completed a private
EVENT: placement offering of securities, whereby the Company
issued 200,000 shares of common stock at an offering
price of $2.50 per share. Costs incurred in connection
with the private placement were approximately $123,000.
A portion of the proceeds from this private placement
was used to repay notes payable (see Note 4).
9. INITIAL PUBLIC The accompanying financial statements have been
OFFERING AND GOING prepared assuming the Company will continue as a
CONCERN: going concern. The Company has had limited
operations, has a working capital deficiency and a
deficit accumulated during the development stage that
raise substantial doubt about the Company's ability to
continue as a going concern.
The Company intends to file a Registration Statement on
Form SB-2 under the Securities Act of 1933. The
Registration Statement contemplates an offering of
900,000 shares of common stock at an estimated offering
price of $5.50 per share and 600,000 Class A warrants
at an offering price of $.10 per warrant, each warrant
to purchase one share of common stock at a price of
$5.50 per share.
Management believes that the successful completion of
the proposed IPO will allow the Company to continue as
a going concern. If the proposed IPO is not
successfully completed, the Company would not have the
capital resources necessary to continue the development
of its business which would significantly impact the
Company's ability to continue as a going concern. The
financial statements do not include any adjustments
that might be necessary if the Company is unable to
continue as a going concern.
F-10
<PAGE>
[BACK COVER]
No dealer, salesperson or other person 900,000 Shares of
has been authorized in connection with Common Stock and
this Offering to give any information or 600,000 Common Stock
to make any representations other than Purchase Warrants.
those contained in this Prospectus. This
Prospectus does not constitute an offer
or a solicitation in any jurisdiction to
any person to whom it is unlawful to make
such an offer or solicitation. Neither ______________________
the delivery of this Prospectus nor any
sale made hereunder shall, under any
circumstances, create an implication that NETLIVE COMMUNICATIONS, INC.
there has been no change in the circum-
stances of the Company or the facts here- ______________________
in set forth since the date hereof.
TABLE OF CONTENTS
-----------------
Page
----
Prospectus Summary .................
Risk Factors .......................
Dilution ...........................
Use of Proceeds .................... ____________________
Capitalization .....................
Selected Financial PROSPECTUS
Information ...................... ____________________
Managements's Discussion and
Analysis of Financial Condition
and Results of Operations ........
Business ........................... MAY DAVIS GROUP, INC.
Management .........................
Principal Stockholders ............. _______________, 1996
Certain Transactions ...............
Description of Securities ..........
Shares Eligible for
Future Sale ......................
Underwriting .......................
Legal Matters ......................
Experts ............................
Additional Information .............
Financial Statements ...............
Until , 1996 (25 days after
the date of the Prospectus), all dealers
effecting transactions in the registered
securities, whether or not participating
in this distribution, may be required to
deliver a Prospectus. This is in addi-
tion to the obligation of dealers to
deliver a Prospectus when acting as Un-
derwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
SUBJECT TO COMPLETION, DATED MAY __, 1996
NETLIVE COMMUNICATIONS, INC.
417,500 Shares of Common Stock and
1,000,000 Common Stock Purchase Warrants
This Prospectus relates to the sale by certain selling securityholders
(the "Selling Securityholders") of 417,500 Shares of common stock, par
value $.0001 per share (the "Common Stock") and 1,000,000 common stock
purchase warrants (the "Warrants") of NetLive Communications, Inc., a
Delaware corporation (the "Company"). None of the proceeds from the sale of
the Common Stock and Warrants by the Selling Securityholders will be
received by the Company. The Company will bear all expenses (other than
selling commissions and fees and expenses of counsel or other advisors to
the Selling Securityholders) in connection with the registration and sale
of the Common Stock and Warrants being offered by the Selling
Securityholders.
The Common Stock and Warrants will be offered by the Selling
Securityholders in transactions in the over-the-counter market, in
negotiated transactions or a combination of such methods of sale, at fixed
prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at negotiated
prices. The Selling Securityholders may effect such transactions by selling
the Common Stock and Warrants to or through broker/dealers, and such
broker/dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Securityholders and/or the
purchasers of the Common Stock and Warrants for whom such broker/dealers
may act as agent or to whom they sell as principal, or both. The Selling
Securityholders may be deemed to be "underwriters" as defined in the
Securities Act of 1933, as amended (the "Securities Act"). If any
broker/dealers are used by the Selling Securityholders, any commission paid
to broker/dealers and, if broker/dealers purchase any Common Stock or
Warrants as principals, any profits received by such broker/dealers on the
resales of the Securities may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any profits realized by
the Selling Securityholders may be deemed to be underwriter commissions.
All costs, expenses and fees in connection with the registration of the
Common Stock and Warrants offered by Selling Securityholders will be borne
by the Company. Brokerage commissions, if any, attributable to the sale of
the Common Stock and Warrants will be borne by the Selling Securityholders.
See "Selling Securityholders" and "Plan of Distribution".
1
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
Concurrently with the commencement of this offering, the Company
offered by separate Prospectus 900,000 shares of Common Stock and 600,000
Warrants (the "Securities"). The Company's offering (the "Offering") is
being made through May Davis Group, Inc. (the "Underwriter").
_____________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH
DEGREE OF RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION.
SEE "RISK FACTORS," COMMENCING ON PAGE 8 AND "DILUTION".
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")
OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ________________, 1996
2
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
niques and to track marketing effectiveness utilizing advanced database and
analytical methods. It is intended that the Company will initially market
its services worldwide over the Internet and it plans, in the future, to
market through traditional media in targeted markets throughout North
America, Europe and Asia.
The Company was organized in the State of Delaware on August 23, 1995.
The Company's executive offices are located at 584 Broadway, New York, New
York 10012, and its telephone number at that address is (212) 343-7082.
The Offering
Securities Offered(1)..... 417,500 shares of Common Stock and 1,000,000
Warrants. See "Description of Securities."
Common Stock Outstanding
Before Offering......... 1,700,000 shares.
Common Stock Outstanding
After Offering(1)(2).... 2,600,000 shares.
Warrants to be Issued in
the Offering............ 1,000,000 Warrants.
Exercise Terms............ Each Warrant entitles the holder thereof to
purchase one share of Common Stock for $5.50,
during the three year period commencing two
years after the Effective Date, subject to
adjustment in certain circumstances. See
"Description of Securities-Warrants".
Expiration Date........... _________, 2001 (five years after the
Effective Date).
Redemption................ Redeemable by the Company, in whole or in
part, at a price of $.05 per Warrant, upon
not less than 30 days prior written notice to
the holders of such Warrants, provided that
the closing bid price (as defined) of the
Company's Common Stock for the twenty
consecutive trading days immediately prior to
the date on which the notice of redemption is
6
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
given, shall have exceeded $7.50 per share.
Use of Proceeds........... The Company will receive none of the proceeds
from this offering. See "Use of Proceeds".
Risk Factors.............. Investment in the securities offered hereby
involves a high degree of risk and immediate
substantial dilution. See "Risk Factors" and
"Dilution".
Proposed NASDAQ Symbols:(2)
Common Stock............ NETL
Warrants................ NETLW
Proposed Boston Stock Exchange
Symbols:
Common Stock............ NLC
Warrants................ NLCW
__________________
(1) Does not include (i) 135,000 shares of Common Stock and 90,000
Warrants, subject to the Underwriters' Over-allotment Option; (ii)
1,000,000 shares of Common Stock issuable upon the exercise of the
outstanding Warrants, (iii) 150,000 shares of Common Stock issuable upon
the exercise of the Underwriters' Stock Warrants and Underwriters'
Warrants; (iv) 800,000 shares of Common Stock reserved for issuance
pursuant to the Company's incentive stock option plan; or (v) 260,000
shares of Common Stock reserved for issuance pursuant to certain other
options. See "Management", "Underwriting" and "Description of Securities".
(2) The proposed trading symbols do not imply that a liquid and active
market will be developed or sustained for the securities upon completion of
the Offering.
7
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
Public offering price per share............ $5.50
Net tangible book value (deficit) per share
before offering.......................... ($ .03)
Increase attributable to public
investors................................ $1.64
Pro forma net tangible book value per
share after offering..................... $1.61
-----
Dilution per share to public investors..... $3.89
=====
In the event the Underwriter exercises its Over-allotment Option in
full, the pro forma net tangible book value per share would be $1.77 which
would result in dilution to the public investors of $3.73.
The following table sets forth with respect to the existing
stockholders and public investors, a comparison of the number of shares of
Common stock owned by the existing stockholders, the number of shares of
Common Stock to be purchased from the Company by the purchasers of the
Securities offered hereby and the respective aggregate consideration paid
to the Company and the average price per share.
<TABLE><CAPTION>
Shares Purchased Total Consideration Average
---------------------- ---------------------
Approximate Approximate Price
Number Percentage Amount Percentage Per Share
------ ----------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Public Investors....... 900,000 34.62% $4,950,000 86.53% $5.50
Present Stockholders... 1,700,000 65.38% $ 770,650 13.47% $0.45
--------- ------- ---------- -------
Totals.............. 2,600,000 100.00% $5,720,650 100.00%
========= ======= ========== =======
</TABLE>
USE OF PROCEEDS
The Company will not receive any proceeds from this offering. The net
proceeds to the Company from the sale of the Securities offered are
estimated to be approximately $3,909,200 ($4,563,005 if the Underwriter's
over-allotment option is exercised in full) after deducting underwriting
commissions and discounts and other expenses of the offering. The Company
expects to use the net proceeds from the Offering as follows:
20
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
CONCURRENT REGISTRATION OF SECURITIES
Concurrently with this Offering, the Company is offering 900,000
shares of Common Stock and 600,000 Warrants in a public offering through
the Underwriter.
SELLING SECURITYHOLDERS
The following table sets forth the number of shares of the Common
Stock of the Company beneficially owned by each Selling Securityholders and
the number of shares of Common Stock included for sale in this Prospectus.
Common
Warrants Stock Warrants
-------- ------ --------
Eaglehurst Corporation, N.V. 50,000 250,000
Celestial Dreams Corporation, N.V. 50,000 250,000
Jasminville Corporation, N.V. 12,500 62,500
Davstar II Managed Investments Corp., N.V. 37,500 187,500
Dennis Sal 90,000 250,000
Arlene Horowitz 10,000 0
Lon Rubackin 10,000 0
Edwin S. Osias 20,000 0
Cliff Feldstein 10,000 0
Georgia M. Rodgers 10,000 0
Ulysses Flemming 10,000 0
Phil Settles 20,000 0
Farid K. Farida 20,000 0
Robert B. Sauter 20,000 0
Balch and Bingham
Money Purchase
Pension Plan FBO
Harold Bowron 10,000 0
Annetta D'Amico Bolson 10,000 0
Ben Shabtai 10,000 0
Gusrae, Kaplan & Bruno 17,500 0
PLAN OF DISTRIBUTION
Each Selling Securityholder is free to offer and sell his or her
Common Stock and Warrants at such time, in such manner and at such prices
as he or she shall determine. Such Common Stock and Warrants may be offered
by Selling Securityholders in one or more types of transactions, which may
or may not involve brokers, dealers or cash transactions. The Selling
Securityholders may also use Rule 144 under the Securities Act, to sell
such securities, if
50
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
they meet the criteria and conform to the requirements of such Rule. There
is no underwriter or coordinating broker acting in connection with the
proposed sale of Common Stock and Warrants by the Selling Securityholders.
The Selling Securityholders have advised the Company that sales of
Common Stock and Warrants may be effected from time to time in
transactions, through the writing of options on the Securities, or a
combination of such methods of sale, at fixed price which may be changed,
at market prices prevailing at the time of sale, or at negotiated prices,
the Selling Securityholders may effect such transactions by selling Common
Stock and Warrants directly to purchasers or to or through broker/dealers
which may act as agents or principals. Such broker/dealer may receive
compensation in the form of discounts, concessions, or commissions from the
Selling Securityholders and/or the purchasers of Common Stock and Warrants
for whom such broker/dealers may act as agents or to whom thy sell as
principal, or both (which compensation as to a particular broker/dealer
that act in connection with the sale of the Common Stock and Warrants might
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Common Stock and Warrants as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The
Selling Securityholders may agree to indemnify any agent, dealer or
broker/dealer that participates in transactions involving sales of the
Common Stock and Warrants against certain liabilities, including
liabilities arising under the Securities Act.
Because Selling Securityholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Common Stock and Warrants, they
will be subject to prospectus delivery requirements under the Securities
Act. Furthermore, in the event of a "distribution" of his or her
Securities, any Selling Securityholder, any selling broker/dealer and any
"affiliated purchasers" may be subject to Rule 10b-7 under the Exchange Act
which prohibits any "stabilizing bid" or "stabilizing purchase" for the
purpose of pegging, fixing or stabilizing the price of the Common Stock and
Warrants in connection with the Offering.
LEGAL MATTERS
The legality of the shares offered hereby will be passed upon for the
Company By Gusrae, Kaplan & Bruno, Esqs., New York, New York. Certain legal
matters in connection with this Offering will be passed upon for the
Underwriter by Gersten Savage Kaplowitz & Curtin, LLP, New York, New York.
51
<PAGE>
[Alternate Page for Selling Securityholders' Prospectus]
EXPERTS
The financial statements of the Company at March 31, 1996 and for the
period from August 23, 1995 (date of inception) to March 31, 1996 included
in this Prospectus have been included in reliance upon the report of
Goldstein Golub Kessler & Company, P.C., independent certified public
accountants, given upon the authority of said firm as experts in auditing
and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Washington, D.C. office of the
Securities and Exchange Commission a Registration Statement (the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all
the information set forth in the Registration State-ment, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
Offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be inspected without charge or copies
made at prescribed rates from the Commission at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549 or at its Northeast Regional
Office located at 7 World Trade Center, New York, New York 10048.
Statements contained in the Prospectus as to the contents of any contract
or other document are not necessarily complete and reference is made to
each such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference.
52
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
In general, Section 145 of the Delaware General Corporation Law
provides that persons who are officers or directors of a corporation may be
indemnified by the corporation for acts performed in their capacities as
such. The Registrant's by-Laws authorize indemnification in accordance with
and to the extent permitted by said statute.
The Company's Certificate of Incorporation and By-Laws provide for
indemnification to the fullest extent permitted by law.
Reference is also made to Section 8 of the Underwriting Agreement
filed as Exhibit 1.1 to this Registration Statement.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of this Offering all of which are to be paid by
the Registrant in connection with the issuance and distribution of the
securities being registered are as follows:
SEC registration fee................... $ 6,363.05
NASD filing fee........................ 1,555.37
NASDAQ listing and Filing fee.......... 10,000.00
Boston Stock Exchange
Listing and Filing Fees...... 15,250.00
Printing and engraving expenses........ 100,000.00*
Accounting fees and expenses........... 75,000.00*
Legal fees and expenses................ 100,000.00*
Blue sky fees and expenses............. 50,000.00*
Transfer agent fees.................... 10,000.00*
Miscellaneous expenses................. 16,831.58*
-----------
Total.................................. $385,000.00*
===========
__________________
* Estimated.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities
Except as set forth below, there were no sales of unregistered
securities by the Registrant during the past three years:
Effective as of September 1995, the Registrant sold 132,268, 263,699,
263,699, 45,206 and 132,268 shares of the Company's Common Stock to Messrs.
Scott Wolf, Laurence Rosen, Jeffrey Wolf, Andrew Schwartz and Michael
Kharitonov, respectively, for aggregate consideration of $10.00. These
transactions were exempt from registration under the Securities Act of
1933, as amended (the "Act"), under Section 4(2) of the Act as not
involving a public offering.
Effective as of December 1995, the Registrant sold 45,206, 88,737,
88,737, 45,206 and 132,268 shares of the Company's Common Stock, to Messrs.
Scott Wolf, Laurence Rosen, Jeffrey Wolf, Andrew Schwartz and Michael
Kharitonov, respectively, for an aggregate consideration of approximately
$5.00. These transactions were exempt from registration under the Act,
under Section 4(2) of the Act as not involving a public offering.
On or about February 1, 1996, the Registrant sold 41,857 shares of the
Company's Common Stock to Mr. Robert Friedman for an aggregate
consideration of $50,000. This transaction was exempt from registration
under the Act, under Section 4(2) of the Act as not involving a public
offering.
Effective as of January 1996, the Company sold 1,674 shares of the
Company's Common Stock to each of Messrs. Laurence Rosen and Michael
Kharitonov for an aggregate consideration of $1.00. These transactions were
exempt from registration under the Act, under Section 4(2) of the Act as
not involving a public offering.
In March 1996, the Registrant issued an aggregate of
$250,000 principal amount twelve percent (12%) promissory notes, 200,000
shares of Common Stock and 1,000,000 Warrants to a total of four private
investors, who paid total gross consideration of $250,000. These
transactions were exempt from registration under the Act, under Section
4(2) and Rule 506 of Regulation D of the Act as not involving a public
offering. May Davis Group, Inc. acted as Placement Agent for these
issuances and received an aggregate of $25,000 in commissions (10%). The
recipients of all of the foregoing securities represented that such
securities were being acquired for investment and not with a view to the
distribution thereof. In addition, the certificates evidencing such
securities bear restrictive legends.
In May 1996, the Registrant issued an aggregate of 200,000 shares of
Common Stock to a total of 13 private investors, who paid total gross
consideration of $500,000. These transactions were exempt from registration
under the Act, under Section 4(2) and Rule
II-2
<PAGE>
506 of Regulation D of the Act as not involving a public offering. May
Davis Group, Inc. acted as Placement Agent for these issuances and received
an aggregate of $65,000 in commissions (10%) and non-accountable expense
allowances (3%). The recipients of all of the foregoing securities
represented that such securities were being acquired for investment and not
with a view to the distribution thereof. In addition, the certificates
evidencing such securities bear restrictive legends.
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Form Underwriting Agreement
1.2 Form of Selected Dealers Agreement*
3.1 Articles of Incorporation, as amended to date
3.2 By-Laws
4.1 Form of Underwriter's Warrant*
4.2 Form of Financial Advisory and Investment Banking
Agreement
4.3 Form of Common Stock Certificate*
4.4 Form of Common Stock Purchase Warrant*
4.5 Form of Common Stock Purchase Warrant used for Bridge
Loans
4.6 Form of Warrant Agreement*
5.1 Opinion of Gusrae Kaplan & Bruno*
10.1 Employment Agreement with Laurence Rosen
10.2 Employment Agreement with Michael Kharitonov
10.3 Employment Agreement with Jeffrey Wolf, as amended
10.4 Registrant's 1996 Incentive Stock Option Plan
23.1 Consent of Gusrae, Kaplan & Bruno (to be included in
Exhibit 5.1)*
23.2 Consent of Goldstein Golub Kessler & Company, P.C.
__________________
* To be filed by Amendment.
All other schedules are omitted, as the required information is either
inapplicable or presented in the financial statements or related notes.
Item 28. Undertakings
The Registrant hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the
II-3
<PAGE>
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforce able.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the small business
issuer 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 small business issuer 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 of
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(2) The Registrant will provide to the underwriters, immediately
after the closing of this Offering, stock and warrant certificates in such
denominations and registered in such names as to permit prompt delivery to
each purchaser.
II-4
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned in the
City of New York, State of New York May 17, 1996.
NETLIVE COMMUNICATIONS, INC.
By: /s/Laurence Rosen
------------------------------------
Laurence Rosen, President
In accordance with the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/Laurence Rosen Chief Executive Officer, May 17, 1996
--------------------- President, Treasurer and
Laurence Rosen Director (Principal Accounting
and Financial Officer)
/s/Michael Kharitonov Chairman of the Board, May 17, 1996
--------------------- Director of Technology
Michael Kharitonov and Secretary
/s/Jeffrey Wolf Director May 17, 1996
---------------------
Jeffrey Wolf
II-5
<PAGE>
<TABLE><CAPTION>
EXHIBIT INDEX
Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C>
1.1 Form Underwriting Agreement
1.2 Form of Selected Dealers Agreement *
3.1 Articles of Incorporation, as amended to date
3.2 By-Laws
4.1 Form of Underwriter's Warrant*
4.2 Form of Financial Advisory and Investment Banking
Agreement
4.3 Form of Common Stock Certificate*
4.4 Form of Common Stock Purchase Warrant*
4.5 Form of Common Stock Purchase Warrant used for Bridge
Loans
4.6 Form of Warrant Agreement*
5.1 Opinion of Gusrae Kaplan & Bruno*
10.1 Employment Agreement with Laurence Rosen
10.2 Employment Agreement with Michael Kharitonov
10.3 Employment Agreement with Jeffrey Wolf, as amended
10.4 Registrant's 1996 Incentive Stock Option Plan
23.1 Consent of Gusrae, Kaplan & Bruno (to be included in
Exhibit 5.1)*
23.2 Consent of Goldstein Golub Kessler & Company, P.C.
__________________
* To be filed by Amendment.
</TABLE>
EXHIBIT 1.1
-----------
FORM OF
UNDERWRITING AGREEMENT
<PAGE>
NETLIVE COMMUNICATIONS, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
, 1996
--------------
May Davis Group, Inc.
20 Exchange Place
New York, New York 10005
Dear Sirs:
The undersigned, Netlive Communications, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with May Davis
Group, Inc. (the "Underwriter" or "You"), as follows:
1. Introduction. The Company proposes to issue and sell to the
------------
Underwriter an aggregate of 900,000 shares of Common Stock, $.0001 par
value (the "Shares"), of the Company and 600,000 redeemable common stock
purchase warrants, each exercisable to purchase one share of Common Stock
(the "Redeemable Warrants"). The Common Stock and the Redeemable Warrants
are collectively referred to as the "Securities." Each Redeemable Warrant
shall be exercisable for a period of three (3) years commencing two years
from the Effective Date (as defined below), for one share of Common Stock
at a price equal to $6.00 per share. The Company may call for redemption
of the Redeemable Warrants commencing eighteen months from the date that
the Securities and Exchange Commission (the "Commission") declares the
registration statement (the "Registration Statement") with respect to the
Securities effective (the "Effective Date") at $.05 per Redeemable Warrant,
provided the last sale price of the Common Stock for 20 consecutive trading
days, during the period in which said warrants are exercisable, exceeds
$7.50 per Share, subject to adjustment. It is contemplated that the Shares
and the Redeemable Warrants constituting the Securities will trade
separately and be purchasable separately immediately upon issuance.
<PAGE>
These Shares and Redeemable Warrants are hereinafter referred to
as the "Firm Securities." Upon your request, as provided in Section 3 of
this Agreement, the Company shall also issue and sell to you up to an
additional 135,000 shares of Common Stock and/or 90,000 Redeemable Warrants
for the purpose of covering over-allotments in the sale of the Firm
Securities (the "Over-allotment Option"). Such additional Securities are
hereinafter referred to as the "Option Securities." The Firm Securities
and the Option Securities are hereinafter sometimes referred to as the
"Securities." The Company also proposes to issue and sell to you, pursuant
to the terms of the warrant agreement, dated as of the Effective Date
between you and the Company (the "Underwriter's Warrant Agreement"),
warrants (the "Underwriter's Warrants") to purchase up to 90,000 shares of
Common Stock and/or 60,000 Redeemable Warrants. The Underwriter's Warrants
shall be exercisable during the four-year period commencing 12 months from
the Effective Date, at $6.60 per Share and $.12 per Redeemable Warrant,
subject to adjustment in certain events to protect against dilution. The
Securities issuable upon exercise of the Underwriter's Warrants are
hereinafter sometimes referred to as the "Underwriter's Securities." The
Securities, the Underwriter's Warrants and the Underwriter's Securities are
more fully described in the Registration Statement and the Prospectus
referred to below.
2. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Underwriter as of the date hereof that:
a. The Company has filed with the Commission a registration
statement and an amendment or amendments thereto, on Form SB-2 (No. 333-
-----
), including any related preliminary prospectus (the "Preliminary
----
Prospectus"), for the registration of the Securities and the Underwriter's
Securities, under the Securities Act of 1933 (the "Act"), which
registration statement and amendment or amendments have been prepared by
the Company in conformity with the requirements of the Act, and the rules
and regulations (the "Regulations") of the Commission promulgated under the
Act. Before the registration statement becomes effective, the Company will
not file any amendment to such registration statement to which you shall
have reasonably objected after having been furnished with a copy thereof.
Except as the context may otherwise require, such registration statement,
as amended, on file with the Commission at the time the registration
statement becomes effective (including the prospectus, financial
statements, schedules, exhibits and all other documents filed as a part
thereof or incorporated therein and all information deemed to be a part
thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the
Regulations), is hereinafter called the "Registration Statement," and the
form of prospectus, in the form first filed with the Commission pursuant to
Rule 424(b) of the Regulations (or included in the Registration Statement,
if no filing under Rule 424 is required), is hereinafter called the
"Prospectus."
2
<PAGE>
b. On the Effective Date and at all times subsequent
thereto up to Closing Date I and Closing Date II, if any (as such terms are
defined in Section 3(d) hereof), the Registration Statement and the
Prospectus will comply in all material respects with the applicable provi-
sions of the Act and the Regulations; neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
c. This Agreement, the Underwriter's Warrant Agreement and
the Consulting Agreement (as defined in Section 5(a) hereof), have been
duly and validly authorized by the Company, and this Agreement constitutes,
and the public warrant agreement dated as of the Effective Date between the
Company and the transfer agent identified in Section 5(j) hereof (the
"Public Warrant Agreement), the Underwriter's Warrant Agreement and the
Consulting Agreement, when executed and delivered pursuant to this
Agreement (assuming due execution by the Underwriter and/or the appropriate
parties to such agreements), will each constitute a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its respective terms, except (i) as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification, contribution or exculpation
provision may be limited under applicable Federal and state securities
laws, and (iii) that the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought. The Securities and the Underwriter's Warrants to be issued and
sold by the Company pursuant to this Agreement and the Underwriter's
Securities issuable upon payment therefor, have been duly authorized and,
when issued and paid for, will be validly issued, fully paid and
non-assessable; the holders thereof are not and will not be subject to
personal liability by reason of being such holders; the Securities, the
shares of Common Stock issuable upon the exercise of the Redeemable
Warrants (the "Warrant Shares"), the Underwriter's Warrants and the
Underwriter's Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to be
taken for the authorization, issuance and sale of the Securities, the
Warrant Shares, the Underwriter's Warrants and the Underwriter's Securities
has been duly and validly taken. The Redeemable Warrants and Underwriter's
Warrants constitute valid and binding obligations of the Company,
enforceable in accordance with their respective terms, to issue and sell,
upon exercise in accordance with the terms thereof, the number and type
of the Company's securities called for
3
<PAGE>
thereby; except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar
laws affecting creditors' rights generally, (ii) as enforceability of any
indemnification, contribution or exculpation provision may be limited under
applicable Federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
d. All issued and outstanding Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the issuances and sales of all such securities complied in
all material respects with applicable Federal and state securities laws;
the holders thereof have no rights of rescission with respect thereto, and
are not subject to personal liability by reason of being such holders; and
none of such securities were issued in violation of the preemptive rights
of any holders of any security of the Company or similar contractual rights
granted by the Company.
e. Except as set forth in the Registration Statement and
the Prospectus, the Company has good and marketable title to, all material
items of real and/or personal property stated in the Prospectus to be owned
by it, respectively, free and clear of all liens, encumbrances, claims,
security interests, defects and restrictions of a material nature, other
than those referred to in the Prospectus and liens for taxes not yet due
and payable or being contested in good faith.
f. There is no action, suit, proceeding, inquiry,
investigation, litigation or governmental proceeding pending or to the
knowledge of the Company, threatened, against or involving the properties
or business of the Company which, if adversely determined, could reasonably
be expected to materially and adversely affect the financial position, or
prospects, or business of the Company, except as referred to in the
Prospectus.
g. All contracts and other documents required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement have been described in the
Registration Statement or the Prospectus or filed with the Commission as
Exhibits to the Registration Statement, as required.
h. The financial statements of the Company, together with
the related notes, included in the Registration Statement and Prospectus
fairly present the financial position and the results of operations of the
Company, at the dates and for the periods to which they apply; and such
financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved. There has been no material adverse change in financial condition
or
4
<PAGE>
results of operations of the Company, or to the knowledge of the Company,
any development involving a prospective change in the condition or
prospects of the Company, financial or otherwise, since the date of the
financial statements included in the Prospectus, except as disclosed
therein.
i. Goldstein Golub Kessler & Company, P.C., whose reports
are filed with the Commission as a part of the Registration Statement, are
independent accountants as required by the Act and the Regulations.
j. Except as otherwise set forth in the Prospectus, the
Company does not own, directly or indirectly, an interest in any
corporation, partnership, joint venture, trust or other business entity.
The Company is duly incorporated and in good standing in its jurisdiction
of incorporation and qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which operations require such
qualification or licensing, except where the failure to be so qualified or
licensed would not have a material adverse affect on the Company. The
Company has all requisite corporate power and authority, and all necessary
material authorizations, approvals, orders, licenses, certificates and
permits of and from all governmental regulatory officials and bodies, to
own or lease its properties and conduct its business as described in the
Prospectus. The Company is and has been doing business in compliance with
all such authorizations, approvals, orders, licenses, certificates and
permits and with all applicable Federal, state and local laws, rules and
regulations, including but not limited to laws and regulations relating to
environmental matters and employee health and safety matters, except where
non-compliance would not have a material adverse effect on the Company and
none of the aforementioned authorizations, approvals, orders, licenses,
certificates or permits have been suspended or revoked, nor to the
knowledge of the Company are there any proceedings pending or threatened
which could reasonably be expected to result in a suspension or revocation
thereof. The Company has all requisite corporate power and authority to
enter into this Agreement, the Underwriter's Warrant Agreement and the
Consulting Agreement and to carry out the provisions and conditions hereof
and thereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained. No consent,
authorization or order of, and no filing with, any court, government agency
or other body is required for the issuance of the Securities, the Warrant
Shares and the Underwriter's Securities, pursuant to this Agreement, the
Public Warrant Agreement and the Underwriter's Warrant Agreement, and as
contemplated by the Prospectus, except with respect to applicable Federal
and state securities laws.
k. The outstanding debt, the property and the business of
the Company conform in all material respects to the
5
<PAGE>
descriptions thereof contained in the Registration Statement and
Prospectus.
l. The Securities, the Warrant Shares, the Underwriter's
Warrants, the Underwriter's Securities and any other securities issued or
to be issued by the Company on or before the Closing Dates (as defined in
Section 3(d) hereof) described herein conform, or will conform when issued,
in all material respects to all statements with respect thereto contained
in the Registration Statement and the Prospectus.
m. Except as set forth in the Prospectus, no material
default exists in the due performance and observance of any term, covenant
or condition of any license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party or by which the Company may be
bound or to which any of the property or assets of the Company are subject
which default would reasonably be expected to have a materially adverse
effect on the financial condition or business of the Company.
n. The Company is not in violation of any term or provision
of its Certificates of Incorporation or By-Laws. Neither the execution and
delivery of this Agreement, nor the issuance and sale of the shares of
Common Stock, the Redeemable Warrants, the Warrant Shares, the
Underwriter's Warrants and the Underwriter's Securities, nor the
consummation of any of the transactions contemplated herein, nor the
compliance by the Company with the terms and provisions hereof has
materially conflicted with or will materially conflict with, or has
resulted in or will result in a material breach of, any of the terms and
provisions of, or has constituted or will constitute a material default
under, or has resulted in or will result in the creation or imposition of
any material lien, charge or encumbrance upon the property or assets of the
Company pursuant to the terms of any indenture, mortgage, deed of trust,
note, loan or credit agreement or any other agreement or instrument
evidencing an obligation for borrowed money, or any other agreement or
instrument to which the Company is a party, or by which the Company is or
may be bound, or to which any of the property or assets of the Company is
subject; nor will such action result in any material violation of the
provisions of the Certificates of Incorporation or the By-Laws of the
Company or of any contract or agreement, or of any statute or any order,
rule or regulation applicable to the Company (assuming compliance with all
pertinent blue sky laws in this Offering) or the Subsidiary or of any other
regulatory authority or other governmental body having jurisdiction over
the Company, except where such violation would not have a material adverse
effect on the Company.
o. Except as disclosed in the Prospectus, all taxes which
are due from the Company have been paid in full, unless being
6
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contested in good faith by the Company and the Company has no tax defi-
ciency or claim outstanding, proposed or assessed against it, except where
the failure to so pay would not have a material adverse effect on the
Company.
p. Subsequent to the respective dates as of which
information is given in the Prospectus included as a part of the
Registration Statement, and except as may otherwise be indicated or
contemplated herein or therein, (i) the Company has not issued any
securities; (ii) declared or paid any dividend or made any other
distribution on or in respect to its capital stock; (iii) incurred any
material liability or obligation, direct or contingent, for borrowed money;
or (iv) entered into any transaction other than in the ordinary course of
business.
q. To the Company's knowledge, the Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus or part thereof.
r. On the Effective Date, (i) the authorized capital stock
of the Company will be as set forth in the Registration Statement, and
(ii) not more than an aggregate of 1,700,000 shares of Common Stock shall
be issued and outstanding, not including: (A) 900,000 shares of Common
Stock contained within the Securities and the 600,000 shares of Common
Stock issuable upon the exercise of the Redeemable Warrants; (B) up to an
additional 135,000 shares of Common Stock issuable upon the exercise of the
Over-allotment Option and the 90,000 shares issuable upon the exercise of
the Redeemable Warrants issuable upon the exercise of the Over-allotment
Option; (C) the 90,000 shares of Common Stock issuable upon exercise of the
Underwriter's Warrants and the 60,000 shares issuable upon exercise of the
Redeemable Warrants issuable upon the exercise of the Underwriter's
Warrants (which warrants are identical to the Redeemable Warrants); (D)
shares of Common Stock reserved for issuance upon exercise of options
available for grant to be granted, as of the Effective Date, under the
Company's Non-Qualified Stock Option Plan (the "Non-Qualified Plan"); and
(E) shares of Common Stock reserved for issuance pursuant to the Company's
qualified stock option plan (the "Qualified Stock Option Plan"). Other
than the shares of Common Stock already issued (within the meaning of the
immediately preceding sentence), the Securities, the Warrant Shares, the
Underwriter's Warrants and the Underwriter's Securities to be offered in or
in connection with the public offering, no other shares of capital stock or
securities convertible into capital stock shall be outstanding or reserved
for issuance at the completion of the proposed public offering without the
consent of the Underwriter, except as contemplated by the Registration
Statement.
s. Except for the registration rights granted under the
Underwriter's Warrant Agreement and those to the Selling Stockholders, as
defined herein, no holders of any securities of
7
<PAGE>
the Company or of any options, warrants or convertible or exchangeable
securities of the Company exercisable for or convertible or exchangeable
for securities of the Company have the right to include any securities
issued by the Company in the Registration Statement or any registration
statement to be filed by the Company.
t. Assuming that there will be two "market makers" for the
Common Stock, at least 500 beneficial owners of the Common Stock and a
sufficient "public float" of the Shares, and that the Company's
registration of the Common Stock pursuant to the Securities Exchange Act of
1934 (the "Exchange Act") becomes effective (all as contemplated by the
requirements of the National Association of Securities Dealers, Inc. (the
"NASD")), the Common Stock and the Redeemable Warrants are eligible for
quotation on The NASDAQ National Market System ("NASDAQ"). The Company has
filed a registration statement with the Commission pursuant to
Sections 12(g) and 12(b) of the Exchange Act, and has used its best efforts
to have same declared effective by the Commission on an accelerated basis
on the Effective Date.
u. Except as described in the Prospectus, to the knowledge
of the Company, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, commitments, payments or
issuances of securities with respect to the Company that may affect the
Underwriter's compensation, as determined by the NASD.
v. Neither the Company, nor, to the knowledge of the
Company, any of its employees or officers or directors, agents or any other
person acting on behalf of the Company has, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal
price concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer, supplier, or official
or governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or
foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) which (i) could reasonably be expected to
subject the Company to any material damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) could reasonably be
expected to have had a materially adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus, or (iii) if not continued in the future, could
reasonably be expected to materially adversely affect the assets, business,
operations or prospects of the Company.
8
<PAGE>
w. Except as set forth in the Registration Statement, the
Company owns or possesses the requisite licenses or rights to use all
trademarks, service marks, service names, trade names, patents and patent
applications, copyrights, methods, protocols, techniques, technologies,
procedures and other rights (collectively the "Intangibles") described as
owned or used by the Company in the Registration Statement. To the
knowledge of the Company, there is no claim, action or proceeding by any
person pending or, threatened, which pertains to or challenges the rights
of the Company with respect to any Intangibles used in the conduct of the
business of the Company, except as described in the Prospectus and that the
Company's former counsel's claim that he has a copyright on the contents of
the Registration Statement. To the knowledge of the Company, current
products, services and processes of the Company do not infringe on any
Intangibles held by any third party, except as set forth in the
Registration Statement.
x. Except as set forth in the Registration Statement or the
exhibits thereto, the Company is not under any obligation to pay royalties
or fees of any kind whatsoever to any third party with respect to
Intangibles they have developed, use, employ or intend to use or employ,
except any obligation that it might have to its former counsel.
y. The Company has generally enjoyed satisfactory
employer/employee relationships with its employees and is in compliance in
all material respects with all Federal, state and local laws and
regulations respecting the employment of their respective employees and
employment practices, terms and conditions of employment and wages and
hours relating thereto. To the knowledge of the Company, there are no
pending or threatened investigations involving the Company by the U.S.
Department of Labor or corresponding foreign agency, or any other
governmental agency responsible for the enforcement of such Federal, state
or local laws and regulations. To the knowledge of the Company, there are
no unfair labor practice charges or complaints against the Company pending
before the National Labor Relations Board or corresponding foreign agency
or any strikes, picketing, boycotts, disputes, slowdowns or stoppages
pending or threatened against or involving the Company, or any predecessor
entity, and none has occurred. No representation question exists
respecting the employees of the Company. No collective bargaining
agreements or modifications thereof are currently in effect or being
negotiated by the Company and its employees. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company.
z. Neither the Company, nor, to the Company's knowledge,
any of its officers or directors or any of its employees or stockholders,
have taken, directly or indirectly, any action designed to or which has
constituted or which could reasonably be
9
<PAGE>
expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
aa. The Company does not: (i) maintain nor has it
maintained, sponsored or contributed to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan" or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") ("ERISA Plans"), except for the Stock Option Plan and
the Directors' Plan described in the Prospectus; (ii) presently maintain or
contribute nor at any time in the past, have they maintained or contributed
to a defined benefit plan, as defined in Section 3(35) of ERISA; or (iii)
has ever completely or partially withdrawn from a "multiemployer plan."
ab. Except as set forth in the Prospectus under
"MANAGEMENT" or "CERTAIN TRANSACTIONS," the Company is not a party to any
agreement with any officer, director or stockholder of the Company or any
affiliate or associate of any such person or entity which is required to be
disclosed in the Prospectus pursuant to Regulation SB. Except as set forth
in the Prospectus, to the knowledge of the Company, no officer, director or
stockholder of the Company or any "affiliate" or "associate" (as these
terms are defined in Rule 405 promulgated under the Regulations) of any
such person or entity or the Company, has or has had, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to
be furnished or sold by the Company, or (B) purchases from or sells or
furnishes to the Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected.
ac. The minute books of the Company have been made
available to counsel to the Underwriter and contain a complete summary of
all meetings and actions by unanimous consent of directors and stockholders
since the time of incorporation and reflect all transactions referred to in
such minutes accurately in all material respects.
ad. The statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "CERTAIN TRANSACTIONS," "MANAGEMENT" and "DESCRIPTION OF
SECURITIES," insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions are correct
in all material aspects.
10
<PAGE>
3. Purchase, Sale and Delivery of the Securities and
-------------------------------------------------
Underwriter's Warrants.
----------------------
a. On the basis of the representations and warranties
herein contained, but subject to the terms and conditions herein set forth,
the Company agrees to sell to the Underwriter, 900,000 shares of Common
Stock and 600,000 Redeemable Warrants, and the Underwriter, agrees to
purchase such Securities from the Company on a firm commitment basis at a
purchase price of $4.95 per Share and $.09 per Redeemable Warrant, to be
sold by the Underwriter at an initial public offering price of $5.50 per
Share and $.10 per Redeemable Warrant.
b. In addition, upon not less than two (2) days' notice
from the Underwriter to the Company, for a period of forty-five (45)
calendar days from the date of the Prospectus, the Company agrees to sell
to the Underwriter at a purchase price of $4.95 per Share and/or $.09 per
Redeemable Warrant, all or any part of the Option Securities, to be sold by
the Underwriter hereunder at an initial public offering price of $5.50 per
Share and $.10 per Redeemable Warrant. Delivery of the Option Securities
shall be made concurrently with tender of payment therefor. Option
Securities may be purchased by the Underwriter only for the purpose of
covering over-allotments in the sale of the Firm Securities, and the
Underwriter shall have no obligation to make any over-allotments. No
Option Securities shall be delivered and paid for unless the Firm
Securities shall be simultaneously delivered or shall theretofore have been
delivered and paid for as herein provided.
c. On Closing Date I (defined below in Section 3(d)), the
Company shall issue and sell to the Underwriter the Underwriter's Warrants,
which warrants shall entitle the holders thereof to purchase up to an
aggregate of 90,000 shares and/or 60,000 Redeemable Warrants. The total
purchase price of the Underwriter's Warrants shall be $10. The Under-
writer's Warrants shall be exercisable in whole or in part to purchase up
to such 90,000 Shares and/or 60,000 Redeemable Warrants for a period of 48
months commencing 12 months from the date of the Prospectus, at a price of
$6.60 per Share and $.12 per Redeemable Warrant (120% of the initial public
offering price of the Securities). The Underwriter's Warrant Agreement and
form of Underwriter's Warrant Certificate shall be substantially in the
form filed as Exhibit 4.5 to the Registration Statement.
d. Payment for the Underwriter's Warrants shall be made on
Closing Date I. Payment for the Firm Securities and the Option Securities
shall be made on each of Closing Date I and Closing Date II, respectively,
by certified or bank cashier's check in New York Clearing House funds,
payable to the order of the Company, or by wire transfer, at the offices of
the Underwriter, or at such other place as agreed upon by the Underwriter
and the
11
<PAGE>
Company, upon delivery of certificates (in form and substance reasonably
satisfactory to the Underwriter) representing the Securities to be sold at
such closing or by confirmation of electronic transfer of the Securities to
the Underwriter for the accounts of the Underwriter. Delivery and payment
for the Firm Securities shall be made at 10:00 A.M. New York time, on or
before the fifth business day following the public offering or at such
earlier time as the Underwriter shall determine or as required by law, or
at such other time as shall be agreed upon by the Underwriter and the
Company. The hour and date of delivery and payment for the Firm Securities
are called "Closing Date I." The Firm Securities shall be registered in
such name or names and in such authorized denominations as the Underwriter
may request in writing at least two (2) full business days prior to Closing
Date I. The Company will permit the Underwriter to examine and package any
certificates representing the Firm Securities for delivery, at least one
(1) full business day prior to Closing Date I. Delivery for each of the
Option Securities as provided above shall be made within the two (2)
business day period after notice of exercise to the Company, and against
payment therefor, as provided above. The hour and date of such delivery
and payment made subsequent to Closing Date I for Option Securities is
referred to as "Closing Date II." The Option Securities shall be
registered in such name or names and in such denominations as the
Underwriter may request in writing at the time of exercise of the
Over-allotment Option.
e. The Company shall not be obligated to sell or deliver
any Firm Securities except upon tender of payment by the Underwriter for
all the Firm Securities.
4. Public Offering. The Underwriter is to make a public
---------------
offering of the Firm Securities and such of the Option Securities as it may
determine. The Securities are to be initially offered to the public at the
offering price set forth on the cover page of the Prospectus (such price
being hereinafter called the "Public Offering Price"). The Underwriter
may, at its own expense, enter into one or more agreements as the
Underwriter, in its sole discretion, deems advisable with one or more
broker-dealers who shall act as dealers or co-underwriters in connection
with such public offering.
5. Covenants of the Company. The Company covenants and agrees
------------------------
that it will:
a. Use its best efforts to cause the Registration Statement
to become effective and will notify the Underwriter immediately, and
confirm the notice in writing if requested by Underwriter, (i) when the
Registration Statement and any post-effective amendment thereto becomes
effective, (ii) of the issuance by the Commission of any stop order or of
the initiation, of any proceeding for that purpose, (iii) of the issuance
by any state securities commission of any proceedings for the suspension
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<PAGE>
of the qualification of the Securities and the Underwriter's Securities for
offering or sale in any jurisdiction or of the initiation of any proceeding
for that purpose, and (iv) of the receipt of any comments from the
Commission. If the Commission or any state securities commission shall
enter a stop order or suspend such qualification at any time, the Company
will make every reasonable effort to obtain promptly the lifting of such
order.
b. File the Prospectus (in form and substance reasonably
satisfactory to the Underwriter) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission in accordance
with Rule 424, if the Prospectus is required to be so filed.
c. During the time when a prospectus is required to be
delivered under the Act, use its reasonable best efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended, and by the Regulations, as from time to time in force,
so far as necessary to permit the continuance of sales of or dealings in
the Securities and the Underwriter's Securities in accordance with the
provisions hereof and the Prospectus. If at any time when a prospectus
relating to the Securities or the Underwriter's Securities is required to
be delivered under the Act, any event shall have occurred as a result of
which, in the opinion of counsel for the Company, the Prospectus, as then
amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend
the Registration Statement to comply with the Act, the Company will notify
the Underwriter promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of the
Act.
d. Deliver to the Underwriter, without charge, such number
of copies of each Preliminary Prospectus and the Prospectus as the
Underwriter may reasonably request and, as soon as the Registration
Statement or any amendment or supplement thereto becomes effective, deliver
to the Underwriter two (2) signed copies of the Registration Statement,
including exhibits, and all post-effective amendments thereto and copies of
all exhibits filed therewith or incorporated therein by reference and
signed copies of all consents of certified experts.
e. Endeavor in good faith, in cooperation with the
Underwriter and Gersten, Savage, Kaplowitz & Curtin, LLP, counsel to the
Underwriter, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities and the Underwriter's Securities for
offering and sale under the securities laws of such jurisdictions as the
Underwriter may reasonably designate, provided that no such qualification
shall be required in
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<PAGE>
any jurisdiction where, as a result thereof, the Company would be subject
to service of general process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Underwriter agrees that such action is not at the time necessary or
advisable, use its reasonable best efforts to file and make such statements
or reports at such times as are or may reasonably be required by the laws
of such jurisdiction.
f. Make generally available to its security holders as soon
as practicable, but not later than the first day of the fifteenth full
calendar month following the Effective Date, an earnings statement (which
need not be certified by independent public or independent certified public
accountants unless required by the Act or the Regulations, but which shall
satisfy the provisions of Section 11(a) of the Act) covering a period of at
least twelve (12) consecutive months beginning after the Effective Date.
g. For a period of three (3) years from the Effective Date,
furnish to the Underwriter copies of such financial statements and other
periodic and special reports as the Company from time to time furnishes
generally to holders of any class of its securities, and promptly furnish
to the Underwriter (i) a copy of each periodic report the Company shall
file with the Commission, (ii) a copy of every press release and every news
item and article with respect to the Company or its affairs, which was
released by the Company, (iii) a copy of each Form 8-K or Schedule 13D,
13G, 14D-1 or 13E-4 received or prepared by the Company, and (iv) such
additional documents and information with respect to the Company or any
future subsidiaries or affiliates of the Company as the Underwriter may
from time to time reasonably request; provided, the Underwriter agrees to
execute a confidentiality agreement with respect to any non-public
information.
h. Apply the net proceeds from the offering received by it
in a manner consistent in all material respects with the caption "USE OF
PROCEEDS" in the Prospectus.
i. Deliver to the Underwriter, prior to filing, any
amendment or supplement to the Registration Statement or Prospectus
proposed to be filed after the Effective Date and not file unless otherwise
required by law any such amendment or supplement to which the Underwriter
shall reasonably and promptly object, after being furnished such copy, in
writing with reasonable specificity as to the nature and extent of any
objection.
j. For a period of two (2) years from Closing Date I,
provide the Underwriter, upon its request, at the Company's sole expense,
(i) with access to daily consolidated financial transfer sheets relating to
the Common Stock and designate [Olde Monmouth
14
<PAGE>
Stock Transfer Co., Inc.] as transfer agent for the Company's securities or
such other transfer agent mutually agreeable to the Company and the
Underwriter and (ii) to cause the Company's depository to fax a "special
security position report" to the Underwriter on a weekly basis.
k. For a period of three (3) years after Closing Date I,
nominate and use its best efforts to engage a reasonably acceptable
designee of the Underwriter as a nonvoting advisor to the Company's Board
of Directors (the "Advisor") or, in lieu thereof, to designate a reasonably
acceptable individual for election as a director, in which case the Company
shall use its best efforts to have such individual elected as a director.
The designee may be a director, officer, partner, employee or affiliate of
the Underwriter, and the Underwriter shall designate such person in writing
to the Board. In the event the Underwriter shall not have designated such
individual at the time of any meeting of the Board or such person is un-
available to serve, the Company shall notify the Underwriter of each
meeting of the Board. An individual, if any, designated by the Underwriter
shall receive all notices and other correspondence and communications sent
by the Company to members of the Board. Such Advisor or director, as the
case may be shall be entitled to receive reimbursement for all reasonable
costs incurred in attending such meetings including, but not limited to,
food, lodging, and transportation. In addition, such Advisor or Director
shall be entitled to the same compensation as the Company gives to other
non-employee directors for acting in such capacity. The Company further
agrees that, during said three (3) year period, it shall schedule no less
than two (2) formal and "in person" meetings of its Board of Directors in
each such year at which meetings such Advisor shall be permitted to attend
as set forth herein; said meetings shall be held quarterly each year and
advance notice of such meetings shall be given to the Advisor. Further,
during such three (3) year period, the Company shall give notice to the
Underwriter with respect to any proposed acquisitions, mergers,
reorganizations or other similar transactions and the Underwriter shall
agree to keep such information confidential.
The Company agrees to indemnify and hold the Underwriter
harmless and such Advisor against any and all claims, actions, damages,
costs and expenses, and judgments arising solely out of the attendance and
participation of the Advisor at any such meeting described herein, except
for gross negligence or willful misconduct with respect to any confidential
information provided to such Advisor. In the event the Company maintains a
liability insurance policy affording coverage for the acts of its officers
and directors, it agrees, if possible, to include the Advisor as an insured
under such policy.
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<PAGE>
l. For a period of five (5) years from the Effective Date,
use its best efforts to maintain the quotation of the Securities by NASDAQ.
m. Supply the Underwriter with one (1), and Gersten,
Savage, Kaplowitz & Curtin, counsel to the Underwriter, with three (3),
bound volumes of the underwriting materials within a reasonable time after
the latest Closing Date.
n. For a period of two (2) years from the Effective Date,
not issue any other shares of Common Stock or without the prior written
consent of the Underwriter, which consent shall not be unreasonably
withheld or delayed. In the event that the Company requests the
Underwriter's consent for any of the above, the Underwriter shall have five
days from the date of such request to indicate its approval or disapproval.
If the Underwriter does not respond within such five day period, its
consent will be assumed. Notwithstanding the foregoing, the Company may
issue securities (A) upon (i) the exercise of any warrants or options
outstanding on the date hereof or contemplated in the Prospectus pursuant
to the terms thereof; (ii) pursuant to the exercise of the Over-allotment
Option; and (iii) the exercise of the Underwriter's Warrant, and (B)
pursuant to any of the Stock Option Plans described in the Prospectus or
plans subsequently adopted.
o. So long as the Securities or the Underwriter's
Securities are registered under the Exchange Act, hold an annual meeting of
stockholders for the election of directors, provide the Company's
stockholders with the audited financial statements of the Company as of the
end of the fiscal year just completed prior thereto. Such financial
statements shall be those required by Rule 14a-3 under the Exchange Act and
shall be included in an annual report pursuant to the requirements of such
Rule.
p. For a period of two years from the Effective Date, the
Company will not file a form S-8 registration statement without the consent
of the Underwriter, which consent will not be unreasonably withheld.
q. Enter into the Underwriter's Warrant Agreement and the
Financial Advisory and Investment Banking Agreement (the "Consulting
Agreement") in substantially the form filed as Exhibits 4.5 and 10.10,
respectively, to the Registration Statement.
r. As soon as possible after Closing Date I, take all
necessary and appropriate actions to be included in Standard and Poor's
Corporation Descriptions or other equivalent Manual and to maintain its
listing therein for a period of five (5) years from the Effective Date.
16
<PAGE>
s. Cause all of the Company's officers and directors and
stockholders, to enter into written agreements (the "Lock-up Agreements")
that, for a period of 24 months from the Effective Date, they will not,
without the consent of the Underwriter, (i) publicly sell any securities of
the Company owned directly or indirectly by them or owned beneficially by
them (as defined in the Exchange Act), or (ii) otherwise sell, or transfer
such securities unless the transferee agrees in writing to be bound by an
identical lock-up for the remainder of the Lock-up Period.
t. Use its best efforts to obtain key-man life insurance
in the amount of $1,000,000 per policy on the lives of such executive
officers of the Company as the Underwriter shall request, with the Company
named as beneficiary of such policies.
u. Use its best efforts to qualify its Common Stock and
Redeemable Warrants for quotation on NASDAQ.
v. For a period of two years from the Effective Date, the
Company shall not issue any of its securities in any offering pursuant to
Regulation S under the 1933 Act, without the prior written consent of the
Underwriter.
w. Designate the Underwriter as the Company's exclusive
Warrant Solicitation Agent in the event of any solicitation commencing one
year after the Effective Date of the exercise of the Redeemable Warrants,
in connection with a redemption of the Redeemable Warrants or otherwise,
and shall pay to the Underwriter a Warrant Solicitation fee of five (5%)
percent of the exercise price of all solicited Redeemable Warrants, subject
to the rules and regulations of the NASD with regard to such fees.
x. Neither the Company nor any representative of the
Company has made or shall make any written or oral representation in
connection with the Offering and sale of the Securities or the
Underwriter's Warrant which is not contained in the Prospectus, which is
otherwise inconsistent with or in contravention of anything contained in
the Prospectus, or which shall constitute a violation of the Act, the Rules
and Regulations, the Exchange Act or the rules and regulations promulgated
under the Exchange Act.
y. For so long as any Redeemable Warrant is outstanding,
the Company shall, at its own expense: (i) use its reasonable best efforts
to cause post-effective amendments to the Registration Statement, or new
registration statements relating to the Redeemable Warrants and the Common
Stock underlying the Redeemable Warrants to become effective in compliance
with the Act and without any lapse of time between the effectiveness of the
Registration Statement and of any such post-effective amendment or new
registration statement; provided, however, that the Company shall have no
obligation to maintain the effectiveness of such
17
<PAGE>
Registration Statement or file a new Registration Statement, or to keep
available a prospectus at any time at which such registration or prospectus
is not then required; (ii) furnish to the Underwriters and dealers as many
copies of each such Prospectus as the Underwriter or dealers may reasonably
request; and (iii) use its reasonable best efforts to maintain the "blue
sky" qualification or registration of the Redeemable Warrants and the
Common Stock underlying the Redeemable Warrants, or have a currently
available exemption therefrom, in each jurisdiction in which the Securities
were so qualified or registered for purposes of the Offering.
6. Payment of Expenses.
-------------------
a. The Company hereby agrees to pay all expenses (other
than fees of counsel to the Underwriter) in connection with the offering,
including but not limited to, (i) the preparation, printing, filing and
mailing (including the payment of postage and overnight delivery with
respect to such mailing) of the Registration Statement and the Prospectus
and the printing and mailing of this Agreement and related documents,
including the cost of all copies thereof and of the Preliminary Prospectus
and of the Prospectus and any amendments or supplements thereto supplied to
the Underwriter in quantities as hereinabove stated, (ii) the printing,
engraving, issuance and delivery of the shares of Common Stock, the
Redeemable Warrants, and the Underwriter's Warrants, including any transfer
or other taxes payable thereon, (iii) the qualification of the Securities,
the Underwriter's Warrants and the Underwriter's Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of
such securities under legal investment laws, including the costs of
printing and mailing the "Preliminary Blue Sky Memorandum," and
"Supplemental Blue Sky Memorandum" and "Legal Investments Survey," if any,
and the fees and disbursements of counsel for the Underwriter relating to
Blue Sky matters (which fees shall be payable by the Company in an amount
of $35,000, $10,000 of which shall be payable upon the commencement of
filing the Registration Statement), (iv) advertising costs and expenses
including but not limited to the reasonable costs and expenses in
connection with the "road show," information meetings and presentations,
"tombstones" in publications selected by the Underwriter and prospectus
memorabilia, (v) fees and expenses of the transfer agent and warrant agent,
(vi) application and listing fees for inclusion in Moody's OTC Manual or
Standard and Poor's Corporation Descriptions or other equivalent manuals,
and (vii) the fees payable to the NASD and NASDAQ. Payments with regard to
items (i), (iii), (iv) and (v) shall be made on each of Closing Date I and
Closing Date II.
b. The Company shall pay to the Underwriter an aggregate
non-accountable expense allowance, in addition to the expenses payable
pursuant to Section 6(a), equal to three (3%) percent ($25,000 of which has
been paid) of the gross proceeds
18
<PAGE>
received by the Company from the sale of the Securities. In the event that
the Underwriter terminates the offering or is unable to consummate the
offering within ten (10) business days of the date hereof, the advances
toward the non-accountable expense allowance shall become accountable and
shall be returnable to the Company to the extent its out-of-pocket expenses
are less than the amount advanced to the Underwriter, so that the
Underwriter is reimbursed only for its actual accountable out-of-pocket
expenses, which expenses shall not exceed the amount previously advanced.
7. Conditions of Underwriter's Obligations. The obligations of
---------------------------------------
the Underwriter to purchase and pay for the Securities, as provided herein,
shall be subject to the continuing accuracy in all material respects of the
representations and warranties of the Company as of the date hereof and as
of each of the Closing Dates, to the accuracy in all material respects of
the statements of officers of the Company made pursuant to the provisions
hereof and to the performance by the Company of its obligations hereunder
in all material respects and to the following conditions:
a. The Registration Statement shall have become effective
not later than 5:00 p.m., New York time, on the date of this Agreement or
such later date and time as shall be consented to in writing by you, and,
at each of the Closing Dates, no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted or shall be pending or to the
knowledge of the Company be contemplated by the Commission and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Gersten, Savage, Kaplowitz
& Curtin, counsel to the Underwriter.
b. At Closing Date I, the Underwriter shall have received
the favorable opinion of Gusrae, Kaplan & Bruno, counsel to the Company,
dated Closing Date I, addressed to the Underwriter and in form and
substance mutually satisfactory to Gersten, Savage, Kaplowitz & Curtin,
counsel to the Underwriter, and Gusrae, Kaplan & Bruno.
c. On or prior to each of Closing Date I and Closing Date
II, counsel for the Underwriter shall have been furnished such documents,
certificates and opinions as it may reasonably require for the purpose of
enabling it to evidence the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained.
d. Prior to each of Closing Date I and Closing Date II,
(i) there shall have been no material adverse change, or development
involving a material adverse prospective change, in the conditions or
prospects of the business activities, financial or otherwise, of the
Company from the latest dates as of which such
19
<PAGE>
conditions are set forth in the Registration Statement and Prospectus;
(ii) there shall have been no transaction, not in the ordinary course of
business, entered into by the Company from the latest date as of which
their respective financial conditions are set forth in the Registration
Statement and Prospectus which is materially adverse to the Company;
(iii) the Company shall not be in default under any provision of any
instrument relating to any outstanding indebtedness which default would
have a material adverse effect on the Company; (iv) no amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in
the Registration Statement and Prospectus; (v) no action, suit or
proceeding, at law or in equity, shall be pending or to the knowledge of
the Company threatened against the Company before or by any court or
Federal or state commission, board or other administrative agency wherein
an unfavorable result, decision, ruling or finding would materially
adversely affect the business, prospects, operations, or financial
condition or income of the Company, as a whole, except as set forth in the
Registration Statement and Prospectus and except where such a result is
deemed remote by counsel to the Company with respect to such action or
proceeding; (vi) no stop order shall have been issued under the Act and no
proceedings with respect thereto shall have been initiated or to the
knowledge of the Company threatened by the Commission; (vii) the market for
securities in general or political, financial or economic conditions shall
not have materially adversely changed from those reasonably foreseeable as
of the date hereof as to render it impracticable in the Underwriter's
reasonable judgment to make a public offering of the Securities, and there
has not been a material adverse change in market levels for securities in
general or financial or economic conditions which render it inadvisable in
the Underwriter's judgment to proceed; and (viii) there shall not have
commenced or occurred a war or Act of God or other calamity which would
have a material adverse effect on, or result in a material loss to, the
Company.
The Company agrees and acknowledges that the Underwriter
shall be the sole determining party as to the presence of any such
conditions, events, occurrences and provisions set forth in this
Section 7(d).
e. At each of Closing Date I and Closing Date II, the
Underwriter shall have received a certificate of the Company signed by the
Chairman of the Board or the President and the Secretary of the Company,
dated Closing Date I and Closing Date II, respectively, to the effect that
the conditions set forth in section 7(d)(i) through (vi) above have been
satisfied and that, as of Closing Date I and Closing Date II, respectively,
the representations and warranties of the Company set forth in Section 2
hereof are true and correct in all material respects.
f. By the Effective Date, the Underwriter shall have
received clearance from the NASD as to the amount of
20
<PAGE>
compensation allowable or payable to the Underwriter, as described in the
Registration Statement.
g. At the time this Agreement is executed, and at each of
Closing Date I and Closing Date II, the Underwriter shall have received a
letter, addressed to the Underwriter and in form and substance reasonably
satisfactory in all respects (including the nonmaterial nature of the
changes or decreases, if any, referred to in clause (3) below) to the
Underwriter and to Gersten, Savage, Kaplowitz & Curtin, counsel for the
Underwriter, from Goldstein Golub Kessler & Company, P.C., dated as of the
date of this Agreement and as of each of Closing Date I and Closing Date
II:
(1) confirming that they are independent accountants
with respect to the Company within the meaning of the Act and the
applicable Regulations;
(2) stating that in their opinions the financial
statements of the Company included in the Registration Statement
and Prospectus comply as to form in all material respects with
the applicable accounting requirements of the Act and the
published Regulations thereunder;
(3) stating that, on the basis of a reading of the
latest available minutes of the stockholders and boards of
directors and the various committees of the boards of directors
of the Company and any current or former subsidiaries of the
Company, consultations with officers and other employees of the
Company responsible for financial and accounting matters, a
reading of the latest interim financial statements of the Company
and other specified procedures and inquiries, nothing has come to
their attention which would lead them to believe that (A) either
the audited financial statements in the Registration Statement
for the Company for the year ended March 31, 1996 do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that
of the respective audited and unaudited financial statements of
the Company included in the Registration Statement, (B) as of the
end of the Company's last fiscal quarter, there was any change in
the capital stock or long-term debt of the Company, as compared
with amounts shown in the March 31, 1996 balance sheet included
in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any
decrease, setting forth the amount of such decrease, and (C)
during the period
21
<PAGE>
from March 31, 1996 to a specified date not more than five (5)
days prior to the Effective Date there was any decrease in net
sales, other than as set forth in or contemplated by the
Registration Statement, or, if there was any such increase or
decrease, setting forth the amount of such increase or decrease;
(4) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and informa-
tion may be derived from the general accounting records,
including worksheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted
auditing standards) set forth in the letter and found them to be
in agreement; and
(5) statements as to such other matters incident to
the transaction contemplated hereby as the Underwriter may
reasonably request.
h. All proceedings taken in connection with the
authorization, issuance or sale of the Securities, the Underwriter's
Warrants and the Underwriter's Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the Underwriter and to
Gersten, Savage, Kaplowitz & Curtin, LLP counsel to the Underwriter.
i. On each of Closing Date I and Closing Date II, there
shall have been duly tendered to you for your account the appropriate
number of Securities and the Underwriter's Warrants.
j. No order suspending the sale of the Securities in any
jurisdiction designated by you pursuant to Section 5(e) hereof shall have
been issued on either Closing Date I or Closing Date II, and no proceedings
for that purpose shall have been instituted or, to the knowledge of the
Underwriter or the Company, shall be contemplated.
k. Prior to each of Closing Date I and Closing Date II
there shall not have been received or provided by the Company's independent
public accountants or attorneys, qualifications to the effect of either
difficulties in furnishing certifications as to material items including,
without limitation, information contained within the footnotes to the
financial statements, or as affecting matters incident to the issuance and
22
<PAGE>
sale of the Securities or as to corporate proceedings or other matters.
l. On or prior to Closing Date I, the Underwriter's
Warrant Agreement and the Consulting Agreement shall have been executed and
delivered by the Company, and the Lock-Up Agreements shall have been
executed and delivered by all of the Company's officers, directors and
stockholders.
Any certificate signed by any officer of the Company and
delivered to the Underwriter or to counsel to the Underwriter shall be
deemed a representation and warranty by the Company to the Underwriter as
to the statements made therein. If any condition to the Underwriter's
obligations hereunder to be fulfilled prior to or at any Closing Date is
not so fulfilled, the Underwriter may terminate this Agreement or, if the
Underwriter so elects, may waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
8. Indemnification.
---------------
a. The Company shall indemnify and hold harmless the
Underwriter, and each controlling person, if any, who controls the Under-
writer (within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act), against any and all liabilities, claims and lawsuits,
including any and all awards and/or judgments to which either or both may
become subject under the Act, the Exchange Act or any other Federal or
state statute, at common law or otherwise, insofar as said liabilities,
claims and lawsuits (including awards and/or judgments) arise out of or are
in connection with any material misstatements or omissions in the
Registration Statement, Prospectus and related Exhibits filed under the
Act, except for any liabilities, claims and lawsuits (including awards
and/or judgments), arising out of acts or omissions of the Underwriter;
provided that the indemnity provided in this Section 8 (a) with respect to
any preliminary prospectus shall not inure to the benefit of the
Underwriter from whom the person asserting any losses, claims, charges,
liabilities or lawsuits based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein
a material fact purchased Securities, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected is found not to have been sent or given to such
person within the time required by the Act and the Regulations. In
addition, the Company shall also indemnify and hold harmless the
Underwriter against any and all costs and expenses, including reasonable
counsel fees, incurred or relating to the foregoing liabilities, claims and
lawsuits to which the indemnity applies.
The Underwriter shall give the Company prompt notice of any
such liability, claim or lawsuit which the Underwriter
23
<PAGE>
contends is the subject matter of the indemnification by the Company, and
the Company thereupon shall be granted the right to take any and all
necessary and proper action, at its sole cost and expense, with respect to
such liability, claim and lawsuit, including the right to settle,
compromise and dispose of such liability, claim or lawsuit, excepting
therefrom any and all proceedings or hearings before any regulatory bodies
and/or authorities.
The Underwriter shall indemnify and hold harmless the
Company, and each controlling person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all liabilities, claims and lawsuits,
including any and all awards and/or judgments to which it may become
subject under the Act, the Exchange Act or any other Federal or state
statute, at common law or otherwise, insofar as said liabilities, claims
and lawsuits (including awards and/or judgments) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
required to be stated or necessary to make the statement therein, not
misleading, which statement or omission was made in reliance upon
information furnished in writing to the Company by or on behalf of the
Underwriter for inclusion in the Registration Statement or Prospectus or
any amendment or supplement thereto. In addition, the Underwriter, shall
also indemnify and hold harmless the Company against any and all costs and
expenses, including reasonable counsel fees, incurred or relating to the
foregoing liabilities, claims and lawsuits to which the indemnity applies.
The Company shall give to the Underwriter prompt notice of
any such liability, claim or lawsuit, which the Company contends is the
subject matter of the Underwriter's indemnification and the Underwriter
thereupon shall be granted the right to take any and all necessary and
proper action, at its sole cost and expense; provided, that counsel
selected by the Underwriter shall be acceptable to the Company, which
consent shall not be unreasonably withheld, with respect to such liability,
claim and lawsuit, including the right to settle, compromise or dispose of
such liability, claim or lawsuit, excepting therefrom any and all
proceedings or hearings before any regulatory bodies and/or authorities and
provided that no such settlement shall be made without the prior consent of
the Company.
b. In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to
indemnification under this Section 8 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact
that this Section 8 provides for indemnification in such case, or (ii) con-
tribution
24
<PAGE>
under the Act may be required on the part of any such person in
circumstances for which indemnification is provided under this Section 8,
then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after any contribution from others) in such
proportion taking into consideration the relative benefits received by each
party from the offering covered by the Prospectus (taking into account the
portion of the proceeds of the offering realized by each), the parties'
relative knowledge and access to information concerning the matter with
respect to which the claim was assessed, the opportunity to correct and
prevent any statement or omission and other equitable considerations
appropriate under the circumstances; provided, however that notwithstanding
the above in no event shall the Underwriter, be required to contribute any
amount in excess of 10% of the initial public offering price of the
Securities; and provided, that, in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (the "contributing
party"), notify the contributing party of the commencement thereof, but the
omission so to notify the contributing party will not relieve it from any
liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against
any party, and such party notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid fifteen
(15) days, the contributing party will be entitled to participate therein
with the notifying party and any other contributing party similarly
notified. Any such contributing party shall not be liable to any party
seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The indemnification provisions
contained in this Section 8 are in addition to any other rights or remedies
which either party hereto may have with respect to the other or hereunder.
9. Representations and Agreements to Survive Delivery. Except
--------------------------------------------------
as the context otherwise requires, all representations, warranties and
agreements contained in this Agreement shall be deemed to be
representations, warranties and agreements at the Closing Dates, and such
representations, warranties and agreements of the Underwriter and the
Company, including the indemnity agreements contained in Section 8 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter, the Company or any
controlling
25
<PAGE>
person, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriter until the earlier of the
expiration of any applicable statute of limitations and the seventh
anniversary of Closing Date II, at which time the representations,
warranties and agreements shall terminate and be of no further force and
effect.
10. Effective Date of This Agreement and Termination hereof.
-------------------------------------------------------
a. This Agreement shall become effective at 9:30 a.m., New
York time, on the first full business day following the day on which the
Registration Statement becomes effective or at the time of the initial
public offering by the Underwriter of the Securities, whichever is earlier.
The time of the initial public offering, for the purpose of this
Section 10, shall mean the time, after the Registration Statement becomes
effective, of the release by the Underwriter for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities or the time, after the Registration Statement becomes effective,
when the Securities are first released by the Underwriter for offering by
the Underwriter or dealers by letter or telegram, whichever shall first
occur. The Underwriter may prevent this Agreement from becoming effective
without liability to any other party, except as noted below, by giving the
notice indicated below in this Section 10 before the time this Agreement
becomes effective. The Underwriter agrees to give the undersigned notice
of the commencement of the offering described herein.
b. The Underwriter shall have the right, in its sole
discretion, to terminate this Agreement, including without limitation, the
obligation to purchase the Firm Securities, by notice given to the Company
prior to delivery and payment for all the Firm Securities, if any of the
conditions enumerated in Section 7 are not either fulfilled or waived by
the Underwriter on or before any Closing Date.
c. If the Underwriter elects to prevent this Agreement
from becoming effective or to terminate this Agreement as provided in this
Section 10, the Company shall be notified on the same day as such election
is made by the Underwriter by telephone or telegram, confirmed by letter.
d. Anything herein to the contrary notwithstanding, if this
Agreement shall not be carried out within the time specified herein, or any
extensions thereof granted by the Underwriter, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition
of this Agreement by it to be performed or satisfied then, in addition to
the obligations assumed by the Company pursuant to Section 6(a) hereof, the
Underwriter shall provide the Company with a statement of the Underwriter's
accountable expenses.
26
<PAGE>
e. In the event of litigation between the parties arising
hereunder, the prevailing party shall be entitled to costs and reasonable
attorney's fees.
f. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions
of Section 8 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.
11. Notices. All communications hereunder, except as herein
-------
otherwise specifically provided, shall be in writing and, if sent to the
Underwriter, shall be mailed, delivered or telegraphed and confirmed to May
Davis Group, Inc., 20 Exchange Place, New York, New York 10005, Attention:
President, with a copy to Gersten, Savage, Kaplowitz & Curtin, LLP, 575
Lexington Avenue, New York, New York 10022, Attention: Jay Kaplowitz,
Esq., and if to the Company, shall be mailed, delivered or telegraphed and
confirmed to Netlive Communications, Inc., 584 Broadway, Suite 806, New
York, New York 10012, Attention: Laurence Rosen, with a copy to Gusrae,
Kaplan & Bruno, 120 Wall Street, New York, New York 10005, Attention:
Lawrence G. Nussbaum.
12. Parties. This Agreement shall inure solely to the benefit
-------
of and shall be binding upon, the Underwriter, the Company and the
controlling persons, directors and officers referred to in Section 8
hereof, and their respective successors, legal representatives and assigns,
and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of
this Agreement or any provisions herein contained.
13. Construction. This Agreement shall be governed by and
------------
construed and enforced in accordance with the laws of the State of New
York, without giving effect to conflict of laws. The parties agree to
submit themselves to the jurisdiction of the courts of the State of New
York or of the United States of America for the Southern District of New
York, which shall be the sole tribunals in which any parties may institute
and maintain a legal proceeding against the other party arising from any
dispute in respect of this Agreement. In the event either party initiates
a legal proceeding in a jurisdiction other than in the courts of the State
of New York or of the United States of America for the Southern District of
New York, the other party may assert as a complete defense and as a basis
for dismissal of such legal proceeding that the legal proceeding was not
initiated and maintained in the courts of the State of New York or of the
United States of America for the Southern District of New York, in
accordance with the provisions of this Section 13.
27
<PAGE>
14. Entire Agreement. This Agreement, the Underwriter's Warrant
----------------
Agreement and the Consulting Agreement contain the entire agreement between
the parties hereto in connection with the subject matter hereof and
thereof. This Agreement is intended to supersede the letter of intent. In
the event of any conflict between any of the above mentioned documents and
the letter of intent the referenced agreements shall govern.
If the foregoing correctly sets forth the understanding between
the Underwriter and the Company, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
NETLIVE COMMUNICATIONS, INC.
By: _______________________________
Name:
Title:
Accepted as of the date
first above written.
New York, New York
MAY DAVIS GROUP, INC.
By: _______________________________
Name:
Title:
28
EXHIBIT 3.1
-----------
ARTICLE OF INCORPORATION
AS AMENDED TO DATE
<PAGE>
CERTIFICATE OF INCORPORATION
OF
NETVISIONS INCORPORATED
The undersigned does hereby form and establish a corporation under
the provisions of the General Corporation Law of the State of Delaware, and for
that purpose does certify as follows:
ARTICLE I: The name of the corporation shall be:
---------
NETVISIONS INCORPORATED
(hereinafter the "corporation")
ARTICLE II: The registered office of this corporation in the State of
----------
Delaware is Two Greenville Crossing, Suite 300A, 4001 Kennett Pike, P.O.
Box 4477, Wilmington, New Castle County, Delaware 19807-0477 and its
registered agent at that address is Corporations & Companies, Inc., Two
Greenville Crossing, Suite 300A, 4001 Kennett Pike, P.O. Box 4477, Wilmington,
New Castle County, Delaware 19807-0477.
ARTICLE III: The purpose of the corporation is to engage in any lawful
-----------
act or activity for which corporations may be organized under the General
Corporation Law of Delaware; and shall have perpetual existence.
ARTICLE IV: The amount of the authorized capital stock of this corporation
----------
is 1,500 shares of "no par value" stock, or stock without any fixed par value.
All of the said stock is common stock of one class.
ARTICLE V: The name and address of the incorporator are: Corporations
---------
& Companies, Inc., a Delaware corporation, Two Greenville Crossing, Suite 300A,
4001 Kennett Pike, P.O. Box 4477, Wilmington, New Castle County, Delaware
19807-0477.
ARTICLE VI: A director of the corporation shall not be liable to the
----------
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation in respect of any act or omission occurring prior
to the time of such amendment, modification or repeal.
ARTICLE VII: The stockholders and directors shall have the power to hold
-----------
their meetings, to have an office or offices, to keep the books, documents and
papers of the corporation outside of the State of Delaware at such places as
might from time to time be designated by the by-laws or resolutions of the
directors or stockholders, except as otherwise required by the laws of Delaware.
ARTICLE VIII: The undersigned, being the incorporator hereinabove named,
------------
for the purpose of forming a corporation pursuant to the General Corporation
Law of the State of Delaware, do make this certificate, acknowledging under the
penalty of perjury, hereby declaring and certifying that this Instrument is
the act and deed of Corporations & Companies, Inc. and the facts herein are
true, pursuant to 8 Del.C. Sec. 103(b)(2) and accordingly have hereunto caused
this Certificate to be executed by the President of Corporations & Companies,
Inc. this 23rd day of August, 1995.
CORPORATIONS & COMPANIES, INC.
BY: /s/ STEPHEN D.M. ROBINSON
IN THE PRESENCE OF: -------------------------------
STEPHEN D.M. ROBINSON, President
/s/ Donna M. Thompson Two Greenville Crossing, Suite 300A
------------------------------ 4001 Kennett Pike
P.O. Box 4477
New Castle County
Wilmington, Delaware 19807-0477
<PAGE>
Certificate of Amendment to Certificate of Incorporation
Of
NetVisions Incorporated
-----------------------
Dated: December 1, 1995
Netvisions Incorporated (the "Corporation"), having adopted amendments
to its Certificate of Incorporation regarding the change of the Corporation's
name and the number of authorized shares of common stock, pursuant to the
provisions of section 242 of the General Corporations of the State of
Delaware certifies as follows:
1. The name of the Corporation is NetVisions Incorporated.
2. At a meeting of the shareholders of the Corporation held on
December 1, 1995, the Shareholders voted to amend Article 1 of the
Corporation's Certificate of Incorporation to read as follows:
"The name of the Corporation shall be: NetLive
Communications, Inc."
3. At a meeting of the shareholders of the Corporation held on
December 1, 1995, the shareholders voted to amend Article
4 of the Corporation's Certificate of Incorporation to
read as follows:
"The amount of the authorized capital stock of this
Corporation is four thousand (4,000) shares of `no par
value' stock, or stock without any fixed par value. All
of the said stock is common stock of one class."
4. The preceding amendments have been duly adopted in
accordance with the provisions of section 242 of the
General Corporations Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned Corporation has caused this
Certificate of Amendment to the Certificate of Incorporation to be executed
on its behalf by a duly authorized officer as of the date first above
written.
NetVisions Incorporated
By: /s/ Jeffrey Wolf
-------------------------
Jeffrey Wolf
President and Chairman of
the Board of Directors
<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
NETLIVE COMMUNICATIONS, INC.
----------------------------
The undersigned, being the President and Secretary of NetLive
Communications, Inc., a corporation existing under the laws of the State of
Delaware, does hereby certify under the seal of the said corporation as
follows:
1. The name of the Corporation (hereinafter referred to as the
"Corporation") is NetLive Communications, Inc. The date of filing the
original certificate of incorporation with the Secretary of the State of
Delaware was August 23, 1995. The date of filing of the first certificate of
amendment to the certificate of incorporation was January 3, 1996.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article FOURTH thereof and by substituting in lieu
thereof new Article FOURTH which is set forth below.
3. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 141(f),
151, 228 and 242 of the Delaware Corporation Law by unanimous written consent
of the stockholders and Directors of the Corporation.
The capital of the Corporation will not be reduced under or by
reason of any amendment herein certified.
4. The Article "FOURTH" of the certificate of incorporation of the
Corporation, is hereby amended herein to read in full as follows:
"FOURTH: 1. The total number of shares which the corporation
shall have authority to issue is 20,000,000, all of which have a par
value of $0.0001; 19,000,000 of said shares are Common Stock and
1,000,000 of said shares are Preferred Stock.
2. The powers, preferences and rights, and the
qualifications, limitations and restrictions of the Corporation's
Common Stock and Preferred Stock are as follows:
(a) holders of the Corporation's Common Stock as a
<PAGE>
Class, have equal ratable rights to receive
dividends when, as and if declared by the Board of
Directors, out of funds legally available therefor
and are entitled upon liquidation of the Company to
share ratably in the net assets available for
distribution, are not redeemable and have no pre-
emptive or similar rights; and holders of the
Corporation's Common Stock have one non-cumulative
vote for each share held of record on all matters to
be voted on by the Corporation's stockholders.
(b) the shares of Preferred Stock may be issued in
series, and shall have such voting powers, full or
limited, or no voting powers, and such designations,
preferences and relative participating, optional or
other special rights, and qualifications,
limitations or restrictions thereof, as shall be
stated and expressed in the resolution or
resolutions providing for the issuance of such stock
adopted from time to time by the Board of Directors.
The Board of Directors is hereby expressly vested
with the authority to determine and fix in the
resolution or resolutions providing for the
issuances of Preferred Stock and voting powers,
designations, preferences and rights, and the
qualifications, limitations or restrictions thereof,
of each such series to the full extent now or
hereafter permitted by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment of the Corporation's
Certificate of Incorporation to be signed by Lawrence Rosen, its President
and Scott Wolf, its Secretary, this 29th day of February, 1996.
NETLIVE COMMUNICATIONS, INC.
By: /s/ Laurence Rosen
-----------------------------
Laurence Rosen, President
By: /s/ Scott Wolf
-----------------------------
Scott Wolf, Secretary
EXHIBIT 3.2
-----------
BY-LAWS
<PAGE>
BY-LAWS
-------
OF
--
NETLIVE COMMUNICATIONS, INC.
----------------------------
(Delaware)
ARTICLE I - OFFICES
-------------------
The office of the Corporation shall be located in the City and State
designated in the Articles of Incorporation. The Corporation may also
maintain offices at such other places within or without the United States
as the Board of Directors may, from time to time, determine.
ARTICLE II - MEETING OF STOCKHOLDERS
------------------------------------
Section 1 - Annual Meetings:
----------------------------
The annual meeting of the stockholders of the Corporation shall be held
within five months after the close of the fiscal year of the Corporation,
for the purpose of electing directors, and transacting such other business
as may properly come before the meeting.
Section 2 - Special Meetings:
-----------------------------
Special meetings of the stockholders may be called at any time by the Board
of Directors or by the President, and shall be called by the President or
the Secretary at the request in writing of a majority of the directors or
stockholders entitled to vote or as otherwise required by the Delaware
General Corporation Law (the "Corporation Law").
Section 3 - Place of Meetings:
------------------------------
All meetings of stockholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices
or waivers of notice of such meetings.
Section 4 - Notice of Meetings:
-------------------------------
(a) Except as otherwise provided by statute, written notice of each meeting
of stockholders, whether annual or special, stating the time when and place
where it is to be held, shall be served either personally or by mail, not
less than ten or more than fifty days before the meeting, upon each
stockholder of record entitled to vote at such meeting, and to any other
stockholder of record entitled to vote at such meeting, and to any other
stockholder to whom the giving of notice may be required by law. Notice of
a special meeting shall also state the purpose or purposes for which the
meeting is called, and shall indicate that it is being issued by, or at the
direction of, the person or persons calling the meeting. If, at any
meeting, action is proposed to be taken that would, if taken, entitle
stockholders to receive payment for their
<PAGE>
shares pursuant to statute, the notice of such meeting shall include a
statement of that purpose and to that effect. If mailed, such notice shall
be directed to each such stockholder at his address, as it appears on the
records of the stockholders of the Corporation, unless he shall have
previously filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address, in which
case, it shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the
meeting, or to any stockholder who attends such meeting, in person or by
proxy, or to any stockholder who, in person or by proxy, submits a signed
waiver of notice either before or after such meeting. Notice of any
adjourned meeting of stockholders need not be given, unless otherwise
required by statute.
Section 5 - Quorum:
-------------------
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such Certificate and any amendments thereof
being hereinafter collectively referred to as the "Certificate of
Incorporation"), at all meetings of stockholders of the Corporation, the
presence at the commencement of such meetings in person or by proxy of
stockholders holding of record a majority of the total number of shares of
the Corporation then issued and outstanding and entitled to vote, shall be
necessary and sufficient to constitute a quorum for the transaction of any
business. The withdrawal of any stockholder after the commencement of a
meeting shall have no effect on the existence of a quorum, after a quorum
has been established at such meeting.
(b) In case a quorum shall not be present at any meeting, a majority in
interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
number of shares entitled to vote shall be present. At any such adjourned
meeting at which the requisite number of shares entitled to vote shall be
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed; but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
Section 6 - Voting:
-------------------
(a) Except as otherwise provided herein, or by statute or by the
Certificate of Incorporation, any corporate action, to be taken by vote of
the stockholders, shall be authorized by a majority of votes cast at a
meeting of stockholders by the holders of shares entitled to vote thereon.
2
<PAGE>
(b) Except as otherwise provided herein, or by the statute or by the
Certificate of Incorporation or by any Certificate of Designations, at each
meeting of stockholders, each holder of record of stock of the Corporation
entitled to vote thereat, shall be entitled to one vote for each share of
stock registered in his name on the books of the Corporation.
(c) Each stockholder entitled to vote or to express consent or dissent
without a meeting, may do so by proxy; provided, however, that the
instrument authorizing such proxy to act shall have been executed in
writing by the stockholder himself, or by his attorney-
in-fact thereunto duly authorized in writing. No proxy shall be valid after
the expiration of eleven months from the date of its execution, unless the
person executing it shall have specified therein the length of time it is
to continue in force. Such instrument shall be exhibited to the Secretary
at the meeting and shall be filed with the records of the Corporation.
Section 7 - Action Without Meeting:
-----------------------------------
Except as otherwise provided by the Certificate of Incorporation, whenever
the vote of stockholders at a meeting thereof is required or permitted to
be taken in connection with any corporate action by any provisions of the
Corporation Law or the Certificate of Incorporation or of these By-Laws,
the meeting and vote of share-holders may be dispensed with, if the
majority of the stockholders who would have been entitled to vote upon the
action if such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office:
------------------------------------------------
(a) The number of the directors of the Corporation shall be as determined
by resolution of the Board of Directors.
(b) Except as may otherwise be provided herein, in the Certificate of
Incorporation or in the Corporation Law, the members of the Board of
Directors of the Corporation, who need not be stockholders, shall be
elected by a majority of the votes cast at a meeting of stockholders, by
the holders of shares, present in person or by proxy, entitled to vote in
the election.
(c) Each director shall hold office until the annual meeting of the
stockholders next succeeding his election, and until his successor is
elected and qualified, or until his prior death, resignation or removal.
3
<PAGE>
Section 2 - Duties and Powers:
------------------------------
The Board of Directors shall be responsible for the control and management
of the affairs, property and interests of the Corporation, and may exercise
all powers of the Corporation, except as are in the Certificate of
Incorporation or by statute expressly conferred upon or reserved to the
stockholders.
Section 3 - Annual and Regular Meetings; Notice:
------------------------------------------------
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the stockholders, at the place
of such annual meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors, and
may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the
meeting; provided, however, that in case the Board of Directors shall fix
or change the time or place of any regular meeting, notice of such action
shall be given to each director who shall not have been present at the
meeting at which such action was taken within the time limited, and in the
manner set forth in paragraph (b) Section 4 of this Article III, with
respect to special meetings, unless such notice shall be waived in the
manner set forth in paragraph (c) of such Section 4.
Section 4 - Special Meetings; Notice:
-------------------------------------
(a) Special meetings of the Board of Directors shall be held whenever
called by the President or by a majority of the directors, at such time and
place as may be specified in respective notices or waivers of notice
thereof.
(b) Except as otherwise required by statute, notice of special meeting
shall be mailed directly to each director, addressed to him at his
residence or usual place of business, at least two (2) days before the day
on which the meeting is to be held, or shall be sent to him at such place
by telegram, radio, telecopier, facsimile transmission or cable, or shall
be delivered to him personally or given to him orally, not later than the
day before the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not
specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or
at its commencement, the lack of notice to him, or who submits a signed
waiver of notice, whether before or
4
<PAGE>
after the meeting. Notice of any adjourned meeting shall not be required to
be given.
Section 5 - Telecommunication Meetings Permitted:
-------------------------------------------------
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this By-Law shall constitute
presence in person at such meeting.
Section 6 - Chairman:
---------------------
At all meetings of the Board of Directors, the Chairman of the Board, if
any and if present, shall preside. If there shall be no Chairman, or he
shall be absent, then the President shall preside, and in his absence, a
Chairman chosen by the directors shall preside.
Section 7 - Quorum and Adjournments:
------------------------------------
(a) At all meetings of the Board of Directors, the presence of a majority
of the entire Board shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise provided by
law, by the Certificate of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the
same from time to time without notice, until a quorum shall be present.
Section 8 - Manner of Acting:
-----------------------------
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which
he may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the
directors present at any meeting at which a quorum is present shall be the
act of the Board of Directors. Any action authorized, in writing, by all of
the directors entitled to vote thereon and filed with the minutes of the
Corporation shall be the act of the Board of Directors with the same force
and effect as if the same had been passed by unanimous vote at a duly
called meeting of the Board.
5
<PAGE>
Section 9 - Vacancies:
----------------------
Any vacancy in the Board of Directors occurring by reason of an increase in
the number of directors, or by reason of the death, resignation,
disqualification, removal (unless a vacancy created by the removal of a
director by the stockholders shall be filled by the stockholders at the
meeting at which the removal was effected) or inability to act of any
director, or otherwise, shall be filled for the unexpired portion of the
term by a majority vote of the remaining directors, though less than a
quorum, at any regular meeting or special meeting of the Board of Directors
called for that purpose.
Section 10 - Resignation:
-------------------------
Any director may resign at any time by giving written notice to the Board
of Directors, the President or the Secretary of the Corporation. Unless
otherwise specified in such written notice, such resignation shall take
effect upon receipt thereof by the Board of Directors or such officer, and
the acceptance of such resignation shall not be necessary to make it
effective.
Section 11 - Removal:
---------------------
Any director may be removed with or without cause at any time by the
affirmative vote of stockholders holding of record in the aggregate at
least a majority of the outstanding shares of the Corporation at a special
meeting of the stockholders called for that purpose, and may be removed for
cause by action of the Board.
Section 12 - Salary:
--------------------
No stated salary shall be paid to directors, as such, for their services,
but by resolution of the Board of Directors a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 13 - Contracts:
-----------------------
(a) No contract or other transaction between this Corporation and any
other Corporation shall be impaired, affected or invalidated, nor shall any
director be liable in any way by reason of the fact that any one or more of
the directors of this Corporation is or are interested in, or is a director
or officer, or are directors or officers of such other corporation,
provided that such facts are disclosed or made known to the Board of
Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corpora-
6
<PAGE>
tion, and no director shall be liable in any way by reason of such
interest, provided that the fact of such interest be disclosed or made
known to the Board of Directors, and provided that the Board of Directors
shall authorize, approve or ratify such contract or transaction by the vote
(not counting the vote of any such interested director) of a majority of a
quorum, notwithstanding the presence of any such director at the meeting at
which such action is taken. If there be no disinterested director, the
stockholders of the Company may authorize, approve or ratify such contract
or transaction by the vote of a majority of a quorum. Such director or
directors may be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair or invalidate or in
any way affect any contract or other transaction which would otherwise be
valid under the law (common, statutory or otherwise) applicable thereto.
Section 14 - Committees:
------------------------
The Board of Directors, by resolution adopted by a majority of the entire
Board, may from time to time designate from among its members an executive
committee and such other committees, and alternate members thereof, as they
may deem desirable, each consisting of three or more members, with such
powers and authority (to the extent permitted by law) as may be provided in
such resolution. Each such committee shall serve at the pleasure of the
Board.
ARTICLE IV - OFFICERS
---------------------
Section 1 - Number, Qualifications, Election and Term of Office:
----------------------------------------------------------------
(a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, and such officers, including a Chairman of the
Board of Directors, and one or more Vice Presidents, as the Board of
Directors may from time to time deem advisable. Any officer may be, but is
not required to be, a director of the Corporation. Any two or more offices
may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of stockholders.
(c) Each officer shall hold office until the annual meeting of the Board
of Directors next succeeding his election, and until his successor shall
have been elected and qualified, or until his death, resignation or
removal.
Section 2 - Resignation:
------------------------
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors, or to the President or the Secretary
of the Corporation. Unless otherwise specified in such
7
<PAGE>
written notice, such resignation shall take effect upon receipt thereof by
the Board of Directors or by such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
Section 3 - Removal:
--------------------
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
----------------------
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
-------------------------------
Officers of the Corporation shall, unless otherwise provided by the Board
of Directors, each have such powers and duties as generally pertain to
their respective offices as well as such powers and duties as may be set
forth in these By-Laws, or may from time to time be specifically conferred
or imposed by the Board of Directors. The President shall be the chief
executive officer of the Corporation. The Treasurer shall be the chief
financial officer of the Corporation.
Section 6 - Sureties and Bonds:
-------------------------------
In case the Board of Directors shall so require, any officer, employee or
agent of the Corporation shall execute to the Corporation a bond in such
sum, and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting for all
property, funds or securities of the Corporation which may come into his
hands.
Section 7 - Shares of Other Corporations:
-----------------------------------------
Whenever the Corporation is the holder of shares of any other Corporation,
any rights or power of the Corporation as such stockholder (including the
attendance, acting and voting at stockholders' meetings and execution of
waivers, consents, proxies or other instruments) may be exercised on behalf
of the Corporation by the President, any Vice President, or such other
person as the Board of Directors may authorize.
8
<PAGE>
ARTICLE V - SHARES OF STOCK
---------------------------
Section 1 - Certificate of Stock:
---------------------------------
(a) The certificates representing shares of the Corporation shall be in
such form as shall be adopted by the Board of Directors, and shall be
numbered and registered in the order issued. They shall bear the holder's
name and the number of shares, and shall be signed by (i) the Chairman of
the Board or the President or a Vice President, and (ii) the Secretary or
Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall
bear the corporate seal.
(b) No certificate representing shares shall be issued until the full
amount of consideration therefor has been paid, except as otherwise
permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize
the issuance of certificates for fractions of a share which shall entitle
the holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings; or it
may authorize the payment in cash of the fair value of fractions of a share
as of the time when those entitled to receive such fractions are
determined; or it may authorize the issuance, subject to such conditions as
may be permitted by law, of scrip in registered or bearer form over the
signature of an officer or agent of the Corporation, exchangeable as
therein provided for full shares, but such scrip shall not entitle the
holder to any rights of a stockholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
-------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation may issue a new
certificate in the place of any certificate theretofore issued by it,
alleged to have been lost or destroyed. On production of such evidence of
loss or destruction as the Board of Directors in its discretion may
require, the Board of Directors may, in its discretion, require the owner
of the lost or destroyed certificate, or his legal representatives, to give
the Corporation a bond in such sum as the Board may direct, and with such
surety or sureties as may be satisfactory to the Board, to indemnify the
Corporation against any claims, loss, liability or damage it may suffer on
account of the issuance of the new certificate. A new certificate may be
issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper to do so.
9
<PAGE>
Section 3 - Transfers of Shares:
--------------------------------
(a) Transfers of shares of the Corporation shall be made on the share
records of the Corporation only by the holder of record thereof, in person
or by his duly authorized attorney, upon surrender for cancellation of the
certificate or certificates representing such shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed,
with such proof of the authenticity of the signature and of authority to
transfer and of payment of transfer taxes as the Corporation or its agents
may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other
claim to, or interest in, such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise expressly provided by law.
Section 4 - Record Date:
------------------------
In lieu of closing the share records of the Corporation, the Board of
Directors may fix, in advance, a date not exceeding fifty days, nor less
than ten days, as the record date for the determination of stockholders
entitled to receive notice of, or to vote at, any meeting of stockholders,
or to consent to any proposal without a meeting, or for the purpose of
determining stockholders entitled to receive payment of any dividends, or
allotment of any rights, or for the purpose of any other action. If no
record date is fixed, the record date for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held; the
record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the resolution of the directors
relating thereto is adopted. When a determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders has been
made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
----------------------
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amounts, and at such time or
times as the Board of Directors may determine.
10
<PAGE>
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall be fixed by the Board of Directors
from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
-----------------------------
The corporate seal, if any, shall be in such form as shall be approved from
time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
-----------------------
Section 1 - By Stockholders:
----------------------------
All By-Laws of the Corporation shall be subject to alteration or repeal,
and new By-Laws may be made, by the affirmative vote of stockholders
holding of record in the aggregate at least a majority of the outstanding
shares entitled to vote in the election of directors at any annual or
special meeting of stockholders, provided that the notice or waiver of
notice of such meeting shall have summarized or set forth in full therein,
the proposed amendment.
Section 2 - By Directors:
-------------------------
The Board of Directors shall have power to make, adopt, alter, amend and
repeal, from time to time, By-Laws of the Corporation; provided, however,
that the stockholders entitled to vote with respect thereto as in this
Article IX above-provided may alter, amend or repeal By-Laws made by the
Board of Directors, except that the Board of Directors shall have no power
to change the quorum for meetings of stockholders or of the Board of
Directors, or to change any provisions of the By-Laws with respect to the
removal of directors or the filing of vacancies in the Board resulting from
the removal by the stockholders. If any By-Law regulating an impending
election of directors is adopted, amended or repealed by the Board of
Directors, there shall be set forth in the notice of the next meeting of
stockholders for the election of directors, the By-Law so adopted, amended
or repealed, together with a concise statement of the changes made.
ARTICLE X - INDEMNITY
---------------------
The Corporation shall indemnify to the full extent authorized by law any
person made or threatened to be made a party to an action or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he, his testator or intestate is or was a director, officer or
employee or agent of the Corporation or any predecessor of the Corporation
or serves or served any other enterprise as a director, officer or employee
or agent at the request of the Corporation or any predecessor of the
Corporation.
11
<PAGE>
ARTICLE XI - CONFLICTS OF INTEREST
----------------------------------
Any conflicts of interest that may arise between the Corporation and the
interests of its officers and directors will be resolved in a fair manner
which will protect the interest of the Corporation pursuant to Delaware
law. No contract or other transaction between the Corporation and any of
its directors or any other entity in which one or more of the
Corporation's directors are directors or officers, or are financially or
otherwise interested, will be invalidated because of such relationship if
(i) the fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of the interested director, (ii)
the fact of such relationship or interest is disclosed or known to the
stockholders entitled to vote and the stockholders authorize, approve or
ratify the contract or transaction; or (iii) the contract or transaction is
fair and reasonable to the Corporation.
12
EXHIBIT 4.2
-----------
FORM OF FINANCIAL ADVISORY
AND INVESTMENT BANKING AGREEMENT
<PAGE>
FINANCIAL ADVISORY AND INVESTMENT BANKING AGREEMENT
---------------------------------------------------
This Agreement is made and entered into as of the day of
------
, 1996 by and between May Davis Group, Inc., a Florida
----------
corporation ("MDG"), and Netlive Communications, Inc., a Delaware
corporation (the "Company").
In consideration of the mutual promises made herein and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Purpose: The Company hereby engages MDG for the term
-------
specified in Paragraph 2 hereof to render consulting advice to the Company
as an investment banker relating to financial and similar matters upon the
terms and conditions set forth herein.
2. Term: Except as otherwise specified in Paragraph 4 hereof,
----
this Agreement shall be effective for a three (3) year period commencing
---
, 1996 and ending , 1999.
--------- -------------
3. Duties of MDG: During the term of this Agreement, MDG shall
-------------
seek out Transactions (as hereinafter defined) on behalf of the Company and
shall furnish advice to the Company in connection with any such
Transactions.
4. Compensation: In consideration for the services rendered by
------------
MDG to the Company pursuant to this Agreement (and in
<PAGE>
addition to the expenses provided for in Paragraph 5 hereof), the Company
shall compensate MDG as follows:
(a) The Company shall pay MDG a fee of $2,500 per month for
the term of this Agreement. The aggregate sum of $90,000 shall be due and
payable upon the execution of this Agreement.
(b) In the event that any Transaction occurs during the
term of this Agreement, the Company shall pay fees to MDG as follows:
Consideration Fee
------------- ---
$ - 0 - to $ 500,000 $25,000
Above $ 500,000 to $5,000,000 5% of Consideration
Above $5,000,000 $250,000 plus 1% of the
Consideration in excess of
$5,000,000
For the purposes of this Agreement, "Consideration" shall
mean the total market value, as determined by the Company's Board of
Directors on the day of the closing of the Transaction, of stock, cash,
assets and all other property (real or personal) exchanged or received,
directly or indirectly, by the Company or any of its security holders in
connection with any Transaction. Any co-broker retained by MDG shall be
paid by MDG.
(c) For the purposes of the Agreement, a "Transaction"
shall mean (i) any transaction introduced to the Company by MDG, other than
in the ordinary course of trade or business of the Company, whereby,
directly or indirectly, control of, or a material interest
-2-
<PAGE>
in, the Company or any of its businesses or substantially all of its
assets, is transferred for Consideration, or (ii) any transaction
introduced to the Company by MDG whereby the Company acquires any other
unaffiliated company or substantially all of the assets of any other
unaffiliated company or a controlling interest in any other company (an
"Acquisition").
In the event MDG originates, at the Company's request, a
line of credit with a lender or a corporate partner, the Company and MDG
will mutually agree on a satisfactory fee and the terms of payment of such
fee. In the event MDG introduces the Company to a joint venture partner or
customer and sales develop as a result of the introduction, the Company
agrees to pay a fee of two percent (2%) of total sales generated directly
from this introduction during the first two years following the date of the
first sale. Total sales shall mean gross receipts less any applicable
refunds, returns, allowances, credits, taxes and shipping charges and
monies paid by the Company by way of settlement or judgment arising out of
claims made by or threatened against the Company. Commission payments
shall be paid on the 15th day of each third month following the receipt of
customers' payments. In the event any adjustments are made to the total
sales after the commission has been paid, the Company shall be entitled, at
its option, to an appropriate refund or credit against future payments
under this Agreement.
(d) All fees to be paid pursuant to this Agreement, except
as otherwise specified, are due and payable to MDG in cash or
-3-
<PAGE>
company check at the closing or closings of any Transaction specified in
Paragraph 4. In the event that the Consideration is paid out over a period
of time, MDG shall be paid its pro-rata portion of such Consideration as
the Company is paid. In the event that this Agreement shall not be renewed
or if terminated for any reason, notwithstanding any such non-renewal or
termination, MDG shall be entitled to a full fee as provided under
Paragraphs 4 and 5 hereof, for any Transaction for which the discussions
were initiated with a third party at the request of the Company during the
term of this Agreement and which is consummated within a period of twelve
months after non-renewal or termination of this Agreement. Nothing herein
shall impose any obligation on the part of the Company to enter into any
Transaction.
5. Expenses of MDG: In addition to the fees payable hereunder
---------------
and regardless of whether any Transaction set forth in Paragraph 4 hereof
is proposed or consummated, the Company shall reimburse MDG for MDG's
reasonable travel and out-of-pocket expenses incurred in connection with
the services performed by MDG pursuant to this Agreement and at the request
of the Company, including without limitation, hotels, food and associated
expenses and long-distance telephone calls, except that all expenses
exceeding $100 must be pre-approved in writing by the Company and that
total expenses may not exceed $1,000.
-4-
<PAGE>
6. Liability of MDG:
----------------
(1) The Company acknowledges that all opinions and advice
(written or oral) given by MDG to the Company in connection with MDG's
engagement are intended solely for the benefit and use of the Company in
considering the Transaction to which they relate, and the Company agrees
that no person or entity other than the Company shall be entitled to make
use of or rely upon the advice of MDG to be given hereunder, and no such
opinion or advice shall be used for any other purpose or reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose, nor may the Company make any public references to MDG, or use
MDG's name in any annual reports or any other reports or releases of the
Company without MDG's prior written consent or as required by law.
(2) The Company acknowledges that MDG makes no commitment
whatsoever as to making a market in the Company's securities or to
recommending or advising its clients to purchase the Company's securities.
Research reports or corporate finance reports that may be prepared by MDG
will, when and if prepared, be done solely on the merits or judgment of
analysis of MDG or any senior corporate finance personnel of MDG.
7. MDG's Services to Others: The Company acknowledges that MDG
------------------------
or its affiliates are in the business of providing financial services and
consulting advice to others. Nothing herein contained
-5-
<PAGE>
shall be construed to limit or restrict MDG in conducting such business
with respect to others, or in rendering such advice to others, except that
MDG will not provide services to others when such services may materially
and adversely affect the Company.
8. Company Information:
-------------------
(a) The Company recognizes and confirms that, in advising
the Company and in fulfilling its engagement hereunder, MDG will use and
rely on data, material and other information furnished to MDG by the
Company. The Company acknowledges and agrees that in performing its
services under this engagement, MDG may rely upon the data, material and
other information supplied by the Company without independently verifying
the accuracy, completeness or veracity of same.
(b) Except as required by applicable law, MDG shall keep
confidential all non-public information provided to it by the Company, and
shall not disclose such information to any third party without the
Company's prior written consent, other than such of its employees and
advisors as MDG reasonably determines to have a need to know, provided,
that MDG shall instruct such employees and advisors to keep such
information confidential and MDG shall be liable for any breach of such
confidentiality. In the event that MDG is required by subpoena to disclose
such information, the Company shall be afforded an opportunity to seek an
order preserving the confidentiality of such information.
-6-
<PAGE>
9. Indemnification:
---------------
(a) The Company shall indemnify and hold MDG harmless
against any and all liabilities, claims, lawsuits, including any and all
awards and/or judgments to which it may become subject under the Securities
Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act of
1934, as amended (the "Act") or any other federal or state statute, at
common law or otherwise, insofar as said liabilities, claims and lawsuits
(including costs, expenses, awards and/or judgments) arise out of or are in
connection with the services rendered by MDG or any transactions in
connection with this Agreement, except for any liabilities, claims and
lawsuits (including awards and/or judgments), arising out of acts or
omissions of MDG. In addition, the Company shall also indemnify and hold
MDG harmless against any and all costs and expenses, including reasonable
counsel fees, incurred relating to the foregoing.
MDG shall give the Company prompt notice of any such
liability, claim or lawsuit which MDG contends is the subject matter of the
Company's indemnification and the Company thereupon shall be granted the
right to take any and all necessary and proper action, at its sole cost and
expense, with respect to such liability, claim and lawsuit, including the
right to settle, compromise and dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities and provided that no such settlement
shall be made without the prior consent of MDG.
-7-
<PAGE>
MDG shall indemnify and hold the Company harmless against
any and all liabilities, claims and lawsuits, including any and all awards
and/or judgments to which it may become subject under the 1933 Act, the Act
or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are in connection with the services
rendered by MDG or any transactions in connection with this Agreement. In
addition, MDG shall also indemnify and hold the Company harmless against
any and all costs and expenses, including reasonable counsel fees, incurred
relating to the foregoing.
The Company shall give MDG prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject
matter of MDG's indemnification and MDG thereupon shall be granted the
right to take any and all necessary and proper action, at its sole cost and
expense, with respect to such liability, claim and lawsuit, including the
right to settle, compromise or dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities and provided that no such settlement
shall be made without the prior consent of the Company.
(b) In order to provide for just and equitable contribution
under the Act in any case in which (i) any person entitled to
indemnification under this Paragraph 9 makes claim for indemnification
pursuant hereto but it is judicially determined (by
-8-
<PAGE>
the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Paragraph 9 provides for indemnification
in such case, or (ii) contribution under the Act may be required on the
part of any such person in circumstances for which indemnification is
provided under this Paragraph 9, then, and in each such case, the Company
and MDG shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after any contribution from
others) in such proportion taking into consideration the relative benefits
received by each party from the transactions undertaken in connection with
this Agreement (taking into account the portion of the proceeds realized by
each), the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was assessed, the opportunity to
correct and prevent any statement or omission and other equitable
considerations appropriate under the circumstances; and provided, that, in
any such case, no person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
Within fifteen (15) days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any
action, suit or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party
-9-
<PAGE>
(the "Contributing Party"), notify the Contributing Party of the
commencement thereof, but the omission so to notify the Contributing Party
will not relieve it from any liability which it may have to any other party
other than for contribution hereunder. In case any such action, suit or
proceeding is brought against any party, and such party notifies a
Contributing Party or his or its representative of the commencement thereof
within the aforesaid fifteen (15) days, the Contributing Party will be
entitled to participate therein with the notifying party and any other
Contributing Party similarly notified. Any such Contributing Party shall
not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party
seeking contribution without the written consent of the Contributing Party.
The indemnification provisions contained in this Paragraph 9 are in
addition to any other rights or remedies which either party hereto may have
with respect to the other or hereunder.
10. MDG an Independent Contractor: MDG shall perform its
-----------------------------
services hereunder as an independent contractor and not as an employee of
the Company or an affiliate thereof. The parties hereto expressly
understand and agree that MDG shall have no authority to act for, represent
or bind the Company or any affiliate thereof in any manner, except as may
be agreed to expressly by the Company in writing from time to time.
-10-
<PAGE>
11. Miscellaneous:
-------------
(1) This Agreement between the Company and MDG constitutes
the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral
or written, between the parties with respect to the matters set forth
herein.
(2) All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and, if sent to MDG,
shall be mailed, delivered or telegraphed and confirmed to May Davis Group,
Inc., 20 Exchange Place, New York, New York 10005, Attention: President,
with a copy to Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington
Avenue, New York, New York 10022, Attention: Jay Kaplowitz, Esq., and if
to the Company, shall be mailed, delivered or telegraphed and confirmed to
Netlive Communications, Inc., 584 Broadway, New York, New York 10019,
Attention: Laurence Rosen, with a copy to Gusrae, Kaplan & Bruno, 120 Wall
Street, New York, New York 10005, Attention: Lawrence G. Nusbaum, Esq.
(3) This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors,
legal representatives and assigns.
(4) This Agreement may be executed in any number of
counterparts, each of which together shall constitute one and the same
original document.
-11-
<PAGE>
(5) No provision of this Agreement may be amended, modified
or waived, except in a writing signed by all of the parties hereto.
(6) This Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without giving effect to
its conflict of law principles. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Agreement shall be adjudicated before a court located in New York City, and
they hereby submit to the exclusive jurisdiction of the courts of the State
of New York located in New York, New York and of the federal courts in the
Southern District of New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they
now or hereafter may have respecting the venue of any such action or
proceeding brought in such a court or respecting the fact that such court
is an inconvenient forum, relating to or arising out of this Agreement, and
consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of
the address set forth in Paragraph 11(2) hereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, as of the day and year first above written.
MAY DAVIS GROUP, INC.
By:________________________________
Name:
Title:
NETLIVE COMMUNICATIONS, INC.
By:____________________________________
-13-
EXHIBIT 4.5
-----------
FORM OF COMMON STOCK
PURCHASE WARRANTS USED
FOR BRIDGE LOANS
<PAGE>
THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, TRANSFERRED, MADE SUBJECT TO A SECURITY INTEREST, PLEDGED, HY-
POTHECATED, OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF COUNSEL FOR THE
COMPANY IS RECEIVED THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
No.
------
COMMON STOCK PURCHASE WARRANT
To Subscribe For The Purchase of up to _________ Shares of Common Stock of
NETLIVE COMMUNICATIONS, INC.
THIS CERTIFIES THAT _________________________ (hereinafter sometimes
called the "Holder"), is entitled to purchase from NetLive Communications,
Inc., a Delaware corporation (the "Company"), at the price and during the
period hereinafter specified, up to ________ shares of the Company's common
stock, $.0001 par value (the "Common Stock").
This Warrant, together with warrants of like tenor, is subject to
adjustment in accordance with Paragraph 7 of this Warrant.
1. a. The rights represented by this Warrant shall be exercisable,
at any time commencing on the date hereof until the date three (3) years
from the Effective Date (as defined in Section 1.b. hereof) (the "Exercise
Period") at a purchase price of $5.50 per share (the "Exercise Price"),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. After the termination of the Exercise Period or the
redemption of the Warrant (pursuant to the terms of Paragraph 1.b. below),
the Holder shall have no right to purchase any shares of Common Stock
underlying this Warrant.
b. The Company may call these Warrants for redemption (a
"Redemption"), in whole or in part, on the earlier of (i) one year from the
date the Securities and Exchange Commission ("SEC") declares a registration
statement covering the Warrants and the shares of Common Stock underlying
the Warrants effective (the "Effective Date"); and (ii) in the sole
discretion of the Company, at any time, and from time to time, after
September 1, 1996, provided the Company has not consummated an initial
public offering (the "IPO") of its securities by such date on the terms and
1
<PAGE>
conditions as set forth in the Letter of Intent dated March 1, 1996 by and
between the Company and May Davis Group, Inc. ("May Davis"). In the event
the Warrants are redeemed on or after September 1, 1996 because the Company
has not completed the IPO, the Warrants will be redeemed together with the
Twelve (12%) Percent $________ Principal Amount Redeemable Promissory Note
(the "Note") and the ________ shares of Common Stock (all of which are
being purchased simultaneously by the Holder in a private offering on the
date hereof) at an aggregate redemption price equal to eighty five (85%)
percent of the principal amount then remaining outstanding on the Note (no
additional payment shall be made for the Warrants or the shares of Common
Stock). The September 1, 1996 Redemption Date may, however, be extended for
up to an additional three (3) months (until December 1, 1996) upon the
mutual written consent of the Company and the Holder provided the Company
and May Davis have proceeded in good faith towards the consummation of an
IPO of the Company's securities, after which time the redemption right
shall be reinstated automatically.
c. Notwithstanding anything contained herein to the contrary,
the Company and the Holder agree that in the event that the terms and
conditions of the warrants to be registered in the registration statement
for the IPO are not identical to the terms and conditions of these
Warrants, provided the Warrants have not been redeemed by the Company, the
Warrants will automatically be modified upon the closing of such IPO to
conform exactly to the terms and conditions of the warrants offered
pursuant to such registration statement. In such event, the Holder will
surrender the Warrants for warrants in the form of the warrants offered
pursuant to such registration statement, and the holder shall have no
further rights hereunder.
2. The rights represented by the Warrants may be exercised at any
time within the Exercise Period above specified, in whole or in part, by
(i) the surrender of the Warrants (with the purchase form at the end hereof
properly executed) at the principal executive office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books
of the Company); and (ii) payment by cash or certified check to the Company
of the Exercise Price then in effect for the number of shares of Common
Stock specified in the above-mentioned purchase form together with
applicable stock transfer taxes, if any. The Warrants shall be deemed to
have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date the Warrants are
surrendered and payment is made in accordance with the foregoing provisions
of this Paragraph 2, and the person or person in whose name or names the
certificates for shares of Common Stock shall be issuable upon such
exercise shall become the holder or holders of record of such shares of
Common Stock at that time and date. The certificate or certificates for the
shares of Common Stock so purchased shall be delivered to
2
<PAGE>
such person or persons within a reasonable time, not exceeding thirty (30)
days, after the Warrants shall have been exercised.
3. Neither the Warrants nor the shares of Common Stock issuable upon
exercise thereof have been registered under the 1933 Act or any state
securities law and may not be sold, transferred, assigned, hypothecated or
otherwise disposed of until a registration statement with respect thereto
is declared effective under such Act or the Company receives an opinion of
counsel to the Company that an exemption from the registration requirements
of the Act is available. If permitted by the foregoing, any such sale,
transfer, assignment, hypothecation or other disposition shall be effected
by the Holder surrendering the Warrants for cancellation at the office or
agency of the Company referred to in Paragraph 2 hereof, accompanied by an
opinion of counsel satisfactory to the Company and its counsel, stating
that an exemption from the registration requirements is available.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued upon exercise of the Warrants and payment therefor
will, upon issuance, assuming proper exercise by the Holder and payment of
the Exercise Price, be duly and validly issued, fully paid and
nonassessable and no personal liability will attach to the Holder thereof.
The Company further covenants and agrees that during the Exercise Period,
the Company will at all times have authorized and reserved a sufficient
number of shares of its Common Stock to provide for the exercise of the
Warrants.
5. The Warrant shall not entitle the Holder to any rights,
including, without limitation, voting rights or dividend rights, as a
stockholder of the Company.
6. The Company shall be obligated to register the Warrants and the
shares of Common Stock underlying the Warrants in accordance with the 1933
Act, as set forth in the Registration Rights Agreement dated even date
herewith entered into between the Company and the Holder.
7. The Exercise Price and the number and kind of securities
purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as
follows:
a. If the Company shall at any time following the date hereof,
but excluding any such action taken in furtherance of the Company's initial
public offering (i) declare a dividend or make a distribution on its
outstanding shares of Common Stock in shares of Common Stock, (ii)
subdivide or reclassify its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price
in effect at the time of the effective date or record date, as the case may
be, for such
3
<PAGE>
dividend or distribution or of the effective date of such dividend,
subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of shares of Common
Stock outstanding after giving effect to such action, and the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such action.
b. Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraph 7.a. above, the number of shares
of Common Stock purchasable upon exercise of the Warrants shall
simultaneously be adjusted by multiplying the number of shares of Common
Stock initially issuable upon exercise of the Warrants by the Exercise
Price in effect on the date hereof and dividing the product so obtained by
the Exercise Price, as adjusted.
c. Notwithstanding any adjustment in the Exercise Price or the
number or kind of shares of Common Stock purchasable upon the exercise of
the Warrants, certificates for Warrants issued prior or subsequent to such
adjustment may continue to express the same price and number and kind of
shares of Common Stock as are initially issuable pursuant to this Warrant.
d. The Company shall not be required to issue fractional shares
upon the exercise of this Warrant.
8. This Agreement shall be governed by and in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, NETLIVE COMMUNICATIONS, INC. has caused the
Warrants to be signed by its duly authorized officer and is dated as of
____________, 1996.
NETLIVE COMMUNICATIONS, INC.
By:_______________________________
Name:
Position:
4
<PAGE>
EXERCISE FORM
-------------
To Be Executed by the Holder
in Order to Exercise Warrants
The undersigned Holder hereby irrevocably elects to exercise the
Warrants and to purchase _______ shares of Common Stock of NetLive
Communications, Inc. issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in name of:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(please print or type name and address)
__________________________________________________________________
(please insert social security or other identifying number)
and be delivered:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
(please print or type name and address)
__________________________________________________________________
(please insert social security or other identifying number)
and if such number of shares of Common Stock shall not be all the shares
evidenced by this Warrant Certificate, that a new Warrant Certificate for
the balance of such shares be registered in the name of, and delivered to,
the Holder.
------------------------------------
[Signature of Holder]
Signature Guarantee
------------------------------------
EXHIBIT 10.1
------------
EMPLOYMENT AGREEMENT
WITH
LAURENCE ROSEN
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, effective as of September 1, 1995, by and between NetLive
Communications, Inc., a Delaware Corporation having a place of business at
584 Broadway, Suite 806, New York, New York 10012 (the "Corporation"), and
Laurence Rosen, an individual residing at 139 East 63rd Street, Apt. 12D,
New York, New York 10021 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the Employee as its
president and chief executive officer to perform work for the Corporation
and the Employee desires to be employed by the Corporation pursuant to the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
------------------
(a) The Corporation engages and employs the Employee, and the
Employee hereby accepts engagement and employment, as president and
executive officer of the Corporation, and Employee hereby accepts such
retention by the Corporation to undertake such services as the Corporation
shall reasonably request in connection with the Corporation's business,
including, but not limited to, providing the Corporation with financial,
strategic and general organizational and business services as the Company
shall reasonably request.
(b) The Employee shall perform his duties hereunder from the
Corporation's offices in a location to be determined by the Corporation's
Board of Directors and acknowledges and agrees that the performance by the
Employee of his duties hereunder may require significant travel by the
Employee.
(c) The Employee shall devote such of his time and efforts as shall
be necessary to the proper discharge of his duties and responsibilities
under this Agreement. The Employee may engage in other business ventures
and activities, provided that (a) such other ventures and activities will
not unreasonably interfere with the performance of his duties and
responsibilities hereunder, and (b) such other ventures and activities will
not result in violation of the provisions of Section 5 hereof.
<PAGE>
2. TERM
----
The Employee's employment hereunder shall be for a term of three years
commencing on September 1, 1995 and continuing through the third
anniversary of such date, unless sooner terminated as hereinafter provided.
If Employee has not received notification of termination of this Agreement
at least 30 days prior to the expiration of this Agreement, Employee will
remain employed by the Corporation on a year to year basis for an
additional one year term. The Corporation will continue to employ Employee
for successive one year terms and modify Employee's salary to account for
cumulative cost of living adjustments until it gives Employee at least 30
days advance notification of his termination or of the expiration of this
agreement.
3. COMPENSATION
------------
(a) As compensation for the performance of his duties on behalf of
the Corporation, the Corporation shall pay the Employee a base salary
("Base Salary") at the rate of $105,000 per annum for the first year of
this Agreement, $115,000 per annum for the second year of this agreement,
$125,000 for the third year and such equal or greater amount in each
subsequent year of the term hereof as may be determined by the Board of
Directors, payable in equal installments on a semi-monthly basis in
arrears. In the event that the Company fails to pay the Employee for his
services to the Company, Employee's compensation shall nevertheless accrue
beginning September 1, 1995.
The Corporation shall withhold all applicable federal, state and local
taxes, social security and workers' compensation contributions and such
other amounts as may be required by law or agreed upon by the parties with
respect to the compensation payable to the Employee pursuant to section
3(a) hereof.
(b) The Corporation shall reimburse the Employee for all normal,
usual and necessary expenses incurred by the Employee in furtherance of the
business and affairs of the Corporation against receipt by the Corporation
of appropriate vouchers or other proof of the Employee's expenditures and
otherwise in accordance with such Expense Reimbursement Policy as may from
time to time be adopted by the Board of Directors of the Corporation.
(c) The Employee shall accrue paid vacation at the rate of ten (10)
business days per annum.
(d) The Corporation shall provide to the Employee and his spouse and
dependents, at the Corporation's expense, benefits of the type generally
available to the executives of similar companies, including but not limited
to, medical, dental and disability insurance. In the first year of this
Agreement,
2
<PAGE>
Employee shall be entitled to medical insurance with a maximum premium of
$200 per month.
(e) As additional compensation, the Company may pay the Employee a
periodic bonus as determined by the Board of Directors.
4. REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE AND CORPORATION
--------------------------------------------------------------
The Employee hereby represents and warrants to the Corporation as
follows:
(a) Neither the execution and delivery of this Agreement nor the
performance by the Employee of his duties and other obligations hereunder
violate or will violate any statute, law, determination or award, or
conflict with or constitute a default under (whether immediately, upon the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Employee is a party or by which
he is bound.
(b) The Employee has the full right, power and legal capacity to
enter and deliver this Agreement and to perform his duties and other
obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of the Employee enforceable against him in accordance
with its terms. No approvals or consents of any persons or entities are
required for the Employee to execute and deliver this Agreement or perform
his duties and other obligations hereunder.
The Corporation hereby represents and warrants to the Employee as
follows:
(a) The Corporation is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own its properties and conduct its
business in the manner presently contemplated.
(b) The Corporation has full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(c) The execution, delivery and performance by the Corporation of
this Agreement does not conflict with or result in a breach or violation of
or constitute a default under (whether immediately, upon the giving of
notice or lapse of time or both) the certificate of incorporation or by-
laws of the Corporation, or any agreement or instrument to which the
Corporation is a party or by which the Corporation of any of its properties
may be bound or affected.
3
<PAGE>
(d) The Corporation does not now contemplate and will not in the
future require the performance by the Employee of acts that would conflict
with his obligations to any former employer or under applicable law.
Specifically, the Corporation acknowledges that the Employee's duties will
not include the solicitation of employees or customers of any former
employer, disclosure to the Company of any trade secrets of a former
employer, or the use by the Employee in the course of his employment of any
documents provided to the Employee by a former employer or inventions
developed by the Employee during any former employment.
5. CONFIDENTIAL INFORMATION
------------------------
The Employee agrees that during the course of his employment or at any
time after termination, he will not disclose or make accessible to any
other person, the Corporation's products, services and technology, both
current and under development, promotion and marketing programs, lists,
trade secrets and other confidential and proprietary business information
of the Corporation or any of its clients. The Employee agrees: (i) not to
use any such information for himself or others; and (ii) not to take any
such material or reproductions thereof from the Corporation's facilities at
any time during his employment by the Corporation, except as required in
the Employee's duties to the Corporation. The Employee agrees immediately
to return all such material and reproductions thereof in his possession to
the Corporation upon request and in any event upon termination of
employment. The foregoing notwithstanding, the parties acknowledge and
agree that the confidential and proprietary information of the Corporation
and/or its clients shall not include (a) information already in the public
domain or hereafter disclosed to the public; (b) general knowledge about
the internet software and content development industry obtained through the
Employee's academic and professional experience, including but not limited
to knowledge of (i) the business of other companies in the field, (ii)
general business methods and structures useful in operating internet or
computer related companies, (iii) the status of patents and other
technology in the field other than those of the Company; or (c) any
inventions, discoveries, improvements, ideas, writings, computer programs,
or other work product of the Employee made or developed by the Employee
before his employment by the Corporation.
Except with prior written authorization by the Corporation, the
Employee agrees not to disclose or publish any of the confidential,
technical or business information or material of the Corporation, its
clients or any other party to whom the Corporation owes an obligation of
confidence, at any time during or after his employment with the
Corporation.
4
<PAGE>
The Employee agrees that he will enter into a standard non-compete
agreement with the Corporation in the standard form used by the
Corporation shall execute and that is effective for at least two years
following termination of the Employee's employment with the Corporation.
6. TERMINATION
-----------
(a) This Employee's employment hereunder shall begin on September 1,
1995 and shall continue for the period set forth in Section 2 hereof unless
sooner terminated upon the first to occur of the following events:
(i) The death of the Employee or the disability of the
Employee, as defined below;
(ii) Termination of the Employee by the Board of Directors of
the Corporation for just cause. Any of the following actions by the
Employee shall constitute just cause for termination:
(A) Material breach by the Employee of Section 5 of this
Agreement or the non-compete agreement.
(B) Material breach by the Employee of any provision of
this Agreement other than Section 5 which is not cured by the Employee
within fifteen (15) days following written notice thereof from the
Corporation; or
(C) Any action by the Employee to intentionally harm the
Corporation.
(iii) Termination by the Employee for just cause. Any of the
following actions or omissions by the Corporation shall constitute just
cause:
(A) Material breach by the Corporation of any provision
of this Agreement which is not cured by the Corporation within fifteen (15)
days following written notice thereof from the Employee; or
(B) Any action by the Corporation to intentionally harm
the Employee.
(b) Upon termination pursuant to subparagraph (i) or (ii) of
paragraph (a) above, the Employee shall not be entitled to receive any
additional compensation for the term of the Agreement.
(c) Upon termination by the Corporation for any reason other than the
reasons set forth in subparagraph (i) or (ii) of paragraph (a) above or an
election by the Corporation not to renew this
5
<PAGE>
Agreement, or upon termination by the Employee for any reason set forth in
subparagraph (iii) of paragraph (a) above, then the Corporation shall
continue to pay the Employee, as the Employee's sole damages for such
termination, the Base Salary and a pro-rata portion of any bonus that would
have accrued had the Employee been employed by the Corporation during the
Severance Period, as defined below. In addition, the Employee shall be
entitled to all health and other benefits described in paragraph 3(d) above
until the earlier of (i) the end of the Severance Period or (ii) the date
on which the Employee became entitled to health and other benefits provided
by a new employer or contractor at such new employer or contractor's
expense.
(d) For purposes of this Agreement, the Severance Period shall be a
nine month period commencing on the date of termination.
(e) The Employee shall have no duty to mitigate the Corporation's
obligations hereunder by seeking any other employment or consulting
arrangements during the Severance Period. If during the Severance Period
the Employee becomes entitled to health and other benefits provided by a
new employer or contractor at such new employer or contractor's expense,
the Employee agrees to inform the Corporation promptly of such entitlement
and to cooperate with the Corporation in terminating the Employee's
coverage under the corporation's benefit plans.
(f) For purposes of this Agreement, the "disability" of the Employee
shall be deemed to have occurred if, as a result of any injury, sickness or
physical condition, the Employee is unable to perform his duties hereunder
(excluding any accrued vacation).
7. NOTICES
-------
Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express
or similar overnight delivery; or three (3) days after being mailed
registered or certified mail, postage prepaid, return receipt requested, or
one (1) day after being sent by telecopier (with mechanical telecopier
confirmation of receipt), to either party at the address set forth above,
or to such other address as such party shall give by notice hereunder to
the other party.
8. SEVERABILITY OF PROVISIONS
--------------------------
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid,
6
<PAGE>
legal and enforceable, and no provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
9. ENTIRE AGREEMENT; MODIFICATION
------------------------------
This Agreement contains the entire agreement of the parties relating
to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.
10. BINDING EFFECT
--------------
The rights, benefits, duties and obligations under this Agreement
shall inure to, and be binding upon, the Corporation, its successors and
assigns, and upon the Employee and his legal representatives. This
Agreement constitutes a personal service agreement, and the performance of
the Employee's obligations hereunder may not be transferred or assigned by
the Employee.
11. NON-WAIVER
----------
The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and
said terms, conditions and provisions shall remain in full force and
effect. No waiver of any term or condition of this Agreement on the part
of either party shall be effective for any purpose whatsoever unless such
waiver is in writing and signed by such party.
12. GOVERNING LAW
-------------
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to
principles of conflict of laws.
13. HEADINGS
--------
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
14. ATTORNEYS FEES, COSTS
---------------------
In the event a party breaches this Agreement, the breaching party
shall pay all costs and attorneys' fees incurred by the other party in
connection with such breach, whether or not any litigation is commenced.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NETLIVE COMMUNICATIONS, INC.
By: /s/Jeffrey Wolf
_______________________________
Jeffrey Wolf, Treasurer
/s/Laurence Rosen
_______________________________
Laurence Rosen
8
EXHIBIT 10.2
------------
EMPLOYMENT AGREEMENT
WITH
MICHAEL KHARITONOV
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, effective as of April 5, 1996, by and between NetLive
Communications, Inc., a Delaware Corporation having a place of business at
584 Broadway, Suite 806, New York, New York 10012 (the "Corporation"), and
Michael Kharitonov, an individual residing at 145 West 71st Street,
Apartment 4F New York, New York 10023 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the Employee as its
director of technology and secretary to perform work for the Corporation
and the Employee desires to be employed by the Corporation pursuant to the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
------------------
(a) The Corporation engages and employs the Employee, and the
Employee hereby accepts engagement and employment, as director of
technology and secretary for the Corporation, and Employee hereby accepts
such retention by the Corporation to undertake such services as the
Corporation shall reasonably request in connection with the Corporation's
business, including, but not limited to, providing the Corporation with
technical services, technology strategy and other business services as the
Company shall reasonably request.
(b) The Employee shall perform his duties hereunder from the
Corporation's offices in a location to be determined by the Corporation's
Board of Directors and acknowledges and agrees that the performance by the
Employee of his duties hereunder may require significant travel by the
Employee.
(c) The Employee shall devote such of his time and efforts as shall
be necessary to the proper discharge of his duties and responsibilities
under this Agreement. The Employee may engage in other business ventures
and activities, provided that (a) such other ventures and activities will
not unreasonably interfere with the performance of his duties and
responsibilities hereunder, and (b) such other ventures and activities will
not result in violation of the provisions of Section 5 hereof.
<PAGE>
2. TERM
----
The Employee's employment hereunder shall be for a term commencing on
April 5, 1996 and continuing through August 31, 1998, unless sooner terminated
as hereinafter provided. If Employee has not received notification of
termination of this Agreement at least 30 days prior to the expiration of
this Agreement, Employee will remain employed by the Corporation on
a year to year basis for an additional one year term. The Corporation will
continue to employ Employee for successive one year terms and modify Employee's
salary to account for cumulative cost of living adjustments until it gives
Employee at least 30 days advance notification of his termination or of the
expiration of this agreement.
3. COMPENSATION
------------
(a) As compensation for the performance of his duties on behalf of
the Corporation, the Corporation shall pay the Employee a base salary
("Base Salary") at the rate of $100,000 per annum per year through August
31, 1996, $110,000 per annum for the year commencing September 1, 1996,
$120,000 for the year commencing September 1, 1997 and such equal or
greater amount in each subsequent year of the term hereof as may be
determined by the Board of Directors, payable in equal installments on a
semi-monthly basis in arrears. In the event that the Company fails to pay
the Employee for his services to the Company, Employee's compensation shall
nevertheless accrue beginning April 5, 1996.
The Corporation shall withhold all applicable federal, state and local
taxes, social security and workers' compensation contributions and such
other amounts as may be required by law or agreed upon by the parties with
respect to the compensation payable to the Employee pursuant to section
3(a) hereof.
(b) The Corporation shall reimburse the Employee for all normal,
usual and necessary expenses incurred by the Employee in furtherance of the
business and affairs of the Corporation against receipt by the Corporation
of appropriate vouchers or other proof of the Employee's expenditures and
otherwise in accordance with such Expense Reimbursement Policy as may from
time to time be adopted by the Board of Directors of the Corporation.
(c) The Employee shall accrue paid vacation at the rate of ten (10)
business days per annum.
(d) The Corporation shall provide to the Employee and his spouse and
dependents, at the Corporation's expense, benefits of the type generally
available to the executives of similar companies, including but not limited
to, medical, dental and disability insurance. In the first year of this
Agreement,
2
<PAGE>
Employee shall be entitled to medical insurance with a maximum premium of
$200 per month.
4. REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE AND CORPORATION
--------------------------------------------------------------
The Employee hereby represents and warrants to the Corporation as
follows:
(a) Neither the execution and delivery of this Agreement nor the
performance by the Employee of his duties and other obligations hereunder
violate or will violate any statute, law, determination or award, or
conflict with or constitute a default under (whether immediately, upon the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Employee is a party or by which
he is bound.
(b) The Employee has the full right, power and legal capacity to
enter and deliver this Agreement and to perform his duties and other
obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of the Employee enforceable against him in accordance
with its terms. No approvals or consents of any persons or entities are
required for the Employee to execute and deliver this Agreement or perform
his duties and other obligations hereunder.
The Corporation hereby represents and warrants to the Employee as
follows:
(a) The Corporation is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own its properties and conduct its
business in the manner presently contemplated.
(b) The Corporation has full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(c) The execution, delivery and performance by the Corporation of
this Agreement does not conflict with or result in a breach or violation of
or constitute a default under (whether immediately, upon the giving of
notice or lapse of time or both) the certificate of incorporation or by-
laws of the Corporation, or any agreement or instrument to which the
Corporation is a party or by which the Corporation of any of its properties
may be bound or affected.
(d) The Corporation does not now contemplate and will not in the
future require the performance by the Employee of acts that would conflict
with his obligations to any former employer or under applicable law.
Specifically, the Corporation acknowledges that the Employee's duties will
not include the solicitation of
3
<PAGE>
employees or customers of any former employer, disclosure to the Company of
any trade secrets of a former employer, or the use by the Employee in the
course of his employment of any documents provided to the Employee by a
former employer or inventions developed by the Employee during any former
employment.
5. CONFIDENTIAL INFORMATION
------------------------
The Employee agrees that during the course of his employment or at any
time after termination, he will not disclose or make accessible to any
other person, the Corporation's products, services and technology, both
current and under development, promotion and marketing programs, lists,
trade secrets and other confidential and proprietary business information
of the Corporation or any of its clients. The Employee agrees: (i) not to
use any such information for himself or others; and (ii) not to take any
such material or reproductions thereof from the Corporation's facilities at
any time during his employment by the Corporation, except as required in
the Employee's duties to the Corporation. The Employee agrees immediately
to return all such material and reproductions thereof in his possession to
the Corporation upon request and in any event upon termination of
employment. The foregoing notwithstanding, the parties acknowledge and
agree that the confidential and proprietary information of the Corporation
and/or its clients shall not include (a) information already in the public
domain or hereafter disclosed to the public; (b) general knowledge about
the internet software and content development industry obtained through the
Employee's academic and professional experience, including but not limited
to knowledge of (i) the business of other companies in the field, (ii)
general business methods and structures useful in operating internet or
computer related companies, (iii) the status of patents and other
technology in the field other than those of the Company; or (c) any
inventions, discoveries, improvements, ideas, writings, computer programs,
or other work product of the Employee made or developed by the Employee
before his employment by the Corporation.
Except with prior written authorization by the Corporation, the
Employee agrees not to disclose or publish any of the confidential,
technical or business information or material of the Corporation, its
clients or any other party to whom the Corporation owes an obligation of
confidence, at any time during or after his employment with the
Corporation.
The Employee agrees that he will enter into a standard non-compete
agreement with the Corporation in the standard form used by the
Corporation shall execute and that is effective for at least two years
following termination of the Employee's employment with the Corporation.
4
<PAGE>
6. TERMINATION
-----------
(a) This Employee's employment hereunder shall begin on April 5, 1996
and shall continue for the period set forth in Section 2 hereof unless
sooner terminated upon the first to occur of the following events:
(i) The death of the Employee or the disability of the
Employee, as defined below;
(ii) Termination of the Employee by the Board of Directors of
the Corporation for just cause. Any of the following actions by the
Employee shall constitute just cause for termination:
(A) Material breach by the Employee of Section 5 of
this Agreement or the non-compete agreement.
(B) Material breach by the Employee of any provision
of this Agreement other than Section 5 which is not cured by the Employee
within fifteen (15) days following written notice thereof from the
Corporation; or
(C) Any action by the Employee to intentionally harm
the Corporation.
(iii) Termination by the Employee for just cause. Any of the
following actions or omissions by the Corporation shall constitute just
cause:
(A) Material breach by the Corporation of any
provision of this Agreement which is not cured by the Corporation within
fifteen (15) days following written notice thereof from the Employee; or
(B) Any action by the Corporation to intentionally
harm the Employee.
(b) Upon termination pursuant to subparagraph (i) or (ii) of
paragraph (a) above, the Employee shall not be entitled to receive any
additional compensation for the term of the Agreement.
(c) Upon termination by the Corporation for any reason other than the
reasons set forth in subparagraph (i) or (ii) of paragraph (a) above or an
election by the Corporation not to renew this Agreement, or upon
termination by the Employee for any reason set forth in subparagraph (iii)
of paragraph (a) above, then the Corporation shall continue to pay the
Employee, as the Employee's sole damages for such termination, the Base
Salary and a pro-rata portion of any bonus that would have accrued had the
Employee been employed by the Corporation during the Severance Period, as
defined
5
<PAGE>
below. In addition, the Employee shall be entitled to all health and other
benefits described in paragraph 3(d) above until the earlier of (i) the end
of the Severance Period or (ii) the date on which the Employee became
entitled to health and other benefits provided by a new employer or
contractor at such new employer or contractor's expense.
(d) For purposes of this Agreement, the Severance Period shall be a
nine month period commencing on the date of termination.
(e) The Employee shall have no duty to mitigate the Corporation's
obligations hereunder by seeking any other employment or consulting
arrangements during the Severance Period. If during the Severance Period
the Employee becomes entitled to health and other benefits provided by a
new employer or contractor at such new employer or contractor's expense,
the Employee agrees to inform the Corporation promptly of such entitlement
and to cooperate with the Corporation in terminating the Employee's
coverage under the corporation's benefit plans.
(f) For purposes of this Agreement, the "disability" of the Employee
shall be deemed to have occurred if, as a result of any injury, sickness or
physical condition, the Employee is unable to perform his duties hereunder
(excluding any accrued vacation).
7. NOTICES
-------
Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express
or similar overnight delivery; or three (3) days after being mailed
registered or certified mail, postage prepaid, return receipt requested, or
one (1) day after being sent by telecopier (with mechanical telecopier
confirmation of receipt), to either party at the address set forth above,
or to such other address as such party shall give by notice hereunder to
the other party.
8. SEVERABILITY OF PROVISIONS
--------------------------
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provision shall be deemed dependent upon any other covenant or provision
unless so expressed herein.
6
<PAGE>
9. ENTIRE AGREEMENT; MODIFICATION
------------------------------
This Agreement contains the entire agreement of the parties relating
to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.
10. BINDING EFFECT
--------------
The rights, benefits, duties and obligations under this Agreement
shall inure to, and be binding upon, the Corporation, its successors and
assigns, and upon the Employee and his legal representatives. This
Agreement constitutes a personal service agreement, and the performance of
the Employee's obligations hereunder may not be transferred or assigned by
the Employee.
11. NON-WAIVER
----------
The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and
said terms, conditions and provisions shall remain in full force and
effect. No waiver of any term or condition of this Agreement on the part
of either party shall be effective for any purpose whatsoever unless such
waiver is in writing and signed by such party.
12. GOVERNING LAW
-------------
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to
principles of conflict of laws.
13. HEADINGS
--------
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
14. ATTORNEYS FEES, COSTS
---------------------
In the event a party breaches this Agreement, the breaching party
shall pay all costs and attorneys' fees incurred by the other party in
connection with such breach, whether or not any litigation is commenced.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NETLIVE COMMUNICATIONS, INC.
By: /s/Laurence Rosen
_______________________________
Laurence Rosen, President
/s/Michael Kharitonov
_______________________________
Michael Kharitonov
8
EXHIBIT 10.3
------------
EMPLOYMENT AGREEWITH WITH
JEFFREY WOLF, AS AMENDED
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, effective as of September 1, 1995, by and between NetLive
Communications, Inc., a Delaware Corporation having a place of business at
584 Broadway, Suite 806, New York, New York 10012 (the "Corporation"), and
Jeffrey Wolf, an individual residing at 254 West 71st Street, Apartment 1A
New York, New York 10023 (the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the Employee as its
treasurer to perform work for the Corporation and the Employee desires to
be employed by the Corporation pursuant to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, it is agreed as follows:
1. EMPLOYMENT; DUTIES
------------------
(a) The Corporation engages and employs the Employee, and the
Employee hereby accepts engagement and employment, as treasurer of the
Corporation, and Employee hereby accepts such retention by the Corporation
to undertake such services as the Corporation shall reasonably request in
connection with the Corporation's business, including, but not limited to,
providing the Corporation with financial, strategic and general
organizational and business services as the Company shall reasonably
request.
(b) The Employee shall perform his duties hereunder from the
Corporation's offices in a location to be determined by the Corporation's
Board of Directors and acknowledges and agrees that the performance by the
Employee of his duties hereunder may require significant travel by the
Employee.
(c) The Employee shall devote such of his time and efforts as shall
be necessary to the proper discharge of his duties and responsibilities
under this Agreement. The Employee may engage in other business ventures
and activities, provided that (a) such other ventures and activities will
not unreasonably interfere with the performance of his duties and
responsibilities hereunder, and (b) such other ventures and activities will
not result in violation of the provisions of Section 5 hereof.
2. TERM
----
The Employee's employment hereunder shall be for a term of three years
commencing on September 1, 1995 and continuing through the third
anniversary of such date, unless sooner terminated as hereinafter provided.
If Employee has not received notification of termination of this Agreement
at least 30 days prior to the
<PAGE>
expiration of this Agreement, Employee will remain employed by the
Corporation on a year to year basis for an additional one year term. The
Corporation will continue to employ Employee for successive one year terms
and modify Employee's salary to account for cumulative cost of living
adjustments until it gives Employee at least 30 days advance notification
of his termination or of the expiration of this agreement.
3. COMPENSATION
------------
(a) As compensation for the performance of his duties on behalf of
the Corporation, the Corporation shall pay the Employee a base salary
("Base Salary") at the rate of $50,000 per annum for the first year of this
Agreement, $55,000 per annum for the second year of this agreement, $60,000
for the third year and such equal or greater amount in each subsequent year
of the term hereof as may be determined by the Board of Directors, payable
in equal installments on a semi-monthly basis in arrears. In the event that
the Company fails to pay the Employee for his services to the Company,
Employee's compensation shall nevertheless accrue beginning September 1,
1995.
The Corporation shall withhold all applicable federal, state and local
taxes, social security and workers' compensation contributions and such
other amounts as may be required by law or agreed upon by the parties with
respect to the compensation payable to the Employee pursuant to section
3(a) hereof.
(b) The Corporation shall reimburse the Employee for all normal,
usual and necessary expenses incurred by the Employee in furtherance of the
business and affairs of the Corporation against receipt by the Corporation
of appropriate vouchers or other proof of the Employee's expenditures and
otherwise in accordance with such Expense Reimbursement Policy as may from
time to time be adopted by the Board of Directors of the Corporation.
(c) The Corporation shall provide to the Employee and his spouse and
dependents, at the Corporation's expense, benefits of the type generally
available to the executives of similar companies, including but not limited
to, medical, dental and disability insurance. In the first year of this
Agreement, Employee shall be entitled to medical insurance with a maximum
premium of $200 per month.
2
<PAGE>
4. REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE AND CORPORATION
--------------------------------------------------------------
The Employee hereby represents and warrants to the Corporation as
follows:
(a) Neither the execution and delivery of this Agreement nor the
performance by the Employee of his duties and other obligations hereunder
violate or will violate any statute, law, determination or award, or
conflict with or constitute a default under (whether immediately, upon the
giving of notice or lapse of time or both) any prior employment agreement,
contract, or other instrument to which the Employee is a party or by which
he is bound.
(b) The Employee has the full right, power and legal capacity to
enter and deliver this Agreement and to perform his duties and other
obligations hereunder. This Agreement constitutes the legal, valid and
binding obligation of the Employee enforceable against him in accordance
with its terms. No approvals or consents of any persons or entities are
required for the Employee to execute and deliver this Agreement or perform
his duties and other obligations hereunder.
The Corporation hereby represents and warrants to the Employee as
follows:
(a) The Corporation is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite
corporate power and authority to own its properties and conduct its
business in the manner presently contemplated.
(b) The Corporation has full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.
(c) The execution, delivery and performance by the Corporation of
this Agreement does not conflict with or result in a breach or violation of
or constitute a default under (whether immediately, upon the giving of
notice or lapse of time or both) the certificate of incorporation or by-
laws of the Corporation, or any agreement or instrument to which the
Corporation is a party or by which the Corporation of any of its properties
may be bound or affected.
(d) The Corporation does not now contemplate and will not in the
future require the performance by the Employee of acts that would conflict
with his obligations to any former employer or under applicable law.
Specifically, the Corporation acknowledges that the Employee's duties will
not include the solicitation of employees or customers of any former
employer, disclosure to the Company of any trade secrets of a former
employer, or the use by the Employee in the course of his employment of any
documents
3
<PAGE>
provided to the Employee by a former employer or inventions developed by
the Employee during any former employment.
5. CONFIDENTIAL INFORMATION
------------------------
The Employee agrees that during the course of his employment or at any
time after termination, he will not disclose or make accessible to any
other person, the Corporation's products, services and technology, both
current and under development, promotion and marketing programs, lists,
trade secrets and other confidential and proprietary business information
of the Corporation or any of its clients. The Employee agrees: (i) not to
use any such information for himself or others; and (ii) not to take any
such material or reproductions thereof from the Corporation's facilities at
any time during his employment by the Corporation, except as required in
the Employee's duties to the Corporation. The Employee agrees immediately
to return all such material and reproductions thereof in his possession to
the Corporation upon request and in any event upon termination of
employment. The foregoing notwithstanding, the parties acknowledge and
agree that the confidential and proprietary information of the Corporation
and/or its clients shall not include (a) information already in the public
domain or hereafter disclosed to the public; (b) general knowledge about
the internet software and content development industry obtained through the
Employee's academic and professional experience, including but not limited
to knowledge of (i) the business of other companies in the field, (ii)
general business methods and structures useful in operating internet or
computer related companies, (iii) the status of patents and other
technology in the field other than those of the Company; or (c) any
inventions, discoveries, improvements, ideas, writings, computer programs,
or other work product of the Employee made or developed by the Employee
before his employment by the Corporation.
Except with prior written authorization by the Corporation, the
Employee agrees not to disclose or publish any of the confidential,
technical or business information or material of the Corporation, its
clients or any other party to whom the Corporation owes an obligation of
confidence, at any time during or after his employment with the
Corporation.
The Employee agrees that he will enter into a standard non-compete
agreement with the Corporation in the standard form used by the Corporation
shall execute and that is effective for at least two years following
termination of the Employee's employment with the Corporation.
4
<PAGE>
6. TERMINATION
-----------
(a) This Employee's employment hereunder shall begin on September 1,
1995 and shall continue for the period set forth in Section 2 hereof unless
sooner terminated upon the first to occur of the following events:
(i) The death of the Employee or the disability of the
Employee, as defined below;
(ii) Termination of the Employee by the Board of Directors of
the Corporation for just cause. Any of the following actions by the
Employee shall constitute just cause for termination:
(A) Material breach by the Employee of Section 5 of this
Agreement or the non-compete agreement.
(B) Material breach by the Employee of any provision of
this Agreement other than Section 5 which is not cured by the Employee
within fifteen (15) days following written notice thereof from the
Corporation; or
(C) Any action by the Employee to intentionally harm the
Corporation.
(iii) Termination by the Employee for just cause. Any of the
following actions or omissions by the Corporation shall constitute just
cause:
(A) Material breach by the Corporation of any provision
of this Agreement which is not cured by the Corporation within fifteen (15)
days following written notice thereof from the Employee; or
(B) Any action by the Corporation to intentionally harm
the Employee.
(b) Upon termination pursuant to subparagraph (i) or (ii) of
paragraph (a) above, the Employee shall not be entitled to receive any
additional compensation for the term of the Agreement.
(c) Upon termination by the Corporation for any reason other than the
reasons set forth in subparagraph (i) or (ii) of paragraph (a) above or an
election by the Corporation not to renew this Agreement, or upon
termination by the Employee for any reason set forth in subparagraph (iii)
of paragraph (a) above, then the Corporation shall continue to pay the
Employee, as the Employee's sole damages for such termination, the Base
Salary and a pro-rata portion of any bonus that would have accrued had the
Employee been employed by the Corporation during the Severance Period, as
defined
5
<PAGE>
below. In addition, the Employee shall be entitled to all health and other
benefits described in paragraph 3(d) above until the earlier of (i) the end
of the Severance Period or (ii) the date on which the Employee became
entitled to health and other benefits provided by a new employer or
contractor at such new employer or contractor's expense.
(d) For purposes of this Agreement, the Severance Period shall be a
nine month period commencing on the date of termination.
(e) The Employee shall have no duty to mitigate the Corporation's
obligations hereunder by seeking any other employment or consulting
arrangements during the Severance Period. If during the Severance Period
the Employee becomes entitled to health and other benefits provided by a
new employer or contractor at such new employer or contractor's expense,
the Employee agrees to inform the Corporation promptly of such entitlement
and to cooperate with the Corporation in terminating the Employee's
coverage under the corporation's benefit plans.
(f) For purposes of this Agreement, the "disability" of the Employee
shall be deemed to have occurred if, as a result of any injury, sickness or
physical condition, the Employee is unable to perform his duties hereunder
(excluding any accrued vacation).
7. NOTICES
-------
Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given: when delivered personally
against receipt therefor; one (1) day after being sent by Federal Express
or similar overnight delivery; or three (3) days after being mailed
registered or certified mail, postage prepaid, return receipt requested, or
one (1) day after being sent by telecopier (with mechanical telecopier
confirmation of receipt), to either party at the address set forth above,
or to such other address as such party shall give by notice hereunder to
the other party.
8. SEVERABILITY OF PROVISIONS
--------------------------
If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being
enforced in whole or in part, the remaining conditions and provisions or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provision shall be deemed dependent upon any other covenant or provision
unless so expressed herein.
6
<PAGE>
9. ENTIRE AGREEMENT; MODIFICATION
------------------------------
This Agreement contains the entire agreement of the parties relating
to the subject matter hereof, and the parties hereto have made no
agreements, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein. No modification of this
Agreement shall be valid unless made in writing and signed by the parties
hereto.
10. BINDING EFFECT
--------------
The rights, benefits, duties and obligations under this Agreement
shall inure to, and be binding upon, the Corporation, its successors and
assigns, and upon the Employee and his legal representatives. This
Agreement constitutes a personal service agreement, and the performance of
the Employee's obligations hereunder may not be transferred or assigned by
the Employee.
11. NON-WAIVER
----------
The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and
said terms, conditions and provisions shall remain in full force and
effect. No waiver of any term or condition of this Agreement on the part
of either party shall be effective for any purpose whatsoever unless such
waiver is in writing and signed by such party.
12. GOVERNING LAW
-------------
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to
principles of conflict of laws.
13. HEADINGS
--------
The headings of paragraphs are inserted for convenience and shall not
affect any interpretation of this Agreement.
14. ATTORNEYS FEES, COSTS
---------------------
In the event a party breaches this Agreement, the breaching party
shall pay all costs and attorneys' fees incurred by the other party in
connection with such breach, whether or not any litigation is commenced.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NETLIVE COMMUNICATIONS, INC.
By: /s/Laurence Rosen
_______________________________
Laurence Rosen, President
/s/Jeffrey Wolf
_______________________________
Jeffrey Wolf
8
<PAGE>
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
--------------------
This Amendment No. 1 to the Employment Agreement (the "Agreement") made and
entered into effective as of the 1st day of May, 1996, by and among NetLive
Communications, Inc. (the "Company") and Jeffrey Wolf ("Wolf").
WITNESSETH:
----------
WHEREAS, as of September 1, 1995, the Employee entered into an Employment
Agreement (the "Employment Agreement") with the Company, a copy of which is
annexed as an Exhibit hereto; and
WHEREAS, the parties now desire to amend the Employment Agreement in
its entirety to provide that, in lieu of being employed by the Company as
its treasurer, Wolf will be a consultant to the Company and will provide
consulting services to the Company;
NOW, THEREFORE, in consideration of and for the mutual promises and
covenants contained herein, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the Employment Agreement is hereby
amended as follows:
1. The Employment Agreement is hereby amended as follows:
(a) The Employment Agreement is amended so as to provide that in
lieu of being employed by the Company as its treasurer, Wolf will be a
consultant to the Company and will provide consulting services to the
Company, and all references in the Employment Agreement to Wolf being an
employee of the Company shall be changed to Wolf being a consultant of the
Company;
(b) The Employment Agreement is amended so as to provide that
nothing therein shall constitute Wolf as an employee or agent of the
Company, except to such extent as might hereinafter be agreed upon for a
particular purpose; and
(c) The Employment Agreement is amended so as to relieve the
Company from the responsibility for withholding all applicable federal,
state and local taxes, social security and workers' compensation
contributions and such other amounts as may be required by law or agreed
upon by the parties with respect to the compensation payable to Wolf. In
lieu of the foregoing, the Company shall pay Wolf an aggregate consulting
fee equal to the compensation to which Wolf is entitled to under the terms
of the Employment Agreement.
2. (A) This agreement shall be construed and interpreted in
accordance with the laws of the State of New York without giving effect to
the conflict of laws rules thereof or the actual domiciles of the parties.
<PAGE>
(B) Except as amended hereby, the terms and provisions of the
Employment Agreement shall remain in full force and effect, and the
Employment Agreement is in all respects ratified and confirmed. On and
after the date of this agreement, each reference in the Employment
Agreement to the "Employment Agreement" or the "Agreement" shall mean the
"Consulting Agreement," and each reference in the Employment Agreement to
words such as "hereinafter", "herein", "hereinafter", "hereunder",
"hereof", or words of like import shall mean and be a reference to the
Employment Agreement as amended by this agreement.
(C) This agreement may be executed in one or more counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute a single Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first stated above.
THE COMPANY:
NETLIVE COMMUNICATIONS, INC.
By: /s/Laurence Rosen
_______________________________
Name: Laurence Rosen
Title: President
/s/Jeffrey Wolf
_______________________________
Jeffrey Wolf
2
EXHIBIT 10.4
------------
REGISTRANT'S 1996 INCENTIVE
STOCK OPTION PLAN
<PAGE>
NETLIVE COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
----------------------
1. Purpose of the Plan. The Netlive Communications, Inc. 1996 Stock
-------------------
Option Plan (the "Plan") is intended to advance the interests of Netlive
Communications, Inc. (the "Company") by inducing persons of outstanding
ability and potential to join and remain with the Company, by encouraging
and enabling employees to acquire proprietary interests in the Company, and
by providing the participating employees with an additional incentive to
promote the success of the Company. This is accomplished by providing for
the granting of "Options" (which term as used herein includes both
"Incentive Stock Options" and "Nonstatutory Stock Options," as later
defined, to qualified employees. In addition, the Plan also provides for
the granting of "Nonstatutory Stock Options" to all non-employee Directors
of the Company, as consideration for their services and for attending
meetings of the Board of Directors, and also provides for the granting of
"Nonstatutory Stock Options" to consultants and advisors who provide
services to the Company.
2. Administration. The Plan shall be administered by a committee
--------------
(the "Committee") consisting of at least two (2) Directors chosen by the
Board of Directors, each of which is a "disinterested person", as such term
is defined in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Except as herein specifically
provided, the interpretation and construction by the Committee of any
provision of the Plan or of any Option granted under it shall be final and
conclusive. The receipt of Options by Directors, or any members of the
Committee, shall not preclude their vote on any matters in connection with
the administration or interpretation of the Plan, except as otherwise
provided by law.
3. Shares subject to the Plan. The stock subject to grant under the
--------------------------
Plan shall be shares of the Company's common stock, $.0001 par value (the
"Common Stock"), whether authorized but unissued or held in the Company's
treasury or shares purchased from stockholders expressly for use under the
Plan. The maximum number of shares of Common Stock which may be issued
pursuant to Options granted under the Plan shall not exceed eight hundred
thousand (800,000) shares, subject to adjustment in accordance
1
<PAGE>
with the provisions of Section 13 hereof. The Company shall at all times
while the Plan is in force reserve such number of shares of Common Stock as
will be sufficient to satisfy the requirements of all outstanding Options
granted under the Plan. In the event any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in
full or shall cease for any reason to be exercisable in whole or in part,
the unpurchased shares subject thereto shall again be available for Options
under this Plan.
4. Stock Option Agreement. Each Option granted under the Plan shall
----------------------
be authorized by the Committee and shall be evidenced by a Stock Option
Agreement which shall be executed by the Company and by the person to whom
such Option is granted. The Stock Option Agreement shall specify the
number of shares of Common Stock as to which any Option is granted, the
period during which the Option is exercisable and the option price per
share thereof.
5. Discretionary Grant Participation. The class of persons which
---------------------------------
shall be eligible to receive discretionary grants of Options under the Plan
shall be all key employees (including officers) of either the Company or
any subsidiary corporation of the Company and consultants and advisors who
provide services to the Company or any subsidiary of the Company, other
than in connection with the offer or sale of securities in a capital
raising transaction. Employees shall be entitled to receive (i) Incentive
Stock Options, as described in Section 7 hereafter and (ii) Nonstatutory
Stock Options, as described in Section 8 hereafter. Consultants and
advisors shall be entitled only to receive Nonstatutory Stock Options. The
Committee, in its sole discretion, but subject to the provisions of the
Plan, shall determine the employees, consultants or advisors to whom
Options shall be granted and the number of shares to be covered by each
Option taking into account the nature of the employment or services
rendered by the individuals being considered, their annual compensation,
their present and potential contributions to the success of the Company and
such other factors as the Committee may deem relevant.
6. Non-Employee Director Participation.
-----------------------------------
2
<PAGE>
(a) On the date any person first becomes a non-employee Director,
such person shall automatically be granted, without further action by the
Committee, an option to purchase 25,000 shares of the Company's Common Stock.
(b) On each January 1st during the term of the Plan, non-employee
Directors of the Company then serving in such capacity, shall each be
granted an Option to purchase 5,000 shares of the Company's Common Stock.
(c) The option price of the shares subject to the Options set forth
in Sections 6(a) and 6(b) hereof shall be the fair market value (as defined
in Section 7(f) hereafter) of the Company's Common Stock on the date such
Options are granted. All of such Options shall be Nonstatutory Stock
Options, as described in Section 8 hereafter. The Options granted pursuant
to this Section 6 shall vest entirely on the date they are granted and
shall be exercisable for a period of ten (10) years.
7. Incentive Stock Options. The Committee may grant Options under
-----------------------
the Plan which are intended to meet the requirements of Section 422 of the
Internal Revenue Code of 1986 (the "Code") (such an Option referred to
herein as an "Incentive Stock Option"), and which are subject to the
following terms and conditions and any other terms and conditions as may at
any time be required by Section 422 of the Code:
(a) No Incentive Stock Option shall be granted to individuals other
than key employees of the Company or of a subsidiary corporation of the
Company.
(b) Each Incentive Stock Option under the Plan must be granted prior
to February 22, 2006, which is within ten (10) years from the date the Plan
was adopted by the Board of Directors.
(c) The option price of the shares subject to any Incentive Stock
Option shall not be less than the fair market value of the Common Stock at
the time such Incentive Stock Option is granted; provided, however, if an
Incentive Stock Option is granted to an individual who owns, at the time
the Incentive Stock Option is granted, more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of a
subsidiary
3
<PAGE>
corporation of the Company, the option price of the shares subject to the
Incentive Stock Option shall be at least one hundred ten percent (110%) of
the fair market value of the Common Stock at the time the Incentive Stock
Option is granted.
(d) No Incentive Stock Option granted under the Plan shall be
exercisable after the expiration of ten (10) years from the date of its
grant. However, if an Incentive Stock Option is granted to an individual
who owns, at the time the Incentive Stock Option is granted, more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of a subsidiary corporation, of the Company, such Incentive
Stock Option shall not be exercisable after the expiration of five (5)
years from the date of its grant. Every Incentive Stock Option granted
under the Plan shall be subject to earlier termination as expressly
provided in Section 11 hereof.
(e) For purposes of determining stock ownership under this Section 7,
the attribution rules of Section 425(d) of the Code shall apply.
(f) For purposes of the Plan, fair market value shall be determined
by the Committee and, if the Common Stock is listed on a national
securities exchange or traded on the Over-the-Counter market, the fair
market value shall be the closing price of the Common Stock on such
exchange, or on the Over-the-Counter market as reported by the National
Quotation Bureau, Incorporated, as the case may be, on the day on which the
Option is granted or on the day on which a determination of fair market
value is required under the Plan, or, if there is no trading or closing
price on that day, the closing price on the most recent day preceding the
day for which such prices are available.
8. Nonstatutory Stock Options. The Committee may grant Options
--------------------------
under the Plan which are not intended to meet the requirements of Section
422 of the Code, as well as Options which are intended to meet the
requirements of Section 422 of the Code, but the terms of which provide
that they will not be treated as Incentive Stock Options (referred to
herein as a "Nonstatutory Stock Option"). Nonstatutory Stock Options which
are not intended to meet these requirements shall be subject to the
following terms and conditions:
4
<PAGE>
(a) A Nonstatutory Stock Option may be granted to any person eligible
to receive an Option under the Plan pursuant to Section 5 hereof.
(b) Persons eligible to receive Nonstatutory Stock Options pursuant
to Section 6 hereof are granted Options automatically under the Plan,
without any determination by the Committee.
(c) Subject to the price provisions of Section 6 hereof, the option
price of the shares subject to a Nonstatutory Stock Option shall be
determined by the Committee, in its absolute discretion, at the time of the
grant of the Nonstatutory Stock Option.
(d) Subject to the provisions of Section 6 hereof, a Nonstatutory
Stock Option granted under the Plan may be of such duration as shall be
determined by the Committee (not to exceed 10 years), and shall be subject
to earlier termination as expressly provided in Section 11 hereof.
9. Rights of Option Holders. The holder of any Option granted under
------------------------
the Plan shall have none of the rights of a stockholder with respect to the
shares covered by his Option until such shares shall be issued to him upon
the exercise of his Option.
10. Transferability. No Option granted under the Plan shall be
---------------
transferable by the individual to whom it was granted otherwise than by
Will or the laws of decent and distribution, and, during the lifetime of
such individual, shall not be exercisable by any other person, but only by
him or her.
11. Termination of Employment or Death.
----------------------------------
(a) If the employment of an employee by the Company or any subsidiary
of the Company shall be terminated voluntarily by the employee or for
cause, then his Options shall expire forthwith. Except as provided in
subsections (b) and (c) of this Section 11, if such employment or services
shall terminate for any other reason, then such Options may be exercised at
any time within three (3) months after such termination, subject to the
provisions of subparagraph (f) of this Section 11. For purposes of the
Plan, the retirement of an individual either pursuant to a
5
<PAGE>
pension or retirement plan adopted by the Company or at the normal
retirement date prescribed from time to time by the Company shall be deemed
to be termination of such individual's employment other than voluntarily or
for cause. For purposes of this subparagraph, an employee who leaves the
employ of the Company to become an employee of a subsidiary corporation of
the Company or a corporation (or subsidiary or parent corporation of the
corporation) which has assumed the Option of the Company as a result of a
corporate reorganization, etc., shall not be considered to have terminated
his employment.
(b) If the holder of any Options under the Plan dies (i) while
employed by the Company or a subsidiary of the Company, or (ii) within
three (3) months after the termination of his employment or services other
than voluntarily by the employee or for cause, then such Options may,
subject to the provisions of subparagraph (f) of this Section 11, be
exercised by the estate of the employee or by a person who acquired the
right to exercise such Options by bequest or inheritance or by reason of
the death of such employee at any time within one (1) year after such
death.
(c) If the holder of any Options under the Plan ceases employment
because of permanent and total disability (within the meaning of Section
22(e)(3) of the Code) while employed by the Company or a subsidiary of the
Company, then such Options may, subject to the provision of subparagraph
(f) of this Section 11, be exercised at any time within one (1) year after
his termination of employment due to this disability.
(d) If the services of a non-employee Director of the Company shall
be terminated by the Company for cause, then his Options shall expire
forthwith. If such services shall terminate for any other reason
(including the death or disability of a non-employee Director), he shall
resign as a director of the Company or his term shall expire, then such
Options may be exercised at any time within one (1) year after such
termination, subject to the provisions of subparagraph (f) of this Section
11. In the event of the death of a non-employee Director, his Options may
be exercised by his estate or by a person who acquired the right to
exercise such Options by bequest or inheritance or by reason of the death
of such non-employee Director at any time within one (1) year after such
death.
6
<PAGE>
(e) Upon the death of any consultant or advisor to the Company or any
of its subsidiaries, who is granted any Options hereunder, such Options
may, subject to the provisions of subparagraph (f) of this Section 11, be
exercised by the estate of such person or by a person who acquired the
right to exercise such Options by bequest or inheritance or by reason of
the death of such person at any time within one (1) year after such death.
(f) An Option may not be exercised pursuant to this Section 11 except
to the extent that the holder was entitled to exercise the Option at the
time of termination of employment, termination of Directorship, or death,
and in any event may not be exercised after the expiration of the Option.
(g) For purposes of this Section 11, the employment relationship of
an employee of the Company or of a subsidiary corporation of the Company
will be treated as continuing intact while he is on military or sick leave
or other bona fide leave of absence (such as temporary employment by the
Government) if such leave does not exceed ninety (90) days, or, if longer,
so long as his right to reemployment is guaranteed either by status or by
contract.
12. Exercise of Options.
-------------------
(a) Unless otherwise provided in the Stock Option Agreement, any
Option granted under the Plan shall be exercisable in whole at any time, or
in part from time to time, prior to expiration. The Committee, in its
absolute discretion, may provide in any Stock Option Agreement that the
exercise of any Option granted under the Plan shall be subject (i) to such
condition or conditions as it may impose, including but not limited to, a
condition that the holder thereof remain in the employ or service of the
Company or a subsidiary corporation of the Company for such period or
periods of time from the date of grant of the Option, as the Committee, in
its absolute discretion, shall determine; and (ii) to such limitations as
it may impose, including, but not limited to, a limitation that the
aggregate fair market value of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any employee
during any calendar year (under all plans of the Company and its parent and
subsidiary corporations) shall not exceed One Hundred Thousand Dollars
($100,000). In addition, in
7
<PAGE>
the event that under any Stock Option Agreement the aggregate fair market
value of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any employee during any calendar year
(under all plans of the Company and its parent and subsidiary corporations)
exceeds One Hundred Thousand Dollars ($100,000), the Committee may, when
shares are transferred upon exercise of such Options, designate those
shares which shall be treated as transferred upon exercise of an Incentive
Stock Option and those shares which shall be treated as transferred upon
exercise of a Nonstatutory Stock Option.
(b) An Option granted under the Plan shall be exercised by the
delivery by the holder thereof to the Company at its principal office
(attention of the Secretary) of written notice of the number of shares with
respect to which the Option is being exercised. Such notice shall be
accompanied by payment of the full option price of such shares, and payment
of such option price shall be made by the holder's delivery of his check
payable to the order of the Company; provided, however, that notwith-
standing the foregoing provisions of this Section 12 or any other terms,
provisions or conditions of the Plan, at the written request of the
optionee and upon approval by the Board of Directors or the Committee,
shares acquired pursuant to the exercise of any Option may be paid for in
full at the time of exercise by the surrender of shares of Common Stock of
the Company held by or for the account of the optionee at the time of
exercise to the extent permitted by subsection (c)(5) of Section 422 of the
Code and, with respect to any person who is subject to the reporting
requirements of Section 16(a) of the Exchange Act, to the extent permitted
by Section 16(b) of the Exchange Act and the Rules of the Securities and
Exchange Commission, without liability to the Company. In such case, the
fair market value of the surrendered shares shall be determined by the
Committee as of the date of exercise in the same manner as such value is
determined upon the grant of an Incentive Stock Option.
13. Adjustment Upon Change in Capitalization.
----------------------------------------
(a) In the event that the outstanding Common Stock is hereafter
changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares,
stock dividends or the like, an appropriate adjustment shall be made by the
Committee in the aggregate number of shares
8
<PAGE>
available under the Plan and in the number of shares and option price per
share subject to outstanding Options. If the Company shall be reorganized,
consolidated or merged with another corporation, or if all of substantially
all of the assets of the Company shall be sold or exchanged, the holder of
an Option shall, at the time of issuance of the stock under such a corpor-
ate event, be entitled to receive upon the exercise of his Option the same
number and kind of shares of stock or the same amount of property, cash or
securities as he would have been entitled to receive upon the happening of
such corporate event as if he had been, immediately prior to such event,
the holder of the number of shares covered by his Option; provided,
however, that in such event the Committee shall have the discretionary
power to take any action necessary or appropriate to prevent any Incentive
Stock Option granted hereunder from being disqualified as an "incentive
stock option" under the then existing provisions of the Code or any law
amendatory thereof or supplemental thereto.
(b) Any adjustment in the number of shares shall apply
proportionately to only the unexercised portion of the Option granted
hereunder. If fractions of a share would result from any such adjustment,
the adjustment shall be revised to the next lower whole number of shares.
14. Further Conditions of Exercise.
------------------------------
(a) Unless prior to the exercise of the Option the shares issuable
upon such exercise have been registered with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), the notice of exercise shall be accompanied by a
representation or agreement of the individual exercising the Option to the
Company to the effect that such shares are being acquired for investment
and not with a view to the resale of distribution thereof or such other
documentation as may be required by the Company unless in the opinion of
counsel to the Company such representation, agreement or documentation is
not necessary to comply with the Securities Act.
(b) The Company shall not be obligated to deliver any Common Stock
until it has been listed on each securities exchange on which the Common
Stock may then be listed or until there has been qualification under or
compliance with such state or federal
9
<PAGE>
laws, rules or regulations as the Company may deem applicable. The Company
shall use reasonable efforts to obtain such listing, qualifications and
compliance.
15. Effectiveness of the Plan. The Plan was originally adopted and
-------------------------
approved by the unanimous written consent of the Board of Directors and
stockholders on February 22, 1996.
16. Termination, Modification and Amendment.
---------------------------------------
(a) The Plan (but not Options previously granted under the Plan)
shall terminate on February 22, 2006, which is within ten (10) years from
the date of its adoption by the Board of Directors, or sooner as
hereinafter provided, and no Option shall be granted after termination of
the Plan.
(b) The Plan may from time to time be terminated, modified or amended
by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the Company present in person or by proxy at a
meeting of stockholders of the Company convened for such purpose; provided,
--------
however, that Section 6 of the Plan may not be amended more than once every
-------
six (6) months, other than to comply with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder.
(c) The Board of Directors may at any time, on or before the
termination date referred to in Section 16(a) hereof, terminate the Plan,
or from time to time make such modifications or amendments to the Plan as
it may deem advisable; provided, however, that the Board of Directors shall
not, without approval by the affirmative vote of the holders of a majority
of the outstanding shares of capital stock of the Company present in person
or by proxy at a meeting of stockholders of the Company convened for such
purpose, increase (except as provided by Section 13 hereof) the maximum
number of shares as to which Incentive Stock Options may be granted, or
change the designation of the employees or class of employees eligible to
receive Options or make any other change which would prevent any Incentive
Stock Option granted hereunder which is intended to be an "incentive stock
option" from disqualifying as such under the then existing provisions of
the Code or any law amendatory thereof or supplemental thereto.
10
<PAGE>
(d) No termination, modification or amendment of the Plan, may
without the consent of the individual to whom an Option shall have been
previously granted, adversely affect the rights conferred by such Option.
17. Not a Contract of Employment. Nothing contained in the Plan or
----------------------------
in any Stock Option Agreement executed pursuant hereto shall be deemed to
confer upon any individual to whom an Option is or may be granted hereunder
any right to remain in the employ or service of the Company or a subsidiary
corporation of the Company.
18. Use of Proceeds. The proceeds from the sale of shares pursuant
---------------
to Options granted under the Plan shall constitute general funds of the
Company.
19. Indemnification of Board of Directors or Committee. In addition
--------------------------------------------------
to such other rights of indemnification as they may have, the members of
the Board of Directors or the Committee, as the case may be, shall be
indemnified by the Company to the extent permitted under applicable law
against all costs and expenses reasonably incurred by them in connection
with any action, suit or proceeding to which they or any of them may be a
party by reason of any action taken or failure to act under or in
connection with the Plan or any rights granted thereunder and against all
amounts paid by them in settlement thereof or paid by them in satisfaction
of a judgment of any such action, suit or proceeding, except a judgment
based upon a finding of bad faith. Upon the institution of any such
action, suit or proceeding, the member or members of the Board of Directors
or the Committee, as the case may be, shall notify the Company in writing,
giving the Company an opportunity at its own cost to defend the same before
such member or members undertake to defend the same on their own behalf.
20. Definitions. For purposes of the Plan, the terms "parent
-----------
corporation" and "subsidiary corporation" shall have the same meanings a
set forth in Sections 425(e) and 425(f) of the Code, respectively, and the
masculine shall include the feminine and the neuter as the context
requires.
21. Governing Law. The Plan shall be governed by, and all questions
-------------
arising hereunder shall be determined in accordance with, the law of the
State of New York.
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EXHIBIT 23.2
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CONSENT OF GOLDSTEIN
GOLUB KESSLER & COMPANY, P.C.
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
To the Board of Directors
NetLive Communications, Inc.
We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form SB-2 of our report dated April 25, 1996, on
the financial statements of NetLive Communications, Inc. as of March 31,
1996 and for the period from August 23, 1995 (date of inception) to March
31, 1996, which appear in such Prospectus. We also consent to the
reference to our firm under the caption "Experts" in such Prospectus.
GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.
May 20, 1996
New York, New York
